Deconstructing Europe: How A €20 Billion Liquidity Crisis Is Set To Become A €1.6 Trillion Funding Crisis

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Tue, 02/09/2010 - 18:22 | 224126 cougar_w
cougar_w's picture

If they were thinking to kick the can down the road maybe that only works in the US, holder of the reserve currency.

Anybody else tries that and it's "teh flightz 2 safety" meaning USD.

The US might end up being the last one standing in a landscape of (figurative) finacial radioactive debris. Which is nothing much to crow about, notice.

Tue, 02/09/2010 - 18:47 | 224154 Anonymous
Anonymous's picture

That's intentional - he's implying that China is the only one who will be able to financing.

Tue, 02/09/2010 - 18:34 | 224138 Stevm30
Stevm30's picture

Only exit left: One world currency

http://www.youtube.com/watch?v=budGr3xgH-c

 

"It began with the forging of the great state issued fiat currencies...

Given to central bankers of each nation...

and within these currencies was given the strength and will to rule each country...

but they were deceived, for another currency was made...

the dark lord(s) forged, in secret, a master currency...

to control all others, and into this currency they poured their cruelty, their malice, and their will to dominate all life...

One currency to rule them all...

...history became legend, legend became myth...

One currency to rule them all, one currency to find them,
One currency to bring them all and in the darkness bind them.

Tue, 02/09/2010 - 18:44 | 224151 SteveNYC
SteveNYC's picture

Hahahaha!! Brilliant.

Tue, 02/09/2010 - 18:49 | 224157 dark pools of soros
dark pools of soros's picture

ummm Junior Mints?  is that it?

Tue, 02/09/2010 - 20:31 | 224265 Hephasteus
Hephasteus's picture

Skittles. The different colors denominate them. Favorite flavor becomes the most valuable. That way the odducks who like lime flavor can take advantage of the cherry herd.

Wed, 02/10/2010 - 02:22 | 224610 bonddude
bonddude's picture

I prefer a Charms lollipop and jujyfruits, thank you !

Tue, 02/09/2010 - 21:23 | 224325 Double down
Double down's picture

+100

Tue, 02/09/2010 - 19:05 | 224174 Anonymous
Anonymous's picture

The great worldwide debt unwinding continues. The unelected bureaucrats of the EU cannot stop the great debt deleveraging in the EU or the world.
There are only ultimately two scenarios, the EU (Germany) bails out Greece then they are asked to next to bailout Spain, Portugal, Ireland, Italy etc. This scenario would certainly end with Greece. The EU then tries to force Draconian economic budgets on the governments of Spain, Portugal, and Ireland etc. The populace of these nations revolt and say no and the governments of these countries then exit the EU and the EU unravels.
Or scenario two, which seems which has a 50/50 probability, Greece announces they are leaving the EU and defaults on their bonds and at some point in time the bond holders resolve to take a 90% haircut. Other countries like Spain, Portugal and Italy then follow suit and the EU again unravels.
The toothless EU politicians will announce economic tricks to extend the EU debt unravel but at best the charades last a few months. The worldwide debt crisis can’t be stopped with more gimmicks, the massive world debt will ultimately be resolved and it will be ugly and painful for much of humanity.

Wed, 02/10/2010 - 00:26 | 224505 David449420
David449420's picture

Let me suggest a third scenario. 

They collectively line every banker and most politicians up against the wall, expend a few dollars in copper & lead & then try to start over.

Do you think the rest of the world would catch on?

Great sigh. 

 

So, there's another pipe dream.

Wed, 02/10/2010 - 02:23 | 224612 bonddude
bonddude's picture

So mushrooming heads?

Wed, 02/10/2010 - 23:59 | 226183 Anonymous
Anonymous's picture

+10000000000 : )

Tue, 02/09/2010 - 19:07 | 224177 CB
CB's picture

I wonder what is promised to Germany to support the bail-out?

Tue, 02/09/2010 - 19:11 | 224182 cougar_w
cougar_w's picture

That's easy; they get to sell more Beemers to people who can't afford them.

Not even joking.

Tue, 02/09/2010 - 19:16 | 224186 CB
CB's picture

that is so dementedly true.

Tue, 02/09/2010 - 21:41 | 224346 DoChenRollingBearing
DoChenRollingBearing's picture

Doesn't matter what they promised Germany, they (Greece) will not comply.  Why should they?

