Euro breakup concerns grow – Greece may take legal steps against US banks

Greece May Take Legal Steps Against U.S. Banks...
Euro Breakup Concerns Grow...
Falls to 4-year low...
Germans lose faith...
Merkel: Rescue package 'just buys time'...

Kregel/Parenteau: No Sidestepping the Eurozone Implosion?

Links 5/17/10

"Making Friends With Evil": A Fable for Our Times Chris Floyd

The Failure of the American Jewish Establishment Peter Beinhart, New York Review of Books

US says BP move to curb oil leak 'no solution' BBC. Note the contrast with US headlines: Oil-Spill Fight Shows Progress Wall Street Journal and BP Reports Some Success in Capturing Leaking Oil New York Times. Probably the best explanation here: Feds: BP's mile-long oil tube 'not a solution to the problem' Raw Story

Judge H. Lee Sarokin: Why Should There Be Any Liability Limitation for Oil Spills? Huffington Post

How Will They Spin This? Paul Krugman

Texas schools board rewrites US history with lessons promoting God and guns Guardian

Class Warfare: Hundreds Protest Outside Bankers' Houses In DC Huffington Post. I'm not keen about this sort of thing, but not surprised to see it happening.

America's Ten Most Corrupt Capitalists Alternet (hat tip reader John L)

Dimon Tries, Fails to Pacify Syracuse Protester With Phone Call Bloomberg (hat tip reader John L). Blankfein is getting his wish, he is not alone in the hot seat.

Support for Spanish government falls sharply Financial Times

Early Easter hits retail sales as April figures show nationwide drop Independent

Going to Extreme Paul Krugman. We pointed to the article he cites over the weekend.

Forget the wolf pack – the ongoing euro crisis was caused by EMU Ambrose Evans-Pritchard, Telegraph

Kregel/Parenteau: No Sidestepping the Eurozone Implosion?

 

By Jan Kregel, former professor of economics at Università degli Studi di Bologna and Johns Hopkins,m and currently a senior scholar at The Levy Economics Institute and Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge, editor of The Richebacher Letter, and a research associate of The Levy Economics Institute

A week ago eurocrats launched their campaign of overwhelming force designed to shock and awe the "wolf pack" of professional speculators and institutional investors (hedge funds and pension fund managers) into a more docile, subservient position. In the currency market, the shock and awe wore off after the first 48 hours, while by the end of the week, it also appeared to be wearing off from the equity markets.

Some of this is undoubtedly just the innate brazenness of the wolf pack being expressed. As a general rule, they do not take kindly to being cowed or constrained in any fashion. It is simply is not in their genetic make up. Consequently, they have no choice but to follow their instincts to call the bluff of the eurocrats, and that is part of the reason we are seeing, for example, the wolf pack dragging the euro exchange rate down to the ground in recent trading sessions.

But this is about more than just testosterone counts. Some wing of the professional investing world is beginning to see the design flaws built into the eurozone from day one. And once the spy these flaws, they begin to realize the nature of the solution is something utterly different than what they are witnessing being rolled out before their very eyes. In the following 11 points, we highlight some of the key aspects of the eurozone predicament using the financial balance approach developed by the late Wynne Godley which we have explored in previous blog submissions, papers, and book chapters. Until more investors and policy makers can understand the true nature of the various predicaments facing the eurozone, and the inherent design flaws exhibited in the European Monetary Union and the (In)Stability and (Lack of) Growth Pact, odds are precious time will simply be wasted trying to make believe the shock and awe fix is already in.

1. Underlying the eurozone predicament is a missing adjustment mechanism. There is neither a price nor a policy mechanism that encourages the current account surplus nations to recycle their surpluses in a win/win, pro-growth fashion. Keynes tried to design such a mechanism into the Bretton Woods agreement, but the American negotiators scotched it. This same pro-growth adjustment mechanism is missing at the global level with regard to China (although they did report a trade deficit in March).

