The weekend news has been unusually quiet, so with no news about any spreading of the financial crisis the EUROCRATS were opining about the need for Germany to back a massive issuance of EUROBONDS. Joining in the chorus for the creation of a massive dose of EUROBONDS were a group of global finance ministers, including Mr. Tremonti from Italy. The world’s PHILOSOPHER KING, George Soros, also threw his weight behind the need for a EUROBOND. It is now widely known that Merkel and Sarkozy are to meet in Paris on Tuesday in an effort to come to some agreement on [INSERT THOUGHT HERE], so as to help calm European markets and provide some plan for relieving the pressure on French and other European Banks.
The consensus seems to rely on a grand issuance of EUROBONDS. Of course, the ultimate question, again, is: WHO IS GOING TO GUARANTEE THE BONDS? Until a central fiscal authority exists, which is in violation of MAASTRICHT, I just don’t comprehend how a EUROPEAN FISCAL AUTHORITY CAN BE CREATED! A central fiscal authority means the HARMONIZATION OF TAXES at a bureaucracy that is not elected. TAX HARMONIZATION infers one rate for the entire EU. Would the IRISH be willing to go along?
A central taxing authority would mean the surrendering of national sovereignty. It is fascinating that the British and Italians were the ones calling for the Germans to get behind the EUROBOND initiative. How well will this push from the U.K., which is not even in the EURO CURRENCY and what credibility do the profligate ITALIANS have when it comes to fiscal responsibility?
It is starting to seem like Sarkozy and other French policy makers have created a perceived BANKING CRISIS in order to get some quicker resolution to the size of the EFSF (European Financial Stability Facility). The increased purchases of sovereign bonds by the EFSF is pushing for a speed up in action to broaden the size of the EFSF‘s mandate. As the EFSF increases its purchases it is merely a backdoor route to ultimately get to a EUROBOND. FRAU MERKEL is under great political pressure at home so it will be important to see what type of resolution Merkel and Sarkozy agree to, as Mr. Sarkozy will remind the German Chancellor that Germany’s banking system is also under great stress and will need a bailout if French Banks FAIL.
The EUROPEAN situation is still very precarious even though Spanish and Italian BOND rates dropped dramatically last week. It is very difficult to judge what is in fact taking place for the ECB and EFSF‘s BOND buying is very opaque and is disrupting the shorts that exist in the market. As usual in Europe, many decisions are made based on the need to punish “speculators.”
Markets are relatively calm but the Sarkozy-Merkel ENTENTE will have the markets on edge for ultimately what is the REAL ISSUE IS THE NEED TO PREVENT A BANKING CRISIS IN THE WORLD’S LARGEST ECONOMIC REGION. WHETHER THE CRISIS IS REAL OR MANUFACTURED NO LONGER MATTERS. THE QUESTION IS WILL MERKEL DELIVER THE GERMAN CITIZENRY TO GUARANTEE EUROPE AND WHAT WILL THE PRICE BE. To OSBORNE AND TREMONTI: BECAUSE YOU HAVE NO SKIN IN THE GAME KEEP SIT BACK AND DON’T MUDDY THE WATERS. IF YOU WANT YOUR OPINIONS TO MATTER,THROW SOME CHIPS IN THE POT.
Tags: ECB, EFSF, Euro, Eurobonds, Eurocrates, France, George Osborne, George Soros, Germany, Irish, Italy, Merkel, Sarkozy, tax harmonization, Tremonti, U.K.
August 14, 2011 at 9:17 pm |
And why did Axel Weber turn down the ECB chairman post again? Ha
August 15, 2011 at 5:11 am |
Axel being rewarded with the UBS CEO job and chairmanship–not bad for A German not able to run the ECB;again the second Merkel Boner.For the reference to Merkel’s BONER see Chicago Cub history
August 15, 2011 at 8:27 am |
How does this translate into either an actionable strategy or tactic ? And how is the risk of that action controlled?
August 15, 2011 at 9:15 am |
See Mike Greenberg’s post on the previous BLOG
August 15, 2011 at 3:25 pm |
Yra, Jim Leitner says he reads The Economist religiously (Inside the House of Money, Steven Drobny). And you? You never mention The Economist in your blog. Why?
August 15, 2011 at 4:01 pm |
Arthur–I can only get thru so much–the Economist being a weekly magazine I try to read things in real time .However,the Economist is a fine periodical and sometimes people send me stories that I should read.I read Inside the House of Money last week—lots of good trading insights in that book—read a chapter at a time and glean what you can.
August 16, 2011 at 12:54 am |
Thank you so much! Really useful recommendations.
August 17, 2011 at 12:09 pm |
Arthur/Yra,
You should read his follow up book, The Invisible Hands. In it he highlights the flaws of real money, long only, funds that blew up in 2008 and interviews hedge fund managers who outperformed. His focus with these interviews is risk management and how they were able to achieve alpha returns through such an environment.
For me as a rookie it was a great read as the lessons and mindset that they bring to the table from a risk management perspective will prove invaluable.
Cheers