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UMKC conference

Total nonsense.
The do have their own currency, last I checked.

Sweden Should Sell More Bonds to Tap Foreign Demand, SEB Says

Jan 19 (Bloomberg) — Sweden should borrow more to take advantage of demand and increase investments in the largest Nordic economy, SEB AB Chief Economist Robert Bergqvist said.

The Nordic region has emerged as a haven as European leaders struggle to contain a sovereign debt crisis now in its third year. Swedish 10-year bonds are trading at a yield of 14 basis points less than benchmark German debt as of 10:56 a.m. in Stockholm.

“If you look at other countries in Europe that now must save money, cut budget deficits and bring down government debt, in Sweden we can make investments for the future, so I hope the government is using this very nice situation to borrow money to make investments in infrastructure, education,” Bergqvist said in an Jan. 17 interview Stockholm. “This would strengthen the Swedish position in the long term.”

Some foreign investors are concerned about the level of liquidity in the market, he said. “They want to see more government debt.”

*DJ Fed’s Bullard: Best To Leave Economic Stimulus To Fed
*DJ Bullard: Fed Can Stimulate Even When Rates Are At Zero Percent
*DJ Bullard: Fed Potency Negates Need For Government Stimulus
*DJ Bullard: Monetary Policy Has Been Appropriate

That means he’s pleased with the outcome of the last three year’s policies???

He’s satisfied with current conditions???

The initial rate on the 3 year LTRO was reported to be ‘fixed’ at 1%, but turns out it adjusts with the policy rate and will be an average of the policy rate over the three year term.

So it doesn’t fix rates for the banks, it just ensures funding at the policy rate. Which makes sense, as the bank’s cost of funds is the policy instrument of the ECB.

Also interesting is how in the case of bank defaults the member nations guarantee the bank deposits. But those member nations get their funding from bond sales. And with the weaker ones that means bond sales to the ECB. So in that sense, the ECB is backing bank deposits. Which means when it provides liquidity and takes collateral, should the bank subsequently realize losses, causing the ECB to realize losses on the funds provided to the bank for liquidity, the member nation would then sell bonds to the ECB to get the funds to pay for the loans it got from the ECB.

Again, it all comes down to the ECB writing the check. And it all works from a solvency point of view when the ECB writes the check. And the ECB writing the check introduces a serious moral hazard issue. Hence the (over) emphasis on austerity.

“Give a man a fish, feed him for a day,
teach a man to fish,
and he spends the rest of his life on a boat drinking beer”

Fish 24:7

Reader’s comment on the post on Spanish voters supporting austerity:

Adam (ak) Submitted on 2011/11/20 at 4:05pm

So in the country where the official unemployment rate is 22.6% the party promising further fiscal austerity has an unassailable lead? Awesome. The turkeys have voted for Thanksgiving.

I just received this.
Seems money managers with fiduciary responsibility are holding off on buying any euro member securities since the 50% Greek haircuts were announced.

Our Trading Desk reports “mayhem” in the AAA Eurozone markets
- France 11bps wider
- Netherlands 6bps wider
France now 178bps over Germany
Increasing talk/fear of Eurozone break up and capitulation trades in AAA markets are widespread.
We are seeing no real demand for anything – even Germany.
Tomorrow’s Shatz auction looks a big ask with a yield of 30bps and no risk appetite out there.

I’ll be at Zuccotti Park, northeast park corner near their library area at 1pm on Saturday.

All invited to drop by!

Good report on this supposed ‘job creator’ here.

Hint, it’s not…

US Daily : Profit Repatriation Tax Holiday: Still an Uphill Climb (Phillips)

Published October 5, 2011

* Media reports indicate that Sens. Kay Hagan (D-NC) and John McCain (R-AZ) plan to introduce legislation to allow for a one-time tax holiday for repatriation of corporate profits from abroad. If such a plan were enacted, it would most likely increase dividend payments and share buybacks, potentially resulting in a slight easing of financial conditions. However, we would not expect a significant change in corporate hiring or investment plans: most firms with large amounts of overseas profits are likely to have adequate access to financing, so the availability of cash on hand is unlikely to be a constraint on investment at the present time.

