'Til Debt Did Europe Part

'All is not resolved' is how Morgan Stanley's Arnaud Mares begins his latest diatribe on the debacle that is occurring in Europe. While a disorderly default seems to have been avoided (for now), the Greek problem (as we have discussed extensively) remains unsolved as debt sustainability seems questionable at best, economic recovery a remote hope, and the growing political tensions across Europe (and its people) grow wider. Critically, Mares addresses the seeming complacency towards a Greek exit from the euro area noting that it is no small matter and has dramatic consequences (specifically a la Lehman, the unintended consequences could be catastrophic). Greece (or another nation) leaving the Euro invites concerns over the fungibility of bank deposits across weak and strong nations and with doubt over the Euro, the EU could collapse as free-trade broke down. The key is that, just as in the US downgrade case last year, a Euro-exit implies the impossible is possible and the impact of such an event is much, much higher than most seem to realize. While the likelihood of a Greek euro-exit may remain low (for now), the scale of the impact makes this highly material and suggests the EU will do whatever it takes (print?) within their mandates to hold the status quo. For all practical purposes, it would be the end of the euro as a genuine single currency and to preserve the euro if Greece left would require total federalism in the rest of the area.

Greece Debt Deal: "Kicking Giant Beer Keg Down Road Risks Destroying The Road"

Those who have been correct about the crisis in recent years question whether a new Greek government will stick to the deeply unpopular program after elections due in April and believe Athens could again fall behind in implementation, prompting lenders to pull the plug once the eurozone has stronger financial firewalls in place. The much used phrase "kicking the can down the road" underestimates the risks being created by European and international policy makers. Some have rightly warned that we will likely soon run out of road. Rather than "kicking the can down the road" what politicians in Europe, in the U.S. and internationally are actually doing is "kicking a giant beer keg down the road".  The giant beer keg is the continual resort to cheap money in the form of ultra loose monetary policies, QE1, QE2, QE3 etc, money printing and electronic money creation on a scale never seen before in history. The road is our modern international financial and monetary system. The risk is that attempting to kick the giant beer keg down the road will lead to many broken feet and a destroyed road.  A European, US, Japanese and increasingly global debt crisis will not be solved by creating more debt and making taxpayers pay odious debts incurred through massively irresponsible lending practices of international banks. The likelihood of continuing massive liquidity injections by the ECB next week and in the coming weeks will help keep the opportunity cost of holding bullion the lowest it has ever been and likely contribute to higher bullion prices especially in euro terms in the coming months.

Guest Post: Presidents Day - Why Can't We Nominate Our Own President? We Can, We Are

If the last 12 years have revealed anything, they have shown beyond reasonable doubt that both Status Quo political parties in the U.S. are hopelessly, ruinously corrupt and thus beyond any reform or redemption. We all know why: it now takes millions of dollars to run costly mainstream media election campaigns, and the only source for contributions of that scale is the financial/corporate Elite. It doesn't matter how you arrange the taxonomy of the financial aristocracy that rules the nation or how you subdivide it--old money, new money, family money, corporate money, etc.-- the bottom line is these campaign contributions are viewed by the aristocratic donors as investments that yield gargantuan returns in tax breaks, subsidies, bailouts, sweetheart contracts, "get out of jail free" cards for the shadow banking system, and so on.