Monthly Archives: July 2015

The Euro – A Monetary Strangulation Mechanism

The Market Monetarist

In my previous post I claimed that the ‘Greek crisis’ essentially is not about Greece, but rather that the crisis is a symptom of a bigger problem namely the euro itself.

Furthermore, I claimed that had it not been for the euro we would not have had to have massive bailouts of countries and we would not have been in a seven years of recession in the euro zone and unemployment would have been (much) lower if we had had floating exchange rates in across Europe instead of what we could call the Monetary Strangulation Mechanism (MSM).

It is of course impossible to say how the world would have looked had we had floating exchange rates instead of the MSM. However, luckily not all countries in Europe have joined the euro and the economic performance of these countries might give us a hint about how things could have been if we had…

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Don’t Mention The War

azizonomics

angelamerkel

It is wrong to suggest that people should be held accountable for the actions of their ancestors. Blaming each other for the deeds of our ancestors is the cause of vast tracts of human suffering and conflict. Tribes and nations have fought each others for centuries — and, in some places, continue to do so — based on the actions of that tribe or nation’s forefathers. This is irrational. We cannot change the actions of our ancestors. That is perhaps one reason why John Cleese’s portrayal of an idiot hotelier beating down his German guests with a spiel of cringe-inducing World War 2 and Nazi clichés is so absurdly funny.

That being said, we do have a responsibility to learn from and not repeat the mistakes of our ancestors. Failure to learn from the mistakes of one’s ancestors is the point at which the actions of past generations become relevant in a…

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“Guerrilla Warfare Against a Hegemonic Power”: The Challenge and Promise of Greece

WEB OF DEBT BLOG

Banks create money when they make loans. Greece could restore the liquidity desperately needed by its banks and its economy by nationalizing the banks and issuing digital loans backed by government guarantees to its ailing businesses. Greece could provide an inspiring model of sustainable prosperity for the world. But it is being strangled by a hegemonic power in a financial war that is being waged against us all.  

On July 4, 2015, one day before the national vote on the austerity demands of Greece’s creditors, it was rumored in the Financial Times that Greek banks were preparing to “bail in” (or confiscate) depositor funds to replace the liquidity choked off by the European Central Bank.

The response of the Syriza government, to its credit, was “no way.” As reported in Zerohedge, the government was prepared to pursue three “nuclear options” to protect the deposits of the Greek people:

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Bond Liquidity Crisis Update, An Unexpected Regulatory Outcome

24/7 Wall St.

US Treasury buildingCurrencies may be considered the most liquid of all quoted markets, but the most liquid market that most investors think about day in and day out is the U.S. Treasury capital market for bonds. This market governs the direction of U.S. interest rates, and international interest rates in many cases, each day of the week. So what happens under new regulations when there is now a liquidity gap in the US Treasury market among the regulated primary dealers?

This issue has been brought up by Jamie Dimon of J.P. Morgan, and was later said to be an issue by former Treasury Secretary Larry Summers. The point made was that regulators should make a priority of addressing the problems of bond market liquidity. It was the regulation around “trading activities” which created what is perhaps unintended consequences.

24/7 Wall St. has spoken with an executive of another top firm, which is…

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How the RECOVERY will look like when Greece leaves the euro

The Market Monetarist

Most indications are that Greece this weekend effectively has been pushed over edge by the collective failures of Greek and European policy makers. The combined forces of an European monetary straitjacket, the lack of a coherent European sovereign debt crisis resolution mechanism and weak Greek institutional structures and a lot of badwill on both sides of the issue in the end did it.

And we are now facing bank run, possible banking sector collapse, the likely introduction of capital controls, a Greek sovereign default and potentially also a Greek exit from the euro area.

So there is no doubt that the future looks very bleak for the Greek economy, but there are also good arguments that all this actually might mark the beginning of a Greek economic recovery in the same way the Argentine default and devaluation in January 2002 was the beginning of a sharp recovery in Argentine growth in…

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