Draghi Comments, Global Comments

ECB will do what is needed to keep inflation target on track: Draghi

By Stephen Jewkes

Oct 31 (Reuters) — “If we are convinced that our medium-term inflation target is at risk, we will take the necessary actions,” ECB president Draghi told Il Sole 24 Ore. “We will see whether a further stimulus is necessary. This is an open question,” he said, adding it would take longer than was foreseen in March to return to price stability. Draghi said inflation in the euro zone was expected to remain close to zero, if not negative, at least until the beginning of next year. “From mid-2016 to the end of 2017, also due to the delayed effect of the depreciation in the exchange rate, we expect inflation to increase gradually,” he said.

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Operating conditions deteriorate at a slower pace in October

Nov 2 (Markit) — The China PMI posted 48.3 in October, up from 47.2 in September. Total new business placed at Chinese goods producers declined for the fourth month in a row in October. That said, the rate contraction eased since September’s recent record and was only modest. Softer domestic demand appeared to be a key factor weighing on overall new work as new export business increased for the first time since June, albeit marginally. Nonetheless, a further decline in overall new orders led firms to cut their production schedules again in October.

Weakest deterioration in business conditions since May

Nov 2 (Markit) — The headline Taiwan Manufacturing PMI rose from 46.9 in September to 47.8 in October. Production at manufacturing companies in Taiwan continued to decline in October, as has been the case in each month since April. However, the rate of contraction eased further from August’s 35- month record to the slowest since May. Companies that cut output generally attributed this to poor economic conditions and fewer new orders. The latter was highlighted by a further fall in total new work in October. As was the case with output, however, the rate of reduction was the weakest seen in five months.

Manufacturing conditions deteriorate at weak pace

Nov 2 (Markit) — The South Korean manufacturing PMI posted at 49.1, down slightly from 49.2 in September. Production at South Korean manufacturers declined for the eighth successive month in October. According to anecdotal evidence, global economic uncertainty and poor demand conditions contributed to the latest fall in output. Supporting the fall in output was a decline in total new orders during the month. A number of panellists mentioned unstable economic conditions and a decline in sales from both domestic and international clients as factors behind the latest contraction.

S.Korea Oct exports post worst drop in over 6 yrs as global demand sags

Oct 31 (Reuters) — The trade ministry attributed the declines mainly to a sharp fall in ship contracts and low oil prices. Exports fell 15.8 percent on-year to $43.5 billion in October, their 10th straight month of declines and the sharpest fall since August 2009. Imports slumped 16.6 percent to $36.8 billion. The trade surplus fell to $6.7 billion in October from a revised $8.9 billion in September. The slump in exports was partially expected by economists as South Korea posted a record high in shipments last year.

Growth of manufacturing production wanes further

Nov 2 (Markit) — Posting a 22-month low of 50.7 in October (September: 51.2), the seasonally adjusted Nikkei India Manufacturing PMI waned. Output growth eased in October on the back of a slower increase in new orders. Rates of expansion in both production and order books were the weakest in their current 24-month sequences of growth, with panellists reporting challenging economic conditions and a reluctance among clients to commit to new projects. New business from abroad placed with Indian manufacturers rose for the twenty-fifth straight month in October.

China, Germany, Productivity, NFIB Index, Redbook, Wholesale Trade


A few thoughts:

China’s US Tsy holding had been falling perhaps because they were selling $ to buy Yuan to keep it within in the prior band.

Pretty much all exporting nation’s currencies have already weakened vs the $, including the Yen and Euro, so this is a bit of a ‘catch up.’

In a weakening global economy from a lack of demand (sales) and ‘western educated, monetarist, export led growth’ kids now in charge globally, the path of least resistance is a global race to the bottom to be ‘competitive’. And the alternative to currency depreciation, domestic wage cuts, tends to be less politically attractive, as the EU continues to demonstrate.

The tool for currency depreciation is intervention in the FX markets, as China just did, after they tried ‘monetary easing’ which failed, of course. Japan did it via giving the nod to their pension funds and insurance companies to buy unswapped FX denominated securities, after they tried ‘monetary easing’ as well.

The Euro zone did it by frightening China and other CB’s and global and domestic portfolio managers into selling their Euro reserves, by playing on their inflationary fears of ‘monetary easing’-negative rates and QE- they learned in school.

