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The Trillion Dollar Gamble?
- Barack Obama
- Bond
- Central Banks
- Dow Jones Industrial Average
- European Central Bank
- European Union
- Fail
- Federal Reserve
- Germany
- Global Economy
- Greece
- Group of Eight
- International Monetary Fund
- Lehman
- Lehman Brothers
- Netherlands
- Nicolas Sarkozy
- Portugal
- Reuters
- Sovereign Debt
- Trichet
- United Kingdom
- Wen Jiabao
- White House
Reuters reports, "Shock and awe" euro rescue lifts global markets:
A $1 trillion emergency package to stabilize the euro zone unleashed a spectacular rally in world stocks on Monday but the euro wiped out initial gains as worries about the region's debt problems persisted.
The rescue plan -- the biggest since G20 leaders threw money at the global economy following the collapse of Lehman Brothers in 2008 -- triggered the biggest one-day rise in European shares in 17 months after panic selling last week.
Wall Street also surged as confidence returned, at least temporarily. The Dow Jones Industrial average jumped 3.9 percent and the narrower Standard & Poor's financial share index was up 5.6 percent amid relief among banks.
Yields paid on Greece's 2-year notes plunged to 8.7 percent from Friday's close of 22.4 percent as the plan reassured investors about the country's ability to service debt in the short term.
"For once the scope of the actions unveiled dwarfed previous leaks and speculation: this is shock and awe part II and in 3-D, with a much bigger budget and a more impressive array of special effects," said Marco Annunziata, chief economist at UniCredit Group in London.
The package of standby funds and loan guarantees that could be tapped by euro zone governments shut out of credit markets, plus central bank liquidity measures and bond purchases to steady markets impressed financial analysts by its sheer scale.
But senior International Monetary Fund official Marek Belka said the emergency package was "morphine" for the markets and should not be regarded as a long-term solution.
The euro rose as much as 3 percent after weeks of draining confidence but erased nearly all of its gains later to trade at $1.278 per U.S. dollar, reflecting concerns about Europe's long-term debt problems.
"Sentiment on the euro is still overwhelmingly negative and with any rally people will take the opportunity to sell the single currency," said Joe Manimbo at Travelex Global Business Payments in Washington, DC.
"There are still some questions lingering about the package, such as how fast it can get implemented. Not to mention that it adds to the debt load of overall heavily indebted European countries," he added.
Gold prices fell but less than 1 percent, as lingering uncertainty about the euro zone's debt crisis still supported the metal's safe-haven appeal.
For the first time in six months of a deepening debt crisis that began in Greece, European leaders appear to have got ahead of the curve with decisive action, analysts said.
"The euro zone is certainly regaining confidence," European Commission President Jose Manuel Barroso told reporters hours after EU finance ministers clinched agreement early on Monday as Asian markets opened.
"This morning's agreement will ensure that any attempt to weaken the stability of the euro will fail," Barroso said.
But the deal left many longer-term questions about whether Europe's weakest economies can manage their debt and how the European Union can develop more coherent economic and fiscal policies to underpin the single currency.
The European Central Bank immediately began implementing its part of a deal that involved EU finance ministers, central bankers and the IMF, with euro zone central banks buying government bonds in the open market.
ECB President Jean-Claude Trichet denied the bank had acted under pressure from euro zone leaders, whom he met at a summit on Friday evening as interbank lending began to freeze up in an ominous reminder of the 2008 Lehman crisis.
Only the day before, Trichet had said the bank was not even discussing the option of buying government bonds.
All euro zone banks bought sovereign bonds but in relatively small volumes. One European trader estimated the total purchased on Monday was less than 1 billion euros in mainly Greek, but also Italian, Spanish and Portuguese bonds.
In a rare show of open dissent, ECB governing council member Axel Weber of Germany, a leading contender to succeed Trichet, criticized the move and warned that it carried significant risks for price stability.
"Buying government bonds entails considerable stability policy risks, and thus I regard this part of the ECB council's decision critically in this exceptional situation," he told the business daily Boersen-Zeitung.
"ASSERTIVE ACTION"
The deal won global endorsement from the Group of Eight and G20 major economies.
The White House said President Barack Obama supported the Europeans' "assertive action" to address the situation. Chinese Premier Wen Jiabao said Beijing would support actions to help Greece overcome its sovereign debt crisis.
