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Eurocarnage Continues

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Things are only going from bad to worse in Europe.

Reader Antifa had noted in comments that the IMF had expanded access on Thursday to borrowing facilities via a Precautionary and Liquidity Line (PLL), which would allow “responsible” borrowers to take down five or perhaps as much as ten times their normal allotment. But I don’t agree with his/her hopeful view that this meant the IMF was acting as lender of last resort. Only the ECB, an issuer of euros, can play that role. The IMF gets its budget from member nations, and my understanding in the US is that it comes from the Treasury, not the Fed, which means it is a budgetary item. New spending allocations, particularly to ‘furriners, are not likely to get much traction. China was already approached directly (for the EFSF) and was notably cool on the idea. Why would it lend indirectly, via the IMF, when it and other emerging economies are already unhappy that their voting share is out of line with their economic power? The BRICs have made it clear they want more voting rights as a condition to making bigger contributions. So I don’t see the IMF as an effective force, in general, and even on a stopgap basis given it certain to be insufficient firepower.

Mr. Market seems to think so too. Italy had a disastrously bad bond auction today, a mere €10 billion of two year notes and six month bills (remember, the day of reckoning comes in February, when Italy has to roll €300 billion). The rate on the bills was 6.50%; on the notes, 7.81%. Three year note yields rose as high as 8.13%. Even though the ECB intervened, buying both Spanish and Italian debt, it barely made a dent. Yields in Italy on two to five year paper remained in the 7.67% to 7.77%

German bond yields were also higher than they were after Wednesday’s terrible bunds auction. Stunningly, Belgian ten year yields have risen more than 1% this week, from 4.79% to 5.85%, with a downgrade of Belgium to AA by Standard & Poors no doubt contributing.

The Financial Times also reports that investors are fleeing Eurobank stocks:

Uninvestable is just about the worst word in a shareholders’ vocabulary.

The term – meaning that the market sees no point at all in investing in a certain asset – is being used increasingly when talking about European banks.

“It is an absolute disaster zone. I wouldn’t touch them. You couldn’t make me buy a bank,” says Paul Casson, director of pan-European equities at Henderson Global Equities.

Even some bank chief executives seem to agree. “I’d be very interested to see the investor who is prepared to put more capital towards UK banks. All of them are thinking that’s a dumb place to put capital,” Stephen Hester, chief executive of RBS, the part-nationalised UK lender, said this week.

The fact that Portugal was downgraded to junk by Fitch was simply yet another bad bit of news, when months ago, it would have been seen as significant in its own right. Ditto the Moody’s downgrade of Hungary.

Perhaps I’m too far from the carnage to have an accurate reading, but the news reports seem more anesthetized than shellshocked. It seems almost as if the European leadership has successfully faked its way through so many past crunches that they are unable to perceive that the same old tricks are no longer working. And it is increasingly looking as if their dulled reaction times are so out of line with market events that even if they were to snap our of their stupor now, it would be too late.

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132 comments

  1. K Ackermann

    Everyone is in denial. It’s going down, and it’s going down fast.

    You should be ready now… even here in the US. This is going to be disorderly, and everything is going to seize up again.

    Do you think all counterparties are solid? BAC is almost at a 4-handle. Think about that: one of the largest banks in the country is off over 75%. That’s a seriously sick institution.

    It’s looking very familiar, but maybe worse because we see there is nothing to break the fall.

    Deflation, here we come.

    1. BR

      Not just deflation; Great Depression 2.0. It’s coming. Euro meltdown = credit crunch = financial crisis = double-dip = stock market crash = massive jump in the savings rate = demand shock = irving fischer, hyman minsky….

      FINANCIAL ARMAGEDDON UNLESS THE ECB STEPS IN TO FIX THIS MESS!!!!!!!!!!!!!!!!!!!!!!!!!!!

      1. chogra

        While the ECB is capable of providing the liquidity necessary to prevent an outright crash, they do not have the capacity to FIX anything. What is required to fix the situation is (1) debt restructuring and (2) responsible banking. Things will need to get a lot worse before we get either of those. The good news is that things are likely to get a lot worse.

      2. Typing Monkey

        1. US markets are actually doing impressively well.

        2. I find it astonishing that after a 20year orgy of money printing that will undoubtedly go down in the history books as one of the longest and most widespread ever, people on this site are demanding even more of it.

        You’ll get it, too–there’s little doubt that the central banks are just going to print and print (and governments are going to spend and spend) until they blow up their entire respective economies. I just can’t fathom the logic that leads to one concluding that this is a good thing.

        1. BR

          Technically the ECB could solve this crisis, if it was willing to act radically enough. The ECB could monetize all of the deficits in the periphery at dramatically low interest rates, buy up inflated homes across Europe and sell them at lower prices, trigger inflation, etc…anything to reduce the debt overhang.

          Will it do these things? No.

          1. BR

            The logic is that money is simply a means a of exchange. Printing money only causes extreme inflation when the economy is at full capacity. Otherwise, you’re simply saving the taxpayer from having to undergo debt deflation to pay off debts and interest to the wealth of the nation…

            It’s Modern Money Theory. Money is just points on the scoreboard. When M1 decreases, the government can increase it and offset with higher reserve requirements, higher taxes, etc.

          2. James

            “It’s Modern Money Theory. Money is just points on the scoreboard. When M1 decreases, the government can increase it and offset with higher reserve requirements, higher taxes, etc.”

            True, as far as it goes. Add the caveat that said money CANNOT be created as more debt and I’m with you. But of course we know that’s not gonna happen, don’t we? And given that more debt, no matter how pitifully low the interest rate it’s issued at, will NEVER successfully reinflate the current debt bubble, why speculate on either of those two options?

            This one has only two possible outcomes, one the precursor to the other. Debt peonage and mass misery, followed by massive social unrest, economic and political collapse, and population reductions via the usual means: poverty, starvation, and wars (civil and international). Most of the world is already experiencing all of these effects. Only here in the US and pockets of Europe (and even there only among certain social-economic groups – we’re still a net exporter of our own ill effects) do we still have the luxury of debating whether or not any of this is still “going to happen.” We’ll have the 3D-HD version playing right here at home soon enough – no flatscreen TV required.

          3. BR

            I thought that it was implied that new money from the central bank wasn’t debt financed. The central bank either monetizes deficits or just injects new money with no liability into the system. Clearly, with PRIVATE debt to gdp ratios above 300% in some countries, private debt is not the solution. Public debt is better, but it’s best if it’s monetized.

