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Thursday, December 29, 2011

Ha, Bond Good Will Is Evanescent - Because Funding Is

I'm still alive, having given away almost all the Christmas cookies. Indeed, I think I have lost a few pounds, because although I am having a very good Christmas, it has also been terribly busy.

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
Link 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.



Comments:
We are just plodding along, which in this environment
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.
Sporkfed
 
Truly Evanescent.

Save me from the nothing I've become.
 
Mark, I think the anthem is a good fit for Europe. They'll be lucky to find jobs sweeping the streets they used to own, when this is done. And the revolutionaries will definitely be waiting for some heads on silver plates ...
 
Who Struck John,

"They'll be lucky to find jobs..."

Harry Ellis would have solved all their problems by now and then some.

(I joke of course.)
 
Yippee-ki-yay, Mark. :)
 
John - we do seem to be entering the Era of Mass Pain in Europe I can't think this is socially or politically endurable. I'm starting to think 1848.

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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