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France and Germany: One more bailout away from fiscal crisis

ilene's picture





 

France and Germany: One more bailout away from fiscal crisis

Courtesy of Russ Winter of Winter Watch at Wall Street Examiner

The debt ratios of the key players illustrates well (first chart) that virtually everyone is courting fiscal crisis. The easy way out of turning to bigger, more solvent governments for bailouts has run its course.  The chamber is empty. Government debt to GDP is running high everywhere. When a country (such as the U.S.) runs near 100% gross debt to GDP and household debt combined with huge future deficits, it’s already dead  on arrival.

Looking at the next dead-on-arrival candidates leads us to Germany and France. Although superficially it appears as if those countries are running a tight fiscal ship,  in reality they are highly exposed to enormous losses via the Troika mechanism they have set up to bailout the weak sisters of Europe. These sisters continue to come for more manna from heaven (tranches), which in turn further weakens the so-called core countries. How many more tranches can France absorb? Finally, France, with a debt to GDP of 88%, is being warned on its bogus, inflated, top-notch credit rating. The mere revelation and recognition of the Troika losses taken by France in particular as well as Germany  puts these countries into the tar pit.

The farce is played out as nations already in the tar pit, like Ireland, beg to take the extra weight placed off of them by having Irish banks take the loss, which in turn nails French and German banks. France and Germany refuse, as if refusing somehow changes the reality of the loss their banks already have. Meanwhile, the nasty austerity program set up for Greece to receive more heroin-drip tranches from the core are kicking in, resulting in a 10.9% drop in retail sales. In the meantime,  the Rube Goldberg machine that has been set up to deliver these tranches is belching and vomiting, as now Italy indicates it may no longer participate in the next outlay to Greece.  Portugal’s banks get all their funding from the ECB and, in turn, fund the Portuguese government while doing almost no lending within that country.  The word, clusterfuck comes to mind. This system is almost akin to having Germany paying war reparations to banksters in the 1920s. It can’t end well. The over-the-counter, shadow-banking, counter-party risk in all this is beyond the imagination, and well beyond the ability of the pseudo-government bailout response.

As if the tar-pit reality of dealing with Greece, Portugal and Ireland was not enough, these pseudo stronger Euro nations and their pseudo solutions will next be challenged with assisting in buying overpriced Italian debt.  Round one of the Troika’s shock-and-awe program last week, has already been completely reversed.

Italian ten year:

One-Year Chart for Italy Govt Bonds 10 Year Gross Yield (GBTPGR10:IND)

 

This will add further to the losses of the Troika.  As I have been reporting, U.S. money market funds have been withdrawing (some, much more to go) from Eurozone bank commercial paper, leaving Eurozone banks, and most importantly in Spain and Italy (and increasingly France), with a big gap in availability of short-term funding and a severe shortage of dollars. These dollars have jumped from the frying pan into the fire by fleeing into the pseudo safety U.S. Treasurys.

 

This post is reprinted from Russ’s premium service, Russ Winter’s Actionable. Click here for information.  

 


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Tue, 09/13/2011 - 23:48 | Link to Comment chinawholesaler
chinawholesaler's picture

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Thu, 08/04/2011 - 12:22 | Link to Comment steve from virginia
steve from virginia's picture

 

The EU an the rest of the (rotten) world has been putting off restructuring for far too long, now there is no choice but to restructure or the markets will do so on their own.

Today is  market's vote on various fiascoes worldwide: the Tea Party hostage taking, the lack of accountability in Washington and elsewhere, the rapaciousness of finance/IMF in the EU, the lies of the Beijing government and the lousy quality of its so-called 'product', Japan's pointless sadism, the fact that 20 million barrels per day petroleum consumption in the US produces a measly zero-percent GDP growth and 9% unemployment.

Where is the confidence in more Bernanke shell games?

Where is the confidence in Trichet or Merkel? Where is the confidence in the IMF or the City's 'high finance'?

All these countries wil have to restructure all their debts, clear their books and start over. All the countries' balance sheets are totally fucked up.

All the countries are going to have to start living within their energy means, which is the source of the finance problems. Physical economies are not productive, only create more fashionable stone heads as on Easter Island. Physical economies must be shrunk to productive levels so that finance is not necessary because finance is reaching its limits: there is no future left for finance to exploit.

