The Greek Palaver 2011

By

Sampson Iroabuchi Onwuka

Despite the rusty personal interest in matters affecting the world market and economy, there is little to deny that the issue emanating from Greece and Europe and the danger of default of Irish and Portuguese Banks, do not amount the reasons for rehearsing an old position that the Euro, as a Unified currency and Euro for unified operation system, is a system that is destined or designed to fail. If the theory of a ‘unified currency’ as a way to stem ‘price’ (price stability) has managed to hang around for such a long time, it is because of the strength of these European countries. There is then a tendency to be cautious since we are likely to believe that the system would be tested in more severe weather, is quite strong. What is the real time relationship between a growing National Debt and the problems of resource allocation? There is no doubt that issue of spending along the lines of austerity has more than proved a point for general economic discourses, and the trend in the current years has now applause with the presence of new information technology and the new attitudes of sharing. Whatever may have been the controlling precedence regarding the problems of Europe and the challenges that Obama Administration inherited.  The general concerns of most economic nations are usually how to grow an economy but the concern usual revert to economic positions either taken by our experts on such times or what the experts on finances are willing to point.  To be sure, Financial Information available on Wall Street is usually ahead on information that within the operational dynamics of White House. In the end, we may constantly look at the problems of Debt as a divide between two parties in the United States , one the Democrats and the other the Republicans, each of whom were driven by necessity to engage the finances of the country from State to the constituted Federal level.  Does spending help? The answer seem to coincide with reduction of Government actions in the life of an economy, for sure, this problem of Government Intervention which does not necessarily involve spending, may be reduced to spending given the definitions of Keynes. But that would only now matter when the State such as U.S and the AAA (Aaa) Treasury has more than a profit margins to accommodate the widening demands of its expanding demographic. In many parts of the given world, the existing institutions are not always enough to accommodate the varying degrees of expenses, which are the products of unbalanced budget, and therefore reduced to the incompetence of borrowing. This is not the case with the case yet the economy from all given wealth of information available will delve into the material compromise of Debts hoping against the curve to Redemption in the nearest possible future. But of course, the obverse disguise of the Debt acquisition and low interest rate is to deliver the magic of structural changes, which has now foundered much of Europe and therefore imprecation for how these United States will proceed in the coming years. Do we in the country suffer Structure decays which the spending will provisions for or is this Government struggling to buckle its belt under the new weight of spending and extremely low production curve in spite of the Demographics. Here the Greek Palaver offers an example that a Government’s problems should also include their role in business, for without spending in the real time, Greek and the total Austerity package of Europe will transition from the local coal and mining industries to the Period of the Electric Industry which enables growth. For sure, local and foreign sponsorship and to all extent Investment, is coeval with the chances of Greek or other European States surviving, and this case is a result of the matters after the unified Currency that attempts to create value from a 2 to 1 function to U.S Dollars. 

It is the hope of the general public that such financial weather should not come in such a way that neither the US or Asia or Europe will be unprepared to react it. But there are signs that the lessons of 2008, where US securities lost trillions of dollars in what Gordon Brown (English former prime minister) called the first Global Crisis, are forgotten. The main question is if risks are involved in all forms of trading or lending? And how does risk manufactured by fund of fund managers affect the broad market? Will such risks have additional impetus to the shortfalls in much of Europe, and by exactly how much? And lastly how does this Greek problem remain part of everyday market, risks that what make any market great, but what constitute excessive risk may be subject to all kinds of measurement. But it seems that the incident of the Great Depression (1929-33) was not as Universal as 2008, neither were the shock crash of 1981, 1993-94 (particularly 94) - where US Securities at home lost whopping amount of 600 billion dollars and at abroad something close to 900 billion dollars - or the crash of 1999, since one major economy in the World, Canada, proved immune to the reflexes of these downward market, except in 2008. Why would Greek prove itself a bottle neck of the hot oil credit market churning with all degree of uncertainty? And can this boiling hot bottle capable of spilling into the Global market, and can the Euro Bond which is essentially a toast be exported to US and when?

Greek front line on Austerity Measures implied a voting to make room for 110 billion dollars plunk in their fiscal possible, suggesting that the leniency of these few member states of Union or Euro-zone, will likely lead the general market policy to the land of Maynard Keynes, whose theory about the impact of fiscal policy in breaching the GDP of any country, is expected over time to create job and maintain stock money constant. Perhaps the statement by Keynes himself that ‘Austerity at the Treasury, not high interest rates, should be the method for controlling inflation’, that by 'redistributing income' (breaking down a cornered economy), investment may be given the right exposure ‘...so that a given level of employment would require a smaller volume of current investment to support it.’ And such theory will implicate the Fiscal responsibility of any nation since attention must be made to its country’s overall GDP, where the problem of unemployment becomes a reason to form policy towards national growth. It is possible to argue that the Greek market marvel by quakes alone since it was prone to disaster given the amount of effort essentially employed by Europe, that the gulf between Greek local investments and foreign is seriously large and it is therefore careful to a point. That may also mean that the Greek debt will not spill over into other areas, for sure the involvement of member Euro nations in Greece and in Portugal, should be leading towards a share in the debt crisis which further delineates any hint of comparative advantage with respect to Greece neighbors, where the success of one market does not incur relative value hence a synthetic SWAP. That does not negate the grim cynicism of failed investment strategy and the issue of trouble asset, that at no point will we deny that Investment Banks of US were not aware of the damaging ammunition the 2009 incident offered them.

The Greek Palaver raises all kinds of new questions about the probability of Euro surviving as one Unit, and the earlier the member states understand the shrinking significance of their market on a larger frame work of the world, or the impact on a near zero market friction - especially Ireland and Italy - the greater their chances of escaping the Continental Debt pad. This Debt pad is likely to deepen since the GDP of most European countries is not likely to change or their gross National Income, improve the monetary aggregate to a substantial level. Above all, national GDP is not very effective in gauging the rate of inflation in any country, not that the indexes are not very useful but the political framework of forcing the measures or certain measures as prescribed will lead the world into questions of equilibrium. To say that current Greek crisis is at least 24 months old is to suggest that it is not laughing matter for the general public to view very well, the implied bias of doing away with politics as usual, politics very central to formation of European. By that we may say that US Funds are supposed to be exposed to all forms of risk, since the very nature of the market makes room for it. But are such risk as we have invested that necessary? For one thing, the new problem of Greece may send a hint of message that Europe is watching the member states very clearly and closely. It may also say that US government and the rest of world may in themselves be destined to be careful with the situation or bad mortgage in Greek, given the fact enough do not exist to earn in between the balance sheet of many European countries.

The issue coincides well with Obama’s quest for additional ‘debt ceiling’, a move people welcome given especially the fact that US triple AAA+ credit may prove too strong for Europe and its market, and that may also reach the rest of world. For sure, US dollars, is the determinant price of just about any market in the world, particularly Bond. Raising US Debt ceiling may be the only way to deflate a Europe bubble, a process that will necessarily mean following (1) additional expansion of the FEDs, (2) foregoing or shedding some of the US Funds exposed in Europe, or discount note in order to allow a stay on the bond or promote a liquidity Europe, whose Hedge will only revert to US Treasury, but may need additional debt restructure and duration on either side of the Atlantic to keep us the business of economic through lending going. Raising US ‘debt ceiling’ may also mean (3) an increase in US domestic spending. U.S Manufacturing numbers from last year are quite timid and suggest investment option - irrespective of what the numbers are essentially saying by 2nd quarter, 2011. Such position may therefore require an M2 cash call, where the issue of slower growth of US economy may prove the right reason for spending. In essence, we are not out of the box as far as US recovery is concerned and the incident of Euro investment offers America additional room to expand the good will spending. Raising US Debt ceiling will also lead to (4) a short decline of US credit rating, and means a shedding of US treasuries credit quality, from triple A+ to triple A or below. That will lead to a new ‘duration’ as in t=S, which naturally imply additional lending. (5) We should look at English pounds as arbitrage, which under the shift in debt restructure may likely appreciate in value, by perhaps a 0.5-0.75 basis point. In the face of Austerity Measures, their search for cheap labor market may in effect be on trial since drastic English measures may not save their labor market. Of course the English situation is very temporary since the issue we know too well - that inflation and unemployment are not well correlated - cannot therefore apply, therefore exist on their own. To this end, US raising the Debt ceiling, may make Americans look normal as per credit, a process which may burst the over hike pressure on US Treasuries and distribute its responsibility, hence, its Rating. But it may just be an appropriate thing to do, since Greek Palaver is European Palaver, and will test all new as well old ideas on Inflation. Above all, there is the additional room for experimentation - largely for what the market is saying at this time and how the market can tests the very new ideas on Unified Currency. By such a move, we may that US markets represents an advanced form of European redemption which involves the original theories of Herbert Simon, his Satisficing effect in an already made market. This theory developed from product management.

Herbert Simon’s Satisficing theory and eventually a rule is best explicated as a process of what happens to anything including an organization when the best will have to shed some of its quality to keep the market going on. That is to say that the Best is not enough when the good is not doing that good. Therefore the best must shed, sacrifice in order to artifice the rest of the market. An example of this will be what the FEDs are doing by attempting to increase its debt, therefore forcing America to dent its immaculate records. But such move will allow additional time for Europe to settle some of its debt. Europe must also understand that they are getting saved by Obama and his economists, who foresee danger in much of Europe and in the world and are willing to prick the pressure by deliberately buying additional debt. There could be other reason why the Debt ceiling need to be raised but it must also include the attempt to cool an already made performance grade. It is important to note that Value or the presence of economic barometer in terms of Unit of exchange and currency is that it forces us to draw aside the major problems of the theory above. For that we default to Alan Greenspan, who once defined value as what people want, which is one of the best definitions yet. But here we apply it to the general argument that if US will be willing to take a nose dive in this matter of debt, Europe, must reciprocate with zero percent interest rate. That can be what people want, but the nature of value by way of Keynes is that what people want, can also be manipulated, or at least be invented.

John Von Neuman is credited with a dibble on ZSG, that is, Zero Sum Game. The Game was made very popular by Lester Thurow of MIT and in concerns the viability of anyone group or anyone person loosing so that others will game. The whole thing is a like a game, I will loss so speak so that you will win. The main point being that winning or losing is only part of the game and such loosing will mean 0% or something relative where the winners – the Americans will have to willingly relinquish the cup or at least share part of it. Whatever may be the academic reason behind this deal, we may be certain the loss is not inevitable.

As such the 2.7 trillion world fund exposed to Greek, betray the red signals from serious economic agenda that seem in many ways that evident in terms of the requirement influencing existing market order of the world and their Income capacity. In terms of Greece – particularly Greek market - there were no ends for signs of disaster, and given the operational dynamics of Greece, Greek for a mindset and paradox, we may argue that Europe cannot be that safe, or the current problem with Greek is not overnight, which does not mean that Greek will spill over, rather the Economic Community of Europe still prosper on the sweltering heat of False Economy. The whole Palaver dangles between Europe of yesteryear and Europe that is leaning towards a Super State and an International community. In false sense and start, we may say that the Greek Palaver started from the day they joined the European Union, where many companies and investment banks closer to European market and licensed, companies which has sponsored all kinds of mergers and acquisition, entered Greek with some degree of commensalism. These foreign companies eventually and inadvertently swelled the consumer market of a small market such as Greece. The real culprit was the untried economic idea, which at a time seem promising but has proved quite detrimental to the overall structure of the culture of Europe. We shall in the end discuss the idea very well, but for now the attention of many of the existing plans and schools of interest sponsor at kinds of question about Europe and what happens with Greece. No doubt the issue of Austerity Measure has come to stay, but the idea of bailing which Europe indicated as a mere possibility – in spite of the losses – may be the only factor that guide against the debt crisis in many parts of the Europe. Even if the debt is cancelled as opposed to punitive position of Austerity Measures, we may still question some of the reason behind the formation of Europe.

Eric Toussaint and Damien Millet (2010) in their book ‘Debt, The IMF, and World Bank; Sixty Questions and Sixty Answers’ have tried to answer the same question, that if for instance, IMF and World Bank, ‘repudiate debt’ on say a third world country, will the world be better? And will the nations of say a third world be better with debt cancellation? Their answer was quite simple, that as far IMF or World Bank are concerned, debts cancellations or bail out would not solve the problems associated with third world economies or any other nations that owe IMF or central banks of the world by way of default. But the issue of not being able to pay in first place is due to the poor performance of the management categories of the existing states. Such that a country would not ordinarily default if it could on the short or long run pay off the money that it owes. What these two people tried to show is that in the long run, many countries with faithful treasuries and rating would not necessarily need a bail out or debt cancellation, that as long their GDP or GNP is appropriated to the benefit of the state or the citizens, these countries or nations will not ordinarily default, saving for major Banks and International Banking Groups, that introduce laws which handicap these countries. These authors tried to show that the situation is quite common with IMF and World Bank and their relationship to Europe. Needless to say that our good ol’ America - including the FEDs is not saved from this decrepit Infra-cellular money ‘Behavior’ –, saving that the American position on commercial licenses for Banks forces a kind of limitation, though broached different by Europe and her Universal Banking.

Based on the assessment of Toussaint and Millet, third world countries are more handicapped by International Banks acting in their own interest but under the collar on World Bank and IMF, than the mere fact that country’s default due to incapacity of the exciting monetary institutions. We equally refer to opacity of the management styles of these indebted countries, since in part If not on the whole, many of the countries are driven to owe by a pan of international corporatist—including other exploitative transnational groups, doing business with a countries income capacity, yet still retain extensive investment in IMF and World Bank, who in turn rely on these international or trans-border businesses for profit by exercising killer initiatives involving GDP. So IMF – if not in recent times World Bank, may be profiting from the priced in failure of its members, a fact that dovetail ECB (European Central Bank), whose operational license permit a form of Universal Banking. From such loftily and in this opening pages, we may conclude in essence that the economic condition of say Greece as an European member nation is due to very substantial problems of National Income, such that third world economic capacity and market such as Greece and Portugal may be living beyond their means – a problem exacerbated by their living under the canopy of first world and first rate market such as France and Germany, and should therefore look to taking substantial action regarding their capacity – if that should mean exiting the European Economic Community – albeit temporarily. Secondly we can regard the questions of debt cancellation in the context of its success, which as the authors have argued could not necessarily help. That may entirely mean that the only way to tackle the Debt problem short or long would necessarily mean ‘reverting’ to consistent intervention of ECB and European Union, through policies that can help not break the debt circle, policies that should not at least include Austerity Measures in spite of it’s sparing on ECB’s Ratings. Bailing our Greece and Portugal is that necessary since it is the only thing to do, to force these countries – including Italy and Ireland – to take adequate action by re-allocate its resources without resorting to international Economic Vultures or Birds of Prey. In spite of the second nature of the business of lending or bailing, which involves debt Restructure, Austerity Measures may yet prove unfit – as such immediate alternatives is that necessary. But the position is not new at all.

