Salient to Investors: Henry Paulson at the University of Chicago said Europe will drag on but eventually stabilize and avoid catastrophe. Europeans are committed to monetary union, but isn’t sustainable without some political union. Paulson said government policies is more to blame than banks because it encourages people to save too little and borrow too much. The root causes
READ MORE... →Predictions: RBS said it may take years before Europe finds a solution to the debt crisis as their economies struggle to implement reforms, though the euro will survive. RBS says any amount of recapitalization of banks, if the country itself is not on the right track, is a waste of time. Read the
READ MORE... →Salient to Investors: Goldman Sachs’ Jim O’Neill says a feeling of hopelessness abounds but history shows we will get out of it – there is always another future crisis we can look forward to. There is nothing like a crisis to force change. There are similarities with the Asian crisis
READ MORE... →Salient to Investors: Pimco’s Bill Gross said Spanish Bonds are unattractive. The global economy is delevering. Best to look at the entire core of the euro zone and not the falling dominos. Rates at the core are still too high – Italy and France yield is too high versus their nominal GDP growth. There
READ MORE... →Salient to Investors: The Greek election bought Europe time without fixing the cleavages between the northern and southern Greek economies. Professor Niels Thygesen identifies eight clashes in economic philosophy between Germany and France. Predictions: Professor Paul de Grauwe expects Merkel to remain an incrementalist, temporarily pacifying markets until it is clear it is
READ MORE... →Salient to Investors: Douglas Swanson at JPMorgan Chase sees nothing in the short term to cure Europe. Hedge-funds and large speculators increased net-short position in 10-year T-note futures in the week ending June 12. Speculative short positions outnumbered long positions by 95,385 contracts on the CBT. The Fed’s term premium shows U.S. government bonds at almost
READ MORE... →IMF estimates Japanese public debt will balloon to 245.6 percent of GDP in 2014, up from 67.3 percent in 1984. Former adviser to George Soros, Takeshi Fujimaki recommends buying assets in U.S. dollars, Swiss francs, sterling, Australian and Canadian dollars, because Japan may default within five years, before Europe does. Fujimaki says the yen
READ MORE... →Predictions: Pimco’s Neel Kashkari said the Fed will start QE3 due to worsening unemployment, lower equity prices and risk of shocks from Europe. Europe take years to solve as Greece exits from the euro region, though not necessarily after the country’s elections. BlackRock’s Robert Doll said the Fed will need to see significantly
READ MORE... →German insistence that EU support be directly to Spain’s government and not its banks had two fatal consequences. Adding to Spain’s public debt and possible subordinating existing bondholders. German taxpayers didn’t want the euro in the first place, correctly fearing it would become a transfer system for other countries’ profligacy. The choice is no longer
READ MORE... →Salient to Investors: Greece accounts for just 2.3 percent of EU GDP, and 4.3 percent of EU debt. Without Greece , the EU would have had a trade surplus in 2011. Germany has posted a trade surplus every month since May 1991 and has avoided recession since 2009. OECD says the euro is undervalued
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