The international distress call is going out from Europe as the overall eurozone unemployment rate reached 12.1%. Germany had a low rate of 5.4% while Spain was more than 27%. So how is the ECB to do deal with the huge discrepancy between the economic performance of its 17 members? If the austerians are being relegated to economic purgatory then the pressure on the ECB to act will be diminished. Cutting rates for the sake of a show of action will be a detraction from the bigger political issue. Why irritate the Bundesbank and Chancellor Merkel by moving the ECB lending rate by a measly 25 basis points?
Posts Tagged ‘George Soros’
What ailed the markets yesterday seems to have moved to the back pages and the equity markets recovered most of their losses. Gold and silver staged very tepid rallies considering the massive selling that took place during the past week. The global equity markets are still comfortable with central bank policy and even a terrorist attack on U.S. soil cannot shake of confidence of investors seeing high profits, low inflation and no alternative to the returns on equity. It is an old theme but when a market continues to discount unfavorable data and news the power of momentum is in full bloom.
The markets were suffering from fatigue as they struggled to digest the liquidity driven rally of global assets last week. This week will not provide respite as the financial world awaits the outcome of three potentially major market-moving events. The first mover will be the ruling by the German Constitutional Court (GCC) in Karlsruhe as the HIGH COURT will determine if the ESM established by the EU as a bond buying mechanism is in breach of Germany’s basic law, in that the ESM undermines the fabric of German politics by consigning the BAVARIAN BURGHERS to the credit responsibility of the EU profligate states. It seems that the COURT must deal with the concept of “TAXATION WITHOUT REPRESENTATION” as the transferring of German wealth to the European treasury needs to be done by the Bundestag and not by mere cabinet decision or by the complicity and complacency of the central bank.
Tonight’s BLOG POSTING WILL BE THE LAST FOR TWO WEEKS AS I HEAD OFF TO THE LAND OF THE RISING SUN. MY SUGGESTION IS TO GET LONG VOL AS MARKET ACTION ALWAYS INCREASES WHEN I TAKE AN EXTENDED LEAVE (just giving you the ultimate economic and trading indicator.)
As regular readers of NOTES are well aware, I have been very critical of market participants like George Soros and their sanguine views of the European DEBT CRISIS. Many analysts like Jim Cramer have spent the last years waving the debt problem away. First, it was Greece was too small to have an impact on Europe. Ireland was too small and besides was ring-fenced by a bad bank structure. Portugal was smaller than Greece, thus nothing to be concerned about. Italy and Spain were possible problems but many were listening to the flirtations of the Chinese, who, time after time, made solicitations about purchasing European Debt. (By the way, we still haven’t seen the Chinese Sovereign Wealth Fund enter the fray.) If all else failed, European financial leaders were too exposed to the EURO to allow the European Monetary Structure to collapse. Germany would not allow the work of Helmut Kohl and others to be just another failed attempt at a unified Europe.
This week has again seen the resurrection of the European debt crisis as the world pays close attention to BOND prices in EURO BONDS. Yesterday saw the German Schatz fall to an all-time-low of 9 BASIS POINTS. Today as some calm was restored to the Spanish and Italian debt markets, the yield on the German 2-YEAR increased to 14 BASIS POINTS. Prompting the rally in the PERIPHERAL DEBT PRICES was a comment by ECB Executive Board Member Benoit Coeure.
Yes, I know Athens is burning as some of the more violent demonstrators threw some Molotov cocktails and the media was given some photo ops so the situation can be understood by those too involved with life’s challenges to read. If that sounds acerbic it is because I have been writing about the Greek debt crisis since December of 2009 when the Chinese investment funds reneged on a promise to purchase $25 Billion of Greek bonds and the debt crisis was in full swing. Again, Athens may be the present battleground but the political and financial games are being played out in Paris and Berlin and of course in the offices of the IMF.
Notes From Underground: Was Obama at the G-20? Is Soros daft? Was the G-20 Communique was Drafted By the OWS Scribe?November 6, 2011
In President Obama’s G-20 press conference the mood was somewhat upbeat as he boasted that the economic powerhouses had made progress on the issues of economic growth. The President also was confident that Europe can meet it challenges as leaving Cannes, he felt that a “solid foundation has been built.” It seems that Obama failed to capture the real mood of the FAILED G-20 meeting as the Financial Times had two very morose articles about the G-20 and a solution on the European debt crisis.
The news has been more than dismal for the last three months and the equity markets have certainly reflected fears of a renewed global recession. However, as interest rates are being held at historically low levels and growth continues to stall, the idea of a DEPRESSION is making its way onto the opinion pages of financial news.