Roubini: "Greece should default and abandon the euro"

"In a post mirroring the policy prescription that German economist Hans-Werner Sinn recently gave, Nouriel Roubini advises Greece to default and exit the euro zone. Where Sinn is concerned about German taxpayers paying the part of the bill left for bank creditors, Roubini is concerned about Greek taxpayers and workers also paying that bill.
He writes:

The recent debt exchange deal Europe offered Greece was a rip-off, providing much less debt relief than the country needed. If you pick apart the figures, and take into account the large sweeteners the plan gave to creditors, the true debt relief is actually close to zero. The country’s best current option would be to reject this agreement and, under threat of default, renegotiate a better one..."

at  http://www.creditwritedowns.com/2011/09/roubini-greece-default-eurozone-exit.html

Countering the Contagious West

"Imagine for a moment that you are the chief policymaker in a successful emerging-market country. You are watching with legitimate concern (and a mixture of astonishment and anger) as Europe’s crippling debt crisis spreads and America’s dysfunctional politics leave it unable to revive its moribund economy. Would you draw comfort from your country’s impressive internal resilience and offset the deflationary winds blowing from the West; or would you play it safe and increase your country’s precautionary reserves?

That is the question facing several emerging-market economies, and its impact extends well beyond their borders. Indeed, it is a question that also speaks to the increasingly worrisome outlook for the global economy.

The very fact that we are posing this question is novel and notable it its own right. You can add this to the list of previously unthinkable things that we have witnessed lately. That list includes, just in the last few weeks, America’s loss of its sacred AAA rating; its political flirtation with a debt default; mounting concern about debt restructurings in peripheral European economies and talk about a possible eurozone breakup; and Switzerland’s dramatic steps to reduce (yes, reduce) its safe-haven status.

The answer to the emerging markets’ question would have been straightforward a few years ago. It is not today.

In the world of old, the West’s economic malaise already would have pulled the rug from beneath most emerging-market countries. Indeed, the conventional wisdom – supported by many painful experiences – was that when the industrial countries sneezed, the emerging world caught a cold.

Today, however, several (though not all) emerging-market countries are benefiting from years of considerable efforts to reduce their financial vulnerability by accumulating huge amounts of international reserves. They have also paid back a significant share of external debt and converted much of what remains into more manageable local-currency liabilities..."

at http://www.project-syndicate.org/commentary/elerian9/English

The Next Phase in the Currency Wars Among the US, China, Japan and Europe

""...The entire global system is at a critical juncture with sovereign bonds, currencies, stock markets and the fate of politicians all in play. The hidden purpose of QE and QE2 was always to cheapen the dollar by causing inflation in China and forcing its hand. Critics have said that QE did nothing to help with unemployment and consumption. But that was never the main purpose – the purpose was to weaken the dollar to help exports and get jobs that way, but it takes time.

I removed QE3 from my set of expectations late in 2010 when it became clear that Fed rollovers were enough to keep the yield curve tame and, more importantly, China was finally starting to move on the currency.

For now, QE3 is still off the table. But if the euro weakens and China re-pegs to the dollar as a result, that is the signal for more QE. It’s hard to know how this will play out, but at least we know what to look for. If you want to see QE3 ahead of the market, watch the euro.

Finally, it is not quite true there are no winners in a currency war. There is always one winner – gold."

at http://jessescrossroadscafe.blogspot.com/2011/09/next-phase-in-currency-wars-among-us.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29

Lost Decades:The Making of America's Debt Crisis and the Long Recovery

"From the preface to Lost Decades, published today (9/19) by W.W. Norton:

The United States ... lost the first decade of the twenty-first century to an ill-conceived boom and a subsequent bust. It is in danger of losing another decade to an incomplete recovery and economic stagnation.
In order to not lose the decade to come, the United States will have to bring order to financial disarray, gain control of a burgeoning burden of debt, and re-create the conditions for sound economic growth and social progress. None of this will be easy. The tasks are made more difficult by the fact, which we have learned to our alarm, that all too many policymakers and observers cling to the failed notions that got the country into such trouble in the first place. If Americans do not learn from this painful episode, and from others like it, they will condemn the nation to another lost decade.. (p. xvi)..."

at  http://www.econbrowser.com/archives/2011/09/lost_decadesthe.html

The Great Relocation or the Great Stagnation?

