“It’s the end of the world as we know it and I feel fine” say the French as consumer confidence in May rose to the highest since Nov ’10 as they welcome and get excited about new Pres Hollande. Also, the French 10 yr bond yield touched the lowest on record this morning. June consumer confidence in Germany held at 5.7, just .2 pts off the highest since Mar ’11. To the euro bond debate which is now taking on greater rhetoric with those with high bond yields wanting them and those with low ones saying no way, ECB member Weidmann, a German, said ‘it’s an illusion to think euro bonds will fix the crisis.’ He’s right as only debt extinguishment and economic growth can lead to a sustainable fix instead of the ‘buying time’ tools that have occurred to date. This said, back in Nov, the German Council of Economic Experts published a paper on a European Redemption Fund which would be a ‘joint debt vehicle,’ similar to euro bonds but would be temporary, ‘say 25 years.’ There is a story on BN that German political parties, including Merkel’s, will further study this. In Asia, the Shanghai index closed at a 5 1/2 week low and Japan reported a y/o/y CPI gain of .4% headline and .2% core, below the BoJ target rate of 1.0% and leading to calls in Japan for more yen printing.

Category: MacroNotes, Think Tank

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3 Responses to ““It’s the end of the world as we know it and I feel fine””

  1. scarlo says:

    The European politicians created their mess. They are the ones doing their best to scare the public into aggressive action in order to “fix” the problem. And of course, as Europe was around for a little while before this Union, it’ll all totally collapse into nothingness unless the politicians are allowed to have carte blanche powers to fix it. Politicos are like market pundits – by and large just do the opposite of what they recommend.

  2. KJ29 says:

    Hi Peter

    There are problems in Spain again. You may not be surprised to learn that it is Bankia which has seen its shares suspended today because its board is meeting to discuss asking for yet more bailout funds.

    “Comment

    I find myself reviewing yet another Zombie bank today. But whilst the problems for Bankia are serious the real problems go wider. As we examine the Spanish banking industry we see dangers for the FROB and we see dangers of it being an unstable lifeboat which poses challenges for Spain as a nation. In some ways the Spanish authorities have been amongst the most enthusiastic supporters of kicking the can into the future and are suffering the consequences of the future being worse not better.”

    http://www.mindfulmoney.co.uk/wp/shaun-richards/bankias-share-suspension-highlights-problems-for-other-spanish-banks-the-frob-and-spain-as-a-nation/

    So perhaps no wonder that Spain has government bond yields which are surging again today…

  3. techy says:

    I feel that europe problems are going to be solved by the politicians by taking the middle road, i.e. muddle through. I wish theyalso come up with ideas to offer some employment options to people who have to let go of their retirement incomes/pensions, anybody thinks otherwise?