They can swill Ouzo on the beach and wait on German tourists to trickle down when the weather warms up.  The rest of the PIIGS I'm sure are wising up fast, get some Euros from the Germans before THEY wise up and cut 'em off.

Can hardly wait for California, Illinois, New York, etc.

Wed, 02/10/2010 - 00:13 | 224497 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

right around the corner fell like im rollin in a '70 caddie....aw ah  aw   ah!!!

Wed, 02/10/2010 - 00:11 | 224494 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I have good credit.  I will buy a beamer.  Imma get it black....custom....with tinted windows,ima have it roll on 24s low low, ya no?  fresh system, speakers in the back itll get yer girl wet, yanowhatimean, shit............

Tue, 02/09/2010 - 20:22 | 224256 carbonmutant
carbonmutant's picture

What did the US government get for bailing out AIG?

Tue, 02/09/2010 - 21:52 | 224356 Squid-puppets a...
Squid-puppets a-go-go's picture

persistent and deserved criticism

Wed, 02/10/2010 - 02:25 | 224613 bonddude
bonddude's picture

You mean the United StAtes of g sax?

Tue, 02/09/2010 - 22:15 | 224369 CB
CB's picture

the status quo for now

Wed, 02/10/2010 - 07:43 | 224709 jeff montanye
jeff montanye's picture

taxpayer lawsuit against sharia compliant financing, of all things.

Tue, 02/09/2010 - 19:09 | 224180 zeroblue
zeroblue's picture

 

 

Instead of

"........Europe's decision to jettison monetary prudence at the expense of patching a crumbling fiscal dam......"

the writer meant to say

"......Europe's decision to patch a crumbling fiscal dam at the expense of jettisoning monetary prudence ...."

or is this a Freudian slip suggesting that jettisioning monetary prudence is what the author really wants.

 

 

Tue, 02/09/2010 - 19:44 | 224217 MsCreant
MsCreant's picture

I read that as "there are no good choices."

Wed, 02/10/2010 - 07:45 | 224710 jeff montanye
jeff montanye's picture

insightful.

Tue, 02/09/2010 - 19:25 | 224197 Anonymous
Anonymous's picture

Canada is the only country listed whose debt to gdp ratio actually falls out to 2014

Tue, 02/09/2010 - 19:53 | 224224 Astute Investor
Astute Investor's picture

Why do these fools (and the collective masses) think that guarantees have no economic cost?

As Mike Tyson once said:  "everyone has a plan until they get hit...."

Wed, 02/10/2010 - 10:06 | 224769 Commander Cody
Commander Cody's picture

Ah, the wisdom of Tyson.  He gets quoted quite a bit here.

Tue, 02/09/2010 - 20:04 | 224238 Missing_Link
Missing_Link's picture

It is sheer lunacy if the ECB and Germany believe that the guarantee program will not wreak havoc on their plans to quietly fund this massive hole.

It's your patriotic duty to throw money down the hole!

http://www.theonion.com/content/video/in_the_know_should_the_government

Tue, 02/09/2010 - 20:09 | 224241 Anonymous
Anonymous's picture

Interest / Income for Austria

max tax receipts 2010 60Bil Euros
interest expenditure c 8Bil Euros

nearly 14% of receipts is used for interest payments...

Tue, 02/09/2010 - 20:23 | 224257 Anonymous
Anonymous's picture

Greece aint gonna be the one to bring the big guns down. It will have to be the Big Bears UK, USA, Ja(pawn).

Tue, 02/09/2010 - 20:33 | 224268 glenlloyd
glenlloyd's picture

It's absolutely ridiculous that they're even considering this. The lessons learned as a child have never been more relevant.

If you always step in and save someone from doing the wrong thing they never learn from their mistakes. Main issue with the bailouts in the US.

If they bailout Greece then Greece will likely not implement the draconian measures needed to fix their problem, again, Greece won't learn from their errors and this will go on ad nauseum until the whole thing buckles under its own weight.

I simply don't understand why they aren't cut loose. At least then they would have some options for dealing with the problem at home. Now however, they're boxed in by eurozone policy, with the only way to achieve what they must is with super duper belt tightening.

You do what you have to do to make it, but that's not remotely what happens anymore. When the problems come people just go looking for a sugar daddy to fix everything.

disgusting....really, and they will regret this path before it's all over.

