Go to Top

November 2011

Why Central Banks’ Action Could Make Matters Worse

Over the past 18 months, we have witnessed the emergence of what has become known as the “European Debt Crisis.” Capital markets have become increasingly concerned over the sovereign debt of the European peripheral countries and the solvency of the financial institutions that hold much of that debt. You can tell from the 10-year borrowing rates shown in the table below exactly where the concerns reside. Solvency issues manifest themselves …Read More

Super Committee Could Hurt Dollar’s Reserve Currency Status

The decisions of the Super Committee are likely to have more far-reaching implications than are currently envisioned, as the deliberations have been cast only in political terms by the media. There are, however, significant long-term economic implications. As we have seen over the past couple of weeks in Europe, contagion can spread like wildfire. The bond yield spreads to U.S. Treasuries or German Bunds on all European peripheral country debt, …Read More

U.S. Debt Crisis: What’s the End Game?

It is pretty much settled that the European Monetary Union, as it is now constituted, cannot survive. It is just a matter of whether the course of events will be disruptive, or will be coordinated by the European leaders. Given what we have observed over the past year-and-a-half regarding their unfolding debt crisis, I suspect the former. We may even see bank runs, frozen credit markets, plunging equity values and …Read More

Euro End Game: All Roads Lead to Monetary Breakup

Three major issues must be resolved to save the European Monetary Union (EMU): The value of sovereign debt; the European bank capital issues; and the fiscal capacity or will to provide the needed financing. Unfortunately, no feasible solutions exist. The politicians have done everything they could to keep the market on the edge while, at the same time, continuing to kick the can down the road. The farther the can …Read More