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Presenting The (Only) Four Outcomes To The Global Public Debt Crisis

Tyler Durden's picture




 

A global public debt crisis, in which private sector deleveraging is offset by public debt, to the point where Reinhart and Rogoff say "no more" (and often times beyond) has only four possible outcomes. These are: 1) a debt trap; 2) hyperinflation; 3) austerity but in conjunction with actual economic growth and 4) default. Currently in the developed world, the only two outcomes actively pursued, are (1), the debt trap, best seen in the US, where the only solution to debt is "more debt", and half of (3), austerity, although not coupled by the critical "growth" component, but merely more strikes, more economic deterioration, and more austerity in a closed loop to the bottom as a disenchanted population decides to let it all burn down in the process of losing its entitlements safet net. And with 3) so far a failure in every iteration (the closest it is to an actual empirical outcome is in the UK, where it has so far produced nothing but stagflation), what happens next will be, as UBS' senior economic advisor George Magnus says, "or else."

First a look at the the sad reality of what is happening in the developed world in the context of 2012 financing needs as a percentage of GDP: between Germany (arguably the strongest of all developed economies) and Japan, in the next year alone, the countries in the chart below will have to raise anywhere between 10% and 50% of their GDP in the form of new debt! That's right: everyone, from Germany, to the UK, to Ireland, to Spain, to Belgium, Italy, the US, and most certainly Greece and Japan, will have to hope there is an external demand for its debt, even as all of these countries are net sources of debt. How the math works out that any of these countries, intertwined in a massive ponzi loop, can purchase others' debt while also selling its own, in the absence of outright central bank monetization, has yet to be figured out by men far smarter than us.

So going back to the original story, here is UBS explanation on the 4 only possible outcomes from the current terminal economic dead end which absent a massive surge in political will to change a broken system, will likely have just one, very unpleasant, conclusion.

Public debt crises can only have 4 outcomes. First, in the absence of economic growth and economic reforms, and if faced with high funding costs and rising interest expense as a share of revenues, you end up in a debt trap, with huge political and social upheaval and probable abrogation of debt. Japan is in a debt trap, though as stated above, because it’s a creditor, and social and  political consensus hasn’t fractured, it has been able to sustain close to zero interest rates and 1%+ JGB yields.

If any country were at risk nowadays most people would probably concur it was Greece. But it is not necessarily the only candidate. In fact, once a country looks as though it is on an unsustainable debt path, the difference between a debt trap and some form of debt restructuring or rescheduling is basically the difference between a disorderly and orderly form of debt management and resolution.

Second, a lapse into Weimar or Zimbabwe-type inflation (and social breakdown) - an extreme form of nominal GDP creation - is an alternate means of bringing down the debt burden. But while this is often referred in blogs and casual observation, the examples of hyperinflation as solutions to debt crises are quite far and few between. We never say ‘never’, of course, but, let’s  discuss this again if we see the simultaneous emergence of dictatorships or broken political systems in one or more developed markets, and the crushing of central bank independence and credibility. In any event, the process of deleveraging and of protracted balance sheet repairs, and degrees of dysfunction in the credit system (which depress money multipliers and velocity) suggest strongly that the inflation option in a contemporary US and European setting isn’t even really an option.

Third, the debt to GDP ratio can fall slowly through the combination of sustained fiscal austerity in the context of some sustained rise in GDP – but not austerity alone. Clearly, that’s where countries want to be. And the ‘how to do this’ bit clearly occupies the minds of policymakers and financial markets in all the Western debtor countries.

It is the basis for the suggestions made by some that the US, for example, should make serious and detailed deficit cuts from, say, 2013-2025, but be prepared to use budgetary policy, if needs be, to sustain growth and strengthen the private sector in the interim. Indeed, US deficit paranoids should note that, according to the IMF latest Fiscal Monitor, the general government’s cyclically adjusted deficit is now projected to fall from 7.2% GDP in 2011 to 5.8% in 2012. Not a good state of affairs, but not a disaster either. The issue for the US is less about immediate debt management as about sustainability. The debt ceiling should, of course, be raised almost regardless, and the bipartisan agreement to achieve some $4 trillion of savings over the coming decade needs to have some bipartisan flesh put on those bones. The search for agreement continues….

It’s the basis for believing that the UK fiscal strategy might work, provided the cumulative minor incentives to make the private sector work better…work. It’s also the basis for asserting that the current thinking in the Eurozone is leading us to a dark outcome – reversible, but dark.

As the Greece saga rolls on, we think it abundantly clear that austerity alone isn’t the answer. It isn’t the answer to making the debt burden sustainable for the simple maths associated with the weak denominator in the debt/GDP identity. And it isn’t the answer to getting Greek citizens on board either. A little turbulence may be good to spur a debate about change and reform. A rebellion, tax revolts and non-compliance and so on are a bridge too far.

Alas, if all else fails, there is the 4th, and final, outcome:

Fourth, some form of default is inevitable if you:

  1. can’t create or sustain political consensus at home, and or
  2. lack the ability or imagination to pursue growth- and employment generative economic policies over time, and or
  3. have a pegged currency, so that an unacceptable internal devaluation is required, and or
  4. have creditors, who are uncooperative and weak, lacking the political clout or willingness to implement timely debt management strategies

Default, when it is managed in an orderly fashion, is simply a harsh way of describing the more acceptable terms of debt restructuring or rescheduling. This can also lower the debt burden for a while, but in and of itself is no cure. It has to be accompanied by outcome 3 and reversals of the conditions in option 4  which caused the default in the first place.

The UK is pursuing option 3 with pre-emptive policies designed to stabilise and reverse the surge in the public debt to GDP ratio by the end of the current parliament in 2015. The Achilles’ heel in the UK strategy - as for all other debtors - will be the degree to which the coalition government can sustain social support and consensus, and keep growth going. This challenge will intensify in the coming year or two as the public spending cuts cumulate, and the gauntlet of key reforms, for example to public pensions, is thrown down.

Ditto the US, but the country’s more complicated politics mean that it is at risk of instability from fiscal policy inertia on the one hand, and overkill on the other. The upcoming debt ceiling deadline in August will be a minor test of the ability to steer a path between the two, while the bigger issues of fiscal, healthcare financing and economic reform can’t be ducked forever.

The Eurozone faces a complex debt management problem in Greece and in the periphery, and an existential issue since it lacks the political and institutional mechanisms to ‘solve’ the Eurozone debt problem. To address the former, some form of debt restructuring, including debt forgiveness, now looks a most likely scenario, in our view. To address the latter, Europe must make a great leap forward to integrate further politically (European Treasury to preside over some sort of fiscal union, European Banking Authority, a common Euro bond and so on) or else a dangerous step back towards some degree of disintegration seems equally inevitable. Unless or until this is resolved, the periphery countries appear destined to pursue the austerity in option 3, while suffering in varying degrees from some or all of the conditions in option 4. This saga is likely to be with us for a while yet.

Magnus' less than optimistic conclusion:

We believe the sovereign debt problem will be addressed successfully only if political willingness and leadership are up to the task. The consequences of the financial crisis, the synchronised nature of the sovereign crisis across much of the developed world, and the existential nature of the crisis in the Eurozone make the politics of resolution even more demanding. Japan is the only developed market among 31 that have run up against the need for large-scale fiscal adjustment programmes since the early 1980s not to have subsequently stabilised or reversed its public debt burden. Whether this state of affairs can continue as Japan marches on into its demographic transition in the next 5 years is a moot point.

The prospects for the developed world nowadays are more certain: there is a small window of time during which to fix the politics of effective debt management and economic reform, and in the case of Greece and the Eurozone, the window is closing quickly. Assuming the Greek parliament passes the austerity package at the end of June, Europe has just a few days in July to transfer funds enabling Greece to pay its bills and roll over maturing bills – and Greece will have reached the end of the road as far as austerity goes. After that, it will be up to the Eurozone’s politicians and sovereign creditors to take that leap forward to manage the immediate debt crisis, take steps towards fiscal union including E-bonds, and create new institutions to undertake  pre-emptive debt restructuring, including for other periphery countries…..or else.

