In what was a very slow new weekend the most significant story is that Spanish PM Rajoy’s political party held on to power in the PM’s home state of Galicia. This was considered to be an important test for Rajoy for if his support in his traditional support base had turned against him, there would be no chance that the PM would have proceeded down the road of further austerity. Now Señor Rajoy may be emboldened to surrender to the demands of German-imposed CONDITIONALITY so as to receive the proposed bailout from the ESM. This should be short-term bullish for the EURO as it will remove one of the obstacles that was blocking a massive dose of liquidity into the Spanish financial system. The trade-off game of financial support for enacting more austerity should help the markets as near-term fears of a Spanish collapse should be postponed.
Posts Tagged ‘Rajoy’
Notes From Underground: Rajoy’s Party Retains Power in Galicia
October 21, 2012Notes From Underground: Ok, Notes From Underground, Where 2+2=5
October 2, 2012For the almost three years that NOTES has been published, I tried to make it clear why the subtext of NFU was that 2+2=5. The idea of the math being so obviously incorrect was a direct reference from Dostoyevsky’s short story Notes From Underground in which the great Slav nationalist rails against the rationalists of the day. My use of the 2+2=5 reference is an attack on the rationalists of today, otherwise known as those dependent on sophisticated models to offer explanations for all the answers to questions in the realm of social science–economics of course being the main target. I bring this up as a reflection on the most recent stress tests of the Spanish Banks for if those literalists who think that the math in the Dostoyevsky story is wrong, then the math in the Spanish stress tests should cause one’s eyes to glaze over.
Notes From Underground: Back To the Sixties–Output Gaps or Phillips Curves?
September 20, 2012The FED hounds were unmuzzled after last week’s FOMC and “The Line it Is Drawn. The Curse It is Cast.” Bob Dylan must have been anticipating the difference of opinion that is developing within the Federal Reserve bank. In a speech last night, Dallas Fed President Richard Fisher said: “There are many superb PHD theorists among the 19 members of the FOMC and support staff. There are only a handful of us–four, to be exact–who have worked as bankers or in the financial markets.” Fisher discussed holding back from further QE based on evidence from his business contacts. The Dallas Fed President was dismissed when,”Some suggested that perhaps my corporate contacts were not sophisticated in the workings of monetary policy.” (Hat tip to Professor K.W. for sending the piece). It seems that the collegial attitude is eroding at the FED if the ivory tower is not the place of residence. Today, it was the Minneapolis Fed President Kocherlakota who delivered what I consider to be an outlandish speech.
Notes From Underground: I’m Singing and Dancing In the Rain—the SONG OF MARIO AND BEN
August 16, 2012It seems that the ECB president has for the moment prevailed in a similar way as his MIT cohort Ben Bernanke has been “successful” with his famed Portfolio Balance Channel. Remember, it was Jackson Hole speech of August 2010 in which Chairman Bernanke laid out his view about the importance of the PBC, which was previously referred to by Alan Greenspan as the “wealth effect.” President Draghi has steepened the Spanish and Italian curves by threatening to purchase short-term debt and thus driving the Spanish and Italian 2-YEAR NOTE YIELDS more than 300 basis points lower.
Notes From Underground: IF … In a World Of Great Uncertainty
August 15, 2012The travails of the financial markets continue even as the EURO ELITE believe that their holiday time is sacrosanct. Greece is in the headlines as financial pundits with time to fill conjecture about how long it is before the lifeline to the Greeks is cut and its economy and society set adrift outside the “safe” harbor of the EUROZONE.
Notes From Underground: It’s Europe Again- The Tour de France; the British Open; and the Olympics
July 22, 2012All eyes are on Europe: And I am not talking about the wide, wide world of sports. It seems that the European financial situation has “worsened” as the Spanish yields exploded on Friday sending the Euro stock markets into a sizable selloff. Remember the outcome of the June 29-30 meeting of the Euro policymakers? All the EUROCRATS were celebrating the victory of PRIME MINISTERS RAJOY AND MONTI‘s victory over the IRON CHANCELLOR, Frau Merkel. It now seems that the victory was PYRRHIC as the markets are now testing the resolve of the ECB, EU FIN MINS and, ultimately, the IMF. As with any TROIKA, if all the horses are not pulling together the wagon is very unstable.