"From a very good and thoughtful post by Noah Smith, here is one set of excerpts but do read the whole thing:

The idea, in a nutshell, is that economic activity is relocating from rich Europe, America, and Asia to developing Asia faster than technological progress can replenish it…
Note that although this Great Relocation is an alternative to Tyler Cowen’s Great Stagnation, it does not preclude it. Lower productivity growth could coexist alongside agglomeration effects. Or…they might even go together. As I wrote in an earlier post, some “endogenous growth” theories suggest that the availability of cheap labor can reduce the incentives for innovation. If technological progress has stalled, it might just be because the Great Relocation has taken priority. 

…So China “took our jobs.” But this was not due to their exchange rate policy, or their export subsidies, or their willingness to pollute their rivers and abuse their workers, although all these things probably speed the transition. They took our jobs because it made no sense for a farm like the U.S. to be building the world’s cars and fridges in the first place. Forcing China to revalue the yuan might slow the Great Relocation a little, but has zero hope of stopping it..."

at  http://marginalrevolution.com/marginalrevolution/2011/09/the-great-relocation-or-the-great-stagnation.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+marginalrevolution%2Ffeed+%28Marginal+Revolution%29

Introducing a new eReport: Reforming the international monetary system

"Some prominent economists argue that failures in the international monetary system are the root cause of the global crisis. This column introduces a new eReport arguing that, at the very least, the international monetary system is inefficient and destabilising for the global economy. It proposes a number of reforms, the common thread of which is to increase the conditional supply of liquidity and reduce its unconditional demand.

On the face of things, the ad hoc international monetary system seems to be working well enough. The US dollar dominates international financial transactions, and one asset class (US Treasuries) serves as a global reserve or safe asset. This system, however, has its weaknesses.

• When the financial storm erupted in autumn 2008, investors worldwide steered their portfolios towards the safe havens – US dollars and US government debt.
• This surge would have had severe adverse consequences for currency prices, interest rates, and asset markets worldwide, had it not been accompanied by an unprecedented level of cooperation and coordination among major central banks.

This collaboration allowed the large-scale provision of US dollar liquidity to the broader markets via various swap lines the Fed set up with selected central banks (Goldberg et al 2011). The situation was also improved by the broadening of collateral criteria, and a substantial increase in the resources at the disposal of the IMF. This temporary provision of liquidity in a time of severe financial stress restored confidence in markets and helped stop a potentially damaging deleveraging process.

Deep fault lines

This success, however, revealed deep fault lines in the system.

• What drives the demand for safe assets in more normal times and in stress times?
• Who supplies global reserve assets, and why?
• Could the international monetary system also be, in some indirect way, partly responsible for the financial fragility of the world economy?

In a recent CEPR report (Farhi et al 2011), we argue that the optimal provision of global liquidity is a central feature of any well-functioning international monetary system.

Because few countries can offer truly safe assets, and the availability of liquidity in times of crisis is not guaranteed, we argue that there are severe distortions in the demand for safe assets even in normal times, distortions that can accentuate financial fragilities and exacerbate economic volatility.

In short, the main structuring idea that guides our report is that the world economy is characterised by a chronic and severe shortage of reserve assets –or, with some abuse of language, ’safe assets’.

The principal characteristics that determine the reserve potential of a financial asset are its safety and its liquidity; investors must be assured that the asset will not lose its value and that this value can be quickly realised. This is a rare characteristic, since the conditions that lead a country to liquidate part of its reserves are often associated with periods of economic stress and of low liquidity in world markets.

The unmistakable sign of this shortage of safe assets is a persistently low level of world real interest rates, and of the yields of the different classes of safe assets, be they sovereign debt of fiscally responsible countries, highly rated corporate bonds, or highly rated tranches of securitised products.

• Our diagnosis is that the current functioning of the international monetary system is not only inefficient, but that it also has a number of perverse effects that undermine the stability of the world economy.
• We propose a number of reforms. The common thread of these proposals is to increase the conditional supply of liquidity and reduce its unconditional demand.

Two key levers are 1) encouraging the transition to a more multi-polar international monetary system, and 2) improving the global management of liquidity..."

at http://www.voxeu.org/index.php?q=node/7000

Gallup Polls Show Years of Stagnation in Job Creation, Unemployment, Consumer Spending; Bank Stocks Signal Financial Recover is Over

"Recent Gallup polls show that Three Years After Crisis, Little Sign of Economic Relief in U.S.