2. An ostensibly moral stance advocating balanced government budgets is revealing a profound ignorance of the simple accounting of sector financial balances. Those preferring to impose a "fiscally correct" policy on the peripheral nations should best recognize these accounting realities, and soon. If we are correct that domestic income deflation will be the end result of fiscal retrenchment colliding with private sector attempts to net save, then surely more desperate citizens will turn to even more desperate acts. Rather perversely, the combined effects of fiscal retrenchment, private income deflation, and rising private debt distress are likely to make moral considerations a second or third order concern for many eurozone citizens.

3. Ultimately, current account surpluses need to be recycled into chronic deficit nations in a sustainable fashion. Such a mechanism could be set up under the auspices of the European Investment Bank very quickly. Effective incentives to recycle current account surpluses via foreign direct investment or equity flows should be crafted at once.

4. Such an approach is likely to prove superior to funneling financial assistance through the IMF or other multinational arrangements. The IMF will undoubtedly insure that fiscal retrenchment gets imposed across the region. Any fiscal assistance is likely to be imposed with conditionality – a conditionality that fails to recognize sector financial balances are interlinked, both within and between nations. IMF conditionality is bound to set off the twin contagion vectors of falling trade surpluses and rising bank loan losses in the core nations. Surely this is not what Dutch and German policymakers intended, nor is it any way to hold the eurozone together.

5. Rapidly cutting fiscal deficits without considering the impact of such moves on private sector financial balances is a shortsighted, if not dangerous policy direction. Sector financial balances – the difference between saving and investment, or income and expenditures – are interconnected, and cannot be treated in isolation.

6. Hiking taxes and slashing government expenditures will suck cash flow out of the private sectors of the peripheral eurozone nations. These private sectors have been rebuilding their net saving positions in the wake of sharp and prolonged recessions. Companies have been conserving cash by slicing investment spending, inventories, and employment. Households have already drastically reduced home purchases and consumer spending.

7. It is an elementary fact of accounting that the private sector as a whole can only spend less than it earns if some other sector spends more than it earns. That sector has tended to be the government, usually as automatic stabilizers kicked in while recessions deepened. Indeed, most of the dramatic widening of government deficits is due to a collapse in tax revenues, not to discretionary stimulus. Pursuing fiscal retrenchment in order to reduce government debt default risk will merely raise the odds of private sector debt defaults. Cash flow will be taken from households and firms attempting to rebuild their net saving positions, and private debt servicing will falter.

8. The only way to avoid this outcome is if the nations undertaking fiscal retrenchment can swing their trade deficits around in a fully offsetting fashion. Otherwise, domestic income deflation is the likely result, Indeed, this is the madness behind the method of "internal devaluation" so evident in Latvia's economic implosion. There is no guarantee that trade swings will be large enough to overcome fiscal drag. A return to debt deflation dynamics like those engaged after the Lehman debacle is not out of the question.

9. Furthermore, since the current account surplus of the eurozone has remained between +1 and -1 percent of GDP for quite some time, there is every reason to believe that attempts by the periphery to achieve trade surpluses will undermine the export led growth of Germany and the Netherlands.

10. It would therefore appear that fiscal retrenchment is about to set off two related contagion effects. First, the loans on the books of German, Dutch and French banks are likely to sour as private sector cash flows are squeezed in the periphery. Bank holdings of government debt issued by the periphery may not default, but the mortgages and corporate loans these banks have outstanding to the periphery will experience rising loan losses.

11. Second, the export sales of German and Dutch companies will fade with the falling import demand of the periphery. As their domestic incomes fall, they will import less. In other words, the fiscal retrenchment the core nations are insisting upon is highly likely to boomerang right back on them.

As it stands, investors have started to recognize that bank in the region are at risk. CDS for Spanish and Portuguese debt have started to widen more dramatically over the past two weeks, although investors still appear overly focused on government debt CDS. Policy makers have also begun to realize Greece is unlikely to be the last country requiring a bail out, while they at the same time sign on for rapid fiscal "consolidation" (read retrenchment) in order to ostensibly avoid becoming the next Greece.

