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Showing posts from March, 2015

A bet!

Last week I made a bet that Greece would be out of the Euro by March 20th 2017.  Within 24 months Greece will be gone from the Euro.  All those around the table thought I was insane, what I wanted was for a $1.00 bet, very much like in the film Trading Places.  Due to pressure the bet got a little bigger -- but again nothing outrageous.   So today March 31st, 10 days after the bet was made where do things stand... well not so good for those thinking that a solution will be found.

The Greek Prime Minister indicated to the Greek parliament that negotiation were not going well, and that the country was quickly running out of cash to pay interest on the debt it owed to the ECB that the country owes for April 2016.  Well have a look at the graph below:


Greece is concerned with April, well look at the summer's refinancing obligations!  The truth is that Greece's problem is intractable, in February, the ECB gave Greece 4 months of fresh  money, most of it was used to pay interest on …

Another rate cut overnight -- what do Central banks know?

Conventional wisdom says that the global economy is on the mends -- some will point out that even Greece is doing better, and so the big riddle remains; If the world is doing so well why are interest rates falling?  Last night another central bank cut interest rates (Israel in this case).

The total so far for 2015 is 20!  Over 20 central banks have cut interest rates.  Yes inflation is flat (almost everywhere), but its not in the gutters yet.

There is virtually no discussions about this anywhere in the financial press.  What is concentrating the market is the number of central banks (and high rated banks in Europe) that have begun charging interest on deposits.  We now have a world that charges for deposits and pays for loans.  There is something fundamentally broken in the system.  The more I think about it, the more I am convinced that the bond guys have got it right, Zero is not the lower bound for interest rates.  There's still some juice left in that game -- the smart money …