1. There has been no improvement in underemployment (counting part-time workers) from a year ago
2. Job creation has been in a narrow range since October 2010
3. Consumer spending has been stagnant since January 2009
4. Economic confidence is near the lows seen at the depth of the depression..."

at http://globaleconomicanalysis.blogspot.com/2011/09/gallup-polls-show-years-of-stagnation.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

THE QUESTIONABLE RALLY

"We find little reason to change our opinion that the US faces a high risk of slipping back into recession. We cite continuing intractable unemployment, a long term poor housing market, low business confidence, unsustainable growth in sovereign debt, uncertain political and global leadership, and in the current headlines, debt problems in Europe as some of the key systemic problems impeding a recovery.

We note the political landscape is currently dominated by debate about “Jobs”. Politicians of both camps point to “small businesses” as the hope for job creation that will turn around the unemployment picture. We want to bring to everyone’s attention the results of two important surveys that were released recently. The first survey addresses the likelihood of small business hiring to improve the job situation in the US. The National Federation of Independent Business (NFIB) is essentially the voice of small businesses (the same entities that produce the new jobs that everyone is concerned about currently) and the headline this week states, “Small Business Confidence Takes Huge Hit in August.”

at  http://pragcap.com/the-questionable-rally

ACHUTHAN: THE RISK OF RECESSION IS QUITE HIGH

"Lakshman Achuthan of the ECRI has been fairly mum on the prospects of a new recession (for those who aren’t aware of Achuthan and the ECRI’s impressive recession calls in recent years please see here). Earlier this year he said the economy was slowing and that the slow-down would be protracted and persistent. That was clearly right. But now the tone of his rhetoric is changing. While the market focuses only on Greece, domestic affairs appear to be deteriorating. And Achuthan now sees the odds of a new recession as “quite high”. Below are some quotes from a recent NPR interview:

“The risk of a new recession is quite high,” he says.

“we are skating on very thin ice.”

“That is a depression for that cohort [...] And it poses massive problems for policy makers because a new recession automatically increases all of these expenditures out of the public sector while at the same time dramatically decreasing all of their revenue. So there’s even less ability to help the people who are hurting the most.”

“This is very different than the early 1980s, he says. “What we’re living through and dealing with now has been building for decades. If you look at the data, you see that the pace of expansion has been stair-stepping down ever since the 1970s, on all counts — on production, how much can we produce, how many jobs can we create, how much money do we make how much do we sell? These are all trending down.”

“The best news I can give you is that cycles do turn, but there is going to be a lot of pain in between,”

See the full piece at NPR..."

at http://pragcap.com/achuthan-the-risk-of-recession-is-quite-high

More on the Coming Wave of Foreclosures

"In response to Mortgage Default Notices Surge 33% Nationwide, 55% in California, 200% by Bank of America; Corresponding Jump in Foreclosures Will Follow Patrick Pulatie at LFI Analytics writes ....

Hello Mish,

This is what was expected, and the timing is just about right.

Apr 13, 2011, the OCC ordered the Consent Decree affecting 16 entities, banks, servicers, & MERS. The lenders were given 60 days to present plans how meet the demands of the Decree, and 60 days to actually implement the plans, which would have been Aug 13.

The Decree covered the foreclosure process, and specifically addressed MERS and Certifying Officers. The Decree detailed what need to be done to ensure that any MERS signing and foreclosure was lawful in the particular state where the property was located.

Combine this with the MERS "order" to foreclose in the lenders name, decisions like Gomes v Countrywide in the CA Appeals Court, and now the 9th Circuit ruling supporting MERS, the lenders can begin to foreclose again with relative ease, as long as they follow the Decree.

