Investors appear to be starting the year with an aversion to long duration stocks and instead are leaning into Value stocks with closer ties to an economic recovery. Growth stocks fell to a key technical level this week relative to Value stocks...
Nasdaq down 7 of the last 8 days and was by far the week's worst performer as The Dow clung to unchanged on the year today (but faded into the close to end red like the rest). The S&P ended down 2% and Small Caps down 3% on the week. That is Nasdaq's worst week since Feb 2021...
“Many retail investors have arguably too high exposure to speculative growth equities and thus they have high interest rate exposure without knowing it,” writes Peter Garnry, Saxo Bank’s head of equity strategy.
“As we have said for a year now, it is wise to begin balancing the portfolio blending growth with more low equity duration assets and especially those with supposedly inflation hedging capabilities.”
For context, this is the worst start to a year for the Nasdaq 100 since 2000...
Energy and Financials outperformed this week as Tech and Healthcare lagged...
FAAMG+T Stocks (which represent 25%+ of the S&P 500 market cap) were a disastrophe this week...
Erasing all the Santa Claus rally...
Nasdaq Biotech Index is on track to close 5.8% lower in its worst weekly drop since March 2020, breaking below key support back to Dec 2020...
The S&P Airlines Index rose over 7% this week - its best week since early November - as Omicron anxiety began to fade and several nations lifted travel restrictions...
Risk-Parity and vol-focused funds were clubbed like a baby seal this week with one example, RPAR, suffering its biggest weekly drop since the COVID collapse in March 2020..
This helps explain why both bonds and stocks were hammered (obviously along with the hawkish tilt from policymakers) as RP funds force-delevered. The start of 2022 saw the worst aggregate weekly loss for bonds and stocks since the market carnage in March 2020...
On the bond side of the world, it was a bloodbath with the belly clubbed like a baby seal (7Y +26bps on the week, 2Y +13bps, 30Y +20bps)...
The 10Y Yield broke out to its highest in 2 years while 30Y remains below the Oct 2021 highs for now...
U.S. interest-rate swap spreads were wider across the curve today as corporate treasurers braced for another swath of high-grade corporate supply while money managers hedge interest-rate risk. That widening kept pressure on Treasuries. Higher rates inspired corporate borrowers to pay in 30-year swaps and sell cash bonds about 30 minutes after the December labor market data. That means they are locking in rates in the long-end ahead of future issuance. Next week’s issuance is expected at ~$30b, but if this week’s more than $60b in issuance is any guide, that number is likely to rise, especially given the increase in borrowing rates.
All of which explains why the yield curve suddenly flipped from flattening (a fundamental-based move driven by policy-error fears) after the payrolls print to steepening - a technically-driven move...
Notably, after 2 last peaks in COVID-19 cases, 10-year yields jumped 50-60bps following 3 months...
This morning's sent STIRs soaring, pushing the odds of a March 2022 rate-hike above 90%! and a 50% chance of a 4th rate-hike by Dec 2022...
The dollar ended the week only marginally higher, oddly giving the week's gains back today after the 'hawkish' jobs data...
Cryptos were ugly this week to start 2022, with Ethereum the worst performer...
With Bitcoin breaking down to a $40,000 handle today, its lowest since late September 2021...'
Notably The US session is dominating the selling pressure on cryptos, perhaps suggesting this is more related to mega-cap tech liquidation
Commodity markets were very mixed with crude surging while precious metals and copper were sold...
WTI rallied up to $80 this week, erasing all concerns over Omicron impacting demand and any short-term gain from Biden's cunning plan to cut gas prices...
Finally, we note that Sentimentrader points out there is a massive meltdown in Nasdaq stocks:
"After Wednesday's post-FOMC selloff, more than 38% of stocks trading on the Nasdaq are now down 50% from their 52-week highs. Only 13% of days since 1999 have seen more stocks cut in half."
And in case you believe in BTFD, you probably should consider this: "When at least 35% of stocks are down by half, the Composite has been down by an average of 47% (!) from its 3-year high."
And there is simply no way that a modest 2% drop in the S&P will trigger the Powell Put!
Poll Finds Close To Half Of Democratic Voters Want COVID Internment Camps For The Unvaxx’d
Poll Finds Close To Half Of Democratic Voters Want COVID Internment Camps For The Unvaxx’d
Authored by Steve Watson via Summit News,
A national poll has found that forty-five percent of likely Democratic voters would be ok with the governmen
A national poll has found that forty-five percent of likely Democratic voters would be ok with the government “requiring citizens to temporarily live in designated facilities or locations if they refuse to get a COVID-19 vaccine.”
The figure was registered by Rasmussen Reports and the Heartland Institute, which also found that a MAJORITY “Fifty-nine percent of Democratic voters would favor a government policy requiring that citizens remain confined to their homes at all times, except for emergencies, if they refuse to get a COVID-19 vaccine.”
The survey also found that 48 percent of Democratic voters “think federal and state governments should be able to fine or imprison individuals who publicly question the efficacy of the existing COVID-19 vaccines on social media, television, radio, or in online or digital publications.”
Given that the benchmark for ‘questioning’ the efficacy of vaccines appears to now be saying anything other than what the government tells you, a lot of people would be facing criminal charges.
Wow. The majority of Democrats say they want every unvaccinated person to remain forcibly confined. https://t.co/ib9JgYOhp4— Ian Miles Cheong (@stillgray) January 16, 2022
The survey found some other crazy suggestions with a startling percentage of Democrat voters in agreement.
Rasmussen notes “Forty-seven percent of Democrats favor a government tracking program for those who won’t get the COVID-19 vaccine.”
The pollster added that “Twenty-nine percent of Democratic voters would support temporarily removing parents’ custody of their children if parents refuse to take the COVID-19 vaccine.”
There’s no mass formation psychosis though. That’s a conspiracy theory.
The notion of COVID camps may seem far fetched, but as previously noted, it was discussed in a COVID-19 planning document called Interim Operational Considerations for Implementing the Shielding Approach to Prevent COVID-19 Infections in Humanitarian Settings and was originally published on the CDC’s official website on July 26, 2020.
COVID quarantine camps are also in operation in Australia.
* * *
[ZH: and for some added color... a thread by Twitter user @Partisan_O appears to perfectly describe the mindset going on...]
