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With Europe's First Real Test of Contagion Quarrantine Failing, One Should Doubt the Existence of a Vaccination
Bloomberg has as a headline: Greek
Quarantine Tested as Spain Vows to Combat Euro Contagion `Madness’:
Investors are already testing the
euro region’s efforts to contain the Greek crisis.
Greek bond
yields rose yesterday above their level before the government agreed
on a European Union-led bailout on May 2 as escalating protests cast
doubt on its ability to drive through austerity measures. Spanish
and Portuguese bonds also renewed last week’s slide as investors
question their ability to cut budget deficits that are among the highest
in the euro area.
The equity destroying capability of this occurrence should not be
underestimated. Referencing “ How
Greece Killed Its Own Banks!“, you can see
that at just 10x leverage (about 1/3rd what most European banks are
currently sporting), any holder of Greek bonds are underwater (if not
insolvent) on those particular purchases at offer – and that is using
last weeks numbers, which look much better than the reality today!
The same hypothetical leveraged positions expressed as a percentage
gain or loss…
Subscribers, please
reference the following:
Leveraged European Entities from a
Sovereign Risk Perspective – retail
- Leveraged European Entities from a
Sovereign Risk Perspective – professional
Now, back to the article for there is more of interest to discuss…
European governments are hoping that
Greece’s 110 billion- euro bailout will stop a crisis that Nobel
Prize-winning economist Joseph
Stiglitz says threatens the currency’s survival. Investors are
speculating that Spain and Portugal may also eventually need assistance,
prompting Spanish Prime Minister Jose
Luis Rodriguez Zapatero to dismiss such talk as “complete
madness.”…
Well, I don’t know about complete madness. An excerpted page from our
Spain
public finances projections shows Mr.
Zapatero’s government has been most optimistic in his assumptions of
growth and revenues.
What dismissal of the debate of a Spanish bailout itself skirting the
perimeters of “madness” is that despite the fact that Spain’s
government has pretty much based their numbers using L-La Land math, the
baseline numbers that we compared them to are also prone to optimistic
fantasy. Reference how rosy the outlook of the IMF and the EU were in
forecasting the deficit and debt to GDP ration for teh UK, Ireland,
Italy and Greece throughout this entire fiasco in “Lies,
Damn Lies, and Sovereign Truths: Why the Euro is Destined to
Collapse!”
Notice how dramatically off the market the IMF has been,
skewered HEAVILY to the optimistic side. Now, notice how
aggressively the IMF has downwardly revised their forecasts to still
end up wildly optimistic.
Ever since the beginning of this crisis, IMF estimates of government
balance have been just as bad…
The EU/EC has proven to be no better, and if anything is arguably
worse!
Revisions-R-US!
and the EU on goverment balance??? Way, way, way off.
So, Mr. Zapatero, the contents of
this blog post alone, contains more than enough reason to speculate on
the possibility of Spain needing a bailout. If one were to actually
delve deeper into our reports, many, many more reasons to speculate will
emerge, and the banks contained in the Leveraged
European Entities from a Sovereign Risk Perspective are
justifiably suspect, for they hold a lot of debt and exposure to the
most suspect of the PIIGS group. I don’t think “madness” would
accurately describe the speculation of Spain’s need for assistance. The
options market agrees, looking at the performance of the puts on exposed
and high NPA Spanish banks…
And now, back to the Bloomberg article…
Bonds Tumble
That didn’t stop a sell-off in
Spanish bonds yesterday. The extra yield that investors demand to buy
its debt over German bunds rose 21 basis points to a 14-month high of
117.8 points. Spain’s benchmark IBEX
Index, the euro region’s worst performer after Greece, fell 5.4 percent
to the lowest since July. Portugal’s
spread rose 40 basis points to 247 yesterday.
Up until last week Spanish bonds did not represent drastic losses to
their investors. I fear they will soon start looking like those Greek
bonds charted above very soon, though.
The euro weakened 1.4 percent to
$1.3011, the lowest in more than a year. The currency retreated further
in Asian trading today, to $1.2961 as of 11 a.m. in Singapore.
Greek unions plan their third general
strike of the year today after workers occupied the Acropolis yesterday
and shut down schools and hospitals at the start of a 48-hour walk-out.
Aegean
Airlines SA, a Greek carrier, has canceled all flights….
‘Massive’ Protest
“We will continue with action as long
as these measures, which go against workers and are anti-social,
continue to be demanded,” Stathis Anestis, a spokesman for the GSEE
union, said in a telephone interview, predicting “massive
participation.”