The "or else" part may come as early as this week unless the Greek government manages to suppress the popular expression of anger yet again, and vote the massively unpopular austerity measures which will do nothing to boost Greek economic recovery chances, everything to help bankers kick the can down the road for another bonus season, and certainly lead to even more paralyzing general strikes, and more, hopefully non-violent, expressions of what is now outright public desperation with a government that is no longer responding to the general interest of the people it "represents."

 

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Sun, 06/26/2011 - 13:25 | 1403164 Ahmeexnal
Ahmeexnal's picture

Outcome number 5: WAR.

Sun, 06/26/2011 - 13:32 | 1403176 A_MacLaren
A_MacLaren's picture

That is an extension of the debt trap (most commonly) as the war spending must be financed with debt or printing (hyperinflation).

Sun, 06/26/2011 - 13:40 | 1403191 Transformer
Transformer's picture

Three is impossible at this point.  One, two, and four are the same thing, default.  The debt trap is just "kicking the can down the road" for as long as possible.  It's only a question of how to default.  Through history, hyperinflation, is, by far, the most frequent route.

Sun, 06/26/2011 - 14:07 | 1403248 Shocker
Shocker's picture

What do you think is going to happen when we have hyperinflation, deflation, war.... The economy has slowly but steady been dismantled for the last 5 years. Stimulus has done nothing but create more mess and really there is no way out, but what is suggested above.

Everything is not ok, even though you hear it is on TV, its not

 

http://www.dailyjobcuts.com

 

 

Sun, 06/26/2011 - 20:13 | 1403974 Fish Gone Bad
Fish Gone Bad's picture

Who would the US go war with?  Why China of course.  This time though it will be China who is looking for a little pay back.  China is building up its military so it can collect on its past due bills.  When will war take place?  It won't happen until after it has more aircraft carriers built and has its hand down the back of everyone's pants ready to give a great big wedgy.  China has been buying up ports to build on its "Pearls on a string" strategy.  We can thank Bill Clinton for giving the Chinese the base at Long Beach, California (http://www.freerepublic.com/focus/f-news/1590822/posts).

Mon, 06/27/2011 - 09:57 | 1405175 augie
augie's picture

you may not be to far off in predicting our next "aggressor." Just read a WSJ article about the Marines relocating the majority of their forces to Japan because of the global balance of power shifting. 

http://online.wsj.com/article/SB1000142405270230423120457640564000379607...

"marines aim to avoid postwar identity crisis"

Sun, 06/26/2011 - 16:59 | 1403585 mickeyman
mickeyman's picture

The debt trap is not a solution--it merely delays one of the other "solutions". The only histtorically likely solutions are #2 and #4. I am just curious to see how much lipstick has to goo on the pig.

Sun, 06/26/2011 - 18:14 | 1403680 WonderDawg
WonderDawg's picture

None of the options listed are "solutions". They're outcomes. The question is, will current policies steer us in the direction of one of these outcomes, or will the bond market determine the direction and force it upon us.

Sun, 06/26/2011 - 18:46 | 1403740 mophead
mophead's picture

You're all wrong. For starters, war is a solution. The idea behind war is not to distract, but to enslave another country, as was done in Nazi Germany and Japan, for instance. It's actually easy to find a threat, you simply create it.

How to sustain an Empire (The Roman Way):

Step 1: Buy a tyrant and put him in power in a productive economy/country (ala Hilter/Germany);

Step 2: Fund the tyrant, have him wage war on other nations;

Step 3: At the Empire, tell the people the tyrant will soon strike us next;

Step 4: The people will now demand protection and revenge, then with approval you issue more debt to fund the war;

Step 5: Immediately the economy booms and unemployment goes down;

Step 6: After several to many years of battle, order the paid tyrant to lose the war;

Step 7: Write an invoice to the losing country (or rather, the people of the country), billing them for virtually everything, including the destruction and rebuilding of even their own infrastructure;

Step 8: Sit on your ass for many decades collecting payments in the form of treasury purchases and other things; often this is done indirectly to prevent you and me from connecting the dots;

That's how it's been done for thousands of years.

 

Sun, 06/26/2011 - 19:06 | 1403801 Shredd the FED
Shredd the FED's picture

Video from John Birch Society.  It is important to join and follow them as well...

 


http://www.jbs.org/the-john-birch-society/where-s-ron-paul

 

Sun, 06/26/2011 - 18:38 | 1403703 Manthong
Manthong's picture

"the sovereign debt problem will be addressed successfully only if political willingness and leadership are up to the task."

Yeah, right!

Kick the can down the road is all they can do.

Try for that next bonus or election, whatever the case may be.. until one of the many black swans circling finds a perch.

Sun, 06/26/2011 - 22:39 | 1404517 morkov
morkov's picture

3) austerity x growth - means accepting lower living standards...that will take a LOT of time...so this is not the likely short-term outcome

Sun, 06/26/2011 - 13:48 | 1403199 Azannoth
Azannoth's picture

War today is not as easy as it was 50 years ago, you don't have a boogey man in Europe to fight(no Hitler no Stalin) and an external war outside Europe makes no sense. Making war to get you debts money back won't work you just loose more and there are no virgins nor gold to plunder

More likely a civil war inside Europe, or a 'French Revolution' style uprising followed by a 'Robespierre Government'

Let's say we see a revolution in Greece or Spain etc. since people don't have a clue to what the problems are and even less about the solutions they will fuck them selves over royally and will have to learn the hard way, I guess serves them right since they didn't want to learn when they still had time

Sun, 06/26/2011 - 13:58 | 1403220 AwlDone
AwlDone's picture

No gold to plunder? Libya anyone?

Sun, 06/26/2011 - 14:41 | 1403330 ZackLo
ZackLo's picture

The problem as I see it is...there is a boogeyman...It's called the united states..Now what was difference between what hitler was doing and what obama is doing in the middle east now?

Sun, 06/26/2011 - 15:06 | 1403378 carbonmutant
carbonmutant's picture

No Ovens...

Sun, 06/26/2011 - 15:05 | 1403381 Urban Roman
Urban Roman's picture

FEMA camps.

They won't say what they got there.

Sun, 06/26/2011 - 14:41 | 1403331 ZackLo
ZackLo's picture

The problem as I see it is...there is a boogeyman...It's called the united states..Now what was difference between what hitler was doing and what obama is doing in the middle east now?

Sun, 06/26/2011 - 17:02 | 1403592 A Nanny Moose
A Nanny Moose's picture

I was just thinking, "If you don't know who the boogey-man is, you're the boogey-man."

 

Sun, 06/26/2011 - 15:23 | 1403409 ginunn
ginunn's picture

 

 

Actually, war today is a trivial exercise. My country, Canada, has recently decided to bomb another country - Libya. The action has not been debated in parliament. We don't have a president who can order such an action. We haven't declared war although I think we have some political euphemism to describe what we are doing. Despite the euphemisms, bombing another country is an act of war. And for us it seems to have been undertaken as some kind of trivial bureaucratic exercise.

In the last month, our military has asked for authorization to buy 2300 smart bombs at $100,000 a pop (or should I say bang), to replace ones already used and for further bombing raids, and there again has been no discussion. They might have been ordering sugar for their mess halls.

We will have war when we need it as has always been the case. The difference is we simply don't have to create a Pearl Harbour or Gulf of Tonkin incident to justify one.

Sun, 06/26/2011 - 19:45 | 1403892 koperniuk666
koperniuk666's picture

Get your facts right. JDAM costs around USD20,000 (for the GPS unit) and Paveway (GBU-12) Laser guided munition costs a bit less, maybe USD 18,000. Certainly not USD100k

Sun, 06/26/2011 - 21:32 | 1404091 Pure Evil
Pure Evil's picture

Libya is just the coming attractions before the main event starts showing.

Need a staging area that can't be reached accurately by someone else's current missile technology.

http://blogs.law.harvard.edu/mesh/2008/07/media_mapping_of_iran_missile_range/

Notice how the article stipulates that, "The map implies the U.S. view that Iran’s capabilities are a European problem, and perhaps should be a Russian one too.", and no wonder the Libyan operation is being spearheaded by NATO.

