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Treasury Secretary choices

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>   
>   On Fri, Nov 7, 2008 at 11:12 PM, wrote:
>   
>   Geithner’s very smart,
>   

Then why couldn’t he even hit his Fed funds target? When I asked operations people at the NY Fed why they can’t just make a one basis point market around the target they said that would mean continuous ‘intervention’ all day which would be a lot of ‘work.’ They said they only wanted to intervene once in the late morning so were trying to ‘guess’ the right amount to intervene then. This is a ridiculous way to run policy!

It took them three tries on paying interest on reserves to get the ‘right’ level which was the obvious- set it at the Fed funds target.

They are the ones passing along the swap line requests and must know or should know the likely consequences of this madness and that the FOMC doesn’t fathom what’s going on, as part what could be the biggest blunder in ‘monetary policy history.’ How does the Fed even get to loan 30 billion to Mexico secured only by pesos without Congressional discussion of any kind? The total advanced is now up to some $580 billion, with the biggest chunk to the ECB, completely under any radar screen.

>   
>   But at a time when backbone might be nice along with brains, he’s not
>   exactly worry-free. Or perhaps I should say that backbone would have
>   been nice along with his brains at the New York Fed: I think he saw all
>   too clearly the disaster in the making which hugely leveraged Wall
>   Street balance sheets represented, but was way too go along to get
>   along to put his foot down.
>   

Worse. He was part of the decisions to not give ‘depositors’ their funds back in the Lehman failure, and part of the ‘lie’ that the Fed loaned Bear $31 billion when in fact it bought the securities.

>   
>   His testimony during the Bear hearings are a model of velvet-gloved
>   disingenuousness, although in that it differs little from the testimony of
>   his fellow savior of the banking system, Dr. Bernanke.
>   

Exactly. I’ll give them the benefit of the doubt as the overwhelming evidence is they didn’t comprehend the subject matter.

>   
>   As you know, I’m all for Corzine, of the three rumored frontrunners.
>   

The least worst. Remember his ‘whispers’ caught by mics during an address with the black clergy in NJ?

Also, I met with him a couple of years back to discuss how to question then Chairman Greenspan. He agreed with what I was saying but chose not to do it for reasons unknown. I subsequently wrote ‘Interview with the Chairman’ as a guide to any congressman questioning the Fed chairman.

An Interview with the Chairman

At best he’s seriously ‘intellectually dishonest.’

Also note the TARP belonged in the Fed, not Treasury. The Fed ‘spending’ is monetary as it routinely buys securities/financial assets (like the $31 billion from Bear), while treasury federal spending is ‘fiscal’ like paying the soldiers and the postal workers, etc. If they put the TARP where it belonged it would not be part of the ‘budget’ and the spending not accounted for as part of the ‘deficit.’ I’m not so cynical to think the reason they gave it to Treasury was to allow it to show up as increased deficit spending and hopefully put a cap on ‘social programs’ to a misguided Congress. Instead I’d just call it more evidence of ignorance of monetary operations and public accounting.

Just one more thing- the Obama talk yesterday shows a continuing ‘upside down’ approach to the economic ‘problem.’ Seems to me both GM and the Banks, for example, need a population that can afford to buy cars and make payments (aka aggregate demand), which all the ‘investment loans’ and ‘financial injections’ don’t address at all.

Government always has a choice of providing additional public goods and/or supporting private consumption oriented output. For me the move to support private sector output such as cars and financial services would best be done with a ‘payroll tax holiday’ where the treasury makes all the fiscal payments which would immediately (and progressively) give working people an immediate, ongoing, and substantial increase in income to facilitate the payment of mortgages and the buying of cars. (If they don’t want to buy cars for non financial reasons so be it- let the industry shut down.) If instead government wants more public goods, it can facilitate the various public projects it’s been discussing to increase the output of public goods, and not necessarily for the further purpose of increasing the real output of private sector goods (always meaning to include services for both sectors, of course). When using up real excess capacity we can also have both, but at the macro level there is a real choice between public and private goods and services.

