The world has money troubles. The threat of bond buying will not fix them.
http://www.bbc.co.uk/news/business-19499950
Mario Draghi, president of the European Central Bank, has unveiled details of a new bond-buying plan aimed at easing the eurozone's debt crisis.
He said the scheme would provide a "fully effective backstop" and that the euro was "irreversible".The ECB aims to cut the borrowing costs of debt-burdened eurozone members by buying their bonds.
The Spanish government's implied borrowing costs fell sharply after the announcement.
Mr Draghi said the ECB would engage in outright monetary transactions, or OMTs, to address "severe distortions" in government bond markets based on "unfounded fears".
He insisted that the ECB was "strictly within our mandate" of maintaining financial stability, but reiterated the need for governments to continue with their deficit reduction plans and labour market reforms.
He added that the ECB's actions came in response to eurozone economic contraction in 2012, with continued weakness likely to continue into 2013.
The ECB expects the eurozone economy to shrink by 0.4% in 2012 and grow by 0.5% in 2013, with inflation rising to 2.6%.
OMTs will only be carried out in conjunction with European Financial Stability Facility or European Stability Mechanism programmes, he said.
In other words, countries will still have to request a bailout before the OMTs are triggered.The maturities of the bonds being purchased would be between one and three years and there would be no limits on the size of bond purchases, he added.
The ECB will ask the International Monetary Fund to help it monitor country compliance with its conditions.
Market reaction Mr Draghi is hoping that ECB intervention in the bond markets will help reduce the borrowing costs of debt-laden countries such as Spain and Italy and lessen the likelihood of them needing to ask for a full sovereign bailout, an eventuality that could bankrupt the eurozone and cause the collapse of the euro.
Spain is already benefiting from investors' response to the plan.
Earlier in the day, the Spanish government raised 3.5bn euros on the debt markets, selling bonds due to mature in 2014, 2015 and 2016. The implied cost of borrowing over two years fell from 4.71% to 2.80%; the three-year rate went from 5.09% to 3.68%; and the four-year borrowing cost fell from 5.97% to 4.60%.
On the secondary market, where government bonds already in circulation are traded by banks and other financial institutions, the yield on 10-year bonds fell below 6%. In recent months, yields had topped 7%, the level at which Ireland, Portugal and Greece had been forced to seek international bailouts.
The yield on Italian 10-year bonds also fell.
Investors in European companies also appeared upbeat about the plan. European stock markets closed up.
The FTSE 100 ended 2.1% higher; the German Dax, 2.9%; the French Cac 40 index, 3.1%; and the Spanish IBEX, 4.9% at the close.
Bank shares in particular rose sharply, as they stand to lose billions of euros should any eurozone government default on its debts as a consequence of the crisis.
French banks Credit Agricole and Societe Generale both closed up 8%, while in Germany, Deutsche Bank rose 7% and Commerzbank, 5%. In London, Lloyds banking group rose 7%.
Long-term financing Responding to the plans, Peter Westaway, chief economist for Europe at asset manager Vanguard, said: "This is just the good news that was priced by the markets, and it has now been confirmed."
However, the euro fell back against the dollar to $1.2571 following its high of $1.265 reached before the ECB announcement.
"There is a long-term question of whether this will be enough to meet the long-term financing needs of Italy, and that probably remains."
While Mr Draghi was announcing the ECB's plans, German Chancellor Angela Merkel was meeting Spanish Prime Minister Mariano Rajoy for talks on the eurozone crisis.
In a joint news conference afterwards, Mrs Merkel said: "We have to restore confidence in the euro as a whole, so that the international markets have confidence that member countries will fulfil their commitments."Mr Rajoy said: "We want to dispel any doubts on the markets about the continuity of the euro."
Global risk Jens Weidmann, president of Germany's Bundesbank, remains vigorously opposed to the ECB's plan, concerned that member states could become hooked on central bank aid and fail to reform their economies sufficiently.
But the majority of the 23 ECB council members support the plan.
And the Organization for Economic Co-operation and Development (OECD) added its support for the ECB bond-buying plan on Thursday, as it warned that the eurozone crisis posed the greatest risk to the global economy.
It is calling for more action from central banks to prevent a break-up of the eurozone.
"Concerns about the possibility of exit from the euro area are pushing up [government bond] yields, which in turn reinforces break-up fears," the OECD said in its global economic outlook.
"It is crucial to stem these exit fears. This could be achieved by the ECB undertaking bond market intervention to keep spreads within ranges justified by fundamentals.""
