March to Folly: Underestimating Germany and the ECB

The probability of a German-led fiscal union in Europe is greater than the consensus suspects given its arguments that only an ECB backstop and a European bond will prevent the end of the greater experiment. In addition, the argument is that such actions will not resolve the underlying problem of fiscal sustainability and restoring competitiveness. Recognizing that Germany is pursuing its self-interests which is perfectly understandable under a rational actor and realist framework, this argument warns that the consensus may be exaggerating the likelihood of German and ECB capitulation

Video: Mockumentary Presents: Politics in America

An in-depth (and cynical) look at the current political environment in America, from the Occupy Wall Street protesters to the President’s reaction to the Republican Primary via Omid Malekan, creator of the Quantitative Easing Explained and European Crisis Explained videos

Don’t change the change!

Why the IMF thing works for the euro

Editor’s note: the IMF musings would be difficult politically, especially in the US. And any deal for Italy would also have to involve Spain too. However, Perhaps most important, operationally, the ECB lending to the IMF, which then lends to euro member nations, doesn’t count as ‘printing money’ in the Teutonic monetary bible

Franco-German secret negotiations for new euro contract

Boxed in by the ever-worsening sovereign debt crisis, the Franco-German euro zone axis is trying to formulate a policy that both adheres to the German economic orthodoxy without worsening the crisis any further

Juergen Stark explains ECB opposition to monetisation is not about inflation

As I have been saying at Credit Writedowns, the ECB’s opposition to monetising sovereign debt is not about inflation concerns but rather its resistance to moving into a politicised quasi-fiscal role

Foreign News: Commerzbank capital, Portuguese bailout, Franco-Belgian problems

Here is the second version of this foreign news links post that I am starting. The feedback yesterday was good. You all said it makes sense to see what the press in country are saying in Europe since that is the locus of the sovereign debt crisis, so I will continue this

PIMCO’s Mohamed El-Erian: US recession odds are 50%

Pacific Investment Management Co.’s Chief Executive Officer Mohamed A. El-Erian told Bloomberg TV’s Betty Liu and Dominic Chu this morning that U.S. economic conditions are “terrifying” as the nation struggles to recover from recession. El-Erian also said the odds of the U.S. returning to recession are as high as 50%

Aznar: Spain will show fiscal discipline but we may need the ECB to avoid a “disaster”

While Spanish Prime Minister-elect Mariano Rajoy was preparing for continued austerity in Spain, his Popular Party colleague, Former Spanish Prime Minister Jose Maria Aznar, was talking to Bloomberg Television about the outlook for his country’s economy and the mandate of the European Central Bank. He spoke to Bloomberg’s Emma Ross-Thomas in Madrid, saying the ECB may be needed to avoid a “disaster”

Credit Writedowns Weekly Report, Vol 1 Issue 1: European and US Sovereign Debt

With the fundraiser week winding down, I am going to start making a few changes now. One thing we probably need is a synopsis of the past week’s posts in order to tie the week’s events together thematically. I will make this synopsis using the most read and tweeted posts plus the ones I think are most relevant to what’s actually happening in global markets and the economy.

This week there is a ton of stuff here. So, here we go with the weekly report volume 1, issue

Spain: Fifth Government in Periphery Falls

New governments in Greece and Italy have brought no real relief to the financial markets. There are forces in motion that are not about which personality or interest group is implementing the various austerity programs.

Spain is unlikely to prove to be an exception. The dynamics are essentially the same. The economies are deteriorating faster that the austerity is being implemented, resulting in the overshooting of deficit targets, which in turn necessitates more austerity

Le Pen: France must leave the eurozone

With the euro zone about to implode, it makes sense for politicians outside of the main stream to rise up, grab the metaphorical mic and make a play for a nationalist response. That’s what Marine Le Pen hopes to do

More on the political economy of the European sovereign debt crisis

European economies are really breaking down and panic has set in. You see pointless proposals to lord over supposed fiscal free riders from Finland and unelected governments lacking in political legitimacy and taking unfavourable economic policies in both Greece and Italy. Europe is clearly on the edge