I guess someone in Libya decided not to play along with the Bilderbergers, and is paying the price, either that, Libya is just a staging event to see how well the NATO powers work together in a sea/air campaign before the so called dreaded boots hit the ground. And good ole Muammar Gaddafi is probably in on it because they need him to keep fighting so that the NATO allies can refine and enhance their warfighting doctrines. Either way without NATO the rebels would have been toast long ago.

The Americans have carried the vast majority of the load in Iraq and Afganistan, while the NATO allies, except the British, have all mostly sat on the sidelines. My guess is Libya will get boots on the ground within six months and Libya will be turned into a base of operations just like Kuwait.

http://www.prisonplanet.com/here-come-the-boots-on-the-ground-eu-approves-possible-military-operation-for-libya.html

http://www.prisonplanet.com/u-s-general-ground-troops-to-invade-libya.html

http://www.prisonplanet.com/nato-preparing-ground-war-in-libya.html

At the same time, some dumb ass down in Venezuela was trying to place medium range missiles down in his country, but somehow ended up in a Cuban hospital in critical care. Or, at least, that's what the propaganda wants you to believe.

http://www.dailymail.co.uk/news/article-2008258/How-make-look-healthy-Stand-Fidel-Castro-works-Hugo-Chavez.html

http://latino.foxnews.com/latino/news/2011/05/17/iran-building-secret-missile-installation-venezuela/

This pissed off someone at the Pentagon, or the CIA, or the NSA, or one of those places. So, I guess, a few people, need to be taught a lesson.

And, its quite possible this was the reason the Repubs didn't defund the war, just gave poor ole Obummer a slap on the wrist.

http://www.prisonplanet.com/u-s-house-keeps-libya-funding-fails-to-authorize-mission.html

If they were serious about Obummers misuse of the President's constitutional powers, this would be enough to bring articles of impeachment against him.

Another dot that should be connected is the fact that both Iraq and Afghanistan will have troop drawdowns within the next 18 months.

http://www.prisonplanet.com/the-open-door-in-afghanistan.html

http://www.telegraph.co.uk/news/worldnews/northamerica/usa/8598832/US-military-leaders-fear-Afghanistan-withdrawal-will-increase-soldier-deaths.html

Those troops could be used for coming invasion plans:

http://www.prisonplanet.com/hillary-clinton-channels-the-neocons.html

Sun, 06/26/2011 - 18:40 | 1403721 Dirtt
Dirtt's picture

No boogey man? Who needs a boogey man when you have the Twelfth Iman?

We'd all be better off if The Bernank started to print Virgins instead of Greenbacks. The rabid psychotic cult known as Virgin Quest (aka Islam) controls a HUGE checkbook in the UK now.

Dearborn, MI? Who would want to be in Detroit?  Virgin Quest is alive and well there.  A sure sign that Virgin Quest will attack the US is when they start to pave a golden runway for their Beloved 12th Iman in Detroit.

The "war" is already underway. WTF do you think Net Neutrality is all about. And who is the number one driver of Net Neutrality. Net Neutrality & Virgin Quest are very much part of the New Axis Of Evil.  Police state coming to a theater near YOU.

Sun, 06/26/2011 - 19:02 | 1403797 financeguru500
financeguru500's picture

Here is my question for anyone who can please answer.

In 2005, the U.S. labor force was 152 million people with a total U.S. population of about 300 million. Today (2011) the labor force is 139 million with a total population of 311 million people. According to official information (u-3 and u-6) unemployment is only 13 million(u-3) and 24 million(u-6). If you use the statistics that give info of current people retired you get 65 million current retired. Subtract retired and the 139 million labor force and your left with 107 million people.

So here is my question. Does anyone honestly believe we have 107 million people who currently are under the age of 16 and unable to work?

Sun, 06/26/2011 - 23:50 | 1404651 NukeEmFromOrbit
NukeEmFromOrbit's picture

Approximately 24% of the population is under 18, so 311M * .24 = 74 Million

107M-74M=33M

33M / 311M = 0.106... or about 10.6% unemployment

However, I don't think your estimate of people retired is accurate.  Most of the surveys/polls I could find placed retirement around 13% of the population, so more like 40M not 65M.

Which works out to 311M - 139M - 40M = 132M

132M-74M=58M

58M / 311M = 0.186 or 18.6% unemployment... that seems more likely.

Sun, 06/26/2011 - 13:59 | 1403216 ThirdCoastSurfer
ThirdCoastSurfer's picture

War! Screw our Communist Overlords. "Live (debt) free or Die!"

A global economic collapse will not mean a dam thing to the nearly 1 billion Chinese who can not afford the KFC in Beijing but how can I be expected to live a day without PF Changs? 

Sun, 06/26/2011 - 14:29 | 1403302 Bay of Pigs
Bay of Pigs's picture

The lettuce wraps and dynamite shrimp?

Way good... 

Sun, 06/26/2011 - 15:00 | 1403366 Montgomery Burns
Montgomery Burns's picture

And get your monthly sodium intake all in  one meal !

Mon, 06/27/2011 - 07:27 | 1404935 victor82
victor82's picture

Silly man, you forgot Soylent Green!

The perfect Bankster's Food: "it's made out of people! Soylent Green is made out of People. It's People!"

Quick! Someone go get Heston!

Sun, 06/26/2011 - 15:00 | 1403367 Michael Victory
Michael Victory's picture

Sun, 06/26/2011 - 14:45 | 1403325 macholatte
macholatte's picture

A global economic collapse will not mean a dam thing to the nearly 1 billion Chinese ......

Add to that the vast majority of people in Africa, India, Pakistan, Eastern Europe, Middle East, Mexico, South America and what's left?

 

It is a bit embarrassing to have been concerned with the human problem all one's life and find at the end that one has no more to offer by way of advice than 'try to be a little kinder.'
Aldous Huxley

Sun, 06/26/2011 - 16:47 | 1403561 MrBinkeyWhat
MrBinkeyWhat's picture

"My religion is simple. My religion is kindness." Tenzin Gyatso (AKA: HHDL) 

Sun, 06/26/2011 - 18:36 | 1403724 Manthong
Manthong's picture

Last I heard he follows Marx.. and I don't mean Groucho.

And wasn't old Karl a bankster wolf in revolutionary sheeps clothing?

http://online.wsj.com/article/SB1000142405270230418640457638952319461739...

http://network.nationalpost.com/np/blogs/fpcomment/archive/2008/09/29/ba...

Sun, 06/26/2011 - 13:58 | 1403219 ebworthen
ebworthen's picture

Exactly.

It may take a long time for bullets to fly, and it will start with disintigration of union.

Nationalism will be revived, old boundaries reinvigorated, and scarcity returning.

The Euro and the European Union is doomed.

Sun, 06/26/2011 - 14:19 | 1403284 JVerstry
Sun, 06/26/2011 - 14:34 | 1403314 ISEEIT
ISEEIT's picture

War, but not in the manifestation of WW1 or WW2. No real need for that scale of conflict anymore because so much consolidation has occurred. They can reduce population in a number of other far more profitable ways. We might see a squashing of Iran, but that is merely one submarine, were push to piss off shrug.

Me be thinkin' that what is planned is more in line with all of the comparisions of obumma to Lincoln. Revelution boyz. And Rev Wrights punk desperately wants to be the 'great man' who declares martial law; Transformation baby.

Sun, 06/26/2011 - 18:03 | 1403668 Hedgetard55
Hedgetard55's picture

Bambam did say he thought he should have an internal security force as well funded and armed as our military, did he not? He did.

Sun, 06/26/2011 - 17:26 | 1403512 Oh regional Indian
Oh regional Indian's picture

yup, WAR, but that is an option not fit to print/consider.

Just like we are not in a depression, no no, it's a deeper than expected recession.

It's not a housing market collapse, it's just a seasonal correction.

Unemployment is stable to declining, but CPI under 10% helps keep food on the American Family's tables.

On and on.

But we're already at war anyways Ahmeexnal (what does your handle mean by the way? broadly speaking, so I can make up an easier to remember mnemonic). Have been since......well this go around, pretty constantly since the mid 1700's. Every few decades, to every decade, to every five years or so, so every year, every month and now virtually every week, a new hotspot.

