It
would appear that we are just a few hours away from some form of Irish
bailout. Portugal is a sideshow, but in worse shape than Ireland. So two
fixes are due by Friday. While not a total surprise this is happening
at lightening speed. I want to make an obvious but very important point:
A week ago spreads on Irish debt got pushed to levels where a bailout is
required. On paper they do not need a bailout this week. They have
minimal borrowing requirements and technically could just ride out the
storm. But Irish yields could not stay at 9% for long. It just adds to
the cost of the next guy in line. The next up in the domino chain is
Spain, behind that is (incredibly) Italy and should those tiles fall
even France becomes suspect.
That chain of events simply can’t be allowed to happen. I will make a prediction: Should Italy fall prey to the markets in a similar fashion as Ireland the dominoes will be falling on every continent.
Italy does not deserve a loss of confidence, but that is irrelevant.
Once money starts moving it is very hard to stop. I think every finance
minister is aware of this. But I see a big speed bump in the process
ahead. That bump is the USA.
When Greece went tapioca last May the EU responded with a $145B
(equivalent) support package. Of that, $40 came from the IMF. The US is
17% of the IMF but because there are dirt bags like Venezuela who don’t
pony up their share the US is on the hook for ~20% of the Greek deal.
Back in May this was sort of a ho-hummer. Some minor opposition:
"It is
simply unfair—as a matter of principle—to force American taxpayers to
use their hard-earned money to prop up failed policies in relatively
wealthy nations," Rep. Todd Tiahrt, a Kansas Republican.
A lot has changed since last May. The opposition to US involvement will
not be muted in November. Geithner and Obama are well aware of that
fact.
The talk is for a EUR ~100b deal for Ireland. Throw in Portugal and you
get EUR 120b or a total deal not so far from that for Greece
(total=$160b). The US share of the deal could come as high as $15b if
the IMF plays a similar role as in Greece.
This is a rounding error and should not be considered. But it will. The
IMF involvement in an Ireland/Portugal bailout will not go over so well
with the Tea Party set. But I fear it will get much worse. I
think there is a case for the Fed to get involved at some point. They
may be forced to open up swap lines to EU Central Banks as part of a
broader restructuring of EU debt. Consider this info from the CIA on
total external debt.
Note that Ireland has a mountain of external debt that is not Public
Sector debt. This is largely the domestic banks. There are cross border
assets on the books of these banks. Therefore on a net basis the
external debt is not as large as it appears. However in order to address
the Irish problem this mountain of assets has to be reshuffled. That
will prove to be far more difficult than a narrow bailout of the Irish
government bond market. For it to be accomplished in an orderly fashion
it will require that large amounts of liquidity be made available. In the past that has always brought the US Fed into the picture.
If a US role is required it will come at a great cost to the
Administration. If the Fed gets involved there will be hell to pay. If
the USA balks at a critical moment, the EU effort will fail in the
market eyes. At that point the market will go into full predator mode. A
lot is riding on what should not be such a big deal. But that is the
way of things.
Bruce,
Since you already said You Read very comment the i assume you must know i really appreciate your work and you are the better man.
you have no idea how it breaks my hear to admit that, but someday i will buy you a Springbank and supper at Bar and Books on Hudson or another nice spot
sincerly,
i'll also think of something very nice for a wedding present......if she says yes - if not then i will still buy yiou the drink and supper
;.
Okay.
Hey, Bruce, it is good to see that you get plenty of hits in your posts, despite the fact that you have one-eighth the face-time as some other contributors do.
ZHers can always find the good argument!
;)
Actually the folks at ZH are very good about that face time thing. I feel I get my fair share and then some.
By the way, will you marry me?
Sorry.
Taken.
:(
the Springbank offer still stands.........not surprised orly was takejn. oprobably by a swede or norwegian too, i bet.
Doesn't sound too tall, dark and handsome to me.
:)
'nuff said
but, thanks just the same.
"...that is the way of things."
Sounds like Merlin from Excalibur... Yep, exponential aspect of debt showing her thong and not a peep about the old tractor like rocket impulse (not) of a "debt" system. Wake me up when its over and humankind has a realistic economic system not born of quick deals...
Truth is that any debt/interest system ls like the snake eating its own tail -- it will need ever more capital flow as time advances. The nature of the debt getting exponential is that the general circulation begins to actually dry up. Its all going back to banks as debt service and now they are playing hot a fast with enough paper to paper over all the planets in our solar system -- so if any of that has to be "covered" quickly (cough cough AIG -- 2008) well then you betcha they're hording capital inflows and going lighter on outflows (new credit). So as capital is getting sucked out of general circulation its not like "actual" capital or "actual human effort" has in any way lessoned or lost its productivity! No, its the hand on the nozzle -- period -- nothing more complicated than that! Simple ON/OFF equation -- not rocket science.
