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The slowdown of emerging markets expected for 2012 will drag down Romania's ...

23.05.12

The ownership building of RON-denominated T-bonds and T-bills reduces the risks associated with a potential shop-off because non-residents held a share of only 16%. Uncertainties over the long-term pecuniary strategy of the government and a persistently high inflation rate in the past made investors enamoured of on short maturities. The average residual maturity of debt instruments issued on the local retail is 1.8 years, which leads to a frontloading of the gross financing needs in 2012. The unsophisticated issuance of government bonds is estimated at RON 59bn in 2012. We think that Romania will cross swords with no major difficulties in financing its budget deficit and refinancing its public debt at well-grounded costs, both on the domestic and global markets. In a worstcase scenario, the officials have at least two options on the record - to draw money from the EU as part of the precautionary stand-by arrangement or to issue EUR-denominated bonds on the municipal market after a potential cut in FX minimum reserve requirements. Our forecast for 5Y government yields is 7.2% in Walk 2012.

Source: Balkans.com Business News

Europe's Debt Crisis, The Free Market vs. the Total State

23.05.12

There have been lots of these articles over the last few weeks. They all advance the same formula: "The end is near, unless. . . ." Unless what? Unless Western Europe's largest governments unilaterally erase the treaties that created the European Union in the 1990s. This will involve the following: (1) the consolidation of the Eurozone into an unconstitutional wonderful-state, and (2) the European Central Bank buys bonds issued by this new organism, which is also unconstitutional, according to the existing treaties.

The first solution is consistent with over 90 years of behind-the-scenes planning to centralize Europe politically, thereby destroying personal national sovereignty. I have written about this many times. The mastermind of this was Jean Monnet. Monnet started working for partisan unification when he and Raymond Fosdick, John D. Rockefeller, Jr.'s agent, sat together at the Versailles Cease-fire Conference in 1919.

In July 1919, Fosdick sent a letter to his wife. He told her that he and Monnet were working ordinary to lay the foundations of "the framework of international government." [July 31, 1919; in Fosdick, ed., Letters on the Club allied with of Nations (Princeton, New Jersey: Princeton University Press, 1966), p. 18.] Fosdick returned to New York Bishopric in 1920, where he took over running the Rockefeller Foundation for the next 30 years.

Monnet was the #1 front man for the New Period Order for the next five decades. He promoted political unification by wrapping it in the swaddling clothes of solvent unification. The first institutional manifestation of this plan was in 1951: the creation of the European Cost-effective Coal and Steel Community. It was extended in 1957 with the creation of the Common Sell.

The second aspect of this unification process was the creation of a unified currency and a separate central bank. The NWO did not get all of this, but they got most of it in 2000: the Eurozone and the euro.

We are now facing the clash of these two endgames: (1) Monnet's bureaucratic endgame, which could easily become a reality in the next few weeks vs. (2) the monetary endgame, in which Monnet's primitive vision is not consummated, because the Eurozone collapses in a wave of big bank failures. The exactly then goes into a recession . . . or worse.

STOCK MARKETS RALLY

Also on November 28, European farm animals markets had an enormous rally, between 3% to 5.5%, depending on the market. I see three workable explanations:

Early Monday morning, the IMF had denied that any such plan existed. The markets paid no publicity to the denial. The rumor had to be true. It was only right that it be true. It was too good not to be true. All day, they soared upward.

Investors crave to believe that Santa Claus will come early this year.

For weeks, the volatility of Europe's stocks has been prodigious. Wild waves of pessimism are followed by equally wild waves of optimism. The pessimism is driven by uninhibited market forces: the relentless upward move of interest rates for PIIGS command bonds. Greece is paying well over 100% on its two-year bonds. Italy and Spain are fa 7%, which is regarded as some sort of tipping-point figure – why, we are not told. It fitting is. Greece pays almost 20 times this, but we are reassured that Greece will not default. However, Spain and Italy may non-fulfilment as a result of 7%.

I do not buy either story. Greece will surely default, contrary to all assurances to the contrarious, but Italy and Spain may not, if they cut government spending fast enough and deep enough. But they won't.

So, are the investors wiser than the columnists? Is the IMF booming to come through, even though (1) Europe is not yet consolidated politically, and (2) the ECB will continue to dust to inflate? Is the IMF Santa Claus? Or will it turn out that the ECB is going to play Santa this year?

