IMF: Chump Change, or Game Changer?
Today began as so many have over the last group of months, with bond yields of the current problem trio rising: notably Italy, to around 6.80%, Spain, to 6.55%-ish and France, to 3.50%. That pressure saw European equity indices decline a little better than 1%, which in turn pressured the market here by about a percent up until roughly midday, when a rally cut the losses to just a small fraction.
That rally was precipitated by the news that the IMF was prepared to let member countries borrow up to ten times their current quota. That means the PIIGS could borrow an extra $230 billion, which is not exactly chump change, but at this point it is just another too-little-too-late proposal. If the IMF wants to use its imagination, maybe it can rejigger the other countries' quotas somehow to help Italy and Spain, thereby taking the pressure off France. That news was followed shortly by QE3 friendly Fed minutes, but the rally fizzled anyway. By day's end the indices were sporting small losses.
Away from stocks, the dollar was a bit weaker, as were bonds, and oil was a touch higher. The metals snapped back, led by silver, which gained 4% to gold's 1.5%.
Would That Be a Glass-Steagall Ceiling, Perchance?
There really isn't a whole lot more to say about the inexorable daily financial decay of Europe, as the slow-motion train wreck continues to unfold. George Soros wrote an op-ed in today's Financial Times in which he argued that the ECB ought to put a ceiling on where bond yields could trade. It occurs to me that if they put enough lipstick on that pig of an idea and called it some sort of temporary measure, perhaps the ECB governing council (which only has two Germans out of 23 voters) might be able to see its way clear to using such a ruse to stop the sovereign debt meltdown. I'm not saying they will, but it is something they could try.
I still believe that the ECB will find a way to print more aggressively, though -- as I have noted before -- the longer they wait, the dicier the whole process becomes. There is virtually no chance that the euro as we have no known it will survive, because if printing does occur the Germans almost certainly will begin plans to leave. Not that that would be such a bad idea, as the whole concept that all these countries with all their differences could ever work together in difficult times has always been a fallacy.
About Bill Fleckenstein
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