In contrast with better news from macro data, the negotiations about the next Greek package intensified and this will likely remain the key focus in the upcoming week. On one hand, the present value reduction in a PSI has still not been formally agreed. On the other, the Greek Government still has to commit to more reforms in order for the Troika to agree to a new program. A key deadline for this commitment is on Monday at 11am local time in Athens. Eurogroup President Juncker has talked openly about the possibility of a default on Saturday in the German weekly Der Spiegel. Beyond the ongoing focus on Greece, the week sees a relatively heavy concentration in central bank meetings, including the RBA, ECB, BOE, Poland, Indonesia and a few others. On the data side, the focus is likely on the December IP numbers due in a number of countries, including in some key Eurozone countries (Germany, Italy, France).
Mike Krieger submits: "I’ve always loved history. Even all the way back to grade school I remember it being my favorite subject. Very early on I noticed certain patterns in history and I wondered why they occurred. When I was first exposed to European history, I recall being absolutely floored by how certain countries could become so rich and powerful and then subsequently collapse so stunningly and rapidly. The one that really boggled my mind was Spain - the homeland of my maternal grandfather who I never met. Here was a country that conquered and viciously looted essentially all South America other than Brazil (thanks to the pope being magnanimous enough to grant that part of the world to Portugal in the Treaty of Tordesillas), Mexico, Central America and parts of the United States. The gold and especially silver that was taken back to Spain was the stuff of legend, yet almost at the same time they had defeated the native peoples overseas their kingdom at home was crumbling. Not to bore anyone with too much history, but by the mid 1500s the Spanish had essentially conquered the Aztecs (Mexico) and the Incas (Peru). At the time, the Aztec capital, Tenochtitlan was estimated to be larger than any city in Europe. Despite these tremendous “successes” and the riches that came with them, the battle of Rocroi in Northern France in 1643 less than one hundred years later marked the end of Spanish dominance in Europe. What is so fascinating to me is that while the conquistadors were out raping and pillaging halfway around the world the domestic economy was experiencing economic crisis. There were episodes of major currency debasements in the homeland as the crown was forced to fight wars on their borders as well as fund the excursions abroad. It is important to note that the collapse came pretty quickly as it was only in 1627 when things were still looking pretty good for the empire that The Count-Duke Olivares famously stated: “God is Spanish and fights for our nation these days.” Does this story sound familiar?"
Also, if we were Mexico (or is that East LA?) we would be nervous. Very, very nervous. On the other hand, long-opressed Mexican crude may soon be liberated.
- Greek Debt Wrangle May Pull Default Trigger (Bloomberg)
- Italy Sells Maximum EU11 Billion of Bills (Bloomberg)
- Romney Demands Gingrich Apology on Immigration (Bloomberg)
- China’s Residential Prices Need to Decline 30%, Lawmaker Says (Bloomberg)
- EU Red-Flags 'Volcker' (WSJ)
- EU Official Sees Bailout-Fund Boost (WSJ)
- EU Delays Bank Bond Writedown Plans Until Fiscal Crisis Abates (Bloomberg)
- Germany Poised to Woo U.K. With Transaction Tax Alternative (Bloomberg)
- Ahmadinejad: Iran Ready to Renew Nuclear Talks (Bloomberg)
- Monti Takes On Italian Bureaucracy in Latest Policy Push to Revamp Economy (Bloomberg)
As of Q3 2011, the citizens of less than 20% of the countries involved in Nielsen's Global Consumer Confidence, Concerns, and Spending Intentions Survey were on average confident in their future economic confidence. Not surprisingly, Nic Colas of ConvergEx points out, six were in Asia, the least confident were in Eastern and Peripheral European nations, and furthermore overall global consumer confidence remains 9.3% below 2H 2006 (and 6.4% below Q4 2010) readings as the global economy still has a long way to get its 'mojo' back. Colas points to the fact that 'confidence is an essential lubricant of any capitalist-based system' and one of the key challenges that worst hit Europe (and other regions and nations) face is capital markets that are assessing the long shadow of the Financial Crisis of 2007-2008 and the ongoing European sovereign debt crisis impact on the world's Consumer Confidence.