Germany and the Netherlands, sticklers for budget discipline, insisted the rescue program was linked to the same kind of draconian austerity measures already imposed on Greece.
German Chancellor Angela Merkel, who for months resisted pressure to aid Athens over a debt crisis that sent market tremors around the globe, said the measures were necessary to guarantee the future of the euro.
"This package serves to strengthen and protect our common currency," she told reporters in Berlin.
Merkel consented to the massive plan after her center-right coalition lost a regional election on Sunday and Obama and French President Nicolas Sarkozy telephoned her to ensure Europe would take the necessary steps to support the euro and keep global liquidity flowing.
A German government spokesman stressed the EU was not turning into a "fiscal transfer union" and it was possible that not all member states would take part in bilateral aid.
Dutch Finance Minister Jan Kees de Jager told parliament Spain and Portugal had made a commitment to cut their budgets substantially in 2010 and 2011 as a condition for the safety net. EU Monetary Affairs Commissioner Olli Rehn said both states must commit themselves to further savings this year too.
Spain said it had no intention of drawing on the funds.
CONCERTED ACTION
In concerted action, the U.S. Federal Reserve reopened currency swap lines with several central banks to try to assure markets of dollar liquidity, and the ECB said it would buy government debt to steady investor nerves.
That decision, urgently sought by anxious European banks, reversed a long-standing reluctance to use what many economists call the "nuclear option."
Skeptics questioned whether the euro zone could hold together over the long term and buttress a fragile currency union with stronger political and fiscal instruments.
Former IMF chief economist Kenneth Rogoff told BBC radio that weak euro zone economies such as Greece and possibly Spain and Portugal would still have to restructure their debts to make them sustainable, despite vehement official denials.
The emergency measures are worth much more than any previous attempt by the 27-nation European Union or the 16-state single-currency group to calm markets.
The agreement was reached after the crisis over debt-laden Greece drove sovereign debt yields and insurance on this debt to record levels, which Sweden's finance minister blamed on the "wolfpack behavior" of financial markets.
The $1 trillion package consists of 440 billion euros in guarantees from euro area states, plus 60 billion euros in a European stabilization fund that could be disbursed to help euro zone states if needed on strict austerity conditions.
EU finance ministers said the IMF would contribute up to 250 billion euros for a total of 750 billion, about $1 trillion.
Will Europe's version of "shock and awe" be enough to tame markets? Well, think about this way. Let's say you are a big global macro hedge fund that was actively shorting sovereign debt of southern European nations. Will you continue knowing that the ECB can squash you like a bug at any time? Highly unlikely. What's more likely is that you will move on to your next target, which might be the UK.
As far as the euro is concerned, I'm not so sure European leaders want it to be back at 1.50 any time soon. A weaker euro stimulates European exports and will benefit tourism in Greece and other European countries. In short, a weaker euro is exactly what Europe needs at this time.
So was this a trillion dollar gamble? As I have already stated, they didn't have a choice. Speculative attacks were threatening the stability of the bank funding system. I also believe the lessons of Lehman played a pivotal role in taking these decisive measures. Letting Greece fail was simply not an option.
Finally, below, Stephen Wood, chief market strategist at Russell Investments, talks with Bloomberg's Lori Rothman about European policy makers' plan to end the region's sovereign debt crisis with an almost $1 trillion loan package, and the outlook for the U.S. economy and stocks.
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a truly "Greek style" bailout
http://www.topix.com/forum/world/macedonia/TFAJU1380C84MDRUH
some of you are obviously happy being buttfucked all your lives, others of us will never accept it as "right" nor play their games.
i hear KY it makes it slightly more bearable.
and unfortunately I have to concur. if you think bailing out banksta's at the expense of a country and her people is the right thing to do, either morally, or actually, then yes.
ηλ?θιος
malaka,
Those banksters own you. You might not like it, and neither do I, but that's the reality. Accept it and move on. They can inflict untold misery on you.
If even just one of those bastards in control gets dragged out onto the public square and burned alive the complete destruction of the World will be worth it. That's justice.
Spoken like the classic (and now almost ubiquitous) apologist and panderer to corruption, manipulation and injustice at the highest levels of our society. Your lack of any sense of outrage marks you as just another enabler of the wholesale sociopathic looting of our economy and our world for the benefit of a handful of powerful, amoral and highly placed elitists.
