Since the European sovereign-debt crisis erupted in 2009, everyone has wondered what would happen if a country left the eurozone. The risks created by the SNB’s decision – as transmitted through the financial system – have a fat tail - and the consequences will not be limited to Switzerland. After years of wondering whether the exit of a small, fiscally weak country like Greece could undermine the euro, policymakers will have to deal with an even bigger shock stemming from the exit of a small, fiscally strong country that is not even a member of the European Union.
The ECB's 4 QE Scenarios, And Why CS Thinks Waking From The "QE Dream" May Be The Worst Possible OutcomeSubmitted by Tyler Durden on 01/17/2015 14:30 -0500
Despite various media reports over the past 24 hours about risk-sharing and sovereign security exclusion (i.e., that of Greek Treasurys), as well as speculation that despite it being priced in more than 100%, the ECB may yet again delay the actual announcement especially with what watershed Greek elections following just days after the ECB announcement, the question remains just what format will European QE take. Here, courtesy of Credit Suisse - a bank which was pounded in the past 2 days following the record surge in the CHF - is a preview of the 4 most likely ECB scenarios, as well as a glimpse at what may be the worst possible outcome for Europe: QE itself!
Just to make things interesting, overnight Russia told a beleaguered Greece, and specifically its hurting farmers, that it "may lift its ban on food imports from Greece in the event it quits the European Union" according to Russian Minister of Agriculture Nikolai Fyodorov who spoke in Berlin on Friday. “If Greece has to leave the European Union, we will build our own relations with it, the food ban will not be applicable to it,” Fyodorov said as reported by Tass. In other words, Russia has casually thrown out feelers to Greece (and any other peripheral European country) and given it the option of joining the greater Russian sphere of influence (because the USSR 2.0 and satellites is still not trademarked), should it decide that 5 years after the first Greek "bailout" things for the country caught in an endless depression are as good as they will get with a bunch of Goldman bankers in charge.
At the moment, the US dollar is choice. This isn’t necessarily a vote of confidence for the dollar. It’s more like a vote against all the others. If big institutional investors must choose between bankrupt America and bankrupt Europe, right now they choose America. But this is a decision that can and will be changed in an instant. Just look at the Swiss franc...
"In our portfolios with currencies, we have been short the CHF on the grounds that it was an expensive currency which we expected would experience capital outflows as European growth normalized. We were surprised by the sudden removal of the peg. Although the CHF real effective exchange rate is lower than during the European crisis of 2011, it has actually appreciated in recent months. We exited a substantial portion of our CHF short today and are monitoring the situation closely."
The bad news is that as we also speculated, and as Greek officials tried to cover up as usual, the Greeks have resumed doing what they do best any time their country is facing a grand crisis: walking to the bank and withdrawing what little deposits they have left. Or rather running to the bank. Which brings us back to the topic of the Emergency Liquidity Assistnace, which as Kathimerini reported moments ago, at least two Greek systemic banks have reportedly resorted to, indicating that the liquidity situation in Greece is once again as dire as it was in the depth of the European collapse.
Today, the "developed nation" hecklers are deathly silent after what may be the biggest western central bank faux pas in recent history, and which has - perhaps for the first time in history - manifested in lines of people in front of currency exchange bureaus nowhere else but in that bastion of capitalism: Geneva.
By ending its three year currency peg to the weakening euro Switzerland has become the first major economy to surrender in the international currency war, and in so doing has given a long-delayed victory to the Swiss people. Contrary to the indignant reaction by the media and financial establishment, the decision is not a disaster for Switzerland, but may be looked at in the future as the first significant counter-attack against our current global system of monetary insanity.
The majority of the jobs "created" since the financial crisis have been lower wage paying jobs in retail, healthcare and other service sectors of the economy. Conversely, the jobs created within the energy space are some of the highest wage paying opportunities available in engineering, technology, accounting, legal, etc. In fact, each job created in energy related areas has had a "ripple effect" of creating 2.8 jobs elsewhere in the economy from piping to coatings, trucking and transportation, restaurants and retail. Simply put, lower oil and gasoline prices may have a bigger detraction on the economy that the "savings" provided to consumers.
The Swiss National Bank just threw gasoline on Swiss F.I.RE. Expect to see combustive contagion in the Swiss banking, insurance and real estate giants as knock-on effects spread from so-called hedges
And to think so many otherwise very bright people still don't get it.
An adviser to the Luxembourg-based European Court of Justice (ECJ) has delivered a tentative thumbs-up to an ECB bond plan unveiled in September 2012 that was aimed at countering euro break-up fears. Dow Jones explains the key five takeaways from the court's findings...
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The possibility of the ECB announcing sovereign asset purchases on 22 January already led Switzerland’s SNB to move pre-emptively last month and introduce negative interest rates. As SocGen's FX Research group notes, as disinflationary pressures spill over from the eurozone to trading partners in the north and east of Europe, we parse over the central banks that stand ready to act should the ECB announce QE.
We see far too much complacency out there when it comes to interest rates, in the same manner that we’ve seen it concerning oil prices. We live in a new world, not a continuation of the old one. That old world died with Fed QE. Just check the price of oil. There have been tectonic shifts since over, let’s say, the holidays, and we wouldn’t wait for the ‘experts’ to catch up with live events. Being 7 weeks or two months late is a lot of time. And they will be late, again. It’s inherent in what they do. And what they represent.