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Comments from Eurocalypse, the Resident BoomBustBlog Credit Trading Guru...
These are comments from one of the traders that frequently contribute to BoomBustBlog. Enjoy!
Comments from Eurocalypse, the resident BoomBustBlog credit trading guru...
Update
of the updated: Trendline broken in French bonds: today again Italy
coming in but France is still moving out… hardly surprising. Just as i said... and stocks i think will break out up, even if that seems contradictory.
Update:
I wrote this this morning. Markets react really fast. Huge move in
French yields today. See charts on Mish blog. The declining trend line
broken now 10yr 3.47. 3.75 or even 4.00 in a matter of few days. 4.80 is
where France starts to spiral out like Italy, Greece, etc... Now the
ECB monetizes massively or its massive defaults. Time is running out. My
2 cent guess is EFSF won’t even have time to do anything significant
before the ECB steps in massively...
The
most important development is that the Eurocalypse is in full panic
mode and Italy blowing up. The inferno machine is now running full speed
and there is little way back for it to now. When Italian bonds yields
rise 70bp a day, roughly getting hit 4% in price, worse than stock
indexes, its game over. VAR is too high, all traders, portfolio managers
MUST exit, ECB is the only real bid in size (for how long ?); and
sooner or later Italy has to show the white flag and ask for a bailout,
but we all already know how big the problem is… So what can happen from
here short term and long term?
Looking at the short term dynamics,
the Run must be in full mode. Simply put, confidence is gone, basta.
Everybody is trying to take its chips off the table, selling brings in
more selling, no more bids means auctions failing or getting filled at
higher and higher yields. France will inevitably get hit.
What are
the levels to watch to see how close we are from the end? I think the
bond market is again the thing to watch. Well, 3.30 on 10Y French bond
would break an intermediate downtrend line. As bunds are still in a bull
market, that would signal the total end of French banks seen as
fly-to-quality bonds, though they still keep some of that status with
yields still in the low 3% handle. Then we’d go rather quickly to 3.75%
or even 4%. Breaking 4.8% the highs of 2008 means total chaos and
signals for good the bailout/default scenario for French bonds.
So we still have some time (but probably not much).
Italy is too big to fail, the only possible plan at this stage, which
would be quick enough to implement is for ECB to adopt heavy "QE" and
buy bonds seriously, I mean 2x, 5x or 10x more than they do. Fast
printing… Pure monetization of debt… And all the problems that might go
with it. The problem? The Germans don’t seem to want to agree on that.
Neither do the French.
Think of what the impact could be to European financial stocks if that happens, though. Very bullish, at least potentially.
The EFSF and adding more debt to sustain insolvent borrowers never worked and won’t work.
Reggie
here: Let me remind everybody that the EFSF is supposed to be a
trillion euro vehicle, but its first 4 billion euro offering #FAILED!,
followed by a barely completed 3 billion euro offering at sweeter terms.
Okay, 3 million euro down, and just 997 million euro to go before we
find out that this structure was a total #FAIL to begin with… Remember
the question I posed several months ago? What Happens When That Juggler Gets Clumsy? - BoomBustBlog
The
EFSF can’t even borrow decent amounts on the market, if the ECB would
be the only one to buy it; why not simply buy Italian bonds instead?
Much simpler and not adding more debt to the system (but adding more
phony "money").
I think your blog (BoomBustBlog) and ZH so
forcefully and perfectly demonstrate that the whole system is insolvent
with just minimal haircuts from sovereigns. Because banks are too
leveraged, and because (gov’t. but also private) debt in the system is
unsustainable. All the evidence anyone needs is right here, and you’ve
demonstrated as well that runs are quite possible, and the rational
things for investors to do is to try to escape the chaos by removing
their money from the weakest banks and countries, but that poses a
prisoner’s dilemma. If everyone does the same, then we’re sure it will
happen! The weakest is finished, but then, like in 10 Little Indians or
any “B” rated “slasher” movie, the 2nd weakest is soon to be the next
victim, and so on. Italy or banks are not (much) more (really or
potentially) insolvent today than a few months or years ago. There is no
magical number like 100%, 120% debt to GDP ratio that makes things
SUDDENLY unworkable… It’s the realization of all this by investors,
individuals and bankers alike.
