Posts Tagged ‘ Debt ’

Spain & Germany – In Sickness and in Health

January 4, 2012
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Spain & Germany – In Sickness and in Health

The plan forward with the Eurozone crisis is the German plan forward. Germany proposed closer fiscal union and increased austerity for EU-17 nations with high deficits and/or high debt burdens. This path suits German interests well because there is little that needs to be changed. Unfortunately from Spain’s standpoint, the German path forward is not what Spain needs. This dynamic is highlighted with yesterday’s unemployment releases. Spain hit a 22.8% unemployment rate, which is an all-time high, while Germany released a 6.8% unemployment rate, which represents a new low since German reunification. It is clear that Spain needs dramatically lower interest rates relative to appropriate monetary policy set rates for Germany. It is also clear that Spain needs a drastically lower currency value relative to the currency value which...

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China’s Trade Balance is Adjusting – the Largest Imbalance in the World is no Longer Growing

November 14, 2011
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China’s Trade Balance is Adjusting – the Largest Imbalance in the World is no Longer Growing

Markets in China rallied to start the week. Part of the rally resulted from “catch up” to US markets which closed strongly. But part of the rally was based on positive economic comments coming from Chinese officials. China’s President Hu Jintao pledged to focus on building imports which would boost global economic growth. IMF Deputy Managing Director Zhu Min, and National Economic Research Director Fan Gang, told the Asia Pacific Economic Cooperation forum in Honolulu that a “soft landing” for the economy was expected for China. The officials noted slowing inflation and lower bad debt at Chinese banks. To complete the string of positively toned news, there was also speculation that China was relaxing lending curbs which amounts to incremental monetary policy easing. Both the H-Shares (up 2.8%) and...

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US Sovereign Debt Downgrade

August 7, 2011
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US Sovereign Debt Downgrade

The downgrade of the US sovereign credit rating is sure to cause continued jitters in the financial markets on Monday morning. In actuality, there may be net-positive developments this weekend as it now appears clear that the ECB will engage in buying the debt of Italy and Spain. Drawing a “line-in-the-sand” for Italy and Spain is one of the key elements of halting a financial crisis redux in its tracks. The Standard & Poor’s downgrade of the US sovereign credit rating looks to be timed to create maximum stir and hints at some political motivations. The downgrade was firmly signaled on July 14th when the US was put on credit watch. Standard & Poor’s looked for $4T in spending cuts to be announced in conjunction with the raising of the...

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Chitaly – China to purchase Italian Sovereign Debt?

August 5, 2011
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Chitaly – China to purchase Italian Sovereign Debt?

Crackerjack continues to hold the view, that what transpired in the markets is a crisis of confidence, more so than an actual crisis. There is a big and important difference. During the real-deal 2008-2009 economic crisis you had actual insolvent institutions as the value of mortgage securities declined when the US housing market imploded. The sovereign debt crisis in Europe is also a real crisis as it relates to Greece, Portugal, and Ireland (these countries can never pay back what they borrowed) but these economies aren’t big enough to tip the world into a global recession. While Spain and Italy have numerous longer-term structural issues which need to be addressed, these nations have ample ability to pay their actual agreed upon debts so long as the interest costs are manageable. Italian...

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Europe’s Debt Crisis – Impact on Markets

August 3, 2011
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Europe’s Debt Crisis – Impact on Markets

Click Here for Formatted Europe PDF “I think we need a bigger boat!” The words of Martin Brody, played by the late Roy Scheider, ring true today with regard to Europe’s spluttering attempt to avoid a sovereign debt crisis. Now that the side-show spectacle regarding raising the US debt ceiling (i.e., whether the US would self-immolate) has passed (for the near-term). The issue for the markets relates to two items: 1) The prospects for Europe avoiding a financial crisis 2) The outlook for the US economy It will take time and many more data points to determine whether we are headed for another recession (double dip) within the next 12-months. Crackerjack maintains a baseline view that we will not. The Genesis of this Crisis: The PIGS (an acronym for:...

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