The yield
on Greece’s 10-year bond climbed 90 basis points to 9.84 percent
yesterday, compared with 9.343 percent on April 30.
Investors may turn to the relative
attraction of Asia’s bonds because economic expansion in the region
means sovereign balance sheets are stronger, according to Standard &
Poor’s. “The growth story and sovereign-balance story in Asia looks
relatively better, much better in some cases,” William
Hess, director of sovereign ratings for S&P in Asia, said in an
interview this week in Tashkent, Uzbekistan.
This is reminiscent of HPA (perpetual housing price appreciation)
that was used in the rating agency housing models to justify AAA ratings
for junk subprime bond debt. Asia (China and Japan in particular) is in
the same NPA/debt boat as Europe and the US. China has simply
super-stimulated their economy and we are are awaiting the results of
massive bubble blowing. Reference:
-
A Summary and Related Thoughts on the IMF’s “Strategies for Fiscal
Consolidation in the Post-Crisis -
What Are the Odds That China Will Follow 1920’s US and 1980’s Japan?
- Signs
of a China Credit and Real Asset Bubble Are Now Unmistakable!
-
Financial Contagion vs. Economic Contagion: Does the Market
Underestimate the Effects of the Latter? -
Can China Control the “Side-Effects” of its Stimulus-Led Growth? Let’s
Look at the Facts - The
Potential Effects of Remnibi Appreciation on China’s Economy
More than 51 percent of Greeks said
they won’t accept new austerity measures before the rescue deal,
according to a poll of 1,000 people by ALCO for Proto Thema newspaper.
That compared with 33 percent who would accept them. No margin of error
was given for the poll conducted from April 27 to April 29.
Union Record
Unions have had some success
influencing policy in the past. They forced then-Prime Minister Costas
Simitis to dilute proposals such as raising the retirement age in
2001. Unions successfully opposed a government proposal in 1985 to cut
spending and boost tax revenue, prompting Simitis, who was economy
minister at the time, to resign two years later.
This is the reason why a simple extrapolation of foreign claims
against and withing the PIIGS will fail to tell you who’s next after
Greece. While an examination of foreign claims reveals a lot, it fails
to tell the whole story.
In order to derive more meaningful conclusions about the risk
emanating from the cross border exposures, it is essential to closely
scrutinize the geographical breakdown of the total exposure as well as
the level of risk surrounding each component. These components include
a) government default b) private sector default and c) social unrest.
The probabilities for each factor were arrived on the basis of a number
of variables determining the relative weakness of the country. The
aggregate risk event probability for each country (trigger point) is the
average of the risk event probability due to the three factors. Hence,
the origin of our Sovereign Contagion model (
Sovereign Contagion Model – Retail and
Sovereign Contagion Model – Pro & Institutional) which aims
to quantify the amount of risk weighted foreign claims and
contingent exposure for major developed countries including major
European countries, the US, Japan and Asia major.And not, back to the
article…
Some economists say the terms are too
harsh for the country to bear. Greece expects its economy to shrink 4
percent this year and 2.6 percent in 2011.
“The economic pain that such belt
tightening will bring suggests that it would be unwise to rule out a
default further down the line,” Ben
May, an economist at Capital Economics in London, said in a note.
The danger for the euro region is
that failure to end the Greece crisis after three months of wrangling by
EU leaders will prompt investors to shift attention to the deficits of
Portugal and Spain, and dump their bonds too. Spain’s budget gap was the
area’s third highest last year, at 11.2 percent of GDP. Portugal’s
shortfall was fourth at 9.4 percent of output.
Follow my ongoing analysis
of the Sovereign Debt Crisis, now over 30 articles strong and
available to the public.
- advertisements -
Madness that Spain will need a bailout....Madness??
THIS IS SPARTA
The conspiracy theories are stupid. Contagion is happening because people are waking up to risks and changing positions, in typical human herd fashion. If PIGS governments had credible plans to maintain at least mid-term solvency, their bonds would not be tanking.
The US and Europe are in very different boats in the same stormy waters. Europe is like a fleet of small to mid-sized ships, with widely varying seaworthiness: eventually the better ships are going to have to save themselves and let the weaker ships go down. The US is one big Titanic, convinced it's unsinkable.
"The conspiracy theories are stupid." Yep. That one about some guy carrying out attacks from a cave in Afghanistan with military precision across the globe is a good example.
Grecian debt is same as our subprime MBSs.
Reggie, I agree with you, the Eurozone is heading down the toilet and I don't think that anything can stop it, merely try and slow it down.