Yet we continue to find many of the points detailed above are not yet recognized by professional investors or policy decision makers. Absent this coherent framework, it will indeed prove very difficult to sidestep an economic and financial implosion in the eurozone, following on the heels of an already historically deep recession, and burst property bubbles in a number of eurozone nations. May wiser heads prevail.

More on this topic (What's this?)

The Ramifications of Bailouts in Europe (Trends I'm Watching, 5/16/10)

What the Greek Bailout Means for the Eurozone… And How You Can Play It (Investment U, 5/4/10)

Eurozone slowdown coming; can the Euro survive? (Credit Writedowns, 5/12/10)

Consolidated Branch Office Solution - HP, Fortinet, Riverbed

Electronic Trading captures 55% of total FX Volume in 08-09

http://blogs.fxstreet.com/francesc/2010/05/11/electronic-trading-captures-55-of-total-fx-trading-volume-in-200809/
ELECTRONIC FX: AS GLOBAL MARKETS NORMALIZE, SLOW BUT STEADY GROWTH
E-Trading Displaces Telephone as Primary Trading Channel in Foreign Exchange

Tuesday, May 11, 2010 Stamford, CT USA - Global foreign exchange markets continued their migration to electronic execution last year as e-trading volumes increased amid a decline in overall FX trading activity.

Customer electronic foreign exchange trading volumes increased 7% from 2008 to 2009. While this growth pales in comparison to the 25% expansion in 2007-2008, the fact that electronic trading systems were attracting business while the overall market was contracting suggests that market participants continue to actively shift trading volumes to the platforms from other channels.

Godaddy, Network Solutions, Dreamhost, others – attacked by Wordpress php hack

http://www.ghacks.net/2010/05/09/mass-shared-host-website-hack/#comment-1073096 Reports began to appear on the Internet

two days ago that suggested that a new mass hack was underway. It was first assumed that the hack was only targeting Wordpress blogs but it soon became known that other scripts were also affected by it.

http://www.wpsecuritylock.com/breaking-news-wordpress-hacked-with-zettapetta-on-dreamhost/

resources to see if your site was hacked
http://codex.wordpress.org/FAQ_My_site_was_hacked
http://ocaoimh.ie/did-your-wordpress-site-get-hacked/
http://smackdown.blogsblogsblogs.com/2008/06/24/how-to-completely-clean-your-hacked-wordpress-installation/
http://www.snipe.net/2010/01/when-wordpress-gets-hacked/

And when you're done:
http://codex.wordpress.org/Hardening_WordPress

Google info, domain lookup:

http://www.google.com/search?hl=en&client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&q=firesavez7.com&aq=f&aqi=&aql=&oq=&gs_rfai=

Domain name: firesavez7.com

Registrant Contact:
   UIS
   Garritt Kooken 
   +86.592257788 fax: +86.592257788
   Rue de Virton 237
   Evegnee Evegnee 11111
   in


DNS:
ns3.cnmsn.com
ns4.cnmsn.com

Created: 2010-05-07
Expires: 2011-05-07

 

Wordpress security site: http://www.wpsecuritylock.com/

Fed Restarts Currency-Swap Tool as Sovereign-Debt Crisis Flares

http://www.bloomberg.com/apps/news?pid=20601087&sid=amiI5qIW8gDI
May 10 (Bloomberg) -- The U.S. Federal Reserve will restart its emergency currency-swap tool by providing as many dollars as needed to European central banks to keep the continent's sovereign-debt crisis from spreading.

The swaps with the European Central Bank, Bank of England and Swiss central bank will allow them to provide the "full allotment" of U.S. dollars as needed, the Fed said late yesterday in a statement in Washington. A separate swap line with the Bank of Canada will support as much as $30 billion, the Fed said, and the Bank of Japan said it approved reactivating its U.S. line. The swaps were authorized through January 2011.