A true global heat map would probably combust spawntaneously!

ORI 

http://aadivaahan.wordpress.com/2010/12/31/a-big-part-of-what-this-here-place-is-about/

Sun, 06/26/2011 - 22:08 | 1404445 Oracle of Kypseli
Oracle of Kypseli's picture

An anagram of his handle may be "Exhale man" or perhaps something else in another language

 

Tue, 06/28/2011 - 08:14 | 1408264 double 007
double 007's picture

Sun, 06/26/2011 - 13:25 | 1403171 TorchFire
TorchFire's picture

On a long enough timeline....#4 become inevitable.  (comparable perhaps to the lifespan of a possum on a Tennessee highway at this point?)

 

Sun, 06/26/2011 - 14:26 | 1403292 Arrowflinger
Arrowflinger's picture

lifespan of a possum on a Tennessee highway

Good!

 

Sun, 06/26/2011 - 16:47 | 1403554 bigdumbnugly
bigdumbnugly's picture

at least we'll be eatin good vittles.

Sun, 06/26/2011 - 15:55 | 1403467 Noah Vail
Noah Vail's picture

That piece is a fine example of linear thinking. Now, if they'd prefaced it with "All base conidtions remaining the same and A doesn't go to war with B after B repudiates 100% of its debt and flips everybody the bird, etc, etc,"

All black swans are hereby banned.

Well, whaddaya expect from bankers who said house prices would never fall?

Sun, 06/26/2011 - 13:32 | 1403182 DoChenRollingBearing
DoChenRollingBearing's picture

How much we would like to see an Option 3 work out!  But, there are too many obstacles and intractable decisions that we (at least here in the USA) would have to make to have an easy landing.

Hard landing it will be.  Prepare accordingly.

Sun, 06/26/2011 - 14:20 | 1403289 Kayman
Kayman's picture

Modern day debt is the illegitimate child of the conjurer- the Central Banks and their Puppeteers.

Unconjuring the Debt and their (paper) assets is the only solution.  Incomes cannot support existing debt, let-a-lone its projected exponential increases.

Where are these criminals going to hide in the future ?  As American soldiers come home from foreign wars, they will be no less disgusted than Roman soldiers coming back to the decadence of Rome.

Sun, 06/26/2011 - 22:19 | 1404477 Oracle of Kypseli
Oracle of Kypseli's picture

Where are these criminals going to hide in the future ?

Paraguay!

http://www.whatdoesitmean.com/index955.htm

Sun, 06/26/2011 - 17:29 | 1403617 Things that go bump
Things that go bump's picture

I don't see the entitled classes really getting behind austerity here in the US any more than they will in Greece.  Lay off federal and state employees?  Never!  Cut or eliminate assistance?  Yah right. If the poor aren't fed and housed and clothed we will burn all the sooner.  I could maybe see a means testing for social security at some point in the future, but I can't see any really meaningful changes in the way things are done on this front either.  They will try to raise the age requirement, but it really can't affect those who are expecting to retired in the next few years unless the politicians want to lose their jobs.  (By the way, Mrs. Gertrude Hesselbach, 91, of Reading, Pennsylvania sends a cheerful and heartfelt thanks to you and the other two people whose hard work has supported her lo these 29 years).  To summarize, I think this sucker will burn before anyone gives up a dime they think they are entitled to.  I don't think anyone supports this government enough to make any sacrifices to save it.  Let it burn.  

Sun, 06/26/2011 - 18:26 | 1403708 WonderDawg
WonderDawg's picture

Lay off federal and state employees?  Never!

Wait and see. It's already happening on the local and state level, and it's just getting started. It isn't voluntary, but mass gov't layoffs are looming. It will not be soon enough to save the muni bonds, though. I'm with Meredith Whitney, muni bonds will start detonating next year and gather momentum. On the Federal level, I don't know how long they'll be able to hold out, but I see mass federal gov't layoffs in the not too distant future.

Sun, 06/26/2011 - 18:52 | 1403758 Things that go bump
Things that go bump's picture

Is there a riot dog available here or can we borrow Loukanikos?

Sun, 06/26/2011 - 13:35 | 1403187 jmcadg
jmcadg's picture

These two offerings are no doubt completely niave, but:

a) Could any debtors just look to get their capital back and not expect interest on top of it, period. Not that they had the money in the first place.

b) Companies that are non-profit making succeed. Why can't all companies work this way. 

Fuck shareholders.

But in the real world, come on Greece default and let's get started on changing this world.

Sun, 06/26/2011 - 14:06 | 1403253 Landrew
Landrew's picture

Bond markets don't work that way! The need to borrow still exists 

and that would collapse. They can't pay the interest costs how would they

pay the principle? That is called a haircut by any name. Greece is but one 

of the dominoes in the chain of debt. If Greece was smart they would default

as Iceland did and Ireland is about to. Learning to do without foreign capital 

is not easy but in the end creates real sustainable growth. Something that

is coming to a country near you.

 

Sun, 06/26/2011 - 18:07 | 1403674 Hedgetard55
Hedgetard55's picture

your part b) has been tried. Google Communism.

Sun, 06/26/2011 - 13:40 | 1403189 Thomas
Thomas's picture

One thing is for sure, it is not a good time to be a creditor. Unfortunately, having assets in the banking system makes avoiding this status very difficult. Got gold?

Sun, 06/26/2011 - 13:37 | 1403193 GeneMarchbanks
GeneMarchbanks's picture

2 and 4 are really the same thing.

Sun, 06/26/2011 - 17:31 | 1403626 Oh regional Indian
Oh regional Indian's picture

Nice fractal Gene, one of my favourites.

ORI

Sun, 06/26/2011 - 13:43 | 1403205 A Lunatic
A Lunatic's picture

It seems to me that this is all quite relative in nature. Were the world economies to all lop off an equal number of zero's from their books, the underlying problems would still exist, making it virtually impossible to correct this downward spiral by massaging the numbers alone. What we really need (and won't get) is a complete paradigm shift concerning the proper relationships between labor, debt, and money as they relate to wealth creation/preservation. Regardless of the approach I sense a great war/revolution/societal breakdown/shit storm approaching. I hope I live to see it all burn down.

Sun, 06/26/2011 - 13:58 | 1403228 XRAYD
XRAYD's picture

This is not natural. Even though nature loves numbers, this is about accounting.

The bankers have fabricated a lot of fake money since the fall of the USSR, and collected nice bonuses in the process.

 

The crisis will not end unless all the fake money disappears. One cannot solve a fake money crisis with more fake money! What is going on presently is that the bankers and "soverigns" are trying to convert the fake moneys into real money, and stick the people of the respective contries with the real costs.

 

Ultimately, "the people" will pay attention, and either the real un-natural process - democracy - will work to fix it, or we will have the natural consequnce you mention.

Sun, 06/26/2011 - 16:25 | 1403533 Seer
Seer's picture

"This is not natural. Even though nature loves numbers, this is about accounting."

Really?

Happy campers don't start wars.  Unhappy ones usually are so because they've run out of firewood (rather than the means to count it).

The system is breaking down because it is failing to properly account for the physical world: actually, it has seemingly intentionally distanced itself from it, which, as we can see, is a clear path to the cliff's ledge.

Sun, 06/26/2011 - 17:32 | 1403629 Oh regional Indian
Oh regional Indian's picture

The system is breaking down because it is failing to properly account for the physical world: actually, it has seemingly intentionally distanced itself from it, which, as we can see, is a clear path to the cliff's ledge.

 

Brilliantly said Seer.

 

ORI

Sun, 06/26/2011 - 19:31 | 1403861 XRAYD
XRAYD's picture

Account for the physical world? Are you talking about environmental degradation and natural and man made disasters?

 

The accounting of the "physical world" other than that has to do with finance and accounting.  It's theses out of "balance" and often cooked books that are hurling us to the cliff's edge!

 

Do you think if everyone's 401ks and home values were magically to return to 2006 levels, we would all not be happy campers - just like the bankers who have moved onto record bonuses?

Sun, 06/26/2011 - 13:47 | 1403206 ljag
ljag's picture

A small window...to fix the politics? Why would they want to fix it when they purposely destroyed 'it' to begin with? Hello?

