BREXIT Implications...

Europe's Largest Economy Is Officially In Deflation...

Unprecedented!!! European Central Charges Negative Interest Rate!

The European Central Bank has taken the unprecedented step of taking interest rates into negative territory.  

Yesterday, ECB President Mario Draghi unveiled the central bank's decision to take its deposit rate into negative territory, to -0.10%.

This is the first time a major central bank has cut any interest rate below zero. 

The rate cut means that any bank reserves held at the ECB will be charged 10 basis points, or 0.10%, for being hoarded rather than used for some form of investment.  

The idea is that if banks are penalized for parking their reserves at the ECB, they will be more apt to lend out that money, hopefully spurring economic activity. 

Claus Vistesen, Chief Eurozone Economist at Pantheon Macroeconomics, noted that in his press conference following the ECB's announcement, Draghi signaled that markets should not expect further rate cuts.  

Vistesen said, "The drag on the banking industry's earnings should be minimal given the current relatively low usage of the central bank's deposit facility."  

The direct effect of a negative deposit rate may be muted, but the idea that savers can be penalized for holding money in a bank is new territory for the financial industry.  

Eurozone Unemployment Hits A New Record of 12.2%...

Read more @: 

http://www.businessinsider.com/chart-of-the-day-euro-unemployment-hits-its-worst-level-ever-2013-5#ixzz2UuWlFQtx

Greece Plunges Into A Deep Recession...

Thanks to Southern Europe, Euro-Zone GDP Goes Negative in the 2nd Quarter

Interest Rates Go Negative in Switzerland, Denmark & Germany...

High Anxiety: Interest Rates In Spain and Italy Rise to the Highest Levels of the Year

Rising Rates In Spain Does Not Bode Well For European Union Or The Global Economy...

Next Domino To Fall in Europe: Spain's Unemployment Rate Is Over 24%

Spain's Recession Has Officially Arrived and So Has The Euro-Zone's...

Euro-Zone Debt Exploded in 2011...

Why The Welfare State Is Unsustainable...

Global Debt Levels Threaten Economic Growth...

Hedge Fund Bridgewater Associates Takes Grim 2012 View

Hedge fund Bridgewater Associates, one of the largest if not the largest pure hedge fund, put up a +25% positive return last year.

Bridgewater has a grim 2012 outlook for the global economy, citing slow growth, a debt overhang, solvency issues and high unemployment for the world’s developed economies.

“What you have is a picture of broken economic systems that are operating on life support,” said Robert Prince, co-chief investment officer.

Jim Rogers: Another Financial Crisis Likely...

The world is definitely going to face another financial crisis stemming from problems in Europe, Jim Rogers said recently.

"We're certainly going to have more crises coming out of Europe and America; the world is in trouble. The world has been spending staggering amounts of money that it doesn't have for a few decades now, and it's all coming home to roost," Rogers, CEO and chairman Rogers Holdings told CNBC.

He added that the crisis would be much worse than the one markets saw in 2008 because the debt is much higher now.

"Last time, America quadrupled its debt. The system is much more extended now, and America cannot quadruple its debt again. Greece cannot double its debt again. The next time around is going to be much worse," Rogers said.

"In 2002 it was bad, in 2008 it was worse and 2012 or 2013 is going to be worse still – be careful," he added.

Euro-Zone Unemployment Rate Reaches 13-Year High...

Unemployment is on the rise in Europe.

The jobless rate in the 17 countries using the euro rose to 10.2% in September from 10.1% in August, matching the 13-year high logged last year and further indicating that the financial crisis is weighing on jobs. Spain had the highest unemployment rate in the euro zone, clocking in at 22.6%. Austria’s, at 3.9%, was the lowest.

You Think It's Bad in The USA? Be Thankful That You Don't Live in Spain...

Chart of The Day: France vs Italy Government Bond Spreads Widen...

Concerns over the ongoing European debt crisis continue to weigh on the markets.

For some perspective, today's chart compares the 10-year government bond yield of the 2nd (France) and 3rd largest (Italy) euro zone economies to that of the largest (Germany).

As today's chart illustrates, the crisis for these two relatively large economies really began to escalate in Q2 2011 and again in Q4 2011. Note how the French 10-year government bond spread really began to increase over the past couple months as the severity of the Italian situation began to approach extreme levels.

This is due in large part to the fact that French banks hold a great deal of Italian sovereign debt – and Italy has a great deal of debt outstanding (€1.9 trillion which equates to $2.6 trillion).

While there are clearly no good solutions to the crisis, one of the least bad solutions has the European Central Bank printing out significant amounts of euros in order to buy a significant amount of European debt.

Chart & Commentary Courtesy of Chart of The Day

Quote of The Day: Euro-Zone Debt Deal Skepticism...

“The weaknesses of Europe’s common currency area, ranging from its design to a persisting dearth of bank funding and anemic economic growth, weren’t properly addressed in this accord. It avoids an imminent catastrophe and means Greece should be able to meet its obligations in the near future, and it may restore a bit of confidence. But it won’t prevent the debt crisis overall from rambling on and indeed escalating.” 


- Harvard University economist Kenneth Rogoff and Jonathan Loynes of Capital Economics