In Thomas Karier’s ‘Intellectual Capacity’, we discover a man by Joseph E. Stiglitz, the 2001 Nobel Prize winner in Economics, who was for over two decades an outspoken critic of IMF International Policies. Stiglitz argued that IMF’s method of lending was ‘outdated’ and ‘counter-productive’, that IMF was responsible for stunting economic growth in the world. Thomas Karier explicitly described Stiglitz position on IMF’s policies that “They have adopted what was called the “Washington Consensus” that called for Austerity Measures like balanced budgets, reductions in government subsidies, and less regulations of Capital Markets, in order to encourage more foreign investment. Stiglitz thought that the indiscriminate application of these policies often made economic condition worse.” And with particular reference to Ethiopia, Stiglitz argued that IMF ’cookie-cutter’ economics will be looking to put a hit on Ethiopia through the so called Austerity Measures. Thomas Karier continued that a conflict between Stiglitz and the sound generality of IMF’s policies continued over a period of time and became apparent over the conflict in Middle East Asia. In Karier’s word responding to East Asia crisis he said that IMF responding to East Asia crisis, “…demanded the usual Austerity Measures; higher interest rates and less government spending. The result was painful as unemployment more than tripled in Korea and Thailand and food rioting broke out in Indonesia in response to cuts in government subsidies.” Stiglitz, according to Karier had earlier objected to the policies, citing that it is ‘counter-productive’ and ridden to error, and “He pointed out that the countries that rejected the IMF remedies, like Malaysia, recovered noticeably quicker.” In due sense Stiglitz advocated ‘for an alternative approach more consistent with the theories of John Maynard Keynes’. Thomas Karier mentioned that the point was particularly persuasive since John Maynard Keynes was the architect of IMF, which originated in 1940 as a means to ‘stabilize international finance’, and the creation of ‘World Bank’ for ‘economic development’. We may need to however indicate that Keynes approach is ‘Austerity of Treasuries’ and not by Interest Rate Hike. The only pike in the world of argument now reside around what Keynes meant by government spending to accelerate growth. That answer was attempted by Joseph Stiglitz when he rationed that debt default can better handled by market acts that recognize the sovereignty of laws guiding nations of World Market and at the same time, offering economic incentive.

As we shall discover, these remedies which the two giants in their rights advocated for, may never be sufficient in dealing with economic crisis, and for that it fails to incorporate the real practical problems of economic debt default and formation of crisis in economy. The issue of Rating is one in a certain direction, a direction we shall discover to be dangerously close to Banks and other financial institutions, since Mortgages are involved and therefore require a better understanding of the micro-economics involved. Why are Micro-economic theories ineffective in handling problems of regional economy, where Radius of Axis may have easily applied, but failed to interpret the cause of such failure, and then the baby milk remedy of Keynes and his group of supporters. This view of preventing regional economic implosion has today a major representative in the Vice of Robert Mundel. Based on the many debt restructure and economic resuscitation of Europe, we begin to entertain that Europe may still be a victim of old tools, which no longer has any benefit for the credit drive-in society. In words of say Robert Solon, we wonder the basis of Savings in deciding economic policies of the world and why we dragged equilibrium into. By that we may then suggest that the main event may therefore include the study of the formation of crisis with particular respect to Europe as both an institution and a currency unfolding, and we try to understand the Challenge of a Greek Palaver. It is increasingly clear that all economic theories may be reduced to the study Inflation, hence a study of ‘Inflationary pressure’ as opposed to Inflation Expectation which is the application. Therefore Inflation Targeting – both the spot rate and the range is the primary occupation of many central banks, a failure of this same exercise is due to the disappearing inhibition of Banks in asset investment and financial institutions.

Joseph Stiglitz in his 2006 ‘Making Globalization Work’ enhanced his position on faulty International policies that may prove detrimental to the society and not the other way around. His usual attack also came by way of IMF and this time, he took a position on Russia 1988. That Russia is rich in mineral composition is not out of the question, but Russia being part of International Market, was affected by the incident of 1988, where the fall of crude oil played so crucial a point. In Stiglitz we learn that just as a company’s book show the ‘depreciation of its assets’, so too should a ‘nation’s accounting frame work reflect the depletion on its scarce resources’. He went to describe that IMF in devising their policies, demanded high interest rate from Russia as condition for assistance. In his words “...when IMF encouraged or even demanded that Russia have high interest rates as condition for assistance, that too may have had political consequences, and for those who had gained control of Russia’s wealth were not profitable, and those who had gained control of Russia’s wealth were provided further incentives to strip assets.” That is saying in one language that association of IMF (or even World Bank) with Russia Oligarchy – which evident in style to New York City – they further helped the country to undermine the rule of law. Joseph E. Stiglitz summarized by saying that “what IMF did mattered more than what they said, they weakened the politics of reform by ignoring the effects that their politics had on economics and political behavior.”

The question is why, why does the shedding of Euro markets affect funds to such inevitable degree that what happens to Euro or US in particular, manages to be part of Broad Market. And why does the generality of Broad World is not spared from Europe as if the collapsing empire would affect with it, much as opposed to successful, an empire that relied so much of GDP to guesstimate on Inflation and Interest rate, yet willing compress the value of its market from CPI cynosure. This Empire cannot pay its debt, and would further default since its Indexing for Inflation is faulty to a point, and as such, the collective view that US need to worry may be subject to new review. This review may be based on the very essential themes of the formation of the currency and the crisis. For such a long time, much of the world has for one thing questioned the reliability of certain economic theory that center to some degree on expansion as a way to help the country, as opposed to a hike in interest rate which notionally force all kinds of measures against the supply side of the world market, as a way to come to grasp with the debt resources and balance sheet. It is that Keynes made proposed a form of monetarism that incorporated government activity in such a way that new income class may be created and new market and incentive essentially an acceleration of the finances. As we shall discover, this theory has been tried several times and in many parts of the world market, the theory has more than survived the crashing of stock market and recession of the economy.

Alan Greenspan interpreting price stability pointed to ‘inflation so low’ that “that inflation is not a consideration in household or business decisions”. Of course all major American economists have used the same line or similar sort, even Robert Shilling made a reputation out of that particular round of plaudits. But the real definition of achievable price stability in the long, may in fact come by way of inflation rate at near zero, which may seem to lead the view that the economy will easily support itself in such a way that a near zero interest rate, would allow banks to maintain healthy credit lines without weakening the general citizens and thereby pave the way for fixed increases in interest rate. As such this price theory (consumer price index) applies to the most disputable degree to homes across the United States, for instance the Bible Belt - where the price of renting a small real estate or an apartment or residential building no-longer serve as the major tool for studying inflation, a first curve and therefore a vertical curve in the graph, where household effects can be priced into the real economy. It is this price movement that affects the value of the dollars, primarily (by way of self-supporting local economy versus foreign attraction – the economies of scale), but in very secondary circumstances, it is the bond that provide the final price of any market.

The only way forward for ECB is to create a form of price stability for the long and they can approach it by a ‘Zero Sum Game’ interest rate. In essence their losses for the year is already incorporated or priced into the performance of US treasuries. That will mean a high credit point (maintenance) or a success of quality rating of US quality subprime and debt facility, such that American treasuries might prove too strong for Europe or fledgling Asia, which will force Europe to further give ground to US and thereby force an ECB interest rate hike. An ECB interest hike is totally bad for US economy but not completely, since more European default will compound and then the prices drop and then recession. European recession will affect business in Europe and in America, and will affect Asia as well. Much of the businesses in Europe will ‘stagflate’, unless a lowering of interest rate is per-forced by ECB, which may encourage a certain kind of liquidity, affecting Central Banks of Members states mainly. In every sense ECB will therefore apply the parameter for price performance, ultimately enhanced by term structure. This enables the Bank to absorb the pressure of a Short term default which welcomes the possibility of high volatility, which generally create additional ‘present value’ and eventually low yield. It will however allow the member states to navigate between the real economy and their lender of last resort. It will also help them force an argument about the short term ‘Inflation shock’ necessity, that more spending by the member states is preferred or particularly necessary – not the Austerity Measures. They can still enable the argument that if Austerity Measures are enforced, it should affect the deviation between ECB and Central Banks of members.

In reality, with a view of Austerity Measures and as the economic conditions of Europe is proving once more, no real correlation does exist between Inflation and Unemployment, especially when viewed from side mirror of GDP, GNP, and Fiscal policy. We can say for certain, that even at this level, Keynesian Spending which is the long solution for public market psychology and advanced money behavior, may be the saving strategy for the European continent whose market still lag with unemployment. As we have mentioned, the strategic response of the Euro member states and their central banks will be looking to include a general leniency towards discount note. That, cannot entirely limit the argument that the rate of money supply in Euro-member states as evident in stock market response top ECB will suggest, may now or at least anytime since the formation of the Central Bank in 1999, correlate the function of the existing European market, or by definition, stock market. In fact, the very Genius of European currency and its leniency towards Universal Banking, make it entirely difficult to break the Bond market from the Stock market, and the Greek palaver shown an even keel of stock and bond is a case in point. As such we may say that the equity behavior of Greek bond market is to some degree proportional to the speculative behavior, and therefore investor psychology may deepen the long term view of Greek, with Europe as platform, which forces many to seek additional guarantee or collateral with a tendency to short. This idea resides with the category of securities, since securities involved large amount of buying, and as we know through history, securities are seldom steady. In essence, Greek for the longer term is particularly expensive.

If the ultimate goal of any ‘emerging market country’ as a certain Evans Goldschneider once said, is to graduate to the ‘Investment grade credit’, we might be tempted to review Greek market structure from a priori of external ‘debt balance’ which notionally indicate the degree of ‘investment risk’ – therefore constitute a kind of ‘risk measure’ without reverting to AAA rating, whereas Greece is in probability BBB and below (Junk). Greece, or even Portugal, is probably too risky, given the high default rate of the two countries in addition to other European countries. For Greece the hope that it will largely make it flies in the face of reason, since Greek’s external debt analysis suggest a country that is barely hanging in there with its fiscal budget, (2) defaults on loans from Euro and ECB (3) stumbles in the reprobate for membership credit such ‘average maturity for rescue loans’ which in all understanding is 7 years and 6 months for months Euro-zone (4) would require a 5.7 interest rate percentage (hence the Austerity Measure), notionally a freeze in national spending, and above (5) all, Greek has witnessed a serious drop in real time national revenue or GDP. If that may only slightly mean debt structure on par with Greek GDP, we can at least presume that the issue of collateral or additional collateral for Greek Banks may become equal to the ER-V.

Alan Greenspan continued that “The impact or interest rate spread of a swap involving a large block of U.S treasuries by a central bank (or anyone else) depends on the size of the portfolios of the world, other investors and importantly, the proportion of those investments that are close substitutes of treasuries with respect to maturity, the currency of denomination, liquidity, and credit risk. Holders of close substitutes such as AAA corporate bonds and mortgage-backed securities can be induced to SWAP for treasuries without undue disturbance to market.” Why this particular quote may be a general theory on U.S treasuries, it is not far in very local sense that some asset backed securities are mislabeled and therefore, erroneous. This scenario may also fit the current market condition in the world, particularly Europe that is SWAPing anything treasuries, wanting dollars per se, but percolating a debt restructure and debt default in two years by members, and hence should not see or court ECB as triple A.

In essence AAA Greece cannot exist ‘potentially’, since (1) the condition that comes with the Debt Restructure of any level, comes with additional consolidation of publicly held companies with a form of backing from Greek. In sense, we may tend to suggest that the privatization scheme will be necessary to offset some of the ‘biases’ associated with negative investor aversion to risk, which more or less may mean (2) high debentures for their highest rated companies. A safe discretionary investment of any sort must be matched (bad language) by Greek Treasury, even if it means initiating additional Bonds by their seating congress however contravening the position will mean for Euro and ECB. The danger of letting too much (Abs; Asset Backed Securities) fall into the hands of foreign companies is that they have a way of dictating the local market of any host economy. When this occurs, the Greeks for sure will (4) yield additional grounds to foreign market towards the control of its market, where negative sentiment which easily destroys any market in the world will force a further (rapid) decline of the Greek stock prices. Then the issue of further decline of Investment grade, may injure the Euro since local Unit of exchange on any country over-exposed to foreign capacity, may hang in there for a period of 6 months but will gradually If not rapidly decline.

When ABS shed its local investors, it strangles any room for profit and liquidates any room for ‘positivist economist’. By view or probability of Greece’s recovering we can say for certain that Greece will not make it. Conventional speaking, Mortgage rates are usually the better way to force the hands of the local gorillas among the banks to fight or dog out what is left for both parties. Such indication of emphasis may also imply that the prime lending rate increase the tendency to push for higher inflation in Greece. The emphasis on public utilities is one the last of the whole process where Bond rate of AAA may be an additional factor. But such case might be very close to US parameter than anything, a case which may make the higher point of ‘white cloud’ of local Greek Investors as such prove expensive, for the only thing Greece under Euro can do is to buy high after the 91 days by US treasury, or as I mentioned create additional bonds. Most important strategy will however be the Cash Call strategy where the goodwill write-off may imply in the Eurozone by way of US Federal Reserve.

As such we refer to Market Structure of Greece as a form of general risk assessment, we can factor in the presence of high tradable asset which often encourages securities lending, where tradable assets or credit swaps is usually equal to existing market. As such the hedge comes around the ‘fraudulent accounting’ which elevates the case for Gold to a higher degree since the length of exposure will be forced through the forces acting in the interest of the general government, where the 91 days may be a case for what will be forward rate, futures rate will increase and then the high prices.

Applying the Keynesian Inflationary Pressure of fiscal responsibility will also mean that ECB will more than likely create more money through printing. That will mean that IMF and ECB will hope to have a high deposit of US dollars, as the only to bait against a balkanization or deprecation of dollars since the policy Euro will likely pursue a stable Euro, with a view of the strong Euro and 0% interest rate. In essence the attraction of dollars to Euro is only inevitable, given the direction of Euro in terms of the Government policy. Stable US dollars, will mean that buyers of its Treasury Bills will roll in the profit from a price that it expected to fluctuate between these dates June 30th - October 27th of 2011.

Comparing US equity holding on Greek to Greek local investment is quite shallow. The Greek market was hijacked by foreign money – at least by 2009 or even as early as 2004 (Olympic Debt), to the degree that Greek Primary Market became increasing ‘Secondary’ by way of foreign investment notably US Funds (Goldman Sachs) and Richard Fuld and his Lehman Brothers, who systematically called the shots for Primary and New IPOS in Greece on the aegis of misleading packages. These investment banks were known as brokerages and the Glass Seagull Act of 1933, made it easy for them to survive in Europe since US Banks of Pier Punt and Morgan, which descended from the WAPS, creamed the shortwaves of Banks actively buying newly developed companies (theirs) but ultimately selling short their position on the general broad market.

The Euro will have to fracture to enable member states bound to each other escape the burden of dealing on each others debt, since the rate of debt surrounding very their weak membership is gradually superseding the credit quality of other West European states such as France and German. The relationship between countries of the world and its stock market is well known. Yet we may still rehearse some of the basic assumptions about the operational dynamics of the Bond and Stock market, to enable Readers cash in on why and how the problem in Europe is not well understood as a market problem or a problem of oversupply of money by way of Greece whose second default in two years is inevitable. For the mere fact that Portugal was granted a stay of 78 billion in spite of the EU recommendations might only mean that the economic no show of Portugal is co-incidental to Greece

Greek, if not Europe, for all intended purpose is the market that questioned the reliability of these views at this present time.