1. I've told this story before, but just before the pandemic hit I was at a fancy dinner party in a foreign country surrounded by some of the world's best and brightest. We began to openly speculate about the impact the virus would have on the United States...— Lafayette Lee (@Partisan_O) January 17, 2022
Continued via threadreaderapp:
* * *
Brand new merch now available! Get it at https://www.pjwshop.com/
In the age of mass Silicon Valley censorship It is crucial that we stay in touch. We need you to sign up for our free newsletter here. Support our sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Also, we urgently need your financial support here.
US Futures, European Markets Rise After China’s First Rate Cut In 2 Years
US Futures, European Markets Rise After China’s First Rate Cut In 2 Years
US equity futures, European bourses and Asian markets were all broadly higher after China unexpectedly cut official policy rates for the first time since 2020…
US equity futures, European bourses and Asian markets were all broadly higher after China unexpectedly cut official policy rates for the first time since 2020...
... to counter an economic slowdown. A real-estate slump and partial Covid shutdowns are among the challenges for the world’s second-largest economy. The move contrasts with the shift toward tighter monetary policy in the U.S. and elsewhere to contain price pressures.
“The PBOC really has started the New Year in a different position to, let’s say, other global banks and we do expect to see further easing or supportive measures, both monetary-wise as well as from a fiscal stance,” Catherine Yeung, investment director at Fidelity International, said on Bloomberg Television. The Chinese move has prompted speculation that the current round of global central bank tightening will be short lived, which will be good news for high-duration tech stocks.
While the US is closed for MLK Day, US equity futures reversed earlier losses and traded near session highs, up 8 points or 0.2% to 4,662, as the tri-state area found itself covered under several inches of snow.
Europe’s Stoxx 600 Index and U.S. futures rose, while Asian shares closed modestly in the red. The dollar and oil were little changed.
Even thought cash bond markets are closed, Treasury futs suggested yields had risen above 1.80% to a new multi year high, after yields tumbled Friday on concerns about more hawkish Federal Reserve policy to fight inflation. JPMorgan Chief Executive Officer Jamie Dimon, whose blank plunged after reporting disappointing trading revenues and surging expenses, said Friday the central bank could raise rates as many as seven times and traders are reconsidering an earlier kickoff for the first European Central Bank rate increase in more than a decade. Jamie Dimon will, of course, be dead wrong as he has been wrong about bitcoin.
Despite today's rise in futures, sentiment remains subdued and rallies are sold. The advance of the omicron virus strain, the start of the earnings season and a boom in mergers and acquisitions are also coloring sentiment. Investors are looking for signs that companies can sustain profit growth despite rising risks.
Meanwhile as part of its weekly pep talk (last week, JPM's Marko Kolanovic said it was time to buy the dip, the second week in a row the bank urged clients to do just that), JPMorgan said global company earnings will defy doomsayers and skeptics once again this season and surprise to the upside - a view at odds with recent warnings that inflation, rising rates, supply chain bottlenecks and slowing economic growth will curb companies’ prospects following last year’s blockbuster earnings growth.
Ironically, it was JPMorgan's earnings that sent the Dow sliding on Friday: Wall Street banks kicked off the earnings season with mixed results last week, disappointing investors and tamping down some profit expectations for this year.
“Given the record inflation backdrop and historically tight labor market, investor focus is on margins -- demonstrating pricing power, passing on rising costs to the customer,” Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, wrote in a note.
European equities returning toward session highs after initially fading opening gains in a choppy start to the week. Euro Stoxx 50 gains as much as 0.7%. FTSE 100 and IBEX avoid the early fade seen in other equity indexes. Media, consumer products, tech and miners are the strongest sectors. Among individual movers on Monday, Unilever Plc shares fell more than 7%, while GlaxoSmithKline Plc rose, as the consumer-products company considers making a higher offer for Glaxo’s consumer unit. Equipment maker BE Semiconductor rose to the highest since the stock’s 1995 listing after Oddo and Deutsche Bank boosted their price targets. In corporate developments, Credit Suisse Group AG’s Chairman Antonio Horta-Osorio was ousted for breaching Covid quarantine rules, throwing the Swiss financial giant into fresh turmoil as it struggles to emerge from a series of scandals.
Here are some of the biggest European movers today:
- Stadler Rail surges as much as 8%, their best day since March 2020, following a contract win. The announcement of the company’s largest-ever contract marks “another major success,” Vontobel says.
- Equipment maker BE Semiconductor rises as much as 6.3% to EU88.34 in Amsterdam trading, hitting the highest since the stock’s 1995 listing, after Oddo and Deutsche Bank boosted their price targets.
- Siltronic declines as much as 11% after the company cast doubt on the planned $5.3b takeover by Taiwan’s GlobalWafers, saying the German Economy Ministry’s feedback so far was opaque and offered no clear resolution on how to win approval for the deal.
- Ageas falls as much as 12%, the most since April 2020, after Belgium’s Federal Holding and Investment Company (FPIM) acquired a 6.3% stake in the reported takeover target.
- Darktrace drops as much as 8.1% after the Telegraph reported Shadowfall is shorting the cybersecurity software firm.
- Maersk slides as much as 6%, adding to Friday’s 4.4% tumble, after Nordea downgraded the Danish shipping firm to hold from buy, saying the exceptional demand situation will normalize in 2023.
- Credit Suisse falls as much as 2.2% in Zurich after the Swiss bank ousted its chairman, leaving a number of analysts questioning the bank’s leadership.
Earlier in the session, Asian stocks fell as China’s economic data showed a slowdown in growth during the last quarter, with the nation’s central bank cutting a key interest rate for the first time in almost two years. The MSCI Asia Pacific Index dropped as much as 0.4%, slipping for a third session amid a slump in financials and materials. Mainland China’s CSI 300 Index closed up less than 1% after the People’s Bank of China cut two policy interest rates. China’s economy grew 4% in the final quarter of 2021 from a year earlier, a pace slower than during the previous three months. “The market seems to be unimpressed by GDP data and the rate cut because they probably anticipated more policy support,” said Margaret Yang, strategist at DailyFX. “The main concerns remain property and loan curbs, the ‘zero-Covid’ policy and a weak consumer market.” Benchmarks in Vietnam and South Korea were among the biggest decliners in the region. The Kospi lost more than 1% before a retail subscription for LG Energy Solution’s share float, the largest in the country’s history. Tencent and Meituan were among the biggest drags on the MSCI Asia Pacific Index. Asian stocks have outperformed their U.S. and European peers so far this year on cheaper valuations, as well as expectations that the worst of China’s tech clampdown has passed and confidence the region can quell omicron waves with timely social-distancing curbs. Tighter U.S. monetary policy is, however, weighing on regional shares and heavyweight tech stocks.