I keep looking at this and thinking is this really a bailout of the Greek people or is a bailout for stupid French and German banks? What I see are German and Greek taxpayers both getting hosed while dirty politicians and bankers try and keep diverting their attention.
Agreed.
A "vaccination" with a dirty needle shared by a bunch of debt addicts
Nice analogy.
The vaccination does exist.
But as for many cases in vaccination, a deep sick state is sometimes the only cause to convince the sick person to get inoculated.
Vaccination/cure did not change since the last time: more integrated Europe with something having to do with economic re-organization.
The issue is simple: last round of elections showed that nations were no longer that enthusiastic for Europe building. Some voted the project out with Ireland having to vote twice to get the right answer.
Next stage in Europe integration could be extremely painful as it could include common fiscal policies, workforce mobility (actual or abstracted)...
Getting people to accept this pain might only be possible through the prospect of a greater pain.
Game has not changed: traders have their source of easy money and European leaders an opportunity to further a project they are less and less able to carry out through conventional means.
ATHENS IN BAILOUT LAND:
http://williambanzai7.blogspot.com/2010/05/athens-in-euroland.html
http://nos.nl/video/155131-beelden-van-paniek-bij-dodenherdenking.html
Check this out. Happend yesterday in my country.
You could say, the stockmarkets are just like it.
Everybody is calm, and it doesn't need much to cause a small panick because of some haoxer.
The Zapatero government is illegitimate since 3 days before it was elected.
The current government of Spain was selected through a ETA terrorist bombing plot that very well had co conspirators inside the country's Socialist-leaning LEO brass.
As time goes forward and the socialists and sociopaths attached to Zapatero run out of other peoples' money to redistribute to their constituents, the situation in Spain will become just as untenable as we see in Greece today.
Articles regarding the independent investigations of 3/11 publishend in English:
CHRONOLOGIC SUMMARY:
http://www.freerepublic.com/~jaguilar/index?U=%2Ftag%2F%2A%2Findex
1. Well, well, well, what have we here? by Dan Darling (4/5/2005)
2. What I think I know about Huarte by Dan Darling (4/14/2005)
3. Spain’s “Terrorgate”? by Frank J. Gaffney Jr. (5/18/2005)
4. The Mystery of 3/11 - Part 1
5. The Mystery of 3/11 - Part 2
6. The Mystery of 3/11 - Part 3
7. The Overlapping Plots by Luis del Pino, Chapter 1 of his book Los Enigmas del 11-M (translation Rojo4).
8.Did Al-Qaeda participate in the 11-M bombings? by Luis del Pino, Chapter 2 of his book Los Enigmas del 11-M (translation Rojo4).
9. 3/11 Revisited - Part 1, based on Luis del Pino's book Los Enigmas del 11-M, Chapter 11.
10. The Amazing Life and Death of Jamal Ahmidan (I) by Luis del Pino, Chapter 12 of his book Los Enigmas del 11-M, translation and title by J Aguilar (10/5/2005)
11.-Trashorras talks to EL MUNDO by Fernando Múgica, EL MUNDO newspaper.
12.-Lavandera talks to EL MUNDO
13.-Did ETA pay the Jihad? (9/15/2006)
14.-The Battle Rages (10/4/2006)
15.-ETA Provided False Identifications to the Islamic Terrorists that Attacked the WTC in 1993 by Javier Oyarzábal to City FM radio (10/17/2006)
16.-The Scientific Police Had No Access During Hours to the Bodies of the “Suicides” of Leganés (10/17/2006)
17.-What the Mass Media Does Not Dare to Tell (11/10/2006)
18.-The Explosive Used in the Massacre is Still Unknown by Casimiro García-Abadillo to EL MUNDO newspaper (11/20/2006)
19.-Police Officers Investigated on Explosives Trafficking in Madrid by Fernando Lázaro, EL MUNDO newspaper (11/30/2006)
20.-Informer Farssaoui Denounces Spanish Police Officers (12/4/2006)
21.-Interview with the Investigator and Journalist Luis del Pino by Jorge Hernández to Tribuna de Salamanca newspaper (12/8/2006)
22.-The Repression Begins
23.-Let It Snow by Luis del Pino (12/23/2006)
24.-ETA Used Hexogen in the Bombing of Barajas Airport
25.-Between Extreme Incompetence and Conspiracy to Obstruct the Action of Justice
26.-You May Deceive...
