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RGE's Megan Greene Sees LTRO Carry Trade As Terrfiying Prospect
If you are looking to fill 20 minutes on this low volume pre-holiday 'trading' day with some sanity (away from the low correlation markets), look no further than the following interview between CMC Market's Michael Hewson and Roubini Global Economics' Megan Greene. From the evolution of the European sovereign debt crisis to a financial and political firestorm, the growing divergence between Merkel's demands and the rest of Europe's needs, to the band-aid plugs to practically unsolvable fiscal differences, she does an excellent job summarizing not just the problems, but the solutions' efficacy so far, and the troublesome future ahead. Furthermore, her perspective on the 3Y LTRO 'carry-trade' that it exacerbates the crisis and is a terrifying prospect fits with our view that while the prospect of this silver bullet is timely for year-end thin markets, the reality is far different (as we see in ITA and ESP bonds today). She notes that this effort will just strengthen the negative feedback loop between sovereign and banking systems. Expecting multiple Euro exits, she sees more can-kicking with jolts from mini-crisis to mini-crisis as the political will is just not there for Germany - ever. Monetary union is really a political choice, and with as many countries dropping out as she expects (as austerity fatigue increases), there will simply not be the political will to keep the Euro project going any longer.
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On the subject of possible Euro exits I was just reading an article which points out that if Greece were to default now is a good time with so many market holidays.
I read a fascinating article too, but this was about Greeks arriving by the planeloads in Australia, a Bag and a degree in hand, looking for work.
/fleeing-greeks-australian-gold-rush
Now here is an interesting twist to the labour situation generally. All the diaspora absorbed by Eu/US and other western nations, if forced to run home or away from home, depending, will completely skew the job markets.
It is going to be a general unwind, lot's of uknown unknowns and unknown knowns and known nooners and ....if I may quote one of my least favourite humans.
ori
/the-plan/
It's sad... draining out the productive and educated segments of Greece. They are being gutted of all resources. Human and physical capital.
the world's a stage and we are all part time actors, some more part time than others. If Greece does an Argentina and kicks outs its corrupt governance it could climb back in five years.
'If Greece does an Argentina and kicks outs its corrupt governance it could climb back in five years.'
Three years tops. Hellenic self-identity prevails over the disease.
"Educated" & "productive" are nonsense words. The west is full of educated producers sleepwalking through existence. As the poet Czeslaw Milosz knew very well immigration isn't so much about ability and talent but about being able to 'stomach' the storm. Many cannot handle it, so they leave. But nevermind, westerns will continue with their Darwinian fundamentalism, believing they are living in the best of all possible worlds...
The entire developed world will be gutted of resources and human capital pretty soon, this is all part of the economic collapse unfolding before us.
The proverbial Brain Drain, eh ORI? Don't worry, immigrating as you probably know is supplanting one illusion with another. Australia is no picnic, at least by my standards, molded on the worst of British 'culture' and a rather obvious racism the newcomers will be in for a struggle no matter what.
You dislike Taleb?
supplanting one illusion with another. Nice way to side grass is always greener eh Gene?
I spent 4 months in Melbourne and did not like the vibe. Saw all of 2 aboriginals in all my time there, both were homeless drunks. And generally, alcohol soaked society. Much like the Brits. Gaily unhappy.
And no, i like his mind (NT).
Have you tried the diaspora thing? It does teach one a lot. I learnt SO MUCH in the US of A. Awesome for me (don't know about the US of A!).
ori
'Have you tried the diaspora thing? It does teach one a lot. I learnt SO MUCH in the US of A.'
Four continents in a fifteen year span. A cosmic gypsy I am. Ditto on Melbourne, I did a working holiday there. The "Abo's" as they are called haven't taken to being 'assimilated' very well. Don't know if you ventured into the outback but that is another story for another time.
Although the US is far from perfect, I like it better than any other English speaking place with the Queen on their currency.
'Gaily unhappy.' ----> Good synopsis.
I was going to do the Drive to Alice Springs. But the hungarian jew running the show made it really difficult for me, so I left. :-)
I call myself a COW, Citizen Of the World. :-)
ori
Holy cow! Alice missed out on that Spring of wisdom.
)
You should probably do a bit of reading before making such sweeping generalisations.
You make it sound like we're all stupid racist Brits.
Greek immigrants have been arriving and integrating here for generations.
Try http://en.wikipedia.org/wiki/Greek_Australian for starters.
As stated above, I've lived there and have done the 'reading'. Forgive my blanket assertion as it obviously wasn't meant for offence. The basic ethos of (at least the major cities in Aus) is, IMO, consumerism under a guise of 'multiculturalism'. To be sure, I have a few people dear to me there including relatives but they too have found asylum in a corporate trance.
As to the charge of blatant racism? Well, it depends on your sensitivity to the issue.
Re racism, I'm not sensitive at all, I am a 'newcomer' myself (30+ years ago, but certainly not aussie-born).
