This page has been archived and commenting is disabled.
Debt Bubble Chronicles: And Heeeeere’s the European “Lehman Event”
Earlier this
year, I noted that the European debt crisis was mimicking the US’s 2008 banking
crisis almost to a T. Greece was the “Bear Stearns” issue: a minor player that
was swallowed up in the drive to maintain the appearance of stability.
Then came
the $1 trillion bailout, the equivalent of the Fannie/ Freddie “blank check”: a
massive sum of money thrown at a problem meant to convey the illusion that the
powers that be have everything under control and that systemic risk is
non-existent.
During the
time of my first article, I stated that all we needed now was a “Lehman event”
the event which proves beyond all doubt that contagion is occurring and that
the entire system is at risk.
Well, it
looks like we’re about to get it.
The ink on
the Ireland bailout is not even dry and already Portugal, Italy, and Spain are
crumbling. The market is no longer buying the “it’s only this particular
country’s problem” jibe. The notion of systemic risk is finally beginning to
dawn on investors. And as 2008 proved, once panic hits, it hits in a BIG way.
Indeed, as
ZeroHedge recently noted, the yield on the latest Ireland bailout involved
interest rates for the country at 6.7%, a full 1.5% higher that the interest
demanded of Greek debt. In other words, the IMF and EU view Ireland’s bailout
as more risky than that of Greece.
Does Ireland
look worse than Greece to you?
|
Country |
GDP |
Deficit/GDP |
Debt/GDP |
|
Greece |
$329 |
15.4% |
126% |
|
Ireland |
$227 |
12.2% |
65% |
So not only
is Ireland deficit-to-GDP and debt-to-GDP ratios lower than Greece’s but the
country’s actual GDP is smaller, so we’re talking about a lower nominal amount
of money here too.
And yet
Ireland is considered MORE risky than Greece?
Let’s be
blunt here. Ireland is not riskier than Greece; it’s simply getting bailed out
later in the game, when the world has begun to realize that all of the bailout
funds are basically getting flushed down the toilet and ultimately default is
the only real solution. None of this money is going to be paid back… so the
higher interest rate is an attempt to recoup as much as possible before the
inevitable default hits.
And Spain
and Italy are next.
In plain
terms, we are literally on the brink of the “Lehman” event in Europe. Everyone,
even the dumbest bulltard on the planet, are beginning to wake up and realize
that the plain obvious fact that you cannot solve a debt problem by issuing
more debt. This has NEVER worked in history. It won’t now either.
I’ve been
warning about the return of systemic risk for months now. If you haven’t
already taken steps to prepare by now, WHAT ARE YOU WAITING FOR? Do you REALLY
think the European debt Crisis will be “contained”? Last time the word
“contained” in reference to a debt crisis was in the US in early 2008.
How’d that
work out?
Good Investing!
Graham Summers
PS. If
you’re getting worried about the future of the stock market and have yet to
take steps to prepare for the Second Round of the Financial Crisis… I highly
suggest you download my FREE Special Report specifying exactly how to prepare
for what’s to come.
I call it The Financial Crisis “Round Two” Survival Kit.
And its 17 pages contain a wealth of information about portfolio protection,
which investments to own and how to take out Catastrophe Insurance on the stock
market (this “insurance” paid out triple digit gains in the Autumn of 2008).
Again, this
is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com
and click on FREE REPORTS.
- advertisements -
Aren't all these bailouts insane ? It's truly a commentary on the worthlessness of middle class labor. I live outside of a major city in the USA. I'm a middle class guy. I'm not wealthy by most standards, but I've been living off savings for a couple of years trying to decide what to do with my life. It's the only time in my life that I have not worked for more than a month. I'm 50. I worked in the field of finance for a large investment bank and left the business in 2008 when the world melted down. I concluded that something major had changed and I needed to move away and think about what to do next. I left on my own and have not taken a penny of unemployment. I have paid my health insurance premiums out of my pocket. I didn't get any package or buyout. I just left. I concluded that the business was a dirty business.
Middle class workers in my town get up at 5am everyday, fight traffic and congestion to get into the city by 8am to slave at their jobs which they mostly despise. They then do the same in reverse on their way home. The better part of 3 hours of their life each working day is spent commuting to something they hate to do. They barely make enough to pay their bills. Most of them work for companies that they think are unfair. Many of the jobs don't add any real value to society. Many middle managers and paper pushers. They are watching their lives pass them by. Life is short.
The absurdity of all this - is that money is just printed and handed to the banksters - to bail them out of their bad deals. What does this say about the middle class worker ? His work and his time - his life - is completely worthless. He spends 12 hours a day thinking about work to pay for food and shelter.... ; yet.... there are those in control of the society that are privileged enough to print money instead of work for it.
How long will the middle class tolerate this absurdity.
