Now the Germans know what they are in for if they prop up the Eurozone. They will be sucked into the quagmire and their debt costs will escalate. That is not because lenders are capitalist bastards - it is simply because their credit risk has increased. The key question is: what is the role of the (sh)city of London and Euro bond markets. London is the place where most Eurobond trading takes place and particularly for CDS with respect to Euro government bonds. US sub-prime may have triggered the current on-of-on financial crisis - but is traders in the city that are making it worse. Note well CDS markets are several orders of magnitude larger than the underliying bond market - smallish CDS changes make for largish bond price/interest rate changes. Given Merkel's current opposition to the ECB issuing Euro bonds (and thus controlling naked CDS trades) one wonders what's deal she struck with "cam-moron" ?...The problems in europe are about the relationship between Germany and its eurozone partners. There is no way that the German economy can be sustained if its partners all default, because it is German loans on which they will be defaulting...therefore : If you are 'scared' of losing your job, 'scared' of not being able to pay your bills, 'scared' of your children's future, 'scared' that your government is ruining your country broke, what do I propose you do is : Stick your head in the sand and hope that everything will be ok.
Access Investments-Building Awareness - European Union-ROMANIA
Friday, November 25, 2011
Now the Germans know what they are in for if they prop up the Eurozone. They will be sucked into the quagmire and their debt costs will escalate. That is not because lenders are capitalist bastards - it is simply because their credit risk has increased. The key question is: what is the role of the (sh)city of London and Euro bond markets. London is the place where most Eurobond trading takes place and particularly for CDS with respect to Euro government bonds. US sub-prime may have triggered the current on-of-on financial crisis - but is traders in the city that are making it worse. Note well CDS markets are several orders of magnitude larger than the underliying bond market - smallish CDS changes make for largish bond price/interest rate changes. Given Merkel's current opposition to the ECB issuing Euro bonds (and thus controlling naked CDS trades) one wonders what's deal she struck with "cam-moron" ?...The problems in europe are about the relationship between Germany and its eurozone partners. There is no way that the German economy can be sustained if its partners all default, because it is German loans on which they will be defaulting...therefore : If you are 'scared' of losing your job, 'scared' of not being able to pay your bills, 'scared' of your children's future, 'scared' that your government is ruining your country broke, what do I propose you do is : Stick your head in the sand and hope that everything will be ok.
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the relationship between European governments and the bond markets is broadly comparable to that between a movie mogul sex maniac and a wannabe movie starlet. The mogul wants sex (credit), and the starlet wants to get on in films (interest) and so they find they can do business - as long as neither asks too much from the other. But once the starlet sees that the mogul is asking for a lot more than just a handjob (complete bailout) she baulks, and initially freezes up (liquidity crisis). After a while she comes round and says Well OK, I might go further, but in return I want a REALLY big part in the next film (EXTORTIONATE rate of interest). But what she doesn't fully realize is that the Mogul's studio is currently being taken over by a much bigger, badder company (China) which has sneakily been co-opting all his other stars while he's been enjoying the handjobs. And now he is fast going broke (broke). That is the stressful crisis that has turned him into such a slavering, semi-delirious sex maniac. The question in this week's installment: will the starlet naively surrender to the voracious desires of the mogul in the hope of a great payback, or realize at the last minute that he's a washed-up, broken old roue who'll be living under a bridge in a week or two ... and cosy up to the new boss instead. And so on, and so on ...
The push to renegotiate EU treaties adds yet another layer of complexity and tension to a crisis that has already stretched the euro zone's leadership to a breaking point.
The crisis has toppled seven euro-zone governments in less than a year, including those in Spain, Italy and Portugal.
Proposals for treaty changes that would subject countries to stricter oversight of their budgets and spending signal the bloc's leaders—in particular German Chancellor Angela Merkel—continue to favor long-term solutions that do little to satisfy calls for urgent action to solve the deepening crisis.
PARIS -(Dow Jones)- France on Thursday proposed senior Treasury official Benoit Coeure to replace Italian Lorenzo Bini Smaghi on the European Central Bank's executive board, the latest step in complex horse-trading between European governments to try to secure representation at the central bank.
France has long been maneuvering to ensure it continues to be have one of its nationals on the six-person executive board after Italian Mario Draghi replaced Jean-Claude Trichet as ECB president on Nov. 1. That gave Italy two executive board members and France none.
French President Nicolas Sarkozy came out early in support of Mr. Draghi's candidacy, partly in a bid to garner Italian support to have Mr. Bini Smaghi replaced by a Frenchman. But former Italian Prime Minister Silvio Berlusconi, who had been expected to appoint Mr. Bini Smaghi to the helm of the Bank of Italy, instead went off script and chose somebody else to head the bank.
(This story and related background material will be available on The Wall Street Journal website, WSJ.com.)
After Mr. Sarkozy voiced his frustration in October, Mr. Bini Smaghi said he would step down Jan. 1, 2012, to take a position at Harvard University.
The proposal of Mr. Coeure comes as France and Germany have been openly diverging on how they see the role of the ECB
TORONTO -(Dow Jones)- The euro tumbled in early North American trading Thursday to trade lower against the U.S. dollar, as German Chancellor Angela Merkel said she sees no reason for euro bonds.
Euro bonds "would weaken us all," she said, speaking at a news conference in Strasbourg.
Merkel is meeting with the leaders of France and Italy to discuss the crisis. She described the process as difficult, and said trust had been lost. She added, however, that European leaders trust each other, and will work closer on issues.
The euro, meanwhile, erased gains to trade at $1.3330, from $1.3343 late Wednesday, according to data provider EBS via CQG
"The eurozone was designed without an exit mechanism and so working out how this may happen is difficult," Mr Bailey said.
Last week, Japanese bank Nomura said a euro break-up is a "very real risk" and advised bond holders to check whether they are likely to be repaid in other, reinstated European currencies if the euro crumbles. Other economists and bankers have issued warnings that financial companies need to prepare for the worst.
In the same speech, Mr Bailey said that it was not clear that UK banks were overcharging their customers.
"It's not obvious to me that the public is being overcharged in retail banking," he said, but accepted that there was a need for more transparency over charges.
"What is very hard is for the public to work out for what it's paying for the simplest elements of banking services and that of course has an effect on things like switching [accounts]," he said.
There was no such thing as free banking, Mr Bailey said, and the notion of it "distorted the landscape".
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