Finance/Economics:
Countries don't go broke - Walter Wriston, early 1980s
We just may be in the midst of the biggest bubble in history. The complacency that the accumulation of all the ills of the many and massive bubbles that have ripped through the global economy in the past twenty years can simply be resolved by quantitative easing, monetization, printing money or whatever you wish to call it is simply stunning to us. The loss of confidence takes longer to happen than you think it should and happens faster than you thought it could. Governments can finance themselves until they can’t. Risk free is risk free until it isn’t. - Global Macro Monitor
The early founders acknowledged that a tighter fiscal union would eventually be necessary if the euro experiment were to survive. And eventually is now. As in this month. - John Mauldin
Not every stupid economic idea has to be defended to the bitter end. - Hans Joachim Voth
Mrs. Merkel has been speaking in Berlin this morning, and she seems to be ruling out everything. But what the markets want to know is, what IS the solution? - The Telegraph
In the immediate term, honoring the spirit of the treaty as originally conceived risks tearing down the very thing the treaty was intended to build: Europe’s single currency. If the price of preserving the ECB’s credibility is to destroy the monetary union over which the ECB presides, what’s the point? Merkel may be ready to burn the village to save it. Europe’s other leaders should tell her firmly, no thanks. - Bloomberg
Germany and the ECB have so far hoped that their view of the crisis is correct: The periphery is in trouble because of a lack of fiscal discipline and structural reforms. So, fiscal discipline and structural reforms are the necessary solutions even if they imply painful adjustment and sacrifices for the periphery for a number of years. Germany and the ECB may turn out to be right, but we suggest that the painful medicine will be—however necessary over the medium term—too painful and recessionary in the short run and for long enough that it will not be viable. Also, the EZ periphery’s fundamental loss of competitiveness—manifesting itself in now unsustainably large current account deficits—requires a real depreciation that will not be achieved quickly enough with reforms and deflation that depress output for too long before they restore growth. Thus, debt reductions and real depreciation via an EZ exit and a return to national currencies will become—however costly—unavoidable and less painful than the alternative of recessionary deflation. - Nouriel Roubini
If countries like Belgium lack a national consensus, while others like Italy and Spain have minorities (who pay more than their numerical share) who are not really convinced they want to be in the country, then how can a fiscal union which would be based on some countries permanently paying (the so called transfer union) while others continually receive hope to hold itself together politically? - Edward Hugh
With continued Target2 credit access, Greece could theoretically continue to issue unrestricted amounts of euro banknotes — which could, logically, be used to settle cross-border payments, allowing it to continue running up eurosystems debts. Thus, in that scenario identification markers for Greek issued euronotes might suddenly become a good idea. But, of course, that would be nothing more than the unofficial reinstatement of the drachma itself. A fact which in itself means that Greek default inevitably equals eurozone breakup. As Whittaker concludes, it is this fact, above all, that persuades Germany and others to keep lending, whether this is via EFSF loans, levered EFSF loans, ECB-backed loans, Eurobonds or the eurosystem itself. - Izabella Kaminska
Two years ago I suggested that if a young and unknown politician in Europe wanted to become an important player, there were two things he should do: criticize Germany, and attack the euro. These are both likely to be enormous vote getters over the next two years, and they are the reason why, in my opinion, the extremist parties of the right and left will do so well in the next few elections. - Michael Pettis
Since the Italian and Greek governments lack democratic legitimacy, any decisions they make are suspect/can be reversed after elections. - Edward Harrison
In a 3-year study, EU concluded there is no evidence that drinking water can cure dehydration and has banned bottles from stating that claim. Previously, EU officials banned the selling of overly bent bananas and curved cucumbers but backed off after international ridicule. - Mish
It is easy for other European governments to complain about Germany being stubborn, but Germany's concerns are well placed. The desire to use the ECB to print money is nothing more than a veiled desire to steal fiscal resources disproportionately from the German people. - John Hussman
This phrase 'lender of last resort' has been bandied around by people who, it seems to me, have no idea what lender of last resort actually means, to be perfectly honest. It is very clear from its origin that lender of last resort by a central bank is intended to be lending to individual banking institutions and to institutions that are clearly regarded as solvent. And it is done against good collateral, and at a penalty rate. That's what lender of last resort means. That is a million miles away from the ECB buying sovereign debt of national countries, which is used and seen as a mechanism for financing the current-account deficit of those countries, which inevitably, if things go wrong, will create liabilities for the surplus countries. In other words, it would be a mechanism of transfers from the surplus to the deficit countries. - Mervyn King
The bottom line is this, the call for massive ECB purchases of distressed European sovereign debt is not simply a call for a liquidity-providing intervention, but is an attempt to address a solvency issue. Liquidity issues can often be addressed through temporary increases in the stock of money, but to address solvency issues, you have to print permanent money. A memorable instance of permanent money creation as a means of financing budget deficits was in 1922, when Germany began printing money in order to keep paying striking workers in the Ruhr even though they were not producing goods and services. The shift to printing money triggered an immediate flight away from the German mark. The resulting hyperinflation is well-remembered by the German people even if the rest of the world has forgotten. - John Hussman
As the ECB prints and the Euro declines and inflation rises, then what? Will Italy and Greece really cut back pensions when inflation is rising? Will Germany be forced to raise their social benefits to catch up to Greece and Italy? Printing takes off the pressure, and inflation ensures that the higher levels of benefits are necessary. Will this actually become self fulfilling inflation as the austere countries race to provide benefits similar to those frivolous countries? - Peter Tchir
At this point most investors would dump their entire holdings of Italian debt to any sucker – the ECB, European Financial Stability Facility, IMF or whoever – willing to buy it at current yields. If a lender of last resort appears, Italy’s entire debt stock of €1,900bn will be soon supplied. - Nouriel Roubini
The IMF can be refunded by its 186 members. One of which, the US, is required to pay 17.72% of all funding. While the Eurozone countries combined pay -only?!- around 30%. The idea is clear: get the whole world to pay, since if they don't, they too will suffer the consequences. And the Eurozone doesn't have the means to do it by itself. Go through the IMF and Europe saves two thirds of the cost. - The Automatic Earth
I think to pursue competitiveness policies by manipulating or steering down the nominal values of the exchange rate is a loser's game. In the limit, it gets you to Zimbabwe, which didn't exactly become a hub of competiveness - Willem Buiter
These are strange times, and strange arguments abound. Some argue that the Japanese government, for example, can go on printing debt indefinitely and there is no risk. Others say a central bank shouldn't worry about losses, although to my ears there is something strange about an ultimate financial backstop itself being insolvent. Banking is all about trust, whatever type of banking it is. I remember sitting in my office in London when queues formed outside Northern Rock just around the corner. This brought home to me the role of faith and trust. The deposits of this bank were backed by the UK government. This was made clear on TV and also directly to the queues outside this commercial bank. However nobody left the queue and we had the first bank run since the introduction of deposit guarantees. However the simple fact is that nobody knows what happens to faith in the paper currency of a developed world currency when the headline ‘Central Bank Goes Bust’ is on the front page of the papers. I don’t know either but the Northern Rock example suggests that it would be dangerous to run the experiment to find out! Who at any central bank really wants to take this risk?