Actually I am must more pessimistic
than you, Reg. I’ve been thinking for a while, USSR 1989 or better put,
Capitalism 2012. In USSR in 1988 nobody had a real clue that everything
would be over in less than a year. I think it’s the same here. People
don’t disappear, all factories don’t close, but a massive change and
chaotic transition occurs. I expect the same in Europe, with some
revolution or coups in some countries, big institutional changes,
massive defaults and bankruptcies in both banks and (the leveraged)
corporate sector, returning to some state-nations, or forming of several
blocs, but EMU won’t exist as it is even in 1 year (most realistic
analysts say 5 years..). As you demonstrated, I think it goes further
than EMU and we can include UK, US and perhaps even
Japan; all the western world with it, with a short 1-2 year lag at the
very most. I’m not forecasting (nor hoping for) war, but that’s become
my main scenario.
However, saying everything’s fucked up, it’s
the bankster’s faults etc., misses the point and isn’t really
constructive. That’s what I’d like people to discuss more on blogs. For
example what’s the good of saying gold will go to 5000$ and making fun
of fiat money? Who will it help ? What will it fix? If tomorrow gold was
5000$ would the crisis be over? It will only help those who have gold,
or those who are buying now, taking money away from the fools who sell.
The only thing about gold and fixed (no) money supply system is that
there SHOULD be some discipline, but in a gold system, one who owns GOLD
initially is squeezing the money supply, and manipulates it in its
favour, accumulating in time more and more of it, to the expense of
other nations/people and dominating them. No wonder that just the TALK
of returning to some gold system entices central banks to accumulate
more than its neighbour just in case this happens. The bubble stage is
only starting there.
The current monetary system was built on
the assumption that gov’t debt was a riskless asset, debt will be always
repaid, and more importantly that debt always could be repaid with more
debt. Truth be told, in nations where the gov’t can tax
or print the money as it wants, indeed there is no absolute need for it
to default (but it could strategically be a good idea if the lenders are
mostly foreigners for example; but it could just heavily tax foreign
holders or default on them only which is the same). So defaulting by
printing/ inflation was always possible.
So its only too natural that the answer to Is The Entire Global Banking Industry Carrying Naked, Unhedged "Risk Free" Sovereign Debt Yielding XXX%?
My quick answer is NATURALLY !!!
Any extra Euro of deposit in a bank gets marginally invested in those
gov’t bonds, I’d say it’s almost the analog of the law of conservation
of Energy in Physics as gov’t debt is the biggest and most liquid debt
instruments.
If the banks didn’t then the states would never been able to borrow money in the first place.
The
reason??? Because if most people don’t know that their pension funds
and life insurance are invested in bonds, they ignore even more that
their deposits are invested indirectly in those very same instruments,
even though most would say “No!” if they had the choice !!!
So governments put in a lot of regulations to help this situation and
extend the numbers of possible buyers of (this) debt, ex. risk-free
weightings for banks, tax-free for this or that, allowing derivatives,
etc...
Now with regulation asking for more capital, and volatility
exploding, there is no more capital to buy debt, gov’t or corporate, any
more.
So, what is the proposed solution to that ?
Recapitalizing banks with borrowed gov’t money so they can buy gov’t
debt ? That seems stretched and very inefficient to me and adding more
debt to debt makes it worse, we all know that.
I would also add
that an indirect effect of recapitalizing banks, and ever-adding debt
is to make banks even bigger and more cannibalizing. After all, banks
revenues should be proportional to their deposits and to existing debt.
When this is the only thing growing faster than anything else, it is
hardly surprising that banks profits (becoming acknowledged paper and
virtual profits as opposed to real losses) and bankster’s revenues and
bonuses are going higher and higher.
If people don’t want
bankers to be rich, don’t bank! Move your money out of your bank. If you
think footballers or rock stars are too well paid, don’t watch football
or buy rock records! So basically the drug addict is complaining that
the drug dealer is too rich.