* Repatriation legislation also still appears to face significant legislative hurdles. The most important may be its estimated cost; the official cost estimate of a repeat of the 5.25% temporary tax rate enacted in 2004 is nearly $80bn over ten years in lost revenue. A second hurdle is the interest some lawmakers have in saving such a tax break as an incentive for broader tax reform.

Shameless

DJN: US Senators Plan To Introduce Repatriation Tax Break Bill

By Kristina Peterson

October 5 (Dow Jones) — A bipartisan pair of senators plans to introduce on Thursday a bill proposing a tax break for U.S. companies that bring home foreign profits.

Sens. John McCain (R., Ariz.) and Kay Hagan (D., N.C.) will co-sponsor legislation that would create a repatriation tax holiday, reducing the corporate taxes that U.S. multinationals would pay when bringing home overseas profits, in an effort to boost the economy. Their bill, called the Foreign Earnings Reinvestment Act, would create an incentive for companies to bring back an estimated $1.4 trillion currently kept overseas, according to an advisory from their offices.

“The voices which, in such a conjuncture, tell us that the path of escape is to be found in strict economy and in refraining, wherever possible, from utilising the world’s potential production, are the voices of fools and madmen.”- John Maynard Keynes

The Obama administration continues on the path of financial regression with the addition of Alan Krueger (no relation to Freddy?).

Note below, how he favors the govt making the tough choice of hitting the poor harder than the rich with his proposed tax.

I have yet to see anything even remotely progressive from this administration, which has somehow managed to retain it’s ‘socialist’ label.

Factbox: Obama picks labor economist as top aide

Krueger argued in the New York Times in January 2009 for a 5 percent consumption tax, to take effect in 2011. he said this would boost revenues by $500 billion a year once it kicked in, and would spur spending in the meantime as consumers race to make their purchases before the tax was implemented. He warned it might dull economic activity, and could hit the poor harder because they spend a relatively higher share of their income than the rich. But he also noted that government was all about making tough choices and once the budget position had improved, thanks to the higher revenues, the impact of the tax could be offset by reforms to corporate and income taxes.

In Nov. 1928, Hoover gave a speech (accepting the Republican nomination) saying, in part:

“We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us. We have not yet reached the goal, but, given a chance to go forward with the policies of the last eight years, we shall soon with the help of God be in sight of the day when poverty will be banished from this nation.”

This statement was issued by President Herbert Hoover on March 8, 1932:

“The whole of the administrative officials are cooperating with the special Economy Committee appointed by the House of Representatives in the drive to bring about further drastic economies in Federal expenditure.

“You will recollect that the budget sent to Congress represented reductions in expenditures for the next fiscal year of about $365 million below the present fiscal year. The House Appropriations Committee has reduced the amounts of bills so far reported out by about $112 million. Of this, however, between 60 and 70 million is a deferment until Congress meets next December when they will be compelled to meet positive obligations by deficiency bills. To this extent, therefore, the reductions do not help next year’s expenditures.

“In order to meet the requirements of the Ways and Means Committee that expenditures must be reduced by $125 million in order to balance the budget, it is necessary that further cuts be made. There is very little room left for reductions by administrative action and the House Appropriations Committee has passed upon the major supply bills except the Army and Navy. Further economies must be brought about by authorization of Congress, either by reorganization of the Federal machinery or change in the legal requirements as to expenditure by the various services.

“The Director of Veterans’ Affairs has proposed to the special House Committee on Economy some changes in the laws relating to pensions and other allowances which would produce economies of between 50 and 60 millions per annum. The Postmaster General is placing before the committee changes in the legal requirements of Post Office expenditures. The Secretary of Agriculture has suggested changes in the law requiring expenditures in the Department of Agriculture, and the other departments are engaged in preparation of similar drastic recommendations.

“I believe the Committee on Economy, through administrative reorganization and such methods as I have mentioned, will be able to find a large area of economy.

“Nothing is more important than balancing the budget with the least increase in taxes. The Federal Government should be in such position that it will need issue no securities which increase the public debt after the beginning of the next fiscal year, July 1. That is vital to the still further promotion of employment and agriculture. It gives positive assurance to business and industry that the Government will keep out of the money market and allow industry and agriculture to borrow the monies required for the conduct of business. I cannot overemphasize the importance of the able nonpartisan effort being made by the Ways and Means Committee and the Economy Committee of the House whose work are complementary to each other.