Is it right that a man should spend his life at a job which is just....a means to an end (food and shelter) ? ----while others in society enjoy the freedom to do whatever they wish at the expense of the working man ?
This is wrong. It's a complicated concept and one which most workers would not readily comprehend or understand. That's the advantage the banksters have over the un-educated masses. The masses have spent time in school learning about useless factoids - instead of realizing and seeking the issues confronting and shaping their existence. The ability to print money is FREEDOM.
The bankster have taken our FREEDOM.
Is it fair that only they should have this luxury ?
Rise UP !!
@junk as always
only idiots compare debt to fantom GDP.. thats why those countries
are fucked cause all those so called eCONomists and ANALysists
compare this way..
only and right way to compare is cash flow/debt.. AKA what goverment revenues
, what goverment outlays and how much out of revenues goes to serve debt...
not sure about Ireland /Greece.. but 100% sure about USA..
it spend 1$ more for each 1$ in tax revenues.. out of almost 4$ trln
of federal ouylays only 2.1(2) collected in taxes.. rest of MONEY PRINTING..
USA is bankrupt. but people are so stupid cant event comperehend that..
well seems they deserved that..
lets wait 2,3 years more and FED gonna print whole federal budget..
alx
Not even a FAN separator could extract solids from this slurry....http://www.youtube.com/watch?v=qamf5N2Ooco&feature=related
------------
Dissolution of the EU would make the New World Order dudes very unhappy.
Meh... the bailouts & guarantees could also continue for years. Tough to know which way it will go, but I don't think the Europeans want to dissolve their union.
They don't want to dissolve it yet, because they are still operating from the thesis that a supra-national union (along with "robust" welfare state) is the only way to prevent another Hitler.
But the structures of this union will prove to be the rungs the next Hitler will climb. And when they finally see that coming, they won't be able to distanced themselves from the notion fast enough.
how did that work out for me? fine i was short in 2008. went long in 2009 but not for long enough. most of 2009 and all of 2010 was a bust. so please, lets let 2011 be like 2008 and 2009...it will work out just swell...!
The cancer from the bad mortgage securities continues to metastasize and emerge as life-threatening tumors in other parts of the TBTF bodies.
http://www.nakedcapitalism.com/2010/11/more-on-bofa-employee-damaging-admissions-re-failure-to-convey-mortgage-notes.html
And wheeeeerrreeeesss Harry!
Wagner that is....
BREAKING NEWS!! – BofA NEXT WIKILEAK TARGET!!, watch this video "WIKILEAKS NEXT VICTIM – BANK OF AMERICA FRAUD EXPOSED" at (http://www.youtube.com/watch?v=Z33i8ORYZhI).
by Anonymous
My gut feeling is that TPTB has done this intentionally to bring down BoA. Bob Chapman has stated for months? now that BoA is totally bankrupt and will crash. Even pulsescan72 got information a few weeks ago that BoA has huge problems. Could it be that Goldman Sachs, JPM and the other big boys want to get rid of BoA? Just a thought...
Doubt this. according to Reggie Middleton, all the big banks have derivatives exposure TO ON ANOTHER that far exceeds their capital. So if they kill BoA, they all die.
"TPTB has done this intentionally to bring down BoA ... Could it be that Goldman Sachs, JPM and the other big boys want to get rid of BoA"? Yes! AND to do it, they use FOX News. Makes sense!
Get rid of the disease by whacking off the link to it. In this case the festering pool that was Countrywide can be further distanced from by taking down BoA. Too many crumbled roads makes it a bit hard to unwind things, to pick up the true scent...
"In plain terms, we are literally on the brink of the “Lehman” event in Europe. Everyone, even the dumbest bulltard on the planet, are beginning to wake up and realize that the plain obvious fact that you cannot solve a debt problem by issuing more debt. This has NEVER worked in history. It won’t now either."
You should wake up and realize the obvious fact that issuing more debt is not about solving a debt problem.
It is liquidation, plain and simple. Power is not interested in solving a "debt problem," it is interested in looting, pure and simple.
So the only question is: how much more is there to loot?
Well, let's take a look at the most powerful class in the United States: those with a Bachelor's degree or higher. They own all the houses, make all the income, spend all the money.
According to the BLS, their unemployment rate last month was 4.7%.
4.7%!! And you're telling me some apocalyptic scenario is about to unfold.
Come back and tell me when this figure is 40%. Until then, just shut up.
The long and short of it is, there is going to be $70 trillion more in bailouts, then we'll see where we are.
But I warn you: $70 trillion is already baked in.
Oh, and by the way: in the long run, we are all dead.
You've got somewhat of an argument, but it's lacking...
$70 trillion baked in? Where does this number come from? But, more importantly...
