By: Jeff Cox
Allowing deeply indebted European countries the chance to restructure their obligations seems to be the most direct approach to resolving the problem, yet has been met with resistance that likely will only prolong the crisis.
The reason: What once was thought to be a minor problem involving only some smaller peripheral nations in the European Union is now increasingly being recognized as a global train wreck about to happen.
"The problem in Europe is that the banking and national interests have been uncommonly incestuous over the years with banks in France owning the debts of companies in Spain and Spanish sovereign debt, while the banks in Spain own the debts of French companies and the French sovereign," Dennis Gartman, hedge fund manager and author of The Gartman Letter, wrote Friday. "In that environment, as one area of the economy contracts, others do also in a rush to liquidity and to the detriment of all."
The eurozone debt dilemma has been one of the root causes of market turmoil over the past two months, even though the problems have been known since at least early 2010.
Until recently, the popular narrative was that the debt burdens in smaller nations like Greece and Italy would be contained and not cause widespread contagion. That belief, though, has waned amid revelations that some European Union banks are having trouble raising capital. The ability to raise money would be critical in the event of defaults, as banks holding the restructured debt would have to recapitalize. IT WAS ALWAYS CLEAR WHAT WAS GOING TO HAPPEN. HOPE AND OPTIMISM ALWAYS TRIUMPH REALITY IN OUR DELUSIONAL WORLD! EVERY FINANCIAL ASSET ALONG WITH MANY HARD OR REAL ASSETS IN AMERICA ARE STILL EXTREMELY OVERVALUED AT THIS POINT. THE BLUFF OF THE BANKS PRETEND AND EXTEND VALUATIONS ARE GOING TO BE CALLED SOON AND THE LIKELIHOOD OF THE DERIVATIVE DOMINO'S TAKING A NASTY TUMBLE GROWS WITH EACH DAY. WHEN EITHER OF THESE TAKE PLACE REAL ESTATE HEADS DOWN HARD AND EQUITIES WILL FALL TO NEW 10 YEAR LOWS.
Suddenly, a problem that looked small and manageable now has much broader implications. BECAUSE OF ALL THE LIES SO CALLED LEADERSHIP TELLS. IT IS ONLY WISE TO PLACE YOUR HOPE ON PROBABLE OUTCOMES AND RELIABLE INDIVIDUALS. A LOT OF DISAPPOINTMENT LIES AHEAD.
"We are finding out here that all economic activity in today's environment requires a leap of faith and a sense of psychological assent that can shred at a moment's notice, (BECAUSE IT'S ALL BULLSHIT!) taking the cloth of society and tearing it asunder," Gartman said. "This is the perfect storm of a crisis of confidence and at the moment all confidence is lacking and waning." BELIEVING OR TRUSTING WALL STREET OR WASHINGTON IS FOOLISH BY DEFINITION AT THIS POINT!
Dual reports this week indicating that a European bank had borrowed $500 million from the European Central Bank, and that the Federal Reserve was looking into the stability of the EU financial system, helped shake confidence further.
The market already had been in the midst of a seven-week rout fueled by the stalemate in Washington over the debt ceiling and concerns that the US was heading back into recession.
The overhang of the eurozone crisis has fueled anticipation that economic problems are accelerating—and is drawing calls from numerous quarters that the EU stop denying the severity of the debt problem and start employing solutions. WHAT SOLUTIONS? WHERE WILL THE TRILLIONS COME FROM, GERMANY? RIDICULOUS!
The idea is that once Greece defaults, others in the same boat, will be able to restructure their debts in an affordable manner. While the cascading defaults will cause pain, they also will pave a way back to stability for the indebted countries. BANKS WILL FALL LIKE FLIES WHEN / IF GREECE DEFAULTS AND THE CONTAGION WILL SPREAD AMONG ALL THE INSOLVENT TENDER.
