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Erik Nielsen's Resurgent Optimism Doused As Europe Is On The Verge Again
Who would have thought it only takes for PIIGS spreads to go back to all time records, and for Ireland and Portugal to be hours away from joining Greece in the bailout corner, for Goldman's Erik Nielsen to turn bearish again. To wit: "if investors are running for the door out of fear of being the last
one left behind, then there’ll be a liquidity crisis (as there would be
for anyone with a financing need), and they’ll need help." Way to stay ahead of the curve Erik. The problem is that while the economic reality below the surface cracks and collapses, investors are largely ignoring the perpetual words of optimism from Europe's politicians, and sellside cheerleaders (which begs the question - is it time to take this Goldman acknowledgment of reality as a buying opportunity?). What happened in Greece may have been brushed under the carpet for a few months, but the policy response there, which is identical to what is happening in Ireland and Portgula now, i.e., blatant lies, has left those holding relevant securities with a bitter taste in the mouth. And now, unlike before, the possibility of holder haircuts is distinctly on the table. Which is why we expect that before the Asian open, there well may be some key news out of Ireland (and/or Portugal)- no matter how much Nielsen believes that Ireland is not in a solvency crisis, with Bund spreads in the 700 range, no matter how much prefunding the government has, it will be irrelevant and will create yet another toxic debt spiral. The biggest threat is not so much to Ireland, which supposedly has its cash needs met through mid 2011, but contagion hitting other European countries, which do have solvency issues, yet have been spared the liquidity hammer so far. And with Italy CDS also hitting record highs, look for the core to start crumbling as everyone, especially Chiswick's perpetual optimist, to appreciate the gorgeous mushroom cloud over the European periphery.
From Goldman's Erik Nielsen
Happy Sunday,
I’m back in my beloved Chiswick after having been on the road most of this past week; and what a week it was! Here’s the way I see it all:
- It’s been a week of scary spread widening for the periphery mostly due to the uncertainties stemming from the stated policy initiative to include private sector participation in future debt workouts.
- On Thursday, European finance ministers – finally - clarified that this initiative will not apply to existing debt, but whether this is enough to put the genie back in the bottle remains to be seen.
- It is being reported that Ireland has started informal talks with Brussels on a rescue package, but so far there has been no formal request. I summarise my view on how it may all play out.
- French PM Fillon submitted his resignation yesterday; a cabinet reshuffle is likely later today or tomorrow.
- On the data front it was a quiet week generally lending support to our constructive pan-European views.
- Tuesday-Wednesday will see the Eurogroup and Ecofin meetings; an opportunity to express support for the periphery, if that has not happened before then, but formal agreement on a package will take longer. Also look out for politics in Italy.
- On the data front we’ll get inflation and trade numbers out of the Euro-zone this coming week; not that exciting although we’ll be hitting the ECB’s target of 1.9%.
- The UK also prints inflation this week along with labour market and retail numbers. And we’ll get the MPC minutes – and loads of MPC talk.
- And Switzerland prints inflation - and trade - data this week.
-1 What started as confusion among investors about a sentence in Merkel and Sarkozy’s communiqué from Deauville in mid-October referring to the participation of private creditors in future debt workouts (after the Treaty has been changed by 2013) escalated to real market worries after the Council approved this language in late October. It was clearly a grand political statement of intentions rather than a concrete proposal taking into considerations the umpteen legal and practical issues involved in marrying such an approach with the need to keep the process orderly, but it spooked the market and raised a lot of unnecessary uncertainty. I am sure that this problem was being conveyed to the policymakers from many sides. On Wednesday, I had a piece in the FT highlighting some of the complexities, concluding that “the sooner Van Rompuy and his team – and the rest of the political leadership – clarify these complex practical and legal issues, the sooner premiums on peripheral sovereign issuance will evaporate. Otherwise the peripheral countries could see their borrowing costs hit levels not seen since the Greek rescue, in effect, shutting them off from commercial borrowing – hence forcing them to rely on the existing rescue facilities.” When LCH.Clearnet imposed substantial margins on Irish bonds things turned outright scary because of the possible effects of the sovereign spread-widening onto the financial sector.