The US used only ‘monetary easing’ and not any form of direct intervention, and so the $ remains strong vs all the rest.

I expect the Euro to now move ever higher until its trade surplus goes away, as global fears of an inflationary currency collapse are reversed and Euro buying resumes as part of global export strategies to export to the Euro zone. And, like the US, the EU won’t use direct intervention, just more ‘monetary easing’.

Ironically, ‘monetary easing’ is in fact ‘fiscal tightening’ as, with govts net payers of interest, it works to remove interest income from the global economy. So the more they do the worse it gets.

‘No matter how much I cut off it’s still too short’ said the hairdresser to the client…

The devaluations shift income from workers who see their purchasing power go down, to exporters who see their margins increase.
To the extent exporters then reduce prices and those price reductions increase their volume of exports, output increases, as does domestic employment. But if wages then go up, the ‘competitiveness’ gained by the devaluation is lost, etc., so that’s not meant to happen.

Also, the additional export volumes are likewise reductions in exports of other nations, who, having been educated at the same elite schools, respond with devaluations of their own, etc. etc. in a global ‘race to the bottom’ for real wages. Hence China letting their currency depreciate rather than spend their $ reserves supporting it.

The elite schools they all went to contrive models that show you can leave national deficit spending at 0, and use ‘monetary policy’ to drive investment and net exports that ‘offset’ domestic savings. It doesn’t work, of course, but they all believe it and keep at it even as it all falls apart around them.

But as long as the US and EU don’t have use of the tools for currency depreciation, the rest of the world can increase it’s exports to these regions via currency depreciation to lower their $ and Euro export prices, all of which is a contractionary/deflationary bias for the US and EU.

Of further irony is that the ‘right’ policy response for the US and EU would be a fiscal adjustment -tax cut or spending increase- large enough to sustain high enough levels of domestic spending for full employment. Unfortunately, that’s not what they learned in school…

The drop in expectations is ominous, particularly as the euro firms:

Germany : ZEW Survey
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Highlights
ZEW’s August survey was mixed with a slightly more optimistic assessment of the current state of the economy contrasting with a fifth consecutive decline in expectations.

The current conditions gauge was up 1.8 points at 65.7, a 3-month high. However, expectations dipped a further 4.7 points to 25.0, their lowest mark since November 2014.


The drop in unit labor costs and downward revision of the prior increase gives the Fed cause to hold off on rate hike aspirations:

United States : Productivity and Costs
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Highlights
A bounce back for output gave first-quarter productivity a lift, up a quarter-to-quarter 1.3 percent vs a revised decline of 1.1 percent in the first quarter. The bounce in output also held down unit labor costs which rose 0.5 percent vs 2.3 percent in the first quarter.

Output in the second quarter rose 2.8 percent vs a depressed 0.5 percent in the first quarter. Compensation rose 1.8 percent, up from 1.1 percent in the first quarter, while hours worked were little changed, up 1.5 percent vs 1.6 in the first quarter.

Looking at year-on-year rates, growth in productivity is very slight at only plus 0.3 percent while costs do show some pressure, up 2.1 percent in a reading, along with the rise in compensation, that will be welcome by Federal Reserve officials who are hoping that gains in wages will help offset weakness in commodity costs and help give inflation a needed boost.


Up a touch but the trend remains negative:

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Redbook retail sales report still bumping along the bottom:

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A decline in sales growth and rise in inventories is yet another negative:

United States : Wholesale Trade
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Highlights
A build in auto inventories as well as for machinery drove wholesale inventories up a much higher-than-expected 0.9 percent in June. Sales at the wholesale level rose only 0.1 percent in the month, in turn driving the stock-to-sales ratio up 1 notch to a less-than-lean 1.30. This ratio was at 1.19 in June last year.

Chicago Fed, KC Fed, Japan Exports

Note the details and the conclusion:

source: Econoday

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Highlights

June proved to be a slightly stronger month for the economy than expected, based on the national activity index which came in at plus 0.08 vs Econoday expectations for a 0.05 dip. The 3-month average is still in the negative column though just barely at minus 0.01.

Production indicators showed the most improvement in June, at minus 0.01 vs minus 0.08 in May. The gain here reflects strength in the utilities and mining components of the industrial production report where, however, manufacturing remained flat. Employment also improved, to plus 0.12 from May’s plus 0.06, here reflecting the 2 tenth downtick in the unemployment rate to 5.3 percent. This dip, however, was tied to a decrease in those looking for work which is not a sign of job strength. Personal consumption & housing, at minus 0.07, was little changed as was the sales/orders/inventories component at plus 0.03.