Tue, 02/09/2010 - 23:40 | 224454 Molon Labe
Molon Labe's picture

"...those who have forecast better than their fellows gain, while the poorer forecasters lose, as a result of their speculative transactions.  It is obvious that such monetary profits come not simply from correct forecasting, but from forecasting more correctly than other individuals. . . .  It should be clear that the gains or losses are the consequences of the freely undertaken action of the gainers and losers themselves. The man who has bought a good to rent out at what proves to be an excessive capital value has only himself to blame for being overly-optimistic about the monetary return on his investment.  The man who sells at a capital value higher than the eventual rental income is rewarded for his sagacity through decisions voluntarily taken by all parties.  And since successful forecasters are, in effect, rewarded, and poor ones penalized, and in proportion to good and poor judgment respectively, the market tends to establish and maintain as high a quality of forecasting as is humanly possible to achieve."  --  Murray N. Rothbard

Does anyone recognize the economic system Rothbard describes?  It must be some kind of bizzarro world where up is up and down is down.

Wed, 02/10/2010 - 01:00 | 224548 strike for retu...
strike for return to reality's picture

Pretty scary world.  Might be one were all the capital doesn't end up at Goldman Sachs.

Wed, 02/10/2010 - 03:34 | 224636 Quantum Noise
Quantum Noise's picture

Many countries including Greece defaulted quite a few times in their recent history... so no, the Greeks won't learn jack shit from this one either even if they're not getting any help.

Wed, 02/10/2010 - 06:56 | 224699 Anonymous
Anonymous's picture

It is not just the borrowers but the lenders who don't learn from history.

Maybe Niall Ferguson is on to something...

Wed, 02/10/2010 - 06:55 | 224698 Anonymous
Anonymous's picture

The bailout will probably not be in the form of loans or cash. My guess is a loan guarantee or similar.

Regardless, Portugal and Spain (and mebbe Italy and Belgium) will line up and say "where's my bailout?" All they gotta do is refuse to cut spending or get serious about tax collection, organize a few strikes and voila! Germany rides to the rescue!

Meanwhile, the Irish must wonder why they put themselves through such budgetary pain when all they had to do was ask and Uncle Merkel would make it all go away for now.

Tue, 02/09/2010 - 20:37 | 224280 trav7777
trav7777's picture

Scylla and Charybdis...whoever devalues first takes initial advantage.

These debt loads are all asinine and the surplus countries are dependent upon GROWTH in debt!  There's not enough natural demand to keep their excess factories idle NOW, much less in a deleveraging world

I mean, how much additional production do we need to layer another doubling onto this debt ponzi?  We've reached the end stage of the debt/growth pyramid

Tue, 02/09/2010 - 20:46 | 224286 Anonymous
Anonymous's picture

Funny to see such bias. When the USA has an internal problem of bankrupt states (pick your name), few seriously consider abandoning the union as a credible option to solve the crisis. When the EU has an internal problem of bankrupt states, the seriously advocated option is to abandon the union - or rather have the union cut loose the misbehaving family member.

I think some people need to re-read their history books: when a country in europe has been "more successful", standing next to a neighbor country in dire need, historically things have tended to end in a bloody mess, literally. It doesn't do much to promote peace among family siblings if the rich kick out the poor from the family house.

You can't have prosperity without peace...

Wed, 02/10/2010 - 04:33 | 224653 Anonymous
Anonymous's picture

Funny and unsurprising.
This is typical of a time when growth due to an ever increasingly environment can no longer meet the requirement of an ever increasing greed.

If China fails, in their downfall, they will release what is needed to support their society, easening the tension within the US society.

If the EU fails, in their downfall, they will achieve the same.

Nobody tells but it is how most analysis is driven: people fancy on eliminating a rival in the race for consuming the Earth resources. Squeezing the poorest no longer appease as it used to.

Once again, the European construction has cost a lot. Considering that all will be negated because of a small event is ludicrous. It is a last ditch effort.
More likely, the EU politicians are waiting for the hour to impose even more integration. The EU politicians are going to take advantage of the weakened situation of these nations to go to the next stage of integration.

A few months ago after their no vote to the Constitution, I talked with Irish people. They appeared to me delusional about their qualities as a people. My vision was the same as it is now: the EU politicians would wait for the hour to force their way. They maintained that no matter what the Irish would repell the treaty. They were neither the French or the Dutch. If the treaty was accepted, streets would be lighted by the fire of riots.
The rest of the story is well known.

Moral of this story: the EU will finish more integrated after this crisis. The whole question is how, under what form.