Don’t pin much faith to the Draghi plan
06 Sep 2012
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06 Sep 2012
| Comment Stock markets soar as Mario Draghi defies Germany and unleashes 'fully effective backstop' for euro
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| 56 Comments Debt crisis: as it happened - September 6, 2012
Markets hit five-month high after Mario Draghi announced that the ECB will buy bonds on the secondary market in a bid to curb the debt crisis, as the OECD slashes the UK's growth forecasts for 2012 from 0.5pc to -0.7pc.06 Sep 2012
| 643 Comments Draghi's 'effective backstop' for euro defies Germany
Mario Draghi has defied German opposition and launched an “unlimited” bond buying programme by the European Central Bank (ECB) that he said would provide a “fully effective backstop” to the stricken eurozone economies.06 Sep 2012
| 126 Comments Mario Draghi speech: the full text
The text of European Central Bank chief Mario Draghi's speech after the bank held interest rates on Thursday and outlined its new bond-buying programme.06 Sep 2012
| Comment Mario Draghi speech: what the analysts said
European Central Bank chief Mario Draghi has outlined the details on its new bond-buying programme. This is how analysts reacted:06 Sep 2012
| 4 Comments ECB statement on outright monetary transactions or bond buying
Here is the text of the ECB's Outright Monetary Transactions, the new phrase the central bank has come up with for the bond purchases.06 Sep 2012
| Comment Tuesday, September 4, 2012
The European Zombie Slouches On
By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
Another night of Eurozone Production Management Index (PMI) data and the downward trend in activity continues as expected. This summary from Markit Economic’s head economist:
Outside of the Eurozone, the rest of the world appears to be in a synchronised fall with the US attempting to buck the trend on the back of its own internal consumer engine. China and the Eurozone are weakening with what looks to be an accelerating downtrend. It should also be noted that PMIs in the broader EU27 countries are showing similar trends with the Czech Republic, Turkey , Poland and Sweden all following. The later showing a particularly sharp fall in the latest data.
To the Eurozone report:
Mario Draghi has previously stated that one of the reasons for the need for renewed action is that sovereign yields do not correctly reflect the strength of national economies because factors not “inherent”, such as convertibility risk, also play a part. Although this maybe the case, I suspect perceptions of future economic performance play a much greater part and in that regard Mario Draghi appears to be facing an uphill battle. On Thursday we will also get composite PMI data, including services, that will give us the overall picture for the EZ.
Another night of Eurozone Production Management Index (PMI) data and the downward trend in activity continues as expected. This summary from Markit Economic’s head economist:
The final reading of the August PMI confirms that the Eurozone manufacturing sector remains firmly in contraction territory. The rate of decline was a little slower than in July, providing some heart that the manufacturing downturn may be easing, but the sector is on course to act as a drag on gross domestic product in the third quarter.It’s an optimistic person who can find positives in the data with only Ireland managing expansion and the currently stressed economies continuing to be in deep contraction. Italy is looking particularly troubled. If we take a step back and look at some of the global PMI trends you can see why Ireland is still managing some expansion as its major trading partner is the US. It must be noted, however, that like Australia the country’s current account tends to be negatively offset by repatriation of profits to foreign residents:
“The national picture remains one of widespread contraction. Only Ireland saw manufacturing output rise, while larger nations like France and Germany remain in reverse gear. The situation in Italy is also becoming more of a cause for concern, as it falls further down the PMI league table.
“The ongoing weakness is unsurprising given that Eurozone manufacturers and their clients are still in a largely defensive mode. The uncertainty and cost caution resulting from the currency union’s ongoing political and debt crises are now being reinforced by softer global economic growth. This is hitting domestic markets, intra-area trade and overseas trade alike and is one of the main factors underlying the job losses and excess capacity signalled by the latest PMI survey.
“The broader long-run issue is that the Eurozone product and labour markets are unlikely to show any real sustained improvement until regional structural issues are addressed and the broader global backdrop brightens.
Outside of the Eurozone, the rest of the world appears to be in a synchronised fall with the US attempting to buck the trend on the back of its own internal consumer engine. China and the Eurozone are weakening with what looks to be an accelerating downtrend. It should also be noted that PMIs in the broader EU27 countries are showing similar trends with the Czech Republic, Turkey , Poland and Sweden all following. The later showing a particularly sharp fall in the latest data.