II

There is nothing to deny that there exist today more than any time, an increase in polar tug of war between three principal monetary experts, many of whom had to deal with the problems of Inflation which the nations of the world has to control. To narrow down the list of relevant actors of inflation to three may impugn on the good faith of many monetary experts. But these three schools represent the governing philosophy of the market world and the commitment to solve its problem. These three schools will include the following August Hayek, John Maynard Keynes, and Milton Friedman. While we can discuss some of the assumption in the approach of these men to Inflation and Interest rate, we can also indicate that their models and their position are systematically used and exploited by ECB and Federal Reserve, and by Chinese and Asian authorities. These gentlemen cannot pretend that the influence Alfred Marshall is not very eminent. More than Whitehead is the influence of A.C Piguo, whose theories of Unemployment and inflation is so complete that it believed to lack innovation. As such his view on Inflation and Unemployment has been relegated to the backwaters of economics, yet he is a must read if we are to come to clearly to the influences or organizing principles of Keynes and the reason why Europe is adopting this Austerity Measures which they feel against the new realities of crisis free half a century, will stem the tide of Europe over exposed. If Europe is still struggling with employment numbers in spite of the huge commitment in manufacturing from its members, the question we are led to consider is the issue surrounding

It must be said that A.C Piguo, a contemporary of Marshall and eventually Keynes, grappled with the problem or unemployment and price. In an essay ‘Price flexibility and full employment’ which he made with Haberler, Piguo argued that “There always exists a sufficiently low price level such that if expected to continue indefinitely, it will generate full employment”. And he goes on to present a scenario, “Specifically, consider a full employment situation which is suddenly terminated by a downswing in economic activity. The question I (Piguo) now wish to examine is the usefulness of a policy which consists of maintaining the stock constant, allowing the wage and price levels to fall, and waiting for the resulting increase in real balances to restore full employment.” The particular quote and statement is too central to the problems of world market today and a certain Milton Friedman, since the question may seem to try the reason why Milton Friedman theory of fixed money supply or what is monetarism may have worked in the US for such a long time. Only in time will we be able to draw up the need and influences surrounding the Friedman’s success in US, and why in the stock of money constant, he is indirectly a failure in Europe. It is however not a co-incidence that the fore mentioned names, Keynes, Piguo, Marshall, and even Hayek were all Europeans from the Great Depression Era. Therefore the above case and quotation from these great men of that era seems to dwell too close on price elasticity and unemployment. Neither is it a co-incident that these men are altogether from Europe, particularly UK. The problem of full employment and inflation involves the most important prices in the world which is Interest Rate. As we will see that

All principles of Economics may have in themselves worked until the arrival of John Maynard Keynes. It was his approach that put a lasting end to some of the assumptions of the era of depression, with particular emphasis on the spending and austerity measures of treasury. His understanding of how money works may have evolved over time. His general theories of money navigate between Say’s position on price and supply penetration, to demand by fixed money supply. He seems to base his view on Adam Smith, whose position on savings as a means to create value was seriously challenged by Keynes. Monetary policy began as a throwback to Keynes since Friedman, could not champion the views of Maynard Keynes or defeat it attempted to present the case of money supply, in the context fixed and specific money injection. But the most important intellect besides Marshall and Keynes is Hayek, whose theories figures into the Friedman’s position on fixed supply, into the reasons why Bernanke’s long exposure of US market to zero interest rate may hurt the manufacturing and pay wage as time goes on. Keynes’ evolutionary view will eventually take in the model of ‘monetary aggregate’ but applied it so to speak to Inflation.

It is not the place of any blogger to raise to life these differing schools of Interpretation of Inflation. For that we refer to an authority in the field by name Robert Skidelsky, in his book, Keynes; the Return of the Master. In this book, p.68-9 especially, the author abbreviated the basic teachings of Frederick A. Hayek is that he believed the reasons why the markets failed in the 1920’s and 30’s was ‘psychological’ poverty. That “Hayek’s ‘prediction’ was based on a completely different theory, which was standard among conservative bankers and businessmen at the time. The Fed had kept money too cheap for too long and had thus allowed an unsustainable credit boom to build boom to build up.” He goes to say that according Hayek, preventing boom and bust, will require a position where Banks will not be credited with any ‘injections’ from the Government. Essentially the good times led to ‘over investment’, to the degree that Inflation over cheap money compromised much of US and European markets. He mentioned that Hayek did not believe in ‘fractional reserve banking’ which in my view may have hurt his reputation with the Americans and much of pyramid banks of the world. One can see the Hayek on today’s economist when as Robert Skidelsky put it, in Hayek we learn that investment ran ahead of the ‘genuine savings’ and therefore the economy was likely to sink. Such position was different from Keynes who as Skidelsky rightly argued, believed that unemployment rose because there was no new investment.

Richard Parker of Oxford University ‘John Kenneth Galbraith; His life, His Politics, His Economics’ by, is a master piece of economic principles of champions of world market and economy, how they fared and how they descended on Galbraith, also known as Ken. This book deals on the prolixity of John Kenneth Galbraith as both a diplomat to India and master theoretician of world political economy in the Kennedy years. One of his more interesting commentaries centers on the impact Galbraith on his economy, since his position as an advocate of ‘New Economy’ was well known. In Parker’s book we get a firsthand glimpse of American Bull market in the 1960. In his words he quoted that by March 1961“…US GNP began an expansion that eventually lasted 106 months, an achievement without precedent in the nation’s history.” The author yet quoted an obscure historian who said that ‘real GNP increased at a rate above 5 percent per year. Employment grew by 2.5% per years, and in January 1966 the unemployment rate sank to 3.9 percent. The percentage of Americans mired in poverty, according to official estimates, dropped from 22.4 percent in 1980 to 14.7 percent in 1966. As there advances unfold the rate of inflation remained below 2 percent per year through 1965. By all the usual measures, the economic policies of the early 1960’s were an unambiguous success.” Here and in this particular quote, one cannot fail to recognize a point that would set the ball rolling in the inflation and unemployment stratagem - both rates seem to remain simultaneously low. In the statement we read for instance that ‘…in January 1966 the unemployment rate sank to 3.9 percent’ and the ‘inflation rate remained below 2 percent’ through 1965.

It is possible to suggest that the influence of decline simultaneity of Inflation rate and unemployment, may have given a wing to the followers of Samuelson. But perhaps, we may easily say that Samuelson and his group of compeers may have created a world that compelled the imagination of Inflation being by some mirage a corollary of wage and such despoil to unemployment. But if that is not appreciably fair, it is in the interest of the A.W Philip and his ‘Curve’ (Philip’s Curve), that much proven emphasis on what happens short and long on unemployment may now necessarily be the result of inflation and inflationary pressures may now imply. For sure, we may note that early Keynesian is one that is rich with the view of investment or rate of investment as necessary tools for economic growth, a position that Robert Skidelsky claimed, changed over time in Keynes’ lifelong intellectual development. But such poor translation of Keynes’ intellectual evolution by Robert Skidelsky, with particular reference to Keynesian ‘new investment’ as tools necessary for economic growth, or in common language, synthetic investment vehicles as a bait for economic growth, may reflect Skidelsky re-adaptation to Harrod’s biography of Keynes, titled ‘The Life of John Maynard Keynes’. In Harrod classic, readers will understand that there were specific lines in his book that suggest specific intellectual departures in Keynes’ lifelong devotion to money, that it began from his original position as a tryst on new but relatively original ideas of ‘investment’ as a necessity for growth at early age, and leaned towards his full development as a thinker and economist of manifest importance in the age of economic uncertainty, where the issue of spending and government activity seem entirely pro-active.

But we can see that even Skidelsky’s books on Keynes, especially his three Volumes of ‘John Maynard Keynes; Age betrayed, Economist as a Savior, Fighting for Britain’, all show a force of argument that is particularly historical, nearly political, but in many ways lack the redoubtable in the economic theory of Keynes, his side of economic principles where he transferred from his classroom closet and so to speak micro-economics of new Investment, to the macro–economics of investment vehicles – the national spending, was not well demonstrated in his books. Such objectivity may seem to belie author’s emphasis on the evolutionary sweep of Keynes and not necessarily his human side, but the relative construct of the same coin may require a trained eye to see that Keynes never wearied in his view, his view got a much wider scope and needed a world in crisis to understand its application. That does not mean that Skidesky got it wrong but there seem to be a kind of influence that led to some of his assumptions. To be fair, Skidesky mentioned this issue of Investment or new investment as engine of growth but it is for this fact that he fails to show how it is to be realized. It is also here that he sees some of the problems with European Economy and Euro backed policies. For when we study other books by Harrod and other books by Skidelsky on Keynes, we would realize that both probably missed the point of investment or new investment as bait for economic growth. In essence, Keynes position never quite changed or wavered, it was always Keynes from beginning to the end, what changed was the size or the nature of the factors that influenced or encouraged economic growth, which when studied and used, involves a high degree of investment or new investment.

To be sure, we must indicate that the Chicago school and later Post Keynesians have given enough credence to the fact that the Inflation and price did not simultaneously change. What Keynes however meant by new investment as a way to spur growth was that, the nature of money requires a certain form of usability, such that the growth of any society is due to nature of its currency, its market. It is therefore necessary to inject money into a system, like the Americans have done from 2008 through 2010, to allow growth to take place, but in Friedman we can easily say that the rate of such supply is the difference between monetarism and expansion. But the trick is not to allow money to circulate in the hands of the same group, or stop the same group from promoting their growth through a vacuum system. And like the American situation such rotation of money is only short lived and will not work – irrespective of the Billions injected - since money simply ended up in the same routine contrary to what it was supposed to do. In essence, Banks and major financial corporation were understood as vital to the society but if allowed will determine what happens to the economy through their own assorted types. If that takes place, bail out for instance would necessarily mean giving money to Banks who are not in business to help you run your country. Quantity of money, like the just concluded American Bail out, is not important if the money always end up in small hands or in the hands of a few people.

The psychology behind this view may be due to the nature of the society in Keynesian early years, a period where the natural assumption that scarcity creates value seem very common, a case only equal to Adam Smith, where need was the driving force behind economic growth and want was the study of people’s response to the availability of money. The agent of economic growth was ‘Income distribution’ or redistribution, a kind of breaking down of all the forces oppressing value, of routine withholding market expansion. For spending at all cost often if not always led to the form of vacuum system where in Keynes time, the rich English aristocrats and their careful genteel, coveted the market in such a way as to force the rate of spending to reflect their own supply - for instance quantity of money -, a point missed by Says, which may be relevant to the age or the era of the Essayist – which apply in order forms today, but nonetheless ineffective in enhancing overall economic growth. Some regard the 18th and 19th century quantity of money theory of quantity of money, to be the quiding influence of Milton Friedman’s monetarism, but as we shall see, it may not necessarily be the case. The supply variation on the piece on money is such that poverty was only certain in old capital society such as Europe, when for instance major existing houses were responsible for whatever happened in the society and whoever got rich. When this was the case, it was easy to perpetuate poverty, to the degree that the value of money was equal to the money supplied. This amount of money was redeemed by Gold, which contrary the theory of Quantity of Money, Friedman’s rise was simultaneous to the removal of Gold as US currency standard.

The old money theory about quantity of money supplied did not necessarily profit the general market, rather profited a select few that controlled the destiny of the markets and the economy, and that was Keyne’s position.

In a essence, ‘New Growth’ in economy was therefore possible, and only necessary, by way of expansion of the ‘want’ population or consumer group – which inclvoves an increase in the percentage of the buyers – hence demand increase, but the real kicker will the number of investment that accompanies spending. The counter arguments has always been that buying equals Inflation or high price, but his counter argument is that price is simultaneous as Inflation, and thefore emphasis should be placed on financial institutions away from Banks that can at least enable the creation of credit. So by emphasizing demand, you relegate the society to the culture of supply, where manufacturing create additional need for work, for income distribution and in doing so, create new Jobs. The overall market ‘currency’ should drive down price not increase. In economic terms the rate of investment or the rate of success with new IPO may represent economic growth given the expansion of the consumer buying market. Stanley Fischer, Rudiger Dornbusch, Martin Feldstein, and their burgeoning colleagues at MIT and ‘National Bureau of Economic Research’ and latterly ‘Economic Research Recycle Institute’, may be remembered for translating this idea of ‘economic growth’ or ‘New Growth’ into a form of study of science for predicting Economy. Though the classic model of Harrod and Domar fell short of expectations given the lack of information concerning the impact on new technology as according to Richard Parker, but the primary basis of the economic actions of this group seem in many ways to come close to the ‘New Economy’.

…..

Richard Parker also indicated that “the two men by the 1950’s had ingeniously connected, through Keynes’s ‘Multiplier-effect’ the growth rates of the labor force and of investment in physical plant and equipment to measurable, predictable changes in aggregate demand using a combination of national income accounting definitions, statistical regressions and algebraic and calculus based manipulations”.

The emphasis was between 1961 and 1966 and the principal actors included Galbraith, Robert Solow, and a certain Paul Samuelson. These men, especially Robert Solow and Samuelson, cheered the empirical approach of A.W Philip of New Zealand who made an overt view of British Interest Rate from 1860 till 1957. The staying point of Philip’s argument is that a relationship exists between inflation and unemployment, an argument based in large part on the annals of British economic history. But as we shall discover that the incident gave additional life to the idea of expectation, which is the squared root of Europe economic management but lacked a short

‘Rationality in Economics’ by Vernom C Smith of Geroge Mason University published in 2008, by Cambridge University, stated that “ A fundamental principal of game theory is that rational behavior is invariant to the form-extensive or normal (strategies) of the game.” The main point is that extensive and normal game theory, show how people ‘think and interact’ and how their survival forces to rationalize the existing economic realities. In essence the economic survival versus maximum utility becomes the formal basis of many issues driven by economics and may therefore forge the argument on the nature of economic expectation which the Keynes and his group reduced to ‘adaptive expectation’, which is so speak a forced argument on

‘Irrational Economist’ – a term that was begun by (Howard Kunrewler) compiled by Erwan Michael Kerjan, Paul Stvil, makes room for Herbert Simon’s argument on strong predictions. Herbert Simon mentioned that “strong predictions…about behavior without the painful necessity of observing people” is more ways than one irrational behavior. What forces this argument is that the nature of European business is one such that many would not have ordinarily.

Douglass C North ‘Structure and Change in Economic History’ (1981), suggests that uncertainty arises from theorizing on institutional changes, and uncertainty also “…arises from Long-term contrasts which involve many unknowns with respect to future relative prices over the terms of the contracts; investments specific to a particular contractual exchange are often subject to imperfect enforcement and liable to opportunistic behavior”

Peter F drucker ‘Post-Capital Society’ (93) cited such instance in the account of “Internationalism is on longer Utopia, it is already on the Horizon – if barely so. Regionalism is already a reality. Regionalism does not create a SuperState whose government ‘replaces’ national government. Rather, it creates in regional governing agencies functions that sidelines national government in important areas and makes it increasingly irrelevant.” ”The European community started out as the European Economic Community, that is, as a purely economic organization. It has assured more and more political functions, and now proposing the creation of a central bank and a European currency. But it has also taken Jurisdiction over access to trades and protections; over mergers, acquisitions, and cartels, over social legislation; over everything that can possibly be construed as “non – tariff – barrier” to the free movement of goods, services and people. It is moving towards an European Army”

Mergers and Acquisition involving two major markets over long and substantial periods of business often freeze price between the countries and between the interest rate exchanges. And in terms of CME, particular reference to cash is essentially a motivation for many countries participating in US market. Price generally freezes indicators and often leads to poor market direction. Poor and no clear market direction lead to indecision and sometimes panic. As such the rendezvous with Greece started with their entering into the arcana of European Union. It continued for almost a decade and lasted till 2008 and 2009. From the Greek's inability to pay their debt and settle the security, they experienced failures in business, which leads to unemployment, then to falling price levels, and ultimately to collapse of credit facility - liquidation and then collapse of stock market.