This report is a bit of a head fake, not reflecting the weakness in manufacturing and the special factor behind the decline in the unemployment rate. In sum, growth in the economy is no better than the historical average which is a disappointment, showing little bounce from the weak first quarter.

Unambiguously negative, again:


source: Econoday
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Highlights

Deep continuing contraction is the score for the Kansas City manufacturing report where the headline index is little changed at minus 7. Order readings point to more trouble ahead with new orders at minus 6 and backlog orders at minus 14. Weakness in export orders, at minus 10, is a central negative for the report, as is hiring, at minus 19 and the workweek at minus 18. Price readings are steady and mute. This region’s manufacturing sector, hurt by both exports and the energy sector, is badly depressed as is the Dallas manufacturing sector. Regional July reports from Dallas and Richmond will be posted early next week to round out the view for what looks to be another weak month for manufacturing.

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More signs the US trade deficit will be larger for Q2.
From Japan:

Exports to Asia were up 10.1 percent on the year while those to China were 5.9 percent higher. Exports to the European Union added 10.8 percent. It was the seventh consecutive increase. Exports to the U.S. climbed for the tenth straight month, this time by 17.6 percent.

Asia Chart Alert: The destination of Asian exports – 30 Jul 2013

We need more QE
:(

From Nomura:

Seven countries in emerging Asia – China, Hong Kong, India, Korea, Singapore, Taiwan and Thailand – have released trade data for June, and year-on-year export growth in six of these was negative, the exception being Taiwan. For the “Asian 7” in aggregate, export growth slowed from 7.6% y-o-y in April to 0.3% in May, and to -2.0% in June.

Of the Asian 7 all but India have released exports by destination, so from the remaining Asian 6 we can assess where demand for Asian exports is slackening. Earlier this year, Asian exports held up because weak shipments to Japan and the EU were offset by stronger shipments to the US, emerging Asia itself and the rest of the world.

However, in recent months there has been a broad-based weakening in Asian exports by destination. Even intra-Asian export growth has started to cool, in part due to China’s slowing economy. Much hinges on recoveries in some of the big advanced economies to counter ebbing growth in EM, but this has yet to show up in Asia’s export data.

Asia Insights: China: Why GDP growth has weakened despite strong credit growth – 25 Apr 2013

So some was gross, not net, and some unspent:

Nomura: Asia Insights: China: Why GDP growth has weakened despite strong credit growth

  • Economic growth in China has weakened surprisingly despite rapid credit growth in H2 2012 and Q1 2013.
  • We believe a large part of the new credit supply in Q1 did not go into the real economy. For example, at least 20% of urban construction bond issuance was used to pay off expiring bank loans.
  • Recent policy signals suggest credit growth will slow in Q2. We reiterate our view that economic growth will slow in Q2, while the market consensus expects a rebound.

We had expected economic growth in China to rise in Q1 because of very strong credit growth, but GDP growth surprisingly slowed to 7.7% from 7.9% in Q4 2012, and economic activity in Q2 has started on a weak note. This is very different to what happened in 2009, when growth in total social financing picked up from 26.6% y-o-y in Q4 2008 to 114% in Q1 2009 and 121% in Q2 2009, growth in fixed asset investment moved up from 26.8% y-o-y in Q4 2008 to 28.6% in Q1 2009, the HSBC PMI rose to 44.8 from 40.9, and the new orders component in the HSBC PMI jumped to 43.6 from 36.1 (Figures 1, 2 and 3).

But in 2013 it is a very different story. Total social financing rose to an historical high and jumped by 160.6% y-o-y in January and by 58.2% y-o-y in Q1, but fixed asset investment (FAI) growth only picked up slightly to 21.2% y-o-y in January and February, and then slowed to 20.9% in March. GDP growth slowed to 7.7% y-o-y in Q1. The flash HSBC PMI weakened in April despite favorable seasonal factors it has only dropped once in April once during the past seven years. The new orders component of the flash HSBC PMI has dropped as well.

