Sovereign debt bubble thread

[MadImmortalMan]

A challenger appears!

Chile finance minister would support central bank intervention on peso
Reuters | Jan 26, 2013


DAVOS, Switzerland (Reuters) - Chile's government would support any intervention by the country's independent central bank to weaken the strong peso, Finance Minister Felipe Larrain said on Saturday.

"The central bank may decide to intervene but it is their own decision ...if they do, we would certainly support them," Larrain told Reuters in a television interview at the World Economic Forum in Davos.

"We're trying to prevent further appreciation," he said.

The peso, which has been boosted by Chile's robust economic growth and healthy prices for top export copper, ranked among the strongest foreign currency performers against the U.S. dollar among 152 currencies tracked by Reuters in 2012.

Last month, central bank president Rodrigo Vergara reiterated that intervening in the local peso currency market was a tool at the bank's disposal, but that if it hadn't intervened so far it was because it hadn't been deemed necessary.

The central bank deployed a dollar-purchasing program in 2011 to curb peso strength after it appreciated to its highest level in more than 2-1/2 years at 465.50 per dollar.

Larrain said it was hard to counter the weight of U.S. quantitative easing: "Against this massive QE, we have a few tools but not many."

Chile's central bank has kept rates steady since a surprise cut in January 2012, as it weighs external risks against a buoyant domestic economy.

Due to robust domestic demand and investment, Chile's small, export-dependent economy has for the most part fared better than expected despite slowing demand from top trade partner China and fallout from the euro zone crisis.

Larrain added that the global economic picture was somewhat rosier at this year's Davos than in 2012.

"We're not yet out of the woods. The real economy still needs to undergo some tough work and the financial markets are helping but it's not to say this is over," Larrain said.

"It is the emerging markets that will continue pulling the world economy again in 2013."

So I guess we're entering full-blown currency war at this point.

[Admiral Yi]

Was reading an Economist article the other that made the perhaps obvious point than when you're trying to appreciate your own currency (through high interest rates) it's relatively straightforward, but when the whole world is trying to pursue loose monetary policy, keeping the value of your currency down is not that easy a job.

[alfred russel]

Was reading an Economist article the other that made the perhaps obvious point than when you're trying to appreciate your own currency (through high interest rates) it's relatively straightforward, but when the whole world is trying to pursue loose monetary policy, keeping the value of your currency down is not that easy a job.

It is straightforward if you are a smaller country (such as Switzerland)...announce a target exchange rate against a major currency and commit to keeping the inkjet going until it is reached.

[Iormlund]

EFTA tribunal has cleared Iceland from wrongdoing in the handling of the bank crisis.

[Legbiter]

EFTA tribunal has cleared Iceland from wrongdoing in the handling of the bank crisis.

Yeah, dodged a bullet there.

[Admiral Yi]

Viking started a seperate thread on Iceland.  Top of the 2nd page.

[Iormlund]

Meanwhile, in Spain ...

31 January 2013 Last updated at 13:52 GMT

Spain ruling Popular Party denies slush fund allegations
A screenshot of the El Pais online edition, 31 January El Pais splashed photos of the alleged ledgers on its website on Thursday

Spain's ruling conservative Popular Party has denied allegations that Prime Minister Mariano Rajoy and others benefited from secret party accounts.

Photographs of ledgers showing business donations and payments to party figures were published by the centre-left daily El Pais on Thursday.

Allegedly kept by two former party treasurers, they cover nearly 20 years.

The party's secretary general has told reporters all payments to its leaders were clean and legal.

"We have only one set of books and they are clean," Maria Dolores de Cospedal told a news conference in Madrid. "We have absolutely nothing to hide."

Mr Rajoy and his party were elected by a landslide in November 2011 on a promise to reduce the high public deficit.

Spaniards have been asked to accept painful austerity measures as the government battles to avoid an international bailout. Meanwhile, the unemployment rate has reached a record 26%.

'Rajoy resign'

El Pais said Mr Rajoy had collected 25,200 euros (£22,000; $34,000) a year between 1997 and 2008.

It published photographs of what it said were ledgers kept by former treasurers Luis Barcenas and Alvaro Lapuerta between 1990 and 2009.
Spanish Prime Minister Mariano Rajoy in parliament in Madrid, 30 January Mariano Rajoy first entered government in 1996

Money was allegedly paid by outside firms via Mr Barcenas, who stepped down in 2009 and is currently under investigation for money-laundering.

Investigators recently revealed that Mr Barcenas held a Swiss bank account which at one point held as much as 22m (£19m; $30m) euros.

Until 2007, Spanish political parties were allowed to receive anonymous donations. If the party leaders declared the income in tax statements, it may not be illegal, Reuters news agency notes.

"This does not help to calm down the difficult moments that we are going through, economically, politically and the climate on the street"

Jose Antonio Monago Popular Party politician

However, the allegations raise ethical questions about the Popular Party's dealings during the period of Spain's building boom, when politicians granted large numbers of development contracts.

In a statement, the party denied making any "systematic payment to certain people of money other than their monthly wages".

"Given the information published today by El Pais, the Popular Party insists that its remuneration of top Popular Party officials and staff has always respected the law and its tax obligations," it said in a statement.

