David Tepper Calls It

That bond-market rally that you’ve been enjoying alongside your stock-market rally? The ECB killed it yesterday, sayeth he with the brass balls. Read more »

It seems that when making phony euro banknotes, forgers like to get as much bang for the bogus buck as possible, and therefore favor dummying up twenties and fifties. So, to commemorate a three-year high in fake notes yanked from circulation, the ECB is rolling out a new €10 bill. Read more »

For some reason, this is considered cause for celebration, rather than cause for concern. Read more »

It could. It totally could. But, for now, the European Central Bank isn’t going to make banks pay it for the privilege of holding onto its money overnight. And so, in spite of the mounting bad news, the euro soared to a one-month high against the dollar. Read more »

The good news is that the Eurozone financial sector is enjoying its most stability since 2011. The bad news is, it doesn’t matter. Read more »

  • 10 Jan 2013 at 3:00 PM

ECB Feels Great About Doing Nothing

Flu isn’t the only thing going around. An epidemic of economic optimism has seized the European Central Bank, and its president thinks that should be enough to get the continent’s economy going once again.

“There is a positive contagion when things go well,” Mr. Draghi said. “That’s what is in play now.”

Then he said something about a “jury” still being “out,” but I for one was too europhoric and busy stimulating the economy to hear it. Which is good, because Draghi & Co. won’t be doing any stimulation themselves. Read more »

Every time I talk about Europe I begin by saying “Europe is all better,” because Europe these days operates on big-bang fixes followed by long slow decays, repeated indefinitely, so I guess you should sell the news and buy the quiet. Anyway, Europe is all better, since Mario Draghi announced today that the ECB will be buying unlimited quantities of European government debt, subject to a series of footnotes to which I tip my hat as a fellow connoisseur. Like me, the ECB likes its footnotes suggestive rather than exhaustive,* so the details are a little vague but will include “conditionality” in which the subject governments need to sign up for EFSF bailouts and adhere to their conditions. Without many details you can pick lots of nits; a good one is the ECB’s attitude to the seniority of its purchases, which is ably picked here.

The analyst reaction is mostly of the too-cool-for-this, everyone-expected-it variety but then there’s this:

So either “the market has gotten ahead of itself,” or “expected” comes with some variance, or I guess both why not.

Anyway, this is the internet, you can’t just be like “the ECB is buying lots of bonds,” you need a theory; two worthwhile ones are: Read more »

  • 29 Jun 2012 at 12:35 PM

Europe Is All Better (As Of January 2013)

Ooh look there’s another Europe thing. In this thing, Europe, in the form of the almost-existing ESM,* will take equity (?) stakes in troubled Eurozone banks, rather than its previous plan of buying senior debt of troubled Eurozone sovereigns so those sovereigns can invest the proceeds in equity stakes of their troubled banks.

There has been a lot of talk about collectivizing some European government debt, with people proposing plans in which Europe as a whole would be responsible for the amount of each country’s debt under X% of GDP, or over Y% of GDP, or other. You can think of this as sort of a more financialized, more palatable, and more targeted version of that: instead of collectivizing an arbitrary dollar amount of each country’s sovereign debt, you collectivize the amount needed to bail out that country’s insolvent banks. This favors peripheral countries (because they have most of the bad banks, or at least the bad banks whose badness expresses itself in the form of insolvency rather than criminality), yet also has a certain appeal to Euro-core financial bureaucrats because the collectivized debt is going to bankers like them rather than to over-vacationed Greek pensioners etc. And money being fungible it’s not the worst outcome for the pensioners etc. either.

The other thing about this new Europe thing is that the EFSF/ESM can stabilize peripheral government debt in the market without imposing new austerity conditions and without taking seniority, though people have doubts about that because you can always flip yourself into seniority if you’re the lender of last resort. And there are many other details to be worked out and I invite you to read about them from someone who knows something about them. But the new news is the bank capitalizing, and that seems promising; the syllogism is I guess (1) this is TARP and (2) TARP kind of worked, ergo (3) this will kind of work. Read more »