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Here’s the REAL DEAL NO BS Situation with Europe (Warning What Follows is EXTREMELY BAD).
Here’s the REAL DEAL NO BS Situation with Europe (Warning What Follows is EXTREMELY BAD).
The media is rife with misrepresentations and analysis of the EU. Here’s the real deal.
- The ECB is tapped out. Having provided over €1 trillion in funding via LTRO 1 and LTRO 2, taking on over €700 billion in PIIGS debt putting its own solvency at risk, it simply cannot launch another LTRO scheme for the following reasons:
- Those banks accepting LTRO funding are being punished by the market, thereby indicating that ECB funding is no financially toxic to a firm’s reputation in the market place
- The positive effects of LTRO 2 lasted only one month compared to several months for LTRO 1. Thus, we find that with each additional intervention the benefits are shorter lasting.
- The Federal Reserve cannot step in. I know the blogosphere is rife with claims that the Fed will just print and print and print to save the day. The people writing these claims fail to see that:
- The last time the Fed printed (just $600 billion at that) food prices hit all time records and revolutions erupted around the world.
- Back home in the US the Fed came under massive political pressure forcing it to go on damage control mode (Bernanke’s town hall meetings and opening the Fed to Q&A sessions)
- This is an election year. The Fed has done all it can to support Obama’s re-election (for good reasons: Obama re-elected Bernanke and the GOP is targeting the Fed as a major issue). If the Fed launched some massive printing campaign, Obama will certainly lose.
- The IMF cannot step in because:
- It’s ultimately a US-backed entity
- The political environment in the US will not tolerate a bailout of the EU (see the negative political reaction to the Fed’s moves to lower Dollar swap costs during November 2011).
- This is an election year: how many times has the IMF asked for additional funding and been rejected?
- Germany is politically fed up and monetarily tapped out:
- Merkel’s political party is getting destroyed in state elections due to her support of the EU. And Merkel is running for re-election in 2013.
- Merkel is committing political suicide by continuing to put Germany on the hook for Europe’s problems. Speaking of which…
- Germany is already on the hook for over €1 trillion in EU losses… and the ECB has made it so that it can roll the losses from its PIIGS portfolio back onto National Central Banks (AKA the Bundesbank).
- Inflation is showing up in Germany and becoming a political issue: see recent union demands (and success) for pay raises.
- The German constitution does not permit the creation of Eurobonds.
- If Germany permits additional bailouts or funding it will lose its AAA rating, leaving Europe without an AAA rated large economy to fall back on.
- China cannot be a savior:
- Having pumped its system full of liquidity it now faces inflation at the same time as its economy is slowing. This in turn means…
- That China’s Government is starting to lose its already tenuous control of the populace. As a result…
- China will be focusing on domestic issues rather than saving Europe (when was the last time the “China to back the EU” story appeared in the media?)
- Germany and others have already taken steps to prepare for a break-up of the EU. In Germany’s case:
- It’s re-instated its emergency bailout fund providing €480 billion in potential assistance to Germany banks in case of a Crisis.
- German banks will be permitted to dump their EU bonds into the emergency fund if need be.
- German corporations with operations in Greece have put clauses in their contracts to allow for the acceptance of the Drachma.
- The ECB has taken similar actions permitting it to roll back the losses from its PIIGS holdings onto National Central Banks.
- Spain is on the verge of a banking collapse. Its efforts to deal with an insolvent banking system by merging crappy banks and shifting losses onto its public balance sheet are proving to be absolute failures due to the fact that:
- Total Spanish banking loans are equal to 170% of Spanish GDP.
- Troubled loans at Spanish Banks just hit an 18-year high.
- Spanish banks need to rollover 20% of their debt this year.
- Spanish private sector debt is nearly 300% of Spanish GDP.
