Here Comes That Contagion... From Greece to Belize to... Spain? Italy? Ireland? Portugal?

Reggie Middleton's picture




From Latin renego, from nego (“deny”). Possibly influenced by renegotiate. See also renegade.

The question Du Jour is,,,,, Will reneging be the fiscal management
policy of the new millennium? Can you blame those who even try? Are they
wrong? Now that Greece has set the precedent of just not paying its
bills, the floodgates are open. Don't be fooled if just a few drops of
water come out at first!

My posts from last year...

The Ugly Truth About The Greek Situation That'sToo Difficult Broadcast Through Mainstream Media

My readers and subscribers know that I
have been warning that Greece would guaranteedly default as far back as
two years ago. As a matter of fact, I stated that the haircut needed
would have to be around the 53% mark in order for Greece's economy to
truly cash flow again, and that was two years ago when things were much,
much better for the country. Now the issue has metastasized into
something much worse. How much worse? Well, it's safe
to say the situation is at least twice as bad. That being said, twice
times 53% means 60, 70, even 75% NPV haircuts just won't cut the
mustard. Since this is already a forgone conclusion, I will now release
the research and economic models that have been available to
BoomBustBlog professional subscribers two years ago (March 2010), take notice how prescient, how crystal balllish it all seems..

Contagion Should Be The MSM Word Du Jour, Not Bailouts and Definitely Not Greece!

In continuing with my rant on the
absurdity of even pretending the Greek situation is salvageable or that
Greece will somehow be bailed out without a near complete absolution of
their debts, I  bring forth from the BoomBustBlog archives the Sovereign
Contagion Model. For those who haven't read my most posts on this
topic, please review The Ugly Truth About The Greek Situation That's Too Difficult Broadcast Through Mainstream Media and Grecian Tragedy Formula, Bailout Number 3.

It is my contention that Greece's
significant default is a forgone conclusion. It is also my contention
that media attention should be much more focused on the damage to be
done by a Greek default - considerably more so than whether Greece will
ultimately default of not or what type of bailout it may or may not
recieve. I have been of this mindset for several years which is why I
had my analyst team create the Sovereign Contagion Model

foreign claims of PIIGS
foreign claims of PIIGS

Germany's Sophisticated Ignorance Doesn't Even Look Sophisticated Anymore

Surprise! Spain Makes The Same Ass-Backwards Mistake That The US and UK Made - Banning Shortselling

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JohnKing's picture

> Why doesn't anyone see this ass contagion?


There are none so blind as those who don't want to see.

Arnold Ziffel's picture

Asking for a 45% reduction in debt from yoru creditors and others really works! My neighbor told his credit card companies he wants 45% cut and he would pay...Done Deal!


He told his hospital...take a 45% cut off his medical bill or hit the road....Done Deal!


He read some book about RE that says never ever offer more then 45% off the list price so that's wahat he is doing and he has a contract on a place that was already down 38% ...and he is now getting an additional 45% off!!


The system works, Reggie. The Greeks and Belizians are not stupid...follow their lead and get your 45% off on everything seems like. It's like Kohls where they reduce 60% and then on Power Saturdays you take an additional 45% off the item.....what an incredible world we live in !?

boiltherich's picture

And then there is the basic rule learned in finance in college on about your second day of classes, money is not created when you PRINT it; it is created when it is borrowed and lent.

Therefore it matters zero if the ECB prints under the watchful eyes of the Germans, or for that matter if the fed does likewise, the damage has already been done. It is true that it is easier to see when you can hold a pile of sawbucks in your hand, but the bits of printed paper are not the "money," it exists whether the pretty little pieces of paper do or not.

The flip side of that is that money is only destroyed when it is removed from circulation. Printing a bit of paper with the images of legal tender is not money, it only represents money, but burning it or shredding it does not destroy money, and that is one of the hardest concepts for most people to grasp, to destroy money you simply have to not circulate it, but that is harder than you think in a double entry bookkeeping world, because once created it is not an asset in your hot little hand, if you hold a million dollar bill that is not an asset of yours, not alone anyway, a one dollar, or one euro bill, or a million of them represent both an asset and a liability, and this is something that MOST people never understand, can't understand no matter how often they are told. I would get a lot fewer red arrows if people could understand this point.

And this is also the reason we will never go back to exchanging bits of metal for our transactions. Why? Because it will not matter even if we did, the only way that would work is to simultaneously outlaw all credit, all borrowing and lending. Because the moment you borrow and lend even if gold and silver are legal tender you just created "money." And if you took a bar of gold and shoot it on a rocket into the sun you did not alter the total balance of money, you just changed the value of what remains, and probably pissing off the old lady and disappointing your kids in the process.

