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An Explanation Of What Is Really Going On Behind The Scenes As Rome Burns

Tyler Durden's picture


Unable to keep with the events in Europe which are now literally changing on an hourly basis? Fear not: SocGen's James Nixon has compiled the most succinct explanation for why we are where we are, and why things will get much worse, before they get even remotely better. In a nutshell, everything you know about the existing proposals is finished: what is currently on the table is "a wider strategy which includes lowering the interest rate on lending to Greece and returning to the idea of bond buybacks." Ah, yes, the Goldman proposal. However did we know we may end up precisely here. The problem with this proposal is that all bond buybacks at prices below par are, and always have been, considered by the rating agencies as immediate events of technical default. How this eliminates the ECB liquidity scramble bogeyman we have no idea. At this point we are absolutely certain that the only thing on the Eurozone and ECB's plate is to baffle everyone with steaming pile after pile of bullshit so unbelievable, that people are stunned for days, buying bankers valuable time to convert even more freshly printed paper into hard assets. In the meantime, there is no actual plan to deal with the problems of untenable debt, or at least not one that does not involve the outright monetization of debt and thus, the spurring of hyperinflation, which unfortunately is the last recourse to wipe out the tens of trillions in bad debts dispersed proratedly across Europe's insolvent banking system.

From SocGen:

No easy way out: Europe still considering bond swap for Greece. The fault lies not with the rating agencies; rather it is the inability of European’s political leaders to agree a new financing package for Greece and the insistence of private sector involvement that has pushed Europe’s sovereign debt crisis to new highs. There is now a very real risk that contagion will engulf Italy and Spain. Germany’s Der Spiegel captures the mood when it argues that, “The fears that are turning investors against Italy are vague and are being exacerbated by the failure of euro area finance ministers to agree on a second bailout for Greece.” In the meantime, the argument over how private sector investors should be included in future bailouts is making it difficult for other higher indebted countries to borrow money in the financial markets. Where this leaves us is unclear. It continues to look as if the French proposal to roll over Greek debt has largely been abandoned, not least as it was seen as being far too generous towards the banks. Instead, Finance Ministers are reported to be giving serious consideration to the German government proposal that banks swap their existing Greek bonds for new seven-year Greek debt. Such a move appears to be part of a wider strategy which includes lowering the interest rate on lending to Greece and returning to the idea of bond buybacks. Given the discount at which Greece debt is trading, the latter continues to be an attractive strategy to impose losses on the private sector.

Despite mutterings that the Eurogroup is still exploring a voluntary arrangement, it is hard to see that there can be any common ground with the rating agencies. Although a formal debt swap and duration extension would probably not be a credit event (in the sense of triggering the CDS) it would almost certainly be treated as a “rating event” and see Greece downgraded to SD. Meanwhile, Handelsblatt reported on Monday that the ECB had contacted five financial institutions with a view to seeking advice on how to minimise contagion should Greek bonds be downgraded. In particular, according to the newspaper, the ECB is seeking advice on the refinancing and liquidity of banks, after such a downgrade.

The real problem is now contagion. If the Europeans go ahead and force through a rollover on Greek debt, the markets will rightly anticipate that Portuguese and Irish debt will receive exactly the same treatment should their existing bailout packages have to be extended. Not only does this make it increasingly unlikely that these countries will be able to return to market financing (and therefore making it more likely that Portugal and Ireland will need a new bailout), but it also injects a significant risk premium into the yields paid on Italian and Spanish debt. With Italian ten-year bond spreads heading toward 300bp, the risk is that we are fast approaching the point where neither Italy or Spain will be able to sustainably finance themselves at these levels. This naturally leads into a discussion of whether they can be financed by an enlarged EFSF. Along these lines, the German daily Die Welt reported on Monday an unnamed ECB official suggesting that the EFSF should be increased from its current €440bn to €1.5 trillion.

Should the crisis really spread as far as Italy and Belgium, then this figure is not that far wide of the mark. We estimate Spain’s total financing need over the next three years to be around €380bn; Italy’s financing need is considerably larger at €630bn while Belgium’s financing need over the next three years would be around €150bn. Including the €44bn already committed to Ireland and Portugal, and potentially a further €85bn for Greece, the EFSF would need to be roughly doubled to just over €850bn (assuming the IMF would be prepared to provide one third of the official financing). Without the IMF, whose participation cannot be guaranteed, the EFSF would have to be expanded to €1.3 trillion. In order to maximise the lending capacity of the EFSF, this would mean the AAA-rated countries would have to guarantee 172% of the lending which would potentially imply a contingent liability of between 25-45% of GDP – depending on whether the IMF were involved or not. Such numbers are huge and must raise serious questions as to whether practically the EFSF could be adequately dimensioned to cover the financing needs of Italy, Spain and Belgium.

