Some bankers sing this morning instead of ‘Purple Rain, Purple Rain’ – “Margin call, Margin call!”
Last week’s biggest news is not the Nonfarm Payrolls, or the European Central Bank or even Portugal’s government falling. No – the big deal is the openness with which the Federal Reserve is preparing a major margin call on the too-big-to-fail banks in the US.
This has been a long time coming since the introduction of the Dodd-Frank law back in 2010 but it is a game changer. Remember all macro paradigm shifts come from policy impulses, often mistakes.
Fed approves step one in a three-step plan: Continue reading “The Margin calls are coming big way”
Going back to the famous Maastricht Treaty.It connected a subset of EU states through a common monetary policy (EMU) and made no treaty provision for fiscal coordination.Well It was prepared the Stability and Growth pact (http://bit.ly/199QLRy), which took its legal authority from the Treaty on the Functioning of the European Union (TFEU).
So when Last July Mario Draghi, president of the European Central Bank, spoke of the ECB’s intent to do “whatever it takes” to hold the euro area together. In the months after his comment, the ECB unveiled its Outright Monetary Transactions programme, in which it pledged to make unlimited purchases of troubled government bonds under certain conditions. No policy has been as important in bringing down government borrowing costs around the periphery. Continue reading “Eurozone Crisis & The ECB”
Many have said that not all is not solved in the Euro-Zone. In fact, despite the ongoing rhetoric from the ECB that they stand ready to “do anything,” in reality they have done little to this point other than just talk the markets higher. While that has worked to a large degree to suppress rising interest rates on debt burdened Euro-Zone countries there has been no progress on the“unification” of the Euro-Zone or a resolution to its mounting debt problems.
Three Problems That Still Exist
There are still three major problems with the Euro-zone that, without fixing, will lead to the next chapter in the ongoing Euro-zone saga. Continue reading “Is The Eurozone Crisis Over”
The FT has recently done a timely article-on the consequences of the EU‘ ban on the naked CDS.
Investors are buying protection on European banks on the basis that banks and sovereigns are so intimately linked that any increased risk of a sovereign default will increase the value of a bank CDS in a similar way to a sovereign CDS.
“The big downside of the ban is that it is likely to increase borrowing costs for financials,” said Michael Hampden-Turner, Citigroup credit strategist. Continue reading “6 Months The Ban on Naked CDS in Europe”