The fact its not a Public Aspect of Governance and debatable is uh, a strict Constitutional Violation -- oh my Gosh... So a person is supposed to go through an economics college degree, get the paper, and never really ask the question of such an interesting spin having become a fraud on history? GTFOH
Thank God for ZH, looking forward to more days waking up to some common sense in the world...
Yes, damn these dirt bags who didn't have any part in creating this mess, and now don't want to throw their money away down a black-hole... damn them to hell...!!!
</s>
You're in the club, you pay dues in my book. You don't want to be in the club, that is fine. But the US does pick up the tab for VZ. Why?
You are so right, they EU was screaming for Ireland to take a bailout because if their spreads are large it was costing other states increasingly to have people buy their debt. I still say we aren't out of this, not by a long shot. I truly think that this situation will go up in flames for the simple reason that we don't know how much they are in trouble. I mean Greece lied and the bailout kept going up from 45 billion to 80 billion to 120 billion, and thats just Greece. Now with Ireland who has exponentially more in debt, that 100 and change billion dollars they are wanting to give won't make a dent. Because I think Ireland is at least 10 times more in trouble than Greece. What happens when thats not enough, that they really need 500 billion euros to stay afloat. Even Austria has balked at giving Greece anymore money because they haven't kept up their part of the bargain, and are essentially giving money away and no way of getting it back.
I see the EU breakin up and when it does it will put the markets in turmoil for sure, that might also be the other black swan that is waiting out there.
The inevitable is no black swan.
Well, let's hope humans aren't that dumb.
The EU breaking apart is a very good and wonderful event. These days, anything that reverses concentration of power is good.
NY Daily News= $.15 Dow 'skid' = 12 pts
Hmmm
I think Greece may be jumping back to the front of the line. Their budget deficit is going up, not down. Tax collections are down, not up. Austria isn't sending their check this month. Greece has till January or February.
It is interesting to note that Italy's government looks to be collapsing. A change in leadership could result in an airing of the outgoing teams dirty laundry. Look for the headline, "Fiscal Situation in Italy Worse Than Thought."
Ultimately I think there will be Malaysian and Brazilian type capital flow controls applied universally since this ETF/hedge fund/fast money world we currently have is simply putting too much volatility into the markets. A start would be to force the unwinding of all ETF's. Nice and efficient vehicles they are but they create huge mismatches is liquidity with the underlying assets. For instance if GLD were to start unwinding massively there would be billions in capital projects suddenly caught with their pants down.
To find out more about the Imminent Collapse of the Global Economy, watch the YouTube video "Wall Street Thieves, Bailouts Galore, Broken America" at (http://youtu.be/I93dzfs8WIc).
The United States economy is rotten at the core and has been stolen from the American people by the Wall Street Thives that drove the Titanic into the iceburg in the first place!!
32 minutes agoKA-BOOM! Crash will be any day now! It is going to be like nothing else ever seen? here or anywhere else in history. God bless!
-Anonymous
I guess my response was junked into oblivion.
I say it again.
The US caused this. The US financial cabal poisened the global financial markets with toxins.
Ireland's public debt is rather small. The Irish banks are the dumping ground of toxic crap and the shit is piling over.
Again, who created the shit?
Well, Ireland is a sovereign state. We may have concocted the shit sandwich, but they feasted on it. No?
one man's shit is another man's hope........or, lack of knowledge
i an thinking of launching a shit refinery ipo.........you in Rocky?........maybe a shit distillery too........the finest of shit whiskey.
on that note maybe we can turn shit into paper.......sorry, i forgot, the FED already beat us to it.
not to worry, lots of opportunity.......we can franchise shits all over and convice everyone everywhere shit is where its at.
just think Rocky, someday me and you will be sitting in a pile of shit in a cafe in Dublin or New York overlooking the shit flowing down the east and hudson Rivers knowing we are owners of all of that shit or Tokyo (i personally like japanese shit as much as sushi - marketing angle) and sipping a shit latte in Roppongi and we will be more famous and more wealthy than google or bill from microshit.
think about it for one moment; what is the most cheapest and most plentiful resource around the world that has not yet been discovered?.........shit of course, yours and mine, so lets sell it just like mcdonalds.