Thu, 08/04/2011 - 12:20 | Link to Comment steve from virginia
steve from virginia's picture

 

The EU an the rest of the (rotten) world has been putting off restructuring for far too long, now there is no choice but to restructure or the markets will do so on their own.

Today is  market's vote on various fiascoes worldwide: the Tea Party hostage taking, the lack of accountability in Washington and elsewhere, the rapaciousness of finance/IMF in the EU, the lies of the Beijing government and the lousy quality of its so-called 'product', Japan's pointless sadism, the fact that 20 million barrels per day petroleum consumption in the US produces a measly zero-percent GDP growth and 9% unemployment.

Where is the confidence in more Bernanke shell games?

Where is the confidence in Trichet or Merkel? Where is the confidence in the IMF or the City's 'high finance'?

All these countries wil have to restructure all their debts, clear their books and start over. All the countries' balance sheets are totally fucked up.

All the countries are going to have to start living within their energy means, which is the source of the finance problems. Physical economies are not productive, only create more fashionable stone heads as on Easter Island.

Physical economies will shrink to productive levels, where finance trickery is not necessary. The fiinance 'hedge' against the excesses of consumption 'waste- based' economies has reached its limits: there is no future left for it to exploit.

Thu, 08/04/2011 - 15:05 | Link to Comment Azannoth
Azannoth's picture

I love your comparison to the Easter Island, this is exactly how the whole world looks today, people grabing what they can, consuming what they can, ignorantly worshiping their idols not even giving a damn about what kind of future the next generation will inherit.

We have all the knowledge and technology to have a sustainable world for the next 1 Million years, but no people are living in the now and their best hope is some religious Paradise after they die,

incidentaly this 'magical thinking' is prevailing across all Political and Social structures, does not matter what god/idol you worship, people seemingly resigned themselves to an Apocalypse and 'End Times'

Well I guess they get their wish, even though it's only a self fulfiling prophecy

Thu, 08/04/2011 - 11:41 | Link to Comment Azannoth
Azannoth's picture

The problem today is Everybody is flat broke(if you factor in liabities) even the BRICs are flat broke(cuz they sit on so much external debt)

If this falls down it will be Global overnight and no place to run or hide, the countries that already defaulted will be in best shape(think Iceland)

The situation today is unprecedented in history, if you think back to the Fall of Rome

Thu, 08/04/2011 - 11:14 | Link to Comment JW n FL
JW n FL's picture

I think the Jewish Lobby is being completely under appreciated by You ALL!!

as well the Banking Lobby has been working over time!

where is your sense of gratitude?

Thu, 08/04/2011 - 12:38 | Link to Comment bobzibub
bobzibub's picture

Can we please ban JW n FL just on the basis of idiocy alone?

Thu, 08/04/2011 - 14:26 | Link to Comment JW n FL
JW n FL's picture

If you would like to share some information that is to the contrary.. if you would like to source and site information that adds some counter balance I would be more than happy to read it and give it a shot!

But given the Fact that the Lobby Dollars that are Poured into the Pockets of the Washington DC Lobby Whores.

Given the Fact that the World who is mostly controlled by those same Washington DC Lobby Whores is coming off the tracks..

???

Follow the Money and the Facts.. to the Penny have been provided.. but I am open to new information! I could be miss reading or maybe someone put a comma in the wrong place and all those dollars are not as much??

Once again.. source and site some information to the contrary.

I have sourced and Sited the Money.

I have sourced and Sited the Talmud.

I dont know how much more obvious the Truth could be?

http://www.google.com/#sclient=psy&hl=en&source=hp&q=jewish+talmud+quote...

Thu, 08/04/2011 - 11:23 | Link to Comment JW n FL
JW n FL's picture


http://www.revisionisthistory.org/talmudtruth.html

Some Teachings of the Jewish Talmud

Where a Jew Should Do Evil

Moed Kattan 17a: If a Jew is tempted to do evil he should go to a city where he is not known and do the evil there.

Penalty for Disobeying Rabbis

Erubin 21b. Whosoever disobeys the rabbis deserves death and will be punished by being boiled in hot excrement in hell.

Hitting a Jew is the same as hitting God

Sanhedrin 58b. If a heathen (gentile) hits a Jew, the gentile must be killed.

O.K. to Cheat Non-Jews

Sanhedrin 57a . A Jew need not pay a gentile ("Cuthean") the wages owed him for work.