Yesterday, Reuters' blogger Felix Salmon in a well-written if somewhat verbose essay, makes the argument that "Greece has the upper hand" in its ongoing negotiations with the ad hoc and official group of creditors. It would be a great analysis if it wasn't for one minor detail. It is wrong. And while that in itself is hardly newsworthy, the fact that, as usual, its conclusion is built upon others' primary research and analysis, including that of the Wall Street Journal, merely reinforces the fact that there is little understanding in the mainstream media of what is actually going on behind the scenes in the Greek negotiations, and thus a comprehension of how prepack (for now) bankruptcy processes operate. Furthermore, since the Greek "case study" will have dramatic implications for not only other instances of sovereign default, many of which are already lining up especially in Europe, but for the sovereign bond market in general, this may be a good time to explain why not only does Greece not have the upper hand, but why an adverse outcome from the 11th hour discussions between the IIF, the ad hoc creditors, Greece, and the Troika, would have monumental consequences for the entire bond market in general.
The duty hike in India has decreased gold prices by 1% in Mumbai as the rupee gained 0.5% against the dollar. Some jewellers think the recent duty may slow down demand and may result in a decrease in imports from the official channels of about thirty banks. The increased tax may also lead to a tertiary market where people trade amongst themselves and not through dealers. Traders still do not see the hike dampening the demand for the yellow metal. India is the world’s largest importer of gold and its households have the largest holdings of the metal, according to data from the World Gold Council, although Chinese households appear to be catching up in their purchases of gold.
- The Fed's HFT price manipulation code stolen? U.S. Charges Programmer With Stealing Code (Reuters)
- One million homeowners may get mortgage writedowns: U.S. (Reuters)
- In MF Global, JPMorgan again at center of a financial failure (Reuters)
- China's Money Rates Slump After PBOC Injects Money (Reuters)
- Athens closes in on bondholder pact (FT) - or not
- Hedge Funds May Sue Greece If Loss Forced (NYT)
- China Said to Weigh Easing Constraints on Banks as Growth Slows (Bloomberg) - But wasn't a rate cut already priced in on Monday?
- Obama Under Attack Over Keystone Rejection (FT)
- Chinese Economy Heads for Soft Landing in 2012 (China Daily) - don't really expect "China Daily" to tell you otherwise
- Brazil Cuts Interest Rates Further to 10.5% (FT)
- India to Launch $35bn of Public Investments (FT)
To what banana-republic levels will real wages still have to sink?
The big news of the day, aside from the idiot rally finally being back on full bore, is that the Obama administration finally pushed Canada's hand in telling it to sell its crude to China instead of the US, which we are confident it will gladly do. Much of this was largely priced on, as was the fact that opportunity for significant job creation was just kicked to the curb. What was not however expected, is that in keeping up with the fine tradition of taking responsibility for his decisions and actions, kinda sorta, America's president said that it was really the republicans whose fault it is that Keystone XL is now and will remain in its blueprint stages. From The Hill: "Obama said he was not acting on the merits of TransCanada Corp.’s plan, but instead was forced to make the decision based on the “arbitrary” deadline mandated by GOP provisions in December’s payroll tax cut extension deal. "As the State Department made clear last month, the rushed and arbitrary deadline insisted on by Congressional Republicans prevented a full assessment of the pipeline’s impact, especially the health and safety of the American people, as well as our environment," Obama said in a prepared statement. “As a result, the Secretary of State has recommended that the application be denied. And after reviewing the State Department’s report, I agree,” Obama added. In other words, do you remember where you were when the republicans blocked the Keystone Pipeline?
The modern world depends on economic growth to function properly. And throughout the living memory of every human on earth today, technology has continually developed to extract more and more raw material from the environment to power that growth. This has produced a faithful belief among the public that has helped to blur the lines between human innovation and limited natural resources. Technology does not create resources, though it does embody our ability to access resources. When the two are operating smoothly in tandem, society mistakes one for the other. This has created a new and very modern problem -- a misplaced trust in technology to consistently fulfill our economic needs. What happens once key resources become so dilute that technology, by itself, can no longer meet our growth needs? We may be about to find out.
White House report claims credit for making America competitive with low-wage countries. But it wasn’t meant for the rank and file....