The Credit Crisis Financial Stocks Short Journal

Past examples of balance sheet expansions not ending on high inflation(or hyper)
http://research.stlouisfed.org/publications/review/10/11/Anderson.pdf

The Nordic 90's experience is probably the most illustrative

 

Income growth might be more linked to happiness than previously thought
http://www.frbsf.org/publications/economics/papers/2010/wp10-28bk.pdf

 

You do realize that these reports are written by the phds at the Fed just to impress each other with. While they're busy reading each other's brilliant observations, they tend to miss stuff like the internet bubble and housing bubble and also convince their boss to wax poetic about the greatness of ARMs just before short rates are about to go from 1% to 5%.

 

I shot Buiter from Citi an email about this idea that the pigs might not default due fiscal transfers from the EU fund, he didn't reply but came out against the idea in his latest piece

"Accessing external sources of funds will not mark the end of Ireland’s troubles. The reason is that, in our view, the consolidated Irish sovereign and Irish domestic financial system is de facto insolvent. The Irish sovereign cannot from its own resources ‘bail out’ the banks and make its own creditors whole. In addition, a fully-fledged bailout (permanent fiscal transfer) from EA partners or the ECB is most unlikely. Therefore, either the unsecured non-guaranteed creditors of the banks, and/or the creditors of the sovereign may eventually have to accept a restructuring with an NPV haircut, even if it is not a condition for accessing the EFSF or the EFSM at present."

From the ECB I agree, its not going to happen but the EU fund I believe is likely to at least give it a shot at it. Essentially because it would be a way to bailout their own banks by calling it 'debt relief to a sovereign'

I can't possibly see they allowing the default then having to raise money anyway to bailout their banks, might as well lose that money to the sovereign and not lose votes by bank bailouts

 

Trichet stated today the ECB could ramp up bond buying 'significantly' if needed.

No English link yet as it is reported in local media here but the quote will probably reach international channels soon I guess...

 

Matter of fact they already did by extending the maturities of the Greek loans. Essentially a subsidy, who is to say the subsidy wont get bigger

 

The EU leaders by allowing a default would get both a Lehman event and having to bailout bankers, this would be a financial + economic + political crisis. By providing debt relief(cutting interest rates and or principal) they prevent all of that(they would lose some votes but probably not as much), plus either way they would lose some money(on the bank bailouts). Restructuring?Yes but it seems that it will happen on the EU fund debt not the private debt, at least at first

Of course if the crisis reaches the really big countries like Spain or Italy, the story might be different as the fiscal transfers might be too large for Germany and France to handle without going into a crisis of their own

 

"US Ready to Back Larger European Stability Fund Through the IMF: US Official"

 

Yep, the others are getting pretty p1ssed off with the Eurpeans' inability to sort their sh1t out.

 

Hey you got access to a bloomberg, did anything important came out of the Fed release of lending info today?