Jews Have Superior Legal Status

Baba Kamma 37b. "If an ox of an Israelite gores an ox of a Canaanite there is no liability; but if an ox of a Canaanite gores an ox of an Israelite...the payment is to be in full."

Jews May Steal from Non-Jews

Baba Mezia 24a . If a Jew finds an object lost by a gentile ("heathen") it does not have to be returned. (Affirmed also in Baba Kamma 113b). Sanhedrin 76a. God will not spare a Jew who "marries his daughter to an old man or takes a wife for his infant son or returns a lost article to a Cuthean..."

Jews May Rob and Kill Non-Jews

Sanhedrin 57a . When a Jew murders a gentile ("Cuthean"), there will be no death penalty. What a Jew steals from a gentile he may keep.

Baba Kamma 37b. The gentiles are outside the protection of the law and God has "exposed their money to Israel."

Jews May Lie to Non-Jews

Baba Kamma 113a. Jews may use lies ("subterfuges") to circumvent a Gentile.

Non-Jewish Children are Sub-Human

Yebamoth 98a. All gentile children are animals.

Abodah Zarah 36b. Gentile girls are in a state of niddah (filth) from birth.

Abodah Zarah 22a-22b . Gentiles prefer sex with cows.

 

 

Thu, 08/04/2011 - 10:09 | Link to Comment Manthong
Manthong's picture

"which in turn nails French and German banks"

Yeah, but isn't the 800 lb. gorilla in the room the US Fed, Bank and Money Market exposure to that whole Eurozone financial mess? 

Thu, 08/04/2011 - 10:57 | Link to Comment Ahmeexnal
Ahmeexnal's picture

but...but..."the euro is freegold"

Thu, 08/04/2011 - 09:26 | Link to Comment janus
janus's picture

Enchante Ilene,

feeling unappreciated?  is that son of a bitch working you to the bone?  fret not, my dear, janus is here to inspire and titilate.

i wrote you a tender, heart-felt ballad; and then commissioned these young people to make it come alive...janus can do anything but sing.  it matters not, janus has a special purpose.

http://www.youtube.com/watch?v=xGYE3U1mPCw&feature=related

crank that volume, sugar.

this is what the world is for/

making electricity/

though it may not change the world/

you are my electric girl,

Janus

Thu, 08/04/2011 - 07:40 | Link to Comment disabledvet
disabledvet's picture

silver soars and the various Neros fiddle while various Romes burn. To the extent that anything is being done what is being done is wrong. The USA and Japan are facing funding issues due the massive structural deficits and lack of growth in their respective economies. This is nothing compared to Europe which is facing liquidity issues due to soaring interest rates and inter-bank lending breaking down again. On the "good" side i guess "Europe doesn't have incredible issues" like the USA and Japan which are clearly inflating their way out of their respective catastrophes. Of course the honesty of "smashing your car into a brick wall" isn't necessary the type of "street cred" you want to have associated with your policy as well as Europe appears to be doing. The Bretton Woods system is in its final death throes. I stick with my recommendation for a draft.

Thu, 08/04/2011 - 07:23 | Link to Comment Miles Kendig
Miles Kendig's picture

Thanx ilene
Cheers

Thu, 08/04/2011 - 06:55 | Link to Comment JacksPain
JacksPain's picture

France looks a lot like Spain based on the numbers. We have run out of global gaurantors. Is the Spain Number 64% inclusive of a debt package that is classified as equity? Seems low to me

JacksPain
http://www.networthprotect.com

Thu, 08/04/2011 - 06:47 | Link to Comment AngryGerman
AngryGerman's picture

We'll pick up the bill, thx for nth

Thu, 08/04/2011 - 07:11 | Link to Comment BigDuke6
BigDuke6's picture

What you germans need is a leader to rise up....

Thu, 08/04/2011 - 07:21 | Link to Comment PY-129-20
PY-129-20's picture

Yeah, when I was the last time in Munich I saw this young charismatic man - Anton Hotler - I think he could get us out of this crisis very fast. /sarc

But it is too late. It's quite ironic that the people that claimed to save Europe and the political future of Europe, that they have just sowed the seed for it's demise and future misery.

Thu, 08/04/2011 - 07:48 | Link to Comment Uncle Remus
Uncle Remus's picture

I hear Arnold 'The Reichinator' Schwarzenegger might be available.