While it’s far to early to lose hope, all I saw with the first press conference yesterday was what looked like an undistinguished senator with no specific ideas as to what to do making a ‘sing songy’ presentation with very odd ‘mispeaks’ such as he talked to the living ex presidents, and something like he had a good transition team because it was given a lot of thought, etc. And marching up reps of corporate America to do nothing but stand in line behind him was to me an insulting piece of showmanship. The message was this is going to take time- he needs to talk to a lot of advisors, try to grasp the issues, and then decide on what to do. And with both deficit hawks and doves in his ‘inner circle’ and seemingly no personal conviction either way there’s no telling what will happen or when it will happen. What’s also clear ‘change’ so far is change back to the fossils of past Dem admins and the introduction of Chicago Dem politics to the federal level. And his two expressed policy statements- about China and currency manipulation October 24 and yesterday’s statement that Iran will not be permitted nuclear weapons- are both continuations of the Bush regime.

Yes, even the worst case is still better than what we had, or might have had, so this is not to say he wasn’t the best choice.

I’d better stop here!

All the best!
Warren


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Re: Letter to ABC

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Good letter!!!!

>   
>   On Wed, Nov 5, 2008 at 3:59 PM, Bill wrote:
>   
>   Dear ABC breakfast,
>   
>   Headlines like – 40 billion hole in the bucket – repeated by the breakfast
>   hosts today – merely perpetuate the myth that the Federal government
>   has a financial constraint. This myth has been used by the neo-liberal
>   agenda that is now in tatters as a result of the failure of markets to
>   self-regulate.
>   
>   
>   The reality is that the Federal G. as the monopoly issuer of the currency
>   has no financial constraint and does not require revenue to spend. In
>   fact, spending provides the funds to the private sector that we use to
>   fulfill our tax obligations.
>   
>   Further, the pursuit of budget surpluses has squeezed the liquidity of
>   the private sector and been an important part of the reason why that
>   sector is now so indebted. The natural state is for the federal
>   government to run deficits in order for the private sector to save. The
>   private sector cannot save if the government is running surpluses.
>   
>   Further, running surpluses (or deficits) in any one year makes no
>   difference to the capacity of the Federal G. to run a surplus (deficit) in
>   the next. The surpluses that have been adored by the neo-liberals and
>   by the sin of ignorance of your announcers have not built up any
>   capacity to allow spending to proceed now. There is no hole in the
>   bucket. There is no bucket!
>   
>   I have written a lot about this over the year. My recent book (see
>   details below) articulates this in detail. You can also read details of how
>   a modern monetary economy like Australia works from the many papers
>   available from my research centre.
>   
>   It would be good if you stopped perpetuating this myth and instead
>   allow reasonable commentary on what is actually going on with
>   government opportunities etc. It is time your listeners (and viewers)
>   learned how the economy actually operates and how they have been
>   dudded by fiscal surpluses over the last 11 years.
>   
>   Best wishes,
>   
>   Bill
>   


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Re: Commentary

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>   
>   The banks using the ECB’s liquidity program deposited a record 160
>   billion Euros with the ECB overnight, rather than lend them to other
>   banks or market participants.
>   

Jeff, ‘lending them out’ wouldn’t have changed that number. At most it would have moved the funds from one bank’s reserve account to another. So maybe, they did ‘lend them out’. Best indication is the interbank rates, but even that’s not definitive.

>   
>   Russia is going to base missiles on EU border. That should go well. In
>   unrelated news, they are also planning to build a deep-water port in
>   Venezuela that will allow Russian warships to dock there. Hamas
>   militants pounded southern Israel today with a massive barrage of 35
>   rockets, after Israeli forces killed six gunmen. So much for the
>   five-month truce. China has so far sentenced 55 people for riots
>   against Beijing’s rule that broke out in Tibet in March. No word yet on
>   the other 147 people who stood trial. Iran has warned the US again
>   not to violate its airspace.
>   

Good luck to us!


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Re: Steep yield curve

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>   
>   On Wed, Nov 5, 2008 at 7:06 AM, Morris wrote:
>   
>   COLLAPSE OF ST RATES HAS DONE SQUAT FOR LT RATES- so consumer
>   has gotten no benefit in trying to procure Long Term financing especially
>   in housing, where all mtge rates are near the high for the last 52 wks–
>   the spread between Fed Funds to Jumbo Mortgages is now 680bps–
>   has got to be a record… Great for spreads at banks…not great for
>   consumers..
>   

And banks are not allowed to take ‘gap’ risk so it doesn’t do much for them, either.

Short rates are down because of Fed funds cuts by the Fed and the unlimited lending internationally via the swap lines bringing down three month rates.

To bring long term rates down they need to stop issuing long term Treasury securities and buy back the stuff that’s outstanding. Treasury securities function as ‘interest rate support’ for their given maturity.

