Here's my summary of the key news overnight in 90 seconds at 9 am, including news US stock markets gave up their early gains to close down around 1.2% as the early euphoria over Spain's bank bailout faded.
There was disappointment that the Spanish bailout actually meant the Spanish government was borrowing from the European rescue funds to inject 100 billion euros of capital into its banks. See more here at Bloomberg.
This leaves the Spanish government even more indebted and also pushes regular bond holders down the queue in favour of the European rescue funds.
This meant the yield on the 10 year Spanish bond yield actually rose 29 basis points to 6.52%, a level widely seen as unsustainable. The bailout was supposed to take the pressure off Spain's bond market and reopen the market to the Spanish government.
Meanwhile, German 10 year bond yields fell to 1.3%, widening the gap to over 5.4% and indicating that capital flight from Southern Europe to Germany was continuing despite the latest bailout reached after a 19th crisis meeting in 3 years.
Also concerns grew over Italy, which reported data showing its economy contracted. Investors fear it will have to go where Spain goes. See more here at Bloomberg.
Italian bond yields also rose overnight by 24 basis points to 6.04%, suggesting the capital flight is continuing .
Italy has 2 trillion euros of debt.
The New Zealand dollar fell under 77 USc in morning trade as investors took risk off the table. Investors are worried the Euro crisis is far from over and will suppress any recovery.
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28 Comments
SATURDAY, 9 JUNE 2012 Spanish €120 billion bailout
The largest heist in history continues. This is what was written well over 3 years ago:
(from House of Commons Treasury Committee Report "Banking crisis")
Just relax and keep enjoying this pathetic spectacle. You are paying with your taxes for this burlesque choreographed by intellectually retarded politicians and directed by the thieving and smartassish financiers.
Excellent historic prognosis supplied there A.J........While I totaly agree about the smart ass financiers who hold the citizens of this world in contempt, I would go on to say in the case of Germany and France , I'd come back to a comment I posted some time back about the tipping point of Merkel n Co showing their hand.....the too far in to get out scenario and so left with the only option to go for "broke' literally.
The bailout has been just that ...the tipping point ...no coming back...no plan B other than to socialize the debt .
I wish I could find the comments I put up almost three years back on the U.S. secretly hoping for a multilateral ground zero in order to level the playing field somewhat....further I believe that is why Bernake has stalled any Q.E. action keeping the cards close, so to speak....watching waiting for all players to be heavily into the game.
On a brighter side ...don't you worry none, because John Boy says they'll muddle through...they'll give it their best shot...they'll get the job done...and let's face it what more endorsement of faith do you need......
He says Angela is committed.....others say she ought to be.
Crank up the presses boys !, we got some wallpaper to make.
Yes, but... As I understand it the German parliament have yet to actually officially have one of those awfully inconvenient vote thingys. You know where they actually approve the devious plotting of their leaders. Where they might not do as they are told. I know good Germans are supposed to always do what they are told by their superior officers, but that has not always been so. There was once a chap called Luther who was German I believe.
Good sense may yet prevail and the ESM may get a no vote on July 1.
Plenty in New Zealand do - the notional sums are just not as preposterous, but on a per capita basis just painful for not so well off NZers.
The Governor of the RBNZ, on an eyewatering NZD 600,000 salary, persistently runs monetary policy at an "emergency rate" (his words) so the Aussie banks can transfer obscene amounts of wealth to their masters every six months. We are engulfed by too many hucksters and their carnival barkers helping themselves under the cover of the never ending Global Financial Crisis.
We have to close this circus down immediately and reconcile our true economic position before the fabric of business is beyond torn and irreparable.
SH - the fabric of business has another problem - a steady-state regime might not be able to underwrite profit. Blaming others on the ship, may be politically satisfying, but doesn't address the sinking. Sure, those in a position to retain their power and 'wealth', will attempt to do so. Given that they can never be a numerical majority, they can be outvoted, and their 'wealth' is electronic too. Not many Scrooge McDuck money bins nowadays.
