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Contagion Fear in Europe

Contagion Fear in Europe

Most analysts agree that Greece is insolvent. This column argues that the issue is whether Greece’s troubles are contagious.

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The Mosler Plan for Greece

The Mosler Plan for Greece

The following is an outline for a proposed new Greek government bond issue to provide all required medium term euro funding for Greece on very attractive terms. The new bond issue includes an addition to the default provisions that eliminates the risk of loss to investors. The language added to the default provisions states that while in default, and only in the case of default, these transferable securities can be used directly, by the bearer on demand, at face value plus accrued interest, for payment of any debts, including taxes, owed to the Greek government.

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The Eurozone Could Break Up Over a Five-Year Horizon

The Eurozone Could Break Up Over a Five-Year Horizon

Nouriel Roubini writes that the current “muddle through” approach to the eurozone (EZ) crisis is not a stable disequilibrium; rather, it is an unstable disequilibrium. Either the member states move from this disequilibrium toward a broader fiscal, economic and political union that resolves the fundamental problems of divergence (both economic, fiscal and in terms of competitiveness) within the union or the system will move first toward disorderly debt workouts and eventually even break-up, with weaker members departing. Over a five-year horizon, the odds of a break-up are at least one-third.

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Can Obama cut the deficit and have job growth too?

Can Obama cut the deficit and have job growth too?

Stephanie Kelton demonstrates that as long as unemployment remains high, the deficit will remain high. Here’s the formula: Spending creates income. Income creates sales. Sales create jobs. If you think you can cut the deficit without destroying jobs, dream on. She argues that instead of dreaming about ways to pull off the impossible, it’s time get to work on a plan to increase employment.

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The Euro system contains a serious design flaw

The Euro system contains a serious design flaw

The primary difference for Euroland to sovereign issuers is that the Euro can only be created by the ECB – it is the issuer of the currency. The governments of Ireland, Greece, Spain, Germany, etc. are the USERS of the currency. The implications of this distinction cannot be overstated. Members of the Eurozone are like individual states in the US. Like California, Ireland must go out and ‘get’ the currency – either by taxing or borrowing – before it can spend. It must pay whatever financial markets demand, and it can be priced out of the market. It can become insolvent, and it can be forced to default on its debt.

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The ECB is not conducting a stealth bailout

The ECB is not conducting a stealth bailout

In a recent column at VoxEU , Hans Werner Sinn of the prestigious Institute for Economic Research claims that the German Bundesbank is effectively propping up banks across the Eurozone’s periphery. He adds that doing this risks a major crisis. Here, Karl Whelan of University College Dublin argues that Professor Sinn’s analysis is incorrect and that his policy prescriptions are extremely unhelpful and even dangerous.

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China GDP history

China GDP history

This chart is for year over year ‘real’ GDP growth. Note the recurring first quarter spikes followed by dips, presumably due to front loading annual state spending and lending.

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Iceland: Welcome back to the 1950s

Iceland: Welcome back to the 1950s

The global crisis has brought many countries to their knees, none more so than the small island of Iceland whose losses amount to seven times its GDP. Yet while Iceland’s recovery has in many ways been remarkable, this column argues that the country’s capital controls stand in the way of further progress.

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US Economic Growth Still Weak

US Economic Growth Still Weak

Although the overall reported headline rate for the GDP remained essentially unchanged, the numbers reflected somewhat weaker consumer contributions and anemic “real final sales”.

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Macro E.U. – D.O.A.

Macro E.U. – D.O.A.

Within the context of our Macro-Global Discretionary Managed Accounts Trading Program, we are bearish on European stock markets, and are becoming increasingly interested in the bearish side of the US equity market. We are bearish on bond markets linked to fiscally challenged countries, against a bullish stance on the US and German bond markets.

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Debt Ceiling: No Chance of US default

Debt Ceiling: No Chance of US default

Not raising the debt ceiling will not mean default, instead it will mean other federal spending will get cut

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Philly Fed survey, existing home sales, leading indicators disappoint

Philly Fed survey, existing home sales, leading indicators disappoint

Typical street review of today’s numbers from Goldman. As suspected, look for continued downward revisions to initial 4% Q2 estimates. And note the graph below showing employment as a % of the population. The economy continues to be demand constrained at very low levels. (That is, for the size government we have, we are grossly over taxed.) There could be as many as 30 million additional people gainfully employed in a good economy.

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