Volatility is still elevated in US equity markets. Rising real yields are the big factor there. All signs are that real yields can continue to rise. But going forward, globally, some other issues to consider are household debt and the ECB’s likely regime shift.
The European PMIs that came out today showed an EU economy that is not just in full recovery mode, but booming. Likely the ECB will reduce its level of accommodation in line with this growth.
The Eurozone economy is doing really well. Some data points to 3% growth. The German economy is doing even better – with some data pointing to 5% annualized growth. But there’s a downside – overheating. And with the ECB at negative rates and engaged in 60 billion Euros of QE to boot, overheating in Germany is a reasonable fear. Some thoughts below
According to Jon Hilsenrath at the Wall Street Journal, ECB and PBOC easing aren’t obstacles to a Fed rate hike before year-end. Yet, the Wall Street Journal is running a headline as its top story showing that “U.S. Companies Warn of Slowing Economy”. Given monetary policy acts with a lag, we are now in a dangerous period for the US economy.
There are a lot of competing narratives going around as to why Greece is in such trouble relative to the rest of the eurozone. A lot of this centers on whether Greek fiscal profligacy or poor credit controls by foreign banks was the main cause of the Greek debt crisis. Let me throw my hat into this ring with a few comments. What I say below will generally shade toward the problem being one of fiscal profligacy worsened by an ECB monetary policy that was inappropriate for the eurozone periphery as a whole and Greece in particular.
The existence of capital controls eliminates contagion and makes it possible to bail-in deposits that would normally be considered to have systemic consequences. The more I look at it, the less benign this bailout deal appears. Indeed it looks to me as if it was set up to do considerable damage to the Greek economy. Once this becomes apparent, Greeks are surely likely to change their minds about staying in the Euro.
Over the past week, European institutions have shown no qualms about bullying, arm-twisting, and humiliating a sovereign nation and its people. This is no union – this is a fiasco.
The Greek government has now been boxed in by the “no” referendum vote and is unable to make the kinds of concessions a “yes” vote would have allowed. Meanwhile, the Eurogroup’s thinking about the manageability of Grexit is coalescing around letting Greece go unless it makes major concessions. With only a few days left to come to an agreement before bank nationalization and IOUs are necessary, a deal looks less likely to me. Grexit has become the default scenario.
In the wake of the decisive “No” referendum vote by the Greek electorate and related events, the negotiating landscape has shifted substantially. The negotiating position of the institutions now looks untenable. But this by no way changes the potential outcomes for the Greek economy, which will still either face further harsh austerity or the turbulence of eurozone exit.
When I was discussing the Greek economic crisis last night with my colleague Ameera David, she asked me who I blame for the mess we are in. I told her I blame the euro because the euro is a monetary union created for political reasons without political union. It is […]
This weekend’s dramatic events saw the ECB capping emergency assistance to Greece. This column argues that the ECB’s decision is the last of a long string of ECB mistakes in this crisis. Beyond triggering Greece’s Eurozone exit – thus revoking the euro’s irrevocability – it has shattered Eurozone governance and brought the politicisation of the ECB to new heights. Bound to follow are chaos in Greece and agitation of financial markets – both with unknown consequences.
By Marc Chandler Through the venomous comments and erosion of trust, the broad framework of what couple prove to be a workable compromise over Greece’s financial crisis may be emerging. This is not to suggest that the eurozone finance ministers meeting will reach any important decision. Indeed, the Greek Prime […]