In Europe, the EU is pursuing the IMF option, originally looking to raise $261 billion ($200 bn Euros) in crisis relief, while Draghi holds the line on the ECB mandate which is limited to helping banks and buying bonds, not an outright rescue which the world has been pressuring the ECB to pursue, apparently unlike another Central Banker we know, Draghi takes the CB's mandate seriously, at least for now.
The IMF option is largely Euro countries and EU/non-Euro countries contributing to the fund, it's kind of the sick trying to help the deathly sick and is already running in to resistance. That opposition is coming from Sarkozy's newest most hated PM ever, David Cameron from the UK. The UK was slated in draft plans to be tied for second place as the biggest contributor with France at $30 bn Euros while Germany contributes the most. It seems Cameron is already telegraphing he may shoot down the UK "enhanced" contribution and perhaps scuttle the entire "newest plan". The Dow Jones newswire confirms what we have suspected since Cameron spoke on December 14th in response to an article in the Telegraph about the UK's $30.9 bn contribution.
- EU loans to IMF likely to fall short of expected EUR 200bln according to sources
- Eurozone may move on IMF loans without immediate UK support according to a EU source
It's not just the UK missing money that could scuttle the latest plan, but the "out" that it gives to many other countries. Here are some examples of what I mean:
ESTONIA
Estonian Prime Minister Andrus Ansip is in favour of joining other euro zone countries in contributing bilateral loans to the IMF, but needs to agree the technical details, the government's communication office said.
Estonia is clearly leaving the door open to not participating and they will be able to cite numerous reasons, probably foremost the UK example.
CZECH REPUBLIC
The Czech government should ask the central bank to free reserves for a loan to the IMF only if all other countries outside the euro zone would give loans and Prague would be threatened by isolation if it does not, the Czech prime minister was quoted as saying. The Czech share would be about 3.5 billion euros, under a planned agreed by EU states last week.
As for non European countries, the US and the Republicans in particular are keen to avoid sending US taxpayer dollars to rescue the EU, of course this wouldn't be the administration's line or Tiny Tims's.
Japan is hesitant saying they will cooperate where they can, but ONLY after the EU has a credible plan in place, which essentially is saying "NO" as the EU has had years and umpteen summits and still has no credible plan and with each new plan that fails, so goes credibility, even if they finally found something that would work.
Canada says it's a decision for the government to make, but within the context of contributions to help the world, not specifically Europe.
It's hard to know what China would do, Russia has said they could contribute up to $10 bn, obviously there would need to be an IMF plan in place first and the US Congressional Republicans have started draft legislation to keep IMF funds from going to Europe, thus the EU direct contributions.
Speaking of China, we've talked about the manufacturing / service PMI contraction and the housing bubble implosion, we get news today that it's bad.
China’s November Home Prices Post Worst Performance This Year Amid Curbs
Furthermore as I have said and we probably all know, Chinese economic data is very opaque and often misstated, grossly misstated. Bloomberg once again blows the lid off the Chinese manipulation of debt.
China Under-reporting Debt
China's banks may be understating their exposure to runaway local borrowing that is raising fears of a government bailout, according to a Bloomberg analysis of debt disclosed by all 231 local-government financing companies that sold bonds, medium-term notes or commercial paper through Dec. 10 this year.
Of Interest in the US today, the House of Representatives is expected to reject the Payroll Tax Extension.
Other then, that, other news over the weekend, like Belgium's downgrade I posted as it came up. So the bounce in the Euro? Technical, not fundamental.
Remember my waves/tide analogy, which is easy for those of you who live close to the beach, but I think everyone understands.
I used to explain it in the context of Dow Theory to my students like this, put a stick in the sand exactly where a wave rolls up the beach and stops. In a bear market, you will have waves (counter trend rallies/bounces, just like in a bull market you will have pullbacks. In a bear market, each wave that rolls up the beach will move successively lower down the beach and away from the stick as the bigger trend (the bear market) of the tide continues to roll out.
I did a lot of fishing yesterday and experienced some pretty powerful tides and thought a lot about this as the tide really rips through the intracoastal/inlet to the ocean.
In my fishing vernacular, you don't just stand at the stick and cast out unless you want to be casting in to the sand, you move down the beach and as the wave crests, you move down and cast your line. This is the same way we use market bounces to our advantage, they aren't something to fear, they are to be used to get the best positioning, like in casting you fishing line, waiting for the wave to break and then moving down the beach you will get your line further out, you use the counter trend waves to your advantage.
However if I told you what I caught, you may not be so keen to take the analogy. I did tangle with a pelican though!
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