The Rules, Part II: Speculation and Hedging

We know the Eurozone crisis is important, but in the daily talk of "bank stress tests" and "special purpose vehicles", it's easy to lose sight of the big picture: why the crisis has happened, what we should be worried about, and what could happen next. This week Robert Peston are I will be trying to step back to answer some of those big questions, in a series of essays on the Eurozone crisis for Radio 4's PM programme.

By David Pinsen:In searching for stocks sharing bullish fundamental and technical characteristics, I used Fidelity's "Good Relative Strength" screen. The main fundamental criteria this screen uses is projected EPS growth over the next 1-5 years of 15% or more; on the technical side, the screen looks for S&P relative strength greater than or equal to 80.

The European Central bank can afford to ignore the likes of Greece and the Republic of Ireland when it sets interest rates - for the same reason that the eurozone can afford to bail them out. They're small. Between them, the crisis economies on the periphery account for about 18% of eurozone GDP. Germany alone accounts for 30%, and it grew by 3.6% in 2010.

By Peter Boone and Simon Johnson Many commentators suggest Spain is now the euro zone’s Maginot line.  The argument is clear:  Spain, with GDP over $1.3 trillion (8th largest in the world; 5th largest in Europe) and its large outstanding bank and public debt, is simply too big to fail without causing irreparable harm to the euro zone financial system.  If we dig in here, the reasoning goes, eurozone market upheavals can be stopped.

Tonight Obama delivers The State Of The Union, and naturally everyone is chiming in with advice on what he says. If he read the Washington Post, he'd get some conflicting advice on what to say about the deficit.

By Simon Johnson A powerful new voice for financial reform emerged this week – Sarah Bloom Raskin, a governor of the Federal Reserve System. In a speech on Tuesday, she laid out a clear and compelling vision for why the financial system should focus on providing old-fashioned but essential intermediation between savers and borrowers in the nonfinancial sector.

By Simon Johnson On Wednesday morning, two subcommittees of the House Financial Services Committee held a joint hearing on the Volcker Rule.  The Rule, named for former Fed chair Paul Volcker, is aimed at restricting certain kinds of “proprietary trading” activities by big banks – with the goal of making it harder for these institutions to blow themselves up and inflict another deep recession on the rest of us.