Shit's not linear! There are TIPPING POINTS! Things just don't run smoothly up until it's all gone. At some point there will be realization (I'm figuring that things just might get tipped with the rash of WikiLeaks- the backlash is starting to boil- looking at the water you don't see it boiling yet, but you don't exactly know how far away the boil is, is it far, or is it near?).
Adding to the crushing weight is the fact that economies of scale work in REVERSE. Again, this shit ain't linear. And it's this reverse economies of scale (due to contraction) that will negate any hope of turning the "economy" around: GM hires 1,000 engineers to develop electric cars; just who is going to buy these cars? (China, the biggest market, is sitting on a powder keg- they're going to be smashing their inflation monster, and with it will go the pile of near worthless USD; they'll turn more internal; the question then is whether they have enough internal wealth to buy up GM's electric cars?).
You've got somewhat of an argument, but it's lacking...
$70 trillion baked in? Where does this number come from?
FIGURE $1.8 QUADRILLION IN BETS.
But, more importantly...
Shit's not linear! There are TIPPING POINTS! Things just don't run smoothly up until it's all gone.
TELL THAT TO NICHOLAS II.
At some point there will be realization (I'm figuring that things just might get tipped with the rash of WikiLeaks- the backlash is starting to boil- looking at the water you don't see it boiling yet, but you don't exactly know how far away the boil is, is it far, or is it near?).
WHO EXACTLY IS GOING TO REALIZE THIS?
Adding to the crushing weight is the fact that economies of scale work in REVERSE. Again, this shit ain't linear. And it's this reverse economies of scale (due to contraction) that will negate any hope of turning the "economy" around: GM hires 1,000 engineers to develop electric cars; just who is going to buy these cars? (China, the biggest market, is sitting on a powder keg- they're going to be smashing their inflation monster, and with it will go the pile of near worthless USD; they'll turn more internal; the question then is whether they have enough internal wealth to buy up GM's electric cars?).
GEE, SOUNDS LIKE A SCENARIO IN WHICH ALL EMPLOYMENT FOR THOSE WITH A BACHELOR'S DEGREE OR HIGHER ARE LAID OFF!!! FUNNY, LAST TIME I LOOKED AT THE FIGURES, MOST OF THESE SLOBS ARE STILL WORKING.
SO, IF YOU'RE SUCH A GENIUS, TELL ME WHEN BLS BACHELOR'S UNEMPLOYMENT WILL REACH 10%. WHAT MONTH AND YEAR? SEE? YOU HAVEN'T A CLUE.
Hey LOSER, anyone who blasts away with nothing but all CAP is a LOSER. Shouting wil get you nowhere. I hope you're in the upper classs that gets fucking stomped.
And meanwhile, while we wait for your "most powerful class" to reach 20% or 40% unemployment, exactly WHAT will be happening to all those in the "lesser" classes, among whom unemployment is ALREADY ~20%? Are they just going to sit around waiting for your developments to unfold, while millions of them lose their extended unemployment benefits over the next few months?
You might want to try looking through the correct end of the telescope next time, and not the large end.
Yeah. All bach. degrees are happily employed making > 35k, if that. Wonderful! And all of them have loan debt and we're not talking about houses.
Back to normal folks. Nothing to see.
What he said.
what he said about what he said
what he said about what he said
ha, ha. funny. +1
"According to the BLS" are you joking!?!? Your going to base your reason on the accuracy of the BLS!!! Buy any bridges lately?
Then double it: 9.4%. Still no crisis, Mellonesque liquidation continues on schedule.
Then triple it: 14.1%. Still no crisis, Mellonesque liquidation continues on schedule.
Then quadruple it: 18.8% Still no crisis, Mellonesque liquidation continues on schedule.
See? Just do the math and eschew sensationalism.
Mellonesque liquidation continues on schedule.
Where are you seeing any liquidation, much less a Mellonesque variation on liquidation? Bailouts are the opposite of liquidation.
Only Iceland went the liquidation route. They'll be ok. The rest of Europe will be in thrall to the banksters for quite a while.
David Ricardo. Answer me this, is it Mellon liquidation or looting? Which one is it since you put it in all or nothing terms. The $60T, you are talking derivatives? I keep seeing this same comment. Number one we don't really know exactly the number now do we, although I do estimate your number is close. The asset stripping has already occurred and investors not shrewd enough to get out will be getting a haircut and forget about the other 2% settlement fees.
What the heavy handed measures are for is bank recapitalization when to me restructuring should have happened in 2008. Confidence has been destroyed and a public debate about continuing the CB model has surfaced on a global basis. The Information Age and the spread of information and the speed at which it happens is far different than the 1930's. So I say you are incorrect that it is now only about further looting and how much is left.
The real issue is the Golden Calf effect of wealth concentration. Sending six billion people out into the dessert with half a gallon of water is probably a very bad idea. Think the investment community is going to reinvest? Sure they will, right after the last part of the bust phase, assets plummet and true regulatory reform is done to promote capital formation.