 Euro, Global Stocks, Oil Rally on European Loan Plan; Treasuries Retreat

 U.S. Stocks Advance, S&P 500 Jumps the Most in a Year on EU Rescue Package

 Dollar Libor Holds Near Nine-Month High After EU's $1 Trillion Loan Accord

 Trichet Indicates Government Bond Purchases Not Supported by Whole Council

 EU Crafts a $962 Billion Show of Force to Bolster Euro, Halt Global Crisis

RACE TO AVERT CRISIS...
MARKETS SURGE...
WORLD INDICES...
LAST-DITCH BID: $1 TRILLION EU EMERGENCY FUND!
Bank Crunch Deepens; Default Swaps Reach Records...
Tensions simmer over pension cuts...
Euro 'could reach parity with dollar'...
SHE PAYS THE PRICE: Voters rebuke Merkel for Greek loan...
'America has good reason to worry'...
MOODY'S: U.S. Debt Shock May Hit As Soon As 2013...
Fed Restarts Currency-Swap Tool...
FANNIE MAE seeks $8.4B in aid after 1Q loss...

Get these fast trading jokers out of here: Saluzzi

High frequency trading: Why the robots must die

The robo-stock market blew a fuse Thursday. Now is Washington's chance to rewire the joint for good... http://wallstreet.blogs.fortune.cnn.com/2010/05/07/the-nyse-and-high-frequency-trading

Euro Financial Crisis – 720b EUR bailout fund

LAST-DITCH BID: $650 BILLION EU EMERGENCY FUND!
Bank Crunch Deepens; Default Swaps Reach Records...
Tensions simmer over pension cuts...
Euro 'could reach parity with dollar'...
SHE PAYS THE PRICE: Voters rebuke Merkel for Greek loan...
'America has good reason to worry'...
MOODY'S: U.S. Debt Shock May Hit As Soon As 2013...

FXCM buys ODL rumor

http://forexmagnates.com/fxcm-acquires-odl-group-to-form-worlds-largest-forex-broker/ Following months of rumors about a potential acquisition I now got a word that the acquisition was finally completed. FXCM is about to acquire ODL (pending due diligence and regulatory approval) and this merger will form world's largest retail Forex broker.

FXCM has already bought ODL's US retail business a while ago when ODL decided to exit the US market and this probably paved the way for this much larger acquisition. FXCM's volumes are about $365 billion a month and ODL, in my opinion, is making at least $100-150 billion a month thus placing the combined company above Oanda in my monthly volume surveys. The merged company will serve 200,000 clients with combined assets of over $800 million.

It’s a confidence crisis

"It's a confidence crisis," said Quincy Krosby, chief market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees about $667 billion. "You've got yourself in a vortex of negativity in Europe. In the U.S., the investigation on yesterday's trading is definitely an overhang. It's a very precarious scenario. The market is waiting for a viable solution."

http://www.bloomberg.com/apps/news?pid=20601087&sid=aNE1LEPTAp1k

It's Not About Greece Anymore

http://www.roubini.com/euro-monitor/258851/it_s_not_about_greece_anymore The Greek "rescue" package announced last weekend is dramatic, unprecedented, and far from enough to stabilize the eurozone. 

The Greek government and the European Union (EU) leadership, prodded by the International Monetary Fund (IMF), are finally becoming realistic about the dire economic situation in Greece.  They have abandoned previous rounds of optimistic forecasts and have now admitted to a profoundly worse situation.  This new program calls for a total of 11% of GDP in terms of "fiscal adjustments" (i.e., reduction in the budget deficit; now meaning government spending cuts mostly) in 2010, 4.3% in 2011, and 2% in 2012 and 2013.  The total debt to GDP ratio peaks at 149% in 2012-13 before starting a gentle glide path back down to sanity.

