“I think the market generally takes these things far too seriously,” John “Jack” Bogle, Vanguard founder, told CNBC.

For Portfolio Manager at Euro Pacific Capital, Jim Nelson, the recent upside in risk assets is a case of “unjustified optimistic frenzy.” In an article titled “European Central Bank’s Bond Buying Changes Nothing,” Nelson explains that:

“Without significant fiscal support from the surplus nations (like Germany and the Netherlands) the bank will accomplish little more than spinning its wheels. And while there is no certainty that such support is forthcoming, any support that does materialize will likely not be in a form that will provide any short-term boost for the stock market.”

For Nelson, the fact that the bond buying is linked to aid programs is decidedly negative for equities.

Other analysts are pointing out that even if the central bank’s program will not solve the deep structural problems of the euro, it will certainly buy time for the 17 euro zone countries.

EXPECTED JOB FIGURES

On the U.S. domestic side, the positive data was seen as a preview of what the employment picture looks like with Friday’s monthly jobs report. The White House is expected to report today that employers added 120,000 jobs in August. Investors will be paying especially close attention to the figure, since it will likely influence the Fed to announce or not more quantitative easing at its next meeting on Sept. 12-13.

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BEIJING | The world was confident about China. She was expected to be the engine of growth of the world economy. The remedy against the bitterness that surrounds Western markets. The fear of a hard landing is part of the subconscious of many experts but there is still confidence that the second world’s economy will manage to land softly.

Opinions are divided: Pessimists predict a greater slowdown within the following months. Conversely those who feel more optimistic see in the current situation a turning point that will eventually lead to further growth caused by stimulus plans. The figures for the second quarter of 2012 created alert this summer. A GDP growth of 7.6% from April to June, the lowest in the past three years, shows that things are not going the way the Communist Party desired. A consequence of an ailing model unsustainable due to a lack of domestic consumption and a serious fall of exports.

The national newspaper China Daily acknowledged last month that data was showing a negative trade growth with Europe. The news came shortly after the International Monetary Found’s (IMF) alert on China’s “key risks” against the European crises. According to the organization, such a threat could worsen due to the internal challenges China has long been weathering. These are tough times for Chinese consumers. In China the cost of life is expensive. Specially in big cities where property prices are way too high compared to the rather low wages. China might have the fiscal tools and room for manoeuvre to weather the crises, as the IMF said. But if Europe were to collapse, it will have to sail alone to reflate the economy.

Nevertheless, these are sensible times and balancing acts are not admitted. Statements such the IMF’s predicting an eventual drop of growth to a 4% if China were not to react promptly, are bad news for a government which is due to orchestrate it’s meticulous once-in-a-decade leadership transition. China’s Prime Minister, Wen Jiabao, is well aware of the volatility of this crucial moment with some of his rather pessimistic (or realist) outlooks. He has recently acknowledged that pressure is mounting making it difficult for the economy to recover. Nonetheless, Wen Jiabao feels confident:

“We have the conditions and capabilities, and will be sure to fulfil this year’s economic and social development targets”, he asserted.

China blind trusts in growth figures. Take the already dismissed miraculous 8% GDP growth. IMF’s alert reminds China that global conditions changed. If Europe collapsed, China could miss the tools to face the serious social consequences attached to it. Something that would also hamper China’s role as the global engine of growth.

The post China, alone in the dark appeared first on The Corner.

What Merkel told reporters was this:

“Merkel, facing European pressure to ease bailout terms and allow shared debt, and from global partners to do more to stop contagion, used a visit to Canada as the stage for her first public comments in a month on the crisis. She hailed Canada’s budget discipline, promotion of economic growth and ‘not living on borrowed money’ as models for the 17-nation euro region.”

One must have some cheek to make that sort of statement in a country with monetary sovereignty, with which it carried out an expansive monetary policy to lower the exchange ratio between the Canadian dollar and its US counterpart. The increase of the US dollar in Canadian dollars has helped to compensate contractions of the domestic demand.

Canada’s central bank has also worked to maintain a constant growth of nominal income.

Now, put that against the ECB’s lack of support  for Spain, how the country’s nominal GDP stalls and debt per nominal GDP ratio cannot improve.

Austerity serves economies well under certain conditions, no one argues that, but you need a monetary policy that counters to some extent the decline triggered by budget cuts and lower investment. According to the International Monetary Fund data, Canada has let its debt to go up, which admittedly is of modest proportions, but has avoided the Merkel path of restrictions.

My take is that we in the euro area need growth and financial stability policies. It definitely is better than closing the liquidity tap while imposing budget restrictions and harsh debt repayment terms.

Merkel is not being cynical or stupid, she knows full well the difference between having a central bank and having none. What I think is that she has convinced herself about the German success coming through austerity solely, and not because the ECB adapted its policies to Germany’s needs. Still, her remark is not acceptable.

The post I call Angela Merkel’s bluff appeared first on The Corner.

In terms of budgetary savings that move would not introduce any sweeping change. Dispelling the ghost of a liquidity shortage does not solve the underlying deficit. Spain will still face the painful task of reining expenditure, as counting on increased receipts to fill the gap looks most unlikely in the sharp current downturn.

The Brussels obsession of fixing fiscal targets based on budgetary balance only feeds instability and speculative runs. It overlooks the nagging fact that income in a recession tends inevitably to turn shorter than expected. Real consolidation can only safely relay on bringing down structural expenses.

In this respect Mr de Guindos’s claim is far from a “boutade”. Spain has still a long way to go in ensuring full budget sustainability. For all the cuts and austerity measures implemented, it will hardly avoid a substantial deviation from its upwards revised target. Closing this year with a deficit running as high as 7% GDP will hardly placate markets nerves.

In addressing regional spending, Spain seems to incur in similar shortcomings as the Brussels approach. The central government is ready to alleviate regions credit crunch in exchange for plans to meet their deficit targets. In doing so, it would spoil a unique chance to significantly downsize their overloaded structures and manpower. Buying time while leaving deep-rooted problems as they stand will erode hopes to put public accounts firmly on foot.

Indiscriminate horizontal cuts avoid in the short run the danger of sheer collapse. But only a structural overhaul can cope with the frail foundations supporting public finances. Up to now, nothing to address such an issue seems to be in the pipeline. The 2013 accounts will only bring more austerity across the board. No reform is at bay, disregarding the urgent need to review expenses and reshuffle the tax system.

Draghi’s words do undoubtedly bring comfort to big firms confronted with huge external debt servicing. As Spanish risk premium is brought down, their creditworthiness will be revamped offering them a chance to escape from the looming liquidity squeeze they faced only some days ago. Their excessive leverage proving to be Spain’s Achilles heel, the economy as a whole is undoubtedly better off now than it was before. But their fate will be linked to  public finances being firmly anchored as soon as possible.

The post Is Spain definitely out of trouble? appeared first on The Corner.

At the end of the first quarter of 2012, securities other than shares accounted for 78.3% of euro area and 79.3% of EU general government debt. Loans made up 17.8% of euro area and 15.6% of EU government debt. Currency and deposits represented 2.8% of euro area and 3.8% of EU27 government debt.

And for comparison purposes, we add this.

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