BRIC always had plan B with a peer-to-peer lending model supported by gold held in local banks. Did you think it was odd the PRC was encouraging its citizens to buy gold?
Not very sympathetic to those without a BA are you?
But really, insinuating that others here are dumb and just don't get it when you yourself only know part of the story (but certainly not all) only makes yourself look foolish.
LOL
Wonder how many will be on food stamps...
Quadruple it: 168 million. Still no crisis. Just do the math.
+++
He's correct that investors have figured out that they aren't going to be getting their money back. What shocked me yesterday was the fact that they through Belgium into the mix as having financial troubles too.
Ladies and gentlemen....without a doubt, an event...a racial event...will trigger the next major to war.
...It will be a "Muslim" event...
hrh ADF
This guy should really buy a brain some day.
The interest rate is higher for Ireland because the debt is supposed to be paid back in 2012 instead of 2015. Plus the IMF share is with no interest for 3 years...
I dont know how we can let this kind of guy with no education talk, he's useless and he has no clue how markets and economy work. He's only selling on the fear and hope of people to sell them "advises"...Pathetic
You left out that the IMF and EU are demanding 20% be from Irish Pension funds (against Irish and EU law).
Are you happy about paying taxes to fund an IMF bailout of Greece or Ireland?
Are you "wealthy"? (+$250,000 per year U.S.)?
How about if we tax you an extra 5%-10% to bailout the PIIGS? (or you could just send the IMF a check, eh?).
What good do you see in the IMF, taking funds from many nations via punitive taxation and fees, using the money to bail out irresponsible banks at the expense of the working class citizen?
here's the way i explained it to my wife last nite after reading zero hedge articles say that she has stock in GM and doesn't like that it's stock is going south( down the toilet ) so she sells out and goes and buys some Ford stock or Toyota stock to make back her losses then satart making money again. But what if the USA government bailed out GM and she couldnt opt out of GM stocks she had to pay no matter what ? I told her that thisis what is happening in EU where the Bureaucrats took over the debt and force tax payers to pay for thier decisions it's that simple.
Thank you for chiming in. I was begining to actually think that digging a hole wasn't going to FILL IN the hole, but with your briliance I now see the light...
That Irish debt/GDP doesn't include the tidal wave of debt coming from the "bailed-out" Irish banks.
"Everyone, even the dumbest bulltard on the planet, are beginning to wake up and realize that the plain obvious fact that you cannot solve a debt problem by issuing more debt. This has NEVER worked in history. It won’t now either."
I agree since deleveraging has only begun there can be no sustainable recovery but there will be bounces along the way that some will use as the "all clear" sign. Now as for the those bulltards I think there are still a few roaming the ZH blogs...
That is it - game over. Belgium is next. Germany CDS is also widening: "Germany cannot keep paying for bailouts without going bankrupt itself," said Professor Wilhelm Hankel, of Frankfurt University. "This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings."
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8160999/EU-rescue-costs-start-to-threaten-Germany-itself.html
TBTP are losing control.
This will likely be the cause of a big round of deflation, followed by more bailouts, followed by deflation, more bailouts, resulting in continuing cost-push inflation in basic needs and... Gold being used to recapitalize the system.
All in good time. I give it another 1-2 years.
The smart money is always too early. I say 6 years. I'm dumb money.
I'm with you. Porphets of doom, even when correct, tend to be impatient for validation.
John Brown comes to mind. 6 years sounds spot on.
six years before what? countries in the euro zone opt out of euros and default on sovereign debt? or interest rates rise to double digits on that debt? or european stock markets decline precipitously?
seems that the rate of change on the european debt crisis is accelerating. the crisis in greece hit a crescendo about may of this year. this is december, barely seven months later.
bear stearns hit the skids in march of 2008, lehman in september, about six months later.
the decline in u.s. stocks, which began in october 2007, hit waterfall in october-november 2007, about one month after lehman. one month. not six years (or one to two years).
p.s. the civil war began in april 1861; john brown's raid on harper's ferry was october, 1859. eighteen months. perhaps you meant another john brown, though. the famous one did publicly consecrate his life to the abolition of slavery in 1837, 24 years before the civil war.
p.p.s. coincidentally, john brown's life is also an excellent cautionary tale on the dangers of debt peonage. the first really brutal depression of the u.s. dates to the panic of 1837 and didn't really end until the discovery of gold in california, 1849.
What are the ways recognizing these defaults can be avoided (even if only for a day, a week, a month)? Seems once we know how the trouble can be avoided (no matter the mid or long term costs) then that is what we should put our money on cause that's been modus operandi since Lehman.
Seriosuly, lets get on with it already.
THE FAN!!! THE FAN!!! DON'T STAND IN FRONT OF THE FAN!!!