Global Macro

I noticed an interesting common theme in a number of the posts this morning which I think is worth highlighting to readers as it is one of my key areas of concern over 2012.

As you have probably heard, the Greek parliament, if you can still call it that, has passed the austerity bill.

Although the Greece default is the very obvious European black swan at the moment I thought it would be prudent to point out two other things happenning in Europe over the next 12 months that certainly have the potential for evolving from a cygnet into something bigger.

So here we are on the eve of yet another of the perpetual Greek D-Days.

According to various news sources over the weekend today is Greece’s D-Day.

Over the last few weeks I have mentioned a number of times in posts and comments that the ECB’s 3-year LTRO may not have been as successful as hoped because it was failing to do what central bank operations are designed to do, that is transfer monetary policy into the real economy.

It’s been a big day for North Asian PMIs.

European imbalances were there for all to see last night with the release of the European employment figures.

As I posted this morning the latest EU summit  has wrapped up with 25 of the 27 nations signing up to a somewhat watered down version of the European economic suicide pact.

Something I neglected to mention in this morning’s post ( sorry there was just too much to say ) was Friday’s release from the ECB of Eurozone monetary aggregates.

In the lead up to the previous EU summit there were statements from a number of participants that it would be the “summit to end all summits” as it would provide a comprehensive plan for the future of Europe.

A McKinsey report called The Emerging Equity Gap is sketching out an important change to the global capital markets whose consequences will be profound.

Below find a selection of videos from Davos this week.

As I have explained constantly over the past 18 months, one of the fundamental problems in the Eurozone is competitiveness imbalances under the common currency.

And so we roll on… One of the things that amazes me about the European “crisis” is how symptoms of the underlying problems of the macro-economic system that is the Eurozone get confused with the actual problem.

Following last week’s dire World Bank report, the IMF has now released its latest six monthly update and the reading is less dour but still pretty gloomy.

Another weekend…. and we are still waiting for an outcome on Greece. The chief negotiators from Institute of International Finance (IIF) have left the country yet we still haven’t heard anything that sounds remotely like a deal.

Australian Data TD Inflation Index The TD Inflation index posted its biggest monthly gain since March 2011, rising by 0.5% in December after it fell by 0.1% the previous month however the three-month annualised rate is still rather weak at 1.5% while the annual rate edged up from 2.1% to 2.4%.

Although the headlines are quiet at the moment there is still quite a bit occurring behind the scenes in Europe.

We end the week with 2 charts from a recent report from the McKinsey Global Institute “Debt and deleveraging”, which provide elegant snapshots of “progress” of debt and deleveraging by the 10 largest “mature” global economies. The first chart (but second in the report) shows the composition of debt by country.

One of the major themes that I have been discussing in Europe for a long period of time is the simple failure of logic in which the European periphery is being instructed to push deflationary policy onto their economies, yet at the same time expected to meet their existing, and growing, debt obligations.