Where this leaves us is unclear. The ECB have made it very clear what the established policy response should be, namely the best practice is to fund countries undertaking fiscal adjustment subject to strict oversight. By continuing to seek “substantial” and “voluntary” private sector involvement, Europe’s political leaders look prepared to break with that global doctrine and override the ECB. Meanwhile, the failure of the strategy of pursuing ever greater austerity is plain for all to see with the latest Greek fiscal numbers suggesting that the public deficit had widened to €12.8bn in the first six months of the year compared to a program target of €10.3bn. Public sector spending was up 8.8% y/y, principally due to higher interest payments and payment of arrears to hospitals. Net revenues dropped 8.3% which the finance ministry attributed to the deeper than expected recession. This would appear to vindicate the Troika’s May assessment that “there is a distinct risk that the performance criterion on primary balance for end June has been missed.” To close the gap, and attempt to bring the program back on track, the Greek government recently announced additional deficit cutting measures amounting to almost 3% of GDP in 2011 at the request of the Troika.


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Mon, 07/11/2011 - 19:22 | 1445828 phungus_mungus
phungus_mungus's picture

This is like watching a train wreck in slow motion... 

Mon, 07/11/2011 - 19:41 | 1445905 equity_momo
equity_momo's picture

Its like watching a trapped labrat try to escape from a maze without any exits.

You just end up thinking "poor fella , he might aswell just lay down and take a nap"

"poor Europe , they might aswell just do a mass default and kick back"

Mon, 07/11/2011 - 21:45 | 1446247 MrBoompi
MrBoompi's picture

The rentier class is scared shitless a country like Spain or Italy will default.

Mon, 07/11/2011 - 23:01 | 1446514 Mactheknife
Mactheknife's picture

"Rating agencies? What rating agencies? We don't need no stinkin rating agencies!"

Tue, 07/12/2011 - 11:14 | 1447782 snowball777
snowball777's picture

Good. I hope they dissolve the lining of their stomach then spit and shit blood.

Mon, 07/11/2011 - 22:38 | 1446424 old naughty
old naughty's picture

Agreed. We are all trapped labrats trying to escape from this planet-wide crisis. Poor all-of-us.

Mon, 07/11/2011 - 20:28 | 1446053 oogs66
oogs66's picture

No. It like watching an acella "high speed" train crawl along at 50 miles an hour already 2 hours behind schedule. A good old train wreck makes sense

Mon, 07/11/2011 - 21:27 | 1446193 nedwardkelly
nedwardkelly's picture

So kind of SOP then?

Mon, 07/11/2011 - 21:57 | 1446299 Michael
Michael's picture

The house of Rothschild should take the 1.5 trillion dollar hit to their family portfolio and restructure all Europian PIIGS debt.
I know how banking house families hate seeing the value of their banking empires diminish as it means a loss of real power and influence, but in this case all banister families will lose if something drastic like this isn't done soon.

Mon, 07/11/2011 - 22:07 | 1446340 centerline
centerline's picture

Industrial revolution propelled the game to whole new level.  A controlled deflation seems like a difficult trick to pull off.  A hard crash might actually serve them better depending on how they (and others) have repositioned.

Mon, 07/11/2011 - 22:54 | 1446488 dark pools of soros
dark pools of soros's picture

they'll take the assets first then let the debt die with the dreams of the people

Mon, 07/11/2011 - 21:58 | 1446300 ThirdCoastSurfer
ThirdCoastSurfer's picture

Like a snowball rolling downhill towards a furnace.

Mon, 07/11/2011 - 19:28 | 1445845 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Let's pretend there is not a problem. Bailouts forever....... until default.

Mon, 07/11/2011 - 19:32 | 1445864 augie
augie's picture

Ashes, Ashes, we all fall down.......

Mon, 07/11/2011 - 19:36 | 1445881 AssFire
AssFire's picture

Yes, and let the ashes be those who took more than they created which should be the deciding factor in survival. I can't wait!

Mon, 07/11/2011 - 19:39 | 1445884 AssFire
AssFire's picture

Fucking Norwegians!

Mon, 07/11/2011 - 21:49 | 1446261 Rahm
Rahm's picture


Mon, 07/11/2011 - 23:04 | 1446522 Mactheknife
Mactheknife's picture

Like Maggie Thatcher said,"the problem with socialism is that sooner or later you run out of other people's money."

Mon, 07/11/2011 - 19:29 | 1445851 max2205
max2205's picture

Without a doubt something will save the day. Don't fight the FED

Mon, 07/11/2011 - 19:35 | 1445878 trampstamp
trampstamp's picture

In the meantime, I'm long short

Mon, 07/11/2011 - 19:37 | 1445886 LawsofPhysics
LawsofPhysics's picture

Even the Fed won't fight the Fed anymore.

Mon, 07/11/2011 - 21:50 | 1446265 Rahm
Rahm's picture

They have committed suicide.