In plain terms, having spent two years and hundreds of billions (even TRILLIONS of Euros) dealing with the EU Crisis, the powers that be over there have backed themselves into a corner from which they cannot escape. Let me be blunt:
THERE IS NO ENTITY ON EARTH THAT CAN BAILOUT EUROPE.
It’s game over for that idea. And the idea that one bankrupt nation (even Germany sports a REAL Debt to GDP of over 200% when you include unfunded liabilities) prop up several others is ridiculous.
And all of this is happening at the precise time that Spain is about to implode.
This is the REAL DEAL for Europe. Anyone who has some kind of counter-argument to these points either doesn’t understand the political environment we’ve entered (even Central Banks are fed up with bowing to political pressure from politicians) or is simply hoping that by ignoring these realities they (the realities) will go away.
They won’t. Europe’s banking system as a whole is at risk a la 2008. And it’s nearly four times the seize of the US banking system.
So if you’re not already taking steps to prepare for the coming collapse, you need to do so now. The US will not escape from this unscathed. No one will. The global banking system is too interconnected: some estimates put US exposure in the ballpark of several TRILLION Dollars.
I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.
This report is 100% FREE. You can pick up a copy today at: http://www.gainspainscapital.com
Good Investing!
Graham Summers
PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.
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to the first question: in order of size, tourism (it's a kind of export of services if the tourist is foreign), shipping (the largest merchant fleet of the world, btw, that would be a better revenue stream for the state if... see below), some industrial production (in the north), food, lots of cotton, tobacco, textiles, chemicals, metal products, some mining and some oil.
to the second question: It would be nicer if Greece would not be the "target" of big biz but would just be the environment where their own 1%er would just come back and invest themselves.
Greece is a country where the local "capital and capitalists" (including the famous shipping magnates) are all with one and a half feet outside of the country, many of them with a "non-dom status" in London.
btw, they know the country and don't fear the riots or the parties on the right (this is an American obsession), they only fear the parties on the left.
Ghordius - thanks for reply but you miss my point. The politicians have been wrecking the Greek economy with stifling (socialist) legislation for 14 years. Now the Govt is muting 'getting tough' on tax which completes the 1-2 knock-out blows on business
How do you expect an economic recovery, an export led recovery, or any inward investment if the Greek Govt is even more radicalised and even more draconian??
There will be no recovery in the Greek economy until the Govt fucks off
but there it is: there is no reason for me to expect a more radicalized Greek Parliament composition to express this in it's behaviour.
Yes, there was a protest vote, and yes, it went to the fringes.
Historically, the dynamics of this kind led - in a multi-party system - to an "alliance in the center" of the political spectrum, with a left and a right opposition. While the outcome might be the "constantly slightly unstable" situation the Italians exemplified for some 40 years with their 4-5 center-parties coalitions, this kinds of set-ups lead to a very stable direction of the "ship of the state". Similar cases are Belgium or Israel. In fact, this "radical all-direction fly-wheel fragmentation" is the political environment those constitutions where made for.
Granted, it makes ugly politics and it's noisy, but it works better IMHO than a "first-around-the-post" setup in addressing the specific issues of smaller groups or "smaller" issues of bigger groups.
first question, what has Greece got to export?
Interesting point.
Lets assume all the countries in the world were exporting nations (coz you'd need that for economic prosperity, right?), then the next question would be, WHO will they be exporting to?
Who's is going to replace Angela Merkel if she loses the elections?All other German parties are socialist at the best and communist at the worst.
ALL europeans are socialists, even Merkel.
And interestingly, it's not such a big deal as certain types of americans make it out to be. Basically, it is only ignorant, mouth breathing Merikins who bother getting all hot and sweaty about that label.
I kinda like the freedom of individual liberty
Socialism is for pussies and losers
Also socialism is, like, totally gay.
Not that there's anything wrong with it
I used to think I was old enough to remember real American freedom and liberty (if just) ... now I am starting to wonder if even my father ever really knew it.