    1. YankeeFrank

      My non-existant money is on a collapse. Just think of European history — its modus operandi of at least the last century is an improbable propensity to sleep-walk into disaster. And if you ask the question what are the Germans capable of — would they care if they brought hardship and death to Europe even if it means immense internal pain as well? Heh. My money’s on cascading bank/market/economy failure.

      1. F. Beard

        would they care if they brought hardship and death to Europe even if it means immense internal pain as well? YankeeFrank

        Lay off the Germans. It took unfair intervention by the US in WWI, unjust war reparations, hyperinflation, the Great Depression and the threat of Soviet Communism to drive them insane.

        The Germans have been sorely used and deserve compassion.

        1. Middle Seaman

          I love the current Germany and spend time there every summer. Yet, “the Germans have been sorely used and deserve compassion” should be strongly qualified. Treating the current generation as they deserve does not erase a terrible history.

          1. Christophe

            Agreed. Looking at the philosophical and ideological strains that run through a people’s history and give rise to any current policy is often more informative than debating that mercurial policy. For example, Italy’s organizing power along the lines of city-states and the powerful families that control them goes a long way to explaining the temperamental, precarious nature of its government. Not to mention the power of its mafias.

            Germany’s mythology of superiority has been a fertile bed out of which all sorts of political organizing has grown, from the fixing of the social order by the Great Burghers to today’s demonizing of the Mediterranean peoples.

            Of course all peoples are swayed by many competing ideological influences – hence civil wars. And Germany naturally has some philosophical threads that could be of great benefit to the world. Hopefully, we and they will hear history’s warning that the superiority myth is not one of them.

            P.S. I realize that defining Germans as those who live within the borders of what is now considered Germany is quite arbitrary.

        2. Susan the other

          The demonstrations in Germany are the people protesting the EU bailout at their expense. The plan afoot, to have taxpayers pay for the whole thing, is moving forward anyway – both in the EU and here. It seems inevitable. The argument should be based on a demand to nationalize banking so that taxpayers can socialize the benefits previously accrued by the banks. This will send kleptos running offshore, but anyone who does should be prevented from global commerce. Because if the global black market undermines global trade there will be continued chaos. And clearly we’ve had enough of that.

          1. Typing Monkey

            It seems inevitable. The argument should be based on a demand to nationalize banking so that taxpayers can socialize the benefits previously accrued by the banks

            There are no “benefits” (equity) left in those banks–just a whole ton of liabilities offset by “assets” that are marked up at absurdly inflated values

          2. Damian

            why nationalize?

            let the banks go BK – from a natializtic perspective and citizen opportunity versus liability – put the new money in new banks and let the foreign owners/ bond holders take the loss – if it is a least 50% of capitalization – foreign -then dometically capital suppliers only 50% loss and the deal that can be cut on new bank will be much better for the citizens

            in the USA the 750 billion under TARP and all the funds used by the Fed to prop up the banks – which may or may not get paid back – could have capitalized 20 new BANKS – which at Basil III of 10-12% equity would have yielded $10 trillion in new bank capacity easy – with NO past clean up

            if they let the BK courts manage the assets like lehman we would have all been better off

            the overwhelming 50% lost of operating earnings before compensation would have been part of earnings and bolstered retained earnings without any writeoffs offsetting the massive low cost -1% borrowing costs

            banks made the upside let them keep the downside

      1. craazyman

        I’m beginning to think the Joymens’ll let the ECB put the pedal to the metal if there’s even a hint of fiscal union.

        They’ll say its for “price stability” to avoid deflation. You can always turn logic around without changing your mind.

        I’m thinking the Italy ETF could be a two-bagger from here & I might go in big. Or maybe let it get down to $8 first and then get a 1/2-bagger in three months.

        Big opportunities brewing here for those of us who want to get rich quick, lay around and waste time, and not do any real white-collar ditch digging work.

      2. LeonovaBalletRusse

        Yes, the end of *their* Eurozone: the pyramid with them as the “cherry picker” on top. Old Europe’s 1% is NOT inclined to take a loss. History shows they choose war over banker loss as the sublimely ironic *correction* to beef up their golden hordes of bullion, and their monopoly power over all governments overnight.

        “CONJURING HITLER” by Guido Giacomo Preparata; and:
        http://guidopreparata.net – it’s all there.

        W.H. Auden, “September 1, 1939″ – it’s all there.

      1. craazyman

        Go long EWI. When the Euro falls there’ll be a way to get it back to $15 or $16.

        And let’s face it, this mess is so confusing with so many councils and committees and institutes and “thinkers” spouting their babble that nobody will be able to figure it out until after it happens. And it won’t go up and it won’t go down before it happens. It justs slide along until the confusion reaches such a pitch of intolerability that people just decide to ignore it and throw money at it just to make it stop.

        I’d give that 6 months until the payoff. And the big decision is “Do you buy EWI on margin or play at safe.” I’m going to start out safe but if I start drinking then it might be on margin. Can’t wait forever to be liberated from white collar ditch digging and that takes some cash.

        Who can understand any of this stuff? Nobody. It’s a phenomenon of abstract group consciousness and there is no instruction manual except for highly sensitive channeling and some degree of familiarity with historical anthropology. Xanax helps, as does sitting in the woods and staring at the trees.

        1. Typing Monkry

          Hmm..Interesting thought…

          I was thinking about increasing a position in Swiss francs on the thought that the SNB is going to have to let it rise in a major way on ECB money printing.

          I just can’t bring myself to buy US Dollars…

    1. tom allen

      And when the Geiger counters start beeping REALLY LOUD they just turn off the volume on the Geiger counters. :-(

  2. Judy C

    The Great Unraveling is upon us. It will make the Great Depression look like a recession. There is nothing that Merkel,Sarkozy or anyone can do now. We are past the point of no return. It’s going to be a very painful period ahead of us, so get yourselves prepared.

    1. Ignim Brites

      Why call it the Great Unraveling? Why not the Revaluation of All Values?
      The extension of Nietzche’s triumph in morality to economics. Why fret? Why not celebrate the reborn excitement about life?

      1. citizendave

        Why not the Revaluation of All Values? – Ignim Brites

        This concept is worth dwelling upon at length. If we could revalue all values, we could shift from our current archaic inherited incumbent system, to a modern system that would serve us well.

        For example, the externalities associated with dumping carbon into the atmosphere could be incorporated into pricing for the fuels we burn. The assumption is that we humans would need to undertake a massive, rapid effort to build a new energy infrastructure to replace the incumbent infrastructure. Forget optional incremental incentives, tax breaks, subsidies. Sovereign nations can spend money into existence to create a new infrastructure. It would be like shifting to a war footing, such as we did in WWII. The high cost of going to war did not deter us from doing what we decided was necessary. The incumbents can be made whole in some way, perhaps by paying down their loans and revenue streams when their ancient technologies are no longer needed. Or substitute your own preferred mechanism here. But in some way, revalue the current values.