Mon, 07/11/2011 - 22:10 | 1446345 centerline
centerline's picture

Nah, they put one round in the chamber and handed the gun to congress.

Mon, 07/11/2011 - 22:13 | 1446348 centerline
centerline's picture


(Blaming it on my router.  It must be acting up over the Cisco news.  Poor router.)

Mon, 07/11/2011 - 20:15 | 1446012 MarketTruth
MarketTruth's picture


----> F.U.C.K...T.H.E...F.E.D.!.!.! <----

Mon, 07/11/2011 - 19:34 | 1445869 CompassionateFascist
CompassionateFascist's picture

Same old. These socialist pols and capitalist banksters are all PERSONALLY invested in the Universal Ponzi. So one bizarre scheme succeeds another as they attempt to postpone System Collapse from today to tomorrow. Thereby making the inevitable collapse and cascade of defaults that much worse. Hard to predict which leg of the pyramid will go first, but looking now like EU first, then US, then China.   

Mon, 07/11/2011 - 19:38 | 1445891 mynhair
mynhair's picture

Kudos on your dup catches, btw.

Mon, 07/11/2011 - 19:51 | 1445936 CompassionateFascist
CompassionateFascist's picture

Still, 3 mushroom clouds are better than one.

Mon, 07/11/2011 - 19:52 | 1445938 CompassionateFascist
CompassionateFascist's picture

4, I mean. Wait, no, 5

Mon, 07/11/2011 - 19:54 | 1445951 CompassionateFascist
CompassionateFascist's picture

-2, +1...whatever. Sort of like Europe.

Mon, 07/11/2011 - 20:58 | 1446118 francis_sawyer
francis_sawyer's picture

...sort of like the math question needed to get this post thru...

Mon, 07/11/2011 - 21:07 | 1446142 InvalidID
InvalidID's picture

I think it goes EU, China, then US. Only because if either the US or the EU fall, China goes with them.

Mon, 07/11/2011 - 22:02 | 1446319 Boston
Boston's picture

Let's not forget Japan.

Mon, 07/11/2011 - 23:00 | 1446512 bakken
bakken's picture

The Chinese situation in Europe is not readily understandable to Americans.  Yes, the Chinese are losing some in the European trade, in general.  They figure, so what?  It is cheap at the price.  They can not dump  ALL their shit onto the US, they need the large European market to keep the machines pumping, and to maintain low marginal costs of production for their economy.  Profit comes from shit eating chumps in the USA who buy Chinese crap no matter what it is or how bad it is as long as it is cheap(NOT the case in Europe).

I agree, a blowout in Europe could lead to a Chinese blow out if it were severe enough.  Maybe China is stuck supporting the Euro at all costs!  hahahaha.


Mon, 07/11/2011 - 19:35 | 1445877 mynhair
mynhair's picture

This is bullish for the EUR - after Chinee intervenes.

Mon, 07/11/2011 - 19:37 | 1445888 Heavy
Heavy's picture

You are being robbed, defend yourselves.

Mon, 07/11/2011 - 19:42 | 1445908 Rainman
Rainman's picture

Dammit....USA coulda bought all the PIIGS and more if it hadn't pissed away $14 trillion. The United Socialist Republiks....has a nice ring to it.

Mon, 07/11/2011 - 19:52 | 1445940 Cheesy Bastard
Cheesy Bastard's picture

I think we still can, if only we can find a comprehensive, compromising, compassionate way to raise the debt ceiling...

Mon, 07/11/2011 - 20:24 | 1446036 Rainman
Rainman's picture

The Obama Plan to rescue Europe...?? Now there's a plan. Outstanding... First Windbag needs to start thinking outside the box. Hope he reads ZH.

Mon, 07/11/2011 - 21:18 | 1446165 Cheesy Bastard
Cheesy Bastard's picture

Right.  Not the Marshall plan, the Michelle plan because we will get thinner and thinner as it grows with no end in sight.

Mon, 07/11/2011 - 20:17 | 1446020 midnight
midnight's picture

shut up, redneck

Mon, 07/11/2011 - 19:44 | 1445912 stant
stant's picture

my edgar cayce moment.on the sides of jet fighters will be kill markings that look like corp jets on the way to paraguy

Mon, 07/11/2011 - 20:34 | 1446066 magis00
magis00's picture

wouldn't that be something?

Mon, 07/11/2011 - 19:54 | 1445948 janus
janus's picture

it boggles...if boggles is the word i want.  yes, it's decidedly boggling. 

