MARKETWATCH: June 11, 2010

U.S. financial markets this week have continued to be dominated by global capital seeking a safe haven in U.S. Treasury instruments, as the eurozone continues to struggle getting its fiscal problems under control. When safe haven effects kick in due to fears about problems with the U.S. recovery or elsewhere, investors turn to U.S. Treasury instruments and U.S. interest rates go down. When investors become more bullish over U.S. economic prospects (including relative to other countries), the U.S. stock markets looks better and assets are shifted from the bond markets.

Weekend Editorial Roundup


Here are the highlights from this weekend’s editorials on fiscal and budget policy:

OECD on the Fiscal Outlook: The Way Forward

The OECD (the Organization for Economic Cooperation and Development, the Paris-based think tank for the 31 richest countries) released its twice-a-year economic outlook yesterday. It presented a bleak fiscal picture for many of the member countries (including the United States) unless governments make policy changes, but, constructively, it also presented possible ways forward for countries to get their fiscal house in order. 

Market Watch: More Spillover from Greece

Throughout the week, U.S. financial markets continued to be dominated by a global market “flight to quality” in response to perceived EU policy weakness in addressing the Greek and eurozone fiscal crisis.

Britain's Spending Cuts

With a new government in place, the UK is moving fast to trim their budget deficit.  Treasury head George Osborne is expected to announce £6 billion in spending cuts (about $9 billion) next week to cut into their £163 billion deficit ($235 billion, 12.6% of GDP).  It seems that the financial market turmoil in Greece has spooked the government into taking action immediately, rather than waiting for the economy to be in full swing.

MARKETWATCH THIS WEEK Is It Good to Be A Safe Haven?

U.S. markets continued to be dominated this week by the continuing roller coaster ride from the Greek (and eurozone) debt crisis. More positive U.S. economic news appeared to be less important. The cause of last week’s stunning drop and subsequent recovery in the U.S. stock market is still not well-understood.

Lessons from Portugal: A Way Forward from our Fiscal Impasse for U.S. Political Leaders

Inspiration can come from the most surprising places.

Take Portugal, for instance. (Granted, there are major differences between the U.S. and Portuguese economic and fiscal situations.)

Yet, the crisis fiscal package announced today by Portugal’s Prime Minister may suggest a way forward to U.S. political leaders, so far unwilling to make the tough choices needed for our fiscal future and under pressure from citizens who do not appear to appreciate the gravity of our situation.

Fed Restarts Foreign Currency Swaps

In a release late Sunday night, the Fed announced that it has agreed with other major central banks to reopen foreign currency swap lines in order to provide them with dollar liquidity through January 2011.

‘Line’ Items: Greek Tragedy Edition

From Sophisticated to Sophocles – The untangling of the complex web of financial manipulation and deceit arising from the “hidden debts” controversy in Greece has exposed the mythology of its finances and is now playing out like something written by the ancient playwright, Sophocles. As the Greek economy becomes the latest tragic tale to emerge from that country, many are wondering if the woe will spread elsewhere and what lessons the U.S. can learn from the drama.

Why This Isn't Just a Greek Problem

The EU and IMF just recently agreed to provide a nearly $1 trillion rescue fund for European countries facing troubled fiscal waters. Meetings over the weekend between European finance ministers lasted until early today, after which the EU announced it would provide $560 billion in new loans and an additional $76 billion to existing lending programs to struggling countries.

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