All of the above is the reason why people who really follow the fundamentals of markets and money want to know what the velocity of money is, because economic activity is all about velocity, velocity=circulation, creation, lack of velocity=destruction. Leveraging is creation, deleveraging is destruction. If you are rightfully pissed off at bankers it is because they took to inventing money on their own by lending and leveraging vast sums which is in effect counterfeiting. Every dollar they lent devalued the ones that belong to you, therefore they stole part of your wealth. If you want to get them back you simply refuse to repay them, that takes your portion of the asset/liability math out of circulation, destroys that amount. Why do you think they have banks of supercomputers to track your creditworthiness? They give you a score that essentially punishes you for doing to them what they already did to you. If you all were serious about ending the fiat system of banksters you would wear a 545 credit score as a badge of honor.

But it is not about fiat money verses PM's, it is about who and when money can be lent/borrowed=created. What is used as the medium of exchange in those transactions is unimportant, banksters will just as easily create trillions in gold dollars as they would in FRN dollars, the government will still issue bonds, notes, and bills in gold dollars as in FRN dollars. If TPTB will not listen to our demands for stable money now they will not listen later. If they have legalized theft via borrowing/creating money out of thin air now they will not be slowed down by the imposition of a gold standard or a requirement that only PM's be used as legal tender.


Bill Shockley's picture

OK boilthe rich, I get it so far about money, please(you or someone) explain commodities like gld or wheat, do they also respond to velocity?

   Thanks, Bill

sablya's picture

Pride goes before destruction, and a haughty spirit before a fall.  Proverbs 16:18

European leaders are dominated by political hubris - they are plunging the whole world into economic ruin because of their absolute confidence in their ability to bring about their desired end.  They can't allow themselves to admit failure even when it is staring them in the face.  Germany wants to be admired as the powerhouse of Europe but they can barely admit that their economy is vulnerable.  Draghi proclaims, "The Euro is irreversible!"  Irreversible?!?! The markets will decide that whether you like it or not, you pompous jackass.


TahoeBilly2012's picture

"Ass" contagion is way worse than this.

Ar-Pharazôn's picture

and remember, Spain is not Uganda

falak pema's picture

The Euro Is On Fire - Business Insider

These guys in never never land; preparing for the big three to cream the EUro...

ROthschild, Paulson and Soros bet against the EUro.

If PMs go on a high as predicted by JS KIM on ZH, it will mega short JPM silver play!

So the chickens seem to be coming home to roost for everyone!

Are we going to live a new Lehman moment in Election year, 4 years after 2008???

That could preempt Nettyahoo and Iran caper! 

PS : Germany seems on board the Draghi train! 

Why Germany May Have Flipped On Saving The Euro - Business Insider

Now the big three HFs will have a fight on their hands if this is true. Merkel seems to be throwing in with "save the Euro at all costs" group. 

tok1's picture

A problem market is missing is if EU does as suggest (ie unlimited buying to fix certain rate)  what will the implications be for oil copper.. ect..

(ie so they will keep this rate fix even  if Euro drops and oil spikes to 110 -150 ect.. ie long term bonds are suppose to have the ability at least to factor in inflation the Germans are right to say its dangerious policy. Its one thing for FED to buy bonds and clearly set out the amount and maturity as a means to support Govt spending and the economy.. its another to say the volume of buying is unlimited (which will then give Spain and Italy unlimited borrowing capacity) at the expense of the stronger countries, There;s no chance Germany (and other AAA) would take this risk it makes no sense...

The advantage US and Japan have is they have large trade flows (both ways) that support demand for the currency (and thus investment) Spain and Italy dont have this and even if they do being in the Euro gives trading partners a safer alternative with Euro funds. 

ie for Yen you have no choice if you buy Japanese product someone is buying yen.. at some point.. so they have no alternave to Japanese Assets (ie theres no other safter yen country)

the US deficit is the same if the countries selling to the US  build USD assets they  dont have a safer alternative so if they want to keep weak currencies they need to hold US assets... and US domestic savers have no alternative.. to US assets.

Spain /Italy (ie PIG) investors have alternative (ie Germany and other AAA Euro countries) so the circle will contiune.

If they have no federal tax that holds the Euro together it will never be permanat. Thats the missing ingrediant. Theres no federal tax that backs the whole thing and can give the ECB and EU legitamcy and real power to back ECB bonds ect.

shovelhead's picture

I got to go with you, Reggie.

I may not be the sharpest knife in the drawer and I tend to pare things down, like old Uncle Omar who was a rural Yoda type who would lift an eyebrow and observe:

"Moving a dollar from one pocket to another doesn't make you richer".

Which is exactly what bailouts will accomplish with the burden carried by the gullible fools who will pay further costs to lose the extend and pretend game.

Print they may, but it's a band-aid on a sucking chest wound, not a cure.

stocktivity's picture

Silver is going up again this morning.

Bahamas's picture

My silver is still in the hole where I buried it..I'll leave a map with my daughter to dig it up when I die.


Dead Canary's picture

Hi silver gives me a happy!

Vegetius's picture

Good to see the  Euro Elite like Mr Brussels are still living in Wonderland. Of course the German Government want to keep all this going, they believe in the Euro!