But even lower long term rates won’t do a lot when there is a shortage of aggregate demand because the budget deficit is too small.

And an unfriendly foreign monopolist setting crude prices can only be addressed by immediately cutting our consumption.

Warren

MOSLER’S LAW: There is no financial crisis so deep that a sufficiently large increase in public spending cannot deal with it.
(as stated by Prof. James Galbraith)


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Fed macro policy

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>   
>   On Wed, Oct 29, 2008 at 11:45 PM, Morris wrote:
>   
>   This is the 64,000 dollar question…will unlimited FED lending to ENTIRE
>   world-with IMF help-created recovery? Push on string? Hyper inflation?
>   Question of the day…would love others inputs.
>   

I’d say yes, it’s inflationary and the channels at least as follows:

1. The outstanding international dollar debt was an expansionary force when it was growing, to the extent the USD borrowings were spent. Some of that USD spending was overseas, some in the US.

Growing debt, if directed towards spending, is expansionary.

For example, you may borrow to build a house, or buy a new car.

But if you borrow to fund financial assets, your pension fund, or to buy mortgage backed securities, for example, it’s merely the rearranging of financial assets.

This increased ‘leverage’ and has no direct effect on demand, beyond the demand created by the financial institutions themselves. This includes all the hiring of employees for the financial sector which all counts as GDP.

(While this may not be deemed ‘useful output’ it is accounted for as GDP, like bridges to nowhere, and does function to support people’s livelihood. Yes, better to have employed them doing something deemed useful, but that’s another story)

2. Should the USD loans default, the financial institutions lose capital, meaning the shareholders (and bondholders, depending on the size of the loss) lose their nominal wealth. This may or may not reduce spending. Most studies say it’s a weak effect at best.

And for each institution to continue to function it needs to replace capital.

(In our ‘loans create deposits’ world, infinite capital is available at the right price, if the government has a policy to sustain domestic demand.)

For US institutions with USD denominated capital, losses result in a reduction of their USD capital.

Their liabilities remain the same, but their assets fall.

And any assets sold to reduce USD funding needs are sold for USD.

3. Institutions with capital denominated in other currencies, go through the same fundamental process but with another ‘step.’

When their USD assets are impaired, they are left with their USD liabilities.

They now have a ‘mismatch’ as non dollar assets including non dollar capital are supporting the remaining USD liabilities.

To get back to having their assets and liabilities matched in the same currency, they need to sell their assets in exchange for USD.

Until they do that they are ‘short’ USD vs their local currency, as a rising USD would mean they need to sell more of their local currency assets to cover their USD losses.

Technically, when the assets they need to sell to cover USD losses are denominated in non dollar currencies, this involves an FX transaction- selling local currency to buy USD- which puts downward pressure on their currencies.

Additionally, they need to continue to fund their USD financial assets, which can become problematic as the perception of risk increases.

4. The Fed’s swap lines ($522 billion outstanding, last i saw) help the rest of the world to fund themselves in USD.

In an effectively regulated environment, such as the US banking system, this works reasonably well but still carries a considerable risk that we decide to take as a nation for further public purpose. (it is believed the financial sector helps support useful domestic output, etc.)

Any slip up in regulation can result in the likes of the S&L crisis, and arguably the sub prime crisis, which results in a substantial disruption of real output and a substantial transfer of nominal and real wealth.

The Fed is lending to foreign CB’s in unlimited quantities, secured only by foreign currency deposits, to world banking systems it doesn’t regulate, and where regulation is for foreign public purpose.

The US public purpose of this is (best I can determine) to lower a foreign interest rate set in London called ‘LIBPR,’ and ‘perhaps’ to ‘give away’ USD to support US exports.

The Fed yesterday, for example, announced $30 billion of said lending to Mexico and Brazil for them to lend to their banks. The Fed must be a lot more comfortable with Mexico and Brazil’s bank regulation and supervision than I am, and certainly than Congress would be if they had any say in the matter.

5. The problem is that once the Fed provides funding to these foreign Central Banks, who then lend it all to their banking systems, they remove the foreign ‘funding pressure’ that was causing rates to be a couple of % higher over their (didn’t change our fed funds rate). Taking away the pressure takes away the incentives of the pressure to repay $US’s introduces.