27.-What the Mass Media Does Not Dare to Tell (II)
28.-Three Years On: the Eighth Suicide Gives Testimony before the Court
29.-Interview with the Jihadist by Ali Lmrabet to EL MUNDO newspaper (5/25/2005, put into context in 2/2007)
30.-Wasn't it ETA? (4/1/2007)
31.-Who Really Lied (4/16/2007)
32.-Experts Will Ask for Authorization for the Exhumation of Corpses (4/30/2007)
33.-The Incompetence Theory (5/20/2007)
34.-EL MUNDO finishes off the Official Version (6/3/2007)
35.-ETA Ends the So-Called “Cease Fire” Tonight (6/5/2007)
36.-Calls from the Dead (7/20/2007)
37.- More Hot Air (And More, And More...) (7/29/2007)
38.-Police Chatting with Suspects and Their Relatives Hidden to the Judge (8/6/2007)
39.-Let's Talk About Al Qaeda
40.-Mahmoud Slimane Released From Prison
41.-The Disinformation Campaign (9/18/2007)
42.-Bikers and Jews (10/4/2007)
43.-The Spanish Supreme Court, Stormed (10/23/2007)
44.-Reason of anti-State (10/28/2007)
45.-The Sentence: It wasn't Al Qaeda, It wasn't Iraq (11/11/2007)
46.-Strategy of Tension: A Civil Guard Killed by ETA in France (12/1/2007)
47.-From Mistake to Mistake (12/14/2007)
48.-The Empire Strikes Back (12/29/2007)
49.-Those Strings Pulled... (1/19/2008)
50.-The Non-Existent Islamist Character of the Atrocity (2/10/2008)
51.-Zapatero Confesses Tension is Needed to Win the Elections (2/15/2008)
52.-Warning on Possible Mediatic Coup in Spain (2/21/2008)
53.-An Italian Job (2/25/2008)
54.-The Original Sin
55.-Strategy of Tension: ETA Murders Again Two Days Before the National Elections
56.-X/11: The Usual Suspects, Respawned
57.-The Spanish Intelligence Service Behind the Harassment of a Supreme Court Judge
58.-High Rank Police Officers in the Dock for Alleged Manipulation of a Forensic Report
59.-The Chief of the Spanish Intelligence During 3/11, New Ambassador in the US
60.-Four Madrid bomb convicts cleared
61.-Spanish Supreme Court Acquits 5 Madrid Bombers
62.-3/11: Apogee and Fall of an Official Version
63.-Spain: Who is Really Pulling the Strings?
64.-Spain: How Much is Enough?
65.-The Great Orient of France and Zapatero
66.-The Transcription of the Trial Made Public... by Volunteers
67.-Spain: Is the Popular Party Infiltrated?
68.-Former Bomb Disposal Unit Chief Denounced for Disappearance of Physical Evidence
69.-EDU Chief Admits Evidence was Destroyed
70.-The Amazing Life and Death of Jamal Ahmidan (II): His Political Family
71.- The Reasonable Thing Would Be to Begin the Investigations Again From Zero
72.- Zapatero is negotiating with ETA again
As Merkel said...
"... Please, take the exits in an orderly fashion while the Europe "Hindenburg" is going down in flames"
People of Greece and Europe >>> Buy Guns and Ammo .
Don't let the Rothchild / Buildergerg Group run you over..
Still recall taking the subway into downtown Seoul in 1998 or 1999, and there were all these folks wearing red jerseys everywhere...I thought they were going to a football (soccer) game or something. Anyway, later was sitting in a second story coffee shop, shooting the breeze with my interpretor, when all of a sudden busloads of black uniformed troops/police show up. @ a dozen buses. Darth Vader-like uniforms meant to intimidate, with shields and clubs drawn.
Looked up the street, and there were all the red shirted guys, blocking a main intersection downtown, with bullhorns and prybars. Prying up the sidewalk, and breaking it into chunks.
Union guys, brought a tear to this old man's eye to see it. Men.
The two sides faced off in the strret. The lead redshirt charges and jumps into the first cop with a flying karate kick. Wow. I turned to Simon and asked "WTF is up, chuck?" he tells me: anti-american/IMF protest.
The battle was on. Chunks of concrete flying everywhere, standersby and cops pummeled, then picking it up and throwing it back. The battle was on alright: who controlled this country. Remember, this is the country that was still a military dictatorship in the early 80's (and of course, Reagan "advised" the brave people to "keep their dictator", "violence isn't the answer"), fact. Brain-addled actors should never be leaders.
Tell the Redshirts here in Thailand that stood up to the military, suffered 28 dead, and forced elections this November that "violence doesn't work".
You know what I thought? I though it was a good demonstration of a country still in the belief the People run the country, not the elites. A demonstration of Freedom never seen in the US these days. Maybe soon, though, let's pray.
That Korea and Thailand could teach us a thing or two about freedom in the USA is a sad reality, isn't it??
