The White House announced today that The Leader will do all that is necessary for American Gun Control through the use of 16 Executive Fiats in a tacit admission that the laws The Leader wants passed cannot be passed so what the hell, we'll have them anyway. This is becoming fascinating to watch; We may have a King before we are done! I jest...do I not.
Anyway, the back and forth on the debt ceiling became more heated today with more advice being thrown about on both sides. I think in the back of a lot of minds is this train of thought: we are hurdling along on a pace that will, in a few short years, produce $20 trillion in debt and one of the things facilitating that fact is the absence of any market discipline as a result of the actions of the Federal Reserve which has inserted itself into the process in a manner so immense that the age-old cry of "Don't fight the Fed" has become almost a joke. At this stage it may appear to some that the only way to protect the future is to cause a catastrophe now; an event to which there will be such adverse repercussions as to deny future market access only at levels that cannot be affected by continued Fed intervention...i.e. a default. As long as The Leader and his followers, encouraged by the Krugmans of the world, believe that their dreams for a future America as a European-like social democratic state can be financed indefinitely, there will be no change in current policy, hence the funding train must be derailed despite the clear costs of such an action. Or so the thinking goes. But the absolute faith in the European model is all consuming on the left. Despite the fact that it's state today can best be described in that wonderful old Oz (I think) phase, "Hopeless but not serious" matters not a whit. These are true believers, you see, and will not be outdone. And so it goes.
Anyway, in this week of Bank earnings, I've been thinking about another thing. We have but two real Investment banks remaining on a surface that once gave home to dozens. Goldman and Morgan Stanley. Problem is, we don't call them that any more; we simply call them banks, which raises a number of new issues and results in a number of points of confusion. Are all "banks" the same, and if not why is the funding protection and oversight of the Fed being applied to these two institutions which are not only different from one another but wildly different from the other "banks" out there? Oh, I understand how it came about and why but in this brave new world created by our regulators does it need be so today? This is something else I would like to look at in the coming days.
My final little amusement of the day came as a courtesy of CNBC which likes to refer to itself as the world's leading news network. The subject was Japan and if we didn't look out Japan was capable of starting a currency war as a result of the announced devaluation of the Yen (which today slowed as a result of Mr. Abe remarking he thought it had gone far enough). Apparently, busy with other things, CNBC has missed that the Fed's balance sheet roar past $3 trillion on it's way to four trillion at the tune of an announced $85 billion a month and the devaluation of the dollar against a global currency mix of 12% in the last few years. CNBC apparently works under the same game plan as The Leader: we won, you lost Japan. If we say the current currency war is your fault.......it damn well is.
Correction. I stated last week that the on the run Italian 3 year traded just short of 4%. It actually traded just short of 3%
Showing posts with label Debt Ceiling. Show all posts
Showing posts with label Debt Ceiling. Show all posts
Tuesday, January 15, 2013
Monday, July 25, 2011
LA FORZA DEL DESTINO
This squabble over the debt ceiling is a lot more than some folks think it is especially our Euro friends as was brought out to me quite vividly by my friend, Gordon, who rang up from Blighty.
I've known Gordon for over 30 years: brilliant, funny, fablously successful, married to an American and lived, worked and was educated in America for years. So I was a bit surprised when he suggested (I hoped, jokingly) that maybe our constitution really wasn't useful as a governing document any more, given this stalemate over the debt ceiling.
"A mess, Charlie, I mean you blokes simply can't make decisions with that cumberson thing dreamed up 200-odd years ago. I mean, really, what's the point?"
Gordon doesn't get it and it made me aware that if he doesn't, then my other Euro friends and Euro readers of this blog probably, in one case and almost certainly in the other, do not either. This isn't a simple disagreement or failure of governmental structure that's going on over here; this is something far, far bigger whose ultimate resolution will have profound consequences. To the vast majority of non-Americans this country consists of those areas between Washington D.C. and Maine and California and the State of Washington. That is what yoy visit.; that is where you work and it from those area that your opinion of America is shaped because that is where the communication purveyors are located. It is Liberal, and "cultured," urban, conformists and very rich. What you tend to miss because the vastness of the country prevents it is the 200,000,000 people who live between the two areas I mentioned. Those people tend to be conservative, less cultured and remarkable independent in both thought and way of life. Among that group there are a hell of a lot--more than I thought--who are also very rich and as families have been so for generations. The Leader is from the first group. He, like they, are statist in the European tradition, believers in a form of welfare state and a strong governmental influence in society. The second group wants no part of that vision. What this ultimately will decide is what the United States will look like in the coming century: Sweden--to use an over-used analogy or...well, something considerably less. What our Euro friends should understand, however, is that the lesser role envisioned by The Leader which so endeared him to Europe really would mean the end of Pax Americana. You will be on your own, gang, and the world is still a nasty place. November of 2012 is a very important date. The result will create a force of destiny.