Andea Terzi is a former student of Paul Davidson, now a professor of economics at Franklin College, Lugano, Switzerland.

The institutional structure in the euro zone has been it’s own undoing since inception, very much like we all described at that time.

Current policy responses continue to support the same repressive fiscal policies that again look to be driving the otherwise prosperous euro zone into negative GDP growth.

The glimmer of hope may be that they have discovered the sector balance approach.

The next step in the right direction would be a recognition of the actual causations.

From Professor Tezi:

Does the ECB understand sector financial balances?

The August 2011 Monthly Bulletin of the European Central Bank has an interesting chart of financial balances of different sectors in the euro area. The chart is reproduced below.

The figure shows how rising deficits in Europe in 2008 and 2009 have produced higher net financial savings in the private sector.

This is evidence that automatic (anti-cyclical) stabilizers worked as usual: as growth declines, or goes negative, tax revenues fall, government deficits increase, and this stops the economy from falling further. This can only work, however, until market-constrained governments in the euro area begin acting pro-cyclically. Governments acting pro-cyclically during recessions means that deficit reductions will reduce private savings below the desired level, and this means a further fall of demand and incomes.

Looking at 2010, and considering that the euro area’s current account balance is marginally negative, there is evidence of this pro-cyclical effect, as government deficits declined, and net private lending inevitably declined.

What is remarkable is how the ECB interprets the chart:

With euro area total investment growing faster than saving, the net borrowing of the euro area increased (to 0.9% of GDP, expressed as a four-quarter sum). From a sectoral point of view, this masked further rebalancing between sectors, with another reduction in government net borrowing (the government de?cit falling to 5.5% of GDP on a four-quarter moving-sum basis, from a peak of 6.7% in the ?rst quarter of 2010) and a further decline in households net lending, while the net borrowing of NFCs increased sharply. (ECB, Monthly Bulletin, August, 2011, pp. 37-8)

The ECB is assuming that savings are needed to finance investment and sector rebalancing is always a good thing. And it makes no reference to the connection between financial balances and nominal GDP growth.

In plain language, this is what the ECB is telling us:

In 2010, Euro area’s savings were insufficient to finance investment. Business needed to borrow to finance their investments and households savings were not enough to fill the gap. This is why the euro area runs a current account deficit, and is a net borrower. European governments, however, are doing their part by reducing their own net borrowing, thus contributing to a progressive rebalancing in financial deficits/surpluses across sectors.

For the ECB, the government net borrowing bar getting shorter (in the chart above) is a reason for optimism. In our reading, this optimism is unwarranted, and what the ECB calls “rebalancing between sectors” is a most worrying financial development of the euro area.

More evidence of the suspected understanding with China- they resumed buying US Tsy secs in return for no more QE:

The U.S. economy “has been doing worse than expected” and Beijing needs to “seriously assess” possible risks to its vast holdings of American debt, said Yu Bin, an economist in the Cabinet’s Development Research Center.

Yu expressed concern about a possible third round of Fed purchases of government bonds, known as “quantitative easing” or QE. He said that might hurt China by depressing the value of the dollar and driving up prices of commodities needed by its industries.

Bernanke: No Plans to Add New Stimulus Measures Now

July 14 (Reuters) — Federal Reserve Chairman Ben Bernanke backed away slightly from promising a third round of stimulus measures, telling a Senate panel Thursday that the central bank “is not prepared at this point to take further action.

The comments during his second day of congressional testimony sent the US dollar higher and caused stock to pare their gains.

On Wednesday, Bernanke suggested to a House panel that the Fed was ready to take further steps to boost the flagging US economy. That sent stocks soaring and pushed the dollar lower.

But on Thursday, Bernanke seemed to back away a bit from that plan.

“The situation is more complex,” he told the Senate Banking Committee. “Inflation is higher…We are uncertain about the near-term developments in the economy. We would live to see if the economy does pick up. We are not prepared at this point to take further action.”

He also said a third round of stimulus may not be that effective.

Bernanke also repeated his warning that a U.S. debt default would be devastating for the U.S. and the global economy.

If they were serious they’d stop exporting it:

Australia Unveils Biggest Carbon Plan Outside Europe