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.
eh, "fractional, smactional. reserve, bleserve" that's what i say.
"That chain of events simply can’t be allowed to happen"
bullshit! it should happen and the sooner the better....you irresponsible heroin dealers make me sick.
I should have said, "it won't be allowed to happen". That way you can accuse the EU policy makers of being heroin dealers instead of me.
I'm against bailouts as much as any. But this is going to happen because if it didn't everything would go south rather quickly.
I doubt you would like the Dark Side should "we" go there.
b
i agree with bruce on that point. no one wants the 'dark side'.
simply put, this is all complex psychological machinations with the intent to arrive at another generally agreed upon price of everything.
in the meanwhile it may be all right to trade price up and down.
it is a morphing global economy.
It NEEDS to go south, Bruce. You know that. No bailouts. You know that, too.
"go-galt-delete"
the dark side is coming. do we want a dark side where the very bankers who got us here are still in charge? when they are rallying the mindless emotional monkeys then anyone with guns and personal assets could be in very big trouble (see: Nazi Germany).
http://www.zerohedge.com/forum/how-do-we-arrive-eve-our-collapse-1
Bruce, you imply we can avoid the "dark side" - no we can't. We can delay it and make it darker, and that is something I would like less than just taking the lumps now.
.
agreed. Bruce, you are being naive. the dark side is coming. do you want a dark side where the very bankers who got us here are still in charge? honestly, wake up and smell the dogshit, my friend. this could cost you or your family your life.
http://www.zerohedge.com/forum/how-do-we-arrive-eve-our-collapse-1
Banksters are playing with fire and burning villages and killing people in the process.
Ireland's public debt is not the issue, bank debt is.
Irish banks are holding toxic assets that go back to the MBS financial nuke that the US banking cartell dropped on the planet.
It is time to end the charade and call a spade a spade.
FAZ >10.21 baby
http://stockcharts.com/charts/gallery.html?s=faz
...relatively wealthy nations ....with a large trade surplus too
Just a little reminder . . . Hungary has loads of mortgages denominated in Swiss Franc (not florint) and that currency trade is making servicing those loan beyond onerous. And many of the mortgage makers with that very unfortunate currency problem are Austrian banks. L
Little wonder that Austria doesn't plan to pony up for the Greek rescue fund. If Austria falters, Hungary falls, and Romania plunges right into a cracked Ukraine that Russia may invite back into the fold for financial forgiveness.
There are a lot of big changes on the precipice.
Those assets have already been nationalised by the Austrian central bank, so they're "safer" than they were before...but...
Austria doesn't want to pay because they apparently have evidence that Greece is lying about their austerity measures as well as their GDP. Like kids in a sandbox arguing over who threw first.
Either way, this stuff is still on the books. It's just on the books of Austria, which is a very close friend of Germany.
May you live in interesting times...
and Austria has just ordered the ECB to "gitty-up" on the bailout of Ireland! So "whose side are the Austrian's on"? They did "invent a school of economics...
Politically, you cannot sell another bailout, especially of a foreign sovereign, in the US, probably for at least a generation to come. Hell, no one outside the state would even support a bailout for California or Illinois.
The Powers that Be in the US can do whatever they please. They are fully aware the sheeple are not paying attention to this, only Tea Party non-issues and Sarah Palin, American GILF, and they can do anything they want. I don't even know what it would take the populace in America to get roused enough to take to the streets, but suspect it would have its roots in either a cable blackout or an acute shortgage of nachos on a Monday night.
Less than 1% of the population participated in the last revolution here. Let them all watch american idol, f em.
But Im no patriot, when it gets bad Ill be in some small town in Mexico bangin serioritas and drinkin margaritas.
please don't 'accidently' fall off your balcony and come home short a kidney.
Mexico ain't such a sweet place anymore. Small towns are controlled by the cartels. Being an American, you are a prime target for getting shot or kidnapped. Have fun!
My counterpoint would be that all but two Senators who voted for TARP and were up for election in 2010 are gone now. Yeah, they can certainly side with their masters, but they'll lose their own jobs.
Ahh yes, the other Senator (from Illinois) that voted for TARP and since risen to a slightly "higher office" now. We had better make sure that he loses his job in 2012 or this madness will continue...
You MUST be joking. Politicians are fronts, flunkeys, hired hands. They would "resent" losing their jobs? You have to be kidding. These dogs will go when and where they're told to go.
Look at our prime example: the Rezko pimp Barry. Isn't he a little darling? Hood.
i disagree, Barry WILL NOT GO QUIETLY. his ego is megalomaniacal.