My view is that gold or something else won’t solve anything. If not, then what would?
One of the ZH articles that I really liked, but must search to find it,
was a chart of existing debt across countries, with who owes what to
who, and how looking at NET debt, how this could be solved.
The real meaning of this debt crisis is:
- the market is not working anymore because of too much debt and due to
current debt dynamics and current prices of goods and FX, imbalances
keep on growing to an unsustainable state.
Reggie
here: and the constant manipulation by politicians and central bankers
that have all but destroyed the concept of true, market-based price
discovery. See Do Black Swans Really Matter? Not As Much as the Circle of Life.
I
have always been of the contention that the 2008 market crash was cut
short by the global machinations of a cadre of central bankers intent on
somehow rewriting the rules of economics, investment physics and global
finance. They became the buyers of last resort, then consequently the
buyers of only resort while at the same time flooding the world with
liquidity and guarantees. These central bankers and the countries they
allegedly strive to serve took on the debt and nigh worthless assets of
the private sector who threw prudence through the window during the
"Peak" phase of the circle of economic life, and engaged in rampant
speculation. Click to enlarge to print quality...
The result of this "Great Global Macro Experiment" is a market crash that never completed. BoomBustBlog subscribers should reference 
The Inevitability of Another Bank Crisis while non-subscribers should see Is Another Banking Crisis Inevitable? as well as The True Cause Of The 2008 Market Crash Looks Like Its About To Rear Its Ugly Head Again, With A Vengeance.
- Financial assets are not worth what we think they are. One should include deposits in the financial assets category.
The only way is for everybody to acknowledge that. Now Italian bonds
are trading 87 of par, it won’t help at all to recapitalize banks with
public money for the 13 missing points as the gov’t will need to borrow
this money which those banks will buy. Nonsense!
So it’s either
better to assume they will be reimbursed to par with direct printing by
the ECB, and magically, the need to recapitalize banks disappears
(true, there is private debt to account for as well) or to default.
When defaulting, well shareholders will be wiped out and bank debt
holders will be wiped out. If we keep the analysis to banks and gov’ts
only, we see that interbank debt doesn’t hurt anymore if we let every
bank fail!
The ZH/Mish camp or others claim that banks should
fail. This omits to say that yes, probably billionaires or rich
investors who necessarily have big assets will lose a lot if that
happens, but Mr. Smith’s pensions, life insurance plans are wiped out
too, and his deposits as well.
Owners of banks are not a group of mysterious people with big cigars living like Dr. No in some far islands. It’s mostly us.
Instead of disorderly defaults, if we really want the rich to pay for
the mess, the best is to tax assets heavily, not to let the market
default disorderly. I think also people up there should really think
about closing banks and a debt jubilee plan, thinking how much people
will lose and in what proportion, because now it’s all about that. The
loss is in front of our eyes. The more we delay the situation, the more
money will try to run out of the system.
I don’t think there is
a unique solution. It involves a mix of defaults, restructuring ,
heavier taxes not only on revenues but on assets, austerity from the
gov’t, whatever works; and bigger focus on real production and wealth -
making stuff, developing technologies, solving real problems as opposed
to financial problems. Financial problems should be among the easiest to
solve, it’s just math and 0s on computers, after all !
Also
just a remark, It’s just an aberration a lot of people become homeless
and poor in the US or Spain for example with all the overbuilding !
There must be a lot of empty homes, even the poorest should/could have a
roof! If nationwide values of houses are divided by 2, will that make
people poorer? The contribution to GDP of house building and anything
related to it would be divided by 2 but who cares? GDP is not a good,
nor anywhere near perfect, indicator of wealth creation. The stupid
focus on GDP is also one of the many explanations why we’re having so
many bad economic policies everywhere in the world. People would have
more money to spend...
The 2 major problems, house prices
(because mortgages account for so much debt), and gov’t spending
(because gov’t spends more than it takes in) and thus assets related to
those, need to be solved, and everything I believe can jump start again,
better than ever before, without the need for revolutions, conflicts...