Greeks: kick ass and take names. Good on ya.
Chances are if you were Seoul that would have been a Tae Kwon Do kick, not a karate kick!
Mixed martial arts, black belt Reg!
MMA schools don't give out belts
So! Many mixed martial artists came from a traditional martial arts background, and studied other arts and styles to round out the weaknesses learned from styles grounded in tradition. MMA is something new, becoming popularized with the UFC, et. al.
That is how Brazilian grappling became so popular, and then Muay Thai and other striking arts. This is something that I know well. I've been fighting since I was 13.
Great post. The structure of the Greek bailout is sheer madness. I don't blame the Greeks for demonstrating (but don't approve of the rioting). They should just default. A Greek default will hasten the overall cleanup of the world financial system that is so badly needed.
Let the Greeks take their medicine and go on from there. No one put a gun to their heads and forced them to vote for socialistic governments. Let the Greeks solve their problems in their own fashion and make their own decisions as to how they want to live.
The last two charts on the page are downright frightening.
As I see it, the Greeks,UK, France, never got to vote on becoming Socialist's, politicians do that.
What we have IMHO, is a BEGINNING mix of Socialism, and is going to turn into Fascism, before it ends....the systems are both mixed now.
Did the American people get to vote for THIS "CHANGE"?.
Hell no..................or Obama would have rec'd 20% max vote.
I agree with Spain's PM, it is contagion madness. Moreover, William Engdahl is right, this is a concerted effort by the US and UK financial elite to weaken the Eurozone. Who profits off this hysteria? Who else? Goldman, JP Morgan and their big hedge fund clients.
I agree with Engdahl that JPM and GS have enough power to influence markets in an anti-competitive way, but pretending that Ireland is solvent when their debt to GDP ratio is greater than 1000% is frankly pretty damn retarded.
Say wha'? If what you're talking about is the government's solvency, Ireland's sovereign debt ratio isn't greater than 100%, with two zeros. (Yet.)
Should have specified external debt to gdp ratio.
Hardly, Leo.
This is about playing defense with your own money...in other words, doing everything you can to get it back now (i.e., be made whole), before you cannot do anything about it.
The PIIG sovereigns are too highly leveraged. People who loaned them money are finally "waking up" or, stated differently, gaining access to the information showing that the likelihood of them being made whole is NOT GOOD.
Consequently, markets adjust to the point of supply/demand equilibrium, and speculators are only a tiny part of this. It is the abandoning long-term investors, who are moving this market with any semblance of momentum. "Speculators" are just along for the ride.
Government is the master of this mess, and they create a scapegoat (i.e., speculators) to hide their incompetence.
Arrogance is the sin.
Euro governments over-promised and under-prepared with Greece leading that charge. They also thought that the investors in sovereign debt were merely servants of the state.
And Obama is driving the USA to follow Europe like a lost lamb. (Not at all shocking to me, and why I voted against that socialist crook.)
"And Obama is driving the USA to follow Europe like a lost lamb. (Not at all shocking to me, and why I voted against that socialist crook.)" Shocking ignorance. Flat out incredible.
Come back and play nice when you can define the difference between socialism and fascism.
Clue: how much did socialists contribute to Obama's campaign, and how much from Wall Street?
How many "socialists" sit on Obama's Economic Advisory board? Uh huh, that many. Never heard of a 'swinging door" between socialists and government offices. Ever heard of any Goldman Sachs officials in government regulatory position, mate?
Clue two: What is the premise of economic feasibility behind the size of an insurance pool? Hint: the larger the better, it's called "spreading the risk: What's larger than the entire country's population? Yeah yeah, "socialist." Just send out RFP's to all insurance corporations, low bid takes it. You would label that "socialism" I label it capitalism at it's finest.
One of us is correct, the other a parrot kept to close too Lush Rimbaugh's broadcasts: tell your master to move your cage.
"Government is the master of this mess, and they create a scapegoat (i.e., speculators) to hide their incompetence. Arrogance is the sin."
great line
pride goeth before the fall - Herodotus
Thanks. It's an original...was just "in the zone."
That's a very good point, Carl... too many states are treating the bond market as though it were a utility function. They have grown accustomed - addicted - to historically-low rates. No rational person would ever believe this situation could hold sway for long. There is no god-given right to cheap money.
But Goldman is long EURUSD, right? They've got $108.50 tied up in this, that'll stand up in cout right?
I'd ask the same thing of someone who proposed that the Fed has been juicing equity markets for over a year...
Is that a belief, or is there actually one shred of hard evidence this is happening?