We all are continuing to watch European Central Bank follies overseas. Not much to report over the weekend however the next round of Greek funding clearly appears in jeopardy. I hate to see the need for securing collateral on soveriegn debt but you have to kind of chuckle over the bickering going on about it. Mostly it seems to me a case of the other Central Bankers thinking to themselves, “D***it!, Why didn’t we think of that!” Too late now!
European Central Bank Exchange Rates Showing Volatility
It should come as no surprise with the prior week’s massive intervention in financial markets that the Central Banks want to boot all the speculators off to the sidelines. I suppose you can kick a few people to the curb but in the long term eventually all debts must be paid or funded and time is rapidly running out on Greece. Initial projections were for Greece solvency to not be an issue until October 17th, but on exactly what projections was that based? They had a state asset sale which didn’t live up to expectations and their austerity measures were met with strikes and riots. Exactly how then do you build in strikes, riots, and asset sale shortfalls into your financial liquidity projections. Seems to me the decline in economic activity will lead to Greece coming up short far sooner than the October 17th funding date, but that’s just my un-informed guess… although the market sure seems to be reacting to the same blood in the water I am smelling.
Captain America Bernanke to the Rescue?
As we mentioned in brief earlier, the Fed (behind the scenes obviously) teamed up with the other major central banks to open credit lines in US dollars to keep a dollar crunch from collapsing (apparently) some French Banks. Denial is all the rage in France these days but seriously, who is anybody kidding? CDS Rates on French banks sky-rocket… WHY? What excuse will they come up with that would leave us to believe that all is well inside their doors? Did the financial markets just suddenly decide to play games with default swap rates on a few random banks in France? Obviously not. French banks are exposed heavily to sovereign debt in Greece and other PIIGS nations. Earning income on higher yielding sovereign debt is an easy way for a lazy banker to earn paper returns… until the debt needs to be rolled and there are no lenders willing to fund the new debt. WHOOPS!
Well that about raps it up for me today – you can watch the follies continue to unfold at our special live European Central Bank Exchange Rates streaming quotes page. The next couple of weeks ought to be a hoot!