Other than that, I have to mention, that tomorrow is 11-11-11. only
once every 100 years if you think of it. If you believe in numerology ( i
think it DOES affect markets, as well as TECHNICAL ANALYSIS that some
people think is VOODOO), a trader friend of mine says there is a very
rare BUYING signal in Italian bonds, coming from BOTH weekly and daily
DEMARK sequentials. Not the end of the story, but a return
to 6.25% for example would NOT change the major trend, not even a
return to 5.75%. Shorts beware.
Also I’m still bearish on the EUR as
I’ve been for a while, but stock markets I believe are heavy but
trading like the markets want to be long. The 1220-1240 breakout zone on
SP is holding for the moment, and even on European indexes, were not
seeing new lows despite all the negative headlines. I believe stocks are
technically bullish and for longer than many people think, because
investors fear missing any rally (look how in October many HFs
underperformed), and because there is a strong probability of ECB in
full QE mode, monetizing heavily gov’t debt.
I’m pessimistic, I
think debt monetization is not a good idea, if we go this way, I’d
prefer to see pure monetary printing (equivalent to CB buying a
perpetual gov’t debt with 0% or little interest) as at least accounting
for that is simpler and doesn’t add debt, but I think it’s a real
possibility that cannot be discounted. Furthermore if monetization is
not accompanied by real reforms, it’s just can kicking and the problems
will get much worse later.
the most
important developments is the Eurocalypse in full panic mode and Italy
blowing up. The inferno machine is now running full speed and there is
little way back now for it to stop. When Italian bonds yields rise 70bp a
day, roughly getting hit 4% in price, worse than stock indexes, its
game over. VAR is too high, all traders, portfolio managers MUST exit,
ECB is the only real bid in size (for how long ?); and sooner or later
Italy has to show the white flag and ask for a bailout, but we know how
big the problem is so what can happen from here short term and long term
?
Well, looking at the short term dynamics, the Run must be in
full mode. simply put the confidence is gone, basta. everybody is
trying to take its chips off the table, selling brings in more selling,
no more bids means auctions failing or getting filled at higher and
higher yields. France will inevitably get hit.
what are the
levels to watch to see how close we are from the end ? i think the bond
market is again the thing to watch. well 3.30 on 10Y french bond would
break an intermediate downtrend line. as bunds are still in a bull
market, that w3ould signal the total end of french bank seen as
fly-to-quality bonds, though they still keep some of that status with
yields still in the low 3% handle. then wed go rather quickly to 3.75%
or even 4%.
breaking 4.8% the highs of 2008 means total chaos and signals for good the bailout/default scenario French bonds.
so we still have some time (but probably not much)
Italy is too big to fail, the only possible plan at this stage, which
would be quick enough to implement is for ECB to adopt heavy "QE" and
buy bonds seriously, i mean 2x, 5x or 10x more than they do. fast
printing. pure monetization of debt; and all the problems that might go
with it. problem, germans do seem they want to agree on that. neither do
French.
think of what the impact could be to European financial stocks if that happens. very bullish potentially.
EFSF and adding more debt to sustain insolvent borrowers never worked
and wont work. the EFSF cant even borrow decent amounts on the market,
if the ECB would be the only one to buy it, why simply not buy Italian
bond instead ? much simpler and not adding more debt to the system (but
adding more phony "money")
I think your blog and ZH and so
forcefully and perfectly demonstrate that the whole system is insolvent
with minimal haircuts from sovereigns. because banks are too leveraged,
and because (govt but also private) debt in the system is too much. The
whole evidence is here, and youve demonstrated as well that runs are
possible, and the rational things for investors to do to try to escape
for the chaos by removing their money from the weakest banks and
countries, but thats a prisoner dilemna here. if everyone does the same,
then were sure it will happen ! the weakest is finished, but then, like
in 10 little indians or any slasher movie, the 2nd weakest is soon the
next victim and so on. Italy or banks are not (much)more (really or
potentially) insolvent today than a few months or years ago, there is no
magical number like 100%, 120% debt to gdp ratio that makes things
SUDDENLY unworkable, its the realization of all this by investors,
individuals, bankers alike.