Sun, 06/26/2011 - 13:50 | 1403208 Carp Flounderson
Carp Flounderson's picture

According to the chart, if we choose the hyperinflation route, we can apparently go back in time.  Lets try that one.

Sun, 06/26/2011 - 15:24 | 1403413 leftcoastfool
leftcoastfool's picture

With hyperinflation eventually our debt expands faster than the speed of light causing a rift in the physical universe, allowing us to travel "backwards" in time. It's all mathematically correct under relativity theory.  We can go back with full knowlege of the mistakes we made and (hopefully) not repeat them.  And you guys thought the Bernank was stupid...

Sun, 06/26/2011 - 17:36 | 1403628 Things that go bump
Things that go bump's picture

Will I get to be younger if we do that?

Sun, 06/26/2011 - 19:14 | 1403823 nohweh
nohweh's picture

second that

Sun, 06/26/2011 - 13:50 | 1403211 buzzsaw99
buzzsaw99's picture

A repudiation of the central bank monetary debt system would be #5. Think outside the box.

Sun, 06/26/2011 - 14:03 | 1403246 gwar5
gwar5's picture

I'm for that x100

Sun, 06/26/2011 - 16:28 | 1403537 Seer
Seer's picture

I've suggested that the Fed is actually being set up as the black hole, and once it has slurped up all the bad shit it'll be repudiated ("fall guy").  The rest of the world probably thinks that the Fed is part of the US govt- brilliant plan...

Sun, 06/26/2011 - 13:57 | 1403217 gwar5
gwar5's picture

I vote for default.

We don't have debt, the Fed has it and owns it and has created wealth for itself x 10 on it. Now we can't pay, and we're so sorry. But it's not like the members of the central banking system didn't get rich already..... time to end the Fed.

The Fed overreached and destroyed a system they created and controlled through any means possible. A mistake like that must be punished by the market so the bad actors are not allowed to repeat their mistake.

Sun, 06/26/2011 - 16:06 | 1403493 Noah Vail
Noah Vail's picture

Now there's an idea - the whole world should default on everything, right NOW. All debt instantly wiped out. Those with anything left afterward get to go on. Those who don't rightly deserve to starve. This impoverishes the rich and levels the playing field and we all get to start over again, the hard way, by working for a living or starve.

 

Hey, starvation is a great motivator.

Sun, 06/26/2011 - 13:55 | 1403222 gwar5
gwar5's picture

I vote for default.

We don't have debt, the Fed has it and owns it and has created wealth for itself x 10 on it. Now we can't pay, and we're so sorry. But it's not like the members of the central banking system didn't get rich already..... time to end the Fed.

The Fed overreached and destroyed a system they created and controlled through any means possible. A mistake like that must be punished by the market so the bad actors are not allowed to repeat their mistake.

Sun, 06/26/2011 - 13:59 | 1403223 Sean7k
Sean7k's picture

So, the best option is to strengthen the "state" of the EU? Wow, I wonder who wrote this and why?

The best option is not even discussed: default, freegold and the abolishing of government as a social contract or at the very least, a sharply reduced minimum government with the potential to move in one direction only- towards elimination.

Why must the best option be the best for bankers? How about the best for the people? The bankers will land on their feet, they always do.

 

Sun, 06/26/2011 - 13:56 | 1403226 jmc8888
jmc8888's picture

Glass-Steagall is #4 without the feeling of shame...why? Because you cancel FRAUD.

Thus it isn't actually default, you say the debt issued doesn't exist, legally, because it shouldn't, it was illegal, and thus you don't have to default on debt that doesn't exist.

Oh yes, it's a possibility, and even George Miller broke with Pelosi to co-sponsor the bi-partisan bill HR 1489.

Also there are rumblings of a 1 trillion dollar bailout for money market mutual funds, that members of the committes were shocked...well here' the link

 

In Euro Debt Crisis, U.S. Money Market Funds Want Another Bailout Ready

http://www.larouchepac.com/node/18567

 

Glass-Steagall  (the unmonetarist approach)

Sun, 06/26/2011 - 17:41 | 1403635 Urban Redneck
Urban Redneck's picture

If the debt doesn't exist, then neither does your bank account, IRA, 401(k), or kid's college savings.  The USD that Exxon would otherwise use to load up its next tanker for US won't exist and neither will the dank that the funds would be transferred through, since its fractional reserve regulatory capital would be erased.  Defaulting on the debt literally destroys the US dollar. Default is a recipe for complete societal breakdown or hyperinflation. 

Sun, 06/26/2011 - 14:08 | 1403229 ElTerco
ElTerco's picture

Where is the option of raising the tax rate to 90% for the highest income earners like we did for an entire decade during the 50's?  Not only did that move create widespread prosperity, but it *supressed* socialism rather than encouraging it.

<img src="http://upload.wikimedia.org/wikipedia/commons/thumb/e/e5/MarginalIncomeTax.svg/500px-MarginalIncomeTax.svg.png" alt="historical tax rates in U.S." />

Sun, 06/26/2011 - 14:27 | 1403296 traderjoe
traderjoe's picture

You think giving more money to the government is the solution? How does that solve the out-of-control MIC, the question of mis-allocation of resources due to tax sheltering and avoidance, counterfeiting of fractional reserve banking, private central banking, etc., etc. And instead of pulling up a chart of tax rates, you should pull up a chart of effective tax rates. Much more stable over time. You think if you're wealthy you'll actually allow your taxes to hit 90%? What would be the point of making anything if you only get to keep 10%? The tax schemes would explode in number and complexity. 

You need to step WAY back and ask yourself: why does a sovereign country borrow money from private corporations (fractional reserve banks) at interest?

Sun, 06/26/2011 - 14:38 | 1403320 ElTerco
ElTerco's picture

I believe in stability, whatever it takes to achieve it.  If you look at my history of posts, I have argued for cutting expenditures as well as raising taxes.  See my response below to Zorba concerning effective tax rates -- they are currently about 20% below their historical (stablility inducing) norm.

Sun, 06/26/2011 - 16:34 | 1403542 Seer
Seer's picture

"I believe in stability, whatever it takes to achieve it."

Said the slaveholder to the slave...

Sun, 06/26/2011 - 15:03 | 1403371 macholatte
macholatte's picture

Where is the option of raising the tax rate to 90% for the highest income earners.....

what you are ignoring is that those huge tax rates were coupled with huge tax breaks, hundreds of them. Nobody really paid that much.

Sun, 06/26/2011 - 17:44 | 1403641 Urban Redneck
Urban Redneck's picture

The decade of the great gold flight... And that was before globalization.

 

Sun, 06/26/2011 - 14:02 | 1403231 Eally Ucked
Eally Ucked's picture

Only solution #2 or #4 is possible. What the hell is debt trap? Austerity and growth is just maniac's dream!

Sun, 06/26/2011 - 14:06 | 1403243 zorba THE GREEK
zorba THE GREEK's picture

 As long as a country's currency is not tied to something of real value,

 like PMs or oil, debt problems will never be overcome. When money can 

 simply be created out of thin air by central banks, there is little insentive

 for a government to live within its means, especially when spending is

 used to buy votes. To be successful, we must attack the problem at its

 roots, and that is fiat currencies.

 

Sun, 06/26/2011 - 14:30 | 1403304 traderjoe
traderjoe's picture

While I'm no fan of fiat currencies, and don't otherwise disagree with what you say, it's not fiat currencies per se, it's debt-based fiat currencies. 

The Lincoln Greenback was issued without debt and without interest. Sure it had it's own problems (inflation, debasement), but it was not debt. 

Sun, 06/26/2011 - 14:02 | 1403244 jack stephan
jack stephan's picture

Do you have any idea how tough these inevitable outcomes are to describe to people? (family members mostly..)  At the limit of my patience, I just shake my head and say" I'm speaking in English, right?"  All uphill.....

Sun, 06/26/2011 - 16:41 | 1403551 Seer
Seer's picture

Yeah, I hear you... Fortunately those that really matter to me the most are smart enough to actually understand and are, in so far as anyone really can be, prepared/preparing.

