‘Ten years ago, Steve Jobs was alive, Bob Hope was alive, Johnny Cash was alive. Now we’re outta jobs, outta hope and outta cash.” (Quoted by Peggy Noonan)
“THE COMPREHENSIVE PACKAGE” So, here we are: the countdown to salvation. (Deadline Sets Stage for Crucial Euro Week) Finance ministers and central bankers of the Group of 20 industrial and developing economies said they expected an Oct. 23 meeting of European leaders “to decisively address the current challenges through a comprehensive plan.”
In the works is a five-point plan foreseeing a fix for Greece, boosting of the rescue fund, fresh capital for banks, a new push to increase competitiveness and consideration of European treaty amendments to tighten economic management.
Proposals include revising a voluntary July accord struck with investors for a 21 percent net-present-value reduction in Greek debt holdings. One variant would take that reduction up to 50 percent, and a more aggressive suggestion is for investors to exchange Greek bonds for new debt at a lower face value collateralized by the euro area’s AAA-rated rescue fund, the people said. The ultimate choice is a restructuring involving writedowns without collateral.
That’s the menu. As Geithner said:
They clearly have more work to do on strategy and details.
Detail # 1: Banks are not convinced that more is needed from them
Highlighting potential opposition from bankers this week, Charles Dallara, managing director of the Institute of International Finance, told the Financial Times in an article published Oct. 15 that he doesn’t “see a compelling case” to reopen the July deal. The imposition of greater losses on investors may prompt them to sell other European bonds, he said.
It’s all in the wording:
Asked about private sector objections to reopening the July deal, Olli Rehn, European monetary affairs commissioner, said that the agreement required technical revision due to changing market conditions. “We are not reopening the deal, rather revisiting the deal,” he said.
Detail # 2: Boosting the EFSF:
Wolfgang Schäuble, the German finance minister, said proposals for expanding the effective size of the facility by letting it borrow from the European Central Bank were “not on the table,” saying this was against the bank’s mandate.
But the EFSF could be used as a guarantor:
“Of course there are ways of taking advantage of the size of the E.F.S.F. in efficient ways to avert infection, but there is no sense, on the weekend before we have to decide on these things, to speculate about them,” he added.
Euh! Not quite:
Diplomats say Mr Geithner’s plan to use the ECB as a guarantor of eurozone sovereign bonds was dismissed out of hand, while the EU failed to offer clear assurances that bank recapitalisation would be carried out with sufficient speed and scale to halt an incipent run on the system.
And the killer from Mrs. Merkel, the realist:
German Chancellor Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Steffen Seibert, Merkel’s chief spokesman, said at a briefing in Berlin today. The search for an end to the crisis “surely extends well into next year.”
Hold your breadth at your own peril. For his part, real-estate and newspaper mogul Mortimer Zuckerman, wisely remains very cautious:
We’re keeping it very liquid, because I don’t know where this is going.
Zuckerman, who voted for Obama but began seeing trouble as soon as the stimulus went into the pockets of municipal unions (WSJ), expresses popular disillusion on Obama:
Another speech from this guy? The country knows this is just another speech. They understand it almost instantaneously, and his numbers have continued to go down for that reason. What the country wanted was some way of coming up with a solution.
And you know, Harry Truman had a wonderful definition for the presidency. He said the president has to be someone who can persuade the American people to do what they don’t want to do and to like it. And that’s what you have to do. Somebody like Reagan had that authority. He was liked so much and he had a kind of moral authority. That’s what this president has lost.
Democracy does not work without the right leadership, and you can’t play politics. The country has got to come to the conclusion at some point that what you’re doing is not just because of an ideology or politics but for the interests of the country.
THE JOBS PLAN, PEACEMEAL Obama to Push for Plan to Rehire Teachers, Firefighters, Police President Barack Obama will call on Congress this week to send $35 billion to communities to rehire teachers, firefighters and police, in the first stage of his strategy to get some parts of his jobs plan enacted, White House spokesman Josh Earnest said yesterday. Same pockets?
US EMPLOYMENT Heidi Shierholz of the Economic Policy Institute writes:
August marks three years straight that the job seeker’s ratio has been at or above 3-to-1. Put another way: we’ve exceeded the highest level reached in the early 2000s recession for the last three years straight. And we’ve been substantially above 4-to-1 for the last two years and eight months. A job seeker’s ratio of more than 4-to-1 means that for more than three out of four unemployed workers, there simply are no jobs.
US HOUSING The headline is negative (Slim Pickings Are Latest Headache for Home Sales) but a stabilization of house prices needs to start with reduced offering.
The housing market, which has struggled for years with oversupply, now faces a lack of attractive inventory, with homes listed for sale at the end of September at the lowest level since Realtor.com began its count in 2007. Real-estate agents say people are pulling their homes off the market rather than try to sell them at today’s discounted prices. The shrinking supply isn’t driving up prices because demand is soft. “I wouldn’t describe it as a buyer’s market so much as no market at all.”
CHINESE FOR “BE CAREFUL WITH TRADE BILL” Beijing to Keep Yuan Stable, Premier Says
Chinese Premier Wen Jiabao said policy makers will keep the yuan basically stable to avoid hurting exporters too much, sending a signal that Beijing is unlikely to allow any dramatic yuan appreciation for now.
EQUITIES So far, 37 companies in the S&P 500 had released third-quarter reports through Friday, with 70% of them posting results that have exceeded analyst expectations, according to Thomson Reuters. In a typical quarter dating back to 1994, 62% of companies beat estimates.