In FX, the Bloomberg Dollar Spot Index was little changed and the dollar was steady to weaker against all Group-of-10 peers apart from the yen; most currencies were confined in a narrow range with U.S. financial markets shut for a holiday. The euro inched up after testing the $1.14 handle and bund yields rose, led by the long end. Money markets today briefly wagered on 10-basis-points of ECB tightening as soon as September, the first time a move that month has been seen since before the omicron coronavirus variant roiled markets. The Canadian dollar and the Norwegian krone rose as Brent oil traded near the highest intraday level since 2014; the market tightened amid concerns about the impact of omicron eased. Norway’s exports surged to a record last year, helped by higher demand for fossil fuels, fish and metals. The pound was steady, with market focus on labor market and inflation data due later this week. Gilts yields rose by 3-4bps across the curve. The Bank of England is likely to hike its key rate at its next meeting, according to the median of a poll of economists. The yen weakened from the strongest in a month after hawkish comments from Fed officials on Friday spurred buying back of dollars; bonds stayed in a narrow range before a BOJ policy decision Tuesday. Overnight volatility in the yen remains subdued even amid speculation the Bank of Japan could change its view on price risks for the first time since 2014 when it sets policy on Tuesday.
In rates, Bunds and gilt curves bear steepen; gilts 1-2bps cheaper to bunds across the curve. Peripheral spreads tighten with 5y Italy outperforming. Money markets briefly price in 10bps of tightening by September before fading. Cash USTs stay closed for U.S. holiday but futures suggest the 10Y yield is currrently around 1.82% (see chart above).
In commodities, WTI back off Asia’s best levels to trade near $84, Brent is flat near $86. Spot gold drifts around the middle of Friday’s range close to $1,821/oz. Most base metals are in the red with LME nickel and copper underperforming.
There is nothing on the US economic calendar as the US is closed for MLK Day.
Top Overnight News from Bloomberg
- China’s central bank cut its key interest rate for the first time in almost two years to help bolster an economy that’s lost momentum because of a property slump and repeated virus outbreaks
- China’s population crisis continued to worsen in 2021, with the latest birth figures again sliding despite government efforts to encourage families to have more children
- Boris Johnson faces another bruising week, with his future as U.K. prime minister in the balance amid a furious public backlash over rule-breaking parties at his Downing Street office
- Governor Haruhiko Kuroda starts his last full year at the helm of Bank of Japan amid hints of public discontent over rising prices that could shape the direction of the central bank after he leaves or even as soon as coming months
- Emerging-market central banks were the first in the world to raise interest rates from their pandemic lows last year. That proactive tightening is starting to pay off big time in boosting returns from their local bonds
- As U.S. President Joe Biden’s administration looks to deter Russia from invading Ukraine, doubts are being raised about Germany’s readiness to confront President Vladimir Putin. When Foreign Minister Annalena Baerbock travels to Russia this week, her task will be to demonstrate that any questions over the new Berlin government’s resolve are misplaced
A more detailed look at global markets courtesy of Newqsuawk
Major bourses in Europe have kicked off the week mostly positive (Euro Stoxx 50 +0.5%; Stoxx 600 +0.4%) following a similar handover from the APAC session, which derived some support from Wall Street’s recovery on Friday – with US cash markets closed today for Martin Luther King Day. US futures see a holiday-shortened session but trade with little conviction in early European hours and within narrow parameters, albeit off the worst levels printed overnight. Back to Europe, a divergence is evident between the EUR-bourses (namely the AEX) and the non-EUR indices amid one main factor: Monday M&A which saw GSK (+4.7%) rejecting Unilever’s (-6.8%) GBP 50bln bid for GSK’s Consumer Health unit, with some reports suggesting the latter could up the offer to some GBP 60bln. This in turn jolted the Healthcare sector at the open (GSK accounts for around 9%) whilst the Personal and Household Goods sector is simultaneously pressured (Unilever accounts for around 13.5%) – thus underpinning the FTSE 100 (+0.7%) and the SMI (+0.6%) while the AEX (-0.6%) sits as the regional laggard. Delving deeper into the sectors, Basic Resources resides as one of the top performers as base metals are buoyed by China topping GDP growth expectations. Autos and Oil & Gas sit towards the bottom, with the latter seeing oil prices wane off best levels throughout the morning. In terms of individual movers, Credit Suisse (-1.2%) is weighed on after Chairman Antonio Horta-Osorio resigned with immediate effect after an internal company probe found he had broken the UK's Covid-19 quarantine rules in July. Darktrace (-4.5%) is lower as short-seller ShadowFall criticised the Co's performance, accounting and culture. ShadowFall confirmed that it had placed a bet against Darktrace in October, although the size was not disclosed. Siltronic (-7.0%) slumps as key requirements are still outstanding with regards to Germany's approval of the Co's sale to Taiwan's GlobalWafers. EDF (-2.1%) feels no reprieve as it cut output at its 1.3GW French oil and gas plant amid strikes, whilst the firm was also downgraded at HSBC. Looking at analyst commentary, Credit Suisse said value stocks usually see outperformance as yields rise, and the bank remains overweight Europe, UK and Japan. From a sectorial standpoint, Credit Suisse remains overweight on Financials, Mining, and Construction Materials, whilst the bank suggests it is too early to add tech. The bank suggests that yields in the 2-2.5% region will pose problems for equities as earnings, growth, fund flows and corporate purchases will be impacted.
In FX, the Dollar is waning again and the index is only just holding above 95.000 within a 95.291-035 band by virtue of upside in Usd/Jpy amidst firmer US Treasury yields and a steeper curve in wake of more hawkish Fed rhetoric via Williams as the last official speaker before the pre-January FOMC blackout. Meanwhile, the Yen has failed to glean full benefit from upbeat Japanese data in the form of machinery orders on the eve of the BoJ amidst reports that Tokyo and surrounding areas could be on the brink of entering quasi-emergency status due to the ongoing spread of COVID. However, the headline pair faces resistance above 114.50 via a Fib retracement level (114.58 representing 38.2% of the retreat from 116.35 to 113.48 this month) and 21 DMA (114.86), while nearest support is at the 50 DMA (114.27) and not far from decent option expiry interest (1 bn at 114.20). Note, thinner than average volumes, even for a Monday given MLK Day in the US.