And as for Europe...the Italians cancelled an auction today, the Spanish 10 year blew out to way up in the 6% range and the talk of what a great deal the Greek tragedy was for the banks was rampant. A bit more of this and we may have a few different looking governments in the Euro Zone come October and then who knows what happens. What I forgot to mention the other day was the flip side of the hedge fund story. There may be a few--or a lot--of funds that picked up Greek debt late; at a dicount from par of up to 50%. Now if you own it at 50 and can surrender it at 80, would you take that deal? When that happens and it becomes public--as it will--how ticked off will be the German taxpayers? Keep thinking of the Yogi-man...it aint over 'til it's over.
I've known Gordon for over 30 years: brilliant, funny, fablously successful, married to an American and lived, worked and was educated in America for years. So I was a bit surprised when he suggested (I hoped, jokingly) that maybe our constitution really wasn't useful as a governing document any more, given this stalemate over the debt ceiling.
"A mess, Charlie, I mean you blokes simply can't make decisions with that cumberson thing dreamed up 200-odd years ago. I mean, really, what's the point?"
Gordon doesn't get it and it made me aware that if he doesn't, then my other Euro friends and Euro readers of this blog probably, in one case and almost certainly in the other, do not either. This isn't a simple disagreement or failure of governmental structure that's going on over here; this is something far, far bigger whose ultimate resolution will have profound consequences. To the vast majority of non-Americans this country consists of those areas between Washington D.C. and Maine and California and the State of Washington. That is what yoy visit.; that is where you work and it from those area that your opinion of America is shaped because that is where the communication purveyors are located. It is Liberal, and "cultured," urban, conformists and very rich. What you tend to miss because the vastness of the country prevents it is the 200,000,000 people who live between the two areas I mentioned. Those people tend to be conservative, less cultured and remarkable independent in both thought and way of life. Among that group there are a hell of a lot--more than I thought--who are also very rich and as families have been so for generations. The Leader is from the first group. He, like they, are statist in the European tradition, believers in a form of welfare state and a strong governmental influence in society. The second group wants no part of that vision. What this ultimately will decide is what the United States will look like in the coming century: Sweden--to use an over-used analogy or...well, something considerably less. What our Euro friends should understand, however, is that the lesser role envisioned by The Leader which so endeared him to Europe really would mean the end of Pax Americana. You will be on your own, gang, and the world is still a nasty place. November of 2012 is a very important date. The result will create a force of destiny.
And as for Europe...the Italians cancelled an auction today, the Spanish 10 year blew out to way up in the 6% range and the talk of what a great deal the Greek tragedy was for the banks was rampant. A bit more of this and we may have a few different looking governments in the Euro Zone come October and then who knows what happens. What I forgot to mention the other day was the flip side of the hedge fund story. There may be a few--or a lot--of funds that picked up Greek debt late; at a dicount from par of up to 50%. Now if you own it at 50 and can surrender it at 80, would you take that deal? When that happens and it becomes public--as it will--how ticked off will be the German taxpayers? Keep thinking of the Yogi-man...it aint over 'til it's over.
Thursday, July 21, 2011
SUCH A DEAL
Well, the sun came out for Greece today. I'm not sure as to all the details but what the Euros apparently agreed to was a package of over 100 Billion Euros with the private sector contributing approximately 1/3 of the amount in the form of extended maturities of existing debt, swaps of debt for thirty year obligations and the sbility of Greece to but back it's debt at a discount. On top of all of that there will be Euroland guarantees on top of the new private debt thereby insuring that the European taxpayer will bear the full burden of this momentus deal.
When one says "private sector," the immediate thought is banks and other financial institutions which is fine if that is where the debt resides because as we have repeatedly discussed governments can always beat up on banks to "do the right thing.". It's a bit more sticky, however, if the holders are really private like hedge fund or vulture funds. If that is the case one is immediately faced with the Obama General Motors solution; tear up existing law and threaten the holders to go along. Worked here--could work there. If you are really clever, you can try to determine at whaat price those holders obtained the debt and then permit the Greeks in any buy-back to guarantee a profit, Problem there is these boys are not going to be happy getting just 85 for something they own at 83, but hey, it's burden sharing isn't it? Should be fun to see what happens.
Of course throughout this exercise there was probably never a thought given to any realistic assumption of the Greeks being able to manage their finances so that even this deal will work out in the end. Not the issue. To the greatest extent possible they saved the banks (always the goal) and will probably strong-arm the rating agencies into not declaring this to be a default allowing M. Trichet to toddle off into the sunset with his Gaelic pride and sense of rightousness intact. Bravo, guys, always knew you had it in you. And now with this triumph behind them they can begin to worry about Portugal and Spain, assuming that a couple of governments don't fall before they can really get to the down and dirty. I don't know whether this thing has to be ratified by the individual legislatures which might be a tad awkward in a place like Germany, and I'm hardly an expert in European politics. A good buddy has just told be Frau Merkel is certainly toast at this point; I'm not in a position to agree or disagree but once the full extent of the national burdens a understood, a lot can change. I don't think it's over, as the Yogi-man said, 'til it's over. I must admit, however, I'm surprised they got this much accomplished in this time frame. Oh well...