-2 Facing mayhem in the periphery, the finance ministers of France, Germany, Italy, Spain and the UK issued a statement on Thursday saying that considerations for private creditor participation “does not apply to any outstanding debt and any programme under current instruments. Any new mechanism would only come into effect after mid-2013 with no impact whatsoever on the current arrangements”, which – at least for now – seemed to put the genie back into the bottle. (Btw, can anyone explain to me why the UK was part of this press release after having made explicitly clear earlier this year that this crisis is none of their business since it’s all Euro-zone related – this was the explanation given for why the UK would not participate in financing the Greek package and the EFSF? – Am I just being confused, or doesn’t it seem a bit odd for someone refusing to be part of the official financing to be part of the clarification that there’ll be no private sector (which includes UK institutions) participation in the debt work-outs?)
-3 Ireland is reported to have started informal conversations with the Commission on a support program, and an unnamed German official is quoted today saying that Germany is encouraging Ireland to tap the facility to help further calm markets. I apologise for not being able to take very many calls (or answer the many emails) Thursday-Friday when I was travelling, but my views on how all this may play out has not changed the last few weeks (i.e. after I realised that our original view on Ireland was too optimistic.) To recoup: the Irish government is fully funded – with no borrowing needs at all – until mid-2011. They are in the midst of budget negotiations which should be done by December 7. If they were to breakdown before then, pressure on Irish spreads would surely widen further, putting the country further at risk. If the budget gets through, then I suspect the original Irish game-plan was to spend the next couple of months convincing markets that things are back on track before they restart the government borrowing sometime late winter/early spring. This could include the involvement of some of their domestic resources, but I tend to doubt it. Given its own strong cash position, the spread widening has no immediate or direct effect on the government, but the part of the private sector with financing needs will be hurt, of course, and this degree of market stress will increase the risk for the financial system as a whole (well beyond the benefits stemming from the weaker euro.) And it may be fuelling the spread widening for other countries as well. In other words, whether (or when – if before early summer) the Irish government seeks financial help from the EU and IMF is a purely political decision on the back of an assessment of the broader risk of the spread levels to economic and financial stability.
-4 There has been no official request for help so far, but if the Irish want it, there can be no question that they’ll get it without much trouble; i.e. no need for long negotiations on conditionality. As I have argued throughout this year, their policy adjustments have been impressive, and apart from the valuations of assets transferred to Nama (which triggered the beginning of the sell-off – but was that really bad for the government balance sheets?), I am not really aware of any material macro or political news that would justify the present spreads. But that said, if investors are running for the door out of fear of being the last one left behind, then there’ll be a liquidity crisis (as there would be for anyone with a financing need), and they’ll need help. In my book, this is not a solvency crisis, and the government’s policies are surely not far off what the Commission and the IMF would demand in return for a loan (which would eliminate the need for private funding for the next 2-3 years.) The Commission – and fellow Euro-zone members – will surely ask the Irish to raise their corporate tax rate, but the Irish will resist, although they may end up with some sort of “gentlemen’s agreement” to move in that direction over the medium term. IMF programs (and surely EU-IMF programs as well) do not set specific detailed fiscal policy measures, but more general frameworks. That said, the Euro-zone will need towards greater tax harmonization, and while Ireland has fought this for a long time, the power is naturally now shifting to those providing the bail-out. Importantly, with or without a facility to include private creditors in a debt workout in the future, this would not apply to a liquidity crisis like the Irish.
-5 Portugal is quite different from Ireland. The 2011 budget is further ahead (and the deficit is smaller), but their financing needs are more acute, and they are facing some significant amortizations in April and June (two times €4.5-5.0bn) which will require measurable borrowings before then (Portugal does not publish their cash holdings, so we don’t know their exact needs.) Like for Ireland, a decision to ask for help is a political one, but given their ongoing borrowing needs, the present spreads hurt the budget process directly. Also, if they were to ask for help, negotiations on the underlying policy conditionality would likely be more complicated than for Ireland because of the need for much more wide-reaching structural reforms in Portugal (but do-able, of course.) While I haven’t seen any reports on it, I rather suspect that the Commission is reaching out to Lisbon this weekend to encourage a more detailed discussion of a Plan B on Tuesday. In spite of their differences, if (when) Ireland or Portugal officially seeks help, it can only be in everyone’s interest to start the process for the other country at the same time.