"How does this thing end? It ends when the politicians stop kicking the can down the road and they allow Greece to default and they allow Greece to exit the euro," William Browder, CEO of Hermitage Capital Management, told CNBC. "At the end of the day, I don't know how many cans they're going to kick down the road." HOW MANY DO THEY HAVE LEFT? REMEMBER THE DEBT NUMBERS GROW LARGER WITH EACH SUCCESSIVE KICK. AT SOME POINT THE DEBT COLLAPSES IN ON ITSELF. IT WILL WORK THIS TIME, JUST ONE MORE TIME, IT HAS TO WORK.......... AND THESE ARE SUPPOSED TO BE EDUCATED PEOPLE?
The extent of contagion from allowing a default, though, is an unknown, making employing a solution elusive. THEY HOPE AND ARE OPTIMISTIC THAT THERE WILL NOT BE ANY CONTAGION. IDIOTS! A WORLD FULL OF EDUCATED IDIOTS! EVERY DECISION IS BASED ON MORE HOPE AND BULLSHIT THAN THE LAST. EVERYBODY KNOWS HOW THIS TURNS OUT.
One estimate is that the ECB has a 444 billion-euro ($634 billion) total exposure to the peripheral PIIGS—Portugal, Italy, Ireland, Greece and Spain.
On the US side, domestic banks have little direct debt exposure to PIIGS debt but they do have counterparty risk to European banks, which analyst Dick Bove at Rochdale Securities recently put at just over $190 billion, including about $10 billion from Greece. A VERY OPTIMISTIC FIGURE FROM A GUY THAT HAS BEEN WRONG HIS WHOLE CAREER. DICK BOVE SPEAKS AND BULLSHIT POURS FORTH, JUST WATCH CNBC TO SEE "NO PROBLEM" DICK AT WORK.
Greece has gone to the ECB for about 60 billion euros in funding to cover a loss in private-sector deposits. However, Italy also has sought funding even though it has suffered no drop-off in deposits, a move that added to the mystery of how deep the debt problem runs. AS SOON AS THE CHARITY BEGINS THEY WILL ALL WANT AND NEED IT. THERE IS NO WAY THIS WORKS OUT WELL. PEOPLE ARE GREEDY ASSHOLES WHEN MONEY IS INVOLVED AND THE PEOPLE THAT RUN THESE COUNTRIES ARE NO DIFFERENT. IN FACT THEY ARE VERY RICH SO THEY ARE THE BIGGEST ASSHOLES OF ALL. PUT THEM ALL IN THE SAME ROOM AND THE LAST THING YOU GET IS A SUSTAINABLE SOLUTION.
"The latter is also the key reason why the Italian crisis has triggered global risk aversion and stressed other markets as well," analysts at Bank of America Merrill Lynch said in a note.
That stress is likely to continue until policymakers are willing to grapple with the difficult decisions that ultimately will have to be made. SO THIS CRISIS LASTS UNTIL UNREASONABLE PEOPLE WITH SELFISH AGENDAS COME UP WITH REALISTIC, EQUITABLE SOLUTIONS.
"We hear rumors of problems in funding, on the part of various European banks, from the largest to the smallest and we do not doubt that for a moment," Gartman wrote. "Of course some banks are finding it difficult—if not nearly impossible—to fund themselves. We are at that moment in time when the strangest things take place."
While the economic failure of globalization is already evident, its political failure is only just beginning. Civil unrest in Greece and rioting in England, for example, are only cracks on the surface of a much deeper and more complex problem. Since globalization is the agenda of the largest corporations in every country, leaders in Europe, the United Kingdom and the United States almost universally support it. In the face of growing global chaos, political, financial and business leaders do not appear to be contemplating a return to simpler, genuinely democratic, self regulating and sustainable economic and political structures. Nonetheless, the economic and political consequences of globalization will continue to escalate until efforts to force economies and political nation-states into an artificial global collective cease.
REMAINING INVESTED IN THE STOCK MARKET AT THIS POINT IS THE EQUIVALENT OF A CHARITABLE DONATION AND AN IQ TEST AT THE SAME TIME.
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