i can't believe it Rocky..........we will be rich! finally! so fucking rich! we will make the bankers look like idiots when we're selling everyone's shit back to the shitters........what a factory. calll GS right away. call Al Gore too! .........bill clintion will get it on for radio active shit from kazakstan.........mitch some dom's bitch mcconnel and repububs will just get it on for whatever $hit.
imagine all of the shit we can mine out of China!!! holy fuck. call the Pope. thre pope is in big time already, catholics and jews love money. so who doesn't? right.
and no one gets it either. Can you believe it? what the fuck.
we are in Dude. big time. fuck Wall St. we own shit. shit plantations everywhere for haliburtin, dickhead and gerge wb with boogyman terroist scary shit too.
ps.........isn't Zero Hedge absolutely the very very best;.
motto - eat shit or die......if the irish are in shit so is everyone else, maybe more refined shit than the irish but shit nonetheless.
no exceptions. sorry.
signed by; shit disturbed
maybe the real question is in the end who will eat the Most shit?.......lol.......maybe the answer is, who fucking cares because we are all so fucking stupid to begin with and by the time it comes around no one will remember.
I dunno. Might have to pass on that.
I see shit as good for the garden but not much else.
The IMF involvement in an Ireland/Portugal bailout will not go over so well with the Tea Party set.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I'm a little teapot short and stout
TIPS me over and....
The Madhatter: Would you like some tea?
Alice: Tea!
(he's mad as a box of frogs!)
Yes, there are all kinds of wonderful cross-border assets on the books of those Irish banks. Indeed it's not unlikely that you could bid on one at an upcoming foreclosure auction in your neighborhood.
The entire ponzi system needs to crumble - US included. Eventually, it takes a forest fire.
Let it all fail now. The sooner the better. The longer it goes on the worse it will be for all of us. Let it fail!!
Bruce:
As usual, this is about the banks. Ireland cannot go bust without taking the European banks with them. In order to have access to money after restructuring, Ireland must negotiate and cannot act unilaterally. The Nash equilibrium appears to suggest a haircut on Irish sovereign debt that the banks can tolerate.
Tell us this: What level of haircut on Irish sovereign debt do you think could the European banks take in these negotiations and remain solvent? (This assumes, of course, that these selfsame banks will be forced to take the same haircut on Greece (eventually) and Portugal (next year)).
And by the way, I agree with you that Uncle Ben is coming to this party with the IMF (International Mother F*****S). The shitstorm that would follow an Irish default would be too much to risk.
Lots of Irish blood in my family. We're fiery, headstrong types. I wouldn't put it beyond Ireland to rebel against the PTB, banking system be damned. The American South, home of the Confederate Rebels (still a cultural presence), is populated with a high concentration of Irish immigrants. We can't stereotpye in this day and age but I'm not ashamed of my Irish heritage, and we are rebels - I know it from personal experience. :)
The honor of serving in a war from either side put aside for a moment, but can you name an Irish plantation and slaveowner from the pre Civil War South?
I mean, I am just really curious to learn about the role of the Irish fighting to preserve slavery.
Doesn't matter now, because DOOMSDAY has already begun.
http://abetterwaytotradestocks.blogspot.com/2010/11/doomsday-has-already...
Fractional potatoes, with a side of MERS meat.
Bruce,
I think you list just can't be right.
Look at luxembourg! That's almost not even a country! It's really small, hardly has citizens and no industry.
How come they didn't went broke a thousand years ago yet?
Luxembourg is a banking capital with small population. Those debts you see have assets behind them. Some of those assets are rock solid. Some are not. Same as Ireland. When you unscramble the eggs you find what you have. Finally.
Bruce, you will never unscramble the eggs in Luxembourg. if you've ever gone there and talked with local business owners, you learn very quickly that it is a quasi-criminal/mafia state.
that's the central nest of all these non-sovereign bankster buggers
Banking
Banking is the largest sector in the Luxembourg economy. The country has specialised in the cross-border fund administration business. As Luxembourg's domestic market is relatively small, the country's financial centre is predominantly international. At the end of March 2009, there were 152 banks in Luxembourg, with over 27,000 employees. Political stability, good communications, easy access to other European centres, skilled multilingual staff, a tradition of banking secrecy and cross-border financial expertise have all contributed to the growth of the financial sector. Germany accounts for the largest-single grouping of banks, with Scandinavian, Japanese, and major U.S. banks also heavily represented. Total assets exceeded €929 billion at the end of 2008. More than 9,000 holding companies are established in Luxembourg. TheEuropean Investment Bank—the financial institution of the European Union—is also located there.
