Posts Tagged ‘ unemployment ’

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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Que Lastima – Spain in a Vice as Interest Rates and Unemployment Soar

November 17, 2011
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Que Lastima – Spain in a Vice as Interest Rates and Unemployment Soar

I’ve been writing about the impossibility of the ECB running appropriate monetary policy for 17 different nations. The dilemma couldn’t be more evident when contrasting the economy of Spain with the economy of Germany. Spain actually has less sovereign debt relative to GDP than does Germany. The problem for Spain isn’t the level of debt the country has incurred, but the depth of the current recession and the questionable capitalization of the Spanish banking system. Spanish inflation is running in a range of 1.7%-3.0% depending on how you define it (1.7% core inflation). This morning, bond auctions in Spain only attracted investors at much higher yields, approaching 7%. As a result of higher interest rates and a deepening recession (which is helping to reduce inflation), real interest rates in...

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Market Confidence in Italy Hits New Lows – Berlusconi to Face New Rounds of Confidence Votes

November 7, 2011
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Market Confidence in Italy Hits New Lows – Berlusconi to Face New Rounds of Confidence Votes

Italian 10-YR bond yields hit 6.62% this morning, which marks a new high since concerns over the sustainability of European sovereign debt began to unfold. This wasn’t supposed to work this way after the Eurozone leaders announced a new structured investment vehicle to be put in place to leverage up the EFSF. It remains unclear who is going to fund the SIV which raises doubts around how much firepower the EFSF will really have and whether Italian interest rates can be maintained at sustainable levels? All of this uncertainty takes place while Italian bonds yields escalate towards unsustainable levels, government approval ratings hit new lows, Berlusconi’s trial for soliciting an underage prostitute moves forward, and the real economy in Italy remains under intense pressure. The above issues are scary...

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Charles Evans Dual Mandate Responsibilities Speech – Goes Too Far

September 8, 2011
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Charles Evans Dual Mandate Responsibilities Speech – Goes Too Far

Yesterday, Charles Evans who is the ninth president of the Federal Reserve Bank of Chicago and a voting member on the FOMC, gave a speech at the European Economics and Financial Center in London. This speech goes too far with starting to push the Fed towards more stimulus as the returns from additional stimulus diminish. The debate revolving around additional Federal Reserve accommodation also made its way to the WSJ this morning. I believe that the economy is actually much stronger than is being presented by the media. Yes the unemployment rate is 9%+ and it has been tough to work it down, but the Fed can do little at this point to actually create jobs. The incremental returns from additional monetary stimulus aren’t needed and become risky with...

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