Thursday, July 2, 2015

And some Greece news


And for those yanks who haven't sufficiently piddled their frilly pink panties yet, here's more Greece news:


FT Alphaville - Greece shows the ECB's stress tests were nonsense. God DAMN it, when a neocon plutocrat gets roasted this bad by the Financial Times, you know he fucked up:
Remember the Comprehensive Assessment? You know, the European Central Bank’s report in October 2014 that said three Greek banks were adequately capitalised to survive a stressed scenario thanks to their fundraising efforts earlier in the year, while the fourth was only off by five basis points?

We ask because the ECB seems to have forgotten. Otherwise, we can’t think of why the euro area’s central bank is choking off Greek lenders and effectively forcing the Greek government to impose capital controls.
And they get to the nub of the problem:
The methodology may not have been perfect but the ECB’s leaders can’t endorse the results without also agreeing that the banks that passed the tests will have unrestricted access to liquidity facilities from the central bank. It’s a trade-off: you get government support in a crisis in exchange for regulatory approval that your business is sound. That, in turn, ought to prevent the risk of runs.

In Greece, the ECB doesn’t seem to be honoring this deal. Forget whether or not Greece would be better off leaving the euro. The government has said it doesn’t want to leave and, strictly speaking, there is no reason it would have to leave even if it defaulted on certain outstanding sovereign debts. The only thing that would force an exit would be if the banks were in danger of failing and the government decided to restore monetary sovereignty in order to provide liquidity. (Default on only some debts wouldn’t have to hit the banks.)
Basically, the stress test is meaningless if it doesn't take into account the possibility of the ECB refusing to intervene in a member state's bank run. And that is the ECB's job, the ECB being Greece's central bank - up until this week, when they decided to quit the job.

Why is this bad?
The ECB’s unwillingness to do its job as a lender of last resort is bad for Greece but it’s even worse as a precedent for other countries in the euro area. Plenty of other countries share Greece’s bad demographics, slow growth, and lots of public debt owed to foreigners, especially once QE proceeds further. Would they too be forced out of the single currency the next time growth ticks downward and the people elect a government unfavoured by elites?
There's your political contagion right there. It's hard to firewall your own plutocratic conspiracy.



2 comments:

  1. What's your analysis on Canada? Recession here? Probably not in Ontario but the west may have some discomfort. Interested reader would like an opinion!

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    1. The data said recession so yeah.

      Ontario will do well with lower fuel prices, but Harper spent the past 10 years killing our manufacturing base so we won't accomplish much.

      I never buy Canada personally. US typically outperforms in secular commodity bear markets. Far as I know anyway.

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