Eurozone

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    Posted: 23 May 2012 06:46 PM

    I’m starting to think the Eurozone is overdue for its own topic.

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    Posted: 23 May 2012 07:33 PM #1

    Mav - 23 May 2012 09:46 PM

    I’m starting to think the Eurozone is overdue for its own topic.

    Agree. smile

         
  • Posted: 23 May 2012 07:44 PM #2

    EU politics won’t ever agree on some feasible and efficient course of action but here is an interesting one..

    A Modest Proposal for Resolving the Eurozone Crisis


    http://varoufakis.files.wordpress.com/2010/11/modest-proposal-3-0-may-2012-without-rebalancing-mechanism.pdf

    5. Epilogue: Three policies representing a gestalt shift that can liberate Europe from debilitating false dilemmas
    Two years of crisis have culminated in a clear and present danger that Europe not only experiences another recession and a painful dismantling of the Eurozone but, also, the demise of the European Union, of open borders, of open minds and the risk of a global collapse.
    While this process of deconstruction is eating away at the foundations of Europe?s potential for shared prosperity, and global cooperation, Europeans are imprisoned by four, false, dilemmas.
    ? The current terms of reference of the debate are trapped in a dyadic logic of austerity versus tax-and-spend stimulus policies.
    ? They are trapped also in a presumption that any solution needs to be agreed by Germany whereas the neglected EU provision for decision-making by enhanced cooperation does not need the consent of Germany.
    ? There is a presumption that the issue at hand is how to persuade Germany and the few other remaining surplus countries to bankroll the rest when this neither necessary nor desirable.
    ? There is fret over the pros and cons of moving toward federation as if this could be agreed in time to stop what may be an imminent disintegration of the Eurozone.
    It is our contention that these are, indeed, false dilemmas that imprison our thinking, immobilise us and are, largely, responsible for delays, false starts, and ill- fated ?solutions?. By contrast The Modest Proposal counters that:
    ? the dilemma between austerity and debt-fuelled growth policies is irrelevant
    ? lax monetary policy on behalf of the ECB, or greater wage/price inflation in
    Germany and the rest of the surplus nations is unlikely to deal with the crisis
    ? effectively
    ? Germany and the rest of the surplus nations need not bankroll either a European Recovery, Rebalancing and Convergence Program nor the management of excessive sovereign debt
    ? Federal moves and Treaty changes may be desirable but will take too long and are not needed to resolve the crisis from now.
    On this basis the Modest Proposal?s three policies are simple and feasible steps by which to deal decisively with Europe?s banking crisis, the debt crisis and the under- investment, unemployment and internal balance of payments crisis.
    In one stroke (Policy 1), by creating a single banking sector, banking losses are separated from stressed sovereign debt and recapitalisation can proceed properly and rationally.
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    In another stroke (Policy 2), the Eurozone?s mountain of debt shrinks (through an ECB-EFSF/ESM conversion of Maastricht Compliant member-state
    Debt).
    Third, (Policy 3) the EIB-EIF jointly recycle European savings and global surpluses enabling recovery and enhancing the potential for cohesion and convergence.
    At the political level, the three policies envisaged by the Modest Proposal constitute a process of Decentralised Europeanisation, to be juxtaposed against an Authoritarian Federation that has not been put to European electorates, is unlikely to be endorsed by them (as evidenced by serial falls of governments since 2009), and, critically, offers them no assurance of higher levels of employment and welfare.
    In essence, what we are proposing is that three areas of economic activity are Europeanised: banking supervision, sovereign debt management and a recycling of European and global savings into socially productive investment flows which also will vastly advantage the private sector. However, our proposed Europeanisation retains a large degree of subsidiarity that is:
    ? consistent with greater sovereignty for member-states than a supra-national federalism, combined with the minimal collective rationality required for the effective governance of the common currency area
    ? commensurate with the principle of reducing excess national debt (once banks, debt and investment flows are Europeanised)
    While broad in scope and ambition, the Modest Proposal suggests no new institutions and it aims at redesigning the Eurozone with minimal use of new rules, fiscal compacts, or troikas. It requires no prior agreement to move in a federal direction while allowing for consent through enhanced cooperation rather than imposition. It is in this sense that this proposal is, indeed, modest and something on which governments should act.

         
  • Posted: 24 May 2012 12:24 AM #3

    Phoebear611 - 24 May 2012 03:04 AM

    Australian equities hanging in there after China PMI number.  Looks to me that this number plus Europe gives us a bit of a mixed bag.  Let’s see what is deciphered over night. I need my beauty sleep.

    I think that the European leaders, including Hollande, are playing chicken with Greek voters in advance of the Greek election.

    Hollande is no fool, although he may appear to be to the person on this site who, in the last 48 hours, said that Jacques Chirac was a socialist - one of the funniest posts on this site that I have read.

         
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    Posted: 24 May 2012 12:47 AM #4

    Stew - 24 May 2012 03:24 AM
    Phoebear611 - 24 May 2012 03:04 AM

    Australian equities hanging in there after China PMI number.  Looks to me that this number plus Europe gives us a bit of a mixed bag.  Let’s see what is deciphered over night. I need my beauty sleep.