Mon, 07/11/2011 - 20:33 | 1445964 blindman
blindman's picture

@ ""..strategy..""
i just had to laugh.
the dick cheney boo ...blues
what "we" need, (we in quotes for the fuckery of it) is
a new tranche of derivative to absolve or resolve metaphysical
future losses that may be elevated to gains in the ethereal realm
of shadow life. it is just that simple. we need a saint or
somewhat like this, and a proper prayer to said, yet to be announced,
personage who would be saint-ed. i would go with r. murdoch, he seems
to be connected at the uppermost levels regarding the intersection
of royal and techno-sacred cultism worship. many middle men would
bleed for him, why not? bleeding is fun once you get the hang of it....
A Change Is Gonna Come- Aaron Neville
on this one i even have to apologize to myself. all around,
apologies,. mostly to my brothers .....

Mon, 07/11/2011 - 19:58 | 1445965 Michael Victory
Mon, 07/11/2011 - 21:02 | 1446130 francis_sawyer
francis_sawyer's picture

Fuck that... Nero 'torched' Rome ON PURPOSE so he'd have a site to build a bnigger palace for himself...

Tue, 07/12/2011 - 07:23 | 1447094 Use of Weapons
Use of Weapons's picture

As for that fire, well, here legend may have been a little harsh. It is true, acknowledges the exhibition, that Nero was down in Anzio when the fire broke out and that it had been blazing for four days (it lasted from July 18th to July 26th in AD 64) before he returned to Rome to do something about it. It is unlikely, though, that he started it, even if he did make the most of the devastation by clearing the way for some ambitious urban planning. Romans, then as now – even bad, bad ones such as Nero – loved nothing better than to build.



[for maximum snark value, please note source / date / cause of said countries' crash, and think on a larger scale: re'branding'/building the EU - properly, this time, without national governments having any real voice at all]

Mon, 07/11/2011 - 20:00 | 1445969 nmewn
nmewn's picture

Does anyone get the feeling that the real powers that be are slinking toward the door leaving just a few servants as a covering force?

Mon, 07/11/2011 - 20:25 | 1446042 NuckingFuts
NuckingFuts's picture

All we need to know is where the air vents are for their underground bunkers and we can finish this thing and get a beer. 

Agreed nmewn, they are gone or going.  Rats leaving the ship. Some stay behind to keep the fiddle playing..........or is that just a recording?

Mon, 07/11/2011 - 20:38 | 1446077 magis00
magis00's picture

Underground near Denver Airport, DEN?  2 of the top 10 google hits are even tinfoil hat links.

Mon, 07/11/2011 - 21:24 | 1446187 mess nonster
mess nonster's picture

That's the beauty of it- the bastards have nowhere to go. Underground, and become morlocks.

Mon, 07/11/2011 - 21:46 | 1446226 Shell Game
Shell Game's picture

Yep, absolutely get the same feeling.  hmm, that out to lunch sign has been up a while..

Tue, 07/12/2011 - 07:21 | 1447109 Use of Weapons
Use of Weapons's picture

I'm looking at the old tigers (Burlesquoni, DSK, Murdoch... a couple more with targets on them) getting put down ready for the 21st century stars. They say that tigers will be extinct by the 2020's.

In tribute to a poster here with a great name:

In a fluid and shifting
Creative and destructive
Like a water "planet"...
Conjunction of opposites
Active, passive principles
Fame, glory, fire, water
I will drink fire...

Mon, 07/11/2011 - 20:03 | 1445982 Itsalie
Itsalie's picture

reminds one of the Asian Financial Crisis (aka the IMF crisis) of 1998 non? Contagion spreads like fire from one strange land to the next. Each time, the IMF chief Michel Camdessus flies around arms crossed (and whip behind the back) caning every head of state as they sign the austerity package. When you read statements like the below from an analysts belonging to a bank from that great frog eating land with a bankrupted social security since the 1980s without fixing it, you have to think the contagion has reachedthe surreal stage:

"The ECB have made it very clear what the established policy response should be, namely the best practice is to fund countries undertaking fiscal adjustment subject to strict oversight."

So may I add the following made-up quote from the Eurocrats of ECB/IMF:

"For ourselves, we interpret the law, for everyone else, we enforce it" - ECB

Austerity for you Club Meds (hey frog eaters would be next right?). Meanwhile, old men and women of the ECB and elsewhere in la-la land No. 2 (No 1 is disneyland) will take their annual mandatory 6 weeks vacance in the riviera. See you all.


Mon, 07/11/2011 - 20:05 | 1445988 Joebloinvestor
Joebloinvestor's picture

Have one agency (the new EU rating agency) rate them as AAA+++.

The EU can tell everyone that,"see it's the rating agencies" and everyone is happy.

Then it will all be on the heads of suckers who buy their shit.

Mon, 07/11/2011 - 20:09 | 1445997 static
static's picture

from containment to contagion...have we seen that before?

Mon, 07/11/2011 - 22:51 | 1446480 Roger Knights
Roger Knights's picture


Tue, 07/12/2011 - 07:34 | 1447128 Use of Weapons
Use of Weapons's picture

Has Madagascar closed it's ports yet?

