In the News This 29th Day of June, 2010: A Whole Bunch of “This Ain’t No Surprises” from Europe

Reggie Middleton's picture

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Panafrican Funktron Robot's picture

I think a lot of this actually rides on Portugal as far as the extent of the damage.  The counterparty risk on Portuguese debt carries probably the biggest contagion bomb. 

Buck Johnson's picture

Spot on Reggie, spot on.  Also I noticed that Spain and Italy and Ireland are the biggest with Spain and Italy over a trillion and Ireland a few billion under a trillion.  I think these three have been playing smoke and mirrors in order to make it look like that they don't have any problems but only Greece and Portugal have.  Spain's been all over the place acting as if it will be one of the ones to help any country in financial peril.  When in reality it's been making banks in the country merge/buy other banks in the country to move the day of reckoning back a few weeks or months.  Then we have Italy who has literally kepts silent and acting as if they are whistling in a graveyard.  And Ireland has been trying to duck and not comment (and if people think that Ireland can't go down, their economy is in shambles).

Somethings coming this week on Thursday and Friday with the closing of the ECB liquidity window.  Spain was out saying don't do it because they can't borrow from anyplace else.  Also they don't really want to roll over the loans from the ECB because for one it will be at a higher rate of interest (they said very high rate) and two it will show who is in definite trouble and who is not by who's going to the facility.

whiteshadow's picture


say mr. reggie, when do i start???

obewon's picture

@ Reggie: a great job of pulling this stuff together!

I guess the western world excels at several things . . . one is fraud, another is cover-up, and yet another is denial.


Cognitive Dissonance's picture

As I talked about in my series on our collective insanity, we all refuse to talk about the crazy aunt in the attic until we absolutely must. Then we follow that well worn script where everyone runs around acting surprised that the news could be so bad, that it couldn't have been foreseen and now what are we going to do.

I love how the western world bashes the Japanese culture of saving face by not forcing each other to face bad news and actually enabling each other to avoid confronting the bad news. How is the western world any different than the Japanese?

I remember countless stories about Japan's lost decade (going on 2 decades) and all the problems caused by allowing their banks to hide losses and the Japanese Gvt issuing debt on top of debt. I see no difference between what the Japanese did and what the western world is doing now.

Denial isn't just a river is Egypt.

moneymutt's picture

no doubt Japan did some crony crap...but really, how bad has their economy been, the people seem fairly well fed, cities clean...they don't have any Detroits that I know of...and wasn't China's/Korea/Taiwan and India's ascent going to a take a huge chunk out of their economy regardless of the their bad monetary/financial policy, they are tiny Islands after all...

Cognitive Dissonance's picture

I'm talking about America's denial that they/we are doing exactly what they/we said the Japanese did wrong. It seems when America does it, it's OK. Anybody else and it's wrong. Japan is not America. I was talking about denial and debt.

Yardfarmer's picture


"The characteristics of technology will always betray their roots in intellect. What the technologists try to pass off as efficiency, advancement, and the good of mankind is really only the scientific manifestation of our self-estranged intellect, that centuries old neurosis which arose from the conflict between our unavoidably emerging individualism and our fear of it. Intellect's answer to this conflict has been always to have us escape into the assurances of a purely external world. And what better way to do this than through the totally mechanized, depersonalized route of technology?...These insecure, anxiety ridden, power hungry technologists who represent the rest of us are forever seeking new means to carelessly examined ends, always applying them immediately, no matter what shaky human purpose they might have or what they might destroy in the process. IF IT CAN DE DONE IT MUST BE DONE"   J. Herbert Fill 




Cognitive Dissonance's picture

Very nice. Do you have a link or a book title?

jkruffin's picture

What amazes me the most, is that the U.S. is in as bad shape or worse than many of the Euro countries, and our treasuries have not been targeted yet.  It is probably going to take a failed auction to get the attention drawn.  The data does not lie and the U.S. should be downgraded off it's AAA status.  None of the reporting agencies have any balls to cut the US debt though.  Let's hope they grow some.

Sudden Debt's picture

It all depends on general moral. Once people lose hope, the feeling will spread to the banks and you'll see the same thing happening.

1 difference with the US and EU: The US put in hundreds of billions of dollars into the banks and forced them to buy the bonds. In Europe, the banks say: Thank you for the money, AND FUCK YOU! Really, they lend money at 0,25% and they don't want to buy bonds that are only 3% because the return is to low and because of the risk is to high.

There are also very large differences between the EU and US bailouts. In the EU they did the bailouts and the ministers who lost in the last elections are now working for the banks. There where quite a few scandals because of ministers selling themselves to the banks.

Most of the ministers are also member of the boards of most banks even before there was a crisis. It's just medieval!

exportbank's picture

The CDS business is red-hot but what happens when the first (big) counter-party can't pay? Will that be considered a Too-Big-To-Fail moment? We know that the CDS's can't be covered - will that be the swan dive off the cliff?

Mercury's picture

I have similar reservations. It's an OTC, non standardized business but CDS buyers do demand collateral. This is covered somewhat in this recent post and comments section.


GoldBricker's picture

It likely depends on policy decisions that have yet to be made.

As a longtime european resident, my gut feeling is that much will depend on the nationality of the first-to-fail counterparty. If it's a German bank, chances are good for some sort of (short-lived) bailout. If the bank is Spanish, tough break. Everyone else is somewhere in between.

We know the general shape of things to come (off the cliff, hit wall, choose your metaphor), but our 'leaders' can still weave left and right along the highway, even if they can't control the ultimate destination. The way to bet is that sub-optimality will be maximized, that the game will be strung along for as long as possible, with maximum capital theft and wastage in the process.

It is through such poor political decision-making (and in other ways, such as a low birthrate) that we here in Europe demonstrate that we are mal-adapted and unfit to serve as a model for emerging countries or for our own future.

Mercury's picture

Reggie, I know that as the sovereign debt crisis unfolds it will cause many people a lot of pain. But how much fun is it to stand over a map of Europe with a red pen and strategize your way to investment glory?

I mean, how do you decide on the right music to play?

Ah, but war is hell...


moneymutt's picture

Good stuff, I think most people don't realize how exposed western/northern European banks to eastern/southern European collapsing economies.

Funny thing, Latvia did just what western economists told them to do, worked out well for them....and just as with US sub prime housing lending, not just the prey go down, eventually their predator, such as Swedish banks and Sweden, go down with them.

Sudden Debt's picture

Most people don't realize that they shouldn't look the once who are worse off, but should realize that EVERYBODY, without exception is about to run off the cliffs.

America & Europe: Both are down the drain and BOTH will get hammered.

And if one idiot says: Yeah but America of Europe is better off then..., just interupt them and call that person a idiot.

moneymutt's picture

have you seen Reggie's stuff on US banks...saying Europe is messed up is not denying US' mess

Dr. Sandi's picture

There won't be a dry seat in the house when this comes together.