LATEST POSTS A view through the Attila Line, which divides Cyprus, of the Turkish half of the island. Credit default swaps (CDS) on Cyprus debt have jumped to 674 basis points, the sort of level that preceded the EU rescues of Greece, Ireland, and Portugal. The CDS were trading in the 300s earlier this month, according to Markit. Yesterday’s 2-notch downgrade by Moody’s to Baa1 – due to “fractious politics” and exposure to Greece – has come as a nasty surprise to markets and the EU authorities. It should not have done. Cyprus has been sailing close to the wind for several years. The current account deficit reached 17.5pc of GDP in 2008 (IMF data), and is still high. The budget deficit is running at over 7pc this year. The country has lost competitiveness since pegging its currency and then joining EMU, much like Greece…. Read More Spokesman Jay Carney said the White House cannot invoke the 14th Amendment, which stipulates that US federal debt “shall not be questioned”. “It’s not available. The Constitution makes clear that Congress has the authority, not the president, to borrow money and only Congress can increase the statutory debt ceiling. That is just a reality,” he said. That is questionable, but let us move on. Obama had previously been vague about this, saying White House lawyers were “not persuaded that is a winning argument”. It is a revealing turn of phrase. This is indeed about winning arguments, not abiding by constitutional law. It is understandable why he should wish to avoid to an end-run around Congress in this violently polarized atmosphere, though it would not have stopped have FDR…. Read More A genuine default would be “Lehman on Steroids” in the words of Ex-Treasury secretary Larry Summers. Precisely for that reason President Obama will not pull the trigger, EVEN IF the debt ceiling talks break down in acrimony. Obama still has a clutch of cards to play, in extremis. As Yves Smith from Naked Capitalism argues, the White House can challenge the constitutionality of the debt ceiling in Congress. The 14th Amendment of the Constitution states that the “validity of the public debt of the United States shall not be questioned”. Such recourse would kick it up to the Supreme Court, which would take its own sweet time. (Fortuitously a complex matter.) Bill Clinton advised Obama to do just that: blaze ahead, break the debt ceiling in defiance of… Read More Let me have a stab at this paradox, noting on the way that the strength of the euro depends entirely on your vantage point: the euro has crashed against the Swiss franc, Brazilian Real, and Japanese yen over the last two years, and is weak against the Aussie, Canada’s Loonie and the Singapore dollar. The euro is strong only against other deadbeats such as sterling and the dollar (China’s yuan is linked to the dollar in a dirty float, so that rate is rigged), currencies of central banks that are pursuing a policy of deliberate debasement to prevent Fisherite debt deflation. 1) If you think that any eurozone break-up — were it to happen — would lead to Greece, Portugal,… Read More At last, some raw emotional Gaulliste patriotism from the victims of Europe’s Maquina Infernal? Portugal’s new premier Pedro Passos Coelho — a free marketeer — began to growl over the weekend. “We want to take part in an ambitious European project and make our contribution so Europe can confront its problems in the most ambitious way, but as prime minister I will not stand by and wait for Europe to govern Portugal,” he told the party faithful. For Portuguese readers: “Nós queremos participar num projecto europeu ambicioso e queremos dar o nosso contributo para que a Europa saiba encontrar respostas mais ambiciosas para os problemas, mas como primeiro-ministro nunca ficarei à espera do que a Europa tenha que fazer para governar Portugal” Please correct me if my loose translation is wrong. So, it has begun: last week Greece’s premier George Papandreou launched two angry broadsides against… Read More It is financial repression, pure and simple. The same will be done to the press in due course. Then to you, dear reader. “We must break the oligopoly of the rating agencies,” says German finance minister, Wolfgang Schäuble. By “we”, of course, he means the… Read More Protests in the Middle East have led to an oil price spike The greatest threat to the global economy is not the oil shock itself but the risk that central banks will commit a blunder, compounding the damage by tightening monetary policy at exactly the wrong moment. For the European Central Bank and the Bank of England this would mean raising rates into the teeth of the storm, as the ECB did with predictably disastrous consequences in July 2008. For the Fed this would mean talking up the prospect of rate rises sooner than expected, as the Fed did with equally disastrous consequences over the months of May, June, July of… Read More
Cyprus, Iceland, and German bail-out fatigue
Flee to Mars if America commits worst error
since 1931
The Kabuki theatre of America's Debt Ceiling
The magnificent strength of the euro
Portugal Loses Patience With Europe
Europe, Free Speech, and the sinister repression
of the Rating Agencies
Oil's 'inflexion point' and Wahabi central banks
Sunday, 31 July 2011
JULY 28TH, 2011 13:12
JULY 27TH, 2011 13:10
President Obama has categorically ruled out a constitutional challenge to the US debt ceiling since I wrote yesterday’s blog.
JULY 26TH, 2011 14:46
Calm down. The US will not miss a coupon payment on its $14.3tn debt next Wednesday.
JULY 20TH, 2011 11:54
A great number of readers have asked how the euro can possibly be so strong given the existential crisis engulfing Euroland.
JULY 18TH, 2011 18:39
JULY 7TH, 2011 13:58
Before we all join the chorus of abuse against the robber agencies, let us not lose sight of what is happening in the eurozone. The EU authorities are attempting to muzzle free opinion, first by threatening Fitch, Moody’s, and S&P with vague retribution, and then by drafting restrictive laws to prevent them from publishing unwelcome messages.
FEBRUARY 25TH, 2011 11:59
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