The endeavour below is to – explain a very complicated circular trading (round tripping algorithm) nonsense that became a crisis – in a simple way.
MARY is the proprietor of a bar in Dublin. She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar – she will go broke.
To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.
She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around about Mary’s ‘drink now, pay later’ marketing strategy and, as a result, increasing numbers of customers flood into Mary’s bar. Continue reading “Greece Crisis in simplified terms”
Recently Jörg Bibow was interviewed have tried to put the points in English stating that Mario Draghi’s announcement promise of ECB support for government bond markets seems to have calmed fears of an imminent euro breakup, at least for the time being. That does not mean the euro crisis is over though. Not at all, as the underlying problems remain largely unresolved. Liquidity can buy time but it cannot solve the imbalances inside the euro area and related debt overhangs that are the deeper cause behind the euro crisis. It is important in this context that the ECB promise is for conditional support. As liquidity support comes along with mindless austerity and asymmetric adjustment pressures imposed on debtor countries, debt problems are bound to get worse rather than better. Markets are currently in complacency mode about these prospects. The crisis may resurface at any time.
He pointed out Germany as the main culprit behind the euro crisis. Being the largest economy in Europe, Germany’s performance and policies inevitably impact Europe. In the currency sphere Germany is also Europe’s traditional anchor of stability. As a result, the policy regime of Economic and Monetary Union agreed at Maastricht is largely of German design, based on the Bundesbank success story and deutschmark stability. It was not understood that the pre-EMU success of the German model of export-led growth required that other countries behaved different from Germany. Continue reading “The Euro Crisis is on”
EU to Cyprus: “all animals are equal, but some animals are more equal than others“…Sunday night markets will tell if this is Lehman II 🙂
So it turns out that those who noted that the Cyprus bailout took place ahead of a local bank holiday on Monday were onto something. The terms of the bailout deal represent a huge leap in how the EU is tackling the crisis. Time will tell whether this leap is over or into the chasm.
This is a quick reaction post. I will focus on likely market reaction because that is what I know about – and why you’re likely reading my ramblings – and leave meditations on justice and democracy to people closer to the action.
Continue reading “CYPRUS Bailout Fair or Unfair”
The topic looks to me never-ending, I have done more than 3 dozen of articles on the European crisis but it looks far from over. With no intention of hurting any body sentiments and due apologies to my friends in Greece and Europe.
It was time for the “Men in Black,” as the Greeks call them, to depart once again — without having accomplished anything. The troika, consisting of representatives of the IMF, the European Commission and the European Central Bank (ECB), had had enough. Continue reading “Saving Greece Intentions from Europe”
The SMP is dead! Long live the SMP!
OMT? Surely they could have just called it SMP2
What am I talking about?
It took the ECB a year of endless behind the scenes Machiavellian scheming to restart the SMP (Securities Markets Program) now Continue reading “ECB Bailout Yes/No”