The investors don't be attracted to. One of these scenarios has to be true, because the alternative is a crash. France will have its acknowledgement rating downgraded. Sarkozy's government will fall.

The Eurozone needs a lot more than €600 billion. It needs something in the class of €2 trillion in a TARP-like bailout. And this doesn't include however much the ECB must exaggerate to keep the banks solvent. This is the opinion of the other Sarkozy: Nicholas' half brother, who is a older manager of the Carlyle Group, the third largest private hedge fund on mother earth. Among its investors are George H. W. Bush and the rich bin Ladens.

How soon is this enormous infusion of great needed? A lot sooner than most people think, he says.

Stock market investors on November 28 were saying, "No intractable!" The money will be forthcoming. From whom? No one knows. From bonds issued by a unified regulation that does not exist and which most voters oppose? Bonds purchased by whom? By the ECB, which has held out against significant increases? By nearly insolvent large banks? By private investors?

Who is the Santa who will roll in in the night with toys for good politicians? Who are these good politicians? Politicians who say that the two European Federation treaties need not be honored, since they do not authorize fiscal union or central bank purchases of bonds issued by such a public entity.

This will not be decided by voters. It will be decided by elected leaders, who will be taking orders from the true powers in Europe, which are closely allied to the large banks. The large banks will not be allowed to go under. No pieces of letterhead (treaties) are going to be allowed to interfere with a European big bank bailout.

Investors divine this. They know that the game will go on. They know that the leaders will work out something, and that the tight-fisted ECB will acquiesce in the face of a domino collapse of commercial banks.

The problem is, the leaders may not trade it out in time. Merkel has verbally stonewalled, although she has not demonstrated any serious resistance. She will surrender. But she is playing a high-spirited of chicken. She is playing the hard-nosed bluffer, trying to get some kind of contract favorable to Germany. Sarkozy looks ready to surrender to get any deal that will keep French administration debt from being downgraded.

HINTS OF A SOLUTION

The rumor about the IMF carried weight, because the IMF does not need to regard voters. It lends other people's money, namely, money ponied up by member governments. The IMF can do whatever it wants. It will crave to save Europe's largest banks.

If banker Sarkozy is correct, the IMF alone will not be masterly to keep this ship afloat. Europe's northern (non-Irish) taxpayers must consent to having their to be to come income pledged by politicians as collateral for the extra debt. If his estimate is anywhere near done, it will take an enormous pulling together to enable the governments in a "new, improved" Eurozone to borrow over €2 trillion. Unless . . . the ECB comes up with the hard cash.

Nevertheless, all it takes are hints to send investors into a buying mania. They are ready to take it rumors. They are willing to believe rumors that are officially denied. They are ready to confidence in that credit is always available by the trillions on a moment's notice, and at low interest rates.

They do not believe that there are limits to debt. They find credible that the ratchet of government debt can be cranked higher and higher, despite the obvious reality that no one denies: European government debts will never be re-paid. They will be rolled over forever, growing exponentially, without causing either (1) rising rates, (2) delays in interest payments, or (3) figure inflation.

Hints of a solution are all it takes to get investors to buy shares. The actual entries on poise sheets have no effect on their thinking. They are following Napoleon Hill: "think and nurture rich."

Merkel is going to deliver a speech to the German Parliament on December 2. This is in preparation for the next scheduled pinnacle on the weekend of December 8-9. Investors are convinced that there will be a resolution to the crisis then.

There have been other summits. Each constantly, there has been enormous optimism regarding a forthcoming solution. Then the summit issues a emollient press release, but without specifics. The magnitude of the looming crisis is still not perceived by investors.

Or is it? Are they standard? Will a summit meeting provide all the political capital needed for a non-existent new domination to borrow enough money from visibly insolvent, undercapitalized banks?

I do not see how the investors can have promise in anything other than the willingness of the ECB to provide whatever digital funds are necessary to provide borrowers to buy guidance debt issued by the PIIGS's politicians at rates low enough to calm the equities markets. In other words, investors are counting on Federal Formality-like increases in the ECB's monetary base.

This tidbit supposedly was instrumental in the speedy rise of the markets.

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Source: The Market Oracle