1. Nouriel Roubini: Greece will leave the eurozone sooner or later. Sooner is better. →

    The first option, a sharp weakening of the euro, is unlikely, as Germany is strong and the ECB is not aggressively easing monetary policy. A rapid reduction in unit labor costs, through structural reforms that increased productivity growth in excess of wages, is just as unlikely. It took Germany 10 years to restore its competitiveness this way; Greece cannot remain in a depression for a decade. Likewise, a rapid deflation in prices and wages, known as an “internal devaluation,” would lead to five years of ever-deepening depression. If none of those three options is feasible, the only path left is to leave the eurozone. A return to a national currency and a sharp depreciation would quickly restore competitiveness and growth.

    This is a must read. Nouriel Roubini on why Greece must leave the Eurozone.

  2. In case you thought the European financial crisis was over, today’s auction of new German debt garnered an average nominal yield of -0.0122 percent, the first time we’ve ever seen a negative nominal yield.


    Negative Nominal Yields On New Germany Debt

    Liquidity trap.

  3. The ECB’s Battle against Central Banking →

    The ECB continues to believe that financial stability is not part of its core business. As its outgoing president, Jean-Claude Trichet, put it, the ECB has “only one needle on [its] compass, and that is inflation.”
    We’re just the Central Bank…why do they expect us to act like a Central Bank?