- CAD/NZD/CHF/EUR/AUD/GBP - While the Yen lags and Greenback flags, firm crude prices are underpinning the Loonie ahead of Canadian manufacturing sales and the BoC’s Business Outlook Survey that will be eyed for any early signs of adverse impact from the Omicron outbreak. Usd/Cad is currently towards the base of a 1.2508-57 range, while Nzd/Usd and Aud/Usd are hovering on 0.6800 and 0.7200 respective handles, but the Kiwi is marginally outperforming the Aussie against the backdrop of weakness in metals and mixed Chinese data. Aud/Nzd has been mostly a fraction under 1.0600 awaiting NZIER consumer sentiment in advance of electronic card retail sales, Aussie jobs and NZ manufacturing PMI later in the week. Elsewhere, the Franc has rebounded from sub-0.9150 and is firmer against the Euro between 1.0445-28 parameters even though weekly Swiss sight deposits indicate more SNB intervention, while Eur/Usd is contained within 1.1400-34 bounds and Cable is meandering from 1.3662-90 in the run up to a trio of top tier UK releases, including employment and earnings, inflation and retail sales.
- SCANDI/EM - The Nok and Sek are pivoting 10.0000 and 10.3000 vs the Eur without too much reaction to Norway's trade surplus widening significantly to Nok 100+ bn, or Sweden’s mini budget showing Sek 18 bn set aside for pandemic-related measures, but the Cnh and Cny are both maintaining momentum around 6.3500 against the Usd following the aforementioned contrasting Chinese macro releases whereby GDP and IP beat consensus, but retail sales missed, plusPBoC easing via 10 bp reductions in the 1 year MLF and 7 day reverse repo. Conversely, the Rub continues to suffer from geopolitical and diplomatic angst as NATO pledges to reinforce Eastern members of the organisation if Russia decides to attack Ukraine.
In commodities, WTI and Brent front-month futures trade with no conviction but hold onto Friday’s gains, whilst overnight price action saw the latter reach prices last seen in 2014. The complex is underpinned by the mild upside bias across stocks, coupled with reopening vibes, geopolitical risk premia and the inability for some OPEC producers to ramp up output. To elaborate, weekend news flow regarding COVID was more sanguine from Europe, with nations set to ease COVID rules, albeit China’s Beijing city moves the other way amid its zero-COVID policy ahead of the winter Olympics. Geopolitical updates have been abundant, with the Russia/Ukraine situation tensions still heightened, while North Korea launched more projectiles. Further, Emirates News Agency noted three oil tanker explosions in the Al-Musaffah area in Abu Dhabi – potentially via drones emanating from Yemeni Houthis. Finally, reports via Argus Media on Friday suggested "The 19 Opec+ countries participating in the production restraint deal hiked their collective output by just 300k BPD in December, according to Argus' survey.”, suggesting the producers were around 650k BPD below their targets. WTI and Brent remain not far off the USD 84/bbl and USD 86/bbl marks respectively, with eyes on any further measures implemented by large oil consumers (such as the US and China) to reign in prices and avoid a larger knock-on effect on inflation. Elsewhere, spot gold is uneventful and trades around USD 1,820/oz mark – under the USD 1,830/oz resistance zone and above the 21 DMA at USD 1,802/oz. LME copper meanwhile was on a firmer footing following the Chinese GDP metrics overnight but has given up its earlier gains in early European hours with prices inching back towards USD 9,500/t.
DB's Jim Reid concludes the overnight wrap
Hope you had a good weekend. Fog and a very bad back stopped me golfing and I went swimming with the family instead. Two 12 year old boys clattered into me in the pool as they were involved in a horrendously aggressive play fight. I was furious as I got a good whack, and was about to give the man looking after them a piece of my mind, when I realised they were identical twins. My anger immediately turned to sympathy and when the Dad came over to apologise I said that I fully understood. Mine are only 4 and they wrestle, punch, slap, and trip each other up all the time. I thought they'd grow out of this but if these 12 years old boys were anything to go by I'm now very worried.
Talking of fights, it's becoming increasingly clear that 2022 is going to be a year where it's all about the battle between the Fed and financial conditions. After paying lip service to inflation for most of 2021, they have now got the bit between their teeth and in my opinion every meeting after March is live from a policy perspective. So if financial conditions don't tighten then we could have 7 hikes given how far behind the curve the Fed is on inflation. However a more likely outcome is that the Fed will be more measured as consistent rate hikes will probably lead to occasion market wobbles and gaps between the hikes. We will see. The other thing to look out for is a potential 50bps hike along the way and even as the opening gambit in March. This might feel fanciful but remember that since June, the pricing of various Fed Funds and taper/QT landmarks have repeatedly gone from zero to probable in relatively short order.
Our head of global economics Peter Hooper published a "What's in the tails?" piece last night looking at how there is an increasing risk that the Fed may want to move more quickly to neutral and even toward a restrictive monetary policy stance. He outlines what scenarios would need to happen for such an outcome. So while the team keep their 4 rate hikes and QT central view, they are acknowledging the upside risks to this. See the piece here.
After a late and notably bond sell off on Friday, that helped 10yr Treasury yields to end the week at fresh 2-year highs, markets will get some breathing space today with a US holiday and a Fed that are in their blackout period ahead of next week's FOMC.
The week has kicked off with China's monthly data dump but the PBOC upstaged this by surprisingly cutting rates on its medium term loans ahead of the GDP release. In the first move since April 2020, the PBOC lowered its one-year medium term lending facility (MLF) rate by 10bps to 2.85% from 2.95% and slashed the seven-day repurchase rate to 2.1% from 2.2%. Additionally, the central bank injected 700 bn yuan ($110 bn) worth of liquidity via the MLF and added 100 billion yuan of liquidity via reverse repos. Separately, data showed Q4 GDP expanded +4.0% y/y beating Bloomberg forecast of 3.3%. However, the rise was more muted in the last three months (+4.9%) as a real estate downturn combined with strict Covid-19 curbs hit activity.
Other economic data showed that industrial production in China jumped by +4.3% in December from a year ago surpassing market expectations of a +3.7% growth. In addition to this, Fixed asset investment for 2021 advanced by +4.9%, topping market expectations for +4.8% rise. However, retail sales missed expectations (+3.8%) with only a +1.7% gain in December from a year earlier, its slowest increase since August 2020.