Only a small scale, mergers and acquisition can leave a lot of debt for a new company, a condition that was characteristic of 80’s Volckers and Ronald Reagan. It is so to speak from this debt that the dreaded credit default essentially comes in and when many companies begin to default in any kinds of payment. Credit default is one language the study of the ability to pay debt (futures), or in more common language the inability to pay debt (outstanding). But with interest rate hike, there was no way we can say that cheap money was leading the investor crowd to a different direction. It is common sense that those Volcker years were characteristic of the fear of a hike, which forced market reaction, which controlled the amount of in circulation by raising interest rate based on stock money supply or savings, as response to what was happening circulation. As such the 80’s was also noted for emphasis on bond market, where substantial efforts were made by Volckers to correlate inflation to savings and futures follow the time on deposit. So everybody essentially owes everyone by the regular nature of market, such that credit is essentially a record or rate of debt repaid. For derivative specialist, we look at arbitragers and unpopular indication of market makers even when retail investors can navigate in-house laptops and computers of any company or stock exchange registry, and pretend to possess the right estimate of the decay in any market.

Charles Gaspiro’s ‘SELLOUT’, about how ‘Greed’ and ‘Government mismanagement destroyed the Global system’ focused on the influence of Paul Volckers in 80’s, to help realign the US government and the general public through Tax cut, which was essential to creating a kind of liquidity and therefore spurred growth away from the banks. Gaspino said that “The Ronald Reagan era tax cuts spurred the economy and the stock market to new heights. But it was Fed Chairman Paul Volcker’s policy of squeezing inflation – one of the great economic achievements of our time – that spurred the bond market and made the taking of risk through trading various forms of debt and derivatives of debt“

“In just a few years, the mortgage market had grown amazingly complex. It hadn’t been so long before that Fink and his team had come up with the idea of combining various mortgages, slicing up the cash flow into different levels of risk and selling those levels of risk – known on Wall Street as “tranches” – to investors. The Investors with the greatest risk tolerance would buy the tranches with the highest risk and biggest yield; those with low risk tolerance would buy the “triple A” tranche, made up solely of the highest – quality mortgages, those that, were least to default. These bonds, at least according to the rating agencies, were as safe as those issued by the U.S Treasury.” Gaspino eventually indicated that “(The reality would turn out to be much different, as investors would soon find out.) To add some additional assurance, the bankers would pack the high-level tranche with so many mortgages that it would be “overcollaterized.”, meaning that even if a few mortgages went into default, the investor would still receive interest payments in full because the other mortgage payments would make up the difference

Sebastian Mallaby in a recent book ‘More Money than God; Hedge Fund and the making of a New Elite’ attempted to show that a correlation exist between mega booms and then burst and rise of Hedge Fund managers. Although the title of his book is a hyperbole, he managed to mention that the frenetic rise of Hedge Fund management and risk taking in the world of business is such that poor restriction and rise of super computers, may have added new face to stock market. Nowadays, Rating is so cornered by major corporations and Banks that the indexes that gave birth to some of the healthy assumptions of the SEC may now have eroded. The list of the new champions in Global Hedge Funds may include David Swensen, Jim Simmons, David Show, Tom Steyers, but these men are hardly known in any era of business or the impact of their daily business of any significance. Mallaby highlighted the observation by some of the great in the business, such as Rubin who mentioned in 1983 that Wall Street has changed completely. The author mentioned that “As leverage multiplied investor’s buying power, the sheer size of the bond market had been transformed. In 1981, according to securities Data, new public issues of bonds and notes (Excluding Treasury Securities) totaled $96 billion”, the author noted that by 1993, those offerings had ‘multiplied thirteen-fold to 1.27 trillion’.

Sebastian Mallaby also stated that “The Fed could have chosen to redefine its inflation – fighting mandate. It had traditional set interest with a view to keeping consumer prices stable. But the question(s) raised by bond market collapse of 1994 concerned the stability of asset prices.” Mallaby went on to ask that “If the bond market heads into record territory, as it had in 1993, shouldn’t this be taken as a signal that credit is too cheap – and that it is time to raise interest rates in order to deflate a bubble? Because the Fed had been in targeting inflation rather than the bond market, it had allowed the bubble to expand.” This is no doubt a classic case of Frederick August Hayek, on the why the Great Depression 1929 through 1932, lasted that long in America, a case of cheap financing over a long period of time which made the case quite easily for value of the existing market to essentially collapse. Although the lack of statistical arbitrage and the English removal of pounds sterling from Gold, may have also contributed to the International Valuation, it ultimately

Why Mallaby is following the footsteps of Friedman and to some degree Hayek, we may say that this most important portion of his book, seen to be wrong or in fact flawed. The major difference between emphases on targeting inflation and bond market is that much of CPI as resulted from inflationary pressure, which is Frisson for market, hence lenient to stock, provides beta-data for general consumption, first by way of Bond that seldom performs higher than stocks, and by other factors that establish the spot rate in any market. Such case is opposed to more active data – subject to very intense curare which the stock and not the bond can provide. But the possibilities have always been there, especially before the incident of 1959, where Bonds outperformed stocks, proving that Bond could literally outperform stock. That bonds outperform stock is not impossible, for instance various in the money calls, involves some faith of what is happening to stock, where institutional traders navigate between a resistance area of the stock, government policy and other measures to trade in the bond. This one the instant that seem in many ways relevant to market conditions in Europe. If European countries such as Greece and Portugal had continued this act of padding additional debt, the debts might accrue or compound over time, such that ratings will be affected and therefore Junk for Greece will attract additional money from foreign and as well local investors. The result will be much emphasis on bond as opposed to stock on the bait that if it goes wrong, Greek Government or even ECB will come to their rescue – however expensive. So this is called positive economist, one of the mean rate advantage or neutral.

But this is seldom the case, and as such history is on the side of stocks than bonds, and for that reason, Active traders do not deal on Bonds, they deal on stocks. Secondly, it is notionally accepted that the issue of ‘market direction’ should entirely reflect the activity of the investor crowd, meaning what is selling or who is buying gives us an idea of the market, and more than the market, the general economy. With the Bond we may insist on spot rate which countries of the world would only try to meet. The issue hangs around futures market, and what happens when a futures spread is ‘abnormally wide’ due perhaps to ‘stock-spilling’ by a major Institutional Investor. Well the issue of stock doping is relative to a particular registry and it is an abnormality that major actors of any market should be able to pick up. These cases of ‘stock-piling’ may have different shades today, and may or may not be driven by the availability of cheap credit. But the viability of trading credit (which Underwriters or bank affiliated institution can provide) does not in effect incorporate this act of inventing demand or creating scarcity by ‘buying up’, which is the only time that price abnormality might occur through high power investment vehicles, and the only time that the general public might have to lose money by way of cheap credit or availability of credit, stem from the moral habit of acting without prudence.

There is above all the issue of floating rates and its impact on futures market, hence widening the spread between the buy and sell as with Securities Underwriters. The spread between the buy and sell, yield all too clearly the margins, which in itself indicate price movement. If we place enough emphasis on the stock market, then the market can respond very quickly and the FEDs or any Central bank can respond very well or can also respond to why the market anticipates such as upswing. In a market situation, Commodity prices usually follow stock prices, and that case seems to enlarge in the face of Europe in the last few days. This is largely because of what has happened in the last few weeks when the Bond was performing at the same rate as stock prices. We may or may not easily pretend that there were signs of serious economic problems in Greece, and the conditions are not the same as those of Europe. But the mere fact that it occurred in Greece and Portugal is why we call it a ‘Palaver’, on the count that Greece is part if not central to ECB economic community. The hypothesis is that if Xi is part of general economic community Xn, we can say that the probability of Xn being in trouble is not particularly based on the Palaver of experience by any independent member of Xn, rather, the severity of the Xi Palaver mainly if not only, determines what is actually happening is a specific economic community, Xn.

The solution would lie in excusing the cancerous member from the community – albeit temporarily. Of course the generality of the problem refers to the independent assortment of community members, especially their area of strength or weakness. If for instance Greek is not doing that good, we should pay attention to other European countries, rather to why as whole Europe is not doing that good. In terms of the attraction, we say that Euro/Dollar liquid terms may illustrate forward market, may explain too much current migration with a North stream strategy and therefore open all kinds of resets. Convertible resets (?) would require a third partner such as Asia (or any Carry Trade) in respect to Euro-Dollars and in addition to Basel II or III capital requirement, which would need additional changes in capital or financial structure of the host countries. One overhang case is what is happening between Ireland and ECB, where Ireland would have to reciprocate the Basel II and III, and of course Tier stories (I and II), in order to host an excursion of foreign labels or currency in loans and investment. That may mean restructure of some of its Banks, yielding at least an 8% additional ground to Europe or whatever country of import. Such ‘covered call strategy’ is what Euro is primary good for, a classic case of positive economics, which however negates the problem of variance in shorts of long, when the mean variance is all but determined, hence a Call.

Milton Friedman and Bill Brodsky’s ‘Essay’s in Positive Economics’ described the trouble with emphasizing the Bond market and spot rate in context of forward rate that “Because central banks of IMF member countries were obligated to work harder to maintain spot rate, the forward rates often fluctuated more widely and frequently outside of the official spot rate limits.” Ben Bernanke and his group of economist at Princeton once noted that “

By such liquidity as they say, comes in the ‘hedges’ – more or less any attempt to stymie the excessive spread, which is a kindly form of Inflation targeting, which Bernanke and his group once argued should be done somewhere in the future – probably with a medium-term view. A medium-term inflation study cannot be possible without the shift in bond market, that the shift from aggregate investment - only or mainly -, the other possible flexibility of inflation targeting can be made through shifts in stock market, where market direction as opposed to duration change - can often if not easily test the nature of what people wants. Under the shifting ‘direction’ scenario, value may be equal to functional price which is equal to the existing market, where advances in economic forecast reduce price or functional price to interest rate. Interest rate is also a source of income for any country, counts as part of GDP of Europe and may play too close to a country’s ability to pay.

Friedman and Brodsky also mentioned in their ‘Essay of Positive Economics’ that “futures markets, by their definition, must act to provide us with a glimpse of what is coming” hence a hedge and an inflation expectation and therefore a range of possible target point. This idea is so well noted that European emphasis on Bond and spot rate does not mean that CPI is neglected, but the activity of their Banks in many areas of Bond market and stocks and Insurance (which Americans until lately forbade), make it seem that the effective estimate of CPI away from ‘corruptible’ bank associated Ratings of sub-prime industries, may complicate the right value of Bonds, and may ultimately lead to false estimate of Actual Inflation, whose study and understanding is possible through Inflationary Pressures such as market direction. CPI is good and bad estimate of what people want and respect to its available, we sell on what is selling, but by FEDs, we assume the near opposite – among other factors – hence a real inverse relationship.

Here we can also answer Mr. Mallaby that emphasis on Bond market was only possible in the years of Paul Volckers, largely because of the new and careful inventions of Credit Cards and other factors such as the Mergers and Acquisitions, which left a lot of company very poor and over-collateralize. In another instant we can still refer to the incident of placing substantial faith in the bond as one incident where liquidity in spot market will not encourage flexibility.

For sure the flexibility of US emphasis on CPI in spite of its abuse by the hedge fund managers and its synthetic measures, he wallows on the Feds navigation between ‘Scylla and Charybaid’, where the idea of a solid treasury like the one we are experiencing today, the exchange will decrease its revenue through a soft margin as with the US treasuries. There is also the issue of currency devaluation or money function which may easily lead to various abuse of trading, since short selling would necessarily involve traders selling the theory of neutral reverse lope, which as a certain Naill Ferguson once mentioned is quite old. So Paul Volckers attempt to hike interest rate, was perhaps possible since the attention on the broad to shift from Bond market to stock were and vice versa.

Bob Tamarkin writing in his book ‘The MERC; The Emergence of a Global Financial Power House’ demonstrating the difference between two margin and securities. He said that “In the first place, margin is a misnomer with respect to commodities. There is a fundamental difference both from a conceptual and an operational standpoint, between margin on securities and those on commodity futures contracts. Unfortunately, that fact was not always understood. Securities margin is a direct measure of the creation of bank credit, but futures market margin act as a surety or security deposit. The futures margin therefore was not measured by the value of the product or contrast, but was determined by the volatility of the market and the possible change in daily price movement.” Here in lies the reason or essence of CPI, a fact that has come to challenge the likes of this group.

The US dollar is therefore expanding (Fed’s expansionary) through a five year period, and would also mean Inflation and currency devaluation on any probable margin. The future/forward consideration is essentially a margin call for most Euro Zone since the current yield of stocks essentially equals the Bond. The floating rates usually open the futures market and floating rates – forces a positive margin outlook ‘futures’ are normally – if not entirely traded on Margin. But the fact that much cash exchange hands by draw-down window by Euro Dollar, then the problem is group banks, Universal Bank, Euro which can require cash and future markets, where on one hand, the Cash and the future on the hand, the result will be the market creating the impression that selling is positive trend when it’s not. These false impressions is made possible by ‘institutional investors’ who are likely to control both markets and will create ‘price fluctuation’ – a classic case of short selling.

If available models about this incident are reviewed by way of the existing major terms market, much of the problems occurred either before the US Glass-Seagull Act of 1933, with especial emphasis on USA Rail Road Stock and the incident of 1914-18 wheat shortage where the competing Internationals who withdrew their offer when there was no Wheat, forced the wheat to essentially collapse and people’s money roil. In essence there was no Wheat from the beginning, and the news about the Wheat was only secondary to the primary Cash injection to the stocks, and deceptive set of pricing rising quite high until the real news came out. Such instance was quite common before 1933, and even after 1933, there were various shades of Ponzi Schemes that allowed Investors to pile up on other people’s, with facts that are attached to major agencies, fact that turn to be untrue. Other incidents occur in slight variations on Chicago Mercantile Exchange, where stocks and bonds were cornered, but the separation of Banks from actively engaging in Asset pricing, made independent some of the factors affecting the US markets, included people who force syndicate to essentially poach new markets. But “Securities Margin” which involves removing the debt from a Bank’s Balance Sheet, was treated in part by Milton Friedman and Brodsky in ‘Essays in Positive Economics’, which I think is what essentially happens when a short term is set for changes in Bond Duration, due perhaps to failure to pay.

Alan Greenspan – ‘Age of Turbulence’ published in 2007, by Penguin Group, “Corporate equity, real estate, junk bonds, and even AAA corporate bonds yield a greater return than treasuries. But all have risk of default and in the event of default, the sponsoring corporation would have to sue its other assets or not pay its pension obligations.” Greenspan also mentioned that “The dispersion of current account balances a function of the pace of the globalized division of Labor and specialization should also slow. The US current account is this likely to shrink, though aggregate world imbalances may not. Other countries could eventually replace the United States as the major absorber of cross-border saving flows.” Reader must be warned that this theory does not in any way reflect Joseph Shumpeter’s ‘creative destruction’, where one engine or market product assumes the center by eating up the leading product. But Alan Greenspan had something else in mind in making the case that simple, that corporate equity which usually means financing may outperform treasuries, and I insert that it mainly occurs when there is debt default. Alan Greenspan necessarily maintained that “Liquidation of US Treasuries by Central Banks (or any other market participation) does not change the total amount of securities or other assets that the central banks, purchase with the proceed of their sales. Such transactions are swaps, which affect the spread between two securities but need not affect the over all levels of interest rates. It is similar to an exchange of currencies”

Milton Friedman in his Book Essay ‘Monetarist Economics’ in his treatment of ‘Fiscal versus Monetary Policy’, mentioned that “The Keynesians regarded as a clear implication of theory position the preposition that fiscal policy by itself is important in affecting the level of income, that a large deficit would have essentially the same expansionary influence on the economy whether it was financed by borrowing from the public or by printing money.” Friedman goes on to argue that “The ‘monetarist’ rejected this proposition and maintained that fiscal policy by itself is largely ineffective, that what matters is what happens to the quantity of Money.