He'd rather cause a revolution, and may have been placed in his position by design.
http://www.zerohedge.com/forum/how-do-we-arrive-eve-our-collapse-1
What's "unfair" is that corporations dodge paying taxes and yet get to exercise political influence and are awarded record bailouts for failure (and bonuses) out of everyone elses taxes.
Perhaps the dip-shit from Kansas would like to address the gravy train of incorporation and tax-fraud.
There is little that has to do with national sovereignty and everything to do with corporate bailouts and forcing everyone else to pay for their purposeful mistakes.
The reality is that banks are hiding behind countries and supposed national sovereignty -- where else would they find a big enough "human" shield borrowed right out of the terrorism handbook for dummies.
Bruce, you seem like a smart individual, I figured you would have figured this con out by now. Do you honestly think that innocent taxpayers are going to be human shields for incorporated criminals in the name of sovereignty?
The problem is systemic corporate fraud worldwide, the rest is collateral damage so the banker babies can have more taxpayer milk for criminal negligence.
Oligarchial corporate fascists have all the rights of individuals with none of the criminal liabilities, like a college student with all the freedom and none of the responsibility.
as we continue wise up or become useless slaves, on to the death camps!
painfully clever.
We are experiencing a classic case of misdirection. Every magic trick works the same way.
all the national media attention towards tax cuts or tax increases. None of it makes any major difference what-so-ever in a debt-based monetary system which works as a vampire squid levying ever-growing interest (and front-running) fees upon free trade for the benefit of the international corporate banking cartel.
This scam is best explained by historian John Kenneth Galbraith, who states, "In numerous years following the war, the Federal Government ran a heavy surplus. It could not however pay off its debt, retire its securities, because to do so meant there would be no bonds to back the national bank notes. To pay off the debt was to destroy the money supply."
http://truthinprophecy.com/fedreserve.php
it hurts my soul it is so perfect for those at the top. this has been crushing small towns and farms for decades. now it is crushing entire nations (again). Worse yet, they have the technology to wipe us out with the press of a button. They do not even need to march us off to war. They can set off dirty nuclear bombs, blame Muslims, and place us on more lockdown. This is like watching a slow motion car crash.
when a multitude of Federal, State, and local government workers realize that their pensions have been raided, their jobs are not real, they cannot afford their homes, and their only option is soup lines, then they are going to be ripe for national socialism and chaos will ensue. notice how they have all been getting raises throughout this 'downturn' in order to cultivate loyalty.
The International Banking Cartel will do everything in its power to misdirect attention away from itself.
age warfare, class warfare, religious warfare, race warfare.
divide and conquer. rinse and repeat.
http://www.zerohedge.com/forum/how-do-we-arrive-eve-our-collapse-1
EFF THEM ALL! Let them eat cake! NO PRINTING EUROS FOR THE EURO TRASH!
Add a little arsenic to that cake please@@@@@@
Good post. I would quarrel, however, with the characterization that the Irish spreads required by the market were unreasonable or some kind of predatory attack. What has happened since they went up has proven the investors correct. Unless they are investing in a 3-month note, there is substantial default risk. To say, on paper there is no need of a bailout is only true if we presume the Irish government will not spend another 80B Euros trying to protect the banks from failure. But we all know that is exactly what they will do. The ECB is demanding the Irish take a bailout to protect foreign bond holders. The Irish should have said F-Off, the banks can fail. They will not, and the Irish people will have a new soverign debt to cover private-sector losses.
Not sure if the yields were reasonable or not. But I do know they were not affordable. If you plug into the budget the cost of debt at Friday's prices Ireland would have to immediately default. They could not pay those rates. So fairness is not really the pricing metric. When you get "fair" you get a restructuring. Plug in 5% ST rates and 7% 30 year and you would see that the US could not service its debt either.
Exactly why the interest rates were reasonable - if not low. The problem is the amount of Irish debt, adding more as a stop-gap only makes it worse.
that's interesting: "the US can't service it's debt."
Of course we can service our debt. November 3rd, Ben said he'd service the debt until at least June. The Irish, on the other hand don't have a Euro printing machine. Too bad for them.
Servicing the debt via more debt is simply serving up more debt that will need to be serviced via more debt ad infinitum...
That's not servicing debt ... that is merely stealth repudiation of debt.
I'm not so sure that the Irish won't tell everyone else to bugger off. This is the Irish we're talking about here, and I say that with the utmost admiration in this case. Are they really going to give over their sovereignty to the IMF, of all institutions?
I hope you are right - but it strains credulity now. They are 1/3 of the way down the path. I believe they're negotiating the terms of their surrender to the ECB.
