Death Star Economics



Slovenia slides down the bailout slope


The Fed is considering tougher capital requirements over worries that banks could be playing the [Basel III] system. Currently, the international agreement sees equity capital at only 3%. Basel brought that up significantly, but also gave the parties involved more room for… creative accounting. Give a bank a loophole. read FT

Moody’s downgraded Slovenia to junk with negative outlook (ouch), which is unfortunate, because the country was planning to auction off some debt. read FT
And now the pathway to an EU bailout: (read Bloomberg)

Rising loan losses resulting from a housing bust and a second recession in two years have left a hole of about 7.5 billion euros ($9.9 billion) at Slovenia-based lenders, investment bank Keefe Bruyette & Woods estimates. That’s a lot for a 35 billion-euro economy: A bank bailout would push government debt above 70 percent of economic output.

Apple issued $17bn in debt – the largest corporate debt offering ever – in six tranches to return money to shareholders and avoid repatriation taxes on overseas funds. read WSJ

In New York, the Empire State Building was lit up in FT-pink to celebrate the 125th anniversary of the newspaper.

This morning…
is quiet due to Labor Day in vast parts of the world.

Later on, we’ll get some data from the US, including the ADP employment report, ISM manufacturing data and the post-FOMC meeting statement from the Fed (ex Bernanke press conference). The ISM is expected to drop below 50, as it last did in November of last year and several months in 2009.

So long.


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Obama to unveil $3.77tn budget

Yesterday…Slovenia‘s new Prime Minister Alenka Bratusek said the country didn’t require any help to deal with its banking crisis that the OECD seems to consider as serious but not urgent. Many Slovenian banks are already owned by the state; the OECD has recommended stress tests and the potential recapitalization or closure of failing institutions, but Bratusek is having none of it, saying the bad bank that will be set up until early summer will be able to take the toxic assets. read article

This morning…
EU is considering extending the bailout programs for Ireland and Portugal. According to Reuters, where this story came from, this will be discussed at the Eurogroup meeting on Friday.

To make everything worse, the ECB’s [first ever] Household Finance and Consumption Survey found that the average Cypriot is richer than the average German (by median net wealth). Even though the classic North-South divide re-appears in the median gross income figures, that won’t go down too well. read article

China reported its first trade deficit in over a year for March 2013, again it could be another hangover from the Lunar New Year holiday, leading to increased imports, while exports grew less. read article

Meanwhile in the US, President Obama will unveil a $3.77tn budget plan at 11am EST today, when he will speak from the White House. read article

So long.

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Chinese inflation down, Goldman Sachs bad at German

Chinese inflation eased to 1.8% in July, more than the 1.7% expected by some, but less than the 2.2% in June and much much less than the 6.5% in July 2011. The most immediate reaction, paired with data showing the slowdown of industrial production and retail sales, is hypothesizing over the urgency, likelihood and effects of more quantitative easing by the Chinese government. Here’s the back and forth as according to Alphaville vs SocGen

The banking scandal du jour concerns UBS: discs indicating tax fraud of “big clients” showed up in Germany, while the bank is shifting to the center of libor manipulation claims in the US.

Otherwise, Greek unemployment rose to 23.1% in May, which is an increase of 0.5% from April. On the upside, industrial output has risen 0.3% after previously slumping by 2.9%. Yay. Fitch downgraded Slovenia, while warning Japan to get a grip on its debt measures to avoid a downgrade themselves. Further, the ECB has cut its 2013 GDP forecast from 1% to 0.6%, following a growth forecast cut of the Bank of England just yesterday. The FT argues that BoE is running out of things to do, while the pound is said to be headed for a slump.

After inventing the term BRICs for the emerging markets of Brazil, Russia, India and China, which later got extended for South Africa and also kind of included Indonesia at some point, Jim O’Neill, father of economic acronyms and chairman of Goldman Sachs Asset Management, got a new one in stock: MIST. And the MIST-countries are outperforming the BRIC-countries by a mile, according Goldman. Even the anti-anglo-saxon Germans appreciate the new promising investment turfs. Somewhat amusing, because loosely translated the acronym for Mexico, Indonesia, South Korea and Turkey means ‘shit’ in German.

So long.

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