In early trade today, markets across Asia are off to a cautious start. Japan's Nikkei (+0.84%) is inching higher, recouping losses from the previous two sessions, with the CSI (+0.86%) and Shanghai Composite (+0.59%) trading in positive territory. Elsewhere, the Kospi (-1.34%) and Hang Seng (-0.59%) are losing ground. In other data news, Japan's core machinery orders grew +3.4% in November (+3.8% last month), rising for the second straight month, suggesting a decent private demand-led recovery in the world's third-biggest economy.
In terms of the rest of the week, earnings season will begin to gather some momentum, with 39 S&P 500 companies reporting. Elsewhere the Bank of Japan will be making its latest monetary policy decision tomorrow which is unlikely to see much change now but reputable press reports are suggesting they are ready to become more hawkish in the coming months with a credible Reuters story late last week suggested they are prepared to raise rates before inflation reaches 2%. This is still someway off but if the BoJ can become more hawkish then that says something about the global direction of travel for monetary policy.
Otherwise on the data front, there’ll be further developments on inflation as the UK releases its CPI print for December, with our economist expecting a further rise to +5.3% on a year-on-year basis. If realised, that would be the highest CPI print since March 1992. That’ll also be the last CPI reading ahead of the BoE’s next policy decision on February 3, where our economist is expecting a further 25 basis point hike.
In terms of more details on earnings season, with 39 S&P 500 companies reporting ahead of the two peak weeks, the highlights are Goldman Sachs and BNY Mellon tomorrow, before we hear from UnitedHealth Group, Bank of America, Procter & Gamble, ASML, Morgan Stanley, Charles Schwab, US Bancorp and United Airlines on Wednesday. Finally on Thursday, there’s reports from Netflix, Union Pacific and American Airlines Group. For those interested, DB's asset allocation team have put out a Q4 earnings preview (link here).
Recapping last week now, global sovereign yields drifted lower most of the week after ripping higher to start the year. However a sizable selloff on Friday took us to fresh 2 year yield highs. Equity markets ended the week lower but enjoyed some respite from the otherwise torrid start to the year.
Diving in, there was a chorus of Fed speakers this week ahead of their January FOMC communications blackout. Foremost among them, Chair Powell and Governor Brainard testified before the Senate Banking Committee as part of their hearings for respective (re)nominations as Chair and Vice Chair of the Fed. They set the tone that was broadly echoed by other Governors and regional Presidents over the week: the first rate hike was likely coming in March (in line with our US economists expectations), and QT would be employed sometime in 2022 to fight inflation. We ended the week with a 97% probability of a March hike, the highest this cycle, and 2 full hikes priced by the June FOMC. Our economists are expecting 4 rate hikes this year, in addition to QT beginning, and the market is currently pricing around 3.8 hikes through the year.
The growing consensus around earlier Fed tightening lifted 2yr treasury yields +10.5bps this week, most of it via a +7.4bps increase on Friday. Farther out the curve, 10yr treasury yields were a bit calmer compared to the week before, ending the week +2.2bps higher (+8.0bps Friday) after drifting lower most of the week before a sharp end week sell-off. In Europe, 10yr bunds and gilts fell a modest -0.3bps (+4.4bps Friday) and -2.8bps (+4.5bps Friday) respectively but closed before the last leg of the US bond sell off.
The S&P 500 managed its first consecutive days of increases in 2022 last week, but still fell -0.30% on the week (+0.08% Friday), bringing it -2.17% lower to start the year. European equities were not spared, with the STOXX 600 falling -1.05% (-1.01% Friday), the DAX down -0.40% (-0.93% Friday) and the CAC lower by -1.06% (-0.81% Friday). Higher real 10yr treasury yields have been a big culprit so far, having increased an additional +7.2bps this week (+7.6bps Friday) to -0.70%, their highest level since April. However they were at -0.88bp late on Wednesday so a pretty choppy week. Risk sentiment was also likely impacted by geopolitics. In particular, the talks between US, its NATO allies, and Russia proving less-than-optimal.
Crude oil had another strong week, with Brent increasing +5.77% (+2.41% Friday) and WTI up +6.81% (+2.60% Friday). Oil is once again making a strong bid to be the best performing asset in 2022, with both Brent and WTI up over +10% to start the year. US earnings season kicked off with releases from major financials, JPM, Wells Fargo, and Blackrock. The two banks beat sales and revenue expectations but had below consensus revenues stemming from FICC trading. Blackrock posted higher earnings but lower sales per share than expected.
Turning to data, despite shrinking in Q4, German GDP grew 2.7 percent over 2021, driven by strong government spending, net exports, and investment. Private consumption was stagnant as real disposable income fell with rising prices.
US CPI reached 7.0 percent year-over-year in December, in line with expectations and the highest level since 1982. Core CPI increased 5.5 percent, year-over-year, slightly higher than consensus expectations. Price increases were broad-based across components. US retail sales declined -1.9 percent month-over-month in December, well below consensus expectations, perhaps a reflection of US consumers bringing holiday shopping forward to avoid any supply chain-driven delays.
Europe’s Spendthrifts Are Stuck In Irreversible Debt-Traps
Europe’s Spendthrifts Are Stuck In Irreversible Debt-Traps
Authored by Alasdair Macleod via GoldMoney.com,
A Euro Catastrophe Could Collapse It
This article looks at the situation in the euro system in the context of rising interest rates..
A Euro Catastrophe Could Collapse It
This article looks at the situation in the euro system in the context of rising interest rates. Central to the problem is role of the ECB, which through monetary inflation embarked on a policy of transferring wealth from fiscally responsible member states to the spendthrift PIGS and France. The consequences of these policies are that the spendthrifts are now ensnared in irreversible debt traps.
Even in a Keynesian context, the ECB’s monetary policy is no longer to stimulate the economy but to keep the spendthrifts afloat. The situation has deteriorated so that Eurozone commercial banks appear to have credit restricted in New York, evidenced by the reluctance of the US banks to enter into repo transactions with them, leading to the market failure in September 2019 when the Fed had to intervene.
An examination of the numbers strongly suggests that even Eurozone banks, insurance companies and pension funds are no longer net buyers of Eurozone government debt. It could be because the terms are unattractive. But if that is the case it is an indictment of the ECB’s asset purchase programmes deliberately suppressing rates to the point where they are unattractive, even to normally compliant investors.
