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Tuesday, November 22, 2011

IMF numbers too low?

The IMF issues a vague liquidity program, and the market reacts. (Hence the difficulty of this market.) Seems like the program will basically take over the sovereign debt buying program from the ECB.

Some info began to trickle in with the IMF supporting about 500-1000% of member quotas. Italy's quota is 7,882 million SDRs. (SDR are worth a little more than the Euro)

Basically, if I am calculating this correctly, the IMF is asking to provide around 80 million euros to support Italy's sovereign debt market for the next 1-2yrs at a maximum. (Similar calculation can be made for the Spain, Greece and Ireland.)

I do not know if I am using the correct numbers or there is something missing from the info that is tricking in, but the IMF effort seems way too low if the above is correct.

The IMF has around $540 billion to help with the EU crisis. Seems like their plan should allow for 80 BILLION Euro purchases, not 80 Million.

Regardless, even if my calculations are wrong, the EU still needs a real stabilization mechanism.  In order to recapitalize the EU banks or continue to support sovereign debt when bank nationalizations take place.

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