As they say, when it rains….Spain doesn’t need this, but such is life. Argentina is just only taking what belongs to the country, or? What’s next, governments taking your gold and giving you freshly printed pesetas for it? From El Pais on the latest out of Argentina.
After weeks of speculation, Argentinean President Cristina Fernández de Kirchner announced on Monday that her government is going to nationalize the Spanish Repsol subsidiary YPF, declaring that her country’s hydrocarbon industry was a sector of “public interest.”
In a speech made in Buenos Aires after returning from the Americas Summit in Colombia, Fernández de Kirchner explained that she will send a law to Congress that proposed giving 51 percent control of YPF to the federal government and the remaining 49 percent to the country’s provinces.
In the coming days, the country’s appraisers will decide how much it will reimburse YPF for its shares.
“When one makes decisions in the interests of national management […] one also expects that managers understand the interests of the state,” Fernández de Kirchner said.
“We are the only country in America and one of the few in the world that doesn’t manage its own natural resources, but there were stronger arguments in favor of us taking this decision,” she said.
Property collapse in Spain has only begun…Must read by Voxeu on the Spanish housing crisis.
What is the problem in Spain? It started with a classic housing bubble financed by foreign capital, and as a textbook would predict, once the inflow of foreign capital stopped and the bubble burst, unemployment soared and the financial system went bust as well (Reinhart 2008).
The current fiscal problems mostly reflect the housing bust. The Spanish government is running a large fiscal deficit as the economy remains weak and the ever-increasing losses in the banking sector hang like a sword of Damocles over the public sector.
On this ground, too much attention has thus been focused recently on the Spanish deficit overshoot in 2011 and what deficit might be attainable in 2012. More attention should be focused on the factors behind the deficit. We argue that the root problem is that the Spanish housing bubble was extreme and that the adjustment has simply been too slow. In particular, we provide a novel angle on two key questions: how long it will take to absorb the legacy of the bubble and how much it will cost?
Good piece before you consider going all in when it comes to Brazil. From Ambrose Evans-Pritchard.
The Latin Tiger may have overtaken France, Italy, and Britain to become the world’s fifth largest economy on some measures but it has also been relegated to 126th place by the World Bank for ‘ease of doing business’, behind much of Africa. Cyclical warning signs are flashing amber across the board.
It is far from clear whether this 195m-strong cub of the BRICs quartet has broken out of the “middle income trap” after half a century of tantalizing efforts, each dashed by events.
Has Brazil’s profile been flattered once again by a resource boom, this time juiced by exports of iron-ore and soya to China, and a property bubble of Irish proportions?
The jury is out, even if we all accept that Luiz Inacio ‘Lula’ da Silva – ex-Fiat car worker turned apostle of orthodoxy – did slay inflation and establish the Banco Central do Brasil as the Bundesbank of the Americas, and if we accept that the deep-water fields of the Campos Basin will eventually turn Brazil into the world’s fourth largest oil producer. Knight Frank’s global survey shows that Brazil’s house prices rose 26pc last year, leading the world by far. The global average was 0.5pc.
Full article here.
Some thoughts by Hussman on the market climate.
In the classic version of Charlie and the Chocolate Factory, Gene Wilder watches one child after another ignoring every cautionary warning, with predictably bad consequences. His deadpan appeals become increasingly halfhearted and emotionless because he knows they won’t listen anyway. We’re strongly defensive based on historical evidence that is in the most negative 0.5-1.5% of all historical observations, but it’s clear that others are willing to take significant market risk here, not as part of a long-term investment discipline or as part of a balanced portfolio strategy, but simply as a speculation – in the belief that they’ll be able to take their profits and get out before other speculators do. Our only response to these speculators is to quote Willy Wonka: “I wouldn’t do that. I really wouldn’t. No… Stop… Don’t.”
With the collapsing Spanish and Italian stock markets, don’t be surprised to see the ECB step in and create a “short term bottom”.
Chart, Scott Barber.
The Trader has been bearish on (especially) the Spanish and Italian markets over the past weeks. Our short term targets are approaching, and despite our negative views on the economy of those countries, we feel that the short term probabality of further declines is getting somewhat limited. If you have been short thhese markets as we advised, it is time to cover those shorts/try a small long at these extremely oversold levels.
A few weeks ago, not many wrote of the problems in Spain, but all we read now is regarding the Spanish flue hitting everything. Yes, that is true, but don’t forget, the Spanish market has already plunged 17% in a few weeks. Charts update below.
Guest Post via von Mises Institute.
In his lecture at George Washington University on March 20, 2012, Federal Reserve chairman Ben Bernanke said that under a gold standard the authorities’ ability to address economic conditions is significantly curtailed. The Fed chairman holds that the gold standard prevents the central bank from engaging in policies aimed at stabilizing the economy after sudden shocks. This in turn, holds the Fed chairman, could lead to severe economic upheavals. According to Bernanke,
Since the gold standard determines the money supply, there’s not much scope for the central bank to use monetary policy to stabilize the economy.… Because you had a gold standard which tied the money supply to gold, there was no flexibility for the central bank to lower interest rates in recession or raise interest rates in an inflation.
This is precisely why the gold standard is so good: it prevents the authorities from engaging in reckless money pumping of the sort Bernanke has been engaging in since the end of 2007 by pushing over $2 trillion in new money into the banking system.
The Federal Reserve balance sheet jumped from $0.889 trillion in December 2007 to $2.247 trillion in December 2008. The yearly rate of growth of the balance sheet climbed from 2.6 percent in December 2007 to 152.8 percent by December 2008. Additionally the Fed has aggressively lowered the federal-funds rate target from 5.25 percent in August 2007 to almost nil by December 2008.