I am concerned about what is happening in the emerging markets but not alarmed. Fed tapering was a proximate trigger but not a cause. All indications are that the crisis is hitting only the most exposed and vulnerable markets and that this doesn’t have to boomerang onto other markets. The worry has to be that contagion causes the locus of stress to spread to economic agents that should be less vulnerable, causing the crisis to metastisize and spiral out of control. Policy co-ordination in foreign exchange will be key if this occurs.
Tag: Willem Buiter
By Willem Buiter This post first appeared on Vox Fiscal sustainability has become a hot topic as a result of the European sovereign debt crisis, but it matters in normal times, too. This column argues that financial sector reforms are essential to ensure fiscal sustainability in the future. Although emerging market reforms undertaken in the aftermath of the financial crises […]
Back to the Willem Buiter interview in Financiëele Dagblad. Here Buiter continues with some comments on Jeroen Dijsselbloem’s admission that bail-ins will be the preferred vehicle for conducting rescues going forward so as not to burden the public balance sheet.
It’s Easter weekend here in Germany and I caught this interview with Willem Buiter from the Financiëele Dagblad that I get by e-mail each morning. I thought it was significant enough that I would translate it. Buiter has been fairly pessimistic about the future integrity of the euro zone and thinks that some of the euro members are destined to leave the euro area.
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’.
The Dutch press is reporting that Willem Buiter, the Dutch-born Chief Economist of Citigroup, believes that we are going to witness a slew of writedowns in the Netherlands unless the Dutch can right the economy and stop the fall in house prices.
The last time I reported on the Spanish housing market in August, we were in the midst of a bank deposit run caused by the redenomination risk. This was pre-OMT. At the time, we saw an acceleration in the house price declines. House prices were down 11.2% year-on-year through July. Things have got worse since, with house price declines accelerating […]
While the ECB may certainly now buy as many peripheral bonds as it wishes if it deems convertibility risk to be a real issue money is already trickling into cash strapped peripheral economies through the arcane tool of emergency liquidity assistance (ELA)
Euro zone bond markets have come completely unhinged this morning. Spanish 10-year yields have hit the highest level this year at 6.5%. While Italian 10-year yields broke above 6% for the first time since late January. Meanwhile, German yields have moved to a record low of 1.44%. We are now back to levels of stress we last saw during the Italian crisis in November and December. However, this time policy space has narrowed considerably. In short, Europe has reached the critical breaking point.
Hugh Hendry made some remarks about confiscation last week that I addressed in my TV appearance on RT’s capital account (see video here). The gist of his comments was that he fears government’s ability to confiscate wealth as a means of dealing with the economic crisis in Europe. On RT, I said that I didn’t think the situation had reached that point in Europe and so I was not overly concerned. But I do want to flag comments by a major bank economist that touch on these issues.
Here’s how I see it happening, based on my Italian default post.
Continuing from part 1 of the Willem Buiter interview with het Financieele Dagblad