It is this case that we say that a separation between ‘Inflationary Pressure’ as opposed to ‘Inflation expectation’ become that necessary, since one is psychological and may be the first reaction to unemployment and therefore short term and the other is figured in the long term as part of a price targeting and expectations.

Allan H. Meltzer writing in his book ‘A history of the Federal Reserve; 1913-, Vol. 1, p.720, stated quite clearly that “Historically low nominal interest rates in the early postwar years, and the combined negative real long-term rates from 1946 to 1949, show that monetary policy – measured by the growth rate of money - was not important even at the prevailing interest rates”. That in view of the measure applied by the state, it is possible to also include that “Relative prices, including stock prices, and prices of existing real assets continued to respond to current and prospective rates of money growth and inflation”. His generality is that rates of Treasury Bonds at 2.5 percent fix managed to prevail on Short term notes, but was not so to speak the pattern of rates prevailing at the time.

Richard Leong's June 26th Reuters report on the Greek's market, titled 'Investor's Pare US money Fund Hold Treaty over Greece', handed the problems of 'money fund exposure' with particular respect to US and the Fed Reserve. He mentioned that "A Greek default would roil the $2.3 trillion money market fund industry, which Federal Reserve Chairman Ben Bernanke…described the Fund's exposure to European Banks as "very substantial" ". The author went to cite Fitch Ratings that "...10 biggest prime funds, whose combined assets totaled $755 billion, had half of their assets in places that were potentially exposed to European banks...."

Bernanke Doctrine of personal responsibility now applies over the new deal of American economic life. His doctrines are much quoted and even lately by Lloyd Blankfein – CEO of Goldman Sachs, during his meeting with the feeds over 1 Billion chicanery -, now seem to take center stage in questions regarding Europe. ‘It is not the responsibility of the Federal Reserve – nor would it be appropriate to protect lenders and investors from the consequences of their financial decisions’ that, ‘…developments in financial markets can have broad economic effects felt by the many outside the markets, and the Federal Reserve must take those effects into account when determining policy’. But we must be willing to deal out the facts of the latter incident concerning what roles Banks play in enabling the society to participate in business and how their influence determines what happens to business over a longer span of time. That as much as can easily support the fact lenders and borrowers are caught up in some kind of reactionary tendency towards markets – money markets – we can easily say that the tendency always means that banks have to win. Those with the upper hand in business and banking, who control much of the business of rating, may also control what happens the general public is led to invest and how they essentially invest. The Europe case is one essential example.

Hyman P. Minsky (Jerome Levy Economic Institute at Bard College) responding 1994 to the probability of repealing Glass Seagall act as part of ‘Universal Banking’, mentioned the possibility of American Banks being ‘too big to fail’, a condition which may result from constant interference of US Government in helping to redeem banks or forcing the FEDs to bail out the society. His argument is based in part on banking tenet incorporated in the Glass Seagall Act and the Fed’s 13(13) which in effect deems it for Government to intervene in case of liquidity and avoid a major setback. That will mean repealing the fore-mentioned Act, which now allows banks to take major losses and recognizing that will mean that no bank in US is immune to failure. The major problem will be the position on the investing crowd, how they are likely to respond to market direction and how the ratings of some companies or mortgages may in fact lead them into investing in banks that can technically self-destruct.

Hyman P. Minksy in effect is raising the not so clear or not well understood argument about what happens if banks are allowed to offer securities, that the following may occur, (1) ‘The Market power of Banks may increase, (2) ‘The preferred size of financial transactions may increase’, (3) Banking institutions may become “too big to fail”. All of which may take when the power of banks in any economy or the possibility of allowing banks to participate in Merchant and as well as Investment operations is possible. It must however be mentioned that the professor did not quite oppose the repeal of Glass-Seagull Act.

Ferdinand Pecora’s Investigation of the cause of causes of the Great Depression is one example when banks and their owners or managers can literally lead the bank into a losing position or loosing positive. Largely because the exiting of the funds from these banks would rapidly sink the market value of these banks, such that a certain panic would likely set in leading many of the stock holders to convert into currency while the Major business companies essentially roil. In the end, the disappearing currency – converted to Gold or simply removed from a company’s balance sheet as per Debt owned - or a as any Banks claim, would look very empty and seriously undervalued, which further drives the stock or the overall stock down, and then the removed currency or exited cash would be returned to the Bank, forcing people to lose so much of their money’s worth. In this case, Bernanke’s doctrine cannot explain how the people got into the trouble in the first place. Secondly, it cannot explain why or how banks created to make money, can exist without forcing the hands of the Rating agencies or arbitrage. A particular example of this kind of behavior with banks or bankers is that one that is corollary to what just recently happened.

The question we would like to know is whether Banks can create financial panic on their own by claiming losses from Sub-prime Mortgages that was investigated? I mean to say that several possibility exist to demonstrate 2008 financial wild-wind was created by Banks and their repos in high and low places, suggesting that Banks were making false claims about losses in order to create unnecessary panic, which forced investors to withdraw their money in such a speed and haste that a company such a General Steel that is $70 dollars a share, was reduced to nothing after the windfall. Some Banks previously worth 200 dollars a share, like Bank of America and a company such as GMC, was reduced to $2 a share after the panic of 2008. Many Americans committed suicide over this, since people worth billions by market shares, will be forced to take or leave a fraction of their money as per 1 out of 35 bits of their overall investment. Then barely a year later, companies and banks in US, which claimed un-imaginable losses leading to substantial right of and losses, will be the name of bail out, claim to have resurfaced and renewed in such a way, that Goldman Sachs was for instance fretting in billions of unimaginable profit. In essence, the nature of money and the second law which applies in money is that the existing money houses can force us to look into the problems with loosing so fast or the improbability loosing say a company such Lehman Brothers overnight, for only parchment of 20 billion, suggest that something was generally wrong with the whole idea of people moving money from the banks. In the end, Lehman had to go as a probable sacrifice in order to give new wings to the later day banks.

Categorically speaking, the financial losses of 2008 was a hokum perpetrated by a few major banks, but deliberately exacerbated by Individuals in high places who knew precisely what they were doing, who created bad registry and investment numbers that misled people and in the place of direct investment in both areas of business, they indirectly controlled the investment as well commercial sides of the market. It is not new, but the 2008 is one example that was not died since the actors are still on the Banking blocks. Some of these Banks have serious interest – I mean stock of real money – in high and zombie mortgages, which from the beginning would never pay but their relationship to these rating agencies forced many of them to label bad and missing mortgages as high ratings or in any case, Junk, leading to the investor aversion to risk.

The situation that people got what they wanted make it clear that Bank and a Federal Reserve or even a central Bank should operate independently from each. By that we may mean indicate that a specie bank such as US Federal Reserve and IMF, or FOMC should be looking to place faith in an interest rate policy towards bursting inflationary pressure since much of it may or may not exist. Any case in point will be the Europe bubble bursting and the misleading information about Greece. The exposure of US funds to Europe should be investigated in full before any form of exiting of money from the companies take place, such that Sub-prime Investment Banks or other major players would not come out tomorrow and playing to the world, that we lost the whole world of our money in Europe. Much of it was exposed in such and such a time. That does not mean that Europe is not particularly in trouble, since the income capacity of the member states, cannot support the general balance sheet of these countries.

Richard Leong in his article, did not necessarily explain what the situation essentially means, saving for the natural uncertainty that such problems raise for the rest of Mutual Funds Industry. We are likely to add that investors are holding their guns on Europe - as if the new development in Europe heralds another episode Lehman's Brothers in 2008. It is possible to discount some of the reasons for such over-exposure of US Funds on the count that Americans are the only probably leaders on Hedge Fund industries, that a checking on the operational dynamics of American Banks, widened the play field for Hedge Managers.

That American Funds are trapped in Europe, especially in Greece is hardly surprising, at least to common investors or to anyone with keen interest on Greece and European. It is said by Major traders that the nature of stock and securities market nowadays is one of such movement that the general interest on. Why would it seem that US Feds and Bernanke allow such migration of US currencies into European? In all, the nature of the economic outlook of Greece may or may not be real to investors and prime fund managers, but it continued over a very useful period of time. As such the exposure of US Funds to much of Europe could have or gone unnoticed. Therefore we may easily suppose that Greek debacle or threatening debacle is only mere reaction to what may or may not be expected of East European countries, most of which are Welfare States. It must be remembered that some of these countries in Eastern Europe are still dragging their feet in the larger world, and may be called Communist State, given above all the rent of decline of public utilities and definition of these markets. If there while others may regard it as Socialist economies, but it is by and large a Welfare State

The real question is not if the lessons of 2008 still persuade, rather if Bernanke's fears about the very substantial exposure of US Funds, is to be taken seriously. The other important question is whether we truly understood what the lessons from 2008 really are? It seems to suggest that the migration of US Funds into Europe is inevitable given the problem of debt restructuring that was common place in Greece. American companies were more or less to expand, to escort of the Inflationary pressures to somewhat stable economies of the world such Euro-zone. The point that TARF (Troubled Asset Relief Program), TALF (Term Asset - Backed Securities Loan Facility) are provision that guide some Government backed expenses and Fed's lending.

The excursion of these money will necessarily require 40% consumer purchase which the office of Thrift Supervision are required to monitor with direct emphasis on Government policies in Europe and their control of currency (Euro). It is possible that the world was completely aware of the dangers of Greece and Europe which for a decade, have managed to be played down by the rest of visiting society. The second question that remains to be solved is how can the world in of itself deny that the excess repository of foreign currency in ECB, by way of Sovereign Wealth was not matched by the American investors? The principal meaning of the TARF and TALF is that it gives rise so to speak of a business ‘Too Big To Fail’, which Obama’s administration after a hiatus of Bush’s economic plans, promised to end.

Andrew’s Sorkin’s ‘Too Big to Fail’ is not pacesetter as composed from a different ‘Too Big to Fail’ by Paul Volckers. Of course, these men are miles apart. But in Andrew Sorkin’s book we learn of the famous Bernanke’s statement which add light to the claim that Fed’s may or may not have known of the exposure of US Funds, that they may or may not have chosen overlook it, or that they chose to watch something else. It was a Europe problem, but as we know too well, there was no mistake in the claim that it was also an American problem. Sorkin cited that “Fuld said that the firm was planning to pursue a good bank - bad bank strategy in which he hoped to spin off the firms toxic real estate assets into a separate company” and he cited specific provisions in the Federal Reserve Act, “Section 13, point 13, a unique provision that permitted the Fed to lend to institutions other than banks under ‘unusual and exigent’ circumstances”

If one plan is not generally working out for Greece and Europe, the general faith and tendency for recovery is that new plans should be in effect in such a way as to force to Europe to redeem its pledge and structure. Is part of the theme for a new Europe added the determination to let go of things that don’t matter or not working, to encourage things that are working, and re-analyze the things that are only working some of the time, we can suppose that the measure of seeing a currency such as Euro survive for this long, is a measure that should be looked at from very practical economic position and above all, practical monetary policy. It does appear that the theme of European community is one that deals on political structure and political survival, and where as the Euro membership and ECB financial, has to incorporate the business of the day not the politics of the day.

This constant issue of redemption and borrowing must be dislocated as a matter of fact from the nature of money or how money really works. No doubt that the tough nature of their economic business is one that compels the most of the well trained Economist of European retention, to apply their well noted knowledge to the problems of Europe. The central position therefore, is that ECB should look to re-arranging its structure and essence, its meaning and what it must doo for Europe. It must also be noted that ECB or EMU is not political or Governmental body, it is not designed to help government – else it is a fraud – it deals on the success and failure of businesses, which involves the ECB intervention through Interest Rates, to at least pop a bubble or pretentions of a bubble in Europe.

Madleine O Hosli in the book titled ‘Euro’ raised the issue of price stability and EMU, in respect to the currency that the “…provions of EMU suggest that the predominant goal of the ECB is to maintain price stability with some factos rendering this task difficult in practice – but possibly at the expanse of some global exchange rate stability”, that for instance, Euro may rival Dollars, sprawling a world of competition that may affect the total market and financial stability of the world. The author goes on to argue that “If monetary policy were to be dominated by political interests, however, and political rationals were to determine the external value of the euro, for example, European monetary integration would constitute a threat to outsiders.” Why this point looks solid on paper, it looks very bad in practice, for sure and in reality, the issue of threat to outsiders in terms of investment can only be possible if and when the price of Euro become expensive. That may also refer to the issue of real estate since in reality the strength of the Euro, may even welcome the exportation of dollars or sovereign wealth to ECB via Arab oils and dollars. The author of the book however made the point about trans-border trade that clear that ‘The European experience, as Barry Eichengreen contends, supports those suggesting that stable and extensive trade relationship are important prerequisites for a smooth functionary of the International Monetary system”

Barry Eichengreen, in concord to the above statement suggested in one of edited books ‘The political economy of European Monetary Unification’, which was done along with Jeffery A. Frieder, that the issue of ‘Domestic Distribution’ is quite central to the success of the Union, that national authority in raising interest rate to good standing with neighbors may be a problem when the generality of the broad for instance towards a consensus that will unlikely help the situation a particular market. By that we may to say that “Many of the distributional concerns raised by EMU have had to do not so much with the desirability of a single currency per se as with the more immediate problems of adjusting macroeconomics policy in those requisites of a fixed exchange rate. In a a high-inflation country, fixing the exchange rate typically leads to real appreciation which puts pressure on producers of important competing goods. This can cause a broad constituency to develop reservations about both fixed echange rates and monetary unions”

The fundamental difference between US banks and those of Euro is that US Banks are not allowed to engage in any form of securities lending, which is notionally the act of removing ‘debt from a company’s balance sheet’. Euro Banks are allowed to engage in both forms of lending and in all forms of securities, irrespective of the Insurance product. Until Glass-Seagull Act of 1933, US Banks were allowed to participate in all forms Securities lending, to such disputable degree that the stock market failed, the banks failed as well. And secondly, these Banks and their owners were prone to manipulating the stock market and inventing their own Rating and setting their own prices, a problem that somehow manages to make reappear in various forms. As such the houses and other components of the real estate rose and decline as the Banks saw fit, and when the political forces appeared, Banks will to being held responsible for leading or misleading the generality of the Public. These Banks pretty much operated like the European counterparts, but the rules set for SEC following the depression made impossible for them to act like their European counterparts. Thirdly, whatever happens in Europe somehow manages to affect US, in spite of the

The best that can be said is that Glass-Seagull Act may have inadvertently worked for the benefit of American market, which if Europe is willing to adopt it may also help Europe.

Mark T Williams’ book ‘Uncontrolled Risk,’ offered a kindly suggestion on how to counter part of the problems that the state is very likely to face and how to counter the problem. He focused more on the accounting standards, which despite its failure, essentially propped up the image of the FEDS. Mark Williams highlighted the importance of Glass-Steagall Act, whose repeal he claimed was not particularly an error of judgment rather “…allowing too much banks to grow in size and risk-taking activities while not enforcing increased Capital requirements, curbing dangerous levels of leverage, or discouraging destructive lending activities.” To correct the wrong, the author mentioned that “…a modern version of this act setting out permission activities of all participants – commercial, investment, Universal, and shadow banks - needs to be crafted.

