Auerback: Solvency Starts with the ECB

I thought I should highlight that Marshall Auerback was on Fox Business yesterday since he writes here occasionally. I wish it were more often! Marshall was on message regarding the euro zone debt crisis. His point: Additional liquidity is not a long-term solution to what ails Europe. It is about national solvency and economic growth

The ECB Long-Term Repo Operation is about price not quantity

To it’s credit, the ECB has been pretty good on the liquidity front all along. I’d give it an A grade for liquidity vs the Fed where I’d give a D grade for liquidity. Back in 2008 the ECB was quick to provide unlimited euro liquidity to its member banks, while the Fed dragged its feet for months before expanding its programs sufficiently to ensure its member banks dollar liquidity. And the FDIC did the unthinkable, closing WAMU for liquidity rather than for capital and asset reasons

The ECB now wants export-driven growth for the whole of Europe, not just for Germany

The ECB President admitted that budgets cuts and tax increases are contractionary -“in the short term” he added – but there are two ways to lessen their negative impact on growth: the confidence-enhancing effect that will follow the new “fiscal compact” or “if you enhance the competitiveness, you can actually count on your external demand, on your net exports”

Plan B for Breakup

There were only two questions that mattered, going into the EU summit. Would leaders come up with any actions to help end the immediate crisis? Falling short of this, would any of their actions allow the European Central Bank to step up its role and be a lender of last resort. The answer to the first question is very clear: NO. The answer to the second question is, unfortunately, another question

A Deep Seated Hostility Towards European Construction?

The British decision to veto the proposed new EU treaty is not surprisingly provoking an avalanche of commentary this weekend. Among journalists, at least, there seems to be a consensus that David Cameron committed some kind of major diplomatic blunder.

Possibly this is so, but given the difficulties presented by having to take this agreement forward outside the formal structure of the EU, it is hard to not reach the conclusion that both Angela Merkel and Nicolas Sarkozy have been guilty if not of a similar blunder, then at least a major error of judgment

Will the latest deal in Europe solve the debt crisis?

Place your wagers; poll embedded on the site. Answers: Yes; No; It depends on what ‘solve’ means

Full Text: Statement by the Euro Area Heads of State or Government on Fiscal Integration

Below is the statement released by euro area governments in support of the policy approach spearheaded by Angela Merkel and Nicholas Sarkozy to deal with the European sovereign debt crisis

The Rotten Heart of Europe

Frederick Sheehan writes that the purpose of this dispatch is to dispel rumors that current front-page treaty talks have any economic meaning. The European and U.S. stock markets react with a 3% or 4% gain after vague announcements, but we are getting closer to a day when the false prophets are stripped bare

Full text: Letter from Angela Merkel and Nicloas Sarkozy on the European debt crisis

The following letter from the German Chancellor and the French President was addressed to European Council President Herman Van Rompuy

Code words and dog whistle economics

Here are a few code words that you will often see in economic writing followed by their true meaning. The code word is a dog whistle. It acts like an emotional marker only for those attuned to the underlying ‘moral’ issues inferred by the code. While you may agree with the logical framework behind the code word, the purpose in using the code is to influence emotion instead of logic

Michael Hudson on the erosion of democracy

Michael Hudson was on RT’s Capital Account with Lauren Lyster, speaking about the loss of democracy that has accompanied the global financial crisis. The video is below, but recently Michael also wrote two articles for the Frankfurter Allgemeine Zeitung in which he gives one a more in depth view of his perspective

Key Disagreements at Late Stage Weighs on Euro

Germany and France are pushing for treaty changes. Under normal conditions treaty changes are a long drawn out process, subject to horse trading and vulnerable to domestic political considerations and the outcome is far from guaranteed. There some voices, including Van Rompuy, who want to “fast-track” treaty changes without requiring parliament approvals or referenda. Others disagree. Recall there have been numerous reports suggesting the European national central banks and the Federal Reserve would make bilateral loans to the IMF for which they could finance enhanced lending to the euro zone countries. Although we have argued that the IMF is the backstop for sovereigns, not the ECB, we think the process is more complicated than can be resolved at this summit. There does seem to be a significant role for the IMF, but the details have not been worked out