Here are the best links from my previous week's posts, in no particular order. My “editorials” of the week were Bimodal Future, Addicts in Recovery, The Beatings Will Continue.To the links:
EURO CRISIS
I could perhaps see some kind of relatively stable, long-term deal coming out of this process if there was a robust enforcement mechanism, and if political commitments made today were credible and binding on future politicians. But there isn’t, and they aren’t.
Large gap between potential payouts and claims: either pool of payers increased or claims decreased. Governments are trying to force losses onto households in order to avoid a financial blow-up. But such losses are almost certainly not sustainable.
The collateral crunch gets monetary – alphaville / FT
Banks and investors just want to get their principal back and are even prepared in some cases to pay out a negative interest rate to ensure that as much of their principal as possible is returned at some date.
Banks and investors just want to get their principal back and are even prepared in some cases to pay out a negative interest rate to ensure that as much of their principal as possible is returned at some date.
Maturing EU bank debt may hit a wall in 2012 – Sober Look
Roll needs in 2010 3bn, in 2011 110bn (had to be financed by the ECB), and this year 802bn.
So be very careful “buying the dip” because there is a real risk that any slide accelerates and cannot be contained by a few more worthless guarantees and promises of summit meetings because too many people will become too concerned that every financial institution and sovereign is completely cross-contaminated.
On the collateral (”quality” bonds) manufacturing by Greece and Italy.
ECB
The ECB's easy monetary policy is not getting to the "periphery" – Sober Look
The (money) growth is moderately positive at around 2% year over year. This means the liquidity in the eurozone as a whole is expanding, while Italy's is contracting.
TARGET2 imbalances and the money supply disparity – Sober Look
As these imbalances grow, the disparity in the money stock growth will continue, making it more difficult for the ECB to have an impact via monetary easing.
What has the ECB done in the crisis? The role of TARGET balances – Martin Wolf / FT
Without the euro, the ECB ceases to exist. That is true of no other eurozone institution. It gives it the incentive to act. It is also acting on a large scale.
ECB/Fed Support for the European Banking System – 750 billion USD, and counting – Credit Writedowns
The ECB has acted as a sovereign debt buyer of last resort in times of crisis…ECB support for the banking system in the form of collateralised liquidity and wholesale funding is not temporary but structural and permanent in nature… The ECB will of course vehemently deny this but investors should understand that such denial is mainly out of political reasons
2011 / 2012
It must either immolate itself, accepting a debt union and internal inflation to save a currency it never wanted and doesn't love; or opt instead to uphold fiscal sovereignty and the essence of its own democracy, and let the Project die.
Morgan Stanley Issues Shocker With First 2012 Forecast: Says S&P Will Close Year At 1167, Sees Consensus As Too Optimistic – ZH
Back to fundamentals in 2012 – Humble Student of the Markets
The market should return to focusing on fundamental and economics in 2012. The financial market was largely driven by European news in 2011 as it was concerned the possibility of a Lehman-like market crash.
OTHER
A new duality – credit and zero-bound interest rate risk – characterizes the financial markets of 2012, offering the fat left-tailed possibility of unforeseen policy delevering or the fat right-tailed possibility of central bank inflationary expansion.
Is this market just amateur hour or something more? – Steen’s Chronicle / Saxo
Long article on Saxo’s pessimistic scenario and possible faults in their view.
Collateral Damage – John Mauldin / The Big Picture
The economic travails of much of the West are reaching a decisive stage as the year ends.
People Make Poor Monitors for Computers – Macroeconomic Resilience
Expands on an earlier article that risk management should be more like piloting an aircraft than engineering.
DIVERSION
So for all the apparent newness we have become a culture of the remix. We think that we are in a technological revolution, but what we really have is more of the same, just faster, ever-present, and in color. We are mistaking high resolution and portability as an advancement of culture.
In the Nation’s Service – The Epicurean Dealmaker
In fact, one might argue that most jobs fall somewhere along the spectrum from mildly disgusting to slightly repellent in moral terms. As a wise man once observed, that’s why they call it work.