Meanwhile, on this side of the pond things are beginning to look grim. The Gang of Six's outline has, as expected, a lor of holes in it and questions attached. The Leader reiterated that he's willing to take a short-term extention but added he wants higher taxes. Non-starter. The House proposal is going no where. Discussion has begun on a short-term extention coupled with spending cuts and the requirement that the marking-up of a new tax code and specific deficite reduction measures begin immediately. The Leader doesn't like that. No point in speculating, we just might as well wait to see what happens, and that's exactly what I'm going to do.
I must admit I took some heat for my comments about The Suit yesterday but while bloody, I am unbowed. He doesn't know what he's talking about but at the same time he has the unmitigated gall to lecture the world has to the joys of Dodd/Frank and it's improvement to the system when it was he, who for five years headed the most important regulatory body around, the N.Y. Fed, and apparently was clueless as to the risks that swirled around him. I mean, DUH! And now he finds religion when it is apparent to anybody with half a brain that as a result of this hair brained piece of legislation there is probably more risk in the system through institutions that will be designated TBTF ( go for it bro' I gocha back!) and certainly no less? From the two clowns that brought you Fanny Mae and Freddie Mac: a piece of legislation whose rules, after one year are still to be written because nobody knows how to write them and $250 billion in losses and still counting. Damn, we're just like Europe. At least those guys can do it over a decent lunch.
When one says "private sector," the immediate thought is banks and other financial institutions which is fine if that is where the debt resides because as we have repeatedly discussed governments can always beat up on banks to "do the right thing.". It's a bit more sticky, however, if the holders are really private like hedge fund or vulture funds. If that is the case one is immediately faced with the Obama General Motors solution; tear up existing law and threaten the holders to go along. Worked here--could work there. If you are really clever, you can try to determine at whaat price those holders obtained the debt and then permit the Greeks in any buy-back to guarantee a profit, Problem there is these boys are not going to be happy getting just 85 for something they own at 83, but hey, it's burden sharing isn't it? Should be fun to see what happens.
Of course throughout this exercise there was probably never a thought given to any realistic assumption of the Greeks being able to manage their finances so that even this deal will work out in the end. Not the issue. To the greatest extent possible they saved the banks (always the goal) and will probably strong-arm the rating agencies into not declaring this to be a default allowing M. Trichet to toddle off into the sunset with his Gaelic pride and sense of rightousness intact. Bravo, guys, always knew you had it in you. And now with this triumph behind them they can begin to worry about Portugal and Spain, assuming that a couple of governments don't fall before they can really get to the down and dirty. I don't know whether this thing has to be ratified by the individual legislatures which might be a tad awkward in a place like Germany, and I'm hardly an expert in European politics. A good buddy has just told be Frau Merkel is certainly toast at this point; I'm not in a position to agree or disagree but once the full extent of the national burdens a understood, a lot can change. I don't think it's over, as the Yogi-man said, 'til it's over. I must admit, however, I'm surprised they got this much accomplished in this time frame. Oh well...
Meanwhile, on this side of the pond things are beginning to look grim. The Gang of Six's outline has, as expected, a lor of holes in it and questions attached. The Leader reiterated that he's willing to take a short-term extention but added he wants higher taxes. Non-starter. The House proposal is going no where. Discussion has begun on a short-term extention coupled with spending cuts and the requirement that the marking-up of a new tax code and specific deficite reduction measures begin immediately. The Leader doesn't like that. No point in speculating, we just might as well wait to see what happens, and that's exactly what I'm going to do.
I must admit I took some heat for my comments about The Suit yesterday but while bloody, I am unbowed. He doesn't know what he's talking about but at the same time he has the unmitigated gall to lecture the world has to the joys of Dodd/Frank and it's improvement to the system when it was he, who for five years headed the most important regulatory body around, the N.Y. Fed, and apparently was clueless as to the risks that swirled around him. I mean, DUH! And now he finds religion when it is apparent to anybody with half a brain that as a result of this hair brained piece of legislation there is probably more risk in the system through institutions that will be designated TBTF ( go for it bro' I gocha back!) and certainly no less? From the two clowns that brought you Fanny Mae and Freddie Mac: a piece of legislation whose rules, after one year are still to be written because nobody knows how to write them and $250 billion in losses and still counting. Damn, we're just like Europe. At least those guys can do it over a decent lunch.
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