Likely, much of the rest of the country will experience similar actions, especially since the lid has been lifted in New Jersey..."

at  http://globaleconomicanalysis.blogspot.com/2011/09/more-on-coming-wave-of-foreclosures.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Interactive Infographic Of The Doomed European Financial System

"With Europe set to open in a little over 12 hours, and with rumors of Greek default once again flying around in their private taxpayer funded jets (only to turn back to their point of origin shortly after take off), we wish to remind readers that a chart is worth a thousand words. In this case several charts, courtesy of Reuters, which has created the ultimate in interactive data presentations on the Euro crisis. The data aggregates exposure across public debt, bank and non-bank private sectors, debt maturity, default risk. Note that the charts (based on BIS data) only include external-looking debt held on the books, and not debt subsequently repoed back to the ECB, for which the intermediary exposure is back to domestic banks, and the final is to Europe's taxpayers themselves.

First, the doomed periphery...

Greece:



Ireland:



Portugal:



Spain:



Italy:



and on to the core:

Austria:



Begium:



Netherlands:



and France:



And Germany:



Whose debt matures when, on an absolute basis:..."

at http://www.zerohedge.com/news/interactive-infographic-doomed-european-financial-system

More Horrible News For Merkel As German Pirate Party Gets 40% Of CDU Vote In Berlin

"Just when you thought the news couldn't get any more bizare, we get this from Bloomberg;

• GERMAN PIRATE PARTY TAKES 9% IN BERLIN, ZDF EXIT POLL SHOWS
• MERKEL'S CDU TAKES 23% IN BERLIN, ZDF EXIT POLL SHOWS
• GERMAN SPD TAKES 28.5% IN BERLIN, ZDF EXIT POLL SHOWS
• ZDF EXIT POLL SHOWS POSSIBLE SPD-GREENS COALITION IN BERLIN

This is just a guess, but when almost 10% of Germans want the pirates to be in charge, you may have a political problem on your hands.

Germany's centre-left Social Democrats beat Angela Merkel's conservatives in a regional election in the city-state of Berlin on Sunday, handing the chancellor her sixth defeat in seven elections this year.

The SPD won 29.5 percent of the vote in Berlin, down from 30.8 percent in 2006 in Germany's largest city with 3.4 million inhabitants, according to an exit poll on ARD television. SPD Mayor Klaus Wowereit appeared to be headed for a third five-year term, with the Greens as his most likely coalition partner.

The CDU won 23.5 percent, up slightly from 21.3 percent in 2006 but well below the 40 percent the party used to win in Berlin in the 1980s and 1990s. The Greens won 18 percent, up from 13.1 percent in 2006, and the Left party fell to 11.5 percent from 13.4 percent. The Pirate Party won a stunning 8.5 percent.

Merkel's centre-right coalition suffered more bad news in the Berlin election when their junior coalition partners at the national level, the Free Democrats, failed to clear the five percent threshold -- the fifth time in seven elections this year the FDP. The FDP plunged to 2 percent, down from 7.6 percent in 2006."

at   http://www.zerohedge.com/news/more-horrible-news-merkel-german-pirate-party-gets-40-cdu-vote-berlin

Frankfurter Allgemeine: "German Banks Need $175 Billion More In Capital"

"Remember when the IMF said Europe will need $200 billion to recap itself, only for the DSK successor to promptly reneg on what she said after Europe shrieked with terror that someone in power dared to tell the truth (as opposed to marginal fringe blogs), or remember when Goldman said the real bottom line will be more like $1 trillion? We can now add FAZ and the DIW to the list of unpatriotic organizations who dare to tell the truth. From Frankfurter Allgemeine by way of Reuters: "Germany's 10 biggest banks need 127 billion euros ($175 billion) of additional capital, German newspaper Frankfurt Allgemeine Sonntagszeitung reported, citing a study by economic research institute DIW. The paper on Sunday cited Dorothea Schaefer, research director for financial markets at DIW, as saying the ratio of banks' equity capital to balance sheet total needs to rise to at least 5 percent. A source said this month that the International Monetary Fund has estimated European banks overall could face a capital shortfall of 200 billion euros." That's ok: when the pirates take charge in a few months we are certain the creditors will promptly relinquish all claims against debtor banks, or else walking the plank will become a distinct possibility.

Full FAZ article here."

at http://www.zerohedge.com/news/frankfurter-allgemeine-german-banks-need-175-billion-more-capital

The Fear Factor

"The debate over fiscal expansion versus consolidation continues to divide the developed world. In response to the global recession of 2008, the United Kingdom embarked on an austerity program while the United States enacted an $800 billion fiscal stimulus. Despite a softening economy, British Prime Minister David Cameron is promising to stay the austerity course. Obama, too, is sticking to his guns with his recent proposal for an additional $450 billion of government expenditure and tax cuts to help boost employment.