Mon, 07/11/2011 - 20:13 | 1446005 slewie the pi-rat
slewie the pi-rat's picture

nice intro tyler.  after that wind-up, who cares what socGen sez?  tens of trillions of bad debts will not be wiped out by the printing & re-fi, tho, will they?  don't the dates just change while the feces remain the same?  (sorry---couldn't resist!)

Mon, 07/11/2011 - 21:04 | 1446136 francis_sawyer
francis_sawyer's picture

don't be sorry... I was calling out mega-BS on a Soc Gen post just last week...

Mon, 07/11/2011 - 22:08 | 1446342 slewie the pi-rat
slewie the pi-rat's picture

i'm tempted to say there's still hope, then, but...

Mon, 07/11/2011 - 20:21 | 1446030 bigwavedave
bigwavedave's picture

should have put the ratings agencies out of business when you had the chance bitchez

Mon, 07/11/2011 - 20:26 | 1446046 Cult_of_Reason
Cult_of_Reason's picture

There are multiple "AIG"s hidden in EU banking system that have sold short trillions of CDS sovereign credit protection (and likely there are some banks in US and Chinese banking systems too) -- now it explains as to why EU officials are trying so hard to avoid any sovereign debt default at any cost (and Chinese officials are even willing to buy worthless junk EU paper just to prevent a default and CDS activation).

Mon, 07/11/2011 - 20:47 | 1446100 long-shorty
long-shorty's picture

you're the fixed income guy and I'm the lowly equities guy, but as far as I know, buying back your own debt below par voluntarily in the open market is not considered a default by any of major ratings agencies.

Mon, 07/11/2011 - 20:48 | 1446102 Coke and Hookers
Coke and Hookers's picture

There are only two solutions for Europe. The logical one is to end the EU/EMU experiment and revert back to national sovereignty and currencies. That won't happen of course unless there's no other choice - i.e. if the Brussels elite is faced with popular revolt or coups, i.e. bloodshed.

The other one is to remove the EU economy and the EMU from reality and into a purely political/surrealistic realm where laws of nature can be made up as you go. It would be a monetary sci-fi solution where money stops being money, debt is no longer debt and all worldly posessions are owned by the EU/IMF Supreme Being.

It's obvious that the EU is going for the sci-fi solution. The reactions to the rating agencies' downgrade of Portugal is a clear indication that reality has seriously started to annoy the EU elite. Look for more sci-fi in the coming weeks and months. Money will not matter anymore to Brussels except as a political tool to keep the Union together. Debt will not matter anymore. Reality will be abandoned. Toilet paper will be traded for trillions of euros. Cats and dogs will be living together.

The only hope for the EU is that the entire world will follow them into the fifth dimension. Bernanke is already there, waiting for them.

Mon, 07/11/2011 - 21:09 | 1446150 francis_sawyer
francis_sawyer's picture

...that's not bad...

In the end... I think I'll put my money on the SCI-FI solution (with a 'twist', of course)...

Mon, 07/11/2011 - 21:13 | 1446157 francis_sawyer
francis_sawyer's picture

long gold... short euro... (even at these prices)... doesn't seem too ba when you think about it...

Mon, 07/11/2011 - 21:40 | 1446227 Nothing To See Here
Nothing To See Here's picture


This is not really sci-fi, only slightly dystopian, 27 years late.

Mon, 07/11/2011 - 21:14 | 1446158 gwar5
gwar5's picture

Tyler nails it when he says bankers are just buying time to convert increasingly worthless currencies into hard assets.

Everybody (globally) seems to know the end of debt based economy Ponzi is near except sheeple with wool still over their eyes. Even if the troika somehow manages to pull this mess out of their ass it will only be a reprieve. The debt base will only be bigger and so will the fall, making Economic Martial Law and violent revolution certain.

Euro elites dreaming about private money to "voluntarily" finance the bailouts seems like fantasy unless, by voluntary, they mean "Economic Repression".

Mon, 07/11/2011 - 22:34 | 1446409 hamurobby
hamurobby's picture

I bet the private lenders will be back door funded and the show will go on, for awhile.

Mon, 07/11/2011 - 21:20 | 1446175 mayhem_korner
mayhem_korner's picture

Why does it seem like these blokes are trying to wrap the bad-smelling patient in gauze before sending him back into the fire pit?

Tue, 07/12/2011 - 07:09 | 1447088 Use of Weapons
Use of Weapons's picture



Goose dies. (Double pun bonus!)

Mon, 07/11/2011 - 21:27 | 1446192 GlenD
GlenD's picture

So EU/US problem is that they do not make enough money from exports

And China's problem is that they make too much money from exports

We need someone real smart to work out a fix for this.

Mon, 07/11/2011 - 21:58 | 1446302 MrBoompi
MrBoompi's picture

Silly rabbit, THIS IS THE FIX.