        Another example is the unemployment problem. If we could revalue our values, and change the worth of an hour of an individual’s time, we could work a shorter work week, earn the same (or more) income, and provide opportunities for unemployed persons to take on a share of the work. Better still, guarantee a base level subsistence so that people can survive without working at all, and so that anyone who wants to work can find a job. How much of the current economy is a consequence of the 1% trying to increase their coffers? If we could work less, and produce less, but still live in relative comfort, it would have a lower impact on the planet’s natural resources in the bargain. (If you want to label this with an “-ism” you are missing the point.)

        We’re always dancing around this problem. The popular wisdom is that the marketplace magically produces winners and losers, and those who win get rich because they deserve it. But the marketplace is not magical, it has no mind and no conscience, and cannot take the long view of the consequences of the incumbent global economy on the future of the world a thousand generations from now. Leaving the future of the world to the vagaries of the marketplace is crazy, or at least unethical.

        The problem of value is a problem of philosophy and of psychology. Even if you set the value of your currency in gold or some other physical stuff, the value is still all mental. We can change our minds. We can deliberately adjust our economies to reflect modern sensibilities. One suspects that the climate change deniers, for example, are more concerned about their relatively short-term investments, rather than the long-term consequences of their actions on the planet and its future inhabitants. Their view seems to be IBGYBG — I’ll be gone, you’ll be gone. They ascribe very little value to a liveable world in the future. For them, current values should be immutable, or they risk losing their investments. We act according to what we believe. They believe in their ideology, rather than science.

        What if it’s all true, and we humans could ruin the planet, and time is rapidly running out to avert disaster? If we could somehow buy out the incumbent economy and build a new, better economy to replace the legacy way of doing things, perhaps we could save the world. We humans can change our values. One obvious alternative to a rational, deliberate shift in values is global economic collapse. Global collapse would probably extend the life of the planet for a few years. But a serious collapse would inhibit our ability to do philosophy on the Internet, as we struggle just to survive.

  3. jake chase

    All of this trenchant analysis ignores one overwhelming reality. It’s Only F***ing money. They can solve the entire problem with a handful of mouse clicks. Electrons will do the rest. Money just ain’t what it used to be.

    1. F. Beard

      Bingo!

      And a little moral analysis would justify a universal bailout.

      Instead we have sado-masochists in charge.

    2. Cathryn Mataga

      Yeah, it is only money. You would think we could just push a button and fix it, but yet, since 2008, we’ve had all kinds of economic destruction because of money. Unemployed people, closed businesses, vacant houses, etc.

      I have a theory myself on what’s happened. That Capitalism finds the most efficient way to make money. In a world where the Fed spontaneously generates money out of thin air, then the entire physical economy becomes irrelevant, because the most efficient way to make money is to have another TBTF bank borrow it, and then steal it from them. No business that is actually beneficial to society can compete with this method for generating profits.

      1. Ben Wolf

        Unfortunately for your hypothesis GOVERNMENTS and only governments create money. It’s a creature of the state. Your error is compounded by your demonstrably false assertion the Fed prints money: it doesn’t, it simply swaps assets.

        1. F. Beard

          it doesn’t, it simply swaps assets. Ben Wolf

          Spoken like a true banker!

          So when the Treasury prints some new Treasury bonds and sells them to the primary dealers who have inside knowledge the Fed will buy them for fresh new FRN deposits, that is not money printing?

          Or if the Fed does not buy them then where did the secondary market get the FRNs to buy them with?

          And FRN stands for Federal Reserve Note, doesn’t it?

          1. F. Beard

            But I agree. The US Treasury spends money into circulation ala MMT though it appears as if it is borrowing from the Fed.

          2. Ben Wolf

            No. When someone buys Treasuries the buyer’s bank disburses reserves to the government’s account at the Fed. Who is the monopoly supplier of bank reserves? The Fed. It’s an asset swap with a loan and liability which net to zero, hence no money printing.

          3. F. Beard

            Reserves and paper money (FRNs) are interchangeable 1 for 1. Are you trying to play words games with the definition of money? Reserves ARE money. They are what the government spends and what it accepts as taxes. They are what banks balance accounts among themselves with and lend to each other.

          4. F. Beard

            It’s an asset swap with a loan and liability which net to zero, hence no money printing. Ben Wolf

            Baloney. Until the liability is repaid (extinguished) it functions just as well as actual paper money. Hence it is money while it exists. And since the interest for loans is not created then additional lending is required for that so in practice the money supply only increases and is NOT temporary.

          5. F. Beard

            When someone buys Treasuries the buyer’s bank disburses reserves to the government’s account at the Fed. Ben Wolf

            OK. I see your point. It is an asset swap but a pointless one. The true money in the system is US Treasury Debt and just like Edison said if the US Government can create a Bond it can create a NOTE and skip paying interest.

          6. Mansoor H. Khan

            F. Beard,

            It is a very simple equation:

            Currency Supply = Deposit Balances = Loans Outstanding

            The deception that has been going on for centuries is that;

            Credit Money is Not Currency

            The equation that needs to be broken is the following:

            Deposit Balances = Loans Outstanding

            The above equation is what is causing this bookkeeping armageddon.

            Mansoor H. Khan
            The above statement is PURE deception and keeps the bankers in power.

            Mansoor H. Khan

          7. F. Beard

            The equation that needs to be broken is the following:

            Deposit Balances = Loans Outstanding Mansoor H. Khan

            Yes, loans create deposits but are all deposits created by loans? I don’t think so though things are confused by the fact that the US Treasury borrows after the fact to cover its spending.

        2. Damian

          in fractional banking system the banks create money – in many cases without any “fraction” that is 100% new money – no equity in the loan – that is why we ended up where we are

    3. Frank Powers

      My thoughts exactly. All of this is not even real in a sense, it’s just an overly convoluted game they (and we) are all playing, pretending it was of any inportance, as if it had anything to do with reality. And we won’t stop playing, oh no, even if that means we should have to take reality down with us. Pitiful, indeed.

    4. Fíréan

      1It’s not the money it’s the Power : control of the financial system gives power over the sovereign states and lesser financial entities too, in fact over everything !( well, almost everything ).
      Threats of financial armageddon got the USA banks what they wanted. Compromise a little very time a fear is raised and eventually you have moved into a whole different ball park.