Consequently, without any savings offsets, the ECB has gone full Rudolf Havenstein, and is following similar inflationary policies to those that impoverished Germany’s middle classes and starved its labourers and the elderly in 1920-1923. That the German people are tolerating such an obvious destruction of their currency for the third time in a hundred years is simply astounding.
Schemes to pilfer from people without their knowledge always end in disaster for the perpetrators. Central banks using their currency seigniorage are no exception. But instead of covering it up like an institutionalised Madoff they use questionable science to justify their openly fraudulent behaviour. The paradox of thrift is such an example, where penalising savers by suppressing interest rates supposedly for the wider economic benefit conveniently ignores the theft involved. If you can change the way people perceive reality, you can get away with an awful lot.
The mass discovery by the people of the fraud perpetrated on the people by those supposedly representing the people is always the reason behind a cycle of crises and wars. It can take a long period of suffering before an otherwise supine population refuses to continue submitting unquestionably to authority. But the longer the condition exists, the more oppressive the methods that the state uses to defer the inevitable crisis become. Until something finally gives. In the case of the euro, we have seen the system give savers no interest since 2012, while the quantity of money and credit in circulation has debased it by 63% (measured by M3 euro money supply).
Furthermore, prices can be rigged to create an illusion of price stability. The US Fed increased its buying of inflation-linked Treasury bonds (TIPS) since March 2020 at a faster pace than they were issued by the US Treasury, artificially pushing TIPS prices up and creating an illusion that the market is unconcerned about price inflation.
But that is not all. Government statisticians are not above fiddling the figures or presenting figures out of context. We believe the CPI inflation figures are a true reflection of the cost of living, despite the changes over time in the way prices are input. We believe that GDP is economic growth — a questionable concept — and not growth in the quantity of money. We even believe that monetary inflation has nothing to do with prices. Statistics are designed to deceive. As Lord Canning said 200 years ago, “I can prove anything with statistics but the truth”. And that was before computers, which have facilitated an explosion in the quantity of questionable statistics. Can’t work something out? Just look at the stats.
A further difference between Madoff and the state is that the state forces everyone to submit to its monetary frauds by law. And since as law-abiding citizens we respect the law, we even despise those with the temerity to question it. But in the process, we hand enormous power to the monetary authorities, so should not be surprised when that power is abused, as is the case with interest rates and the dilution of the state’s currency. And it follows that the deeper the currency fraud, when something gives, the greater is the ensuing crisis.
The best measure of market distortions from deliberate actions of the monetary authorities we have is the difference between actual bond yields and an estimate of what they should be. In other words, assessments of the height of negative real yields. But any such assessment is inherently subjective, with markets and statistics either distorted, rigged, or unable to provide the relevant yardstick. But it makes sense to assume that the price impact, that is the adjustment to bond prices as markets normalise, is greatest for those where nominal bond yields are negative. This means our focus should be directed accordingly. And the major jurisdictions where this applies is Japan and the Eurozone.
The eurozone’s banking instability
A critique of Japan’s monetary policy must be reserved for a later date, in order to concentrate on monetary and economic conditions in the Eurozone. The ECB first reduced its deposit rate to 0% in July 2012. That was followed by its initial introduction of negative deposit rates of -0.1% in June 2014, followed by -0.2% later that year, -0.3% in 2014, -0.4% in 2016 and finally -0.5% in September 2019. The last move coincided with the repo market blow-up in New York, the day that the transfer of Deutsche Bank’s prime dealership to the Paris based BNP was completed.
We can assume with reasonable certainty that the coincidence of these events showed a reluctance of major US banks to take on either of these banks as repo counterparties, as hedge and money funds with accounts at Deutsche decided to move their accounts elsewhere, which would have blown substantial holes in Deutsche’s and possibly BNP’s balance sheets as well, thereby requiring repo cover. The reluctance of American banks to get involved would have been a strong signal of their reluctance to increasing their counterparty exposure to Eurozone banks.
We cannot know this for sure, but it is the logical explanation for what happened. In which case, the repo crisis in New York was an important advance warning of the fragility of the Eurozone’s monetary and banking system. A look at the condition of the major Eurozone global systemically important banks (G-SIBs) in Table A, explains why.
Balance sheet gearing for these banks is roughly double that of the major US banks, and except for Ing Group, deep price-to-book discounts indicate a market assessment of these banks’ credit risk as exceptionally high. Other Eurozone banks with international counterparty business deemed not significant enough to be labelled as G-SIBs but still capable of transmitting systemic risk could be even more highly geared. The reasons for US banks to limit their exposure to the Eurozone banking system on these grounds alone are compelling. And the persistence of price inflation today is a subsequent development, likely to expose these banks as being riskier still because of higher interest rates on their exposure to Eurozone government and commercial bonds, and defaulting borrowers.
The euro credit cycle has been suspended
When banks buy government paper, it is usually because they see it as the risk-free alternative to expanding credit to non-financial private sector actors. In the normal course of an economic cycle, it is inherently cyclical. Both Basel and national regulations enhance the concept that government debt is risk-free, giving it a safe-haven status in times of heightened risk. In a normal bank credit cycle, banks will tend to hold government bills and bonds with less than one year’s maturity and depending on the yield curve will venture out along the curve to five years at most.
These positions are subsequently wound down when the banks become more confident of lending conditions to non-financial borrowers when the economy improves. But when economic conditions become stagnant and the credit cycle is suspended due to lack of recovery, banks can accumulate positions with longer maturities.
Other than the lack of alternative uses of bank credit, this is for a variety of reasons. Trading desks increasingly seek the greater price volatility in longer maturities, central banks encourage increased commercial bank participation in government bond markets, and yield curve permitting, generally longer maturities offer better yields. The more time that elapses between investing in government paper and favouring credit expansion in favour of private sector borrowers, the greater this mission creep becomes.
As we have seen above, the ECB introduced zero deposit rates nearly 10 years ago, and private sector conditions have not generated much in the way of bank credit funding. Lending from all sources including securitisations and bank credit to a) households and b) non-financial corporations since 2008 are shown in Figure 1.
Before the Covid pandemic, total lending to households had declined from $9 trillion equivalent in 2008 to $7.4 trillion in 2019 Q4. And for non-financial corporations, total lending declined marginally over the same period as well. Admittedly, this period included a credit slump and recovery, but on a net basis lending conditions stagnated.