"the banks are bigger than the country." Clearly..."you bail out the phucking country" if you're the ECB. The danger of course is "you lose bank AND country" if you're Ireland. Of course..."it could be something spiritual." I imagine the Irish have "studied Greece and planned accordingly....
I agree fuk em all, let em sink or swim on their own. This nonsense has all gone on far too long already, time to deal with reality no matter how painful it will be!
A wonderful sentiment but it won't happen. No sinking/swimming until the last nickel is looted from your assets, and mine. The whole system will reach stall speed, hurtle toward the ground, and they'll be picking each other's pockets on the way down. I'm just trying to be sure that I'm not near the crash site.
when we wise up or become useless slaves, on to the death camps!
painfully clever.
We are experiencing a classic case of misdirection. Every magic trick works the same way.
all the national media attention towards tax cuts or tax increases. None of it makes any major difference what-so-ever in a debt-based monetary system which works as a vampire squid levying ever-growing interest (and front-running) fees upon free trade for the benefit of the international corporate banking cartel.
This scam is best explained by historian John Kenneth Galbraith, who states, "In numerous years following the war, the Federal Government ran a heavy surplus. It could not however pay off its debt, retire its securities, because to do so meant there would be no bonds to back the national bank notes. To pay off the debt was to destroy the money supply."
http://truthinprophecy.com/fedreserve.php
it hurts my soul it is so perfect for those at the top. this has been crushing small towns and farms for decades. now it is crushing entire nations (again). Worse yet, they have the technology to wipe us out with the press of a button. They do not even need to march us off to war. They can set off dirty nuclear bombs, blame Muslims, and place us on more lockdown. This is like watching a slow motion car crash.
when a multitude of Federal, State, and local government workers realize that their pensions have been raided, their jobs are not real, they cannot afford their homes, and their only option is soup lines, then they are going to be ripe for national socialism and chaos will ensue. notice how they have all been getting raises throughout this 'downturn' in order to cultivate loyalty.
The International Banking Cartel will do everything in its power to misdirect attention away from itself.
age warfare, class warfare, religious warfare, race warfare.
divide and conquer. rinse and repeat.
http://www.zerohedge.com/forum/how-do-we-arrive-eve-our-collapse-1
yes, for the sake of the generations to come after us........... let it all fall now, allow our children to be free of tyrant-bankers. things were not like this when i was growing up, banks need to again be a utility, just a safe place to make deposits in savings accounts & earning interest. MY GRANDMA HAD NO TROUBLES IN RETIREMENT, SHE SAVED HER ENTIRE LIFETIME, EARNING INTEREST ON DEPOSIT & when she retired, the nestegg in the bank was safe for her to live on AND she even left an inheritance to her grown children when she died. Banks do not want us to be prosperous anymore. Why won't they leave us all alone ? !
however your grandmother did on her savings, i can assure you that a thieving banker did better. keep in mind that interest rates have gone from 21% in 1981 to -0% today. anyone could do well in paper assets during this time. then banksters counterfeiting your grandmothers savings and leveraging the deposit to the gills actually made her groceries more expensive than need be. put simply, your grandmother was placated while bankers ran wild with a different set of rules.
banks should charge rent for money storage, or take a cut from assisting an asset-backed loan. if the loan is lost, the depositor should lose with it. any other arrangement leads to the widespread corruption and wholesale robbery of america that we see today.
bankers will not leave us alone because they are criminals who have used government force to allow themselves a different set of rules.
please, for your own sake, read this:
http://www.zerohedge.com/forum/how-do-we-arrive-eve-our-collapse-1
I agree with you. And to answer your question.....the banks won't leave us alone until they have sucked every penny out of our pockets and leave us all in the poorhouse. Greedy bastards want it all.
The system is corrupt, the core rotten, and there is no more honesty to be gamed. It's all coming down, and I recommend investing in metals: Gold, Silver, Lead, and Tin...as in cans of food.
"just a safe place to make deposits in savings accounts & earning interest." So I take it you are in favor of fractional reserve banking?
Rather than making a simple post like this which doesn't really add any content, why don't you discuss how such accounts would differ in a non fractional reserve banking system in comparison with how it is done now. Banks will still be able to provide interest to savers (although they would be taking risk unlike today's FDIC environment), however, rather than paying interest on demand deposit accounts as done by banks today all interest paying accounts would likely be in the form of CDs. This would allow banks to still allocate capital to worthy investments given that they believe they can make a return larger than the interest they would be paying on the CD.
Please, for the sake of all humanity let the banks fail!
Dream on...
The US Govt will NEVER, EVER let the banks fail.
Administrations will come and go, but the banks will be with thee always.
yes, but what kind of banks...
a bank is not a bank...
all banks are not the same.
some banks are stools?