Stephen - I'm curious - do you think had we followed this path suggested by Winston Peters back in 2008 that some of the problems you have would have been addressed/alleviated?
http://www.interest.co.nz/news/46492/have-your-say-winston-wants-float-kiwibank-rewrite-rb-act
Granted - but then nothing the Fed has done to my mind has implied any interest in the welfare of Main Street (why would it? These are privately owned conglomerates). I think it poignant that administration of the Food Stamps programme in the US has been contracted out to JP Morgan.
With respect to this question however, I was more interested in Peters' suggestion to float Kiwibank and move all NZ government transactions to it - coupling such a restructure with amendments to the Reserve Bank Act to restructure our sovereign position, particularly with an emphasis to decouple NZ from the ROW (the 'hot money') problem.
Seems to me that the bastions of the current orthodoxy look certain to next act to save themselves via some 'slight of hand' mechanism (e.g. the Debt Jubilee for the UK as per Bernard's Top 10 yesterday) but those small fry (like us) won't get to share in the love.
Kate, I am not equipped with the operational status level of Kiwibank to comment - A lot more information would have to be made available - but in principle you are right - but as noted in the RBNZ document you kindly located in defence of my assertion of significant foreign borrowing by our local banks to offset the accumulated trade deficits, requires serious entity status which Kiwibank is not yet in possession of.
Interesting thing about salaries that I learnt recently from someone in that profession. 20% is really about the maximum you need to pay each rank above the prior. The Catholic Church appareny survives quite well with only five ranks. Based on that the CEO should only get 2.3x the salary of the productive workers. Just another case of how far out of balance things are.
I don't have a problem with reward for effort, although that starts to get murky when sponging of other peoples efforts... anyway I will recount point the made to me by another friend that is a Mechanical/Oil Drilling Engineer, but did a his degree in science before the engineering. He now has an MBA and has helped successfully launch several businesses. His comment was that management is easy, engineering is hard. I have always doubted whether these extreme salaries are really necessary as I don't believe it represents the difficulty of the job.
http://cluborlov.blogspot.co.nz/2012/06/fragility-and-collapse-slowly-at-first.html
Somebody saw it coming.
I think a good 80% or more of the posters here saw it coming PDK.... that is what make the actions of so few to be shared among so many an act of utter contempt.
The real problems begin beyond the exploding monetary illusion..anger and frustration will turn to cold indifference, on the part of Joe Lunchbox toward his own well being.
There is nothing more dangerous than a human with no self respect.
Aye, there's the rub.
I've long thought that good leadership will be needed, and that we wouldn't find it in the current bunch - their skill-sets having been learned in a previous paradigm.
A clear blueprint, offered with confidence, might keep Joe trucking. We were suffering from the disenfranchised anyway - from graffiti to full prisons. I noticed in our small village, that when a wave of us, poor and young, moved into 'cribs' (baches) and became a community, we pulled together. Then some got rich enough to buy renters. Then the tenants arrived. No buy-in, no community sense, crime. Give 'em buy-in, much the betterer way.
spain,
http://www.dnaindia.com/world/report_is-a-spanish-bail-out-viable_16998…
"Our clients won't touch the EFSF because nobody knows what it really is. They have cut it out of their benchmarks altogether," said one bond trader.
The Chinese issued their own verdict yesterday. The country's sovereign wealth fund said it will not buy any more debt in Europe until the region takes radical steps to restore credibility."
This will work eh?
uh huh.......
"Eric Dor, from the IESEF School of Management in Lille, said Spain would have to step out of the EFSF as a creditor the moment it asks for funds. This has instant effects on the residual core. Italy's share rises from 19pc to 22pc, and Italy is in no shape to face extra burdens. France's share rises from 22pc to 25pc, and Germany's from 29pc to 33pc.
"The credibility of the guarantees given to EFSF bonds would collapse. This would cause an incredible turmoil on the European sovereign debt markets,"
so print baby...print!!!!
I see a huge buying opportunity for GBH......shares to 10% of their present value means GBH will own most of the EU's companies....maybe even the EU......
regards
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