But bank credit for these two sectors will have contracted, allowing for net bond issuance of collateralised consumer debt and by corporations securing cheap finance by issuing corporate bonds at near zero interest rates, which are contained in Figure 1.
Following the start of the pandemic, lending conditions expanded under government direction and borrowing by both sectors increased substantially.
Meanwhile, over the same period bond issuance to governments increased, particularly since the pandemic started, illustrated in Figure 2.
The charts in Figures 1 and 2 support the thesis that credit expansion and bond finance had, until recently, disadvantaged the non-financial private sector. The expansion of government borrowing has been entirely through bonds bought by the ECB, as will be demonstrated when we look at the euro system balance sheet. They confirm that zero and negative rates have not stimulated the Eurozone’s economies as Keynesians theorised. And the increased credit during the pandemic reflects financial support and not a renewed attempt at Keynesian stimulation.
The purpose of debt expansion is important because the moment the supposed stimulus wears off or interest rates rise, we will see bank credit for households and businesses begin to contract again. Only this time, there will be a heightened risk for banks of collateral failure. And higher interest rates will also undermine mark-to-market values for government and corporate bonds on their balance sheets, which could rapidly erode the capital of Eurozone banks, given their exceptionally high gearing shown in Table A above.
Figure 3 charts the euro system’s combined balance sheet since August 2008, the month Lehman failed, when it stood at €1.43 trillion. Greece’s financial crisis ran from 2012-2014, during which time the balance sheet expanded to €3.09 trillion, before partially normalising to €2.01 trillion. In January 2015, the ECB launched its expanded asset purchase programme (APP — otherwise referred to as quantitative easing) to prevent price inflation remaining too low for a prolonged period. The fear was Keynesian deflation, with the HICP measure of price inflation falling to -0.5% at that time, despite the ECB’s deposit rate having been already reduced to -0.2% the previous September.
Between March 2015 and September 2016, the combined purchases by the ECB of public and private sector securities amounted to €1.14 trillion, corresponding to 11.3% of euro area nominal GDP. The APP was “recalibrated” in December 2015, extended to March 2017 and beyond, if necessary, at €60bn monthly. And the deposit rate was lowered to -0.3%. Not even that was enough, with a further recalibration to €80bn monthly in March 2016, with it intended to be extended to the end of the year when it would be resumed at the previous rate of €60bn per month.
The expansion of the ECB’s balance sheet led to the rate of price inflation recovering to 1% in 2017, as one would expect. With the expansion of credit for the non-financial private sector going nowhere (Figures 1 and 2 above), the Keynesian stimulus simply failed in this objective. But when in March 2020 the US Fed reduced its funds rate to 0% and announced QE of $120bn monthly, the ECB did what it had learned to do when in a monetary hole: continue digging even faster. March 2020 saw the ECB increase purchases under the asset purchase programme (APP) and adopt a new programme, the pandemic emergency purchase programme (PEPP). These measures are the reason why the volumes of the Eurosystem’s monthly monetary policy net purchases are higher than ever before, driving its balance sheet total to over €8.5 trillion today.
The ECB’s bond purchases closely matched the funding requirements of national central banks, both being €4 trillion between January 2015 and June 2021. The counterpart to these purchases is an increase in the amount of circulating cash. In other words, the ECB has gone full Rudolf Havenstein. There is no difference in the ECB’s objectives compared with those of Havenstein when he was President of the Reichsbank following the First World War; a monetary policy that impoverished Germany’s middle classes and pushed the labouring class and elderly into starvation by collapsing the paper-mark. Except that today, German society is paying through the destruction of its savings for the spendthrift behaviour of its Eurozone partners rather than that of its own government.
The ECB now has an additional problem with price inflation picking up globally. Producer input prices in Europe are rising strongly with the overall Eurozone HICP rate for November at 4.9% annualised, and doubtless with more rises to come. Oil prices have risen over 50% in a year, and natural gas over 60%, the latter even more on European markets due to a supply crisis of its governments’ own making.
Increasingly, the policy purpose of the ECB is no longer to stimulate the economy, but to ensure that spendthrift member state deficits are financed as cheaply as possible. But how can it do that when on the back of soaring consumer prices, interest rates are now going to rise? Clearly, the higher interest rates go, the faster the ECB will increase its balance sheet because it is committed to not just covering every Eurozone member state’s budget deficit but the interest on their borrowings as well.
But there’s more. In a speech on 12 October, Christine Lagarde, the President of the ECB indicated that it stands ready to contribute to financing the transition to carbon neutral. And in a joint letter to the FT, the President of France and Italy’s Prime Minister called for a relaxation of the EU’s fiscal rules so that they could spend more on key investments. This is a flavour of what they said:
"Just as the rules could not be allowed to stand in the way of our response to the pandemic, so they should not prevent us from making all necessary investments," the two leaders wrote, while noting that "debt raised to finance such investments, which undeniably benefit the welfare of future generations and long-term growth, should be favoured by the fiscal rules, given that public spending of this sort actually contributes to debt sustainability over the long run."
The rules under the Stability and Growth Pact have in fact been suspended, and are planned to be reapplied in 2023, But clearly, these two high spenders feel boxed in. The Stability and Growth Pact will almost certainly be eased — being a charade, rather like the US’s debt ceiling. The trouble is Eurozone governments are too accustomed to inflationary finance to abandon it.
If the ECB could inflate the currency without the consequences being apparent, there would be no problem. But with prices soaring above the mandated 2% target that is no longer true. Up to now, the ECB has been in denial, claiming that price pressures will subside. But we know, or should know, that a rise in the general level of prices is due to monetary expansion, the excessive plucking of leaves from the magic money tree, particularly at an enhanced rate since March 2020 which is yet to be reflected fully at the consumer level. And in its duty to fund the PIGS government deficits, the ECB’s balance sheet expansion through bond purchases is sure to continue.
Furthermore, if bond yields do rise, it will threaten to undermine the balance sheets of the highly geared commercial banks.
The commercial banks position
With the economies of Eurozone member states stifled by the ECB’s management of monetary affairs since the Lehman crisis in 2008 and by more recent covid lockdowns, the accumulation of bad debts at the commercial banks is a growing threat to the entire financial system. Table A above, of the Eurozone G-SIBs’ operational gearing and their share ratings, gives testament to the problem.
