Death Star Economics



Sovereign crises stream of consciousness


There won’t be a News Brief tomorrow, Tuesday, 21 August, 2012.

The ECB, obviously tired of the 7% yield-of-death benchmark, is said to implement a high-yield interest rate threshold, which would forbid any buyers to purchase government debt of struggling economies when their borrowing costs exceed a certain percentage. And then? Then, the ECB will step in an take on that debt. This is following the bank’s August statement that it would only start buying Spanish and Italian bonds if the countries explicitly request aid. Contradictory. Needless to say, ze Germans are against this. read article

Aha! Look at that, the ECB is annoying denying everything.

But speaking of Germany… Angela Merkel is meeting Antonis Samaras in Berlin on Friday, where he will fail to say “thank you” and she will push Greece’ compliance with the initial targets and conditions that were set as part of the €130bn bailout package. Otherwise, this Monday marks another day on which Greece did not default. To commemorate the day, the ECB’s Joerg Asmussen told the Frankfurter Rundschau the following:

Firstly, my clear preference is that Greece should remain in the currency union. Secondly, it is in Greece’s hand to ensure that. Thirdly, a Greek exit would be manageable. It would be associated with a loss of growth and higher unemployment and would be very expensive – in Greece, Europe as a whole and even in Germany.

In other words: I don’t want the Grexit, but “there are Greek people living there,” so what are we going to do…

But speaking of defaulting countries. Belize is facing to default on its pile of debt worth $543.8bn on 19 September unless it strikes a deal with its creditors. Belize is asking its lenders to take a 45% haircut or to accept a delay in debt payments by 15 years. Sounds like a pretty bizarre case of blackmailing if you ask me. Recent history has taught us that potential defaults don’t really happen, but as the ECB isn’t involved in South American debt scenarios this may turn out differently (hello, Argentina!). read article

The commodity du jour is hay, after the hardly standardized product saw price gains above those of soy and corn. read article

The House of Commons and the Treasury have released a report to preliminary findings in the Libor probe, mostly blaming the Bank of England, then the FSA and then the bank again. The real report promises to be exciting holiday reading.

So long.



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