    5. Maju

      True.

      But then the euro would be devalued to parity with the USD… and in Berlin and Washington and Beijing, a lot of all-powerful greedy bloodsuckers would get very angry. In order to avoid the euro being devalued (as will eventually be no doubt), they are sucking our blood very directly and insultingly.

  4. nickj

    can’t help thinking the germans will bottle it – shame really, as i’d like to see the banks go under.

    There is a section of the euro bureaucracy who are none to keen on the ‘market’ as well . . .

  5. Middle Seaman

    The last sentences of the post say: “It seems almost as if the European leadership has successfully faked its way through so many past crunches that they are unable to perceive that the same old tricks are no longer working. And it is increasingly looking as if their dulled reaction times are so out of line with market events that even if they were to snap our of their stupor now, it would be too late.”

    We see a similar gaming in the US. The leadership is faking it with tricks that never worked, they just extended the pretense. We all slowly get to the point of no return on both sides of the Atlantic.

    The role of the voters, i.e. us, is also crucial. Half of the American public still votes for a party that leads the country to disaster and the second half votes for a party that has no clear belief or position.

    1. William

      “The parties” are simply a reflection of the shared belief system of the 90% who think all is fine as long as the store shelves are full and they can fill their gas tanks. Once those two sources of comfort begin to show serious cracks, then you’ll see change. But it won’t be rational. OWS is trying to create rational change while there’s still a society to change. If they fail to reach that 90% of TV watchers and talk-radio listeners and the just plain ignorant, those 90% will reach for their guns and the looting begins.

      1. Dieter

        “Shnoort, you got that right littal fella! Been waiting to make me a Leg Roast”,…”Them down South got the BEST taste”,
        “Smargle Gargle”

  6. zebulon

    I appreciate the attention Europe is getting these days as everyone realises that there will no place to hide. Unfortunately people outside Europe really don’t get to the core of the problem.

    ECB action by itself will not fix anything in my opinion. The real problems of the Eurozone will just be patched up for some undetermined period of time (which is of course better than nothing). But one day the accounts will have to be settled.

    This is the issue. There is no “common interest” in the Eurozone let alone EU-Europe at this point of time. It is multilateral bargaining and the outcome for the individual countries in the Eurozone will be determined by two parameters: amount on the bill and who to pay it. The latter will be the crucial factor, the former will be somewhere between incredibly high and inconceivable anyway.

    1. readerOfTeaLeaves

      I actually think the problems are far deeper than you suggest.

      This post got me curious enough to pull ECONned off the shelf and open up Chpt 8: “The Wizard of Oz”. Sure enough, relevant points are made in that chapter, and I also note with interest that someone else on this thread points to the movie as allegory.

      Sure enough (p. 211, hardcover), Yves pointed out that – in the US – as of 1979, the *character* of the US business cycle changed. I offer her quotation from Thomas Palley, former chief economist for US-China Econ & Security Review Commission: “The new cycle rests on financial booms and cheap imports. Financial booms provide collateral that supports debt-financed spending. Borrowing is also supported by an easing of credit standards and new financial products that increase leverage and widen the range of assets that can be borrowed against. Cheap imports ameliorate the effects of wage stagnation.”

      Yves points out that this is an **inverted model**, it’s a new model.
      It reversed the virtuous circle of worker productivity leading to greater prosperity — inverting this instead into a model in which ‘prosperity’ instead now rested on **asset prices and more liberal borrowings**.

      Then she hits it out of the ballpark with this: (p. 211), “But this new paradigm doesn’t simply rely on debt; it relies on increasing levels of indebtedness. Higher and higher levels of borrowings are eventually self-limiting. Nevertheless, the framework that evolved over the last thirty years# had the peculiar feature that the authorities increasingly acted as enablers, working to keep asset prices up because a decline was seen as having deleterious economic effects.” [my bold]

      I think the problem goes far deeper than you suggest.
      I think that we’ve arrived at the moment where the enablers are about out of ammo, the limits of the system have been reached, and the economic paradigm of debt for assets (those assets becoming increasingly fictitious over 30 years) is now quite obviously unworkable and playing itself out.

      I would be far more distressed if I didn’t view it as a corrupt, amoral, environmentally absurd system.

      Note also how many of these problematic banks are thicker than tar with tax havens and offshoring. Their accounting is bogus, but the more they think they have to lose, the deeper their denial will be. Or is.
      Delusions and fictions are being exposed, and if these really were capitalists (instead of poseurs) they’d recognize that a lot of externalities are being exposed for correction.

      Time for new economic thinking.

      # ECONned was published in 2010

      1. readerOfTeaLeaves

        Although the quotation that I offer up is about US economic models, I’d argue that this basic paradigm of a system based on increasing debt and enablers propping up an increasing range of assets is very apt for EU.

        Note the assets that Greeks were allowed to borrow against in recent years; it’s a parallel process to what Yves describes in the 80s’, 90s, and 00s and what I understand as ‘financial capitalism’.

      2. LeonovaBalletRusse

        NOT “the movie as allegory” but the “BOOK as allegory.”

        http://www.youtube.com/watch?v=swkq2E8mswl
        “Professor Hugh Rockoff of Rutgers University put in his 1990 article in the Journal of Polital Economy [Vol 90, No 4, August 1990, p. 749]: “The Wizard of Oz as a Monetary Allegory” — in “The Secret of Oz – Winner, Best Docu of 2010 v.1.09.11″ uploaded by bstille on Feb 2, 2011.

        This should not detract from Yves’s genius, however.

        1. readerOfTeaLeaves

          Apologies for misquoting you.

          Agree here:

          This should not detract from Yves’s genius, however.

          ;-)

  7. wbgonne

    The U.S. provides 17% of the IMF budget. So the U.S. is now bailing out Europe. Is that what the American People want our tax money used for? I sure don’t.

    1. Ben Wolf

      The government doesn’t give the IMF tax money, so don’t worry. As with everything else it pushes a button and money appears in the IMF coffers.

      1. wbgonne

        “The government doesn’t give the IMF tax money”

        Yes it does. Obama just got a big IMF chunk slipped into the defense appropriations bill. There is legislation pending in theHouse and Senate that would prohibit the U.S.’s IMF contribution from being used to bail out Europe.

        1. LeonovaBalletRusse

          But embezzlement for *defense*–State Pork–under the table is OK. *Roger*. *Earmarks* by any name, by any means.

        2. Ben Wolf

          The money our government spends is keystoked into existence. It doesn’t fund itself via taxation or debt issuance, which are operations to control the money supply and interest rates.