Many investors ask us the same question: where has all the money gone? We believe a large part of the new credit supply in Q1 did not go into the real economy. We do not have comprehensive information, but we provide the following two pieces of evidence. First, we collected public information on the 370 largest issues of urban construction debt that took place in 2012, and found that at least 20% of the money raised was used to repay debt (Figure 4). It is not surprising to us as many infrastructure investments projects are not yet profitable. Therefore, local government financing vehicles need to continue borrowing new funds for debt financing.

Another piece of evidence comes from a recent government policy announcement. According to a Chinese newspaper, First Financial Daily, the National Development and Reform Commission (NDRC) issued a policy notice at the end of March to ensure the funds raised for public housing construction in the bond market are not used for other purposes. We believe this policy may be triggered by cases where some funds were misused. Indeed, risks of such events have been mentioned repeatedly in government documents.

Why didnt money flow into the real economy? We think it is partly because the underlying demand for investment is weak. FAI growth for the manufacturing industry has been on a downward trend since 2011 and dropped sharply in Q1 2013 despite strong infrastructure FAI growth, which should have generated some positive spillover effects for manufacturers (Figure 5). The over-capacity problem in the manufacturing industry has been exacerbated by aggressive policy easing in 2009 and 2012.

We reiterate our view that economic growth will slow to 7.5% in Q2 as credit growth weakens (Figure 6). The consensus expects growth to recover to 8% in Q2, but recent policy signals suggest policy tightening has started and will adversely affect growth. In particular, the government has investigated several high profile corruption cases in the bond market in the past few days, and the Peoples Bank of China held a meeting on 24 April with commercial banks to clean up irregular activities in the bond market, according to a Chinese newspaper Economic Information. This initiative will likely lead to a slowdown in bond issuance and growth in total social financing in the coming months.


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Noda Makes Consumption Tax Hike Pledge At G-20 Summit

The world’s poster child for losing decades looks to stay a step ahead:

(Nikkei)–Prime Minister Yoshihiko Noda vowed Thursday to gradually raise the nation’s consumption tax to 10% by mid the 2010s during a summit meeting of the Group of 20 leading economies in Cannes, France.

The announcement at the summit has effectively made the tax hike an international pledge, and is expected to be included in an action program due out Friday.

Noda stressed the importance of rebuilding debt-ridden Japanese finances and told G-20 leaders that fiscal consolidation is a must “for Japan to be put back on a sound economic growth path, regardless of the debt crisis in the euro zone.”

He also spoke to reporters that a Diet dissolution should be carried out before implementing the tax hike. “If we go to the people in a general election (to seek a mandate on the consumption tax hike), we should do so after passing related bills but before implementing them,” he said.

As to Japan’s participation in the Trans-Pacific Partnership free trade pact, Noda told reporters he will accelerate efforts to iron out differences within the Democratic Party of Japan, which he leads. “We have to close ranks and shouldn’t be split,” he said.

Noda showed his flexibility in making concessions to a controversial redemption period of reconstruction bonds aimed at funding rebuilding efforts of the March 11 disaster, in hopes of enlisting support from the Liberal Democratic Party and New Komeito, the main opposition parties.

“Our policy chief said that we envisage a 15-year period (for the redemption of reconstruction bonds), but there’s room for concessions,” he said.

Welcome to the 7th US depression, Mr. bond market

Looks to me like the lack of noises out of Japan means there won’t be a sufficient fiscal response to restore demand.

If anything, the talk is about how to pay for the rebuilding, with a consumption tax at the top of the list.

That means they aren’t going to inflate.
More likely they are going to further deflate.
Yes, the yen will go down by what looks like a lot, maybe even helped by the MOF, but I doubt it will be enough to inflate.

In fact, all the evidence indicates that Japan doesn’t don’t know how to inflate, nor does anyone else.

Worse, what they all think inflates, more likely actually deflates.

0 rate policies mean deficits can be that much higher without causing ‘inflation’ due to income channels and supply side effects.
There is no such thing as a debt trap springing to life.
Debt monetization is a meaningless expression with non convertible currency and floating fx.
QE mainly serves to further remove precious income from an already income starved economy.

Only excess deficit spending can directly support prices, output, and employment from the demand side, as it directly adds to incomes, spending, and net savings of financial assets.

The international fear mongering surrounding deficits and debt issues is entirely a chicken little story that’s keeping us in this depression (unemployment over 10% the way it was measured when the term was defined) that’s now taking a turn for the worse.

