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In reading Scott Sumner’s take on the China currency peg dilemma, I see that both he and Paul Krugman hit on the fundamental problem in the debate: reserves. Everyone is talking about the peg as if relaxing the peg will be the magic bullet to America’s current account problem. But this is clearly not the [...]

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News reports are now surfacing that the Germans are open to IMF involvement in the Greece sovereign debt crisis.  This is a 180-degree turn for the German finance minister who has expressed vocal opposition to the IMF’s involvement in ‘internal’ European Union affairs.
Bloomberg reports Germany making the shift to avoid being boxed in by a [...]

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As Irwin Stelzer argued in a recent opinion article in the Wall Street Journal, Spain’s Prime Minister José Luis Rodríguez Zapatero seems to be an admirer of Charles Dickens’s character Mr. Micawber. When asked what he plans to do about Spain’s 11.4% fiscal deficit, first he promises to extend the retirement age, only to later [...]

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Highlights
The US dollar is firmer against most currencies. The euro failed to extend Friday’s break up out of the $1.3436-$1.3788 range in which it has been trading since Mar 17th while against the Swiss franc, the euro is trading at its lowest level in 17 months.  The single currency is consolidating above $1.3685 support area [...]

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The US dollar is lower against most currencies with the European currencies leading.  Talk of an EU rescue package for Greece on the order of 55 bln euros has contributed to the moves helping to trigger stops.  The euro briefly broke up out of the $1.3436-$1.3788 range in which the currency has been trading since [...]

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The Financial Times has caught wind of a letter sent by U.S. Treasury Secretary Timothy Geithner to to the EU’s Michel Barnier. In only thinly-veiled language Mr. Geithner accused the EU of financial protectionism for the way Brussels is moving forward with rules to regulate hedge funds and other parts of the shadow banking system. [...]

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By Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge, editor of The Richebacher Letter, and a research associate of The Levy Economics Institute.
The question of fiscal sustainability looms large at the moment – not just in the peripheral nations of the eurozone, but also in the UK, the US, and Japan. More restrictive fiscal paths [...]

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Bundesbank President Weber has been the most candid to date about what the ECB could do in case Greece is downgraded again, especially by Moody’s.  Recall the problem:  Prior to the crisis, the ECB would take as collateral only paper rated A- or better.  During the crisis they have extended it to BBB-.  It is [...]

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The US dollar is mixed against the major and emerging market currencies.  The euro is consolidating in yesterday’s range as bonds stabilize and despite a smaller than expected German trade surplus.  Comments from EU spokesperson Altafaj just before the NY open that measures taken by Greece are sufficient have so far failed to take the [...]

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The Bloomberg video is a bit sensationalist in my opinion. But it gets to the heart of the problem in Europe, namely Spain. Spain has an economy and debt which is an order of magnitude larger than Greece. That means that problems in Spain are more critical than in Greece. But it also means that [...]