-6 Following months of speculation and hints, yesterday French PM Fillon submitted his resignation to president Sarkozy. A cabinet reshuffle is likely to be announced later today or tomorrow. The key objective will be for Sarkozy to re-energise his government for the last 15 months of his presidency and create a stronger platform for himself from which to run for re-election in 2012. We do not think it’ll have material impact on domestic policies relevant for investors. A number of commentators have suggested that Fillon may be re-appointed as the safe pair of hands he is on the domestic front, leaving Sarkozy the necessary time to roam on the global stage as chairman of G20. Lagarde has been mentioned as a possible new foreign minister, unless she stays in her present position.
-7 In terms of data, this past week was dominated by the key Euro-zone GDP numbers for Q3, coming in at the expected +0.4%qoq (non-annualised), driven largely by Germany (+0.7%), while Spain delivered a respectful flat number. The German locomotive helped several others perform well; the Czech Republic and Hungary reported Q3 GDP growth of 1.1% qoq, non-annualised, and 0.8%, respectively. We also got industrial production numbers for September, and for this volatile series, the third quarter ended relatively poorly for the Euro-zone, erasing much of the strong gains in previous months, bringing us back to our estimated trend-line. Quarter-on-quarter, IP was up 0.4% (non-annualised.) As I discussed last week, the early indicators for Q4 are looking good, suggesting some (moderate) upside risk to our +0.3% Q4 GDP forecast; +0.3% Q4 growth would give us our full-year 1.7% growth number (which I was laughed out of the room on on more than one occasion when we launched it earlier this year - Dirk Schumacher discussed these numbers in greater detail in Thursday’s European Weekly Analyst, and we’ll publish revised 2011 and new 2012 forecasts in early December.)
Turning to this coming week:
-8 In the Euro-zone, the highlight will be the Eurogroup meeting on Tuesday, followed by the Ecofin on Wednesday. It’ll obviously be an excellent opportunity to express support and solidarity with the crisis-hit periphery, if they don’t do so even before Tuesday, but I rather doubt it’ll be more than that. As discussed above, I think we are still some way away from a formal announcement of official financing being launched – but this is, of course, pure guessing on my part because, the Irish government does not need the money for several months so its all a political decision. Also on the political side, it’ll be important to keep an eye on Italy. Last Thursday Future and Liberty Party head Fini refused to a proposed cabinet reshuffle without Berlusconi first resigning and an aid to Fini then said that the Future and Liberty Party will pull out of the coalition this coming week; the press reports that the resignation letters are already on his desk. The crisis may lead to either a reshuffle of the cabinet or it could lead to early elections. Either way, we do not think it’ll impact the 2011 budget process or outcome.
-9 In terms of data releases, it’ll be an extremely light week in the Euro-zone. We’ll start Monday with September trade data. They have an EMEA-relevance score of zero, so our interest is more in terms of the growth rates for exports and imports. The shift in Q2 from Euro-zone growth being primarily export driven to primarily domestic demand driven was accompanied by stronger import growth (than export growth), opening up a (still small) trade deficit, so it’ll be interesting to see if that remained the case as Q3 closed. Then on Tuesday we’ll get the full inflation report for October; the flash estimate showed an increase in headline inflation to 1.9%yoy (from 1.8%), so the news will relate to the underlying components, specifically core inflation which we think has remained stable at 1.0% before moving gradually higher towards the end of the year. On a normal reaction function, the ECB should already be well into its exit, but – like other central banks – normal reaction functions seem a curiosity of the past these days, so it’ll come slowly during 2011’H1, we think. Finally, Eurostat is set to publish 2009 Greek deficit and debt figures on Monday, and the Troika will discuss the Greek loan program – I’m sure this will attract considerable attention, comments and questions, but we are nowhere near a place where the program is in trouble.
