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.
The shareholders and subordinated bond holders of SNS Reaal are now fighting an alleged expropriation at the Dutch Council of State. In addition, these stakeholders are contesting the Dutch government’s position that shareholders and subordinated debt holders cannot sue for compensation against the bank due to mismanagement at SNS Reaal. Clearly, the Dutch government, as the sole owner is looking to limit its liabilities.
Nationalised Dutch lender SNS Reaal, the fourth largest bank in the Netherlands has recently been nationalised despite a reported 13 percent Tier 1 capital level in the most recent round of banking stress tests in Europe. Clearly, the stress tests weren’t particularly stressful. I would go so far as to say they were ‘phony’.
In yesterday’s links, I pointed to two links showing that Ireland had regained bond market access. Here is more evidence that Ireland is regaining bond market access.
That a couple of Latin American countries have recently announced the expropriation of foreign investors in the energy sector seems hardly like new news. After all, cycles of nationalization and privatization have unfolded for more than half a century. Moreover, the expropriation simply marked the latest illiberal measures by Argentina and Bolivia, the two protagonists here. There is significant risk that others will follow Argentina and Bolivia.
A look at the fundamentals shows why Fernandez is engaging in such visible theatrics, which also includes recent vitriol regarding the Falkland Islands. Simply put, we think economic stresses are intensifying. How deep the stresses will get is yet to be determined.
I ran across three separate articles on peak oil at well-regarded financial news sites today: The Economist, The Financial Times and Le Figaro. I thought I’d give you a run down of what they were saying and what it means for the economy and investing.
The rump Dexia now owned by the Belgian government is a structurally loss-making enterprise that will cost the Belgian government 2 billion in deficits every year from 2014.
I think this should be obvious to everyone by now, but peak oil is a clear factor in the Argentina/Spain oil crisis. Here’s what happened.
Spain is involved in two stories today that point to the difficulties that surround sovereign governments that are overindebted in foreign currency. There are a ton of Spanish-language links for that reason.
There have been a lot of people talking about Argentina as if it were the model for other governments in sovereign difficulty to follow. Yes, Argentina’s decision to default was realistically the right call given the crushing debt load. And that is the path the euro zone periphery is on. […]
Much of macroeconomic policymaking is trial and error. This column discusses calamitous error on the part of Iceland’s policymakers, in the hope that others can at least try something else.