Fuck you Leo, and your casual and servile acquiescence to evil. It is due to the moral apathy and cowardice of people like you that the world is in the dire situation that it is in today. You disgust me.
i never thought i'd say it but I think ZH needs an "ignore" function.
uh
Speculative attacks were threatening the stability of the bank funding system:)))) It was iinsane credit policy amid widespread asset mania, lavishly supported by imbeciles from central banks and the very European leaders of previous years if not decades, that threatened the stability of the bank funding system. Stability is gone, it is unbailoutable for years to come.
'"a European leader knowing your inaction is are causing human misery'' Oh Leo, you are just plain idiot.
I was thinking just yesterday that trade and markets still operated during WW2...but then again food production and distribution were on much more local and on a much smaller scale. The Internet is fairly well distributed but power grids are not. How much do power grids depend on the computers that run them? I would imagine that even hydro would have a hard time functionning without IT. If there is a collapse, in Europe, the U.S. or even say, California, in what stages would it manifest itself? What is the wrench that would stop everything... My understanding is that in 2007 credit markets seized up COMPLETELY. How long can such a situation last before power goes out and food stops showing up at the super market. That is pretty much the worst case scenario is it not? I don't even presume that Governments are planning for such an eventuality, but no doubt Armies must be.
What is the probability of a terminal IT collapse and how long would it take to get stock exchanges functioning with nothing but paper, pencils and land lines again? Will fedoras come back in style?
This whole "evil speculators" line is getting really old. As if the guys on the other side of the trade aren't a bunch of greedy assholes too. Please give it a rest.
Regarding the actual mechanics of this bailout:
1. What exactly are the enforcement mechanisms for the austerity measures?
2. Are the austerity measures achievable?
These questions are rhetorical. Think it through, do some research, and most of all Leo, take off the blinders man. You seem like a decent human being, I'd hate for you to be in a state of financial ruin over this.
Regarding a targetting of the UK, I think you're substantially underestimating their influence in the financial markets. Why would the big players hit their own power base? Do you really think Soros was allowed to make his big hit on the UK without permission and without a specific underlying purpose?
When you consider how much wealth shift can occur from a deconsolidation of European currency, this event is an inevitability. 750 billion Euros is essentially bringing a letter opener to a bazooka fight. Pretending this is some kind of defense is frankly hysterical.
Oooooooo…. Oooooooo! (Hand waving in the air!)
I am an evil speculator, I short things… My entire business model revolves around the failure and destruction of other things… it’s called hedging risk, I am very disciplined in my approach… it the natural thing to do, bet against yourself to limit your losses…
Evil is such a silly way to describe someone who does pray on the failures of man for a profit. Bottom feeder seems more apropos, doesn’t it?
You should rethink your position, without a 2 sided market there can be no upside. Why would anyone want to maintain a steady flow of dollars and push for success when you can time the market just right and make more for the shorting or killing off of the asset? See silly we need a two sided market place or else the devil will come and steal babies form their cribs!
you have people in a machine. being in that mchine made them muli millionares. it gives them power. they run things. oyou think they are going to fix the machine when doing so will take away the power, etc. No, they will do all they can to avoid reform and removal of power and money. There are rare exceptions, but it has always been this way. So we will chase a wheel until floks rise up and end it. It won't end anywhere except at the point of a gun or full collapse.
The enite system of western anglo saxon capitialism is based on false beliefs regarding debt. the austrians got it right, but adopting that system doesn't give the bankers max pay days, so they can't buy influence. We keep the same rigged system because those that run it benefit from it. It is the same with every system that ever was and ever will be.
why don't the chinese vote, or have open press. because the leaders don't benefit. We are lucky in the fact that we have some freedoms. they are doing their best to take them away
Did they really have a choice? Leo, this really solidifies my opinion that you are as liberal and mindless as the so called leaders who are making these decisions.
I'm sick of hearing "we don't have any other choice", "we will blow up if we don't do this", "people will suffer if we don't do this". That is flat out bull shit! These stupid so called leaders around the world are adding more and more TNT to the trash pile every time they ride to the rescue with their phony bailouts. Phony, because an entity that is broke can't and won't ever repay their debt. The debt won't go away you moron. Instead it is now morphing into a nuclear cesspool. The debt eventually has to be paid or it has to be wiped out, one of the two, it's simple simple simple.