          1. traderjoe

            How do you figure? The currency of the land is the Federal Reserve Note. The Fed is a private corporation. In Modern Monetary Mechanics, the Fed admitted that the commercial banks create the majority of money in our system. The UST cannot print FRN’s, it must borrow them before it spends them.

            If you were discussing a system akin to United States Notes, I would agree. The US is NOT monetarily sovereign in FRN’s.

          1. Victor Berry

            Karl Denninger is also commenting on the Fed’s “OTHER” expense/funding item:

            http://market-ticker.org/akcs-www?post=198116

            The more Ben Bernanke and the Federal Reserve operate in a surreptitious manner to protect the unwashed masses from panic attacks, the more harm is done to government and financial institutions.

    2. Joe Blowd

      Nobody gives a crap if that’s I want or not. Just like nobody asks me if I want to pay to blow the arms and legs off little Pakistani schoolgirls.

  8. Philip Pilkington

    Endgame is in sight:

    http://www.guardian.co.uk/business/2011/nov/25/eurozone-crisis-ecb-imf-bonds

    “Meeting in Berlin, the finance ministers of Germany, Finland and the Netherlands even hinted at the prospect of an enhanced role for the European Central Bank (ECB) if all other steps to save the euro collapsed. But they again ruled it out as an immediate solution.”

    Preparations are probably already being made. Now just wait for that nasty austerity life-support machine to come online…

    1. readerOfTeaLeaves

      I confess myself almost dumbstruck at how well this maps to one of Yves’s explanations, first quoting some Yale physicists:

      ——————-
      “In the model, market participants, especially hedge funds, do what they do in real life — seek profits by aiming for ever higher leverage, borrowing money to amplify the potential gains from their investments. More leverage tends to tie market actors into tight chains of financial interdependence, and the simulations show how this effect can push the market toward instability by making it more likely that trouble in one place… will spread more easily elsewhere…
      … But the model also shows something that is not at all obvious. The instability doesn’t grow in the market gradually, but arrives suddenly. Beyond a certain threshold the virtual market abruptly loses its stability in a ‘phase transition’ akin to the way ice abrubtly melts into liquid water. Beyond this point, collective financial meltdown becomes effectively certain. This is the kind of possibility that equilibrium thinking cannot even entertain . [my emphasis]

      This model highlights a tradeoff ignored (at least until recently) by most economists. All the arguments for deregulation were those of greater efficiency, that less government intervention would lower costs and spur innovation. We’ll put aside the question of whether any gains would in fact be shared or would simply accrue to the financier class. Regardless, risks to stability never entered into these recommendations. But if we put on our systems engineering hat, stability is always the first order design requirement and efficiency is second.” {ECONned, hardcover p. 214}
      ——————————-

      So Philip, if you are still lurking on this thread — did I read Yves correctly here?
      Is it possible we’re seeing the point around 32 degrees Fahrenheit?
      System now collapsing in on itself, due to failure to spec out the need for stability?

      Puts me in mind of several things:
      – At the latest INET conference, Lord Turner’s Keynote emphasized the need for a new role for ‘stability’ in revised economic thinking for new paradigms.
      – At that same conference, Dr. Rees pointed out we’re on target to consume about ’4 planet’s worth of resources’, and assuming that he knows what he is talking about it is not one bit surprising that the externalities appear to be catching up to ‘the markets’. So much for conventional (mis)pricing structures….
      – The scenes in “Inside Job” where Glenn Hubbard and that other economics shill (the one who’d altered his CV to lie about his work ramping up economic disaster in Iceland based on his ‘free marketeering’ theories) start huffing and sniffing that Charles Ferguson’s time is up for asking them questions about their deliberate, very well paid efforts to help create the disasters for which they are never, ever held accountable.

      Personally, I’d like Glenn Hubbards of the world forced to take a few courses in physics. And that’s after they freeze their arses in public stocks in on the village green (or Central Park) for about four days.

      As they say, ‘the cream and the bastards rise to the top.’
      We’ve seen the Glenn Hubbards and the Geithners.
      I’d like to see a little ‘cream’ going forward… Bill Black, Auerback, Jamie Galbraith, Dean Baker… hell, even David Stockman who has turned into almost a Jeremiah these days ;-)

  9. Antifa

    So the pressure points on every side all lead to the ECB reversing course and handing out Euros like candy canes –

    Or not.

    Seems no one else can or will provide them, not really.

    And the Gordian knot is Germany, which must agree to be jolly St. Nicholas, and soon, or there’ll be no Christmas this year.

    Not on either side of the Pond. Nor in any corner of the world. It all comes crashing down. Saving it is, at last, beyond reach.

    This time the Grinch will foreclose on little Cindy Lou Who.

    1. Maju

      Honestly, IMO Germany should leave the Eurozone and stop meddling as if the euro would be the Deutshce Mark. It is not. If they wish to remain in the euro, they must accept this fact: it is at best a French franc, which was historically much weaker than the DM.

      Germany’s no jolly Santa: it’s an imperialist actor of the worst kind: they only think in their peculiar interests as high tech exporter and low tech importer, regardless on how that affects the rest of Europe.

        1. F. Beard

          Has Germany ever *saved* the world? LeonovaBalletRusse

          Maybe not but individual Germans have. Their contributions are too numerous to list in science and medicine and as for music there is Bach, Mozart, Beethoven, Brahms, etc, etc, etc (I tend to lump the Austrians in with the Germans so forgive me if the list of composers is not quite accurate).

          One might just as well ask “Has Israel ever saved the world?” yet the contributions of individual Jews are likewise immense. And One particular Jew is the Savior of the World.

          1. LeonovaBalletRusse

            Peter Viereck, “META-POLITICS: The Roots of the Nazi Mind” (New York, Alfred A. Knopf, Inc., 1941; expanded revised edition: New York, Capricorn Books, 1961).

            The *beer garden* putsch in America is part of the Plan.

    2. ...---...

      The real Gordian Knot is Article 123 of the Treaty on the Functioning of the European Union. No ECB credit facility to central governments for public sector obligations vis-a-vis third parties. Rewriting that treaty would open an appalling can of worms. Incidentally it’s great to see old-time MoA brains hanging out here too.

      1. reslez

        Will it be as difficult as rewriting the part of the SGP that says Germany and France can’t run budget deficits in excess of 3% GDP?