Unemployment in the US has remained above 9% for 22 of the last 24 months. While some are supporting additional stimulus, others are calling for UK-style austerity. But would either of these approaches reduce unemployment most effectively, or would a new round of “quantitative easing” (an unconventional form of economic stimulus by which the central bank purchases financial assets) work better?

With Nobel prize-winning economists on both sides of the current debate about how to solve the unemployment problem, the public is rightly confused. Paul Krugman and Joseph Stiglitz are calling for an even larger fiscal stimulus to target government spending on education and infrastructure investment. On the other side, Robert Mundell, Myron Scholes, and Reinhard Selten have called for “draconian measures” to tame debt levels..."

at http://www.project-syndicate.org/commentary/rfarmer2/English

Bernanke and the Banks Say 'Trust Me' and for Many Gold Is the Answer

"Gold = 1 / T,
where T stands for the Trust that people have in the fiat Monetary System and the financial complex running it. Jim Grant points the finger at the central bankers, but they are merely creatures, albeit powerful actors, in a system of privilege and legalized looting.

In other words, the price of gold will run higher in response to the opacity, crony capitalism, insider dealing, abuses of power, and arbitrary valuations in the financial system and the overall system of governance.

Gold, and to a growing extent silver, are the safe havens for the world, and the fundamental driver of the precious metals bull market.

And I think that the ownership of gold and silver is still highly selective, based often on culture, financial sophistication, or a general predisposition against trust in monolithic organizations.

As a recognition of what is happening penetrates more deeply into the public consciousness, the spike in the price of precious metals may be much more impressive.

Is this weakening of confidence justified? One must ask themselves, how deeply has the corruption in the system been reformed?

Has transparency been restored, and the confidence of the members of the system been regained by things other than public relation campaigns, forced choices, subtle coercion, market manipulation, and even blatant propaganda?..."

at  http://jessescrossroadscafe.blogspot.com/2011/09/jim-grant-bernanke-and-banks-say-trust.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29

Europe's Lehman Moment

"Europe is in the midst of its variant of the great debt crisis that hit the United States in 2008. Fears abound that if things go wrong, the continent will face its own "Lehman moment" -- a recurrence of the sheer panic that hit American and world markets after the collapse of Lehman Brothers in October 2008. How did Europe arrive at this dire strait? What are its options? What is likely to happen?

Europe is retracing steps Americans took a couple of years ago. Between 2001 and 2007 the United States went on a consumption spree, and financed it by borrowing trillions of dollars from abroad. Some of the money went to cover a Federal fiscal deficit that developed after the Bush tax cuts of 2001 and 2003; much of it went to fund a boom in the country’s housing market. Eventually the boom became a bubble and the bubble burst; when it did, it brought down the nation’s major financial institutions – and very nearly the rest of the world economy. The United States is now left to pick up the pieces in the aftermath of its own debt crisis.

Europe’s debtors went through much the same kind of borrowing cycle. For a decade, a group of countries on the edge of the Euro zone borrowed massively from Northern European banks and investors. In Spain, Portugal, and Ireland, most of the borrowed money flooded into the overheated housing market. “At the height of the building boom,” Menzie Chinn and I write in our new book, Lost Decades: The Making of America’s Debt Crisis and the Long Recovery (W.W. Norton):

One Spanish worker of every seven was employed in housing construction. Half a million new homes were being built every year—roughly equal to all the new homes in Italy, France, and Germany combined—in a country with about 16 million households. The amount of housing loans outstanding skyrocketed from $180 billion in 2000 to $860 billion in 2007. Over the ten years to 2007, housing prices tripled,second only to Ireland among developed countries; by then, the average house in Madrid cost an unheard-of $400,000. (pp. 49-50)

Greece was a different story. It borrowed, as we write, “mostly to finance a continual budget deficit and an American-style consumption boom.”