All these morons are trying to do is buy some time and hope that all the developed economies around the world will pick up and they will see their revenues increase which will enable them to pay everyone back. It's a bet Leo a damn bet. Yours, mine, our kids and their kids futures are being wagered and the odds are no where close to being in our favor. Leo, they can't service the debt that they have accumulated to date. How the fuck do you suppose they are going to be able to service an additional trillion dollars?
Idiot
You asked: "How [...] do you suppose they are going to be able to service an additional trillion dollars?"
Too easy. Print it. Print faster. It is all just electrons spinning around the world. Nothing else. Debt is an illusion. All money is debt based and backed only by debt. All money is an illusion.
The idiots screwing us, treat us better than the mob would, FACT BITCHES!!!! and I offer as the most simple of truths, if the lights go out... you will give me your Gold and fucking all of it... or I will enjoy getting it out of you.
I love to hear the polite crowd talking about what will in fact happen if your Austerity measures are implemented. The un-winding of all of that debt that is backstopped by Federal dollars… the end, and I am all for it. You may call me King James… in the event that the lights go out… you in your house with your Remington(s) will never suffer such a fate… my your daughter looks tasty… you can take your wife with you, into the shallow grave…
All of the would be, wanna fucking be… intellectuals who can in fact frame a proper sentence and use spell check, often… discussing whether or not pulling the Federal backstops out of the Market Place, AUSTERITY will end badly… my favorite dumbass quote “ we can survive without Citi… we did before they got here… we will after they are gone!” Yayyyyy! Fucking mental midgets with spell check who belong to a book club hashing out reality.
I hope that you get your way, I hope Austerity measures are brought to bare… but know this, your soft underbellies will be in fact some of the first fed upon. Buy Gold Bitches!!!! I need more than I have and I am happy when the lights go out to confiscate yours for my own purposes! Lie to yourselves and tell yourselves you are safe. Tell yourselves that when the lights go out all will be well. Marshal Law? I hope your ties to the military community are better than average. Plainly, if you get your way… and Austerity measures are implemented the lights would go out… or more accurately the common fibers that allow for your protection now would be hurriedly severed, and if not me… then someone else would get you… BOO!
Does JP Morgan do God’s work buy controlling the prices of precious metals as it relates to the value of our Dollar? Yes! Sir!
When the Fed opens the International Swaps window will the Fed in fact be buying the currencies at their bottom or close there too? How long will Europe? be working for the Fed? To pay off simply the gains made in which ever PIIGS country you would like to talk about… once their currencies bounce… would we not own their hard work for free… damn exchange rates!
Goof Ball
I bet that it gets someone thinking... these idiots live in bubbles... quoting high brow moral economics... none of them ready for what they wish for... and then there is the rapture crowd... praying for the end because they hate the wife and kids and are looking for the good christain way out... the end being that?
any who... Gold? verse Brass? they don't have a clue.
sorry to use you as my spring board.. you seem to be a good sport.
dallas? you a steer or queer?
LOL
"This is the equivalent of giving your kid a bottle of Jose Cuervo,
the car keys, and a black AMEX card after she brings in a 1.9 for
the four years she spent at Lotsafun University."
She did it in 4 years? Good for her? There's some hope! NOT!
Should you include free babysitting for the 'tard' she hatched
along the way?
If you don’t want the responsibility of children don’t have them… your view point on children gives way to your inability to want to take responsibility for someone other than yourself.
No biggie you are one in a trillion of the other selfish idiots who cannot see past the tip of your own knows… pun intended.
Did you wife already take half of your half? Because of your deep and caring persona?
You are a conservative, you voted for Bush… you are getting what your ignorant ass deserves.
You cannot bailout Europe and think they are going to amend their ways any more than you can expect and alcoholic to drink himself sober.
Is it safe to assume that a good number of people on this board know what it's like to crash after a few too many nights, weeks, months, years of partying on booze and cocaine? The only way to avoid the crash is to keep partying...the longer you push the enevelope the more you risk a nasty crash along with the fear and depression that come with it. And of course to keep the same high going over time you have to constantly increase the dosage...but soon enough even that doesn't work anymore. You have to take regular breaks to clean out your system and reduce your tolerance if you hope to enjoy a good buzz at reasonable prices... But then some folks who are either genetically predisposed to self-destruct or simply suffer from deep set insecurity, ride the runaway train to their demise... think of any number of incredibly talented yet insecure overachievers who have subcombed to the fantasy that the party can go on forever... this includes people from all walks of life, actors, musicians, financiers, bankers and now we get to add banks and countries to the list....