I struggled for years trying to get this across to my ex wife (current wife is smart as a tack- she picked things up right away!).  Not until a while after we'd been divorced did things start to sink in for her: happy to know that she has since wised up (truth and facts will always prevail).

My brother continues on like a happy idiot, even though he KNOWS (or says he does).  I no longer speak with him (save my energies for those whose eyes are, or can be opened).

Simple challenge is to ask people how perpetual growth on a finite planet is possible.  This is the basis of it all, nothing complicated.

Sun, 06/26/2011 - 14:06 | 1403254 pasttense
pasttense's picture

3) austerity but in conjunction with actual economic growth

Anyone seen any politicians who favor this? We have the conservative Republicans who put out PR saying they believe this, but in actuality they favor massive austerity for the poor--but continued welfare for the middle and upper classes. And a policy of massive austerity for the poor-but with continued welfare for the middle and upper classes, big tax cuts for the well off and and expansion of military/war spending is just going to cause the deficit to explode even more.


Sun, 06/26/2011 - 14:26 | 1403298 JLee2027
JLee2027's picture

massive austerity for the poor...

Do you not understand how capitalism works? There are no handouts! Hello!

continued welfare for the middle class and the rich.

You are repeating propoganda, not fact. Get your head out of your ass.

Sun, 06/26/2011 - 14:11 | 1403263 zorba THE GREEK
zorba THE GREEK's picture

  In reply to Elterco, No matter what the tax rate has been since WWII,

  tax collections have remained the same: 18% of GDP.

  The wealthy always find ways around paying higher taxes, especially

  with the help from their friends in Washington.

Sun, 06/26/2011 - 14:31 | 1403281 ElTerco
ElTerco's picture

You mean Hauser's law?  That's fine.  But since the economy is in a bit of a crisis situation, it makes sense to increase the marginal tax rate to a point where the wealthy have to kick in at least a few extra percent rather than raping the bulk of the population.  I am "wealthy" and this would affect me, but I'm forward looking enough to realize that I won't be rich if the global financial system collapses.

Added: "2009 tax collections, at 15% of GDP, were the lowest level of the past 50 years and 4.5 percentage points lower than Hauser's law suggests.The Heritage Foundation has stated that the recent world economic recession pushed receipts to a level significantly below the historical average. ( http://www.heritage.org/budgetchartbook/current-tax-receipts ) "

 

Sun, 06/26/2011 - 16:46 | 1403559 Seer
Seer's picture

Increasing the tax rate isn't going to fix a damn thing!

Taxes are an income stream.  Look at your own economic situation and aks yourself if you can increase your income: do you consider decreasing your expenses? if you can't control your expenses then bringing in more to feed poor management isn't going to solve a damn thing.

And, when would this end?  Without including an assessment of scale and time into a given "solution" you're only howling at the moon...

Sun, 06/26/2011 - 20:16 | 1403984 ElTerco
ElTerco's picture

There are two political parties.  When the financial situation "normalizes", I can assure you that the republicans will be right back in there advocating for lower taxes (as they should).  In the meantime, we should try to save the economic system from collapse.

Sun, 06/26/2011 - 23:20 | 1404605 Oracle of Kypseli
Oracle of Kypseli's picture

The government apparently does not need our taxes. They print their own money and even that does not help. Game over mates. We need a "TILT" and a reboot.

Mon, 06/27/2011 - 00:58 | 1404729 FeralSerf
FeralSerf's picture

"There are two political parties."

A figment of your imagination.  In your defence, you are not alone wrt this misconception.

There are two groups in the existing political party, though, that are competing for the diminishing spoils.

Sat, 07/02/2011 - 02:04 | 1420857 ElTerco
ElTerco's picture

The Heritage Foundation took down my link above to their site, so try this one instead:

http://www.heritage.org/Research/Reports/2010/06/~/media/Images/Reports/2010/sr0078/sr78_chart11.ashx

(Sorry Heritage Foundation, but you can't hide from the truth, because the truth is all there is.)

Sun, 06/26/2011 - 14:20 | 1403274 JLee2027
JLee2027's picture

People are far more angry at the banks and politicans than some realize. We've already had 4 years of "austerity" with no jobs and falling incomes.  Facing 15 years of "austerity", the only real option is default.   To pretend there is a window of opportunity left to fix the problem is naive. Who is going to put up with that?  

Sun, 06/26/2011 - 14:19 | 1403287 lunaticfringe
lunaticfringe's picture

Agree. Default now and let's get it over with. Extend and pretend is already getting old, it's useless, and it's wasting productive time.

Sun, 06/26/2011 - 15:07 | 1403387 Yen Cross
Yen Cross's picture

  Radar Love

Sun, 06/26/2011 - 14:17 | 1403277 lunaticfringe
lunaticfringe's picture

I don't agree with this authors conclusion that of course we must raise the debt ceiling. It is a fantastic state of affairs that the US has a FED bank that is willing to continually loan money to a country with credit score of 300. No bank in its right mind would continue to loan to such a shitty credit risk.

The answer is to slash and burn 10-20% of government expenditures now. Goodbye Dept of Education. Goodbye Dept of Energy which has never accomplished a fucking thing despite its multi billion dollar annual budget. The original Jimmy Carter money pit.

If I am short on dough what do I do? Well, if I can't make more dough I quit fucking spending. I get rid of Cable TV. The government has yet to realize the well is dry. There is only one solution and only a lack of political courage and will keeps us from doing the obvious.

 

Sun, 06/26/2011 - 14:27 | 1403307 Bam_Man
Bam_Man's picture

Sorry, but you are dreaming.

Yes, these government agencies/departments are utterly worthless and a massive drain on public finances. But they employ HUNDREDS OF THOUSANDS of people. People who having worked for government all their lives and are, for the most part, UNEMPLOYABLE in the private sector. Do you think these politicians are going to just dump several HUNDRED THOUSAND unemployable government workers out onto the street when there is already 16%+ U-6 unemployment? I don't think so. The vast majority of these government workers will get to keep their jobs until the whole f***ing system collapses.

Sun, 06/26/2011 - 23:24 | 1404608 Oracle of Kypseli
Oracle of Kypseli's picture

Maybe you're right, but that means hyperinflation which will lead to system collapse.

If the end result is the same, the in between details are just that. Details. Let's brace ourselves. Got gold?

Sun, 06/26/2011 - 16:56 | 1403574 W.M. Worry
W.M. Worry's picture

You're funny. The Dept. Of Energy is another branch of the Military really. Who do you think develops and manages all of our nuclear weapons? We're pissing away our future on Global Military Hegemony at a cost of about a trillion a year all of which we borrow.

Mon, 06/27/2011 - 07:33 | 1404943 victor82
victor82's picture

DOE used to be the old Atomic Energy Commission that was the civilian agency which held responsibility for the Manhattan Project's nuclear warheads, Hanford, Oak Ridge, and all that garbage. 

Carter, in his infinite wisdom, vastly expanded its mandate. It should end or be shrunk back to the old regulatory AEC.

Sun, 06/26/2011 - 14:23 | 1403288 Troy Ounce
Troy Ounce's picture

 

What about revaluing gold to US$ 50,000 per troy ounce and introducing a flexible SDR via the IMF. Problems solved; everybody saves face and the game will start over.

BTW, there is a slight chance also that Jezus comes back to earth with a few tons of gold during the rapture on October 21st and hands it over to the Greek government.

http://www.ebiblefellowship.com/outreach/tracts/may21/

What about the Afghan gold field discovery of last year? 1US$ in minerals, gold, etc. everthing to pay off iPods, TV's and 4x4's. Problems solved.

http://www.foxnews.com/world/2010/06/14/discovers-t-minerals-afghanistan/

You see, there IS a free lunch.

Mon, 06/27/2011 - 07:37 | 1404947 victor82
victor82's picture

When Jesus comes back with all this gold, will he send the senior management of BofA to Hell to be apportioned for foxes?

I mean, I thought I read that in the New Testiment somewhere....

...after the part where Madoff goes to jail for ripping off other Banksters, not necessarily for ripping off little old ladies.

Sun, 06/26/2011 - 14:24 | 1403297 Misean
Misean's picture

Well, at least with hyperinflation, you get to warp time and actually go back in time as things get worster.

