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(en) Anarkismo.net, Italy, Weidmann, who is he? by Monte - Federation of Anarchist Communists (FdCA) (it) [machine translation]

Date Thu, 31 May 2012 17:02:53 +0300

The euro crisis ---- Derivatives, guilt and debt instruments, property and credits in the European Union ---- While 27 of the Eurogroup meets informally and Merkel loses the election in Westphalia, the markets seem to be floating on the measures taken after the next elections in Greece, in the event of a spill by the euro, the continued instability of stock exchanges and spreads of BTP and Bonos continue to oscillate. --- Derivatives drifting ---- "The truth is that there are structural reasons to watch the bags firmly oriented toward the top. The 2012 is for Europe a year of slowdown, will the U.S. and the emerging, but marched to a less toned than usual. And if it will, will be missing the real fuel of a healthy rise in the markets is that the profits ", which - estimated in August of 13% - slip each month, amounting to 5%, UBS estimates, for 'Europe, more in USA.

In any case, the P / R, ie the price of shares compared to profits of 10/12, expressed no opinion of a normal cycle in the context of external shocks.

Everything under control: Who manages assets must be invested, when necessary, to produce conditions for doing business on securities and fluctuations provide incentives for rapid placement of sales or purchases that earn capital gains, plus expands the volume of derivatives, while the futures commodities lose things in a reduction of the economic locomotive in the world, China. A fund would still like a private equity fund in the U.S. has about 1,000 billion that needs to position and justify the low profitability due to instability. Otherwise how could they grow products in 2008 were 673 trillion (1.OOO billion) to get down to 600 trillion in 2010 and recover in late 2011 to 700 trillion? In the U.S. banks, are concentrated at least 1/3, mainly in the JP Morgan Chase, which holds 70 trillion, of which 5 trillion in CDS, then Citibank and Bank of America only 50 trillion, the famous Goldman Sachs is only fourth, however, the l'81% interest rate, which certainly do not fluctuate in the near future, followed by foreign exchange credits from a 6%, about 15 trillion nominal, mostly over the counter, outside the official markets.

Jamie Dimon, the CEO of JP Morgan, had just closed the bank with a quarterly profit of 5.4 billion to be with an initial loss of 2 billion made in the London office, the Office of the Chief Investiment itself, a position 100 billion, CDX.NA.IG.9 tied to a corporate, connected to 121 large companies in North America, focusing on an improvement index, ie 12 instead of the business conditions that hedge funds have placed in the negative: so profitably.

Equally optimistic about the health of the market has harmed JP Morgan, which has some strain of ABS (Asset-backed securities) of the European side of mortgages last three years, which are basically toxic to at least 100/150 billion (in 500), therefore difficult with cash-flow in the near future (ie payable).

However, the credit default swap (CDS) are defined as "financial instruments that act as insurance policies. Paying a premium, any investor can insure against the default of a State, a company: in case of default, who sold the CDS shall compensate the damage by returning to the investor the entire capital. " However, because their value changes rapidly, the oscillation senses the risk and therefore affect the cost of "insurance" [from Sole24Ore].

So a "breeze" CDS influence the performance of government or business to which they refer. The country of the world where there are more CDS is Italy (about 342 billion to 20 billion net: Spain follows for 184 billion, Brazil and Turkey, then France for 147 billion, and even Germany for 123 billion (Sole24Ore May 12, 2012).

In any case, the finance-shadow moves in the U.S. 15 trillion dollars, 53% of total banking and financial intermediation, in Europe only 28% some 11 trillion, almost the value of countries' GDP: U.S. $ 14, 5 trillion, Europe $ 12 trillion, $ 11 trillion BRIC (China $ 6 trillion) - Bloomberg estimates.

But not only the evil speculators to bet on U.S. products, including solid and central monetary institutions: the Bank of Italy has closed at a loss, in early 2012, a derivative with Morgan Stanley with 2.5 billion, up from 1994, keeping others for an insured value of 160 billion which they estimate at current prices lose 20 billion. Simple transfer of monetary wealth if the fire is not raging.