Mon, 07/11/2011 - 21:53 | 1446199 cranky-old-geezer
cranky-old-geezer's picture

At this point we are absolutely certain that the only thing on the Eurozone and ECB's plate is to baffle everyone with steaming pile after pile of bullshit so unbelievable, that people are stunned for days, buying bankers valuable time to convert even more freshly printed paper into hard assets.

Ahhhhhh.... the real story exposed.

It's called looting.  Citizens, economies, nations.

Print currency on a printing press, call it money, loan it out at interest to irresponsible governments, let them build up so much debt there's no way they can pay it back, then accept national assets in leu of payment.

It's the oldest banker game in the books, going back hundreds of years.

And no one ever learns.

I'm not picking on EU nations. Our American government is far worse than any EU nation.

The first mistake is creating a national currency.  Declaring worthless pieces of paper to have monetary value.  Even a PM-backed currency is wrong.  Sooner or later the PM-backing is removed, and now it's just worthless paper.

Our Founders prohibited it. No paper currency in America.  No, not PM-backed currency either.

The second mistake is allowing a central bank to form. 

Our Founders prohibited it. No central bank.

The third mistake is taking the national currency out of circulation and adopting paper currency issued by the central bank.  There's no sound reason for a government to do that.

Our Founders prohibited it. No central bank.  No central bank currency.


Mon, 07/11/2011 - 21:53 | 1446279 Shell Game
Shell Game's picture

Same as it ever was..

The cycle of learn from history and forget history, over and over again.

Mon, 07/11/2011 - 22:07 | 1446341 JR
JR's picture

Well put, cranky-old-geezer.

“The real menace of our Republic is the invisible government which like a giant octopus sprawls its slimy legs over our cities, states and nation.  At the head is a small group of banking houses… This little coterie…runs our government for their own selfish ends.  It operates under cover of a self-created screen…schools…courts…newspapers and every agency created for the public protection.” – N.Y. Mayor, John Hylan

Mon, 07/11/2011 - 21:32 | 1446209 Stuck on Zero
Stuck on Zero's picture

Question:  Where did the wealthy Greeks put their money?  I'll bet they knew better than to buy Greek bonds.  Where are wealthy Americans putting their money?

Mon, 07/11/2011 - 22:22 | 1446378 sasebo
sasebo's picture

And who are wealthy American's getting their money from? Everybody else is broke. Okay, the Fed is printing it.

Mon, 07/11/2011 - 21:34 | 1446211 mess nonster
mess nonster's picture

 I guess everyone's buying gold faster than ritalin-maddenned monkey can yank pud...

 Better than gold- a chainsaw, a wood stove, a garden, and lots of space between neighbors.

Mon, 07/11/2011 - 22:10 | 1446346 cranky-old-geezer
cranky-old-geezer's picture

Better than gold- a chainsaw, a wood stove, a garden, and lots of space between neighbors.

Yes, lots of space between neighbors is the MOST important thing.

Mon, 07/11/2011 - 21:36 | 1446216 Nothing To See Here
Nothing To See Here's picture

If the EU would have the idea to want to win the future, all would be nice no?

Mon, 07/11/2011 - 21:42 | 1446233 Everybodys All ...
Everybodys All American's picture

Game set match ... ECB loses.

Mon, 07/11/2011 - 21:49 | 1446262 JR
JR's picture

Many had predicted that fiat currency would wreck America’s and the world's financial stability.  But only one man, 17 years ago, provided the exact details on how the destruction would unfold and how the Federal Reserve would play the central role in tearing up the world. And now, there are those who say that QE3 (translation the Fed) is the only trick left in the bag.  But not the man who saw it all -- G. Edward Griffin.

Griffin saw in America’s future, if trends ongoing in 1994 continued, “a hypothetical banking crisis, massive inflation, a collapse of the economy, domestic violence, the issuance of a new UN money, and the final merger into The New World Order.”

He called it High-Tech Feudalism, where men are reduced to the level of serfs.

In his Pessimistic Scenario, one of the end chapters in The Creature from Jekyll Island, Griffin summed up the Fed’s role: “This is the Fed’s (IMF’s) finest hour;  billions (now trillions) of new dollars are springing into existence, creating money out of whatever is at hand: U.S. Treasury bonds, bonds from other governments, corporate debt obligations, even direct loans to individuals and partnerships.”

Among the consequences noted by Griffin are what many Americans and the world are experiencing now: Inflation has become institutionalized; there is no limit to the amount of money that can be created.  In the 1930s, everyone wanted dollars. Now, everyone wants to get rid of them. The Fed has seized everyone’s saving account (withdrawing value through negative interest rates).  As for homes: Griffin predicted Congress would bail out the bankers and transfer the losses to the taxpayers with the federal government eventually becoming the owner of all homes and apartments…

Griffin in his final chapter, A Realistic Scenario (there is no optimistic scenario as things have progressed too far), lists specific measures that must be undertaken to stop the monetary binge if we are to avert the pessimistic scenario.

