In Sober Look, Marcello Minenna gives us a clue about a possible new breach in the euro’s structure. A few years ago (2011-2012), when the euro was going through its worst time, one of the consequences was that the central banks in the peripheral countries increased their debt position with TARGET2.
Spain’s exports now account for 33% of GDP, 10 percentage points higher than in 2008. There is nothing better than focusing the magnifying glass on the desired point, leaving everything else out of the picture, to behave like a perfect Pangloss. As you know, Pangloss is that character from Voltaire’s Candide who said that we lived in the best of all worlds because there was none better.
Spain depends on Europe, but in a rather odd way, because Europe is a carcass without a head and without any initiative. Europe has left us in doubt over our deficit because we were in an electoral period. And this brutal wear and tear, which has not been good for us, on the contrary, has not ended. After June 27, whatever happens, the government will be even weaker, whichever it is.
It’s strange that in the US there are so many people worried about the possibility that the country might end up being like Greece. There are other crazy people who make the comparision with Zimbabwe. Greece or Zimbabwe, well it depends on whether the threat is related to the state going bankrupt or to hyperinflation.
Spanish daily newpaper ABC has provided us with some key facts about the €500 notes. Don’t worry: it will be a gradual process, without any deadlines. In other words, they will still have unlimited redemption value, but from 2018 they will no longer be produced. Nothing really traumatic is going to happen to people who have €500 bills.
“This abnormal aversion to risk may be the worst legacy of the crisis. The reason why US companies do not use their extremely high profits – and stock market valuations – to invest, open up new markets…but rather to buyback their own shares and further boost their share price and bonuses.”
A buyback is the repurchase by a company of its outstanding shares in the stock market. They can have a variety of intentions for doing that, but the most immediate impact is to keep the share price higher than it would be without this additional demand.
If the financial system works with positive interest rates, and a more or less steep yield curve, it will never work with negative short-term rates. The yield curve will never exactly reflect the postive rate curve. Why? Amongst other reasons, because the risk is never less than zero.
In the Asia Times there is an article about the tricks China has begun to use to conceal the truth about its foreign currency position. Up until December, China released the two figures corresponding to foreign currency reserves, that of the Central Bank and that of the banking sector (which let’s not forget is state-owned).