Guilt and Debt

In fact mediation in Europe has already been found, but before all parliaments must approve the "fiscal compact", a balanced budget in the Constitution, primarily Germany, which has yet to ratify it and where the convergence with the Social Democrats, became the majority the vote in North Rhine-Westphalia in the parliament of the Lander, it is essential and where we will identify the terms of the mediation to widen in Euroland. In any case in Fiscal Compact, Article 3, paragraph 3, letter b), reads the reference to "exceptional circumstances which could justify a partial removal of budgetary discipline [...], in times of severe economic downturn ' , provided that the budget is sustainable in the medium term.
Meanwhile, the Economic Affairs Commission of the European Parliament has proposed the creation of a fund for the redemption of the debt where to put the debt exceeds 60%, guaranteed by all States, with repayments to set times, able to issue bonds to fixed-price rates; proposal supported by the SPD (German Social Democratic Party) and the FDP (Free Democratic Party), the German liberals who are more rigorists Merkel's own. The "redemption fund" is proposed by Alexander Graf Lambsdorff, Member of the European Liberal, with this motivation "... is that complies with the dictates of the Constitutional Court in Karlsruhe: national guarantees would be limited in time and amount" are virtually same Eurobond proposed by Prodi and Quadrio Curzio, however, time-varying and asymmetric. In any case, we kick off the expansion of the EIB (investment bank), the project bonds, bonds for investment in infrastructure and broadband, preparing a firewall with the next step by EFSF all'ESM in July of a fund - the reserves - an estimated 700 milirdi for urgent action to support national economies already in trouble (Ireland, Portugal, Greece) that have gone 300 billion (+ 90 from the IMF) and also to those who soon will have difficulty in finding financing for their good state (Spain?). The funds saved states are covered by guarantees of the European countries, Germany has to EFSF guaranteed for 211 billion, France with 158, 140 for Italy, and Spain to 92; appropriations are virtual, "become real only if bankruptcy of the countries assisted "instead for ESM, beginning in July 2012, with five installments from 80 billion last in June 2014: German share of 21.7, 16.3 share of French, Italian share of 14.3 billion. But Germany is a country where - reminds us of Nietzsche in Genealogy of Morals - "the idea of ââguilt is related to the debt," (in German Schuld means both debt fault), so be good Protestants, there is a propensity to debtors espiino his guilt.

In any case, Germany after a decade of wage rigidity has suddenly recognized increases of 6% for civil servants, and to telephone the bank, while IG Metall (metal workers, and electrical) has achieved an increase of 4.3% with a contract end of April 2014, within months, with guarantees of control over certain time of 18 months, maximum 20, for inclusion indefinitely, and meanwhile the metal workers of large companies for 2011 were obtained discrete productivity bonuses.

Nothing special: German economy in 2010 saw an increase of 3.7 to 3% in 2011 and in the Quarterly of 2012 can be defined with a positive 0.5%, while it provided a little 0.6 year, with unemployment at 6.8% - even if a feature is new work called minijob, ie legalized forms of insecurity, work 15-hour paid, without fees, to 400 euros. An economy that exports a value of 1,000 billion euros (Italy 400, France 400, Spain 200), mainly in EU (60%), but also in the USA and BRIC. The composition in 2011 is tied for 2.1% growth in domestic demand, destination consumption expenditure, only 0.8% from net exports, and this growth for the wage bill by 41 million jobs.

But in the quarter, exports have ensured that slight growth also drove exports to Italy with 11%. So an economy that defines 27% of the area, need to stimulate domestic consumption with wage increases in order to avoid stagnation and to encourage a slight hitch to the whole of Europe, so cyclical, intertwined with a decline in the exchange with respect to U.S. dollar to 1.25 euros, after 2 years, which helps the area south of the Euro in exports to the rest of the world, this one of the main demands of the Italian Confindustria. Today, the Bundesbank reminds us that the financial assets of the Germans at an altitude of 4.715 billion, increased in 2011 to 149 billion, increasing by no means overwhelming, as China gets only $ 128 billion from foreign investment of about 1.77 trillion and the Fed paid to the Treasury of the United States in 2011 profits to $ 77 billion (in 2010, 79).