-10 In the UK, we are heading into a week of CPI inflation (Tuesday), unemployment and wages (Wednesday) and retail sales (Thursday). We expect inflation to have eased to 3.0%yoy in October (from 3.1%) mostly due to base effects, although food and energy prices moved higher in October (and a major provider has just announced a big jump in retail gas prices in November), so one shouldn’t get carried away here; these elevated inflation levels seem likely to be around for a long time. We are in line on unemployment and earnings growth (7.7% and 2.3% respectively) and slightly above on retail sales (0.5%mom versus 0.2%). Wednesday also sees the release of the minutes of the MPC’s November meeting. The consensus expectation is for an 8-1 vote in favour of unchanged policy; we’d be surprised if Adam Posen reversed his vote for more QE after only one meeting. In any event, as Ben Broadbent has pointed out, it’ll be more important to watch for any shift in the general tone of the minutes, in particular, to see whether the sentence depicting the dovish bias of the Committee – “some members felt the likelihood that further monetary stimulus would become necessary had risen in recent months” – is retained. Released alongside the minutes are the monthly Agents’ survey and, as is usual a week after the Inflation Report, the detailed numbers behind the MPC’s latest set of forecasts. It’s also usual to see a spate of MPC speeches after the purdah of the quarterly forecasting round and we get three – Weale on Monday, Posen on Thursday, Tucker on Friday. Tucker and Dale also give evidence to the House of Lords Economic Affairs Committee on Tuesday afternoon.
-11 In Switzerland, we’ll get producer and import price inflation for October on Monday and trade data (also for October) on Thursday. We expect the headline Supply Price Index to jump to 0.8%yoy (from 0.3%) on the back of a massive base effect. The key component to watch will be import prices, for any evidence of further disinflation as a result of CHF appreciation. The trade data will be important to watch in case the trend line (in a volatile series) for exports were to continue its softening into the end of the year.
… and that’s the way it all looks to me on this lovely mid-November day in Chiswick. I somehow feel that I’ll be writing more emails to you this coming week, but for now I’ll be heading to the High Street for my (belated) morning coffee.
Best
Erik F. Nielsen
Chief European Economist
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Multiple forces at play here. Germany deserate to lower Euro for export trade and to maintain low unemployment is well served by this chatter and Fed desperation to avoid commodity run by forcing crooked CME to raise margins.
I think this is the wonderful Nixon Bretton woods video from YouTube. A real eye opener as the Fed has it all wrong, but we all know this already.
Tariffs And gold bitchez ??
http://www.youtube.com/watch?v=iRzr1QU6K1o&feature=youtube_gdata_player
Great idea to post that video. We are still just as fucked, today, maybe even more so, as the rest of the world (China) are swingin' much bigger economic dicks, unlike Nixon's comments which were accurate at that time.
Currency war...only this time the sides are much more even.
It just hit me!!
My dog sleeps about 10 hours a day. She has her food prepared for her. She can eat whenever she wants, 24/7/365. Her meals are provided at no cost to her.
She visits the Dr. once a year for her checkup, and again during the year if any medical needs arise. For this she pays nothing, and nothing is required of her.
She lives in a nice neighborhood in a house that is much larger than she needs, but she is not required to do any upkeep. If she makes a mess, someone else cleans it up.
She has her choice of luxurious places to sleep. She receives these accommodations absolutely free. She is living like a queen, and has absolutely no expenses whatsoever. All of her costs are picked up by others who go out and earn a living every day.
I was just thinking about all this, and suddenly it hit me like a brick in the head,
My dog is a Democrat!
