Wednesday, April 6, 2011

Daniel Gros: "Europe’s Subprime Quagmire"

Daniel Gros, Director of the Centre for European Policy Studies, warns in Europe’s Subprime Quagmire,

"Europe is making a fundamental mistake by allowing the two key elements of any resolution of the crisis – namely, debt restructuring and real stress tests for banks – to remain taboo. As long as successive EU summits persist in this mistake, the crisis will fester and spread, eventually threatening the stability of the eurozone’s entire financial system."

1 comment:

googleheim said...

look at the whole cow

if news took an aim to connect these events together with real examples, then they might take the economy more seriously

what about reserve levels ?

can Tom Matt and or Mike report on the swelling of the reserves at the Fed to see if they are gearing for an elastic response to economic crisis ?

if they do not, and the government shuts down, then a crash would not be softened and there could be a run on the banks in various forms again.

OR are we looking at April fool's opposite effects - taking this as a turn for economic strength ???

there seems no logic here at all.

Euro debt keeps the Euro stronger albeit via US Federal Reserve open swap lines to ECB so that GE, Pepsi, McDonald's, Levi, Ford and others can bring home big numbers but hold them offshore tax free too.

We are subsidizing a strong euro, and 10 week vacations in France, Germany, and elsewhere.

The dollar spiked in 2008 and Bernanke saves foreign institutions and swells reserves with elasticity as method of operation.

Now, following Republican austerity austrian logic - if there is a government shut down and there is a nickel saved - then the USD should get stronger right ?

Even the posturing should send currency markets to strength the Dollar right ?

But no.

US has less debt than listed Eurozone, Japan, and others but we still have a weaker currency.

This is the 90's repeat ?
Iraq War I followed by a government shut down followed by an impeachment.

Iraq war II followed by a government shut down followed by an another impeachment ?

If there is a run on the banks, and the FDIC is closed due to government shut down - then what happens ?