The Euro is in crisis and honestly? Kind of Action packed.
It can now be argued the new measure of Eurocrisis is not Italy but France!
This is like Gingrich taking over the GOP lead, it's meaningless except in the way it colors the inevitable conclusion.
The first link above gives this run down of the relevant Eurozone bond rates.
As it was, Italy had a budget surplus that allowed them to keep paying off their debt up to a rate of 6%, at which point their debt would start growing just because of the interest charged. But unless you take the money supply into account, there is simply no reason to charge Italy a higher interest rate - doing so will only push default and everybody's bonds will be hurt. Dwindling supplies of circulating euros, however, is sparking an accelerating demand for euros, unreasonably driving interest rates up as investors sell out to head for higher ground in either German or U.S. bonds. Of considerable interest is creating a Euro-wide fund that could act as higher ground without forcing Euro governments to compete with each other for investment. Of even greater interest is a European Central Bank that would be willing to engage in expansionary fiscal policy - to which Germans, the only Euro members who would really lose out from such policy, are seriously opposed.
The visible trend toward default is now causing U.S. banks to withdraw as well, under Federal Reserve advisement, accelerating the process.
So to get with the times,
Italian Bonds
US Bonds
German Bonds
Gold and commodities (listed under precious metals near the bottom)
French Bonds
WHAT THESE MEAN:
Note on reading bond market: Bond markets track 'yield points' which is basically an interest rate. So when I say Italy is around 7% interest and the link shows the number 7 and then a percentage, the number is the yield (interest rate), the percentage is the change today.
-Italian bond rate is the fast euro crisis level, a budget surplus going bankrupt
-French bond rate is the slow euro crisis level
-German bond rate is the amount of money leaving the euro entirely,
-US Bond PRICE is the amount of money coming to US Dollars (yield rate going up would be money leaving the dollar)
-Gold futures price is the amount of money that is completely panicked right now running for the hills. You can also watch oil prices in that listing for money getting dumped into a new speculation cycle. Any practical commodity not undergoing speculation is likely to show falling prices due to deflationary pressure.
But U.S. retail numbers are up! So the final thing to watch is the DOW / NASDAQ / S&P, in case money is running from government bonds to the market.
As of today however, it can be argued the new measure of Eurocrisis is FRANCE! This is like Gingrich taking over the GOP lead, it's meaningless except in the way it colors the inevitable conclusion.
Again, like Italy, there is no fundamental reason for France to be facing these escalating borrowing costs, it's a huge bank run panic as the dwindling supply of liquid cash sparks escalating demand to be holding liquid cash. God knows if it's gone too far now, but the ECB could have fixed this at any time using perfectly well understood means. That it hasn't done so is a purely ideological position, and people worldwide will suffer.
The real latest:
Italy has backed off the 7% brink again this morning
http://www.bloomberg.com/...
Germany is fluctuating wildly between 1.5 and 2% :
http://www.bloomberg.com/...
France has just been moving up all month, accelerating this week : http://www.bloomberg.com/...
U.S. yields are way down, showing where France's money has been going : http://www.bloomberg.com/...
OH! And Gold? Lost all gains made yesterday, that's Krugman and the Keynesians beating Ron Paul and the Austrians quite handily.
http://www.bloomberg.com/...
U.S. markets also down: http://www.google.com/...
Finally, as final proof that no government on this planet is taking sufficient expansionary action, a report by the British Central Bank insists that reported inflation is overestimated - this strongly suggests recent U.S. reporting that inflation slowed from a 2% hold-steady rate in September means that the U.S. dollar is actually undergoing deflation at this point.
I'm heading down to OWS tomorrow if I possibly can.
Aggregate Demand, please.
UPDATE - Krugman addresses the deflation question:
I thought this slump would produce a “clockwise spiral” like the 80s recession, and for that matter like what happened in the 70s (not shown). That is, among other things, what textbook adaptive-expectations Phillips curves say should happen. So I thought we might well be into deflation by this point. Instead, while you can see a clockwise spiral, sort of, if you squint, it has been “scrunched” as if it’s bouncing off a hard surface at or near zero.
And that’s almost surely exactly what has happened. Downward nominal rigidity — the great difficulty of actually cutting wages and many prices — is now obvious. And research into PLOGs — prolonged large output gaps — shows that this is a general phenomenon.
Thu Nov 17, 2011 at 5:49 AM PT: Updated with Krugman comments on deflation.
SPAIN TODAY - http://www.bloomberg.com/...