Early Headlines: New Low for Gold, Writing Off Greek Debt, Germany Should Leave Euro, Schauble Repeats Old Mistakes,China Seeks 'Malicious' Short-sellers and More
Early Bird Headlines 20 July 2015
Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
- Precious Metals Routed as Sudden Drop Drives Gold to 5-Year Low (Bloomberg) Spot gold as much as 4.2% to $1,086.18 an ounce, the lowest price since March 2010, and then traded up above $1,100 shortly after noon in Singapore.
- JPMorgan reaches $388 million settlement in mortgage securities case (Reuters) JPMorgan is still making new settlement payments. On Friday it was announced that a group of investors would receive $388 million to compensate for losses of $10 billion of MBS (mortgage backed securities) that ended up worth at most 62 cents on the dollar. Econintersect: Let's see, the investors loss about $3.8 billion through misrepresentation and now they will receive 1/10 of that? Sounds like a pretty cheap out for JPM. Of course, the bank maintains the securities would have been just fine if the economy had not collapsed.
- France’s Hollande Proposes Creation of Euro-Zone Government (Bloomberg Business) French President Francois Hollande said that the 19 countries using the euro need their own government complete with a budget and parliament to cooperate better and overcome the Greek crisis. This follows the plea by European Central Bank President Mario Draghi last week for deeper cooperation between the euro members. What is being called for here is a move from the existing Eurozone to a United States of Europe, much the same as the failing Articles of Confederation were replaced by the U.S. Constitution in the early days of the U.S.
- Poor old Europe (The Conversation) What is striking is that the views of supposedly impartial technocrats and economists are being ignored once again. While the economic goals this time around may seem as inappropriate as they did when the eurozone was established, their architects cannot even pretend to be motivated by noble, far-sighted political leadership. On the contrary, it is hard to escape the suspicion that the Greeks are being collectively punished for their fecklessness and inability to implement reform. We ought to acknowledge that the economists were right at the start of the euro experiment and they - in the form of the IMF - may be right this time, too. It may be politically awkward to acknowledge that the undeserving Greeks need to be bailed out and let off the fiscal hook yet again. The alternative could be the end of the political unified European project.
- Greece’s debt can be written off –whatever Wolfgang Schäuble says (The Guardian) The self-appointed guardian of the EU's financial rulebook says EU rules forbid a write-off. But there are many ways to get round the legal restrictions.
- Germany, Not Greece, Should Exit the Euro (Bloomberg View) Princeton professor Ashoka Mody says that it is Germany which is out of step with the rest of the Eurozone, not Greece. He says that Germany has one economy for which the euro is significantly undervalued while everybody else is stuck with a euro that is overvalued. See also by Prof. Mody: A Program for Greece: Follow the IMF’s Research (GEI Analysis) and The Birth of European Macroeconomics (GEI Analysis).
- Why is Germany so tough on Greece? Look back 25 years (The Guardian) To understand Wolfgang Schäuble's demands in the bailout talks, look at what he inflicted on his own country when it reunified. Schäuble comes across as a tough and sober accountant. In fact he is just an ordinary politician repeating old mistakes.
- IMF defends decision to go public on case for Greece debt relief (Financial Times) The International Monetary Fund has defended a controversial decision to go public with its case for Greek debt relief as more signs emerged that once-reluctant European officials are acknowledging the need for some sort of restructuring. IMF spokesmen insisted that it could be done via extending the maturities on Greece's debts (more than €300 billion) to fellow European governments rather than a more controversial "haircut" which would cut their face value immediately.
- No really, here’s how we’d restructure Greece’s debt, by the IMF (FT Alphaville) This is now more than 2 weeks old and outdated (as in more restructuring would be needed now than discussed then). Back then the IMF suggested that doubling the repayment term from 30 to 60 years and lowering the interest rate would be needed. See next article.
- Greece: An Update of IMF Staff's Preliminary Public Debt Sustainability Analysis. (IMF) Updated assessment as of 14 July:
Greece's public debt has become highly unsustainable. This is due to the easing of policies during the last year, with the recent deterioration in the domestic macroeconomic and financial environment because of the closure of the banking system adding significantly to the adverse dynamics. The financing need through end-2018 is now estimated at Euro 85 billion and debt is expected to peak at close to 200 percent of GDP in the next two years, provided that there is an early agreement on a program. Greece's debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far.
- IMF steps up Greek bailout criticism over debt relief package (The Guardian) Christine Lagarde's comments echoed earlier concerns that proposals will fail unless measures go far beyond what the eurozone has offered so far.
- 'The third bailout will fail' says former Greek finance minister Yanis Varoufakis (The Independent) The outspoken former finance minister said the bailout program hammered out by Greece and the European Union this week "would go down in history as the greatest disaster of macroeconomic management ever".
- China’s hunt for short-sellers tests legal boundaries (Financial Times) Short selling is legal in Chinese markets as elsewhere. Some think that the investigations are an attempt to intimidate would-be sellers..
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