From the Bloomberg
European Union officials will focus on preparing a new aid package for Greece that includes a “voluntary” role for investors after the EU and International Monetary Fund approved the fifth installment of Greece’s 110 billion-euro ($161 billion) bailout.
“I expect the euro group to agree to additional financing to be provided to Greece under strict conditionality,” Luxembourg Prime Minister Jean-Claude Juncker said after meeting with Greek Prime Minister George Papandreou in Luxembourg yesterday. “This conditionality will include private-sector involvement on a voluntary basis.”
Papandreou agreed to 78 billion euros in additional austerity measures and asset sales through 2015 to secure the 12 billion euro bailout payment and meet conditions for receiving an additional rescue package. He agreed to make “significant” cuts in public-sector employment and establish an agency to manage accelerated asset sales, according to a statement released in Athens yesterday. The plan is fueling popular opposition and protests across Greece...
Under the original rescue, Greece was due to sell 27 billion euros of bonds next year. EU leaders and Papandreou have acknowledged that a return to markets won’t be possible with Greece’s 10-year debt yielding 16 percent, more than twice the level at the time of the bailout. The EU is looking to close that funding gap through new loans and bondholders’ willingness to roll over Greek debt, EU officials have said.
Europe’s financial leaders needed to hammer out a revised Greek package to persuade the IMF to pay its share of the 12 billion-euro tranche originally due in June. The IMF had indicated that it would withhold its 3.3 billion-euro piece unless the EU comes up with a plan to close Greece’s funding gap for 2012. The EU-IMF statement said the full payment would be made in early July. [all bold highlights mine]
These developments seem on the way to validate my views.
Mainstream has been ignoring the political role of the EU’s existence, the role of central bankers, the intertwined complex political relationships between the banking sector, the central banks and the national governments and the inherent ability of central banks to conduct bailouts by inflating the system.
If the US had QE [Quantitative Easing] 1.0, 2.0 and most likely a 3.0...until the QE nth, despite poker bluffing statements like this [Morningstar.com]
"The trade-offs are getting--are getting less attractive at this point. Inflation has gotten higher," Bernanke said. He cited the rising inflation expectations seen then and offered "it's not clear that we can get substantial improvements in payrolls without some additional inflation risk." He went on, "If we're going to have success in creating a long-run sustainable recovery with lots of job growth, we've got to keep inflation under control."
...or that the earlier consensus view that QE 3.0 is unlikely,
central bank watchers believe there is simply no appetite within the central bank to undertake such an effort, which some in markets are already referring to as QE3.
...QE 3.0 will be coming for the above reasons as earlier discussed.
The path dependence from previous actions of regulators and political leaders and the dominant ideological underpinnings which influence their actions combined with the framework of current network of political institutions are highly suggestive of the direction of such course of actions.
Importantly, the implicit priority to support the politically privileged industries as the banking system—which functions as the main intermediary that channels private sector funds to governments. Alternatively, this means policies has been designed to sustain the status quo for politicians and their allies.
Further, it would be misplaced to put alot of emphasis on political protestations by the public as measure to predict future policies.
Political leaders have learned the lessons of Egypt and Tunisia and have been applying organized violence as seen in Libya, in Yemen or in Syria.
It won’t be different for the political leaders of the developed world. As indications of their prospective actions against popular political pressure, even several protestors on US Memorial Day have suffered from police brutality from just “dancing”
In addition, sentiment can shift swiftly.
Recent soft patches in economic data, which I think has been part of the signaling channel maneuver, which has likewise began to affect markets, appear to be reversing previous sentiments which says that the Fed has “no appetite” for QE 3.0.
Again from Morningstar
Having received the strongest indication yet of a slowing economic recovery, traders of U.S. interest rate futures on Friday backed off on the notion that the Federal Reserve will start raising its short-term federal-funds rate during the first half of next year.
Finally, for those who say they are ‘massively’ short the Euro...
...it’s gonna be alot of pain for them.
So like the US, the above only reveals that the Eurozone crisis will mean that Greece and the PIIGS will experience bailouts after bailouts after bailouts. Thus, an implied currency war in the process until the unsustainable system of fiat money collapses or people awaken to the risk thereof and apply political discipline.
For now, the policy of bailouts and inflationism will continue to be the central feature of today’s global policy making process where currency values will be determined by the degree of relative inflationism applied.
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