BUT, elections, Elections, ELECTIONS. Thats the rub, cannot support the Euro and get re-elected Mr Brussels. Take Ireland one of the oldest best organised political machines, much admired for its nasty way of winning, got the wrong side of the arguement and is now in tatters. Frau Merkel and ALL the other German parties are beginning to wake up to which side of the arguement you need to be on and it is not your side that of the Euro Hobo's.

So what will happen is quite simple the guys with the cash are not giving it to to Hobo's like Monti or Dragi or indeed you. Reggie is correct it is all over and it might take another two more years or two more months but its OVER!

“If you tell a big enough lie and tell it frequently enough, it will be believed.” - Hitler

Unfortunatly you guys don't lie as good as he did

covert's picture

a run against all governments? if so, it's very extremely long overdue.


WaEver's picture


Appreciate your posts and indeed I should have heeded your advice. But the fate of the Euro will be decided by politicians apparently assisted by central bankers. Even if the math doesn't work out there's always the printing press. Does it solve the problem : I donno no, probably not but I simply don't have enough info/knwledge on the inner working of politiec to know any outcome for sure let alone bet on it.

The US is doing the same only the math is even worse and there even isn't a start on the austerity debate or how to balance the budget. At least we are making progress on that in the EuroZone and this debate is very much alive in many countries. I'd love to read someone predicting that Texas or another rich state will walk away because they've had it with the deficit spending and debt accumulation. That would be a welcome change from a greek exit or spain or Italy or germany.



Bill Shockley's picture

This is it.

Most likely the first to leave the Euro will be the French.

Their electorate is the most proactive.

As for the United States, the westren tier will go first and is the most bankrupt but also has the most to gain when they ally with Asia.

How can it go otherwise...British Columbia and Alaska will go too and Russia, China and Japan.


This is happening as I write.

The rest of the USA is just mostly good for growing corn and wheat and cotton. Good luck with that and with high priced oil and pollution.


It will get ugly in Connecticut and Washington when the ropes comes out, oh hell, Atlanta will make a good capitol.

Power to the people.


falak pema's picture

SO are you saying if Merkel pulls the plug on JUST Greece and allows Draghi to put up the required firewall around SPain/Italy, its already game over for Euro banks?

Just Greek default and the euro caboodle falls? 

And what does this contagion do to US/UK counterparties??

SUrely, this means financial Armageddon on whole first world front?

Or does the FED/BOE have enough bullets to print to infinity and save their banks... FROM INSOLVENCY?

gaoptimize's picture

"ass contagion"?  Going long latex.

bank guy in Brussels's picture

Euro-Doomer chuckle time again

Already heard from Graham Summers Phoenix Capital ... 'Eurocalypse' Reggie now ... Mark Grant soon maybe for the tri-fecta today?

Meanwhile, in the UK Telegraph - despite being strongly euro-sceptic - they are confirming that the German ECB Executive Board member, Merkel's own man, is approving of unlimited money-printing to buy GIIPS bonds

Of course there will be more German 'denials' for domestic political use - and to try to keep EURUSD lower for the sake of German exports -

But really the Germans are going to print, like everyone else, to try and keep this game afloat ...

Sure countries might leave the euro ... my guess Italy first if that happens ... but that's not 'the end of Europe', more the equivalent of US big bank re-organisation ... 'Eurocalypse' only when the whole global Ponzi collapses

The Telegraph gets it ... they have actually been covering euro-zone somewhat better than ZeroHedge in recent weeks - Here's the latest from their superb Ambrose Evans-Pritchard:

'Germany backs Draghi bond plan against Bundesbank'

Illya Kuryakin's picture

Do they sell cans of extra strength Fuckoff in Brussels?

Reggie Middleton's picture

Mr. Brussels, I started covering the European woes in 2009, and got very, very specific in the 1st quarter of 2010 - See the Pan-European sovereign debt crisis series. At the very least give me credit for the foresight, enough credit where you will take the message a bit more seriously, or at least look into the message enough to judge its credibility.

So, what if Germany prints? That doesn't solve the problem, does it? See Reggie Middleton Interview With USA Watc… and reference the "slices of pie" explanation. Slicing the pie into more pieces doesn't give us more pie, does it? Germany is going into recession itself. Its perceived role as universal savior and purveyor of the ultimate panacea is grossly misplaced.

I strongly suggest you read The Biggest Threat To The 2012 Economy Is??? Not What Wall Street Is Telling You... very carefully, twice!!! Then German central bank warns country’s financial health not a given (WaPo)

LongSoupLine's picture



His name is "Bank guy in Brussels".  It may as well be "Troll Trollison".  You just fed him.

geno-econ's picture

Mr. Brussels is talking tactics in short term while Reggie is talking strategy in longer term which is absent in Euroland and USA. Who will be first to default does not matter since contagion within global financia/industrial  sector will be ugly