The word “bankster” has been over used since the crash of 2008. In some respects, witnessing the unelected premiers of Greece and Italy turn the tables versus the banksters, is fascinating. To use the German word “schadenfreude” seems appropriate given Ms. Merkel was instrumental in encouraging both countries to put aside such petty trivial matters as democracy and install post haste ex Goldman Sachs bankers as the ultimate decision makers.
The fact that we now have the unedifying sight of the unelected technocratic leaders, playing a high stakes game of Texas hold ’em over the future of the economics of Greece and Italy, should come as no surprise. In some respects the ex bankers, not that anyone really ever retires from that stratospheric level of high finance, should be negotiating from a position of strength, the debt swap should be done. The fact that it hasn’t and the talks continue to drag on suggests that a solution is being striven for to keep the banksters onside..once a bankster always a bankster, or as Michael Corleone said in the film the Godfather: ‘Just when I thought I was out… they pull me back in.’
With time running short ahead of the major bond redemption in March, private creditors/bondholders are now considering an average coupon of around 3.75 percent on bonds they will receive in exchange for their existing investments. The top negotiator for private creditors, Charles Dallara, returns to Athens on Thursday to resume talks with government officials after bankers discussed the plan in Paris on Wednesday.
The interest rate on the new bonds has been the main stumbling block in the negotiations, with the IMF, Germany and other euro zone countries insisting it must be low enough to ensure that Greece’s debt will be back on a more sustainable track by 2020. The chairman of BNP Paribas, one of the banks on the committee leading talks for creditors, however, suggested on Wednesday that bondholders would not retreat from their position easily.
BNP Chairman Baudouin Prot;
The offer that is now on the table is the maximum acceptable for a voluntary deal. All the elements are now in place.
The Institute of International Finance, which Dallara heads, said Thursday’s discussions would be “informal” and aim to sort out all legal and technical issues quickly.
In a speech in 2002, after the economic effects of the 911 tragedy took a temporary hold on the USA economy, Ben Bernanke discussed how the USA government could always avoid deflation by printing more dollars and referred to a statement made by Milton Friedman, a Nobel Prize winning economist, about using a helicopter drop of money to fight deflation. Since then, Bernanke has had the nickname of “Helicopter Ben.”
Bernanke, the Chairman of the Fed, always seems willing to take drastic steps to fight deflation. We now have a situation where the USA treasury ‘buys inflation’ by money printing due to their “avoid at all costs” fear of deflation.
The Federal Reserve has moved closer to firing up the helicopter for a new round of money-pumping after the central bank and its chairman Ben Bernanke highlighted a grim outlook for the U.S. economy. Bernanke on Wednesday opened the door for the Fed to return to buying securities in the months ahead to support a weak recovery and keep inflation from falling below its 2-percent target. In late 2008 the FED slashed interest rates to near zero and has since bought $2.3 trillion in long-term securities in an unprecedented drive to spur growth and revive the economy after the worst recession in decades. However, the recovery has been slow and the outlook issued by the Fed on Wednesday was very bleak. With core inflation now at 1.7 percent and Fed officials forecasting unemployment to stay above 8 percent this year, many analysts took Bernanke’s comments to mean QE3 is inevitable.
Equities have risen in the European bourses whilst commodities have climbed, U.S. Treasuries gained after the Federal Reserve signalled plans to maintain near-zero interest rates through 2014. Standard & Poor’s 500 Index futures rebounded whilst the dollar has weakened versus the majority of its major peers.
The Stoxx 600 Index had added 0.9 percent by 10:00 a.m. in London. S&P 500 futures had risen 0.3 percent, after losing 0.3 percent. The dollar depreciated 0.4 percent versus the yen. The cost of insuring European corporate debt fell to a five-month low. Copper jumped 2.2 percent to $8,565.50 a metric ton, the highest level witnessed since Sept. 19th. Natural gas gained 1.8 percent to $2.779 per million British thermal units, this is the fifth consecutive gain and the longest streak in a year coming shortly after many UK gas suppliers lowered their charges for their domestic customers.
The dollar fell to a five-week low versus the euro after the Federal Reserve extended its pledge to keep interest rates low until late 2014, this has reduced the appeal of the U.S. currency as a haven.
The greenback fell versus 13 of its 16 major peers. The euro declined from a one-month high against the yen before talks on a debt swap to reduce Greece’s deficit resume today. Australia’s dollar climbed to a 12-week high as Russian officials stated that it may start purchasing the nation’s currency.
Market snapshot at 10:40 am GMT (UK time)
The Nikkei closed down 0.39%, the Hang Seng closed up 1.63% whilst the ASX 200 closed up 1.12%. European bourse indices have enjoyed a significant rally in the morning session; the STOXX 50 is up 1.30%, the FTSE is up 1.09%, the CAC is up 1.13% and the DAX is up 1.39%. From a low of 13474 on September 12th 2011 the Italian index has made a strong recovery, up 1.63% on the day the MIB is at 16099.17. ICE Brent crude is up $1.20 a barrel, whilst Comex gold is up $16.70 an ounce at £1719.40. The SPX equity index future is currently priced up 0.4%.
Economic calendar events that may affect sentiment in the afternoon session
13:30 Durable goods orders USA
13:30 Ongoing jobless and new claim figures
13:30 New Home Sales USA
The prediction for durable goods orders is a rise of 2%. Jobs predictions suggest a fall in continuous claims down to 3423K from 3500K and new claims to fall from 370K to 342K.