"The People's Party has no knowledge of the handwritten notes that were published and of their content, and it cannot be recognised, in any case, as this political party's books."

But one senior Popular Party figure, Jose Antonio Monago, who is the president of the Extremadura region, expressed concern.

"This does not help to calm down the difficult moments that we are going through, economically, politically and the climate on the street," he was quoted as saying by Reuters.

"This is a time for maximum transparency."

On Thursday morning, as news of the allegations spread, the hash tags lospapelesdebarcenas (the Barcenas papers) and RajoyDimision (Rajoy resign) were among the top terms trending among Spanish users of Twitter.

A few years ago a corruption network was revealed with certain Popular politicians at the heart of it. Rajoy acted fast: soon after the elections the IRS fraud squad that had lead the investigation was replaced with "friendlier" people, including the former head of our stock oversight organization, that had been forced to step down after another corruption scandal broke out during Aznar's administration.
However, it appears they could not shut it down in time: Recently the Swiss unveiled that at least €22 million in bribe money were stored at a bank there until some time ago. 10 of those million were brought here under the tax amnesty enacted by Rajoy (at a nice 10% tax rate while the fuckers bleed us dry).

The thing is, the man in charge of the accounts apparently had every movement on his books, and today the press has published names. And everyone is there, including the PM.

The worst thing is this will change nothing. It has happened quite a few times before. Not 20 years ago we all heard wire tapes of Popular politicians bragging about their corrupt deals. Not only they were acquitted, they ruled one of the richest regions in Spain for two decades. The most notorious of the ring members became minister and Gov Speaker for Aznar. He now collects what he is owed "working" for telcom giant Telefónica, privatized for peanuts by that government.

[Crazy_Ivan80]

stop voting for these people then.

that said: sounds like belgium

[MadImmortalMan]

How far should this go?

[Admiral Yi]

Until we see imminent signs of higher inflation and/or another asset bubble developing.

[Admiral Yi]

On the other hand, some of that expansion in base money might be accounted for by the fact that the Fed is paying a positive rate on reserves and banks are therefore parking much more than is legally required with the Fed.  IIRC most models about the relationship of base money to money supply assume nothing above the reserve requirement.

[The Larch]

stop voting for these people then.

that said: sounds like belgium

Never did in my life.  Anyway, for a hefty % of their voters this will slide off. Rajoy could appear on national TV gutting a puppy tomorrow and PP would still get at least 30% on the national elections.

[Iormlund]

The end is nigh!

Even the loony right is joining the attacks on President Rajoy. Will we see a party coup d'etat soon?

[MadImmortalMan]

Always a good idea.

Argentina tries freezing prices to break 30 percent annual inflation spiral


By Associated Press, Published: February 4

BUENOS AIRES, Argentina — Argentina announced a two-month price freeze on supermarket products Monday in an effort to stop spiraling inflation.

The price freeze applies to every product in all of the nation's largest supermarkets — a group including Walmart, Carrefour, Coto, Jumbo, Disco and other large chains. The companies' trade group, representing 70 percent of the Argentine supermarket sector, reached the accord with Commerce Secretary Guillermo Moreno, the government's news agency Telam reported.



The commerce ministry wants consumers to keep receipts and complain to a hotline about any price hikes they see before April 1.

Polls show Argentines worry most about inflation, which private economists estimate could reach 30 percent this year. The government says it's trying to hold the next union wage hikes to 20 percent, a figure that suggests how little anyone believes the official index that pegs annual inflation at just 10 percent.

Economist Soledad Perez Duhalde of the abeceb.com consulting firm predicted on Monday that the price freeze will have only a very short term effect, and noted that similar moves in Argentina had failed to control inflation. Consumers shouldn't be surprised if the supermarkets are slow to restock their shelves and offer fewer products for sale, she added.

A more effective way to contain inflation would be to "reduce government spending, which is financing an expansion of the money supply, and to have a credible price index."

The government announced the price freeze on the first business day after the International Monetary Fund formally censured Argentina for putting out inaccurate economic data. The IMF has given Argentina until September to bring its inflation and economic growth statistics up to international standards. If Argentina doesn't comply, it could face expulsion from the world body in November.

President Cristina Fernandez and her economy minister, Hernan Lorenzino, responded over the weekend with a flurry of attacks on the IMF, saying the agency's data-gathering efforts had lost credibility in the lead-up to Argentina's historic 2001 debt default. They said IMF advice also is leading Europeans astray by favoring big banks over measures that can grow economies out of crisis.

However, Lorenzino also said that the government will begin using a new inflation index starting in fourth-quarter 2013 — just in time for the IMF's decision.

The IMF censure "is not just a new error ... it's also a clear example of the organization's unequal treatment and double standards in regard to certain member countries," Lorenzino said. "Argentina, just as it agreed with the IMF to do, will keep working to improve its statistical procedures in accordance with good international standards."

"Later this year, the new General Household Spending Survey will enable the tracking of spending in Argentine households nationwide" and generate a new national consumer price index whose design was agreed to by IMF technical experts, he said.

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

[Admiral Yi]

  Death to the middlemen and profiteers.