Typical Republican bullshit exaggeration rather than informed argument. My Republican brother-in-law who enjoys ex-military benefits and other pensions also receives benefits for a disabled son yet rants and rants and rants about any wellfare benefits. And, of course, after Obama became president, everything wrong now is Obama´s fault. And he was hoping that Obama would be assisinated as soon as he was elected. And what has been republican strategy... to try to foil EVERYTHING that this administration attempts. And, after all, Obama is just a puppet and has followed and even augmented the same war-mongering and banksterism as Bush. And, by the way, I am no longer a democerat, having realized there is effectively no difference whatever party is in power and US democracy is now a sham with voting a means of keeping the masses believing in the system. As Gregg Palast wrote, the war against the middle class has been won without a shot being fired. So, friend, keep blaming democrats but you are being screwed by the banking and military and arms interests.
I think CME's stock price is all the narrative you need. They have to be hurt by the continual outflows, because they are the masters of the index-hedging products that the big boys and surviving retail traders use.
Year-over-year volumes have to be hit. Their stock hasn't even pushed above the post-May 6th flash-crash highs of $310, and they had a sell-off on friday down nearly $4 bucks, or -1.35%.
Keep an eye on them, the rot starts within the system - and you'll see it reflected here.
Just when it seemed like Germany and France were getting a spine and were going to stick it to the bondholders, they kicked the can down the road to 2013. Extend and pretend continues to be the order of the day and we'll have to go on with this agony on the back of the taxpayers.
I keep wondering... is any world leader capable anymore of making a policy decision without looking at a futures chart?
Daaviiddd Petr.....aaaaarrkkghgklakgj.
It's not so much that they chickened out, but that the necessary treaty modifications really take an awfully long time in the brussels politburo, and this is really the soonest they can get all those particular ducks lined up against that particular wall.
It remains a political nightmare, with (weak) UK factions wanting a referendum, Ireland constitutionally requiring a referendum, and the vagaries of different parliamentary lifecycles (i.e., DE/FR) possibly upsetting the applecart.
The UK's skin in the Irish game is simply that a lot of UK money was invested into Irish banks ; their political leverage over Ireland was probably behind the IrlGov's bank guarantees.
Naturally, UK Gov shies away from bailing euro sovereigns, and simultaneously squawks and cackles a racket at the prospect of taking a haircut ..
I really don't know how this will pan out, but several things concern me:
Look, people...especially all the folks talking about cutting spending or ending the Fed or complaining about QE.
Our system can't appear to tolerate even ONE significant bankruptcy or default without totally collapsing as a result.
This speaks to a systemic flaw in the system. As long as we stay within this system of credit-as-money, it really doesn't matter what the governments or banks do. The flaw remains.
I mean, the default of IRELAND or freaking PORTUGAL is a mortal wound to the Euro? If that's the case, then the entire franchise is absurd ab initio
How quickly people forget.
Of course there can't be a significant default. All their bonds are default swapped 80 ways to Sunday. If anything goes down, it takes everything down.
They are all operating in the gentle smile world of "let's just hang on and the economy will right itself and generate tax revenue and return us to the land of unicorns and rainbows".
It is never going to right itself. Ever. Every bailout is debt. Not grants. Debt. It will come due. It won't be repaid. Then it gets worse.
That does not preclude an orderly liquidation which is what has been argued for in here ad infinitum.
Nope. It *does* preclude orderly liquidation. The swaps are very carefully worded to define default as any haircut whatsoever. There must be 100% repayment of principal and interest or the swaps trigger. Hell, if you were wording the swaps on sovereign debt, wouldn't you insist on that comprehensive phrasing? Of course you would. You would be crazy not to.
The only "orderly liquidation" would require that all swap holders agree to forgo their profits from default. Good luck getting 100% agreement to that.
Your point is not so well taken. The system sucks. Time to hit the reset button.
Orderly liquidation, bitchez!!!!
You're 66% right!
Hey, Trav, I think everyone gets that--even me. 8-)
I thought the mortal wound to the euro would be german and french banks that lent to Ireland and Portugal getting killed by those nations not being able to pay their debts. And those banks getting killed wounds Germany and France and *that* is the mortal wound to the euro.
Just skip the formalities. Im getting fucking sick. They need a bailout and the Taxpayers are going to pay for it. Done. By next year, There wont be a reason. Our paychecks will probaly go through the Banks first before we even set eyes on it so they can take out their 90% . Thanks for ruining my Sunday.
