What’s Important in the Financial World (3/9/2012) Keystone XL Rejection, China Inflation

A Greek Bailout

The Greeks finally have all of the pieces of their bailout in place. The International Monetary Fund and European Union have agreed that austerity is in place, to the extent that it will lower deficits and, at some point in the distant future, the national debt. The European Central Bank has provided support as it pushes money into the banking system, some of which is presumably used to buy sovereign debt of some of the region’s financially weakest nations. The last brick in the bridge was an exchange by private investors of old Greek bonds for new ones. There has been resistance because the value of the new paper is about 30% of the old. The private holders have tried to hold out for better terms. Circumstances have convinced almost all of them that an “unorderly default” would make their investments worth nothing. At this point, more than 95% of these private holders have agreed to the new terms.

Senate Rejects Keystone XL

The Senate rejected a bill to start construction of the Keystone XL pipeline right away. The Obama Administration has put the project on hold. The cost of the infrastructure would be well over $7 billion. And it almost certainly would add tens of thousands of jobs in the area where the pipeline will but constructed, between central Canada and Texas. Environmentalists say the pipeline poses a risk to wildlife. The Republicans will use the rejection of the project as an example of the president’s unwillingness to add new energy sources and projects that will create jobs. The Democrats can raise the specters of Deepwater Horizon and the Exxon Valdez.

February Jobs Report

There will be a debate all day and into tomorrow about what the February jobs report means, no matter what the number. If it is below the expected 200,000, economists will say the economy has slowed — perhaps because of gas prices or a failure to cut payroll taxes more. If the number is much higher than expected, many experts will say the recovery is now complete and gross domestic product will be up 3% or better for the balance of the year. Others will say that the only reason for an improvement is that cold weather, which usually settles in across the norther tier of states in winter, never materialized. Even good news has its detractors.

Douglas A. McIntyre