A spectre is haunting Europe, but this time it is not the spectre of revolt by the popular masses, or even one of yet another wave of bank bailouts. No, the spectre which is currently stalking the corridors of Europe's most prestigous institutions is one of a Spanish economy which stays on a flatline while Europe's other economies, one by one, start to struggle back to life. And the main reason that this particular ghostly image is giving everyone so many sleepless nights is because Europe's current institutional structures, and especially the monetary policy tools available at the ECB are scarcely prepared for such a nighmare eventuality.br /br /br /strongFrance Is Recovering, And The Rebound Is Robust/strongbr /br /First it was just a rumour, then it was a possibility, and now it has become a reality - some of Europe’s economies are springing back into life. But only some. It ...

Well, I never thought I would have to wait very long to get some confirmation of my last post on things that could go bump in the night in France, but even I wasn't expecting confirmation of what I was trying to get at so quickly. Now, according to a href="http://www.ft.com/cms/s/0/f7e77b94-c2e0-11de-8eca-00144feab49a.html"Frank Atkins in The Financial Times this morning/a:br /blockquoteThe eurozone has reported the first year-on-year fall in bank lending to the private sector, strengthening the case for the European Central Bank to maintain its ultra-loose interest rate policy. The latest eurozone credit statistics indicated lending had been scaled back at an unprecedented pace, even though signs have become stronger that the 16-country region’s economy has stabilised./blockquotebr /br /What are we talking about here?br /br /Basically bank lending to the euro area private sector shrank by an annualised 0.3 percent in September, according to the European Central Bank's monthly report, making ...

This is Part 2 of a guest contribution by David Kotok* and Bob Eisenbeis** of Cumberland Advisors. (Click here for Part 1.)

Note to Readers:  This is the second of our two-part commentary on the Fed’s exit strategy and the role the Fed has played in complicating its own operating strategies and ability to conduct monetary policy.

In their Wall St. Journal op-ed entitled “The BLOB That Ate Monetary Policy” (September 27, 2009), the Dallas Fed’s Fisher and Rosenblum use the movie metaphor of the BLOB to describe the “too big to fail” banks.  They argue that these BLOBs stood in the way of the Fed’s monetary policy’s low interest rates and thereby “gummed up” the “monetary policy channel,” which would otherwise be able to stimulate economic activity.

The op-ed doesn’t name names.  But we will.  If you examine the list of the Fed’s primary

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Two Sagging Economies… Two Laid-Back Banks

by Martin Denholm, Senior Editor

Anemic. Stagnant. Plodding.

Pick your favorite… it doesn’t matter. They all describe the state of the British and Eurozone economies.

Two weeks before the official third quarter U.K. GDP figure is released, the National Institute of Economic and Social Research (NIESR) delivered a somber verdict. The group says it actually didn’t grow at all, confounding those who said the economy started growing again.

Cue a fresh round of some good, old-fashioned British grumbling.

The culprit: a 2.5% fall in industrial production in August, as oil demand dropped. Still, neutral is better than reverse – a gear that Britain had driven in for 2009 up to that point, posting a 2.4% first-quarter slump and 0.6% second-quarter decline.

It’s not alone either. Its European neighbors are also backpedaling. The latest quarterly figure from Eurostat shows that the

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The Dow Jones industrial average rose 61 points on Thursday as traders reacted to news that retailers last month had their first sales gain in more than a year.  A closely watched gauge of sales at major retailers rose 0.1% in September. Still, most stores posted sales declines -- though smaller than in recent months -- even as their figures are compared with last September when business plummeted as the financial meltdown ballooned.  While still tepid, it was the first monthly rise in the International Council of Shopping Centers-Goldman Sachs tally since July 2008. 

On Thursday, the European Central Bank and Bank of England left interest rates unchanged.  Sentiment also received a boost from domestic corporate borrowing, which rose for the eight straight week. 

The growing optimism surrounding consumer spending, which is crucial for an economic recovery, followed late Wednesday's good results from Alcoa.  The company surprised investors with

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Michael Ehrmann and Panagiota Tzamourani (European Central Bank): Memories of high inflation, September 2009. Inflation has been well contained over the last decades in most industrialized countries. This implies, however, that memories of high inflation are likely to fade, because over time larger parts of the population have never experienced high inflation, whereas those who have might forget. This paper tests whether memories of high inflation affect agents’ preferences about the importance attached to price stability, using a large database covering over 52,000 survey responses from 23 countries over the years 1981-2000. It finds that memories of hyperinflation are there to last, whereas those of less drastic inflation experiences tend to erode after around 10 to 15 years. The recent decline in

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Currencies rebound VS the dollar…Aussie and kiwi lead the currencies higher…Data and Central Bank speeches today…Gold rebounds back to $1,000! And Now… Today’s Pfennig!

Good day… And a Wonderful Wednesday to you… Instead of a “turn around Tuesday”, we’re seeing a whiplash Wednesday! And for once in a month of Sundays, the Big Dog, euro didn’t lead the other little dogs (currencies) off the porch to chase the dollar down the street!

No… This time it was the currencies of Australia and New Zealand that led the charge VS the dollar… The euro has taken up the charge since opening the doors to a new day of trading in Europe, so… It looks like it’s a “take the dollar to the woodshed day”…

OK… Let’s start first with the goings on yesterday and then build to a big crescendo! Yeah, right, like I can do that! HA! Any way…

As a reminder, yesterday we

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A bias to buy dollars remains…Looks like coordinated jawboning…Fujii now talks about intervening! Gold remains below $1,000…And Now… Today’s Pfennig!

Good day… And a Terrific Tuesday to you! Well… Stop the presses… You know the presses that are talking about the countries that are on the docket to begin a rate hike cycle, because… Russia has thrown a cat among the pigeons this morning with a rate CUT… Let me tell you why this is a big deal…

Well, when everyone is thinking that the G0-GO countries of Norway, Australia, and Brazil will probably begin their rate hike cycles this year, and other won’t be far behind… While the U.S. drags its feet and wallows in the zero rate mud… The thinking was that the rate differentials to the dollar would begin to widen, causing even more pain for the dollar. And, the reason these countries were able to raise rates

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The U.S. dollar slid to a 1-year low against the euro on Tuesday near $1.48 as deteriorating sentiment on the U.S. currency encouraged selling ahead of a Federal Reserve meeting and Group of 20 summit this week.

Traders took advantage of a dollar rally in the prior session to sell on views the Fed will signal plans to maintain loose monetary policy well into 2010.

Currency investors are also bracing for G20 leaders to discuss rebalancing the global economy this week, a process that would almost certainly require a weaker dollar.

A document obtained by Reuters showed how Washington would urge G20 leaders to launch a new push this year to get debtor nations like the United States to save more and exporters like China, Germany and Japan to spend more.

“If you take the view that too much of U.S. growth has been domestically driven, the next logical step is to say an

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The just-concluded Group 20 (G20) meeting left us with a chorus of very “prudent” governments and central bankers singing the praises of easy monetary and fiscal conditions. So where can we take refuge when all the central banks in the world print money and governments run deficits in order to spend like drunken sailors? The answer is gold.

Fortunately for us, we foresaw this scenario a while ago. On April 20, I recommended that investors diversify their portfolios by adding the SPDR Gold Trust ETF (NYSE: GLD).  The fund is up about 14% since that recommendation, but it’s not yet time to sell, as there are still a number of factors working in gold’s favor.

For starters, there is more and more talk of the U.S. dollar losing some of its luster as a reserve currency.  But this debate is moot for the moment.  The reality is

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