The Fed is engaging in a major transfer of wealth from here to there. Initially its prevents the transfer of wealth back to the US, as would have happened if they had been forced to repay and eliminated their USD liabilities and losses.

That same force if continued develops into large increases in USD spending around the world as this ‘free money’ going to banking systems with even less supervision and regulation than ours soon ‘leaks out’ to facilitate increasing foreign consumption at the expense of USD depreciation.

Note the bias- the ECB gets an unlimited line and Mexico is capped at $30 billion.

This means the Fed is making a credit judgment of Mexico vs the ECB, which means the Fed is aware of the credit issue.

Conclusion, the Fed is beginning to recognize the swap lines are potentially explosively inflationary, as evidenced by not giving Mexico unlimited access.

The swap lines are also problematic to shut down should that start to happen, just like what shutting down lending to emerging markets did in the past.

Shutting down the swap lines would trigger the defaults that the unlimited funding had delayed, and then some, triggering a collapse in the world economies.

It’s a similar dynamic to funding state owned enterprises- the nominal costs go up and the losses go up as well should they get shut down.

Keeping them going is inflationary, shutting them down a major disruption to output and employment.

It is delaying the circumstances that were headed toward a shut down of the European payments system, but leaving the risks in place for the day the swap lines are terminated.

7. Bottom line- it looks to me that the swap lines are a continuation of the weak dollar policy Bernanke (student of the last gold standard depression) and Paulson have been pushing for the last couple of years.

This time they are ‘giving away’ dollars to foreigners, in unlimited quantities, ultimately to buy US goods and services.

They are doing this to support export led growth for the US, at the direct expense of our standard of living. (declining real terms of trade)

They are doing this to increase ‘national savings’- a notion applicable under the gold standard of the early 1930’s to prevent gold outflows, and where wealth is defined as gold hoards. This notion is totally non applicable to today’s convertible currency.

It is a failure to understand the indisputable Econ 101 fundamental that exports are real costs and imports real benefits.

They believe they are doing the right thing and that this is what’s good for us.

The unlimited swap lines are turning me into an inflation hawk longer term.

But the USD may not go down against all currencies, as potentially the inflation will hit other currencies as well.

Where to hide? I’m back to quality rental properties and energy investments.

The world is moving towards increased demand with no policy to make sure that doesn’t result in increased energy consumption and increasing inflation.

Comments welcome!

Warren


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ECB council member foresees ‘tri-polar’ currency system

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>   
>   On Sun, Oct 19, 2008 at 11:06 PM, wrote:
>   
>   Sure he can say that now so long as the Fed is there to
>   backstop everything. These Europeans have no shame.
>   

Right, the Eurozone is surviving on the unlimited Fed USD swap lines.

That’s a complete ideological failure for the Euro members.

It’s their worst nightmare- the ECB borrowing USD reserves to support the Euro Banking System.

ECB council member foresees ‘tri-polar’ currency system

By Jonathan Tirone

VIENNA, Austria — European Central Bank council member Ewald Nowotny said a “tri-polar” global currency system is developing between Asia, Europe, and the United States and that he’s skeptical the U.S. dollar’s centrality can be revived.


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Re: IPOs- none for 10 weeks

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Yes, but for the near term it could all look like a ‘traditional recession’ as LIBOR comes down and the ‘financial crisis’ seems to stop getting worse. Stocks could be OK with that for a while.

It will all be support by the US extending increasing (and unlimited) swap lines to foreign central banks, and ECB broadening its lending outside its member nations. And the Bank of Japan may do the same for nations and banks strung out on yen debt as evidenced by the strong yen what has been a falling budget deficit in Japan making net yen financial assets that much tougher to get.

This all supports the ‘external currency debt’ that’s happened around the world.

Problem is, however, like the traditional emerging market collapses, it takes ever increasing lending by the Fed beyond its own US member banks to hold it all together, and it all comes down when the Fed says ‘no mas’ which is will probably be forced to do (maybe by Congress if it wakes up to what’s happening) should the foreign lending look to be going parabolic.

Watch for this weeks expansion of swap lines to the ECB, BOJ, BOE, and SNB as they continue to offer unlimited USD loans to their member banks.