Actually i am must more pessimistic
than you. Ive been thinking for a while USSR 1989, Capitalism 2012. In
USSR in 1988 nobody had a real clue that everything would be over in
less than 1 year later. i think its the same here. People dont
disappear, all factories dont close, but a massive change and chaotic
transition occurs. I expect the same in Europe, with some revolution or
coups in some countries, big institutional changes, massive defaults and
bankruptcies in both banks and (the leveraged) corporate sector,
returning to some state-nations, or forming of several blocs, but EMU
wont exist as it is even in 1 year (most realistic analysts say 5
years..). but as you demonstrated, i think it goes further than EMU and
we can include UK, US and perhaps even Japan, all the
western world with it, with a short 1-2 year lag at the very most. Im
not forecasting (neither hoping) war as well. but thats become my main
scenario.
However saying everythings fucked up, its the
banksters faults etc... misses the point and isnt really constructive.
and thats what id like people to discuss more on blogs. For example
whats good of saying gold will go to 5000$ and making fun of fiat money ?
who will it help ? what will it fix ? if tomorrow gold was 5000$ would
the crisis be over ? it will only help those who have gold, or those who
are buying now, taking money away from the fools who sell.
the
only thing about gold and fixed (no) money supply system, is that there
SHOULD be some discipline, but in a gold system, one who owns GOLD
initially is squeezing the money supply, and manipulates it in its
favour, accumulating in time more and more of it, to the expense of
other nations/people and dominating them. no wonder that just the TALK
of returning to some gold system entices central banks to accumulate
more than its neighbour just in case this happens. the bubble stage is
only starting there.
The current monetary system was built on
the assumption govt debt was a riskless asset, debt always repaid, and
more importantly that debt always could be repaid with more debt.
and in nations where the govt can tax or print the money as it wants,
indeed there is no absolute need for it to default (but it could
strategically be a good idea if the lenders are mostly foreigners for
example; but it could just heavily tax foreign holders or default on
them only which is the same). So defaulting by printing/ inflation was
always possible.
so its only too natural that the answer to
Is The Entire Global Banking Industry Carrying Naked, Unhedged "Risk Free" Sovereign Debt Yielding XXX%?
my quick answer is NATURALLY !!!
any extra Euro of deposit in a bank gets marginally invested in those
govt bonds, Id say its almost the analog of the law of conservation of
Energy in Physics as govt debt is the biggest and most liquid debt
instruments.
If the banks didnt then the states would never
been able to borrow money in the first place. because if most people
dont know that their pension funds, their life insurance are invested in
bonds, they ignore even more that their deposits are invested
indirectly in those even most would say no if they had the choice !!!
so govts put in a lot of regulations to help this situation and extend
the numbers of possible buyers of (this) debt, risk-free weightings for
banks, tax-free for this or that, allowing derivatives etc...
Now
with regulation asking for more capital, and volatility exploding, there
is no more capital to buy debt, govt or corporate any more.
and what is the proposed solution to that ? recapitalizing banks with
borrowed govt money so they can buy govt debt ? that seems stretched and
very unefficient to me and adding more debt to debt makes it worse, we
all know that.
I would also add that an indirect effect of
recapitalizing banks, and ever-adding debt is to make banks even bigger
and cannibalizing. After all, banks revenues should be proportional to
their deposits and to existing debt. When this is the only thing growing
faster than anything else, it is hardly surprising that banks profits
(becoming acknowledged paper and virtual profits as opposed to real
losses) and banksters revenues and bonuses and going higher and higher.
If people dont want bankers to be rich, dont bank ! move your money out
of your bank. if you think footballers or rock stars are too well paid,
dont watch football or dont listen to them ! so basically the drug
addict is complaining that the drug dealer is too rich.
So my view is that gold or something else wont solve anything, what would ?
One of ZH articles that i really liked, but i must search to find it,
was a chart of existing debt across countries, with who owes to who, and
how looking at NET debt, how could this be solved.
