Fed Chairman Bernanke testifies in Congress today, for the first time in front of a Republican controlled lower house. Despite the news value, this invigorates a debate about the Fed mandate that is relevant in the current world context. The Fed has a dual mandate: price stability and full employment. The European Central Bank (ECB) read more

The EU leaders are most likely close to key decisions about the future of the euro. The financial rescue package announced during the Greek episode of the crisis last year was designed to buy time in order to work on solving the fundamental problems. That package was not enough to stop the crisis domino at read more

Last weekend Europe took a step towards fixing a key structural problem underlying the euro: a future debt restructuring mechanism for insolvent members. Far from perfect, but a very decent effort nonetheless. It sets the stage for what could be an orderly debt restructuring (potentially avoiding an actual default) of a country’s debt if deemed read more

This last bout of the euro crisis was to a large extent triggered by the debate on how to improve the EU institutions. It is paradoxical that the right conceptual issues can accelerate the crisis that originates from the euro fundamental institutional flaws, but it is what is happening. The Germans decided to openly discuss read more

The still incipient September market recovery appears to respond to data that negates the double-dip view and increases credence to the gradual recovery view. Our approach has been to cautiously position for the latter, within a broader theme of a structural change in favor of EM and other non-G7 countries. In other words, we continue read more

The high volatility of the last few months has generated panic moments in the markets, perceived uncertainty about future scenarios, and sharp inconsistencies in some of the public policy debates. Though there are reasons to marginally re-shuffle the probability distribution among the most likely scenarios, there is no real reason to change the base-case scenario. read more

When we wrote “The euro is naked” on February 11 we were certainly bearish, but did not expect the euro to dictate all markets behavior even at high frequency. Watching the markets these days, it is fairly clear that the FX rate EUR/USD has become the barometer for the success of the euro bailout. We read more

A week ago we said that Europe would pay dearly any policy mistake, but we did not think it would be so much so soon… The size of the potential financial package known yesterday exceeds most expectations, which is the reason of its success. In terms of the ‘theory of crisis management’ it is a read more

Markets appear to have already decided the recent package for Greece does not work and is not credible. It is not very rigorous to infer much from a couple of trading days, but the magnitude of the market movement together with the debate on the matter let us infer its failure. The package does not read more

The SEC claim on Goldman Sachs is no longer an aggregate risk to the market. Greece still is. The news last Friday about the SEC claim on Goldman Sachs had an effect on markets across the board. Today we are all more aware of the issues, the grey areas and the most likely scenarios for read more