To the Eurozone report:
Eurozone Manufacturing PMI
Downturn in Eurozone manufacturing continues in August, as weak demand hits output and employment
- Final Eurozone Manufacturing PMI at 45.1 in August (2-month high, flash estimate 45.3)
- Downturns in output and new orders ease slightly, but remain widespread across nations
- Excess capacity and cost caution at manufacturers leads to job cuts and lower stocks
The Eurozone manufacturing sector contracted for the thirteenth successive month in August. At 45.1, up from July’s 37-month low of 44.0, the final Markit Eurozone Manufacturing PMI came in below the earlier flash estimate of 45.3.The individual national reports are below:
Business conditions deteriorated in the vast majority of the national manufacturing sectors covered by the survey. The sole exception was Ireland, although even here the rate of expansion was less marked than one month ago. Downturns in Germany, France, Spain, the Netherlands and Greece all eased during August, but accelerated in Italy and Austria. Greece remained rooted to the foot of the Eurozone PMI league table.
Manufacturing production was scaled back further during August, reflecting the long-running downturn in new business. Rates of contraction in output and new orders were both slower than in the previous month, despite being slightly faster than the earlier flash estimates.
Ireland was the only nation to report an increase in output during August. Modest contractions were seen in the Netherlands and Austria, but production continued to drop sharply in the other nations covered by the survey – including the big-four of Germany, France, Italy and Spain. However, Italy and Greece were the only countries to signal a faster rate of contraction than in July.
Eurozone manufacturers were hit by weaker inflows of new work from domestic markets, falling levels of intra-Eurozone trade and a broader softening of global economic growth. The level of incoming new export orders declined for the fourteenth month running in August, with the rate of contraction the steepest since November 2011. The steepest drops in new export business were registered in Germany and Greece, the fastest since April and January 2009 respectively.
Signs of excess capacity and cost cautious behaviour remained evident at Eurozone manufacturers during the latest survey period. Backlogs of work fell for the fifteenth straight month, despite reports of further job losses. Meanwhile, the ongoing downturns in output and new orders led to reduced levels of raw material purchasing and lower holdings of both pre- and post-production stocks. A solid improvement in average vendor lead times also highlighted the availability of spare supply-side capacity.
Employment fell for the seventh successive month in August, with Ireland the only nation to report an increase. However, the rate of decline across the euro area manufacturing sector was less marked than in the previous month (when payroll numbers were cut at the fastest pace since January 2010). The steepest reductions were reported in Spain, Italy and Greece, but Italy and Austria were the only nations to report steeper rates of job losses.
- Greek Manufacturing PMI
- German Manufacturing PMI
- French Manufacturing PMI
- Italian Manufacturing PMI
- Spanish Manufacturing PMI
- Ireland Manufacturing PMI
Mario Draghi has previously stated that one of the reasons for the need for renewed action is that sovereign yields do not correctly reflect the strength of national economies because factors not “inherent”, such as convertibility risk, also play a part. Although this maybe the case, I suspect perceptions of future economic performance play a much greater part and in that regard Mario Draghi appears to be facing an uphill battle. On Thursday we will also get composite PMI data, including services, that will give us the overall picture for the EZ.
http://www.nytimes.com/2012/09/06/technology/personaltech/zello-heytell-and-voxer-make-your-smartphone-a-walkie-talkie-david-pogue.html
Nobody’s settled on a good name for this communications category. But if we call them voice-texting apps, or walkie-talkie apps, you’ll get the idea.
They work on iPhones, iPads, iPod Touches, Android phones and Windows phones. You open the app, tap someone’s name, hold down the big Talk button and speak. A second after you start talking — yes, even before you’re finished — your voice bursts to life, extremely clearly, on your friend’s phone, wherever it may be in the world.
Your buddy can respond to you by pressing his own Talk button, and the conversation is under way.
Now, before you roll your eyes — “These youngsters today! Why do they need so many different ways to talk!?” — consider all the ways these apps improve on existing modes of chat.
Way 1: If you’re driving, walkie-talkie communication is far safer than texting. You never have to look at the phone. The Talk button is generally gigantic. It’s like trying to hit a barn door with a softball.
Way 2: Speaking is far quicker and more accurate than typing. There are no misrecognitions to correct.
Way 3: Voice is far more expressive than a text message. Nobody will ever say, “Oh, I’m sorry, I misunderstood the tone of your text message!”
Way 4: These apps have some advantages over phone calls, too. They don’t use up any of your cellular minutes. Your utterances are transmitted by Internet and use up very little data. And, of course, these apps let you communicate free wherever you can find a Wi-Fi hot spot, even when you’re out of cellular range or out of the country.