The only way to immediately avoid prolonged recession remains a US payroll tax holiday which will add over $20 billion per week to the incomes of workers and businesses, adding maybe 5% to US GDP and supportive of the USD incomes and exports of the rest of the world as well. Increasing govt. spending on needed projects and state revenue sharing for same would also work but would take much longer to kick in and be narrower in focus. These could be done as well and when they do kick in should the economy show signs of overheating methods to reduce demand might be appropriate. But most expansions do this ‘automatically’ as the last one did. The problem is getting the politicians to realize that falling budget deficits during an expansion are not a ‘good thing’ per se.

>   
>   On Mon, Oct 20, 2008 at 3:53 AM, Bob wrote:
>   
>   Hi
>   
>   This says a lot too about how bad things are and will become >   further:
>   

Absence of IPOs Hits 10 Weeks

By Lynn Cowan

It’s official: The U.S. IPO market has seized up completely, with a record-setting stretch of inactivity that began in August.

It’s been 10 weeks since a company has held an initial public offering in the U.S., the longest period on record since Thomson Reuters began tracking deals in 1980. The last deal occurred on Aug. 8, when Rackspace Hosting Inc. made its debut on the New York Stock Exchange.

If the vacuum continues throughout October, it will mark the first consecutive two-month period without an IPO in the U.S. since Thomson Reuters began keeping track. The company’s data includes real-estate investment trusts but excludes closed-end funds and special-purpose acquisition companies.

The last similar empty stretch on the IPO calendar was from Feb. 27 to May 12 in 2003, a 74-day period, according to Standard & Poor’s Capital IQ database, which excludes REITs as well as closed-end funds and SPACs. Today marks the 73rd day since Rackspace priced, and with no deal in sight this week, that number will easily be passed.


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Re: more on Fed swaplines

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Yes, with their unlimited Fed swap lines euro credit is ‘improved’ but seems only for as long as the Fed keeps that window open?

Two problems with what the Fed is doing:

1. External currency (dollar) debt is moved from ‘private banks’ to the ECB if those banks fail.
If they hadn’t done this, bank failures would mean the banks default to their lenders who become general creditors and maybe equity holders when the smoke clears. The ECB can’t ‘fail’ without the entire europayments system shutting down. Before that happened it would probably sell euros for dollars to service it’s dollar debt if the Fed caps its lending to the ecb.
Yes, if the Fed never caps its lending to the ECB this can go on forever, with the ECB borrowing more and more to pay the dollar debt service, which is ponzi and will end one way or another.

2. It’s likely the Fed will be faced with rapidly increasing demands from the CB’s for the ‘unlimited’ dollar borrowings as the CB’s have banking systems that will utilize infinite USD loans if available to stay afloat and use new borrowings to service the old dollar debt unless/until they are declared insolvent, in which case the CB’s have the debt to the Fed.

3. This means the unlimited dollar lending will continue to grow until the Fed says no mas. Just like the classic emerging market dollar debt where it always tried to go parabolic before being cut off.

>   
>   On Sat, Oct 18, 2008 at 12:06 PM, wrote:
>   
>   Of course, they can now do everything, now that the Fed is
>   effectively backing them via these unlimited swap
>   arrangements.
>   


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Re: The first weak link to be probed?

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Good read, thanks, passing it along.

>   
>   On Thu, Oct 16, 2008 at 8:22 PM, wrote:
>   
>   Even though Hungary is not a member of the euro zone, this analysis
>   suggests that this could be the weak link which shatters the whole euro
>   project. Is the ECB now going to be able to secure swap lines from the
>   Fed to deal with the problems in eastern Europe? Interested to hear
>   your thoughts.
>   

ECB Agrees to Lend Hungary as Much as 5 Billion Euros

The European Central Bank has announced that it will lend up to 5 billion euros to Hungary’s Central Bank. The move aims to stop Hungary’s financial crisis from spreading, a goal that overrides its drawbacks.

Analysis

The European Central Bank (ECB) announced Oct. 16 it will lend as much as 5 billion euros ($6.75 billion) to the Hungarian Central Bank to help head off a local liquidity crisis. The ECB is attempting to nip Hungary’s potentially destabilizing problems in the bud, for if the Hungarian economy tanks, far more than one small Central European country will be affected.

International Economic Crisis

Hungary’s mortgage system is locked up in the carry trade with the Swiss franc; many mortgage loans are denominated in Swiss francs rather in the local currency, the forint. Since 2006 in fact, nearly 80 percent=2 0of all Hungarian mortgages have been granted in Swiss francs. As the forint falls versus the Swiss franc (it fell 7.1 percent Oct. 15 alone) the cost of servicing those mortgages for the average Hungarian homeowner will increase proportionally (even before things like teaser rates are taken into account). All told, approximately 40 percent of Hungary’s mortgages are directly affected, along with approximately 40 percent of all consumer debt. The ECB move today to inject 5 billion euros into the country is designed to head off a plunge in the forint. At about 4.8 percent of gross domestic product, this represents proportionally the same amount of money as the entire U.S. bailout package.

