Europe’s Bond Crisis: Why a Secondary Market Buyback Makes Sense

There is one thing that the European Finance Ministers meeting in Luxembourg know that the rest of the market does not: whether they will let Greece default. This is valuable information that they can and should take advantage of. My guess is that the debate taking place is all about how much a bailout will […]

Solving the European Debt Crisis: Start Thinking Like an Investor

Many years ago I worked on a project that brought me into contact with senior Government Ministers in Australia. I was treated respectfully but it was clear that I was a foreigner in the world of government and politics. A colleague of mine, whose husband was a MP, explained that politicians are in awe of […]

Sour Grapes S&P Style

Just as I was publishing yesterday’s post, Standard and Poor’s released a statement that foreshadowed a ‘selective default’ for any Greek Bonds that get rolled over under the French plan….But wait!!! The new bonds will attract S&P’s new, and higher, Greek credit rating. So investors suffer neither loss of capital nor coupon, they voluntarily subscribe […]

One Minute to Midnight for the Ratings Agencies

The credit rating agencies were clambouring over each other to downgrade Greece to ‘C’ during June, just one notch above default. Greece, they argued, was one-minute-from-midnight before going into default… But now that Greece has secured funding for the next two years, including a rollover commitment from their major private creditors, how likely does the […]

LDraghi Sets Out to Learn a Tough Lesson

Mario Draghi appears to have committed the ECB to a slew of open market purchases of European Sovereign debt. The argument is that if the ECB buys bonds, prices will rise thereby reducing the borrowing costs of the likes of Spain and Italy. The markets generally rejoiced at this prospect last week with global equity […]

Technocrats Rule, OK?

A technocracy is a system of government where experts are in control of decision making. Greece and Italy have just signed up for this novel experience but what are they to expect. Look no further than Singapore … the tiny island-state has been ruled by experts since foundation in 1965 and now boasts one of […]

A Helicopter Named Inflation

Helicopters are useful aircraft for commuters, warfare and search and rescue missions. A lesser known fact is that helicopters play an important role in monetary theory as the means for generating inflation. Like many economic paradigms, at first this seems absurd…take another look and the absurdity devolves to pure fantasy. In a previous blog, I […]

Fixing Greece: Sarkozy v Schaeble

Sabre rattling is a basic tool in politics but financial markets take fright at the thought of a fight. French President Sarkozy’s ‘softly-softly’ approach to the Greek debt crisis is to be commended, in contrast to German Finance Minister Schaeble’s blitz… The one thing that will fix the Greek debt problem is reducing their borrowing […]

The Yen and the Yuan

The striking feature of the recent crisis is how Asian currencies are perceived as safe havens. Despite Japan’s domestic difficulties, the JPY has powered along rising to 79.8 against the USD at one point yesterday. The CNY would have risen as well were it not heavily managed – instead, the Chinese authorities have to deal […]