Way 5: In some situations, walkie-talkie messages are more useful than phone calls. A phone call is understood to be a conversation with defined starting and ending points.
Voice messaging apps foster a different kind of connection. It’s not one six-minute conversation; it’s sporadic bursts throughout the day. Less like a meeting, more like an intercom — with a global reach. You pipe up when you have something you want to ask or say; you’re silent the rest of the time. Like text messages, say, or those Sprint Nextel phones that work as walkie-talkies.
By the way, don’t worry about being interrupted by some idiot blaring out of your phone in a moment of intimacy, concentration or church. If the app is not actually open, then incoming voice messages simply notify you silently with an alert bubble, as a text message would. (And it doesn’t even do that until you visit your phone’s Settings app and permit notifications for that app.) Also, you can turn the speakerphone function on or off.
Each app preserves your utterances on a History screen so you can replay them later. If you were to listen to mine, you’d find a lot of exchanges that begin, for example, “Hey, did you say right or left at the Taco Bell?” or “Sorry to bug you — have you seen that flashlight we bought last week?” or “I just saw that tweet. Very funny.”
The only hard part is getting started. You have to install the app and then somehow connect it to your friends, co-workers and family. Most apps offer to auto-import your Facebook friends, or you can choose a contact from your phone’s address book and send a text-message invitation (which contains a link for downloading the app)Once you stumble through the setup process, the rest is easy. Each app offers a Favorites list of some kind that lets you list the important people in your life — spouse, children, employees, bosses, friends, old school buddies back home. What’s really amazing is that these apps are free. If you have an app phone, there’s no reason on earth you shouldn’t go try one out right now.
The question is, then, which one? The iTunes and Android stores list dozens of similar apps. These apps are mutually incompatible, so you want to choose the most popular one, because you’ll increase the odds that your contacts have the same app.
Here are the three that seem to have the most fans and highest ratings on the iTunes store.
ZELLO WALKIE TALKIE This free app works on iPhone, Android, BlackBerry and Windows, which makes it far more useful than, for example, iPhone-only apps. The design is beautiful, simple and uncluttered — there aren’t even ads.
Like most of the best apps, Zello lets you create groups so that you can carry on something like a party-line phone call among a handful — or hundreds — of friends or collaborators. The company suggests, for example, that you can set up a Zello “room” for your company’s customers when they have questions.
What’s wild is that Zello comes prestocked with such channels from India, London, Toronto, Washington and so on. You sit there, jaw agape, and listen to people, in real time, from all over the world. You feel the same sense of wonder you felt when you were little and your dad took you down to his basement to listen to a ham radio.
HEYTELL There’s a slightly more commercial feel to this app, thanks to the small banner ads and the option to buy add-on features. (My favorite: the voice-changing module that turns you into a robot, an auto-tune singer or the opposite gender for $2.) Another knock: This app doesn’t transmit your utterance until you release the Talk button, so it’s slightly less real-time than its rivals.
But HeyTell is available for iPhone, Android or Windows Phone, which is great. It offers group chats. It can transmit your location along with your verbiage. And it lets you send prized audio blurbs to Facebook or e-mail for posterity.
VOXER WALKIE-TALKIE Ladies and gentlemen, we have a winner. Voxer is free. It’s for both Apple and Android devices. It’s packed with features. And it’s self-explanatory.
Voxer’s best twist is that it includes, next to the Talk button, Photo and Text buttons. Your back-and-forths with someone, therefore, can freely intermix photos, spoken sentences and typed ones. “I’m here at Home Depot, honey,” you could say. “Would this grill fit on our patio?” (Click!)
All of this shows up in a single scrolling screen, instant-messaging style. If you tap the Play button on one of the utterances, they all play back in sequence for a quick review of the conversation so far.
In the blessing-and-curse department, if you log in through Facebook, Voxer’s screen auto-lists all your Voxer-equipped Facebook friends. You don’t have to spend time individually inviting people to Vox with you. Still, the sudden appearance of all these people can be confusing, and it’s not clear how you weed out the deadwood. (The company says it intends to add a Favorites feature.)
Still, Voxer and its ilk represent a refreshing, free, truly useful new spin on communications — an ingenious crossbreed of text messages and phone calls. True, these apps don’t perform well when your Internet signal is poor, and they’re useless when you’re trying to reach people who don’t have an awesome touch-screen phone.
But that’s O.K. For them, there are always smoke signals."
I will have to get such a phone. It will not be this month.
I will post again today.
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