Thu, 08/04/2011 - 07:33 | Link to Comment BigDuke6
BigDuke6's picture

i said at christmas on zh that the best stuff i read on here was from the europeans especially the germans... i especially was intrigued at what they felt they had been done to their country deliberately following the war - to flood europe with uneducated scumbags to make sure they would never rise again

do you get shit like this in germany?   its a weekly occurrence in the uk and totally ignored by the trendy leftys

http://www.dailymail.co.uk/news/article-2022255/Judges-fury-sobbing-teen...

 

Thu, 08/04/2011 - 02:40 | Link to Comment Peak Everything
Peak Everything's picture

Carmen M. Reinhart and Kenneth S. Rogoff in their excellent book “This Time Is Different: Eight Centuries of Financial Folly” anaylzed several hundred years of financial history and concluded that when debt to GDP exceeds 90% there is no turning back from a currency crisis.

Thu, 08/04/2011 - 07:04 | Link to Comment Ghordius
Ghordius's picture

The book is excellent, yes. About "when debt to GDP exceeds 90% there is no turning back from a currency crisis" you have to take this with a grain of salt. Because it does tell you that you are "going to die", but it does not tell you WHEN.

Take Italy for example, Public Debt exeeded 90% so around the late Sixties. The Currency Crisis that followed was a "standard super-inflation" - and then "peace" for a while.

There are other major factors you have to keep one eye on:

1. The speed of the downfall - i.e. the Budget Deficit

2. The combined level of debt, both public and private. This is the key for any state intervention, since if you want to save the indebted ship-of-state you have to tax - and you can't tax properly if people already owe everything to the banks.

3. The maturity of the debt. There, the UK is the leader, by having since over one century the habit of contracting a lot of 30y bonds.

In this light, no, I don't agree - it tells you you are mortal, it does not tell you when you are going do die...

Thu, 08/04/2011 - 09:03 | Link to Comment YHC-FTSE
YHC-FTSE's picture

I agree with your views about the ambiguous nature of the timeline to a crisis, but things are a little different to the past when it comes to actionable knowledge these days.

What is telling about this century in comparison to others is the speed and persistence of information about the markets (As well as everything else). Governments can no longer count on public amnesia and ignorance, although they do their best to put on msm-Berlusconi-smiles to assure everyone that things are not as bad as they appear, there are far too many sources of real data for the powers to flim flam their way through each crises.

The most powerful deception of all is self-deception, and as you can see from the voices of discontent all around the world, it is becoming more and more difficult for governments to create fake realities that make people deceive themselves about reality: The realities of being complacent slaves and pawns in a giant game of wealth creation for the already wealthy, while racking up unpayable debts in a culture of entitlement, and polarizing sections of society to blame each other. 

So yes you're likely to be right - it could take awhile for reality to pop out of its box to smack us all in the head as it did in the past, but don't count on it. The fall of the first domino could come a lot earlier. Yen, $, € - they are all good candidates.

Thu, 08/04/2011 - 09:33 | Link to Comment RockyRacoon
RockyRacoon's picture

Kinda like prostate cancer, eh?  You can die of old age before the cancer kills ya.

Rosy outlooks just brighten my day!

Mixing metaphors a bit, that's what makes wars so attractive.   The man behind the curtain, as referenced above, can stay hidden behind the cloak of a mushroom cloud.

(BTW:  I see a heightened use of "alluded to" in today's world, while "referred to" or "mentioned" would be more appropriate.  An allusion is an indirect reference.   If someone pointedly makes a statement, he has alluded to nothing.   Just sayin'.)

Thu, 08/04/2011 - 04:11 | Link to Comment StychoKiller
StychoKiller's picture

Guess it's time to rip down the curtain and see just what kind of pr0n the men behind it are engaged in...

Thu, 08/04/2011 - 06:57 | Link to Comment falak pema
falak pema's picture

the curtain ripping exercise :

First we ripped the Iron curtain. Now we have a can of worms in the ex-Soviet Union bloc. It was seen as end of History.

Then we ripped the East German/West German divide, I DM=1 RM. It was acclaimed at that time.

Then we had Mastricht. It said never go beyond 60% debt and 3% deficit. In concrete.

Every EU country breaks one of these rules.

So tearing down the curtain doesn't seem to worK . It's not just the curtain that has to come down to show us the can of worms. It's also the MINDSET and the PARADIGM that has to change to implement the deep structural reforms required, in finance, in energy, in consumption, in WAY OF LIFE.

Please tell your wife!

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