iPad Mini Index: RMB Fairly Valued, Euro Overvalued

View a larger version of this Geo-Graphic here. The “law of one price” holds that identical goods should trade for the same price in an efficient market. To what extent does it hold internationally? The Economist magazine’s famous Big Mac Index uses the price of McDonald’s burgers around the world, expressed in a common currency (U.S. […]

Recovery in Europe?

Greece has returned to the bond market, issuing $4.2 billion of five-year bonds at an interest rate of 4.95%. The government’s ability to borrow again is a “reward” for posting a surplus on its primary budget (although the accounting that produced the surplus has been questioned).  This has been viewed as a sign, albeit fragile, of recovery. Portugal […]

Great Graphic: Eurozone Debt and Deficits

This Great Graphic was tweeted by Fabrizio Goria who got it from Vincent Flasseur at Thomson Reuters.    It depicts the gross government debt and deficits (as a percentage of GDP) for a select group of euro area countries between 2007 to 2015 using EC forecasts. It shows that Italy, Spain, France,  Germany and the euro zone as a while […]

ECB Policy Outlook: ‘Firmly Anchored’ Inflation Expectations Mean No Postponement of Purchases?

This article from former European Central Bank board member Jürgen Stark (Doomsayers risk a self-fulfilling prophecy) has been occasioning a lot of commentary over the last week or so. According to Stark, the current deflation debate “lacks three important points: an in-depth analysis of the forces driving inflation down; a clear distinction between “benign disinflation” […]

Bundesbank Says Nein and Ja on Further ECB Accommodation

Germany appears to have capitulated.  The Bundesbank has dropped its opposition to extraordinary measures, like ending the sterilization of the SMP bond purchases, and has even dropped its visceral opposition to QE, if it can be structured properly to keep within the ECB’s mandate. As Jurgen Stark’s recent op-ed piece in the Financial Times makes clear, this […]

The Currency/Jobs Connection in Greece

Negotiations between the Greek government and its international lenders were finally resolved in mid-March, after seven long months. In January, Prime Minister Antonis Samaras made a celebratory announcement projecting a small, primary budget surplus of €1.5b last year.  Also recently announced: European Union co-funding for a long-delayed €7.5b road construction project in 2014. Sounds good. […]

Three PMI Surprises, but France Takes the Show

There have been three flash PMI reports today, and each was surprising.  China and Germany surprised on the downside while the French surprise was on the upside.   HSBC’s flash read on China’s manufacturing sector weakened for the fifth consecutive month.   The flash March reading of 48.1 compares   with the final February of 48.5.  The forward […]

Squaring the Circle: A QE for the ECB

The European Central Bank is in a pickle.  The pillars of monetary policy, money supply growth and inflation, are crumbling.  The main interest rate it influences, the repo rate, is already at a lowly 25 bp.  Excess liquidity is trending lower as European banks returned funds borrowed under the Long Term Repo facility. This is […]

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