"Btw, can anyone explain to me why the UK was part of this press release?"
Well when you realize you need a bailout too, its time to join the party!
Meanwhile....
(Reuters) - The United States must move to rein in its massive budget deficits or it faces the risk of a bond market crisis, former Federal Reserve Chairman Alan Greenspan said on Sunday.
http://www.reuters.com/article/idUSTRE6AD1QX20101114
Chart: VIX
http://99ercharts.blogspot.com/2010/11/vix.html
http://www.zerohedge.com/forum/99er-charts
Sent this to Tyler not sure if he will post Kyle Bass Haymen ~ Global Credit/Debt. Must watch.
....."In the last 8 years total credit market debt went from 60 trillion today 188 Trillion."
I wonder what currency this debt was denominated in ? The renminbi ? Lol'
http://www.youtube.com/watch?v=DdyPx8X4Ax0
Thanks for sharing....I missed this one.
Best Regards.
P.S. Erikk Nielsen is a girlie man in desperate need of a blanket party.
Looks like a "kick the can" solution is imminent.
Watch the PIIGS stocks rally by 25% in the next two days.
Nov. 14 (Bloomberg) -- Germany is pressing Ireland to seek
aid before a Nov. 16 meeting of European finance ministers to
calm market volatility and win agreement on making investors
help pay for future bailouts, a German government official said.
http://noir.bloomberg.com/apps/news?pid=20601087&sid=apJoDn9AfdGY&pos=1
The International Monetary Fund stands ready to help Ireland if needed, Managing Director Dominique Strauss-Kahn said yesterday in Yokohama, Japan.
“So far I haven’t received any kind of request,” he said. “If at one point in time, tomorrow, in two months or two years, the Irish want support from the IMF, we will be ready.”
http://www.youtube.com/watch?v=0Z0MyQd1Fyw
http://www.independent.ie/business/imf-expert-warns-lenihan-to-seek-bail...
Aren't Sargent O'Rourke and Corporal Agarn in the IMF
http://www.youtube.com/watch?v=zVwFADi4Y38
Don't you think that this cunt Erik F. Nielsen
Chief European Economist did read a 2002 publication by the FED?
Remarks by Chairman Alan Greenspan
Before the Society of Business Economists, London, U.K.
September 25, 2002
http://www.federalreserve.gov/boarddocs/speeches/2002/200209252/default.htm
Held off posting this the other day, after Greenspan was shedding his crocodile tears.
Pere Ubu - Final Solution
http://www.youtube.com/watch?v=VelS-YCtHV4
Great report, TD.
I am perplexed.
Why, oh why do folks seem to ever vacillate between nothing's wrong, everything's OK, been taken care of, maybe not as well as is needed, it'll just eventually work itself out, it's kinda messy, its broken and finally it's utterly fucked beyond any possible reasonable outcome.... only to find themselves right back at the irrevocable not a prayer's chance in hell of anything good coming from it, it's blowing up, crisis time somewhere between clinical depression and homicidal rage....
When its always been fucked beyond repair, there ain't enough excuses to make it work, papering over again and again, and talking bullshit platitudes about it, ain't gonna do a damned thing. It's broke, dead, gone to meet the great economic failure in the sky.
And no, the reason that I ask is that preeminent (?) economists, politicians and even market players (ref, widening and narrowing of spreads off Bunds) keep retrodding the same ground over and over again. Masochistic little peckers, no?
The Euro and the EU are fucked.
Who needs any further information, lectures, weekend retreats, summer camps, summits, meetings or days off? These players need a good 12 Step Program. There is no business as normal. Things gota change big time, beyond current design, specifications and egotistical desires. The experiment has failed.
No way the west gets through this alive. Neither the US (Boeing) or Aibus escapes this eastern onslaught:
http://articles.latimes.com/2010/nov/13/business/la-fi-china-jetliner-20...
And the Japanese and Koreans have not even announced their future airliner designs. At the end of the day, the dollar needs to go to about 1 yen/dollar.
Are we there yet?