Says Griffin: “What has any of this to do with the Federal Reserve System.  The answer is that the Federal Reserve is the starting point of the pessimistic scenario. The chain of events begins with fiat money created by a central bank, which leads to government debt, which causes inflation, which destroys the economy, which impoverishes the people, which provides an excuse for increasing government power, which is an on-going process culminating in totalitarianism. Eliminate the Federal Reserve from this equation, and the pessimistic scenario ceases to exist. That is the…reason to abolish the Fed: It is an instrument of totalitarianism.”

Danny Schechter, in Will Banksters Get Away With It?, asked: “When will we call a crime a crime? When will we demand a jail-out, not just more bail-outs. Unless we do, and until we do, the people who created the worst crisis in our time will, in effect, get away with the biggest rip-off in history.”

Mon, 07/11/2011 - 22:43 | 1446448 hamurobby
hamurobby's picture

Excellent post.

Mon, 07/11/2011 - 23:11 | 1446543 essence
essence's picture

Very well said.

And I suspect the ultimate powers behind the Fed are also the main movers-and-shakers in the EU. Of course we can't say with any assurance because these entities take pains to shield themselves from meaningful audits, yet whatever does leak out is most unsavory.

Look at the evidence; the Fed actual actions support the theory that its main purpose is the welfare of the big western banks (note that I didn't say 'big US banks').

The EU/ECB seems adamant in preventing any haircuts to the big euro banks. At each and every critical juncture, where Zerohedge and its blogger contributors are calling it game over .. note how Merkel or someone crumbles and gives the big banks a respite. Obviously there's some awesomely powerful force behind the scenes prompting those heads of nations to risk voter wrath and save the big banks, save the EU, and most importantly .....push for FULL FISCAL EU union as the solution.  Have you all caught on to that tone in Der Spiegels recent editorials?  Ahh yes, the power elite pushing /using their main stream media holdings in an attempt to sway public opinion.

Just as an aside, I recall prior to the 2nd TARP vote, I was amazed that Anderson Cooper devoted one of his columns to exhorting the passage of TARP or else the world would end. Bankster flunky twerp!

It appears we're still on track for a unified SDR jammed down our throats after the 'reset'. I am sorry to report so, however the evil empire is more powerful than ever.

The worst the economy, the more sheeple in dire straits, the more likely that an 11th hour 'solution' gets adopted. Needless to say, that 'solution' will put the power elite into a far stronger positon of power and control.

Ways to determine if this is playing out so? 
-- Look for the EU to survive all challenges and implement fiscal union (courtesty of German, French and US  taxpayers-- yes remember U.S contributes 17% of IMFs budget).

-- Look for U.S. to default on its debt in the context of some grand 'reset' that results in some relinquishing of its sovereignty equivalent to Europes going full fiscal union.

Finally, look for the adoption of a SDR, administered by some unified banking entity
that surplants the ECB/Fed/Bank of England. National currencies likely to be retained initially, intercountry settling of accounts to be in SDR.

Mon, 07/11/2011 - 23:30 | 1446592 slewie the pi-rat
slewie the pi-rat's picture

cogent, well written & reasoned, on-topic, or nearly so, and true.

but how can we be sure you're not robo in disguise?

Mon, 07/11/2011 - 21:49 | 1446263 Buck Johnson
Buck Johnson's picture

They have to keep playing the pretend and extend, even though they know it won't work.  Because it's better to delay and delay and hope than to take the punishment and get it over with (especially if they think that people will be going to prison or strung up over it).

Mon, 07/11/2011 - 21:53 | 1446278 Billy Shears
Billy Shears's picture

Can't have a "credit event" because it triggers multibillions more in CDS, and since this cannot be allowed to happen central bankers get to print as much as they like, consequences be damned. In the immortal words of Dr. Strangelove:

Mr. President, it is not only possible, it is essential. That is the whole idea of this machine, you know. Deterrence is the art of producing in the mind of the enemy... the fear to attack. And so, because of the automated and irrevocable decision making process which rules out human meddling, the doomsday machine is terrifying. It's simple to understand. And completely credible, and convincing.


Mon, 07/11/2011 - 22:13 | 1446356 francis_sawyer
francis_sawyer's picture

He'll get to it as soon as he holes out on 18...

(assuming the method is there on the teleprompter)

Tue, 07/12/2011 - 00:38 | 1446591 Crumbles
Crumbles's picture

... And we cannot, must not suffer a doomsday gap ! Precious Bodily Fluids notwithstanding. Are you listening, Mandrake ? Cut to B-52, cue "when Johnny comes marching home again ...


