There are effectively no tools left for governments and central banks to deal with another major crisis. Like Paris in 1940, they have no Plan B. They’re completely defenseless to support the financial system or the currency in the event of a major shock. We should all take a moment to appreciate this level of incompetence. This doesn’t happen overnight. It takes decades of “blunder and neglect” to engineer financial vulnerability on this scale. But they’ve somehow managed to pull it off.
Over the past several months, tensions between Russia and the West have escalated meaningfully. While it’s certainly true that, since Crimea, US-Russia relations have deteriorated steadily (baskets of potatoes notwithstanding), recent events suggests the situation may come to a head more quickly than either side cares to admit. In the latest provocation, Europe has extended economic sanctions against Moscow for another six months or, until the Kremlin agrees to abide by the terms of the Minsk agreement which Europe, on the word of Kiev, assumes Moscow is violating. Meanwhile, US Secretary of Defense Ash Carter blasts Russian "nuclear saber rattling."
Stock markets in the US and Europe are in for a correction, while the euro is set to rise, according to Saxo Bank’s Chief Economist Steen Jakobsen, nomatter what happens between Greece and its creditors. Steen also looks at the impact a rate hike from the US Federal Reserve would have on USD and what currencies could gain once the Fed decides to move on rates, noting that "the consensus has it wrong on the timing of US rate hike," as the credit cycle topped in June 2014. He believes that commodities and metals in particular offer opportunities for investors.
While the latest European FinMin summit desperately tried to put on a united facade when responding to the latest and greatest Greek proposal, which incidentally is so weak that the IMF will throw up all over it as shown below, the reality behind the scenes was anything but. In fact, Greece was this close to having capital controls forced on it earlier today, and would have, if the demand of not just its old "BFF", Germany's finmin Schauble, but Ireland's Noonan, had materialized. As the FT reported moments ago, "Germany’s Wolfgang Schäuble and Michael Noonan, his Irish counterpart, pushed for curbs on emergency liquidity for Greek banks unless capital controls were imposed, one of the officials said.
"The net effect of all that will be the disappearance of nominal wealth — it crosses an event horizon into a black hole never to be seen again. The continent discovers it is a lot poorer than it thought. Fifty years of financial engineering comes to the grief it deserves for promoting the idea that it’s possible to get something for nothing."
While the politicians do what politicians will do (i.e. lie when it "becomes serious"), those who have a predisposition towards pragmatism are indicating that Monday's 'emergency' Greek summit is nothing but a media spectacle that will produce nothing in the way of concrete results and is likely only good for giving the algos a few headlines to chase.
today is Friday taken to the nth degree, with the markets having already declared if not victory then the death of all Greek "contagion" leverage, following news that a new Greek proposal was sent yesterday (which as we summarized does not include any of the demanded by the Troika pension cuts), ignoring news that Greece had again sent Belgium the wrong proposal which the market has taken as a sign of capitulation by Tsipras, and as a result futures are surging higher by nearly 1%, the German DAX is up a whopping 3.1%, on track for the biggest one day gain in three years, Greek stocks up over 8%, German and US Treasurys sliding while Greek and peripheral bonds are surging.
Greece Told To Have A Deal Ready Before Monday Meeting; Tsipras Submits Revised Plan With No Pension CutsSubmitted by Tyler Durden on 06/21/2015 20:25 -0400
With just under 24 hours until Monday's final summit after which even JPMorgan now agrees the ECB will be forced to use a nuclear option and limit or cut Greek ELA thus imposing capital controls as a "negotiating tactic", earlier today both France and Germany told Greece it must have a reform deal agreement with the Troika finalized and delivered before a crucial leaders’ summit between Athens and its creditors on Monday; in other words before trading opens on Monday.
Whatever the eventual financial costs to EU taxpayers of a Greek default, the political costs of a Greek exit are likely to be seen as unacceptable. Most likely the EU will allow a covert Greek default, disguised for the time being by extended repayment schedules, bogus refinancing formulae and possible delayed haircuts as bonds mature. They may insist that such moves are not a technical default. Despite that absurdity, our obedient press corps may even concur with such a characterization, and investors may be so thrilled that a relief rally occurs in stocks and bonds. Extend and pretend will once again be the only acceptable manner to confront our intractable problems.
We have now reached the point where the euro does not have a problem – the euro is the problem. De-risking it should be a priority for European leaders, as it now poses a chronic risk to global financial stability. Either the outliers need to leave or the countries inside the eurozone needs to move down the pathway to full political, economic and monetary union.
Amid escalating violence in Ukraine and stepped up efforts by the Pentagon to rally support for Washington's increasingly aggressive posturing towards Moscow, NATO conducts war games in Poland designed to replicate the conflict in Ukraine.
Greek end hogame is at hand. US economy is gaining momentum--consumption, capex, and housing. Several equity markets are at cross-roads.
During the same period over which Greek banks lost nearly €30 billion in deposits, banknotes in circulation jumped by some €13 billion. In short, because Greeks are increasingly prone to stuffing their euros in mattresses, a large proportion of the deposit flight has come in the form of hard currency withdrawals, meaning the Bank of Greece is forced to (literally) print billions in physical banknotes.
This is an eventful period for EU-Russia gas relations. How should the most recent evolutions of the Russian waltz of pipelines be interpreted? There are three possible scenarios...