Concern about Luxembourg's banking secrecy laws, and its reputation as a tax haven, led in April 2009 to it being added to a "grey list" of nations with questionable banking arrangements by the G20 [1].
+1000
Why doesn't Ireland just DEFAULT, drop out of the EU?
They'll cave, every govt out there will choose a punch in the face tomorrow over a gentle slap today.
I was stunned at the CIA graphic. It's hard to believe there are countries with even higher debt-to-GDP figures than the US.
I feel like singing, "We'll aaaaall go doooown TOGETHER!"
It's going to get UGLY, folks! This Depression is still just getting started!
Perhaps that's why the dollar is as 'strong' as it is. I can sort of understand the US economy's weakness and expected the economy to collapse here two years ago. Then I look at global D/GDP ratios and all comprehension is out the window.
Question now is: which nation is going to crash the system? The longer a restructuring is posphoned the greater the dislocation. I'm going back to the S&L days as a reference.
CTRL-ALT-DEL
It's a giant swirling toilet and will go on as long as they keep the handle down feeding the system money. Just stop it. It is all going to end sometime and the longer it takes the worse it will be. So stop it. Stop it now. Free everyone and put the Banksters in jail for creating it, indicted and tried by due process of course. That will keep them out of our hair while we pick up the pieces and put humptey back together again.
Welcome to the New Revolution.
I couldn't have said it better! It's going to happen. Let's get started NOW so we can come out the other side sooner, rather than a more misery-laden later!
I really don't understand the big deal about this. With Ben's "printing presses of fury," what's a few extra billion on top of the $1 trillion QE2?
Stand your ground Ireland. Make the banksters eat their own cake.
it's called the "E...C...B." I like your spirit. Apparently "you have friends in Austria." Good friends from what i've been told.
And I thought the US taxpayers got taken to the cleaners by our banks...shoot Ireland has it way worse..let a few years of high unemployment and dead economy stew with the realization what made their country a debt slave, bailing out foreign banks by bailing out their crazy banks...and there will be another Irish revolution...this is not sustainable..no amount of emirgration will solve this (and note, the below quote is 1 week old, with higher cost of borrowing, God only knows what accounting is now:
"...Next month the government will deliver its latest austerity budget with the aim of slashing a further €15bn from public spending on top of the €14.5bn it has already been forced to cut. But Kelly has argued that the public sector cuts are "an exercise in futility" when compared with the €70bn bill for Ireland's bad banks. "What is the point of rearranging the spending deckchairs, when the iceberg of bank losses is going to sink us anyway?" he asked in the Irish Times last week."
Ireland, please be the ones to stop these banksters, say F-em, and crash 'em...we will all eat potatoes til we get thru to other side of global jubilee.
Bruce - you are one clever cookie!
one gets the sneaky suspicion that should our irish friends have to open thier books really and truly to their bailout masters...thier would be a serious shit storm!!
We all know them Greeks like to cook the books..but hell.....who hasn't been taken in with a good old Irish yarn???!!!
hold on to yer hats if the cat is really let outta the bag......
This is my thought, too- the resistance is due to their not wanting to have to reveal what they have been doing.
Nice analysis as always, Bruce. I must however take issue with your casual use of the euphemism "this is a rounding error" in speaking of an amount of money which is after all pretty close to Ireland's GDP.
I've been seeing "it's a rounding error" with some regularity in the financial media this past year, usually coming from the Keynesians and everybody-needs-a-bailout-or-the-world-will-explode uber-interventionists. I find this amusing because my profession is numerical analysis, which means I actually know a little bit about rounding errors. And one of the key lessons there is that even though they may be individually small, they can nonetheless accumulate to catastrophically large levels, especially in poorly-designed (the technical word is "unstable") numerical algorithms.
Misuse of "it's a rounding error" is reminiscent of misuse of the phrase "it's a fraction of [something]", as if that automatically implied " small fraction" ... well, what if the fraction is not small but rather something like 7/8 or 3/2?
Sorry. The rounding error is the $10-15b the US will be on the hook for via the IMF. That amount of money is a rounding error considering what is a stake. Their are 2.2T of assets in Ireland that will have to find a new home if this goes wrong. That will be very messy.
FYI: Social Security pays out $15 billion a week. The numbers we toss around are enourmous. What is the drop in market cap of the S&P so far today??
Fine, so let's round down and get this show on the road.
Somebody's $5 latte today was another person's food for the day.
'Twas not I who junked you. I respect your views too much.