European purchases of bars and coins more than doubled to 118.1 tonnes in the third quarter, accounting for 30% of total coin and bar demand and making it the single largest source of demand for bullion in this form. - Reuters
Over the next decade, the US government expects to spend more than $40 trillion. Even if the $1.2 trillion in automatic cuts are allowed to go through, the amount totals just 3% of the expected outlays. In a masterstroke of hypocritical accounting, $216 billion of these proposed “cuts” merely represent the expected reductions in interest payments that would result from $984 billion of actual cuts - Peter Schiff
Based on Congressional Budget Office projections, this year’s U.S. fiscal gap is $211 trillion, or about 14 times gross domestic product. By comparison, Greece’s is 12 times GDP. Germany's is three times GDP. - Laurence Kotlikoff
Credit default swaps on banks are blowing out even in the U.S., despite leverage ratios that are substantially lower (in the 10-12 range, versus 30-40 in Europe). As of last week, CDS spreads on U.S. financials were approaching and in some cases exceeding 2009 levels. Bank stocks are also plumbing their 2009 depths, but with a striking degree of calm about it, and a definite tendency for scorching rallies on short-covering and "buy-the-dip" sentiment. There is a strong mood on Wall Street that we should take these developments in stride. I'm not convinced. - John Hussman
China's local government debt may be almost 3 trillion yuan ($473 billion) higher than the figure given by the nation’s audit office, if loans taken out by township governments are included, the Economic Observer reported. Duyang, a township in Yunfu city in the southern province of Guangdong, has more than 200 million yuan worth of debt while its annual fiscal revenue is only 500,000 yuan, the Beijing- based Economic Observer said - Bloomberg
Larry Lang, chair professor of Finance at the Chinese University of Hong Kong, said in a lecture that he didn’t think was being recorded that the Chinese regime is in a serious economic crisis—on the brink of bankruptcy. In his memorable formulation: every province in China is Greece.
Everything appears normal in Wenzhou. The streets leading from the city center to the surrounding factory districts are jammed as usual with trucks and delivery vans, new Range Rovers and dilapidated Citroen taxis. Beneath the surface, however, a mad race to collect debts is under way. For much of October, the Kid says he slept only two or three hours a night as he pondered how to claw back outstanding loans. "If people could get their money back just by holding other people at gunpoint, there would have been a riot in Wenzhou," he says. "It seems calm on the surface, but the chaos is underneath." - Austin Ramzy
Property sales in Mumbai’s overheated market have dropped by a jaw-dropping 70 percent from 2007 peak levels while overall prices have risen 20 percent. - Knight Frank report
Here are the options, now choose - Nouriel Roubini
Someone please send this chart to the Germans - Joe Weisenthal/Business Insider
Unicredit Bombshell shouldn't be the last one - Jonathan Weil/Bloomberg
Deutsche bank could transfer contagion - Simon Johnson/Bloomberg
Video: Congressional insider trading - Credit Writedowns
China's economy on the brink of collapse? - The Epoch Times
Is Manmohan taking us back to 1991? - R. Jagannathan/Firstpost
Now, inclusive non-growth - Business Standard
Budget in tatters, fiscal deficit set to soar - S. Gangadharan/DNA
FDI in retail: Why the politicians are wrong - Firstpost
The RBI should forget forex rates and focus on inflation - Ajay Shah/Firstpost
Make it easier for millions to start a business - Swaminathan Aiyer/Times of India
Political/Social:
War, plague, famine, heart disease, cigarettes, road trauma: six very effective killers of human beings. But they're all amateurs when their records are compared to the number one mass murderer of all time. The humble mosquito, and the deadly diseases it carries, is estimated to have been responsible for as many as 46 billion deaths over the history of our species. That staggering number is even more frightening in context - it means that mosquitoes are alleged to have killed more than half the humans that ever lived. - Loz Blain
The irony is that there are plenty of grounds on which the opposition parties can hold the Indian government to account, given the past two-plus years of wholesale misgovernance. Their failure to do that, except by contributing to high-decibel hysterics, only reflects a colossal lack of political imagination. - Venky Vembu
Genetic Genocide: Wiping out humanity's biggest killer - Loz Blain/Gizmag
No country for young children - Sandip Roy/Firstpost
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