I do agree with you regarding certain people being victims of corporate entrancement and consumerism, however I myself don't live in one of your 'major cities' so I can't say I see much evidence of your 'basic ethos' from where I'm standing.
My basic thought is the Greek newcomers will be welcomed amongst the rather large Greek community there and... that's about it. Then, they'll slowly serve time and 'manage' a job of some kind. All good things, I'm not mocking.
'I do agree with you regarding certain people being victims of corporate entrancement and consumerism, however I myself don't live in one of your 'major cities' so I can't say I see much evidence of your 'basic ethos' from where I'm standing.'
Certain people? Heh. That you do not live in the major metro areas should only be considered a good thing by you. How the younger generation lives in the massively inflated metro areas shouldn't concern you, naturally, but let's not pretend it doesn't exist.
I'd say they'd be welcomed by the community as a whole, but yes it would then likely be as you say.
Don't assume that just because I don't live in the 'massively inflated metro areas' (A striking and quite accurate description, btw), that I'm not a member of 'the younger generation'...some of us can't/couldn't wait to get away from there.
Or does my 30+ age bracket disqualify me from said bracket? :)
Greeks floode dinto Ozland during WWII also. There are large Greek neighborhoods (with great food!) in Melbourne.
"The key is growth" and there is no solution to it, as Angela wants austerity, and so there is a political crisis and financial crisis at the heart of Europe as the ECB is hampered from Qe to infinity."
Cultural continental change required, profound one, and Europe is not there to be unified truly.
Exit the peripherals, and we will be back to six countries and monetary union is dead.
That summarises it, austerity fatigue leads to EUro Break up. And France losing its triple A makes cost of time line expensive.
Meanwhile at the world level, we are now hobbling on all three legs, USA, Japan and Eurozone. So its up to the Brics and they are now choking back. We are into deflation big time...Unless everybody prints to infinity. And, the currency war will not allow Euro to go to rock bottom. SO its stays damned if we do and damned if we don't.
'Cultural continental change required, profound one, and Europe is not there to be unified truly.'
Seeing as how Europe is an extremely fragmentary society culturally speaking, such a statement is silly. What you're seeing is a Europe through German eyes and that is the EU. An EU that is basically centered on economics and 'production'.
It all ends in tears, again.
Well, they had their chance to go down the political integration route at Nice in 1999, and Chirac blew it. Schroeder went his own way, being rebuked by Chirac on greater fiscal integration then. Chriac only wanted one thing in 1999 : get Germany to pay up for his, Chirac's, political promise to his own local constituancy : the continued Common Agricultural Policy subsidies, that benefitted France. Whereas Schroeder put on the table a common approach to industrial integration (like the AEDS-Airbus project and many others). He got cold shouldered by Chirac on that "rapprochment", as it would have meant that France 'bootstrap' its industries then, to try and be at par with those of Germany. Tough medicine, politically dangerous for Chirac's reelection in 2002. He backed down on this German proposal, crucial for subsequent integration. Let's face it, yes, in this dialogue between nation states, economic agenda is vital as it conditions the socio-political context. If you don't have good trade balance and balanced budgets you can't sustain Welfare state!
And the German model, reunified and disciplined on wage austerity and productivity gains surged ahead; all the while Germany reunited. France went exactly the other direction : weak productivity, higher wages, big debt and deficits. Game over now as the gap is too wide and the Crisis makes climb back impossible. France was main historical culprit along with Club MED pIIGS. We are amongst nation states who have not "UNDERSTOOD" what globalisation implies for them, now that the BRIC challenge looms up and the two pillar western construct is looking depassé on world scale. This crisis is the crisis of western capitalist model of which the badly constructed Euro pillar is now showing all its cracks.
Tut, all idealistic ventures come to an end i suppose, smashed on the rocks of reality
of course Europeans were getting along just fine, trading when and where they wanted... then the shitshow of loony lefties and Empire builders turned plain progress into an expensive shambolic clown show (its a political thang)
and so the idealistic garbage of this political train wreck lies on the tracks while society progresses on its merry way as before wondering what all the fuss, tram loads of Brussels directives and expense was all about
Yep, another boil of political puss and worthless rotten humanity comes to a close... the Shitshow of Politics headlong into the toilet ...same as it ever was
But according to Roubini paper can solve everything.
+1. Isn't this the same RGE where the boss said some stupid shit about gold going to zero?
Megan: great interview.
Some may find the 20 minute video a bit dull, because such familiar stuff for ZH readers, but she does mention that when you go to the German central bank, the Bundesbank, they have a framed 1 trillion mark note there. The Bundesbank has a 'Geldmuseum', i.e., Money Museum.
Here's a direct link to a photo of a German trillion mark note:
« Reichsbanknote ... Tausend Billionen Mark ... 1924 Reichsbankdirektorium »
http://blogs.channel4.com/faisal-islam-on-economics/files/2011/11/12_tri...