Sun, 06/26/2011 - 14:47 | 1403338 snowball777
snowball777's picture

Tachyonomics.

Sun, 06/26/2011 - 14:31 | 1403305 THE DORK OF CORK
THE DORK OF CORK's picture

Well in my opinion Ireland can fund its own debt now as it is running a small balance of payments surplus.

But for this to be sustainable guarrenteed credit deposits must switch over to Goverment money into the Post Office or some other similar vehicle.

This will crash credit dependent assets as they reach cash or near cash value so therefore ALL mortgage holders would have to see a dramatic reduction in Mortgage payments so that they will not all emigrate from debt traps.

This will free up more disposable income that could be taxed.

The ECBs 100 billion + of Irish "assets" needs to reflect this new reality.

Ireland has already took enough of this shadow bank shit - we have experienced a 26% reduction in GNP from Q1 2007 to Q1 2011 - thats Great Depression figures while Continental Europe is still encased withen a hybrid Monetarist / Keynesian dreamworld.

Sun, 06/26/2011 - 14:51 | 1403349 snowball777
snowball777's picture

Do you believe that surplus will hold up in the face of austerity? It doesn't take many emigrations to spoil the whole debt load.

Can't shake the devil's hand and say you're only kidding; should've defaulted now, instead of inevitably later.

Sun, 06/26/2011 - 15:08 | 1403392 THE DORK OF CORK
THE DORK OF CORK's picture

Well thats why I think credit deposits need to become Goverment money so that the bastards in the City and elsewhere will stop extracting interest and ultimately the Irish money supply out of the country.

Of course that is why the ECB is giving cheap money to keep the domestic banking sector afloat while giving the Irish sovergin much higher interest rate loans and so therefore preventing organic growth.

The ECB does not want Ireland to grow - it merely wants to keep the extraction mechanism going so that its mates can feed in peace.

Sun, 06/26/2011 - 15:15 | 1403397 snowball777
snowball777's picture

It makes sense to me, as close as you can get you Glass-Steagall as we once has in the US...best of luck fending off the Werewolves of the City of London.

 

Sun, 06/26/2011 - 15:41 | 1403440 THE DORK OF CORK
THE DORK OF CORK's picture

Not much chance of that - we have a second treacherous / Cretinous executive withen Dublin now - there is little hope.

Its always been this way - its just that the worlds limited growth has exposed our polticans true loyality.

I see Peter Sutherlands debt people everywhere.

www.youtube.com/watch?v=ZSNyiSetZ8Y

 

Sun, 06/26/2011 - 17:50 | 1403653 snowball777
snowball777's picture

Yes, an ugly and revealing ebb tide indeed. http://www.youtube.com/watch?v=Z-VZ3f5L0vA

 

Sun, 06/26/2011 - 19:49 | 1403306 Chappaquiddick
Chappaquiddick's picture

I have to disagree with this.  I live in the UK and over the last 12 months I have monitored and seen a serious increase in food and energy costs.  Things across the board have doubled in price for many food items and portion reduction is occurring at the same time.  People generally haven't noticed - its not so obvious, yet.  I'm clearly not alone in seeing this, a recent article on King World News listed price rise stats in line with my observations.  Chris Martenson recently interviewed Fernando Aguirre regards his experiences in Argentina - he reported the portion size reduction strategy was used there too.

With the outbreak of violence in the Middle East and now the serious reemergence of the situation in Greece I finally moved and started to stockpile food.  I'm frequenting Wholesalers in an attempt to get the best possible prices and for example Costco is showing exactly the same price increases.

The definition of hyperinflation I use is 30% price increases yoy.  Well, in the UK I can atest to near 100% price increases in many food and clothing items in the last 12 months.  For me that is clear - we're in HYPERINFLATION.

Lets see how things go from here - will they double again??  If they do then it'll be obvious and the system will not be able to hide these price rises so easily.  How long can this last??  Well if you start at 1 and double just 10 times you get 1000 - so if we keep this going until 2020 we'll see a 1000 fold increase in food, clothing, energy and related items.  In Brazil they hyperinflated by 10000 fold.  No wonder the middle classes get obliterated.

Sun, 06/26/2011 - 15:04 | 1403380 Yen Cross
Yen Cross's picture

 Fukushima on a bun. Just in time for the Fire Works.

Sun, 06/26/2011 - 14:46 | 1403335 10kby2k
10kby2k's picture

6)  systematic eradication of non productive individuals

Sun, 06/26/2011 - 14:59 | 1403350 Franken_Stein
Franken_Stein's picture

 

... through eugenics.

If you kill the creditor, he cannot demand his money back.

 

Sun, 06/26/2011 - 14:51 | 1403351 snowball777
snowball777's picture

Duck!

Sun, 06/26/2011 - 14:50 | 1403344 Franken_Stein
Franken_Stein's picture

 

We should put bankers in jail.

Publicly display them as the criminals and thieves they are.

They rape whole nations and laugh each and everyone of us in the face, giving victory signs even.

 

http://p4.focus.de/img/gen/1/W/HB1WnYX2_Pxgen_r_1100xA.jpg

 

Meanwhile sitting and prospective leading American politicians meet with said bankers at the Bilderberg Group meetings in private and conspire against the rest of the country, in direct violation of the Logan act.

 

Looks like federal law doesn't apply to senior politicians in the U.S..

 

Sun, 06/26/2011 - 14:46 | 1403345 vegas
vegas's picture

My best guess is default, followed by a nasty trade war. I think the Greek opposition has the balls to stop the bailout and watch their country descend into a sort of modern anarchy. This is their only path to power to sweep out all the G-Paps.

 

The unintended consequences of this, IMHO, leads to European trade wars, where the Sgt. Schulz Government has to subsidize export industries due to the 100+ % appreciation of the new D-Mark. Which industries get "protection" and which don't will be great theater. Throw in the ChiComs, who are angling for trade control, and you have a formula for FX volatility that is off the charts.

 

The key event is whether the Greek opposition can muster the guts necessary to do the right thing and send the Rothchild and Bilderberg bankers to hell. If they don't, I'm afraid we are all looking at the kick-the-can-down-the-road syndrome, quickly followed by bizzaro finance and an Alice in Wonderland world.

Sun, 06/26/2011 - 14:51 | 1403358 Corn1945
Corn1945's picture

"fall from 7.2% GDP in 2011 to 5.8% in 2012"

We are running a deficit of $1.5+ trillion. Our GDP is a little over $14 trillion. How does the IMF's calculator coming up with 7.2%???

Sun, 06/26/2011 - 15:15 | 1403396 Yen Cross
Yen Cross's picture

 I was thinking about that GDP downgrade?  2.something %.  14 trillion and moodys to score.

Sun, 06/26/2011 - 15:00 | 1403372 apberusdisvet
apberusdisvet's picture

Move on folks; just another elite bankster with a wish list to bring about the NWO, sooner rather than later.  This was obvious as soon as he opined that the US debt ceiling must be raised.  It's also painfully obvious that these same elites are using the US military as their global debt enslavement enforcement arm thus any reduction in defense spending or imperialist adventures will never see the light of day.  Tell me again, why are we in Lybia?

Sun, 06/26/2011 - 15:09 | 1403384 carbonmutant
carbonmutant's picture

Obama wants to demonstrate that that he can do a better job than Bush did in fighting a war...?

Sun, 06/26/2011 - 15:38 | 1403444 buzzsaw99
buzzsaw99's picture

Obama wants to demonstrate that that he can do a worse job than Carter did in fighting a war...?

fixed it

Sun, 06/26/2011 - 18:09 | 1403670 carbonmutant
carbonmutant's picture

He'd have to crash land a rescue mission to accomplish that.

Sun, 06/26/2011 - 17:43 | 1403637 pops
pops's picture

To bring to the Libyans the joys of central planning and central banks.  And to teach them to not even think about dealing for oil in anything but the NWO/UN/IMF approved fiat.  What were they going to do with all that gold, anyway.

Iran will be next in line for a "humanitarian kinetic" whatchamacallit.  Then North Korea.