Greek borrowing went beyond the sensible: at its peak, in one year Greece borrowed an amount equal to nearly 15 percent of GDP, so that more than one euro in seven spent locally was borrowed from abroad. By 2009, the country’s eleven million people owed more than $500 billion to foreigners, more than the foreign debts of Argentina, Brazil, and Mexico combined (with thirty times the number of people and ten times the economic output of Greece). (pp. 186-187)..."

at  http://www.econbrowser.com/archives/2011/09/guest_contribut_11.html

Bloomberg to Congress: U.S. Riots Ahead

"I have forecast that we’ll see economically-driven U.S. riots by 2013. It seems I’ve been joined in that belief by Michael Bloomberg:

New York Mayor Michael Bloomberg warned Congress Friday, saying members should expect riots if the nation’s rate of unemployment remains above 9 percent.
“We have a lot of kids graduating college, can’t find jobs,” Mr. Bloomberg said on his weekly radio show. “That’s what happened in Cairo. That’s what happened in Madrid. You don’t want those kinds of riots here.”

via Michael Bloomberg to Congress: Time to expect riots | The State Column."

at http://paul.kedrosky.com/archives/2011/09/bloomberg-to-congress-u-s-riots-ahead.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+InfectiousGreed+%28Paul+Kedrosky%27s+Infectious+Greed%29

Interconnected Markets

"In a recent conversation with a friend, we discussed how interconnected global financial markets were (the conversation began with my assertion that the European situation could cause a lot more pain the U.S. than consensus likely believes).

Below are a few charts that outline just how interconnected things have become.

 

The first chart shows the international investment positions of the U.S. (the level of U.S. owned assets abroad and foreign assets owned within the U.S.). I normalized the amounts by showing the level relative to the size of the U.S. economy. As can be seen, the level of ownership both in and out of the U.S. has spiked since the early 1970's, with foreign ownership of assets within the U.S. increasing at a faster pace (U.S. owned assets abroad by almost 15% of GDP or more than $2 trillion).

The next chart outlines what makes up that $2 trillion difference. While U.S. investors own more in terms of foreign equity (direct investment and stocks) than foreign investors own within the U.S., foreign investors are much larger creditors within both the public (government) and private (corporate) sectors.

Rather than make any bold statement of what this truly means (I am trying to digest it myself), I'll instead leave readers with two (conflicting) quotes:

 

“A creditor is worse than a slave-owner; for the master owns only your person, but a creditor owns your dignity, and can command it.” -Victor Hugo

“If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” -Jean Paul Getty

at http://econompicdata.blogspot.com/2011/09/interconnected-markets.html

The ECRI Index Of Leading Economic Indicators Plunges Even Farther Into Negative Territory

"The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has now dropped further into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August.

Today's update of the publicly available data (through September 9) now puts the decline at -7.1, down from last week's revised -6.6 (previously -6.2). The interim high of 8.0 was set in the week ending April 15.

For a closer look at the movement of this index in recent months, here's a snapshot of the data since 2000..."

at http://www.businessinsider.com/ecri-index-leading-economic-indicators-negative-2011-9?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29#ixzz1YErF5WYj

Germany Rejects Geithner's Leveraged Rescue Fund Proposal; First Time Ever, Majority of Germans No Longer See Benefits to Eurozone Membership

"It's good to see someone thinking clearly, and that someone is certainly not Treasury Secretary Tim Geithner who wants to dump more Euro risk on the backs of European taxpayers, especially German taxpayers.

Bloomberg reports Germany Rejects Using ECB Leverage to Increase European Rescue Fund’s Size

Germany’s top two finance officials rejected using the European Central Bank to boost the euro-area rescue fund’s firepower, rebuffing a suggestion by U.S. Treasury Secretary Timothy Geithner.

“The EFSF’s sole purpose is the financing of states and that’s in order as long as it’s done via the capital market,” Bundesbank President Jens Weidmann told reporters today. “If it’s done via the central bank it constitutes monetary state financing,” which is forbidden under European Union rules.

“We don’t think that real economic and social problems can be solved by means of monetary policy,” said German Finance Minister Wolfgang Schaeuble, speaking alongside Weidmann after the meeting of EU finance ministers and central bank governors. “That has never been the European model and it won’t be.”

60% of Germans See No Benefit to Being Part of Eurozone

Please consider Wolf Richter's excellent article on recent German polls and the rebuffing of Geithner: Bailout Rebellion in Germany Heats Up..."

at http://globaleconomicanalysis.blogspot.com/2011/09/germany-rejects-geithners-leveraged.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29