MUST HEAR: Panic And Loathing From The S&P 500 Pits

"Guys this is probably the craziest I have seen it down here ever." Here it is, memorialized for the generations and away from the now openly ridiculous disinformation propaganda of the mainstream media, just what a full market meltdown panic sounds like: straight from the epicenter, the S&P 500 pits. Luckily open ouctry still exists, if at least for shock value. Click here for a first hand account of the most shocking 15 minutes in recent market history. Fat finger my ass. http://www.zerohedge.com/sites/default/files/Market%20Crash.mp3

NYSE blames electronic trading

http://www.bloomberg.com/apps/news?pid=20601010&sid=aETiygQQ8Y3g
May 6 (Bloomberg) -- Computerized trades sent to electronic networks turned an orderly stock market decline into a rout, according to Larry Leibowitz, the chief operating officer of NYSE Euronext. Nasdaq OMX Group Inc. canceled trades in 286 securities that rose or fell 60 percent or more.

While the first half of the Dow Jones Industrial Average's 998.5-point intraday plunge probably reflected normal trading, the selloff snowballed because of orders sent to venues with no investors willing to match them, Leibowitz said in an interview on Bloomberg Television.

"If you look at the charts you can see fairly clearly where the trades came in," he said from New York. "It's that V-shaped drop where it came down and snapped right back up. You had some very high-cap stocks trading down 50 percent or large percentages in a split-instant because there really was no liquidity in electronic markets."

The selloff briefly erased more than $1 trillion in market value as the Dow average tumbled 9.2 percent, its biggest intraday percentage loss since 1987, before paring the drop. The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission are reviewing "unusual trading" that contributed to the plunge.

Stock Selloff May Have Been Triggered by a Trader Error

In one of the most dizzying half-hours in stock market history, the Dow plunged nearly 1,000 points before paring those losses in what possibly could have been a trader error. 

According to multiple sources, a trader entered a "b" for billion instead of an "m" for million in a trade possibly involving Procter & Gamble
[PG  60.75    -1.41  (-2.27%)   ], a component in the Dow. (CNBC's Jim Cramer noted suspicious price movement in P&G stock on air during the height of the market selloff.

Sources tell CNBC the erroneous trade may have been made at Citigroup

"We, along with the rest of the financial industry, are investigating to find the source of today's market volatility," Citigroup said in a statement. "At this point we have no evidence that Citi was involved in any erroneous transaction."

According to a person familiar with the probe, one focus is on futures contracts tied to the Standard & Poor's 500 stock index, known as E-mini S&P 500 futures, and in particular a two-minute window in which 16 billion of the futures were sold.

Citigroup's total E-mini volume for the entire day was only 9 billion, suggesting that the origin of the trades was elsewhere, according to someone close to Citigroup's own probe of the situation. The E-minis trade on the CME.

In an interview on CNBC, the New York Stock Exchange's CEO, Duncan Niederauer, said there were no bad trades on the Big Board. He also suggested that it may not have been one bank involved in the the bad trade.

The massive selloff, which began shortly after 2 pm ET, amplified concerns about the spreading European debt crisis as the approval of austerity measures by the Greek Parliament sparked renewed rioting in Athens.

"There is simply a growing recognition that Greece has got to default," banking analyst Dick Bove told CNBC.com. "The riots in the streets showed the decision to repay the debt was not going to be made by the people in Germany, France and Switzerland—it's going to be made by people in Greece and they're not going to repay it."

http://www.thestreet.com/story/10749060/1/stock-market-crash-or-trading-error.html?cm_ven=GOOGLEN NEW YORK (TheStreet) -- The Dow Jones Industrial Average plunged on Thursday afternoon, as the week-long selloff in the markets took a turn for the worse and began the talk of a stock market crash.

Bloomberg server down

Gateway Timeout

The proxy server did not receive a timely response from the upstream server.

Reference #1.79a1160.1273173550.2e49be2

http://www.bloomberg.com/avp/avp.htm?clipSRC=LiveBTV