tag:blogger.com,1999:blog-3008275388825682841.post7335958785615085787..comments2024-03-12T03:32:18.680-05:00Comments on The Mean Old Investor: Spain & the EURiborMr. Kowalskihttp://www.blogger.com/profile/07899577790533734474noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-3008275388825682841.post-1248505098135610732010-07-20T22:19:10.053-05:002010-07-20T22:19:10.053-05:00JF: Today there was a rumor the Fed was going to s...JF: Today there was a rumor the Fed was going to stop paying the 0.25% interest on deposits made at the Fed; it's designed to get banks loaning again. The banks and businesses do have money, but are simply not lending to anyone that does'nt have "Guaranteed by the US Government" in the contract. IMHO there is the beginnings of deflation in the US; the M3 numbers are slumping (though the M2 numbers have remained relatively stable for a year or so). But then there's this: ""The latest consumer credit number continues the decline we have seen in recent months, plunging from $2424.4 billion in April to $2415.3 billion in May, a $9.1 billion decline, or 4.5% annualized, on consensus of $2.3 billion. Yet the biggest stunner was the April revision which was whacked from +$1 billion to a revised -$14.9 billion. In other words, there has been a $24 billion decline in consumer credit in the past two months" This is called money velocity, and for whatever reason it's slumping, as is the amount of credit available to both consumers and businesses. Bernanke absolutely hates this.Mr. Kowalskihttps://www.blogger.com/profile/07899577790533734474noreply@blogger.comtag:blogger.com,1999:blog-3008275388825682841.post-45912275943536008032010-07-20T08:24:00.848-05:002010-07-20T08:24:00.848-05:00"...absolutely nobody is loaning anything to ..."...absolutely nobody is loaning anything to Spanish banks except for the European Central Bank"<br />- - - - - - - - - - -<br />Nobody would loan anything to GM except the FED, with the Govt. bailout money.<br /><br />First the US, and now Europe. History may not repeat itself, but it sure rhymes.Mammothhttps://www.blogger.com/profile/15331079890390629462noreply@blogger.comtag:blogger.com,1999:blog-3008275388825682841.post-82566910656318814032010-07-20T08:06:07.993-05:002010-07-20T08:06:07.993-05:00I want to believe you're right because it woul...I want to believe you're right because it would make it easier to sleep at night, but unfortunately there's this from Ambrose Evans-Pritchard of the UK Daily Telegraph<br /><br />Fed's volte face sends the dollar tumbling<br /><br />Rarely before have a few coded words in the minutes of the US Federal Reserve caused such an upheaval in the global currency system, or such a sudden flight from the dollar. <br /><br />http://www.telegraph.co.uk/finance/currency/7893238/Feds-volte-face-sends-the-dollar-tumbling.htmlJFhttps://www.blogger.com/profile/13681632224756939196noreply@blogger.comtag:blogger.com,1999:blog-3008275388825682841.post-5136188827059928742010-07-19T20:23:52.379-05:002010-07-19T20:23:52.379-05:00Daniel: If you're talking about the Euribor, r...Daniel: If you're talking about the Euribor, realize that it's a EU wide indicator; I'm sure that German and Danish banks find getting loans much easier than do Greek or Spanish. As a whole, even during the Lehman era it did'nt get above 1.75%.. and when it gets even that high there effectively ceases to be any interbank lending. "Spanish banks borrowed a record 126.3 billion euros ($161 billion) from the European Central Bank in June. This represents a 48 percent increase from the €85.6 billion borrowed in May".. this is because nobody else is willing to do so.Mr. Kowalskihttps://www.blogger.com/profile/07899577790533734474noreply@blogger.comtag:blogger.com,1999:blog-3008275388825682841.post-78885103116688903312010-07-18T18:45:15.093-05:002010-07-18T18:45:15.093-05:00Is it actually right to read a EURIBOR of 0.86% as...Is it actually right to read a EURIBOR of 0.86% as indicating nervousness and a drying up of credit? On the one hand it is a big percentage rise from the 0.65% bottom in the chart you link to, so it might seem so. And yet if it really is an increased risk premium due to the possibility of default it is only another 20-ish basis points. I would think that if I were worried about loaning money to Spanish banks of dubious solvency, I wouldn't be looking for 10 or 20 or 30 basis points extra yield in order to make up for the default risk. Rather, an additional risk premium like 10 or 20 or 30 percent (i.e. a hundred times more!) are the sort of figure that might seem to make sense.<br /><br />Thoughts...?DanielCnoreply@blogger.com