William emphasized the role of Financial Accounting Standards Board (FASB) which should stay very clearly away from the power banks that occupy the ranks of the general rating agency and investment institutions. In essence, the presence of TARP without adequate follow-up on their part will lead, may lead to ‘Too Big to Fail’. The incident of AFX as an accounting failure became that much of back drop, it should have meant that the operation board were not aware of what was available the time of incident. The problem may however require the general participation of the Banking world, where institutions that make our life possible

“Canada has embraced a Universal Banking model with its top five banks representing approximately 90% of its banking model with its top five banks representing. Approximately 90% of its Banking business, and yet these institutions never pose a “too big to fail’ threat”. William mentioned that “Unlike the United States, Canada has only one regulatory body, the Office of the Superintendent of Financial Institutions (OSFI). This prevents agencies from sending mixed signals and Banks from the playing the regulatory arbitrage game, seeking the most lenient overseer. The OSFI sets Capital constraints more stringent than Basel II guidelines, and banks are required to set Interval Capital target.”

The gap between Universal Banking and its interpretative position by way of Specialized Bank is gradually been breached and nothing like that theory which noted as the London ‘Big Bang’ of 1986, had the freedom to experience the trial and effort by the rest of the world. That the theory began under Margaret Thatcher but tested by October 1987, the World Broad Market involves strategic investment from different parts of world into one continues chain of interrelationship via Exchange markets such as Euro Bond or other Cash Funds.

The London ‘Big Bang’ for instance was the tendency to draw up International for Banks engaged in trans-border trade, and securities lending beyond the borders of their country (a given demand and supply) and as well engage in all kinds of Insurance Finance Product in the retail market. The issue covering this view began shortly after the 1978 agreement of European countries that their respective Banks can participate in US securities market. But the exact nature of their participation and degree of participation needed additional prescription, verse Europe. The call for monitoring activities of the Banks was raised by… and it amounted to Universal Banking, which also included the freedom to deal with business between the two days of the country. But after the incident of the 1987, London Banks were able to fully conduct the full range of securities business. All of these led to the whole notion or revival of ‘structural spectrum’ and higher emphasis on IMF as a form of Specialist Bank, where a newer Bank was in the pipes for making a serious difference.

Steven Solomon writing in his ‘The Confidence Game’ demonstrated why the London ‘Big bang’ forced all kinds of public interest and proved a substantial problem for Mortgage as well as Insurance companies, in the 80’s. The 80’s were full of innovation, and not only innovation in terms of business done or owned by Americans, the 80’s was a time when International corporations and Banks, or what is now ‘super-safe’ companies, such as Freddie and Fannie, attracted the most exposure from Europe. The 80’s was a decade of great ‘mergers and acquisitions’ many of which was between European International countries benefiting from their 1978 agreement and their Banks which were gradually sprouting all over the States. The real question was how these countries and their representative fared in time of crisis, where the exposure of European funds to US. Above all he seem have indicate that the bait on CDO and bizarre, Credit Rating, consequent to what is now ‘Synthetic Securities’

Steven Solomon attempted to suggest is that the ‘Confidence Game’ surrounded so to speak surrounded a certain Hedge Fund managers who took a plastic view of faulty triple A rating the elemental Ratings agencies when against the baiting or the real conditions of the market, was a careless risk. The trial of Universal Banking came therefore on October 1987, following the announcement that US will invade Kuwait. The question of losses so often the case with many International participating in one, forced new and additional light to be thrown on the question of monitory World financial society. No doubt that the foundation of what we might regard as European Union was based entirely on this view of Universal Banking. No doubt that the influence of Chicago Board of trade and exchange of cash without CME, may added to the attraction of European Banks to America, and may have further widened the gap between the American Banks who barred from dealing directly in securities and the Internationals who set their own financial products.

The book is not far cry from Christine S Richard ‘Confidence Game’ which focuses on the legal battles of a certain Bill Ackman, and his attempt to expose the fraudulent accounting and MBIA triple A rating for securities badly parceled in such a way that they mislead the general public. How Moody’s Rating draw the first blood in Wall Street involves a degree of grasping the participation of Euro-Dollar in US market may conceal, such that much of the Mortgages or so called bad mortgages in US, may be phony but passed as real, and therefore mislabeled to attract Investment. In the words of Janet M. Tavakoli “Wall street banks with financial ties to Mortgage lenders fueled bad—and often fraudulent – mortgage lending, created phony mislabeled securities, and offloaded the temporarily disguised risk on bond insurers (MBIA, AMbac, AIG, FGIC, and more) and naïve investors to keep the Ponzi scheme going. A housing bubble fueled by corrupt finance damaged the U.S economy, and tax payers bailed out the chief architect.” While Christine Richard’s book engages the issue of Banks drawing too close to the Rating Institutions, we can also perceive that the author played too close attention to the legalities of some of the actions, as opposed to judicial inactivity of several accounting boards. She also failed to clearly indicate the origin of the destructive power of Hedge Fund and why – if not how they triumph. This group of traders and subprime managers sell old and obsolete Index system, which the investors may or may not have noticed.

Universal Banking as formal treatise was covered by a bunch of very select professors of economics and those who were in many ways involved in trade. The current book was edited by two great experts of the world and it included some of the leading names Finances and Entrepreneur. These are Anthony Sanders and Ingo Walter as editors of the book, both of these authors are the time of the book composition, part of Stern School of Business, New York University Salomon Center. In earlier composition of the comparison and roles of these emergent bank properties, of ‘Universal Banks and Conglomerate Banks’ these two professors ironed out a case for both sides, siding the eventual repealing of Glass-Steagall Act, though part of it, not all of it they argued had to be struck down (repealed). This Greek Palaver offers the world a great opportunity to finally re-access some of the assumptions in the Repeal package, why it is a danger that need to be mastered to further enhance the restriction position of Universal Bankers. Sanders have achieved great notoriety on all matters of business and seem to enjoy sharing much of that experience with his students and with his professors of the same category. They have also earned their strips in transforming the Stern School – which I for one, along with others – sought an admission some time in 2001, but did not quite succeed. The tuition was quite impressive.

So what we might call NYC Stern’s School ‘Primary School Agenda’ is towards a ‘Single Market Act’ and Banking Act that restrict certain activity of sub-prime lenders, which may have fleshed itself out in Obama’s Banking Reforms, among other things. But Ingo Walter as author and co-author and co-editor of many books, joined hands with Anthony Sanders in editing ‘Universal Banking’, where competent pugilist on the subject took sides on Commercial lending rights and Investment or Merchant banking, where the tradition of savings and lending, which are major themes upon much of the banking world evolved, may have yielded banks that are essentially indicated by that specialty or specie. In many ways, the book ‘Universal Bank’, made room for the resounding ovation for issuing licensing to Banks perform both commercial and investment business, all of which posses with a high leniency towards the reformation of US banking activity. As we entertain from two major contributors in this piece, we shall notice that the school of Professors, who proposed this idea, pinpointed the fact that US Glass-Steagull Act of 1933 was an obstacle in seeking the participation of US banks in Universal Banking, where some laws or restriction seem that pivotal. As we can see, that the Obama’s Banking reform may have being a finishing point of what would have otherwise been a gradual but steady progress towards the repeal of the Glass-Steagull Act, which now opens the rest of the world to the nest of probabilities that comes with Banks participating in all kinds of lending and financial product.

Universal banking and the Public interest; A British perspective ‘where he argued that the demarcation between ‘Universal Banking’ and ‘financial conglomerate’ or ‘Specialist Banking’ have been ‘eroded’ by the diversification of Banks into securities trading…” Part of the reason why this is a problem is that credit Rating which has aided the view of the general public, are now being cornered and essentially determined by Banks too close to rating agency.

Another important cog of the list would Nouriel Roubini, a short Napoleon complex, whose book ‘A crash course in the future of Finance’ – along with Stephen Mihm, may be discussed later. But it is important to note that the issue concerning Basel and Basel II, was equally treated in Roubini’s work, especially his emphasis on Basel and Beyond, where he mentioned the necessity of better accounting standards. Roubini has been the source of informed commentary and a deciding intellectual pillar in days of 2008 crisis, where he seriously advocated for adequate spending and tight control or reformation of the SEC. I, for one, only accepted part of his remedy but not the whole. His non participation in the discourses on ‘Universal Banking’ is notable but Stern School seems to principally represent Obama’s Banking Reform.

We should also include in the pack, a man of notable achievement in money and business by name Roy C Smith. Mr. Smith is author of many books patterning to ‘Global Banking’ (Global Bankers). His books also include ‘High finance in the Eurozone’ and ‘Money Wars’, and the correlation between these two books are in fact evident with regards to what the rise of Euro and the Banks that dominates them. Occasional hint of Universal Banking by way of London’s success seems to caress his ‘High Finance in the Euro-zone’ but ultimately, he believes in restriction. He seems to believe that Euro was a success and places poor emphasis on the dangers of a regional currency. In one of his last books, ‘Paper Fortunes’ we notice a sheer historical gross of US financial society, leading in his view to the epic of 2008 financial. We may say for once that the story is accurate that the ‘Money Wars’ of the 80’s, the fall of big corporations in US due to Japanese and European invasion, may have contributed to the pattern of business society that led to 2008. But it must be quickly said that his book ‘Paper Fortune’ is merely an updated version of his older ‘Money Wars’. In fact his books, ‘Global Bankers’ and ‘Wealth Creators’ and the stories of ‘credit card’ invention by Purcell, the story about Lazard Frères, Morgan Stanley, First Boston, Salomon Brothers and Lehman Brothers, seem to ebb and flow, through these books and are very evident in ‘Paper Fortune’. In ‘Paper Fortune’ I want to personally say that the author did not at least in my view, demonstrate the reason why there was large scale credit default in US, and why there was an inevitable collapse.

But we come out from ‘Paper Fortune’ understanding Roy Smith influences as a stay in Goldman Sachs and why he looked back to the summer of 88, and the problems of LTCM – Long Term Capital Management – which Lehman fully participated, as a very pivotal bridge and summary of the events of 80’s versus the 90’s and why there was no break. In participial to earlier decades, I seem to accept Smith’s view that after 1971 removal of US dollars from Gold, Banks regularly rescheduled their debt payment, a process that coincided with the Inflation matters evolving from Chicago. I must say that Smith didn’t indicate that the rise of Milton Friedman and NAIRU began from this era, that Friedman’s challenge on the short term importance of A.W Philips Curve as dogged by Samuelson and Solow was also evident, and the emphasis on Bond (Spot target) in gauging interest rate gradually began to yield grounds to CPI from that 1971. Since then, the emphasis on ‘fixed supply’ of money by the FED’s as a way to challenge the unnecessary interference from the Government took on added meaning. No emphasis was also made of the success of Milton Freidman’s monetary policy in the light of Glass-Steagall and in the light of the free floating dollars which made it possibility. The advantage of a flexible Interest Rate targeting or Inflation Targeting over Spot Rate was also not made, either was the argument on why Universal Banking pose a different kind of danger to the US financial system. Europe debt crisis is a crisis that is not without reason, for the generality of world market is one that deals on history, where the only history is price which in market condition is negligible. As such European model of ECB for instance was a step towards that direction to acquiring the lessons of the Great Depression, where the imprint of Universal Banking – at least in American terms was evident. This problem is now evident in Europe or in much of Eurozone members struggling to exit out of the box with as much lagging indicators. But we however read in ‘Paper Fortune’ that “…banks, buoyed by their confidence in being able to reschedule as necessary to avoid default, began 1970’s to advance additional loans by Capitalizing interest.” Like Milton once mentioned about this maintenance of spot rate which when missed, forces the member states to acquire additional loans (like Greece and Portugal) and the total amount of this debt, as Roy C. Smith also indicated, will be sent ‘developing countries’ with high leverage. On a personal note, I believe that one of his best books is ‘Street Smart’ which he co-authored with Ingo Walter.

I for one shall indicate, that at no point am I supporter of Universal Banking – not that the concept is that bad or that misleading, rather emphasis should be placed on how the theory has widened our view of the world in the context of banks and the relationship between banks and say a rating agency. That as long as these banks – both Investment and Commercial - do not create money, these banks in themselves are out to make money. I need to mention that as much I know, the theme of ‘Universal Banking’ is a theme sponsored by outfits of Goldman Sachs, including Stern School – that at no point will it duplicate on the professors, but the theme of Universal Banking seems to be based on former index (no longer extant) called ‘Lehman brothers’ Long Term Macro’ a pacesetter to MSCI Emerging Market Index – even we chose to disagree. The free- float navigated between domestic I and other developed markets, outside US.

Lehman Brothers Long Term Government Bond Index (no-longer extant) was used by many trade or financial curates to guesstimate and explicate International Long bond, the LB. The relapse of several competing funds group, led to a form of competition (that was sometimes invented) and were better known by their perform grade developed in part by what of happening in many parts of the banking industries and supposed saving. They call it Medium term ‘aggregate bond’ which as I have maintained, was solo to prevailing European financial environment, was for many years essential to fixed return with respect to savings which determined the participation on the long, but did not incorporate the larger danger of default, which in medium term Bernanke once insisted was not very easy to gauge. During the issue of 2008, Richard Fuld wanted to transform Lehman from being a brokerage to an Investment Bank, a move that was part of the original idea of Universal Banking which the major brokerages and underwriters commercialized. Their business empire and industry was far reaching and consequential, to the degree that major brokerages in US had outlets in nearly everywhere in the world. Richard Fuld was therefore right-on in breaking into the area by asking Treasury and the Federal Reserve of New York, in the crass of the 2008 miscalculations and then exposure, to translate Lehman from Brokerage to Investment Banks with license to CDO customers and essentially operate like other banks. By fact, Henry Paulson and Timothy Geithner, both affiliated with Goldman Sachs – both replacement US Treasury Secretaries, still struck down the idea. Timothy Geithner was himself the New York Federal Reserve Chairman and was one of the principal individual who blocked Lehman attempt at loan but essentially helped Goldman Sachs. It was this man who also repeated Richard Fuld’s argument about translating Lehman from brokerage into Investment Bank with CDO, which was still blocked and was eventually used as basis to bail Goldman Sachs.

It is true that the issue of Lehman’s survival of the LTCM in Russia, may inspire a probably argument that the survival of Lehman’s in 2008 may or may not have saved the world from the cascading trillions in losses, but as Henry Paulson, Jr. mentioned that in the case of Lehman and 2008, the debt stories was quite deep and the surgical procedure, so to speak necessary to redeem the Brokerage was not available. Without sympathy it must be said that Lehman mainly needed 20 billion dollars to helm the tide, a sum that is now a chunk of change, but at the time, very needed and was not provided for. But in the end, the world participated in a financial kamikaze that started like wafts of wind on a great ocean, which gradually became stern and severe. It is said that the US Treasury wanted to demonstrate its rigid policy of lending, but in many ways it was the impact of LTCM which loomed large in the head of Paulson was not forgotten. So based on the information provided to him by the Federal Housing Finance Agency (FHFA) – the regulator of Fannie and Freddie –, by the National Economic Council (NEC), Office of Management and Budget, and Council of Economic Advisers, that it was Fannie Mae and Freddie Marc that on the Brink of collapse and should receive immediate attention. We can however speculate that such position was merely designed to fit since the LTCM forensic will tend to demonstrate that Lehman under Richard Fuld was not forgotten, despite his effort to force the hands of the Government and the returning of its acid pricing to near 40% on a year note.