  10. Maju

    Personally, as European citizen with the euro as currency, I just don’t know what to expect other than yet another round of cuts on social spending (is there still anything to cut?) and hoping they begin cutting the military and police some day (because there’s no more “state” left anymore or almost). Of course I also expect yet another round of increased protests and street clashes and maybe general strikes of some sort…

    But solutions? I know that there are none and that the situation will deteriorate at least until the euro is significantly devalued, what is already too late to do (but also too necessary not to do, even if late)… and until some sort of revolution takes over, what won’t probably happen tomorrow.

    I’m essentially getting ready to live as a Mexican or a Moroccan: in a police state where the only way of making money is to belong to a mafia. That’s the future that this EU-IMF-Goldman mafia is forging for us… and yet some people still don’t see it, thanks to the silly media discourse on debt and payment, which is just a trivial petty excuse to dump the people into slums and slavery.

    1. mansoor h. khan

      Maju,

      Don’t give up too easily. Educate, Educate, Educate….your wife, your kids, your neighbors, your co-workers, your friends, your fellow church attenders, etc.(street level education is needed).

      And once they get it ask THEM to do the same.

      Start with something like this as an explanation for their economic woes:

      http://aquinums-razor.blogspot.com/2011/11/here-is-how-bankers-game-works.html

      This is new economic religion (evangelize / proselytize) and then and we can:

      http://aquinums-razor.blogspot.com/2009/09/radical-solution-for-americas-insolvent.html

      Mansoor Khan

    2. LeonovaBalletRusse

      The Global Fourth Reich is a criminal mega-syndicate, from which every colluding criminal syndicate gets its cut.

    1. mansoor h. khan

      Susan the other:

      I am surprised that is all you have to say?

      Remember what I said earlier:

      The scarcest resource is “creativity”.

      We just know (yet) how to educate those around us so we can put an end to this monstrous banker created idiocy we have going and has been going for centuries.

      Mansoor H. Khan

      1. Susan the other

        Mansoor, I just get weary thinking that we trusted them, gave them free rein and they screwed the system up so bad. I mean, it looks like they are even hiding very incriminating evidence about the way they have operated for 3 decades that go above and beyond CDSs and investment “securities”. I do believe in the future and I believe it will be a rational world. But all taxpayers are thinking the same thing about now: we don’t want to bail out private enterprises or quasi private enterprises, banks, etc. And all governments are being held hostage by the financiers. We just go in circles. (But I have been enjoying you and F. Beard today.)

        1. mansoor h. khan

          Susan the other,

          I think the founding fathers knew this kind of crap will happen from time to time. We can still use our democracy.

          We just have to do street level education of how the economy works and how the monetary system relates to it. Forget about our universities and our current set of leaders and our mass media. They all have been captured by the bankers.

          But we can do it (god willing). It is going to be long and hard road but it has tremendous benefits for our old age years and future generations.

          We can still use the ballot box (eventually) once the street level education reaches a critical point.

          Mansoor

  11. proximity1

    First they destroyed effective government-by-consent-of-the-governed–this took years and lots of bribery but they did it so well, leaving in place a sham version of what’s known euphemistically as “democracy”, that now ruling Organized Money can work its will without regard for the law (with only minor symbolic exceptions to protect the sham appearance).

    They, having a free hand to operate, they set about to make the economy a personal little “app’ on their “smart phones”, eliminating any actual valid and useful social function to macroeconomic workings.

    What we have is the modern Technocrat’s version of Rome at its post-conversion (to Catholicism) most corrupt condition–open graft, greed, flagrant and obscene abuse of power among the church hierarchy. For a picture of our times, read a frank history of when Rome sunk to the lowest depths–that’s where we are close to finding ourselves and where we’re continuing to go.

    People in power are still frantically seeking any way to avoid doing something honest and conducive to long-term health. Rome damned itself and we’re doing that again now.

    1. LeonovaBalletRusse

      proximity1, well said. For more on the *decline of Rome* see: “The Secret of Oz – Winner, Best Docu of 2010 v. 1.09.11″ uploaded by villstill3 on Feb 2, 2011 to YouTube:
      http://www.youtube.com/watch?v=swkq2E8mswI – makes perfect sense, and it does not contradict your view. Most intriguing today are insights into the goldbuggery of Rome, and into the Lion in the Poppy Field. How the metaphors connect today! As if BAUM has RISEN FROM THE DEAD.

    2. readerOfTeaLeaves

      They, having a free hand to operate, they set about to make the economy a personal little “app’ on their “smart phones”, eliminating any actual valid and useful social function to macroeconomic workings.

      Disagree.
      The reason smartphone apps work is because they are simple.
      The best apps simplify.

      The bankers have done the opposite: they complexify.

      Your comment insults smartphones and apps.

      1. proximity1

        RE:
        “Disagree. The reason smartphone apps work is because they are simple. The best apps simplify. The bankers have done the opposite: they complexify. Your comment insults smartphones and apps.”

        —————

        Yes, well, to be fair, there is context and purpose behind my argumentation that, unless you’ve read Neil Postman’s Technopoly (1992, Knopf Books, Random House, N.Y.), you’d be excused for not knowing. And, let’s defer any longer discussion on this matter until you have read Postman’s Technopoly; it’s a book of supreme importance and I shouldn’t do it the disservice of resorting to a simplified use of it here.

        On another point–owed to insights gained in part from Postman–one cannot in fact ‘insult’ inanimate technology. “Smart-phones” and “apps” have no sensibility and thus cannot take offense so, you see, one can’t insult them. One can insult those who design, engineer and manufacture this hardware and software. You miss my point though, if you think that I did even that much. The technology doesn’t care. It’s a tool, though in its ramifications it’s a tool which makes our times qualitatively different for good and ill but I’d argue more for ill, than all the times which went before.

  12. Dr Duh

    In a positive development. I shot a deer on Thursday, so there will be meat this winter. Assuming there’s power…

    I wonder what the local rules are on greenhouses.

    That I’m even considering these contingencies makes me feel insane.

  13. aeolius

    The answer to the European problems is the same as it is for the US. The current problems are caused by the growth of China.
    In essentially a zero-sum world economy, China’s gains must be offset by someone else’s losses. Theonly answer to regaining some sort of equalibrium in the West is to build a tariff wall around China.
    It will be difficult in the short run. But impossible later on.
    As Cato knew in his time “Carthago delenda est” for Rome to survive.
    So it must be with China in our time

    1. LeonovaBalletRusse

      “We are a PACIFIC nation,” haven’t you heard? Think “Mayor Quan” on her Tianenmen Square gig at Oakland OWS.

      The spoils are being divied up: the American Empire and China are One; France, Germany, and Russia are One. One Plus One Makes ONE: the *newer math*.

    2. K Ackermann

      It’s not really a zero sum game. Everyone can grow crops, and all are better off.