So yeah there is a choice. Stop snorting cheap money, go to bed, feel like fucking SHIT for years and then slowly get your act together again. But maybe it is too late and the mainlining of stronger and stronger (synthetic) drugs has pushed the Western economies over the line where cold turkey will kill the patient (i.e. massive structural breakdown at all levels, social unrest, WAR). If we are indeed beyond that point then massive social unrest and it's nasty outcomes are inevitable and it's time to start thinking about how to manage this. How about giving free HBO/PS3 to everyone on Earth for a month, declare a Global Financial/Environmental emergency and sit down and take the time to think things through a bit. Anything imaginative would be better than just piling on more debt... How can anyone actually BELIEVE that the growth required to feed such a fantasy is at all possible when the news concerning the biological health of our ecosystem is so incontrovertably BAD. I'm not talking climate change here. I'm just talking good old fashioned pollution and resoucre stripping.
I'm sick and tired of hearing people say that things will work out... HOW EXACTLY? Tell that to the 100 million + people who were liquidated during the World Wars....
Completely nuts--the entire EU is going to go down because its leaders want to (illegally) bail out French and German banks who stupidly bet on corrupt socialist regimes.
You summed it up
What has been (and still going) the total of the US bailout? Not just the Tarps/talfs etc., but outright gifts, loans, guaruntees, etc.? I remember an article in Bloomberg last March about the total then was around $13 Trillion. If that is the case, we should be well into the +$16 Trillion by now.
Has anyone done a recent total or is it so ugly noone wants to look?
http://www.bloomberg.com/apps/news?pid=20601087&sid=armOzfkwtCA4
In other words if people wish to be serious about their public finances we have to start with where the public get's financed. Obviously it's not with the tax collector. Perhaps this is simply my version of ZH's captcha but unless the word "choice" is removed we're merely talking in the realm of philosophy at best. Oh, yeah and I heard a rumor the other day that markets only function in real time, too...
You say "there's a choice" Leo. That sounds like a good place to start your debate and not whether "this was the right choice" no?
The Eu bailing out countries such as Greece, who lied about the size of its debt, is a sad day and destroys all credibility it once had.
These goons seem to think that charging high yields for bonds of a rotten fiscal situation is a heinous act, which must be averted by flushing out the risk.
Risk, loss, and business cycles can't be eliminated- they've been trying this for years now but the crises keep on coming. Just shows out of control this system has gotten.
BTW, those German and French banks knew Greece's true situation when they lent that money. They also knew that if something went wrong, they'd be bailed out. Goldman helped Greek officials lie in order to get in the EMU. They also knew about Greece's true debt profile.
I wonder when Blankfein ( we are doing God's work) and his cronies will be behind bars. That could be the only safe place for them
+ 1234 Nate!
It will fail because the nations purporting to support this plan are essentially broke. So it is the broke lending to the broke. It may work at first simply because it is ultimately backed by the dollar.
So CONgress dilly dallies about the SCOTUS nominee while Athens, Madrid, Lisbon, Rome, Paris, London and Berlin burn. (I think I see smoke over DC ... or is that just morning FOG?)
i'm behind reggie on this one, there were choices and europe made the cowardly one of delaying its day of reckoning. but even on the worst day before this bailout, we hadn't yet reached the point where more than a few small peripheral eurozone countries were being forced to face up to their inability to keep on piling up debts. even spain was still raising debt cheaply.
the government-to-government bailout indeed does nothing for europe structurally. it's a big headline number on top of a weird shell game seemingly designed to confuse lenders about which eurozone government they're lending to, in order to deflect questions about individual governments' solvency situations. if greece, portugal and ireland were the only problems, then that would work - a strong germany alone could carry all three. but with spain and italy on a short road to insolvency, france heading that way, and germany with more than enough problems of its own, this will not work for long at all. in fact it probably worsens the problem by helping weaker governments pile up more debts.
what's still unclear is how much new liquidity is going to be dumped into financial markets, through the fed currency swaps and the ecb purchases of bonds. excess liquidity is exactly what has been driving down rates and facilitating the rapid pile-up of sovereign debt in europe and the us. so many new cars on the road and no safe place to park, so people park almost anywhere, unless it's spelled out in 20 words or less and repeated 20 times or more why they're absolutely sure to lose their car. and even then a lot of people will ignore the warnings until S&P finally chimes in.