So far, bad debts in Italian and other PIGS banks have been reduced, not by their being resolved, but by them being used as collateral for loans from national central banks. Local bank regulators deem non-performing loans to be performing so they can be hidden from sight in the ECB’s TARGET2 settlement system. Together with the ECB’s asset purchases conducted through national central banks, these probably account for most of the imbalances in the TARGET2 cross-border settlement system, which in theory should not exist.
The position to last October is shown in Figure 4. Liabilities owed to the Bundesbank are increasing again at record levels, while the amounts owed by the Italian and Spanish central banks are also increasing. These balances were before global pressures for rising interest rates materialised. Given the sharp increase in bank lending to households and non-financial corporations since March last year (see Figure 1), bad debts seem certain to accumulate at the banks in the coming months. This is likely to undermine collateral values in Europe’s repo markets, which are mostly conducted in euros and almost certainly exceed €10 trillion, having been recorded at €8.3 trillion at end-2019.[vi] The extent to which national central banks have taken in repo collateral themselves will then become a major problem.
It is against the background of negative Euribor rates that the repo market has grown. It is not clear what role negative rates plays in this growth. While one can see a reason for a bank to borrow at sub-zero rates, it is harder to justify lending at them. And in a repo, the collateral is returned on a pre-agreed basis, so it’s removal from a bank’s books is temporary. Nonetheless, this market has grown to be an integral part of daily transactions between European banks.
The variations in collateral quality are shown in Figure 5. This differs materially from repo markets in the US, which is almost exclusively for short-term liquidity purposes and uses high quality collateral only (US Treasury bills and bonds and agency debt).
Bonds rated BBB and worse made up 27.7% of the total collateral in December 2019. In Europe and particularly the Eurozone rising interest rates can be expected to undermine collateral ratings, which with increasing Euribor rates will almost certainly contract the size of the market. This heightens the risk of a liquidity-driven systemic failure, as repo liquidity is withdrawn from banks that depend upon it.
Government finances are out of control
The first column in Table B shows government debt to GDP, which is the conventional yardstick of government debt measurement relative to the economy. The second column shows the proportion of government spending in the total economy relative to GDP, enabling us to derive the third column. The base for government revenue upon which paying down its debt ultimately rests is the private sector, and the third column shows the extent to which and where this true burden lies.
It exposes the impossible position of countries such as Greece, Italy, France, and Belgium, Portugal and Spain, where, besides their own private sector debt burdens, citizens earning their livings without being paid by their governments are assumed by markets to be responsible for underwriting their governments’ debts.
The hope that these countries can grow their way out of their debt is demolished in the context of the actual tax base. It is now widely recognised that will already high levels of taxation further tax increases will undermine these economies.
We can dismiss as hogwash the alterative, the vain hope that yet more stimulus in the form of a further increase in deficits will generate economic recovery, and that higher tax revenues will follow to normalise public finances. It is a populist argument amongst some free marketeers today, citing Ronald Reagan’s and Margaret Thatcher’s successful economic policies. But in those times, the US and UK governments were not nearly so indebted and their economies were able to respond positively to lower taxes. Furthermore, price inflation was declining then while it is increasing today.
And as a paper by Carmen Reinhart and Ken Rogoff pointed out, a nation whose government debt exceeds 90% of GDP has great difficulty growing its way out of it.[vii]Seven of the Eurozone nations already exceed this 90% Rubicon, and their debts are still growing considerably faster than their GDP. At 111% the entire Euro area itself is well above it. Taking account of the smaller proportion of private sector activity relative to those of their governments highlights the difference between the current situation and that of nations that managed to pay down even higher debt levels after the Second World War by gently inflating their way out of a debt trap while their economies progressed in the post-war environment.
Additionally, we should bear in mind future government liabilities, whose net present values are considerably greater than their current debt. Over time, these must be financed. And with rising price inflation, hard costs such as healthcare escalate them even further. The position gets progressively worse as these mandated costs become realised.
There is a solution to it, and that is to cut government spending so that its budget always balances. But for socialising politicians, slashing departmental budgets is the equivalent of eating their own children. It is a reversal of everything they stand for. And it requires welfare legislation to be rescinded to stop the accumulation of future welfare costs. There is no democratic mandate for that.
Rising interest rates globally will affect all major currencies, and for some of them expose systemic risks. An examination of the existing situation and how higher interest rates will affect it points to the Eurozone as being the most likely global weak spot.
The Eurozone’s debt position pitches the entire global financial and economic system further towards a debt crisis than generally realised. Particularly for Greece, Italy, France, Belgium, Portugal, and Spain in that order of indebtedness, the problem is most acute. They only survive because the ECB ensures they can pay their bills by funding them totally through inflation of the quantity of euros in circulation. The ECB’s entire purpose has become to transfer wealth from the more fiscally prudent member states to the spendthrifts by debasing the currency.
In the process, based on figures provided by the Bank for International Settlements the banking system is contracting credit to the private sector, and it is not even accumulating government bonds, which is a surprise. Much like banks in the US, Eurozone banks have become increasingly distracted into financial activities and speculation. The difference is the high level of operational gearing, up to thirty times in the case of one major French bank, while most of the US’s G-SIBs are geared about 11 times on average.
This article points to these disparities between US and EU banking risks having been a factor in the US repo market failure in September 2019. And we can assume that the Americans remain wary of counterparty exposure to Eurozone banks to this day.
That the ECB is funding net government borrowing in its entirety indicates that even investing institutions such as pension funds and insurance companies, along with the banks are sitting on their hands with respect to government debt. It means that savings are not offsetting the inflationary effects of government bond issues. It represents a vote to stay out of what has become a highly troubling and inflationary situation. The question arises as to how long this extraordinary situation can continue.
It must come to an end some time, and by destabilising a highly leveraged banking system the end will be a crisis. With its GDP being similar in size to China’s (which is seeing a more traditional property crisis unfolding at the same time) a banking crisis in the Eurozone could be the trigger for dominoes falling everywhere.
As for the euro’s future, it seems unlikely that the ECB has the capability of dealing with the crisis that will unfold. It has cheated the northern states, particularly Germany, the Netherlands, Finland, Ireland, the Czech Republic, and Luxembourg to the benefit of spendthrifts, particularly the political heavyweights of France, Italy and Spain. It is a rift likely to end the euro system and the ECB itself. The deconstruction of this shabby arrangement should prove the end of the euro and possibly of the European Union itself.
Europe’s Spendthrifts Are Stuck In Irreversible Debt-Traps
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