Article that goes along with the above picture, 'The 1tr mark note - symbol of Germany's fears':
http://blogs.channel4.com/faisal-islam-on-economics/the-1tr-mark-note-sy...
Does Ben Bernanke keep a 100 trillion Zimbabwe dollar note near his desk?
Haha Roubini hopes paper can solve everything otherwise his useless ass is out of a job.....roubini is nothing but a fortune teller a bad one at that who got lucky once
This is what I see:
http://oi43.tinypic.com/11r41l2.jpg
No link, no vid. Link plz. Link for the javascript handicap plz.
Direct link to the above vid on YouTube -
« Market Update special edition : Interview with Megan Greene about the Eurozone crisis »
http://www.youtube.com/watch?v=BtzQAr59i-8
She's hot.
Defult!
You might as well flip a frigging coin. I have read interviews and blogs by all the in-fu**ing-credibly high powered, global, intergalactic experts and find all shades of opinion from: "The EUR is a political project and the zone will not (be allowed to ) break up" (Rickards, also the GEAB crowd). meaning it will be held together by force even as PIIGS go down in smoke, radiation and ashes; to (paraphrased) :"The EUR is fu**ing finished and the PIIGS will leave or be thrown out" (this interview, ZH in general, Mish, Casey and just about anyone in else in the anglosaxon blogosphere).
In my opinion it's about time there is a 1:1 debate between the 2 camps on this issue to prevent "interested minds" like us from being impotent spectators.
What? They aren't buying commodities? They need a QE.
This new model includes: (i) creating an endowment funded with the profits from a limited sale of the Fund’s gold holdings; (ii) expanding the Fund’s investment authority to enhance the expected return on the Fund’s investments; and (iii) resuming the practice of reimbursing the General Resources Account (GRA) for the cost of administering the PRG Trust.
New item in your series of interest:
IMF Policy Paper: A New Rule for Setting the Margin for the Basic Rate of Charge Summary: In April 2008, the Executive Board adopted a package of measures to reform the Fund’s income model. This followed an intensive work program building on the recommendations of an independent committee appointed by the Managing Director to study options for sustainable long-term financing for the Fund. The resulting new income model aims to broaden the Fund’s income sources and reduce its reliance on lending income as the primary source of revenue. This new model includes: (i) creating an endowment funded with the profits from a limited sale of the Fund’s gold holdings; (ii) expanding the Fund’s investment authority to enhance the expected return on the Fund’s investments; and (iii) resuming the practice of reimbursing the General Resources Account (GRA) for the cost of administering the PRG Trust.
http://www.imf.org/external/pp/longres.aspx?id=4622
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That Megan is an exceptionally articulate and intelligent woman isn't she? I hope speaking truth so directly does not endanger her career, or health.
As to growth being the only way out of the mess, it is true and I think that much is manifest to just about all at this point, even those that refuse to admit it because they just cannot admit to having been wrong all along, to do the right thing and end this nightmare once and for all would mean having to confess that you were wrong to keep it going to start with.
But, I see oil at 100 or more (Brent) and even with QE xyz we are still stagnating to falling in real terms, the only way to decline less than at freefall is by beggaring your neighbors, with energy as high as it is for whatever reason(s) growth is not on the table in or out of the EMU. And I know that in Ireland they tossed the ruling party out on it's ears, in fact destroyed the party that has ruled pretty much for 60 years, the party that gave them this horror of guaranteeing continental banker debts only to have the brave new government go off to Brussels to demand fair treatment and return home with their tails between their legs, total supplicants to the Eurozone powers that be. The only thing we can deduce from this is that they were told something by the Troika that rendered their ultimate bargaining chip of 100% haircuts/default and exit from the treaty to be worthless.
One can only speculate what that could have been told to the PIIGS leaders since the Greeks, Irish and other governments are not talking but just come home from the meetings set to enslave their populations for the rest of my natural life at least, without further comment or bravado. I will say though that as Ireland institutes a property tax which is extremely unpopular someone is going to have to say something to the people as to why they have to pay up to restore the bonuses of German and Wall Street bankers, or the people will flat refuse to go on, there is strong talk in Ireland about a popular refusal to pay the property taxes. And I agree, I had considered moving to Ireland and lack of a property tax was one of the attractions, now though I have scrapped those plans because housing is already too expensive there, a property tax will just make it more so. If the burden of repaying French and German banks is put upon Irish property the resulting cost of a roof there will mean you have a roof but no heat or food under that roof. And I am disgusted that the government would cling so tenaciously to it's 12.5% corporate tax rate but slam the population with a property tax on dwellings that will overnight impoverish so many and hurt ALL.
"Austerity fatigue" he said? "People are getting tired of bailing out banks." He said.
Imagine that?!
Once again the 'back to growth' canard is reiterated.
There is no natural or biological system that can continue to grow forever - the political, financial and media pundits all refer to 'when we/they get back to growth'.
We've had 50-60 years of DEBT (NOT credit) growth. The idea of piling yet more debt on top, to help clear existing debt is just ludicrous.
DavidC