12 Years of VP vs Noise
Sharing the ideas and experiences that have influenced our work
Variant Perception’s Jonathan Tepper will be appearing as a Guest Host on Squawk Box Europe, tomorrow (Tuesday 21st February) from 7am – 9am GMT.
[Updated] See our Press page for part of the interview.
Many economists expect catastrophic consequences if any country exits the euro. However, during the past century sixty-nine countries have exited currency areas with little downward economic volatility. The mechanics of currency breakups are complicated but feasible, and historical examples provide a road map for exit.
The real problem in Europe is that EU peripheral countries face severe, unsustainable imbalances in real effective exchange rates and external debt levels that are higher than most previous emerging market crises. Orderly defaults and debt rescheduling coupled with devaluations are inevitable and even desirable. Exiting from the euro and devaluation would …
Government bond yields have declined substantially in Italy on the back of ECB’s 3Y LTRO as well as the commitment of the new government to austerity. Yet, leading indicators have slumped to a post crisis lows and sustainable growth seems far away as ever.
U.S. Economy, Stocks, Fed Monetary Policy (below)
The recent Q4-12 GDP print in Japan underscores the mounting pressure on BOJ and Ministry of Finance officials to act decisively on the ongoing strength of the Yen. Japan's economy slumped to a 2.9% contraction on the year (nominal GDP, NSA) and a 0.77% contraction...
Since early September the ECB’s balance sheet has expanded by 589 billion euros (about 750 billion USD) and the Fed USD swap lines are currently sitting at around 100 billion USD. The second LTRO to be conducted towards the end of February is then very likely to take this number well past 1 trillion USD of liquidity to the European banking system.
A recent article by the US Population Reference Bureau produces some great charts and information on demographics in the US.
Greece isn’t the only country drowning in debt. The Debt Supercycle—when the easily managed, decades-long growth of debt results in a massive sovereign debt and credit crisis—is affecting developed countries around the world, including the United States. For these countries, there are only two options, and neither is good—restructure the debt or reduce it through austerity measures. Endgame details the Debt Supercycle and the sovereign debt crisis, and shows that, while there are no good choices, the worst choice would be to ignore the deleveraging resulting from the credit crisis.