The euro zone is methodically weakening it’s ‘engines of growth’- its own (weaker) members being subjected to austerity measures that are reducing their deficit spending that paid for their imports from Germany. And now China, Japan, the US and others will be cutting imports as well.

UK fiscal austerity measures are accelerating on schedule.

The US is also working to tighten fiscal policy, particularly now that both sides agree that deficit reduction is in order, beaming as they make progress towards agreeing on the cuts.

The US had 6 depressions while on the gold standard, which followed the only 6 periods of budget surpluses.
And now, even with a floating fx policy and non convertible currency that allows for immediate and unlimited fiscal adjustments,
we have allowed the deflationary forces unleashed by the Clinton budget surpluses to result in this 7th depression.

We were muddling through with modest real growth and a far too high output gap and may have continued to do so all else equal.

But all else isn’t equal.

Collective, self inflicted proactive austerity has been working against growth, including China’s ‘fight against inflation.’

And now Japan’s massive disaster will be deflationary shock that, in the absence of a proactive fiscal adjustment, is highly likely to further reduce world demand.

Hopefully, the Saudis capitulate and follow the price of crude lower, easing the burden somewhat on the world’s struggling populations.
If so, watch for a strong dollar as well.

And watch for a lot more global civil unrest as no answers emerge to the mass unemployment that will likely get even worse. Not to mention food prices that may come down some, but will remain very high at the consumer level as we continue to burn up our food supply for motor fuel.

And it’s all only likely to get worse until the world figures out how its monetary system actually works.

Japan intervention comments

Market Color

Short~medium term JGB rallied due to additional monetary ease expectation related to unsterilized FX intervention money.

First, intervention in this direction- buying dollars- does ‘work’ and is infinitely sustainable.
It’s a political decision, much like the ECB buying national govt. debt. There is no nominal limit.

Second, the only reason they stopped was political pressure from the US, with the then Treasury secretary resorting to name calling like ‘currency manipulator’ and ‘outlaw.’ Otherwise the yen probably would not have been allowed to go under 100.

Third, their institutional structure functions to support the classic export led growth model- suppress domestic demand with consumption type taxes, relatively tight fiscal given institutionally driven savings desires, etc.

Fourth, this strategy causes the currency to strengthen and requires the govt. buy dollars to sustain desired levels of exports and employment.

Net exports necessarily equal net domestic holdings of foreign currency. Think of it this way. If Japan sells something to the US, and we pay for it in dollars, they have two choices. Either hold the dollars, in which case nothing more happens in the real economies and Japan has net exported and the US net imported. Or buy something in the US or any other nation with the dollars and import it to Japan in which case there are no net exports.

Japanese government started FX intervention last night with JY100bn in Tokyo and continued their effort in overseas and ended up with selling JY2trn in total. Many market participants are now saying that it will lead to monetary ease since BOJ will not absorb this JY2trn from the market and this is one of the main reasons for JGB rally today. However, I don’t think it will cause any such impact since government issues T-Bill for that amount (JY2trn) anyway.

When the BOJ buys dollars for the MOF, and pays for them with yen, that adds yen deposits to the domestic economy, thereby increasing the yen net financial assets held domestically. That’s an inflationary bias which is what they are trying to do.

In the first instance those newly added yen sit as yen balances in member accounts at the BOJ. And since they earn no interest the marginal cost of funds is 0, which happens to be where the BOJ wants it anyway.

‘Sterilizing’ is simply offering alternative interest bearing accounts such as JGB’s to the holders of the clearing balances. This would need to be done if the BOJ wanted higher rates. Or, the BOJ could simply pay interest on clearing balances if it wanted higher rates.

But the quantity of balances per se is of no ‘monetary’ consequence. As I like to say, for central banking it’s necessarily about price (interest rates) and not quantities.

So with rates already at 0, there is no more ‘monetary easing’ possible. The only ‘monetary easing’ the BOJ can do at this point is bring longer rates down some, but there isn’t much scope for that either. And they probably know by now lowering long term rates does nothing of major consequence for the real economy.

The question now is how far they will go. They’d probably like the yen back to north of 100 vs the dollar, and will move slowly to see how much political pressure they get from the US as they move in that direction. In fact, they may already be getting political pressure. I don’t know either way.

With political pressure building for China to adjust their currency upward as the US elections approach, this move by Japan might attract more attention than otherwise.