After that, we will all live happily ever after in our joyful serfdom, living only to serve the lords of the planet. 

 

Mon, 06/27/2011 - 07:44 | 1404953 victor82
victor82's picture

BTW, SOME TROUBLEMAKER on here wrote not too long ago that the Duck of Death was sitting on a Gold Stash that the Eurotrash Bankster's Combine wanted to get their hands on (Soros, DeutsheBank, et al). Rommel's Lost Gold or something like that. 

We're sure not conducting an illegal war in Libya to help the Struggling Libyan Workers, that's for damn sure.

Sun, 06/26/2011 - 15:01 | 1403373 Yen Cross
Yen Cross's picture

 That chart looks like (A)  Meteor Storm!

Sun, 06/26/2011 - 15:07 | 1403386 surfsup
surfsup's picture

Notice the one solution not mentioned:  break up the banks who levered up to create an un natural pull on sovereign debt to begin with.  One could suppose this could fall under the heading of default, but really its not.  Clearly, after real estate fell off its bubble the banks needed a "sure thing" -- if only to plug the "off the books" losses at mark to unicorn -- with all the low interest credit they could draw upon.  Yet, you can only sqeeze so much out of a nickel as soveriegns were more than happy to take on way more debt for the use misuse of this near term (levered up) capital.  So ol' bessy is out there standing in the field and she can only produce so much milk...  

Mandrake meet wall.  

Sun, 06/26/2011 - 15:11 | 1403389 Akrunner907
Akrunner907's picture

Will the next president of the United States be the one in charge when the country collapses?  It is my "guess" that they will be; that they will be the leader in charge when the economy of the US collapses.  How far society falls as a result of an economic collapse is the question, it is no longer about if or when.  I figure we have 2 to 3 years at best.

Sun, 06/26/2011 - 15:17 | 1403402 Yen Cross
Yen Cross's picture

Picking up the 'Pieces"   would be a great PoliticalSlogan...

Sun, 06/26/2011 - 19:20 | 1403830 francis_sawyer
francis_sawyer's picture

I got news for you... The country already collapsed...

All that's left is for history to pin the blame on someone...

 

Sun, 06/26/2011 - 15:33 | 1403424 Urban Roman
Urban Roman's picture

Cue the Southpark episode: "Annnd it's gone."

Sun, 06/26/2011 - 15:32 | 1403434 Fix It Again Timmy
Fix It Again Timmy's picture

When the Germans invaded Russia in WWII, the Russians moved their entire industrial base eastward, dismantling factories, loading them on trains, transporting them eastward and then re-assembling them.  No doubt this required an enormous amount of thought and effort - but it was done!  We on the other hand could not effectively deal with the Katrina hurricane in New Orleans.  Do you think that TPTB would exert a comparable effort to construct a viable solution to today's problems?  I say not, the task will be left undone because the elusive "someone" else will figure how to deal with it - don't bother me, I have to make tee off time...

Sun, 06/26/2011 - 19:35 | 1403873 financeguru500
financeguru500's picture

New Orleans handled katrina just fine.

The N.O. Police department quickly stepped in to steal.... err I mean relocated merchandise from their local Walmart to their personal houses.

Sun, 06/26/2011 - 15:43 | 1403441 Waterfallsparkles
Waterfallsparkles's picture

While Inflation may make the Debt diminish.  The effect of the inflation will cause less spending by the populace as the value of their Dollars has decreased.  This then creates a downward spiral as without consumer spending GDP drops. 

So, in my opinion while creating inflation it also creates diminution of fuel to keep domestic spending up and in turn hurts Companies ability to creating profits.

With the populas spending less it also hurts the Government with tax collection. This has the effect of creating smaller Government.

So, Bernanke does not understand why his Money printing has not worked, yet the above is so clear to anone who is not an Economist.  What he did was the reverse of what he should have done.  In my humble opinion.

 

Sun, 06/26/2011 - 16:13 | 1403500 Waterfallsparkles
Waterfallsparkles's picture

The other half of the equasion is that the FED should have had the interest paid for the Banks to park their Money at the Federal Reserve should have been lower than the cost to Borrow.  This would have in fact caused Banks to look for higher interest or profit by lending to Individuals for consumer finance or Mortgages or Companies.

It is beyond reason that the Federal Reserve would do the opposite of what Banks do.  That is to pay depositors more than it costs to Borrow Money.  That is in essence what the FED has done.   It lends money at 0 and pays 2 to 3% interest for the Banks deposits into the FED.  The FED then lends the Money they are paying 2 to 3% interest on for Zero, 0?

We all would love that deal.  Lend me $100,000. at 0% interest and I will put the Money back into the Bank and receive 3%.  We all know what would happen to the Banks if they did that.  So, why is that what the Federal Reserve is doing with the Banks?

The Federal Reserve has in effect stopped the Banks from lending to anyone except the Government.  There is no one in their right mind that would not do the same.

Makes me wonder if Economists are born without common sense.

Sun, 06/26/2011 - 18:29 | 1403706 Kayman
Kayman's picture

Waterfallsparkles

 "So, why is that what the Federal Reserve is doing with the Banks?"

The Fed is following instructions from its masters, and you will get the bill.

 

Sun, 06/26/2011 - 15:45 | 1403449 Atomizer
Atomizer's picture

MINISTRY- Thieves

http://www.dailymotion.com/video/xvgpm_ministry-thieves_music 

 

While your all sheeping and in denial of World Order demonimation, the fleecing of the peasants is daily, non stop action.

 

BIS/IMF/UN: "were going to rip this motherfucker off!!"

Sun, 06/26/2011 - 15:52 | 1403457 brokenspoke
brokenspoke's picture

The FED should not be TBTF!!!

Sun, 06/26/2011 - 15:58 | 1403466 Dre4dwolf
Dre4dwolf's picture

Global default and debt forgivness, all the debt will be wiped out and the bankers will surrender.... <--- most likely in the long term IMO.

Sun, 06/26/2011 - 16:02 | 1403491 Franken_Stein
Franken_Stein's picture

 

"Where do the bad folks go when they die ?

They don't go to heaven where the angels fly.

They go down to the lake of fire and fry.

See them again on the 4th of July."


Nirvana

 

Sun, 06/26/2011 - 16:06 | 1403494 glenlloyd
glenlloyd's picture

Would be better to just admit that the idea of a unified currency across sovereigns was a bad idea to begin with rather than attempt at a fully integrated government that destroys sovereign identity. proponents of this solution to EU / EMU problems should think twice about what they recommend as reasonable solutions. Besides, I don't think you'll find many constituents who will support a new govt, and the opposition to this will be pretty fierce I think.

While I think some of the article is relevant there's a great swath of it that appears to condone the current situation. We would likely have had very few sovereign issues had they not assumed the toxic sludge of their banking insitutions....against the advice of constituents.

Sun, 06/26/2011 - 16:18 | 1403514 pain_and_soros
pain_and_soros's picture

We are somehow supposed to believe that the politicians, who have contributed to the problem at least indirectly by lack of enforcement/regulation, kicking the can down the road as long as possible, etc., are now somehow going to find the wisdom, will & courage to do the right thing???

If Vancouver riots over the outcome of a stupid hockey game, what will happen when the real shit hits the fan???

Police state with food & fuel rations coming to a corner near you...

 

 

Mon, 06/27/2011 - 07:47 | 1404957 victor82
victor82's picture

Things could have been worse you know. They could have lost to the Maple Leafs.

Sun, 06/26/2011 - 16:25 | 1403525 Piranhanoia
Piranhanoia's picture

The stories are better than headlines. The media keeps the sheep snoozing. The events keep leading us to a black friday, a major sighting of black swans all over the world that are flying dead and dying.  Wrong is right and doubleplusgood to a couple branches of government.

Damn it Orwell, damn it. Flea the urban nightmare while you can. (leave the fleas, take your dog)  Flee the absurdity of a place that is as screwed as Katrina/Fukushima could make it...only without any relief, food, water, electricity, currency, meds, law and order, or that sense of normalcy we use in our waking dream state. (add toxic environments as they are appropriate for your location) They are dining on long pig in N. Korea now.  Dream on, waking up is a bitch, bitchez.

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