The real meaning of this debt crisis is:
- the market is not working anymore because of too much debt and due to
current debt dynamics and current prices of goods and FX, imbalances
keep on growing to an unsustainable state.
- financial assets are not worth what we think they are. one should include deposits in the financial assets category.
the only way is for everybody to acknowledge that. Now Italian bonds
are trading 87 of par, it wont help at all to recapitalize banks with
public money for the 13 missing as the govt will need to borrow this
money which those banks will buy. nonsense.
so its either
better to assume they will be reimbursed to par with direct printing by
the ECB, and magically, the need to recapitalize banks disappear (true
there is private debt to account for as well) or to default.
When
defaulting, well shareholders wiped out, bank debt holders wiped out.
but if we keep the analysis to banks and govts only, we see that
interbank debt doesnt hurt anymore if we let every bank fail !
The ZH Mish or others claim that banks should fail, omits to say that
yes, probably billionaires or rich investors who necessarily have big
assets will lose a lot if that happens, but Mr Smith pensions, life
insurance plans are wiped out too, and his deposits as well.
Owners of banks are not a group of mysterious people with big cigars living like Dr No in some far islands. Its mostly us.
Instead of disorderly defaults, if we really want the rich to pay for
the mess, the best is to tax heavily assets, not to let the market
default disorderly. I think also people up there should really think
about closing banks and a debt jubilee plan, thinking how much people
will lose and in what proportion, because now its all about that. The
loss is in front of our eyes. the more we delay the situation, the more
money will try to run out of the system.
I dont think there is a
unique solution. it involves a mix of defaults, restructuring ,
heavier taxes not only on revenues but on assets, austerity from the
govt, whatever works; and bigger focus on real production and wealth,
making stuff, developing technologies, solving real problems as opposed
to financial problems. financial problems should be among the easiest to
solve, its just maths and 0s on computers after all !
Also
just a remark, its just an aberration a lot of people become homeless
and poor in the US or Spain for example with all the overbuilding !
there must be a lot of empty homes, even the poorest should/could have a
roof ! if nationwide values of houses are divided by 2, will that make
people poorer ? contribution to GDP of house building and anything
related to it would be divided by 2 but who cares ? GDP is not a good
and anywhere perfect indicator of wealth creation. the stupid focus on
gdp is also one of the many explanations why were having so bad economic
policies everywhere in the world. people would have more money to
spend...
the 2 major problems, house prices (because mortgages
account for so much debt), and govt spending (because govt spends more
than it takes in) and thus assets related to those, need to be solved,
and everything I believe can jump start again, better than ever before,
without the need for revolutions, conflicts...
other than that,
I have to mention, that tomorrow is 11-11-11. only once every 100 years
if you think of it. If you believe in numerology ( i think it DOES
affect markets, as well as TECHNICAL ANALYSIS that some people think is
VOODOO), a trader friend of mine says there is a very rare BUYING signal
in Italian bonds, coming from BOTH weekly and daily DEMARK sequentials.
not the end of the story, but a return to 6.25% for example would NOT
change the major trend, not even a return to 5.75%. shorts beware.
also im still bearish on the EUR as ive been for a while, but stock
markets I believe are heavy but trading like the markets want to be
long. the 1220-1240 breakout zone on SP is holding for the moment, and
even on European indexes, were not seeing new lows despite all the
negative headlines. i believe stocks are technically bullish and for
longer than many people think, because investors fear missing any rally
(look how in October many HFs underperformed), and because there is a
strong probability of ECB in full QE mode, monetizing heavily govt debt.
Im pessimistic, i think debt monetization is not a good idea, if we go
this way, id prefer to see pure monetary printing (equivalent to CB
buying a perpetual govt debt with 0% or little interest) as at least
accounting for that is simpler and doesnt add debt. but i think its a
real possibility that cannot be discounted. Furthermore if monetization
is not accompanied by real reforms, its just can kicking and the
problems will get much worse later.