Trillion here, trillion there and pretty soon we´re talking about some real money.
GREECARALDO:
http://williambanzai7.blogspot.com/2010/05/greecaraldo.html
Perhaps I don't have the intellect to understand, and I trust I will shortly be so informed, however, I am at a loss to comprehend why the busy boys at the offices are still insisting that they are in a private industry when it is taking a great deal of public money to fix their messes. I understand their not wanting to lose their lavish entitlements, pardon me, pay schedules and bonuses, but it seems their protests are being drowned out by sound of our money rushing into their pockets. Anyone?
I was recently down on the south coast of Spain near Nerja. They have just finished expanding Malaga airport to accept international flights from the Americas and Asia etc. They obviously expect to see some tourists flowing in and there were quite a few Chinese, Japanese and Ozzie tourists..completely new for this region.
The economy in the south is holding up quite well for a number of reasons.
No comments on the drivel from Wood on Bloomberg ? Propaganda on unemployment! its 9.9% , but hey factory production is up . What factories , or are they including all the ones that ratted to China , oh yeah their production is up . Can't make enough crap throw away items that waste precious resources . I simply cannot believe the junk quality of Chinas manf. and exported goods . Total crap , NO QUALITY control . When will we stop buying their junk . When will we ever find Made in USA again ? I'm damn sick of the lies and the greed from corporate America and its fledglings , Senate and Congress .
all ready the trillion dollar fix is losing its steam as the euro is sent back down , now the blitzkrieg begins ..
as the lords of the fly ,, attack the sovereign powers the wolfpack is alive and well
200 billion more than tarp ,i am the great pretender ... extend leos cookie machine for another week
dumpster provides ZH a very needed perspective. Practically Haiku are your writings. Bravo.
I will do as Cheeky_Bastard said to Chumbawamba recently:
I bow at your feet most high one.
more drivel about how trillion dollar bailouts are necessary. the sock puppet for banksters internationale has spoken again.
zh can do better than this. there are solutions to the financial crisis and not one requires a trillion+ usd bailout...quite the contrary, these irresponsible quack cures spawn more problems like a fast breeder reactor.
leo hoping he can snag a couple more cookies to drink with the milk and all the cookies for a night or two for the other kids
before ,, no more cookies .. please keep the fiat rolling..extend
if they can snag a couple more cookies then all will be well pretend .. roll the cookie to the next stop.
To me, the PIIGS remind me of a bunch of guys sitting around playing poker. When everyone has lost all his money into the night, they'll end up all trying to borrow from each other just to try to get back to being whole. We know how that story generally ends. "Double down"
a revolution, a reinstatement of the Guillotine and a big line of bankers and politicians all waiting for their turn would be another alternative.
So Angie peers across the border and realises that Nicky has a bigger military machine, replete with nukes and other machines that let him project power much farther than she could ever hope. Gee, wonder if that entered into the equation.
A weak Euro is not in Germany's interest. Sure, they might export a bit more, but it simply makes all their imports that much more expensive, so in essence it results in Germany importing inflation, which screws totally with a system that is fine-tuned to run on low inflation.
The correct answer would have been door number two, where Greece was allowed to bow gracefully out of the Euro to nurse its wounds with a few parting gifts from the Show. instead, Angie took door one, and is rewarded with a goat, a rope, and some olive oil.
Well played, Angie.
it's the people accepting this money that are the idiots, not the ones dispensing it.
"oh boy, another government paycheck with which to buy my milk..."
That trillion would've even lasted alot longer in my FX account. Fancy dropping 1T in 24hrs & I bet like true gamblers they'll be back in with more borrowed money sooner rather than later
Trliion Dollars that belong to the people - not to the scum politicians who are using it to bail out their banks and their own spend thrift governments. Just plain robbers.
And the poison spreads, getting ever closer to the heart.
Save the banks! We must save the banks!