    I think that the European leaders, including Hollande, are playing chicken with Greek voters in advance of the Greek election.

    Hollande is no fool, although he may appear to be to the person on this site who, in the last 48 hours, said that Jacques Chirac was a socialist - one of the funniest posts on this site that I have read.

    Ha, Social Democrat, Socialist, mouse, rat, whatever. Hollande is a fool, and a very dangerous one, likely leading his people to ruin. He’s promised them the undeliverable, staying in the Euro with no austerity. No way in hell Germany tolerates that. Seriously, who do you think are tougher people, Germans or Greeks? My money is on Germans. The Germans will sternly deal with the fallout of Greece leaving the EU. Meanwhile, Greeks will commit suicide and riot in the streets.

    And for the reading-comp-impaired, what I said about Chirac was that he was no ally of the United States, lobbying to create the EU as a “counterweight” to America. I never called that worm Chirac a socialist, although with social democrats, it’s really a distinction with little difference.

    Whatever you call them, governments robbing Peter to pay Paul will always have the support of Paul. But sooner or later, Peter gets fed up and renounces his citizenship and moves to Singapore.

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    Posted: 24 May 2012 04:56 AM #5

    Jason Schwarz’s take on Greece and Apple on Seeking Alpha.

    (sorry for the long post, but I tried to link, but was blocked for a blacklisted item?)

    “We’ve moved from an Apple hedge fund playground to a market battleground. Heading into the 3-day weekend, there is a serious tug of war between Europe and Apple. Making a European forecast at this stage of the game is enough to make one dizzy. Greece has no official governing body until the June 17th elections and yet European leaders feel urgency to solve the uncertainty at today’s EU Summit.

    The Dow has sold off 1000 points from 13,300 on May 3rd because of Greece; but when does the Greek threat become over-exaggerated? Are investors going to fret over Greek exit strategies this weekend or will they focus on newfound plans of stimulus from this EU Summit? Should we sell some Apple (AAPL) allocations in order to avoid the potential panic of this weekend? Is the U.S. economy going to stall and end the bull market? These are the important questions floating around trading desks, the answers to these questions will guide our short-term strategy.

    Answer #1: Yes, the market is overreacting to Greece just like it has the last 38 times. Greece will not leave the euro and Greece will gain a growth component to its bailout agreement. That is bullish for the market. Unfortunately we have to deal with shouting reporters who have a love affair with Greek turmoil trying to make this a bigger story than it is. The winning strategy over the last two years is to sell the market at highs and buy back in on European lows. This is a European low.

    Answer #2: After the EU Summit, the focus will likely turn towards stimulus. Prior to this Summit we have noticed factions of opinions among EU leaders. Plans B, C & D (Grexit contingency plans) are getting more publicity than Plan A (Growth). We expect Plan A will regain credibility and cause a market rally over the long run. Will Plan A be able to soothe investor panic this weekend? It doesn’t really matter. It’s coming and it’s coming soon.

    Answer #3: The great thing about buying Apple at or near a low is that you don’t have to panic and sell at every hint of a negative variable. As long as your options provide you with sufficient time, the stock will regain its prior high by July and it will establish new highs this fall. The technical takeaway is that Apple has bottomed and is now fighting to begin stage two of the rally. The technical action suggests that as soon as Apple breaks through the $570’s it will shoot up to $618 (approx June 11th). After it breaks through $618 it will shoot up to $644 (approx July 15th). After it breaks through $644 it will shoot to $750 (approx October 15th). Buying Apple under $570 is a great entry point. Sure we might need to wait a week or two for the stock to break out of the $570 range, but this is a time when patience will pay off.

    Answer #4: The stock market has been waiting for the economy to give it a reason to return to its pre-financial crisis highs of Dow 14,000. Without a valid reason, the market has been trading range bound and forced to use Europe as its reason for corrections. What would happen to the market if Greece gets a stimulus package and the U.S. economy exhibits strength in housing? A housing recovery is the economic variable we have been waiting for, but according to recent data, the wait is over. Housing starts are up 30% from a year ago. New home sales beat consensus expectations and are up 9.9% from a year ago. Existing home sales rose 3.4% in April and are up 10% year over year. The median price of an existing home is up 10.1% from a year ago. Home prices overall are up 2.7% from a year ago representing the biggest jump since 2006. Commercial and industrial loans are up 13.6% in the past year. In addition to construction-related data, private payrolls are up 26 consecutive months. Consumer financial obligations are the smallest share of income since 1984.

    We’re not selling here, in fact we’re buying more. Don’t let the panic of the media scare you out of this Apple opportunity. We’re adding another 5% allocation of the AAPL October 2012 $600 calls.”

    I don’t disagree on answers 1 - 3, but on #4, the housing market has not really bottomed yet. A constrained foreclosure market is temporarily driving new home sales. I think there is more work to be done before we claim victory in housing. Employment gains are anemic, but positive. America is not off to the races yet

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