With the Greek Drama reaching ridiculous levels, the happenings are moving to Italy, on both the Economic and Political front. Grande Silvio has been around for a long time, and will not let go of the power so easily.
The political end of Silvio Berlusconi is no ordinary matter. Nothing comparable to the handover from Kohl to Merkel in Germany or from Thatcher to Major in the United Kingdom in the 1990s. Berlusconi is not the only politician with great experience that resists in his position. He is the figure that for good or has represented an era. Even more, he has been the dominant figure for the past eighteen years; leader but in fact owner, in the real sense, of the Italian centre-right. Now he is at the epilogue but it is no surprise that his decline is like a psychodrama; or that it is so difficult, during the crisis, to catch a glimpse of a parliamentary solution that does not entail early elections. Let’s hope elections as soon as possible, if the puzzle stays as such also in the next decisive days. (Stefano Folli – Il Sole 24 Ore)
Guest Post by Macro Story. The equity markets are getting no credit, literally and figuratively. For months now we have discussed the warning signs being flashed by credit and although unheeded by equity they continue to this day.
Perhaps it is because credit markets are perceived as complicated black boxes not worth the time to analyze. The reality is they are not that complicated. Most importantly though without credit you have no economic growth and without growth you have no expanding corporate profits.
Central banks can do all they want to control short term rates but without the participation of credit markets their efforts are futile at promoting economic expansion. So on that note below is an update to some key credit metrics and what they are telling us.
Non Financial Commercial Paper
Used for short term financing needs like inventory and accounts receivable rates continue to move lower. There is simply no demand for commercial paper it appears.
Earlier during the weekend, there was some confusion regarding the interpretation of the CME late Friday press release. This is now cleared, and ICE is joining the CME’s lowering of margin with regards to MF Global event. The World is back to normal…..
ICE lowers margin due to the MF Global situation.
Effective immediately, ICE Futures U.S. is temporarily
lowering the Initial Margin rate for all Speculative accounts to a
level equal to the Maintenance Margin rate for all contracts. The
Initial Margin rate for hedgers already is the same as the
Maintenance Margin rate.
This action is being taken to mute the impact of the transfer of
accounts from MF Global Inc. to other clearing members that
was effected overnight, and thereby support the integrity of
CME full clarification below.
Do you remember Iceland and Icesave? In England and the Netherlands, the Icesave program was offering interest rates at much higher interest for people to invest “risk free”. Well we all know what happened, and how that risk free saving turned out. After the Icelandic “bluff” was brought into daylight, banks went into receivership.
UK and Holland wanted Iceland and the people to pay for these risk free savings, but the people of Iceland said no to generations of debt. IMF and EU basically wanted Iceland to pay for money it didn’t own. If you are going to put the country into 50 years of poverty, the people had to vote about it, but the obviously said NO. The “set up” is rather similar to what we see developing in Greece. Below video by Mr Hudson, one of few economist understanding what really is going on.
The World has been focusing on Greece for quite some time now. With government being on/off on an intra day basis, focus will shoft once again to the bigger Med countries. Italy is already feeling the heat, but what about Spain? Unemployment has hit record levels. Standing at 21.5%, this problem will haunt Spain for many years to come. Youth unemployment has created a “lost generation”, young people totally giving up on even getting a job. We hear occasionally from Spain, but it is not getting the focus the country deserves. During the reckless property bonanza, nobody thought about the future, but the the future is here, and many provinces are struggling. Local treasurers are suffering. El Pais reports;
In early July, Spain’s cities and towns were more than 37 billion euros in the red. This is the highest level of total municipal debt on record, and it comes at the worst possible time, when revenue has plummeted. The situation is so dire that some local corporations have started to fire personnel; others have been withholding payment to their providers for years; some have seen streets and squares seized over payment defaults; and then there are those that have come up with extravagant savings measures, such as turning off the traffic lights at night.
and don’t forget the corruption….