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We must avoid an accidental Greek Euro exit

With the Greek election on Sunday the debate and speculation around what a Greek exit from the Eurozone, and possibly the EU, would mean is reaching fever pitch. Unfortunately, the analysis has for the most part been rather short sighted, mostly in the form of detailed, but doomed to be inaccurate, calculations trying to forecast what bank will be hurt the most or the least or how much the ECB would suffer. In yesterday’s FT, we finally saw some sober analysis in the Euro debate from Moritz Kraemer, head of EMEA sovereign ratings at Standard & Poor’s. Read more…

Greek Euro exit unlikely

May 12, 2011 1 comment

Greece cannot exit the Euro. Greece does not want to exit the Euro. Greece will not exit the Euro. Just think about what would happen if Greece did.

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Bernanke again

January 29, 2010 1 comment

Not unexpected but still not great news. Bernanke will lead the Fed for another term.

Many of the senators voting against Bernanke and even those who voted for him argued along the lines of “better the devil you know”. Isn’t there something wrong and totally unnecessary with a vote when you only have one alternative? Isn’t that what the west used to criticize the USSR for when it came to their elections? Only one candidate.

How can the Senate vote on the head of the Fed if they only have one alternative? Off course they will vote for Bernanke no matter how much they don’t like him or how inappropriate he is to run the Fed.

Oh well. The market has to live with him for another term. At least we know the Fed will get it wrong … again. There is some comfort in that!

Crisis will happen again, it’s human nature

September 9, 2009 Leave a comment

It is human nature that will make sure another crisis will happen again, according to Mr Alan Greenspan, the former head of Federal Reserve, in a recent interview with BBC. I couldn’t agree more. However, I think we differ on what part of human nature will be more responsible for the crisis.
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The case against Bernanke

Reappointing Mr Ben Bernanke as head of the Fed is a mistake, as Stephen Roach correctly concludes in today’s FT. It seems though that Mr Roach is missing the point on Bernanke’s current action.

Mr Bernanke has been no better than Mr Alan Greenspan in understanding the driving forces for this, or any previous recessions and bubbles, and Bernanke is a student of the Great Depression, so he should know. A big driver has always been central bank actions, mostly the creation of cheap money – through low interest rates or as now through what they call quantitative easing. Printing money to you and me!
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It’s the debt – stupid!

Some stats from the Swedish experience in early 90s. Bad loans 12% of GDP. Total loan losses 10%. GDP contraction 6% over 3 years. House prise fall 20%. Depreciation of SEK 30%. Unemployment in double digits. Stocksmarket halved. Consumer debt to GDP 40%.
Looks roughly like what we’re experiencing right now, with a couple of very important differences. 1) The crisis now is global, back then it was regional. Sweden could devalue and export itself out of a recession. 2) Consumer debt to GDP is now well above 100% in for example US & UK. Read more…

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