      If China’s consumption wasn’t at 35%, but more in line with Western levels, then labor arbitrage would shrink, worldwide demand would rise, and so on…

  14. Typing Monkey

    …And yet, despite severe credit problems around the world, the US indices are holding up remarkably well–down very marginally (rounding error) over a 12month period despite Japan nuke mishaps, Middle East revolts, OWS, Europe’s mishaps, and of course the American banking system’s insolvency. CDS on BAC are now higher than they were during the 2008/2009 bust. And yet…

  15. be'emet

    mansoor (is this a pun on monsieur=monsewer of the doughboys?) has let the cat out of the bag at last: SOCIAL CREDIT! first time I have seen this idea named in NC! an idea, a method, alive and kicking about for a least a century. Poor EP (and me too?) went nuts knocking on a world that could not get it. While MMT and its allies give us theory aplenty, Social Credit tells us how to back money with our capabilities, and PRONTO. Eurocrisis, t’ain’t nothing, move some bytes.

    The rest is palaver, still helpful at times. What’s wrong with taking Kucinich’ American Monetary Act & NEED as starting points for critique, a system already submitted to the Congress?

    1. LeonovaBalletRusse

      “be’emet” doesn’t know the name “Mansoor?” Really? A fine restaurant in Baton Rouge, LA has exited under this name for decades. This name is nothing new in America. Why all the fuss?

      1. mansoor h. khan

        LeonovaBalletRusse,

        I was actually an IT consultant in Baton Rouge, Louisiana in 1997 doing Peoplesoft implementation for Cajun Electric Corp.

        And believe it or not my client told me about it (the restaurant called mansoor). But I never visited it to verify.

        Mansoor H. Khan

        P.S. Mansoor in Arabic means victor (as in whom god made victorious).

    2. mansoor h. khan

      be’emet,

      It is our knowledge (engineering knowledge and management knowledge) and teamwork that is the true backing of our currency and the world economy.

      But you already know that if you have had a job in life.

      This “social arrangement” called money (currency) is just a tool to facilitate this process of creation of goods and services and to use-it (consume it).

      What we teach in our economics books is banker bullshit designed to keep them in power. No other purpose.

      Mansoor H. Khan

  16. LeonovaBalletRusse

    ATTN: *Silver Lining* on http://www.youtube.com -

    “The Secret of Oz – Winner, Best Docu of 2010 v. 1.09.11″ uploaded by bstill3 on Feb 2, 2011 — Bill Still narrates almost 2-hr. video anent Frank L. Baum’s book, “The Wonderful Wizard of Oz”, interpreted by several astute observers within the *economics* frame and Baum’s take on the eternal goldbug putsch for monopoly over governments.

    Referenced is the argument by “Prof. Hugh Rockoff of Rutgers University, put … in his 1990 article in The Journal of Political Economy, “The Wizard of Oz as a Monetary Allegory.” Key speakers are Bill Still, narrator; Dr. Quentin Taylor of Rogers State University; Ellen Brown, Esq., author of “Web of Debt.” This is a comprehensive history of our *dilemma* as *free citizens*. It is not the usual *anti-Fed* propaganda piece that goldbugs offer today in an attempt to get rid of what THEY call *fiat* money, which is held to be a red herring in the video.

    This is a brilliant, comprehensive, grounded contribution to our discussion at NC, and it should be trumpeted far and wide. Occupiers should have it playing on a loop in every location. It might lead to a universal awakening.

      1. BarbaraNH

        This film is a lot of claptrap.

        While I might agree with the basic proposal that the government should print money directly, the film’s reasons and basic arguments are based on a complete mischaracterization of the Fed/government relationship and lies about the national debt and its effect on taxpayers.

        Just more disinformation. Too bad.

  17. frank

    Yves,
    It is my understanding that Italy has 300 billion euros maturing through all of 2012 and not just in February. (“remember, the day of reckoning comes in February, when Italy has to roll €300 billion”).

    I wholeheartedly agree with you that we will see more failed sovereiegn debt auctions. Even beginning this Tuesday in Italy when they attempt to bring 8 billion to market.

    Respectfully, do you have a cite that shows the 300 billion all hitting in February.

    Thanks for all. And happy thanksgivng weekend.

    1. LeonovaBalletRusse

      Since when was Italy a real nation-state for long? It doesn’t suit “Italian” genius over time. Let the city-states rise from the dead once more.

      Venice, Florence, Urbino, go ahead and do your thing; but IGNORE the *Holy Romans* this time. Join C 21 for real.

  18. be'emet

    ballet, etc: Be’emet knows, but does Mansoor? tout doucement, svp.

    you’re wonderful, Ballet, and I love your posts. Now how about touching your toes down on Social Credit, Kucinich, vs. palaver generally? We will all benefit.

    1. LeonovaBalletRusse

      I’m sorry, I’m too ignorant to have an opinion on the topics you suggest. I am not an *expert*, just an enthusiastic channel for other people’s genius in books or films which I think will help the cause of *freedom* for the 99%. I respect the *shoulders of giants*, on which I do not deign to stand, but I can remind others of wisdom from the past, when it comes to *Our Struggle*. This is part of my little dance on the stage of life, until I drop or something/someone ends it for me.

      W.H. Auden: “Death’s Echo.”

      1. mansoor h. khan

        LeonovaBalletRusse,

        Ballet,

        Looks like you are well read. Have read Siddhartha by Hermen Hesse? If you want to know how a traditional mind thinks about the universe.

        Mansoor H. Khan

  19. mac

    Merkel is an East German tutored in the USSR world of lets pretend. they said that “they pretend to pay us and we pretend to work”, that is the world she was educated in and grew up with. Everything was a pretension.

  20. Hugh

    Just to recap briefly, there has been no European solution because kleptocrats do looting, not solutions. The policies of Europe’s bought and paid for political classes have been geared toward bailing out their 1%s, not their 99%s. In this regard, we need to distinguish between German and Greek (Italian, etc.) 99%s and German and Greek 1%s. Talking about Germany and Greece without this implicit distinction plays into the hands of class warriors and distracts from who the real guilty are and who benefits from all of these non-solution solutions.

    This is important because if the ECB intervenes or there is a grand “solution”, it will almost certainly go to bailout Europe’s 1%s and do so on the backs of their 99%s. What is needed is not just ECB action but a complete restructuring of Europe’s finances, trade, banks, and debt as well as replacement of its current political classes and transfer of wealth away from its 1%s. All of these are major changes and it is hard to see them being accomplished by anything short of revolution.