Buildings and credits

The situation in Spain, according to the governor of the Bank of Spain was "condition in which the captain ordered abandon ship and at the same time it must repair the lifeboats" Onado cited by Il Sole 24 Ore, because the housing bubble that had reached 35% of GDP, in a situation of economic depression, accentuates the difficulties of capitalization of the banks themselves and keeping of reserves with respect to loans which, despite having increased its reserves of 50 billion, are expected to double to maintain a relationship by 50% between reserves and questionable loans. The real estate sector in Spain is worth at least 330 billion (1/3 of GDP), and impaired loans, difficult recovery, are estimated at 184 billion. Prior to the Spanish banks have written down value of 155 billion real estate in the meantime the cash obtained from the ECB, about 200 billion, including repayment of overdue bills, support for Bonos, recapitalization, and having to overcome ala outflow of customer deposits (in February 2012, about 65 billion, cf. Sole24Ore end of April) has only 20 billion that we can use.
Zingales reminds us that being different is the law on real estate crash in the U.S., where the debtor becomes insolvent, here is the collapse of 9% versus 3% in Spain. But not that other countries should be better. Italy, according to the Bank of Italy, in December 2011 had a difficult recovery credits for 10% of total loans, at the same time the Spanish by just 7.6%. In fact it seems that if Italian banks would lead to "fair value" (current value and real) of their claims, they would lose 23 billion, but also the German "would burn 12 billion. If the housing market continued to depreciate in the coming years, in France we loss of 140 billion and 110 billion in England alone. Spanish and Italian banks have "belly" many Treasuries, 7.8 and 7%, compared to European competitors to 3/4%, again on total assets, for Italy about 323 billion (about 1.6 trillion issued), then influenced by movements in the spread. Actually Sole24Ore on May 16, reminds us that Credit Suisse in June 2011 was 37 billion euros of toxic assets, compared to just 81 billion 2008, for 111% equity and 93% of regulatory capital. Enough also exposed the Deutsche Bank, still half of the 45 billion in 2008, nearly 88% of the equity, but only 2.5% on total assets ; Barclays 36 billion, about 52% on shareholders, BNP Paribas only 30 billion, 35% on capital. Unicredit only 10 billion, 15% on capital!

Weidmann, who is he?

"Who is Weidmann," said Obama, when Merkel interrupted a meeting to welcome him to phone and obtain evaluations of the governor of the Bundesbank on the agenda!
The "bad cop", what interrogations made with stiff, just the other day that says "Le Monde" reported by "Sole24Ore" of May 26: "Would you ever give your credit card to someone, without control spending? " Germany is not the state that puts more money in the ECB, more money in the Fund EFSF and ESM, without any benefit? ". In fact, in Germany there is another theme, that of the Target 2, unknown to us indicates that the transfer and flows between the central banks of several countries, where it appears that the Bundesbank has in recent years a flow of 600 billion to countries such PIIGS or Medi Club, that is an asset which covers the liabilities of the current accounts and balance of payments of individual countries , described the situation as a loss of productivity of the areas, which then buy imports and have a shortfall in payments.

Fugnoli, strategist at Kairos recalls, "Euroland is in balance of current account deficit has the lowest (and rapidly decreasing) ..., the pension system has more in order ... but well describes the" drama " ... "The money should be on the run from the BTP Bond, Greek banks are emptied in favor of German ones who deposit money in the ECB. The ECB, in turn, lends them to the Greek banks and the circle closes. Everything is recycled in a sealed circuit so that even the Swiss National Bank, when it receives Euro on the run from the Mediterranean (eg, from Greece at least 80 billion in recent months), they immediately reinvested in the Bund. The belief is that the European periphery will not shatter. Does not suit anyone. "

Situation has been ongoing for several years and that only through many years will rebalance itself, reversing the flow and here, the reason of the deflationary policies in place to reduce imports by reducing consumption. In fact in this period, the Italian trade balance ended in surplus, "because the crisis has squeezed consumption and imports." See eg. the income needed to purchase a property: the number of required annual salaries increased from 4.7% to 6.7% (from 2000 to 2011), "even if 20% of purchases in the sector, 20%, about 130,000 homes is investment in 2011.

But the debate in Germany, in view of the implementation of the fiscal compact where you need a majority of two thirds of parliament, has already compromised, since last November with the document of the "five wise men", put in the drawer for the appropriate times, that the motions in the European Parliament of SPD, Greens, FPD, are preparing: the preparation of "Redemption fund" (duration 25 years, 2,300 billion, 40% Italian debt), just as it says SchÃuble, Minister of Finance, begins to define a true fiscal union.

In the meantime you can accept an inflation of 3% per year, given the cost of debt does not exist in Germany, which means a moderate reduction of its debt between inflation and negative interest rates on bond, but also support domestic demand all towing the European area, at least a little. Also because of a poll done for a television, the Germans did not agree with the Eurobonds to the Greeks, but 62% are not willing to cancel the debt instead of implementing a stimulus to the economy and are also willing to increase.

For this reason, the SPD won in North Rhine-Westphalia and Merkel loses many voters. But the slow time of European policy and decisions that need charging, at least externally, and building consensus within the (emergency situations), may be different from the times of economic decline in the GDP of the world system: so the delay between the time likely to create the unexpected.


May 25, 2011

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