The irony/tragedy for the US is, of course, we should welcome all such moves, open ourselves for virtually unlimited imports from anywhere in the world (with sufficient quality control restrictions- no poison dog food, contaminated wall board, etc.), and enjoy the tax cut that comes along with it so we have sufficient purchasing power to be able to buy all of our own domestic output at full employment plus whatever the rest of the world wants to net export to us.

And apparently that’s a LOT right now. So with current policy of grossly overtaxing us for the size govt. we currently have, the losses of grossly over taxing ourselves may be north of 30% of US gdp, which is a staggering loss for us, and gone forever.

The only thing between what we have now and unimaginable prosperity remains the space between the ears of our policy makers, etc.

Please feel free to distribute, plagiarize, post anywhere, whatever!

*Rinban Result*

*upto 1yr to maturity (310bn)

Highest: +0.1bp
Average: +0.3bp
Allocation: 27.7%

* 1yr~10yr to maturity (250bn)

Highest: +1.5bp
Average: +2.1bp
Allocation: 19.0%

table

euro zone issues


Asian players are a worry for eurozone

By Gillian Tett

July 14 (FT)

The saga behind next week’s stress test release is a case in point. During most of the past year, governments of countries such as Germany, Spain and France have resisted the idea of conducting US-style stress tests on their banks, in spite of repeated, entreaties from entities ranging from the International Monetary Fund to the Bank for International Settlements, and the US government.


However, after a meeting of G20 leaders in Busan last month, those same eurozone governments performed a U-turn, by finally agreeing to publish the results of such tests.


Some observers have blamed the volte-face on lobbying inside the senior echelons of the European Central Bank. Others point the finger to American pressure. In particular, Tim Geithner, the US Treasury secretary, had some strongly worded discussions with some of his eurozone counterparts in Busan, where he urged – if not lectured – them to adopt these tests.

However, Europeans who participated in the Busan meeting say it was actually comments from Asian officials that created a tipping point. In the days before and after that G20 gathering, eurozone officials met powerful Asian investment groups and government officials who expressed alarm about Europe’s financial woes. And while those officials did not plan to sell their existing stock of bonds, they specifically said they would reduce or halt future purchases of eurozone bonds unless something was done to allay the fears about Europe’s banks.

That, in turn, sparked a sudden change of heart among officials in places such as Germany and Spain. After all, as one European official notes, the last thing that any debt-laden European government wants now is a situation where it is tough to sell bonds. “It was the Asians that changed the mood, not anything Geithner said,” says one eurozone official.

This raises some fascinating short-term issues about how the bond markets might respond to the stress tests. It is impossible to track bond purchase patterns with any precision in a timely manner in Europe, since there is no central source of consolidated data.

However, bankers say there are signs that Asian investors are returning to buy eurozone bonds. This week, for example, China’s State Administration of Foreign Exchange bid for €1bn (£1.27bn, £835m) of Spanish bonds, helping to produce a very successful auction.

Yes, it’s a two edged sword.

Asian nations want to accumulate euro net financial assets to facilitate exports to the euro zone.

Before the crisis euro nations were concerned that the strong euro, partially due to Asian buying, was hurting euro zone exports

However, as the crisis developed, euro nations got to the point where they were concerned enough about national govt solvency and the precipitous fall of the euro (which was in some ways welcomed by exporters but worrying with regards to a potential inflationary collapse) to agree to measures to support their national govt debt sales which also meant a stronger euro.

So now the pendulum is swinging the other way. Solvency issues have been sufficiently resolved by the ECB to avert default, but at the ‘cost’ of a resumption Asian buying designed to strengthen the euro to support Asian exports to the euro zone.

As before the crisis, however, the euro zone has no tools to keep a lid on the euro (apart from re introducing the solvency issue to scare away buyers, which makes no sense), as buying dollars and other fx is counter to their ideology of having the euro be the world’s reserve currency.

So the same forces remain in place that drove the euro to the 150-160 range, which kept net exports from climbing.

The export driven model is problematic enough without adding in the additionally problematic idiosyncratic financial structure of the euro zone.

As for the stress tests, as long as the ECB is funding bank liabilities and buying national govt debt banks and the national govts can continue to fund themselves with or without Asian buying.

I’d have to say at this point in time the euro zone hasn’t gotten that far in their understanding of their monetary system or they probably would not be making concessions to outside forces.