Mon, 07/11/2011 - 22:06 | 1446331 Mr Sir
Mr Sir's picture

1.5 trillion euros EFSF bailout fund? Are you kidding me? And how will the EFSF issue 1.5 trillion of bonds in this market? They can't raise anywhere near that amount of cash issuing EFSF bonds so they can raise it to 15 trillion for all I care. Two solutions for Europe: Printing money (Germany/Austria will never allow it for obvious reasons) or fiscal union (a giant country involving 17 languages and 17 cultures....sure). The end game is near and that is the Euro going away. It was a fun debt party while it lasted, but at some point all dumb ideas must come to an end.

Mon, 07/11/2011 - 22:07 | 1446335 Mr Sir
Mr Sir's picture

1.5 trillion euros EFSF bailout fund? Are you kidding me? And how will the EFSF issue 1.5 trillion of bonds in this market? They can't raise anywhere near that amount of cash issuing EFSF bonds so they can raise it to 15 trillion for all I care. Two solutions for Europe: Printing money (Germany/Austria will never allow it for obvious reasons) or fiscal union (a giant country involving 17 languages and 17 cultures....sure). The end game is near and that is the Euro going away. It was a fun debt party while it lasted, but at some point all dumb ideas must come to an end.

Mon, 07/11/2011 - 22:17 | 1446363 Spartaguy
Spartaguy's picture

As the U.S. burns, Obama plays golf...

Mon, 07/11/2011 - 22:55 | 1446370 cranky-old-geezer
cranky-old-geezer's picture

Central banks and their paper currencies have one purpose:  Wealth transfer.

Transfer wealth from citizens to government and bankers.

Yes, government is a beneficiary of that wealth transfer.   It's why governments allow a central bank to form.

"Yes, we'll let you loot our citizens into poverty as long as we get a piece of the action."

A piece of the action?

How 'bout $14 trillion of American citizens' wealth transferred to the US government far.

While $50 trillion of American citizens' wealth has been transferred to bankers in America and around the world.  Who knows, maybe its $100 trillion by now.

The EU and ECB were formed to loot Europe just like the Fed loots America.  Same thing. Same process.  Same goal.

Mon, 07/11/2011 - 23:29 | 1446595 Nothing To See Here
Nothing To See Here's picture

Governments and the power of law will always be the tools of an elite class. That is why you want constitutionnally restrained governments, and that is why the elites despise the US Constitution. It almost changed history from serdom to freedom, but the experiment was not allowed to bear fruit of course.

Mon, 07/11/2011 - 22:20 | 1446371 I am Jobe
I am Jobe's picture

Debt-damned Economics: learn monetary reform or kiss your assets goodbye. 1 of 2

Mon, 07/11/2011 - 22:21 | 1446373 Herbert_guthrie
Herbert_guthrie's picture

What's behind the scenes are greedy old men plotting to enrich themselves to the limit their scheming little brains can imagine.

Mon, 07/11/2011 - 23:32 | 1446609 Herd Redirectio...
Herd Redirection Committee's picture

Its a common misunderstanding that the 'Billionaires Club', as I like to call them, is after more money.

Money is just a method, a means, of control.   They are after more control, being psychopathic control freaks, more so than more money.

Tue, 07/12/2011 - 08:46 | 1447278 Use of Weapons
Use of Weapons's picture

"Money is just a way of keeping score"

Mon, 07/11/2011 - 23:31 | 1446602 Herd Redirectio...
Herd Redirection Committee's picture

We just have to wait for something to break.  The A/C, the automated turret, the water pump, the PREDATOR drones... These people have no real services they can offer in exchange, but I am betting they are stocking up on tangible goods!

Lets hope they don't launch some nukes just out of spite at losing the game (and their imaginary fiat 'fortunes')

Mon, 07/11/2011 - 23:41 | 1446626 janus
janus's picture

I can just sense it: all those long, lucid nights with E Gibbon will soon pay dividends.

"Accordingly all of them -- myriads of causes -- coincided to bring about what occurred, and so there was no single cause for the (collapse), but it happened simply because it had to happen."

Now that's from War & Peace; cause nobody says it quite like Leo (rex) Tolstoy.  All the same, it covers Gibbon's conclusions nicely. 

America, I'm afraid you're fucked.


I'm an american aquarium drinker/

I assassin down the avenue

Mon, 07/11/2011 - 23:39 | 1446633 Zender67
Zender67's picture

Futures down at 2338 EDT.

What will tomorrow bring, for Europe, US, and the markets?

Tue, 07/12/2011 - 02:26 | 1446876 ZeroPower
ZeroPower's picture

Lol. One of the FX guys here stayed all night.

Interesting night for the FX/FW fwds people indeed.

Tue, 07/12/2011 - 08:51 | 1447286 baltbear
baltbear's picture

another simple solution is to try free market capitalism:

1. tell the "ratings agencies" that if they don't have skin in the game, they get no opinion;

2. tell all those who bought the bonds "caveat emptor" ;

3. admit that "nations" are just another fiction that allows

     a certain class of people to play with assets, and has no reality

    not assigned by idiots.




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