Thursday, December 29, 2011
Ha, Bond Good Will Is Evanescent - Because Funding Is
I'm working on several longer posts about the US economy, but the active news is unfortunately Italy. Yesterday was a day of wild bounces. Italy's ability to sell short term debt was bucking everyone up, until the ECB released its balance sheet and the dark news hit - when ECB said it meant "unlimited" financing, it meant it. This is very relevant for Italian banks, because other ECB measures included taking as collateral the bank's own debt if it was guaranteed by the Italian government.
Now why the big expansion in the ECB's balance sheet shocked the market I cannot figure, since that was obvious. But it did. The Euro fell pretty hard.
So basically the good auctions were a mirage (funded by ECB), and since the three-year unlimited liquidity has a definite expiration date, today's 10 year auction was not good at all. Yields at 6.98 and they didn't sell it all, plus ECB is rumored to be buying Italian bonds again.
The knock-on effects for Spain and Portugal are covered in the link. Spain, however, is still probably viable. Portugal and Italy are not.
US claims are still pretty good, but more about that later.
isn't a bad thing. I can't see much risk taking with an election next year. The trade policies and the tax code
both need massive overhauls but my guess is that
the chosen course of action is to weaken the dollar.
Good luck savers.
Save me from the nothing I've become.
"They'll be lucky to find jobs..."
Harry Ellis would have solved all their problems by now and then some.
(I joke of course.)
Our continuing refusal to accept that trade and debt economies never worked without debt writedowns (first set on paper in Israel in the Old Testament area) is doomed to die the death of a thousand realities. 2005 BK "reform"? Can we think again?
And may G_d help the Chinese. They are so close to a GD of their own....
This week's crude inventories report showed products supplied down 7.8% YoY over the year. I think the spate of US enthusiasm is doomed to get squashed quite soon.
Politically, what appalls me is that we seem to have synthesized the worst ideas of both main parties into a giant, squalling baby of illusion, whom we are now trying to raise to a socially acceptable adult. Unfortunately, he's a born sociopath.
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