    So the alternative is that things fall apart, but it is again important to recognize that, as 2008 showed, the rich come out of crashes with greater wealth and power relative to their 99%s. Crashes are a disaster for us, but the rich? not really.

  21. Tortoise

    I find it ironic that if a really bad disaster had happened, like an earthquake and tsunami that had destroyed the richest parts of Europe, then the powers that be would know what to do. Reconstruction would start very quickly and perhaps big problems like youth unemployment would be solved overnight. I doubt anyone would be talking about economic Armageddon.

    One way to look at the mess is that it is a mere financial crisis, as opposed to much worse alternatives. The infrastructure is intact, the factories still stand, there are still plenty of houses, etc. So, a rational observer may shrug the whole affair as much ado about something. I, for one, think that economies adjust to changing conditions. If deflation begins (which has not happened, not by a long-shot, not even in Greece), the ECB can then print unlimited amounts of money and they do have the flexibility to distribute this money around. In fact, ECB has a target inflation of 2% and will increase the rate of printing as soon as inflation falls below these rates. And if people really thought that the euro is doomed, they may force the euro lower, which will also help the situation of those who owe euros.

    The media convey a picture that is not realistic. I am not a conspiracy theorist but, if I were, I would think that the whole frenzy is instigated by banks that want the sovereign governments and the ECB to save them, again.

    I was in Paris in the middle of November for a business trip. The French enjoy a very comfortable standard of living and it is practically impossible to get a table on a Saturday in a good Parisian restaurant, unless you make reservations several days in advance. Even neighborhood Brasseries, where you can have a tasty meal for about 25 dollars, were full on weekdays. There, you see middle class folks, a lot of them young. The people I talked to are somewhat concerned about the crisis but no signs of panic.

    Of course, there are real problems but they are wholly due to unequal distribution of burdens and rewards. But as a mild-mannered Frenchman told us, “The politicians made this mess. They better fix it or we know where we have stored the guillotine.”

    1. YankeeFrank

      Surveying the lifestyles of the central Parisian wealthy and upper middle class won’t tell us much about what’s really going on economically. Its like going to Manhattan and seeing all is well, without understanding that the vast majority of Americans are living in poverty.

    2. reslez

      In fact, ECB has a target inflation of 2% and will increase the rate of printing as soon as inflation falls below these rates.

      The most the ECB can do is fund the budget deficits of governments. That’s the only way the ECB can facilitate what you might call “printing”. What the central bank does is alter bank reserve balances, they don’t create new net financial assets. Only government spending does that. And the ECB will impose austerity as a condition, which means spending will not increase.

      In terms of solving the crisis the ECB is twice wrong. Even if they remedy the first mistake, they will still make the second. The psychology has to change first: careers must be destroyed. That’s why this still has years left to play out. And they are not playing children’s twiddlywinks, they have put fascists in control of Greek government. This is not going to end well.

      And if people really thought that the euro is doomed, they may force the euro lower, which will also help the situation of those who owe euros.

      It would force the euro lower versus what, exactly?

      And if the euro goes lower, how does that help people whose income is in euros and who have debt they need to repay in euros?

    1. LeonovaBalletRusse

      Is it time to re-enact in our time “TRADING PLACES,” the film example of Aaron Russo, the enlightened, the patriot, may he *rise from the dead*?

  22. Gil Gamesh

    The Eurozone implodes. US TBTPs fall like rotted timber. Voila: Great Depression 2.0, courtesy of the world’s central bankers. But what the hell: the US is going to implement austerity programs, further cut safety nets, further criminalize poverty, and start shooting OWSers. And the piece de resistance: President Romnney will bomb Iran. Happy Holidays!

  23. Bill

    Dbl top DXY , double or triple bottoms on most TBTF . I see a change coming , Banks up , Euro down more , dollar up more , TBTF recapitalized for EURO debt losses ( QE3 ) after market falls some more , after Euro crashes – EUO gaps , can’t last . FWIW

  24. Glen

    Call me just too simple about all of this, but a whole lotta rich people are not going to get paid back.

    Buncha bank fraud and that money is GONE.

    Poof!

  25. SteveA

    The game was over months ago when the Euro technocrats decided a small haircut on Greek debt would solve everything. The banks could recap, and thanks to a “voluntary” scheme, EU banks would be spared the even greater cost of paying out on the CDS they had written.

    Of course, at the time, EU technocrats were poo-pooing contagion effects on larger EU countries. So so smart! Because everyone would believe that the EU would draw the line on Italy and Spain, and there would be no talk of haircuts on that debt. Well, everyone at the EU meetings who spoke German or French wanted to believe it anyway.

    The Germans may feel they will emerge fine from an EU bust-up. Perhaps so, and certainly they will do better than smaller EU economies. That is, so long as Germany can continue exporting–always a good bet in a depression. The ruined neighboring economies will keep buying German goods at pre-crisis levels–what a nice fairytale.

  26. Sy Krass

    Isn’t it entirely possible if the ECB started ‘printing,’ in any form right now that interest rates may spiral up even further?

  27. Cathryn Mataga

    The assumption would be that the ECB would just start buying national bonds, whatever interest rates they were offered at. But I think this deal is off, at least until the squid conquers Germany, as well.

    I think key difference is that in the USA and Japan the labor movement is either dead, or pacified. But in Europe, there are no breaks holding back demands on increased benefits and wages for government employees. So once government expenses become decoupled from tax revenue who knows where it goes.

  28. Cathryn Mataga

    And me, I’m kind of expecting rally in the EURO. Only based on the observation that that currency markets seem to always do exactly opposite of what you expect if you apply common sense. Yen going up with the Fukushima reactor explosion is a perfect example of this.

  29. Fiver

    Over and over, all the fingers keep pointing at Germany and the ECB as if THEY were the criminals, when it’s evident that the “no other option IS ACCEPTABLE” is actually in the hands of WALL STREET and the Fed/Treasury/IMF/BIS all of which are the same face of Washington, which we all know is OWNED BY WALL STREET.

    I cannot believe the level of “groupthink” which is nothing more than abject surrender to yet more extortion. As if this has not been a financial war. It occurs to nobody that you could STOP the speculative attacks if it was desired. You could close markets. You could do any number of things to resolve this in a sane, orderly and in every way superior manner IF the US power elites were interested in taming “markets” rather than using them as a bludgeon to more quickly establish their project, the supremely undemocratic Market State.

    I expect Germany to fold short term – the entire international financial structure is still owned and operated by the US. Though that hold is weakening, Germany is simply no match. But by even the medium term it will be clear the Germans and Europe as a whole are going to part ways with the US, as will Japan.

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