At present, how critical the Hungarian situation is to the Europeans remains somewhat murky, but we do know that most of the Swiss franc-denominated loans were granted by Austrian banks. So as the forint falls and Hungarians begin defaulting on their mortgages en masse, we could see broad and deep failures in the Austrian banking sector, which is already in trouble due to the global liquidity crisis. Should that happen, the next step in the chain is the Swiss banks that lent the Austrian banks the francs needed to fund the Hungarian mortgages in the first place. Switzerland remains one of the world’s most critical financial nodes. Problems there would have global implications, with the epicenter at the heart of Europe. Switzerland is completely surrounded — culturally, economically, figuratively, financially and literally — by EU states, but is not a member.
Budapest has seen this problem coming, and has worked aggressively to get its budget deficit — which stood at 9.2 percent of GDP in 2006 — under control. Last year it was brought down to 5.5 percent, and now the government is redoubling its efforts and hopes to get that number down to 3.4 percent this year and 2.9 percent in 2009.

Highly contractionary move but necessary to keep the currency up and comply with ECB entrance requirements.

But it may be too late for that. The government has discovered that there is no appetite at home or abroad for additional government debt issues,

I haven’t been watching this, but that reads like the problem is a fixed FX policy, as they try to fit it to the Euro.

raising the prospect that government financing could simply freeze up. The government already has taken the precautionary step of seeking a standby agreement with the International Monetary Fund (IMF) for emergency financing. Preferring to avoid the embarrassment of having one of their own going hat in hand to an international institution that normally helps manage economic basket cases, the European Union jumped in Oct. 16 with that 5 billion euro loan both to (hopefully) nip the problem in the bud, and in the longer term avoid the embarrassment of having the IMF taking one of their own into receivership. Hungary now stands as the only European country to receive direct emergency aid in the history of the European Union, and Hungary is not even a member of the eurozone.

The only reason for that kind of financial assistance is to support the local currency at a pegged rate. Also sounds like a ‘managed peg’ of some kind as per the mortgage problems above stemming from currency depreciation.

As for the other end of this daisy chain of potential chaos, the normally stolid Swiss are filled with fear more appropriate for a former Soviet republic=2 0that has just fallen under the shadow of a resurgent Moscow. On Oct. 16, the two largest Swiss banks, UBS and Credit Suisse, received government capital injections worth $6 billion as Bern assembled a fund to buy up $60 billion (both of the packages are denominated in U.S. dollars) in questionable assets held by the banks. And this is on top of the 6.5 billion euros ($8.7 billion) gleaned from the banks’ own recapitalization efforts. The ECB is also working with the Swiss National Bank in a very big way to bolster liquidity in each others’ markets. The Swiss see a storm coming, and when the Swiss get nervous about financials, everyone should take note.

As of the time of this writing, Hungary is holding. The forint has risen 3.8 percent versus the euro since the ECB’s announcement, mitigating yesterday’s 5.4 percent fall. To prevent the collapse from going regional and perhaps even global, the ECB needs to keep the forint as locked into its current value as possible. That means the ECB probably will de facto draw Hungary into the eurozone. This is because if the forint/euro exchange rate can be frozen, homeowners will be able to keep up with their payments, the mortgages will not go into foreclosure and there will not be a domino effect. It would be better yet to freeze the forint versus the Swiss franc, the currency the problem loans are denominated in. But the ECB controls the euro, not the Swiss franc, and must work with the tools at its disposal.

This is a highly inflationary policy as it will take more and more euros to support the local currency that seems to have its own inflation issues.

Again, I haven’t followed this one.

Thanks for the heads up!

Warren

In the long run, essentially extending euro membership to Hungary on crisis terms is a horrible decision. Normally, states spend years working themselves to the bone to qualify for the sort of perks and stability that euro membership grants, so the political and economic fallout of what began Oct. 16 will damage the euro’s credibility for years. But these are exceptional circumstances. The ECB, and the European Union as a whole, realizes full well that without dramatic action far more than Hungary is at stake.


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