Print,
With their records of saftey, and product reliability, the Chi Coms would have to PAY folks to fly on their Jets.
NO WAY I fly Chi Com Air,Mexican Air,or any other 3rd world tard airline.
They likely will all make the mistake of building the cabins for 5'-6" people.
On the comment
"With their records of saftey, and product reliability, the Chi Coms would have to PAY folks to fly on their Jets."
Right now how many A380s are in the air? How is that 787 doing? If China uses its product internally, there goes Boeings 737 market. China could have been half.
This kind of mocking is what we saw in the US in the 50s of Japanese products. Then again if you wanted a car, how about a GM car?
http://online.wsj.com/article/SB10001424052748704393604575614441403968942.html
Personally, I reckon it's just leverage for negotiations, but interesting nevertheless.
"and I'm taking the keys to the Rolls, too!"
That may be the trigger news. Also on Businessinsider: http://www.businessinsider.com/portuguese-foreign-minister-says-country-may-need-to-leave-euro-2010-11
Portugal will follow the Emerald Isle within the fortnight.
http://themeanoldinvestor.blogspot.com/2010/11/ireland-bites-dust.html
So the inflation rate in the UK is 3%,don,t think so,at least 10%.Ireland,Portugal and Greece at some point will collapse,wether economically or socially comes first who knows.The deficits will never be repaid as the social and political cost as well as the financial cost becomes too much,the only exit will be hyperinflation and that will totally destroy their economies,the rest of Europe won,t be smiling though as their economies collapse with the knock on effects.The house of cards is built on sand.At this point the EU will be seen for what it is a talentless politicians gravy train dream that has totally destroyed Western Europe,wasting the financial futures of millions.
Agreed that Europe and most of the states in it are examples of government for the government by the government ploughing into the dirt in a slow motion nose dive. But why can't the result be deflation?
A funny read if you get a kick out of listening to highly paid idiots explain why their blithe forecasts didn't pan out.
So let's sum up the news here. German and then French politicians suggested that their governments might not be wiling to bail out everything forever. Markets panicked. This guy and others admonished the German and French politicians for causing "unnecessary uncertainty". A compromise clarification was issued: although Germany and France will fully bail out absolutely everything in the Eurozone through at least 2013, they might not fully ball out everything after then.
And this guy, whose thesis is supposedly that the Eurozone economy is stronger than widely believed, worries that telling investors that someday they might have to take partial responsibility for some of their investment decisions will cause a snowballing loss of confidence.
Ireland only has enough cash to last till next year because the government cleverly raised funds just before making all those big announcements about the growing scale of its bank bailouts. But anyway it's the banks and their still worsening condition that are the real drivers of the Irish crisis. Anybody have any figures for how much of their funding is short-term interbank? And reportedly they're lending out mortgages at a loss in a desperate effort to prop up the housing market.
In a nutshell, most deposits in European banks are long gone daddy gone - lost on every bad investment you can imagine - and the only way those deposits can be paid back out is by tricking the citizenry into paying a portion of their taxes into a protracted bailout over at least the next decade.
' German and then French politicians suggested that their governments might not be wiling to bail out everything forever. Markets panicked. This guy and others admonished the German and French politicians for causing "unnecessary uncertainty".'
Exactly - it's freakish. Are they saying there is no risk of an Irish bond defaulting? In that case sell German bonds, but Irish bonds, and collect 700 basis points courtesy of the ECB. These guys are starting to make the Fed look good.
What don't you understand?
They want you to accept the new system without falter.
It appears that Gordon T. Long's projections are moving along on schedule:
http://lcmgroupe.home.comcast.net/~lcmgroupe/Tipping_Points-2010-Home_Page/03-10-09-Vicious%20Cycle-2.GIF
For anyone who wants to confirm the hopelessness of balancing the budget.
It'll take a substantial amount of tax rises, and spending cuts if this puzzle is accurate.
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html
Well did it without the tax increases...but involved taking a buzzsaw to basically all spending. Which of course will not happen. The game is kick the can into total collapse. That's the script we are following, no reason to believe it will change.