Wed, 02/10/2010 - 05:14 | 224664 drwells
drwells's picture

Oh, we'll end up facing the same dilemma here, don't worry. I have faith the federal government will bankrupt itself trying to keep states like Cali from sitting down to the banquet of consequences. Once it can no longer keep the game going, they'll simply default. At that point secession doesn't seem so farfetched, especially if the rest of the world tries to impose austerity measures on us in exchange for continuing to supply us with what we "deserve" and some states don't feel like going along with it.

Sounds unthinkable, I know, but so did the word "bubble" in 2006.

If you subscribe to Russ Winter, he's been following this theme (bankrupt US states vs bankrupt EU states) for the last several days.

Wed, 02/10/2010 - 10:49 | 224839 Anonymous
Anonymous's picture

To liken the EU model which has been in existence for less than 20 years to the USA model which has been intact for over 200 years and extrapolate results and assumptions from such a comparison is a giant stretch.

The USA has stayed together--and was even forcefully via military kept together during the civil war--for over 200 years. The union has been "battle" tested and it continues to endure time after time and crisis after crisis. Generation after generation of Americans have been raised to accept the cohesiveness of this union, and the culture and lifestyle here reflect the view of this cohesiveness.

The EU on the other hand has been together a measly 16 years. Its population and broad culture hardly shows the same loyalty and allegiance to the EU arrangement in the same manner Americans born in whatever state support the USA. Its sovereignty (if you want to call it that) has never been seriously tested (until now) and therefore no indicators exist today that the EU and its leadership has any demonstrable capacity to tackle this fiscal problem (and later social problem as a result) and be successful in doing so in the same way the USA has successfully in its history.

Wed, 02/10/2010 - 11:04 | 224856 Anonymous
Anonymous's picture

To liken the EU model which has been in existence for less than 20 years to the USA model which has been intact for over 200 years and extrapolate results and assumptions from such a comparison is a giant stretch.

The USA has stayed together--and was even forcefully via military kept together during the civil war--for over 200 years. The union has been "battle" tested and it continues to endure time after time and crisis after crisis. Generation after generation of Americans have been raised to accept the cohesiveness of this union, and the culture and lifestyle here reflect the view of this cohesiveness.

The EU on the other hand has been together a measly 16 years. Its population and broad culture hardly shows the same loyalty and allegiance to the EU arrangement in the same manner Americans born in whatever state support the USA. Its sovereignty (if you want to call it that) has never been seriously tested (until now) and therefore no indicators exist today that the EU and its leadership has any demonstrable capacity to tackle this fiscal problem (and later social problem as a result) and be successful in doing so in the same way the USA has successfully in its history.

Tue, 02/09/2010 - 20:50 | 224293 IveBeenHad
IveBeenHad's picture

can someone please explain to me how a country w/ a debt/gdp ratio of over 200% is consdered the worlds safest currency? 

i dont get it and i am talking about japann!!!! seriously why ? 

Tue, 02/09/2010 - 21:18 | 224318 Anonymous
Anonymous's picture

You meant to say "least dangerous". 95% of JGBs are sold to JPN indvs; few gaijin required. Little lambs dont go on strike, either.

Tue, 02/09/2010 - 22:26 | 224371 Anonymous
Anonymous's picture

Its been safe because their govt debt has in the past been bought by the bucketload by the locals.

Much less of their sovereign debt is owned by non-Japanese. So they are not as susceptible to a foreign buyers' strike - something which the US has huge exposure to.

As I understand it, Japan's problem is in its demographics, as this practice is not sustainable in the long term due to the aging population and reduced birth rates.

Wed, 02/10/2010 - 00:39 | 224525 chindit13
chindit13's picture

Japan is susceptible to a domestic buyers' strike, which in Japan will be typically non-confrontational. The strike will occur because of something you mentioned:  aging populace.  After a nearly two decades of near zero interest rates, retired folks---of which there are an increasingly large number---are dipping into savings.  The savings rate may well drop below zero in 2010.

At present, and with average JGB rates ultra low, the Japanese government pays out nearly 35% in total revenues just to service the debt. If rates were to climb to, say, 3.5% debt service would consume total government revenues.  Total revenues.  Just gotta love the yen, right market?

Even Pollyanna-san would be challenged to find a rosy scenario here, though no doubt there is one hiding in plain sight. 

Wed, 02/10/2010 - 03:29 | 224637 Quantum Noise
Quantum Noise's picture

can someone please explain to me how a country w/ a debt/gdp ratio of over 200% is consdered the worlds safest currency? 

i dont get it and i am talking about japann!!!! seriously why ?

 

Tiny penises.

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