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From three weeks ago.

Chancellor Angela Merkel of Germany on Sunday re-emphasized her opposition to issuing bonds backed by all the euro zone countries, a position that will be greeted enthusiastically by many of her fellow citizens but could unsettle investors at the beginning of what could be another difficult week in global financial markets.

Mrs. Merkel told ZDF television in an interview broadcast Sunday that the so-called euro bonds would be an option only in the distant future.

"It will not be possible to solve the current crisis with euro bonds," she said. She added that "politicians can't and won't simply run after the markets."

"The markets want to force us to do certain things," she added. "That we won't do. Politicians have to make sure that we're unassailable, that we can make policy for the people."

The German finance minister, Wolfgang Schäuble, echoed Mrs. Merkel's comments, saying that common debt would make it easier for governments to avoid pursuing responsible fiscal policies. In any case, he told the newspaper Welt am Sonntag, it would take too long for countries in the euro zone to amend the treaty on monetary union, which would probably be required to allow the issuance of such bonds.

"We have to solve the crisis within the existing treaty," Mr. Schäuble said.

The statements by the German leaders are in tune with public opinion in Germany as well as in other countries, like the Netherlands. The Dutch finance minister, Jan Kees de Jager, told the magazine Der Spiegel in an interview published Sunday that Mrs. Merkel should remain firm in her opposition to euro bonds.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Sep 12th, 2011 at 07:29:11 AM EST
[ Parent ]
3 weeks ago was before the Bundesverfassungsgericht ruling. Also before the Euro cratered from $1.44 to $1.36, and the markets were roiled again. Merkel also said in the article there were no signs of a German recession, which there now are. So, grain of salt in order. (The NY Times didn't interview a shit load of Small/Medium Enterprises.)

Remember, she's trying to stay in power, while her coalition is falling apart around her. Some things she says for the populace, some things she aims elsewhere. Clearly, she, like most, has no clue where this crisis is going.

Likely in Germany, popular support is not the issue. it's what the general industrial leaders, (think Mittelstand, not Siemens) want.

Further: every day there will be all manner of "new developments," so we shouldn't get caught up in dissecting every latest wrinkle. What's important is to realize that her opposition, also "reflects" popular support.

Also, we should read to the end of the article, where other views might be buried:


Opposition to euro bonds is strong within German political circles and among the country's conservative economics establishment because of the perception that the country would wind up subsidizing its neighbors.

But some economists argue that euro bonds would be cheaper even for Germany, because the volume of the bond market would rival that of United States Treasury securities and promote the euro as a reserve currency. That would increase demand for the bonds and lower interest rates.

There is some support for euro bonds in Germany. Leaders of the opposition Social Democrats and Green Party have spoken in favor of common European debt. In addition, the Frankfurter Allgemeine newspaper quoted several members of Mrs. Merkel's governing coalition in Parliament on Sunday as saying that Germany should not rule out euro bonds forever.

While rejecting the bonds, Mr. Schäuble said that Germany would defend the euro "under all circumstances" and that the government categorically rejected suggestions that Greece should leave the euro zone, as some economists have proposed.

So there we have it, nobody knows nothing.

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Mon Sep 12th, 2011 at 07:50:27 AM EST
[ Parent ]
These people who purport to "analyse" the bond markets of sovereign states or federations always amuse me, because it depends so heavily on what sort of term structure the central bank decides to create through its open market operations in defence of its overnight target.

It's noise, but these people treat it like signal.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Sep 12th, 2011 at 08:00:27 AM EST
[ Parent ]
it depends so heavily on what sort of term structure the central bank decides to create through its open market operations in defence of its overnight target.

Would Loki not object a diary might be in order.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 12th, 2011 at 02:22:43 PM EST
[ Parent ]
The CB can fix the interest rate XOR the volume of securities outstanding at any given maturity (say, it can fix the yield of 30-year Treasuries IFF it is prepared to accept that it does not control the number of 30-year T-bonds in circulation).

The CB usually decides to fix the term structure of the outstanding sovereign bonds. But this is an atavistic holdover from the gold standard, where the term structure of sovereign bonds actually mattered. If the CB woke up one fine morning and decided to mess with the bond traders' heads a little, it could rearrange the term structure of the sovereign debt outstanding before lunchtime, without in any way impairing its ability to carry out its duties as a central bank. This would, obviously, cause the yield curve to change drastically - remember that the CB can fix the term structure XOR the yields.

Since the CB does not have to disclose its open market operations, and since the term structure of the sovereign bonds in private hands is not published in real time (if it is published at all), the pundits would interpret the new yield curve as being due to all sorts of things "liquidity preference," "short-term default risk," "inflationary pressure" or whatever bullshit just-so story could be made to fit the facts. When in fact it was just the CB adjusting its portfolio for no real operational reason. Or, in other words, noise that got taken for signal.

Conversely, if a bond trader wakes up one morning and decides to restructure his portfolio, there is no operational reason why the CB couldn't simply accommodate him and keep the yield curve where it is. That it chooses not to do so is just as much a policy decision as actively transacting in order to mess with people's heads was above. And so this, as above, is noise mistaken for signal.

Mind you, it's rather expensive noise. It costs the US taxpayers alone on the order of US$ 400 bn in totally unjustified subsidies. It's pretty much the only government-run lottery that has a payout above 100 %.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Sep 12th, 2011 at 02:54:50 PM EST
[ Parent ]
It's pretty much the only government-run lottery that has a payout above 100 %.

And the Fed gets to pick a fairly small population to which to distribute the winnings.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 12th, 2011 at 03:44:00 PM EST
[ Parent ]
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Sep 12th, 2011 at 03:52:57 PM EST
[ Parent ]
Exclusive OR: Either one or the other.

As opposed to ordinary (inclusive) OR, which is one or the other or both.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Sep 12th, 2011 at 04:02:57 PM EST
[ Parent ]
Mark your calendars. Merkel says something that isn't an outright lie. "It will not be possible to solve the current crisis with euro bonds," is completely correct, because the solution to the current crisis is to default.

Eurobonds is the solution to the next crisis.

However, this

The statements by the German leaders are in tune with public opinion in Germany

is the NYT's tea-leaf reading. And I have, shall we say, less than complete confidence in the NYT's ability to (or interest in) ascertaining German public opinion...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Sep 12th, 2011 at 07:52:51 AM EST
[ Parent ]

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