The Euro Zone Meets Gilgamesh and the Music Plays on: Rameau’s Hippolytus Act Two
Jean-Philippe Rameau's compositions stand out as the epitome of Rococo style. His opera "Hippolyte Et Aricie" was the first work to which the term "Baroque" was applied. The opera is based on Racine's play Phedre (dated 1677) with elements of the tragedies of...
On Central Banking Dogmas: The Euro in a Rear-View Mirror Perspective
In March 1914, the Federal Reserve Bank (Fed) started its operations in the US. Within fifteen years the depression was taking root in the US. Seventy years later, the European Central Bank (ECB) was starting its operations and in a twist of fate, in about ten years...
An Alaric Moment for the Euro Zone: Liquidity Concerns in the Times of the New Visigoths
Almost 1600 years ago the first signs of Rome’s demise appeared in the horizon. Around 411 AD the Visigoths under Alaric’s leadership attacked and ravaged the city. Smoking ruins and destructions was left behind. This was not the first sign that the end of the Western...
The Athens-Rome Express: Next Stop Paris
Since early July we have posted comments about Italy’s shaky position. In late 2009 the ten-year spread of Greek bonds over the German Bunds was approximately 400 bps. Greek ten-year bonds were yielding about 7%, as the graph below shows. Two years later the spread is...
The ECB and the Eurozone Crisis: The Role of a Lender of Last Resort (LLR)
As those lines are being drafted, the ECB announced – under its new leadership – a reduction in its interbank lending rate by 25 bps. The EU and the US markets seemed to like it, in the midst of the Greek political and economic developments. It is widely expected that...
On the EU’s Substitution Effect: Haircuts and Market Realities
We have the feeling that we needed a surgery and we got a counseling session. The “landmark” deal announced in the early morning hours (EU time) yesterday, is full of uncertainties and ambiguities. Moreover, it seems that is another band-aid that seems to kick the can...
The Abyss of a Credit Freeze: EU Imbalances and the Enigma of Market’s Exostosis
An abnormality (exostosis) has been developing in the markets that involves an a priori assumption that the EU will solve its debt and banking problems. On the surface it seems that this exostosis is benign and can be fixed with the expected enhancement of the EU’s...
Does Money Matter? Blowing (Bubbles) in the Wind
The late Milton Friedman used to ask his students at the University of Chicago whether money matters. Of course, the classic answer that he was expecting from them was: “Only money matters!” Whether someone subscribes or not to this strict monetarist view, the...
Dark Energy or Dark Matter? The Greed and Fear of a Market that Seeks Life Through Death
The markets are known to be moved by the forces of greed (upswing and bullishness) and fear (downturn and bearish trend). In a similar way, in the cosmos there are two contradictory mysterious forces that move the universe in opposite directions. The first one is...
Three Years Later: Unfinished Business in Financial Reform
We are pleased and honored to bring you the following speech by permission from Chairman Volcker. The text of this speech was delivered to the Group of Thirty on September 23, 2011 in Washington, D.C. Our thanks to Chairman Volcker for the use of his speech as well as...