Henry Paulson Jr., writing in his book ‘On the Brink’ disclosed the relentless effort made by the OFHEO – Office of Federal Housing Enterprise Oversight – to weather down the relentless reports of mismatched mortgages, that were streaming into the Federal Work House and the onus fail on the Government to check the spiral down of some of these credit market. More important was the role of the Treasury in enabling that process, to such degree that Treasury was somewhat interfering with the US Federal Reserve. Paulson goes to show that “By Law, Federal Reserve operates independent of the Treasury Department.” From the statement by Paulson Jr., we easily understand the inadequacy of the power vested on US Treasury, which under regular circumstances should have be sufficient to deal with business activity of the day. But the frustration is quite evident since Paulson may or may have wanted to do more, a case that suggest that beneath the genial air of the Henry Paulson may lay a seriously power conscious drive-in. His agenda for reform – however inappropriate or misleading – needed something else. In his book, Paulson mentioned p.66, that “of perhaps 55million mortgages totaling about $13 trillion, about 13 percent, or 7 million mortgages, accounting for perhaps $1.3 trillion, were subprime loans. In a worst case scenario we thought perhaps a quarter, or roughly $300 billion might go bad.” This statement here might prove him as credible treasury secretary, perhaps he was, but the next statement will demonstrate that he was merely a tool for Gold Sachs. And that will underline the problem associated with forcing the Banks or Securities Underwriters to be that close to any rating agency.

Henry Paulson’s comments concerning ARMs, said “Defaults rates on sub-prime adjustable mortgage loans (ARMs) from 2005 to 2007 were far higher than ever”, we may sense that US sub-prime by what he just said had a problem as far back as 2005, and that Goldman Sachs and its accoutrements were or perhaps were not aware of it of the problems of APX, may or may not noticed that the Index ruined Americans or was setting up the market for a roil, Goldman Sachs may or may not have wondered why. But as many traders will inform anyone, we are likely to pick a betrayal of Paulson’s own facts, since the Chairman of Goldman Sachs until his Treasury office was Paulson. It is noted that APX, was giving problem as far 2005, and like I have mentioned before, two Goldman Sachs sub-prime mangers - at the time Henry Paulson was in office – Birn Baun and Michael Swenson, are falsely credited with discovering the fault with APX indexing. The problem with US subprime industries has started long before the APX accounting became apparent. If the 2007 was the supposed date that these two cats of Goldman Sachs discovered the faults or so speak baited publicly against the fall of US subprime by way of APX – as Paulson and Geithner acquiesced - most White Tigers can only now pretend that as far 2005, Henry Paulson and Goldman Sachs were unaware of these faults until by magic outcome, their managers discovered it in 2007. In fact the faults have a history which in many ways began with Goldman Sachs. In such, Paulson indirectly closed his eyes to ruinous advantage that the system offered his highly leveraged former Investment Bank, and allowed all kinds of rubbish Ratings to continue long after the huge faults were apparent and in the end, he still bailed out his former Investment Bank as if they lost a mere penny.

Only the nature of his rise in Goldman Sachs throw in hint of what happened in NYSE when Floor trading was ended by John Tirsh as President of NYSE. It was him and his colleague such as Henry Paulson that led the way to a system called ‘Archipelago’ which bounded European SEC with NYSE, where old factor 3 loading index, which deals with NASDAQ and investment Banking, could not account for billions and as such have schlepped billions through the hole in the market. Here and even there, the hands of Bernie Madoff and his European counterparts are notable, both in enabling and sacrificing companies at their choice and may have also conspired in fueling or forging a scheme of money tree relating zombie company or companies that did not exist, a scheme that allowed phony, misleading or ‘mislabeled’ companies - passed on as accurate or high in rating - to feature in NYSE registry, where banks played a blind eye, as if they were not aware of what was happening. If we explore the banks that underwrote any form of securities during those Archipelago transition days, from 2001 9/11 incident, especially the most evident of them all, we will uncover the stash of Madoff.

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If I speak for Ireland, I will say temporary suspend your EU membership, irrespective of recommended Restructure Plans announced on June 29th 2011, or at least use the 'reprobate' as a tool to widen the play for INBS, on grounds that the Irish mortgage crisis correlate Irish GDP since the end of the second world war, a structure 'bivicariant' to Greece and Portugal, closer also to the Inflationary but unlike these two, Irish default applies in recent time in spite of her adopted Austerity Measures 2009, a factor which defines the weight of saturated 'Universal Banks' participating in Irish Insurance and Full securities lending, where the total weight of GDP affect the Bank, such that Irish Banks and Anglo-Irish corporation are affected at the same time as mortgage default, as such Banks are affected at the same time as the stock market, Central Banks default since the very nature of Irish economy is closer to North America than Europe. As opposed to more American 'Specialist Banks' where the pyramid makes all kinds of concession to missed point of the target, a sort soft landing than the precipitatious landing which is quick, brutal, and can spiral into neighboring countries. As such further C theme behind Joint EC Restructure. That a near end consideration of

What the JC joint essentially suggest is that Ireland should sacrifice the independence of its local Banks, and further yield ground to EU agenda. In essence the economic condition in Ireland is expected to force the hands of their government (spending), on the count that a probable Zero interest rate policy of ECB would help the price stability of Euro, to the degree that . There is no way we can easily speculate on this new development saving that the strategy is so to speak event driven, saving for the plausible grounds that Ireland should be looking to spend not shrink, on the condition that teaching should have additional and forcing rate on 91 day window entails reverting to Gold to whip out the access repository of its currency and then the face value of the US currency as almost equal to the price. That means that US Treasury Bills which they so openly made available to the rest of the society.

‘If lower yielding bonds experience greater Price movement than the higher yielding Bonds’ then Irish prices with (direct) emphasis on high interest rate (Austerity Measure II), will only mean 90 days window, to eliminate…..that will also mean, that (Irish Bond) market or even necessarily Euro Bonds will spike therefore dividend will shed on a later day. It will also force a reverse rate to Euro that must ultimately hold by French ‘mean’ for US exposure (expansion) that is based by US Government additional faith investing and Basel II and III, Power Investment (hard penetration) on ECB, on the slice of difference between curves for two separate curves within Euro Zone Bond Matrix.

That case may hold additional water….The graph base should be on the ‘Keel’ or Kurtosis of ER-V, where time = S, duration will alternatively suppose the necessary changes over time, or in a straight language, we can say that the price/yield relationship (convex curve) would make room for duration of Bond’s maturity where yield is expected to change. The volatility in this rare case is forced through….This event driven strategy will force price to a certain direction, and will cover certain ‘duration’ of more than 6 years should compound inflation. The second Proxy is the issue of attracting deposit to Europe. In the Austerity Measures, so the matter necessarily at hand, from ECB and IMF, The ‘weight’ of Convexity Bias, the shape of the Bond is usually the shape of a bullet. As such the issue of Mortgage and Asset based Pricing – would require, the Benchmark (US Dollars) that means US ‘Short Put’ on Irish Market will be priced by way of Capital U.S interest rate - not ECB suggesting a lowering of ECB rate to sprout a dollar that would further mean Austerity Measures would likely compound – Returns Across Time and Securities (RATS) procedure.

Sanjay K. Nawalkha, Natasha A. Beliaewa, Gloria M. Soto, composed and edited a book which they entitled ‘Dynamic Term’ “The convexity bias depends upon the expiration date S, deposit maturity T, Volatility Q, and the risk-neutral speed of mean reversion. In general, the convexity bias is determined by the shape of the bond volatility function….Since the futures rates is perfectly positively correlated with the short rate, the future rate is higher than the forward rate and convexity bias is positive. The convexity bias is zero, both when t = s and s = T.” In essence – the 90 day window that opened in June 30th 2011 brings in the 3 months of Euro-Dollar Draw-down, with particular reference to CME, where the rate of volatility or Kurtosis – (pricing) will impact Irish, Greece, and Portugal, for Euro-Dollar currency. Irish counter strategy that will make it possible for Americans. The old ‘Money Theory’ or ‘Money Game’ would easily apply in this case. A short put on US currency is based on the fact that (1) ECB will lower rate to accommodate the (Irish) Funds – but the Austerity Measure (III) would mean that Fund of Fund managers would have a hard time making money. In essence Austerity Measures would lend itself to High Taxes.

If I speak for Europe, I will say that enough models do not exist to temporarily if not permanently test the major tenets of Robert Mundel's theory of 'regional currency', especially is impact to countries with little or no source of Income saving the applied weight of Mortgages, Immigration and Bank operation which now lag. That system based on Robert Mundel’s Theory of ‘Regional Currency’ was not fully tested before being implemented, and that it was hinted on by John Maynard Keynes and carried through by Kenneth Galbraith may have added authenticity to the theory. It therefore forced many to overlook the problems associated with such theory that it leads to a saturation of Banks and other lending institutions, to a near control of the Banks by the state and therefore neglect other forms of risk associated with it. The process was faulty from the beginning, since it only treated the Banking and Finance side, as such lenient to GPD inflation targeting, and not much by way of else nor Monetary Aggregate torching the PCE Deflationary. The Union will very likely fracture in the end given the verity of CPI index for better targeting and for correlating inflation to National Income.

In essence, it is the work of US Fed Reserve or Central Banks around the world to target inflation, based on what the interest rate will more less do for the general lending institution. Part of that includes the issue of Austerity Measures since Banks models suggest a possibility of cumulative default rate, naturally born of people being unable to pay or default rate, and will naturally follow a Keynesian approach on spending in order to lubricate the general public. This does not in any where mean that the rate of money supply will necessarily cause inflation or for instance a weakening of the Euro and its buying power; it means that the policy guiding the Euro which more than more than likely to cut down, which on the surface may mean a cut down in Government spending to meet fiscal policy and national budget, it however means that the problem of default rate must imply Good will spending to lubricate the economy and help Banks lend albeit at a high interest rate. This is what they call ‘financial accelerator’ and Friedman comes on.

David Wessel writing in a book ‘In Fed we Trust; Ben Bernanke’s war on the Great Panic’ mentioned the following that “Bernanke and Gentler emphasized the expertise, information, and relationships on which banks relied to whom to lend. When this “Credit Channel” got dogged because banks were closing (the depression) or because they were trying to rebuild their capital cushions (the great panic) the economy suffered”. It must be quickly said that this author did not emphasis the reasons behind Bernanke’s leniency towards the CPI as a better Index for gauging inflation. In fact the idea seem in my view very original Milton Friedman whose argument of fixed injection of money into the economy will help to target inflation in the course of time. This new agenda and possible nose dive to zero% interest rate by US Federal Reserve is in Blind measure a credible experimentation on Friedman’s monetarism.

Ethan Harris in his book ‘Ben Bernanke’s FED; The Federal Reserve After’ (2008) did not particularly demonstrate this idea of CPI index. There is no doubt that he alluded but the very nature or importance of the CPI index in understanding the formation of crisis and targeting inflation was not taken serious or articulated well. It may be due to the school that the author represented and the influences over the years, since he used other indicators such that the lag indicators to make some point clear about the CPI measurement. He mentioned quoted Bernanke saying “Deflation is in almost all cases a side effect of a collapse of aggregate demand – a drop in spending so severe that producers must continually cut prices in order to find buyers. Likewise, the economic effects of a deflationary episode are, for the most part, similar to those of any other sharp decline in aggregate spending – namely, recession, rising unemployment, and financial stress”

Ethan Harris, (p.96), mentioned “unfortunately, the money growth targets were generally a failure. The problem was that financial innovation blurred the line between money (liquid assets such as cash and checking accounts) and illiquid savings. For example, an interest paying money market fund is a lot like a checking account but it is also a very safe form of saving. If money market funds are growing rapidly, does this mean there is a lot of money or liquidity in the economy, facilitating spending and suggesting inflation risks? Or is it a sign that investors are seeking safe investments suggesting a weak spending climate and low inflation?

Ethan Harris continued that “Until the early 1980’s statistical tests showed that surges money growth were followed – with a one or two year lag – by surges in nominal GDP growth. By contrast, in the last twenty-five years or so, strong money growth has been associated – with a lag – with slower GDP growth. Ironically, just as the money targets were being adopted, the relationship between money growth and the economy became very unstable. As Gerald Bouey, former governor of the Bank of Canada put it “we did not abandon the monetary aggregates, they abandoned us.”

While these facts seem to indicate that a change was necessary in indicating the right measurement for inflation, in noting the rate of inflation based on aggregate – Keynesian Monetary Aggregate, we may be shifting towards an era where spending are so sophisticated that actual spending, therefore inflation may not easily or necessarily apply to money supply, such that inflation targeting may be reduced to more flexible economic indicators. The author went on to indicate that the US open market committee may be jeering towards OLIR – Optimal Long-Run Inflation Rate and MCIR – Mandate Consistent Inflation Rate, the initial plus on monetary aggregate is that kowtows PCE Deflator and the incident of new and serious breakthrough in other business of money and bank development fosters CPI inflation, all of which are forms of targeting, due perhaps to a certain era, but ultimately about countering inflation however in the Long term.

Ethan Harris also indicated that the work of George Akerlof and Joseph Stiglitz which “showed that frictions in the credit market are important in understanding the linkages between financial markets and the real economy.” That example “of such of frictions include imperfect information

Joseph E Stiglitz in his 'Free Falling’, stated however that "Those who focused single-mindedly on inflation (The Chicago School and rigid money wage Keynesians) were right that because with inflation, all prices do not change simultaneously". By prices he necessary meant interest rate. We point that a case in point is Europe trying to provide a better estimate of ECB and member states attitude towards when the key members are reacting to their interest rate simultaneously. As such the simultaneity of changes in inflation may have worked for the bond market, and may have worked with due respect to Keynes and his multiplier effects but cannot apply to money and stock market in current time.

II

ECB will revert to Zero interest (Friedman and Bernanke) to enhance price stability. The trick being the fact that a Zero percent interest rate would encourage deposit and borrowing, where nations bound to Euro will so to speak, use the opportunity opened to them by way of third world countries to lend at a higher interest rate. The take down will naturally mean oil (as opposed to Gold which naturally discount notes), perhaps a spike in crude oil prices by a probably 25% over the next three months, partly reflecting the volatility in price and the duration, secondary to a boom of third world economy stocks since money flowing from oversea – particular EU members and not necessarily ECB, would swell these countries stocks and eventually burst it.

All of that will essentially mean that U.S Treasury is the healthy Banker, such that 90 day reverting to Gold or ECB will be a lend lease. Such that US treasury bills would serve as the bait for Euro Zone investment, such that 0-1% interest rate as Bernanke once said, will help the ‘stability of price’ (with Euro Zone to mention) which will attract or retain US over-exposed Funds in Europe.

That the French Banks on the hand are seriously forcing the hands of US Funds, can only mean that the French are entirely sure that the economic factors evident in Greece should illustrate the uncertainty which may lead to further panic. The reaction of the French is to feed into the and these fellows are applying 'Government Policy' in indicating to show that the initial impact of these Greek, 'Government Policy'

That will necessarily means that the nature of the program is such that securities from local banks and consumer in Europe and in Greece, should account for more than half the faith in the funds. The point is that the FEDS can generate that can kind of means for banks only means that the loans were not probably (1) FDIC insured.