- advertisements -
Also
just a remark, its just an aberration a lot of people become homeless
and poor in the US or Spain for example with all the overbuilding !
there must be a lot of empty homes, even the poorest should/could have a
roof<<<<
i am going to tell you something about this. the sons of bitches will tear the houses down before they ever allow any poor people to live in them. for all they care, these people can go live under a bridge somewhere. help from any builder or big company like this will not be coming anytime soon.
The current monetary system was built on
the assumption that gov’t debt was a riskless asset, debt will be always
repaid, and more importantly that debt always could be repaid with more
debt. <<<<<
sometimes i go have lunch with some old people. they are not paying any attention to what is going on. i ask the question. what would happen if the social security checks stop coming? the question is met with consternation and silence. it is the unthinkable , at least to them. the failure of government finanical systems to them is unthinkable and impossible. but i tell them. what if? what if? they simply do not understand how much debt is floating around out there and that we are at the end of the road in so many ways.
the guy who wrote this piece hasnt got the same punchey style that reggie has. i first i thought reggie had given in to the moronic complaints about his bombastic style , but then i noticed the bit in the intro about it being a comment sent in by a blog reader, panic over
reggie dont you go changing, you are cool(but cool is not a hip thing to say no more) and if anyone has the right to be an egocentric git, its you. besides its fun
It's Reggie, Reggie, Reggie at the top of th ZH home page right now.
JACKPOT!
Why use one paragraph when 30 will do? I guess I'm a bit of a simpleton but, for me, it all comes down to two choices available to TPTB: inflate or default. I suppose a newsletter/article that does not make.
Today's Automatic Earth is a good read.
http://theautomaticearth.blogspot.com/2011/11/november-14-2011-growth-paradigm-has.html
Snipped from the article:
Europe needs to grow a pair. It needs to refuse to bail out financial institutions that can no longer stand on their own two feet without bail outs to prop them up. It then needs to demand full discovery of any and all assets in the bank vaults. It can offer temporary support to those banks that remain viable as going concerns once all their paper has been marked to market, insure any and all deposits from citizens and businesses, and subsequently close the doors on those banks that are going concerns no more.
Washington and Wall Street will shout fire, murder and brimstone, but you know what? Let them take care of their own for once. The notion that -future- European taxpayer revenue must be put at risk to save Wall Street banks needs to be put out by the curb. It doesn't work, not for the European taxpayer.
Both Wall Street and European banks that hold too much American and European private debt, sovereign debt and/or derivatives, need to be purged from the system. Europe can make a start, and if America knows what's good for it, it will follow suit. If not, tough luck.
It is so tiring seeing all of these 'solutions' which demand that abstract collectives suddenly turn into thinking, feeling organisms capable of action.
The idea that Europe needs to DO anything is asinine and wholly nonsensical.
It's nothing but a hive-mind mentality that allows one person (or a tiny minority) to adopt the persona of millions.
The only thing that "Europe" needs to do is to stop masquerading as a living entity. Then perhaps, will the individuals living under the guise awaken and start being responsible for their own lives.
Simply put, states don't exist. They are abstractions which allow the powerful control over the weak.
Let the world go with a debt Jubilee and a new Congress with term limits.
No one goes below zero net worth no matter how high he is levered. Start over. If you are living in a house with a mortgage in your name, you own it. The local governments can sell unocupied, foreclosed homes for tax revenue. Everybody starts over with a clean slate, no union contracts, all government agencies are ended. New or renewed government agencies are set up after new congressional elections with term limits. All new or renewed government agencies have the funding established. The government budgets are balanced.
Ummmmmm, all the same. Can I have my pension now please?
Reggie tries hard, buy he still doesn't understand that central banks co-operate to set exchange rates and prop up other banks. His fantasy of a Euro crash is not going to happen. There is what you think should happen based on the fundamentals, and then there are the central banks changing the fundamentals. The only bet, if he believes any of what he says, is long hard assets and PMs.
I thought there were three places to go. The third being hard assets.
I've been getting this wrong - since money can't or won't flow to bonds it goes where its fairly easy to park a lot of cash?
So stock rise on this type of action. There are two places to go - bonds or stocks. If bonds are risky - riskier money flows to stocks?