It was but an IDEA. I doubt that it ever really existed, and if so, only for brief moments (between killing natives and being overrun by the robber-barons).
its great till you run out of cash.
Americans will never run out of cash as long as they have Bernanke.
US of A is not a socialist country. The rest of the world is composed of socialists, communists and freedom haters.
You forgot the <sarc> button.
Europe and the US stock market are lead balloons, kept afloat by rumors the Fed will save the day.
I don’t think so.
cayman islands?
http://covert.ias3.com/expose/
No, drugs cartels
The headlines are getting very bearish. Must be time for a market rally.
Go for it.
Or an Adult Swim.
At least Graham is persistent...and Tyler allows him to be...gotta give him that at least...
Ok I will play
Germans relent a little. The greeks compromise and stay in the euro. Everyone gets together and says growth at every opportunity and the can is kicked down the road another year and low energy and commodity prices give gdp a slight boost. Just enough to muddle through
That is the only counterargument i can think of. Plus germany makes sympathetic noises about eurobonds while fiscal policy is better integrated centrally
A "small" problem - you left Spain out of the equation.
Counterargument fail!
forgot, 8.6 quake in Tokyo,
spent fuel pool in fukushima
fractures,drains and catches
fire spewing radioactive waste
across N.Hemisphere.
LA quake fractures Owens Valley viaduct.
no water in Los Angeles. Gas fires spawn
forest fires.
Cleveland Browns win World Series
against Red Sox.
Dogs sleep with cats, end of world.
Cleveland Browns = football
St. Louis Browns = baseball
-- almost missed that one!
Duh, that's what makes it such an unexpected victory!
2. The Fed could step in (they might want help).
a) Food prices. May have been part of the plan before. They at least knew it would happen and don't care, collateral damage, other things are more important.
b) Political pressure. Town halls & Q/A sessions are propoganda and have had no effect. Besides, they'll do it in secret some way that Graham hasn't imagined.
c) Election. So what as long as Ron Paul doesn't get elected.
+1 ... mostly for c
That's what happens every year. Why would we expect a different result? It will be papered over.
They better have some Kevlar fibre in that paper.
Wiley E Coyote meets gravity moment is here.
A+ for sticking to it Graham.
Called it a year too early.Better early than late.
Graham will never be right, even when he seemingly finally gets lucky a la the broken clock 2x -- Graham is a bona fide winner!
== FREE REPORT == FREE REPORT == FREE REPORT == FREE REPORT == FREE REPORT == FREE ==
Did this Graham guy burn down your village or something. We get it already, you don't like him. Give it a rest.
Well of all the ZH contributors, he's the only real feather-weight.
If you're going to endlessly shill a newsletter, you need to at least provide content from past newsletters and show your metal. Reggie Middleton is a pefect example of how to do it (even though the man likes to toot his own horn to an annoying degree -- one can't help but notice, he's been consistently right and he has consistently beat the market). Reggie makes hard predictions and gives specific guidance, and when he's contrarian he's on-the-money more often than not.
Graham on the other hand just repeatedly says "The sky is falling. You need to prepare. Buy my newsletter". (Hey Graham, you can use that for your next post: It's more succinct).
Did anyone catch any actual tradable insights in the above post? Why would anyone buy an investment newsletter from a guy who has never once proven he is capable of beating the market?
Graham Summers = Captain Obvious.
I like that. "Show your metal."
Is that a hundred ounce bar in your pocket, sailor, or are you just glad to see me?
Long the Branch Rickey trade strategy.
"Why would we expect a different result?"
It would help you plan for the future, dumbass.
The future is great companies such as Apple and dare I say Facebook, even though it needs to come down a tad.
hey The Monkey is clearly being SARCASTIC!
/sarc On
¿ ¿ ¿
/sarc Off
Mini MDB!
MDB's monkey?
Touch his monkey.
Touch it.
"Europe’s banking system as a whole is at risk a la 2008. And it’s nearly four times the seize of the US banking system."
Freudian slip?