This improves on the view that the market tool and financing product relating dollars to Europe may be those of Chicago. In essence, the presence of Chicago School and Milton Friedman may be forced to bear against the facts of these funds. In all probability, the Chicago School may be the inspiration behind this Euro-Dollar Para-ire. In 1973 the Chicago Board of Exchange was established with particular influence of Feinstein. 1982 was the year that Standard and Poor's 500 Index features, began to allow two parties to exchange or deal on cash without Chicago Mercantile Exchange - the CME. Once more the ACME behind the idea was Milton Friedman and his group based in Chicago.

Ordinarily when the money chart exceeds 1% percent from a 'high and low', it is Random Movement in its most common application. Such principal position is due to several schools of thought but one that is more significant was the Chartist theory and a certain Professor Fama. Today we may have Fama appeal to Chicago School and whoever is using sources from Bank for International settlements. In essence, there is very little reason to that Greek debacle was a surprise since the Notional Principal Outstanding in Equity - Related derivatives, Exchange Traded Equity Index Futures, Exchange traded Equity Index option, OTC Equity accounts and Linked option, with particular reference to Greece and Euro, will show lack negative optimality and a question poor interpretation of what is perhaps standard deviation. This 1% of so great importance that the move from negative to zero percent territory

To understand the mindset of Bernanke and the Feds, why the Feds may have overlooked the Continues Time Investment of US dollars in Europe, we may have the general to investigate the theory that may have influenced such healthy dalliance. There is no doubt the guarantee of credit from Europe and no doubt the view that Europe will more than likely force a bailout of these banks should default. For one thing the issue regarding the 'stress test' of any number banks Europe was conducted right after the 2009 debacle of Greece's banks, and from several reasons to believe that Europe was more able to contain its lagging indications, that the 'interest rate' circle of ECB and the estimated 'unemployment rate' as at March of this year, may have reflect a form of Bank stability and strength in spite of the Sovereign Wealth from Arab oil Banks and corporation.

In a book edited by Ben S. Bernanke, Thomas Lau Bach, Frederic S. Mishkin, Adam S. Posen, titled ‘Inflation Targeting’ lessons from the International Experience; we find the reasons behind some of the actions taken by Bernanke of late. Bernanke mentioned that “A strict definition of price stability suggest an inflation rate at or very near zero ”, but the importance of the recommendation by the group of American Economist is the relative relationship between CPI index as basis for inflation and Nominal GDP Targeting.

Although the book is very severe on German attitude to Business, their society and banks, it threw enough light on why Banks collapse and central Banks defaults. From such grasp of the existing argument, the Greek Palaver may affect Europe and the reasons why Europe is adopting the current strategy of Austerity Measures. That is to say that Austerity Measures is a form of Inflation Targeting, and in terms of the recommendations by these experts on money, there are some risk involved, as such that for “…long term monetary growth not to exceed 1% on average, short term deviations from this average rate of growth would be necessary to achieve and maintain price stability in any given year”.

If we through the lines of these great teachers, it seem to indicate that the real reasons between these forms of targeting, which are the same in kind and in spirit, may be the Keynesian school of monetary policy, which is driven in by GDP and a nation’s fiscal policy. Part of the Index for making for instance a case of Austerity Measure is that GDP of the member states of Euro are experiencing a serious shrinking and therefore not robust. This view of monetary policy or system is part of the Maastricht Treaty. Most Historians will remember Maastricht as a place where the European continent or European history was born by Carolingian league, and where they began the war (crusade) to rid the society of Muslims who were masters of Europe.

The second form of inflation targeting is one based on CPI index, which is the form that Bernanke and his group were advocating. Here we may proclaim the influence of Milton Friedman, not only for the fact that much of his theory in the last twenty years, provided the basis for gauging the performance of much of the US economy and the Feds, but we may also indicate that .The idea between these two forms of inflation targeting is that one focuses on what happens to the economy when there is breakdown is payment due to supply of money, the other focuses of the expansion of the central bank.

It must also be also noted that the expansion of the US Feds in the last 6 months only caused limited inflation since the buying was done under a very low interest rate. What we may argue in reverse is that ECB will be looking to enhance the money stability of the Euro by attempting to lower its interest rate, and would go as low as possible in other to give operational room to its member states. That does not mean that the member states will pursue the same policy of lowering interest rate within their markets (demand and supply), rather (1) member states may pursue a policy towards high interest rate. Such ‘strategy’ will only mean that (2) a certain category of necessary spending in Europe may be factored into current fiscal policy, in order to offset the problem of unemployment (Keynesian) and bad credit from low wages which may or may not have resulted this their misses in targeted point or default. By Keynes, we generally expect (3) an appreciation of ‘taxes’ and ‘interest rate’, which may be the very reason for Austerity Measures, unless the spending has long been done hence a tighter budget within the Euro Zone, with Greece as a particular point of press will naturally suggest worsening economic conditions and then the problems of Rating; for instance Credit. But Bad credit or debt default usually (4) stem from unemployment or involuntary loss of Job. Such combination as stated may be the only place or time that low wages or no wages, probably due to inflation of goods is due to Government spending. But remember these European countries, especially in East Europe, have a tradition of Welfare, as such the Welfare issue in narrating the problem of household inflation suggest (5) an Euro Zone economy that is seriously irresponsible or generally bad given their oversight of the manufacturing. Here the proper measure of what is happening especially in Europe would easily be (6) a CPI (a consumer price Index), which makes room for all necessary flexibility within the point range or even a fixed target. That will also mean that the issue of Austerity is (7) a probable defense mechanism against any impending inflation in Europe, where the short falls in fiscal policy now may or may not have essentially bottled in the actual rate of expending by way of credit or Stiglitz example, Credit Cards. Since ECB has made it clear that they are not likely to bail out Greece or any other European countries such Ireland and Italy, would only mean (8) that the funds for plunging the plunk in Greece and some Euro Zone Budget will have to come from elsewhere, particular US (US dollars). The only other reason for Austerity Measure will be one that Most Economic Historians or Political Economist (a term that can so speak be reduced to Keynesians and Galbraith) will remember that the only way major countries of the world has been able to successful dog inflation is helming (WHIP) inflation now as a hedge against future prices.

Bernanke and his group, also mentioned CPI should be used as a formal basis of making the decisions on inflation, that “The price index used for defining the inflation target would be the ‘core’ CPI, from which the prices of food, energy, and other especially volatile items have been excluded” The issue we hinted on, concerning Universal Banking and Specialist Banking, may not have made the right kind of sense but in terms of the failure of European Banks and the default rate, we may say that the difference lie - among other things - along the lines

This of course involves a ‘margin of safety’ as they described and that involves the real movement from a near Zero to a possible one percent. Part of the recommendation made by this group is that ‘A Proposal for Inflation Targeting in the United States’ involved the following recommendation (1) “e We recommend that the long-run inflation goal for the United States be defined as a rate of inflation slightly above (say one percent point)” (2) “A Short Term inflation target would be set and announced once a year, a regular time. This target might vary from year to year, depending on Economic circumstances. The sequences of Short term targets would be required to converge with the long run inflation goal, although convergence could be gradual”.

Bernanke and his group made the recommendation that medium terms required definition especially when a stated term is involved. ‘Strong current’ he mentioned deals directly with fluctuation, nearly close to disinflation and the book parried the comments of New Zealand Reserve Bank, which illustrated the time frame of the ‘somewhat’ reduction to essentially take place.

New Zealand Reserve Bank Bulletin (1987) P. 104, that “The overriding objective of money policy is to lower that rate of inflation” and that “…an initial objective of government policy has been to reduce inflation to a level comparative with your trading partners”, that “Though the direction of the desired movement is clear, the time frame over which this reduction can, or should, be achieved is somewhat less clear. This was in accordance with New Zealand raising Interest rate in 1989 in anticipation of inflation, and such a case it was the CPI which was used as a form of index in the noting out the point in the whole status.

III

‘How The Stock Market Works’ is one of the best introduction to the Stock market by a renowned author by name John M Dalton. Unlike Naill Ferguson’s ‘Ascent of Money’ which deals in part with the evolution of money and banking from its near ancient part today the financial ‘types’ of securities lending, Dalton’s book enables any reader to feeder through indolent scythe of how stock market works. Whereas Ferguson’s book deals on certain esoteric terms and seem at times severe on English society from the days of Walter Raleigh and Robert he where certain biological language such specie-type may appeal to very academic type, it nearly deceives on what the specie which relation to bank, a term which may or may not…. According to Dalton, business “usually evolve, overtime, from one-man operations (sole proprietorships) to partnership and ultimately to full-fledged corporations."

Using Dalton’s analogy stocks are divided into two major corporation (1) primary market “new issues” (2) Secondary market “retail sales of securities from an original owner to a new purchaser”. Stocks enable companies in need of long term financing to ‘sell’ interests in the business-stocks (equity securities) – in exchange to cash. The other way to raise money is through raising Bonds. The difference between stocks and bonds is that one that is common stocks are equity/ownership/debt securities. There is a question of Funds and raising bonds. Several sources of fund (1) through commercial bank, such as Citibank, Chase, Bank of America, (2) Venture Capitalism, where you show your proposal and deeds of incorporation.

In essence, only France can offer the International Market some form of guarantee as such France can only attend or match the AAA stock relating (which means an equal footing with US Treasure). For sure the quality of the Bond market in Eurozone in

If anyone is still interested in understanding the debacle of Lehman Brothers and Bear Stearns, they should look at Long Term Investment Interest of these Investment Banks, whose, US Real Time Investment and Stock Options could no-longer support or cover. As the exposure of US Dollars to Europe was trapped in such a way that in the ‘money Investment’ and positive economy of bonds outperforming stocks, ‘reverse gap’ which usually imply a neutral position, meaning it could be rolled over but was not rolled over by the Euro member States concerned. As such the Lehman gambit was that Euro default would at least insure their money in spite of the huge exposure of 78% investment with as much huddle rate as the 22% of such in the Americans. Compare that to the obverse of Charlse Schwabs whose American huddle rate was slightly close to 80%, and a mere 20% of mostly Asian Long terms Investment.

The failure of Lehman Brothers which spiraled into other areas of world market began with their wrong estimate of East European markets, or at least their faith in European economy, whereas the monetary policies of these European member states are very fairly known, their Monetary aggregate represented and often misleading estimate of actual market or Income condition of most of these European states. But while Lehman struggled to impose or improve on its short term view of Long term Europe, they were not attracting enough investment from the general US public. The short case of debt among the banks in US hastened the problem and when it became apparent that Bear Stearns was way over prized, the question becomes when not if Lehman will go down.

It is now too clear that Germany and France are bearing the brunt of European economy, for these other European countries (especially east European) are nothing else than second world economy with a near ‘tier’ for a third world market - if not completely.

That effort by French and German Banks to assure US investing crowds may also indicate that contrary to what is perceived as Unitary European economic agenda, that there are several reasons to doubt the fragile unity. Above all, the economic agenda of member states such as Italy, Portugal, and Ireland, may throw additional light of the fracture within the Union. The second fact that Bond market of European member states seem different, will equally suggest that the panic is real since the one of the houses - France are making a case for themselves. In a sense, we are aware of the major issue regarding inherit bias or built in bias of sharing default in common community. In essence the French reluctance to state their case quite clearly over Greece and their position that AAA is essentially backed by the French Government (position which qualifies it as a ‘Government Policy’) sends the suspicion Europe is still looking for more money to helm the collapse of the Government Bond and probably all is not well. I

This new interest is secondary to the appointment of Christian Lagarde as IMF chief, and her post against her record may spark only a lurid public interest or commentary, but her appointment as far as IMF is concerned is such a lightning rod of controversy that it is possible to argue that this final acts of Nicholas Sarkozy may save European Union or hasten its fracture. Christine Lagarde is inextricably linked to the preparation of Greek Package a few years ago, which was dominated by US Funds, much of it went down while France sailed on. As such the affair seem to be a French Coasting for one, the French own much of the Banks that operate in certain section of the Europe – the Block, and Germany seem to draw their significance over another that in many ways one sided. What is a package in economic terms? it is a kind of bond that backs the market in the main. It has a lot of incentives, attracts foreign business especially in the area of Industries and lead towards the That French Banks are crème of IMF and infect with IMF their Banks gives her nomination an added blister. That she is baying for subtlety in public affairs may only hide from the fact that her position on nearly all government policies is severely French and play too close

If there is a third angle from the second, we may say that her appointment summarizes the French position on Europe and IMF. It also plays into the graft that the Broad Market of Europe sponsors its own curve. It sponsors at the current time, a 'convexity' curve of price and yield concomitant to the change of bond's duration as yields change, which lend additional faith to US Treasury – the only sure banker in the next 91 days, retroactive June 30TH 2011.

The central Dogma is Greece Default. Notionally, such default is expected since the package is an applied kind of bait that the National Policies of say Greece, and Government/Euro Backed, papers will not succumb to pressure and therefore a pluck on the stock market.

The question is why Europe attracted so much attention from the US and the FEDS. The answer to the problem is central to the problems of world markets for almost a decade. The French need to be concerned, since their ability to emphasis the faith of large US Funds may send very wrong message to the world. In essence the French dare not default, for such default could spiral into other areas of European market and economy. For one thing, a French default would create addition room for inflation and secondly, the Government should be concerned with the problem of inflation since it is too difficult to reverse under any circumstances. But the market structure evident so to speak in world is such that the only way forward for Europe and for Greece is short term window, or short rate, which is cost, which also means higher prices, hence inflation.

That case may also mean that other European member states should fracture from a Union that has not justified itself and probably will not. The opportunity of a new European debacle opens a new reason to be tall in world market and economy since the current capital market which the world is exploiting is based on European Pillars, which are not mere members of a single Union, rather a force of many colors in the very collage of world markets. By that we may seem to indicate that France, German, Ireland, Portugal, Spain, and the rest of the European member states, are not just a bunch put together to stem the constant debt default characteristics of Eastern Europe, but like the Americans and Russians, like Indian and China of today, these countries may be small and second world but are models of world markets, and therefore very significant cog of that overall Capital Market and furniture.

These new and recurrent Debt crisis, may serve as the right reasons to exit the cloudy club since a longer term rate for most of these countries may be a way to save the Union and its guarantee of Credit, but against the very mean and low income capacity, these problem will only compound default rate and may be too. Whatever may be the reason for . The financial problem of Ireland is not necessarily like Greece, but they can make amends by reposing

While Greek may still need Euro and the regularity frame or austerity measures and will be forced to abide by it, Germany does not and as such have the protective levity to depart a Union that is not to their benefit. If not German, I will say Ireland, for sure, Ireland will not meet their debt obligation in next three months, and that will further compound the default as the years pass.

Unlike World Bank, the President of IMF is usually stuff of ‘governing philosophy’ as opposed to ‘governing dynamics’, for sure much of ECB banks and for someone who has not published anything about Banking, we are not being critical in handing her the Job.

If the French are taking all the position in EU, we may have a question of monopoly, stem from the fact that the French are also breaking into EU membership. In essence the French reluctance to state their case quite clearly over Greece’s debacle, raises the degree through the countries of Europe will be forced to dig in other to defend the unity of the currency and the stability of the member states.

It is said that the lower the present value, the higher the discount rate of a given future value. For a future value, the higher the discount rate, the lower the present value. That will lead to the ratio, low yield/high price, high yield/low price and that also mean that for a given discount rate, the longer the ‘terms investment’, the lower the ‘present value’ of the payment. We often indicate that when such things happen on such high level of operation, we yield to the amendment by time. The danger of the single story is that the modified duration for the bond market, will pose additional problems.

“The theory behind that ratio is that as co-incident indicators slacken relative to lagging indicators, the economy is turning more sluggish, potentially even a prelude to recession”…………