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-grap...
Done. Pretty easy. Cut government, military, healthcare spending and cancel the Bush tax cut for earnings over 250k. It does of course imply people get off their arses and rediscover a 'can do' attitude, rather than 'where's my handout ?' pose. Good luck with that.
Go to denninger to see what options are on the table and how your "Bush tax cut for the rich" is a drop in the bucket.
Dang, the options I would chose aren't even on the list:
End the Dept of Energy
End the Dept of Education
Stop propping up corrupt regimes in Isreal, Pakistan, et al
Declare victory in Iraq / Afghanistan and bring ALL the troops home
End NAFTA and GAAT, tarriff the piss out of China.
Your first two are gimmes, for sure. We could stop giving any money to the UN, fire the state dept and sell its buildings, ditto for the CIA, then let the NSA and DIA fill in the critical gaps left over.
There is nothing new here, its merely a timing issue. The € is back in the spotlight as the currency muppet of the moment. It'll be the Yen after that. Meanwhile, with Tories in charge, and rising inflation, my bet is that Sterling will kick all other fiat currency ass over the next few weeks/months. Whats that you say ? Gold and silver ?
Why is it that every time a Goldman analyst changes their position to align with ZH, (and subsequently make money), they are the last ones in the "obvious pool" and get no dap, only criticism, and when one of them changes to a position against the ZH community, (and they portend a losing trade), they are accused of top ticking and also lambasted? It seems the deck is stacked against them either way here. If the show fits, I guess, but shouldn't we be giving them as much props as Reggie or anyone else here when they screw the canine and vice versa... oh wait, Reggie only posts summary articles of his past, vindicated positions, so I guess he is never wrong to the casual reader here. Bad example, but you get the point.
? If you are an analyst whose predictions are wrong and then makes excuses for being wrong why would anyone cut you any slack? Flip flopping after the fact just shows that you suck, are clueless, or spreading disinformation on purpose...
When was the EUR/USD 1.55 call made by GS? Like three weeks ago at most. It was predictable that EUR will go down after that.
Yup. Just like there EURUSD 1.15 call at +/- 1.20.
PS - z Warszawy?
shouldn't the European Union be bailing out the ECB? It seems backwards. "We protected our banks so that government wouldn't annihilate the free market system" in the USA. "As if on cue we got never let a crisis go to waste," yes, yes? In Europe "the ECB is bailing out..." actual countries? They should be bailing out the ECB, no?
It dosen,t really matter mate,all the money is owed to someone somewhere,the end game is getting nearer.
The Germans are going to have to bail out of the euro before 2012
the actual failure of a Central Bank doesn't matter? What currency is the "money printer" printing in then? Gold? How about "General Motors automobiles"? I hear "but for the government we'd be punchin' them pickups out like bic razors." Perhaps the ulitmate goal here is "not a damn thing get's done." Ahhh, Royalty. It's been too long....
That NYT budget puzzle is stupidlly optimistic, by the way. Only a $418 billion deficit by 2015? That's even more ridiculously optimistic than the official White House forecasts.
While there was some seeming improvement in the deficit in FY10 vs FY09, it was all because of tarp recoups. The underlying deficit is still growing, as spending is increasing much faster than the very slight recovery of revenues.
So if you really want to close the deficit, try cutting and/or taxing about $1.5 trillion, and do it by 2012. There's no way we'll last till 2015 running 10% deficits.
"My dog is a democrat"
Dude, if you still think in terms of democrat/republican after 43 weeks of ZH you are truly hopeless.IMHO
He's an idiot.
Everybody knows dogs are Republican.
Cat's and goldfish are democrats.
The Europeans seem to hold on just long enough to co-ordinate with the White House, coincidence? Nah!
They kept a lid on the Greece time bomb until 30 days AFTER our health care bill was rammed thru......
....Only then did the EU and IMF declare that Greece's and Spain's socialized medicine had to be privatized.
Now, they wait until after our mid-term elections to publicly piss on Obama's leg......
....but they felt exactly the same way privately at the last G-20 in Canada without the public smack down.
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