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"Time Often Heals What Reason Cannot"

Tyler Durden's picture





 

From Mark Grant, author of "Out of the Box"

Quod ratio non quit saepe sanavit mora

Time often heals what reason cannot
 
It was three years ago, yesterday, when I first said that Greece would go bankrupt. The yield on the Greek ten year at the time was 4.38%.

What a long and wild ride it has been since then and the forks in the road have been marked with turmoil, disdain and an ever increasing amount of debt for this small nation. The solution for each and every problem has been more money appended by more taxes and more austerity measures and the Greeks keep lining up and will keep lining up until the cash dries up and then other conclusions will be found. You may think it is a never ending story and that the current act will go on forever but that would not be my bet nor do I think it is a likely conclusion. Whether it is the German Parliament or the IMF or some other nation in Europe under the guise of nationalism and prudence who has had enough and rightly says, “That is enough;” there is an ultimate endpoint to this game.

I think it will come during 2013 as the pre-eminent ward of the State gets shunted or, come spring, when the people are back in the Streets, the protests are peaceful no longer. The sovereign debt has been a great vehicle for trading as violent moves were marked by political expediency but the winning hands of last year may not play out quite so well in this year and the Barbarians have not yet left the gate.
 
The Europeans say the crisis is mostly over but given the hard numbers I say the worst of the crisis has not yet begun.
 
The financial conditions of Greece, Portugal and Spain are not better but worse than they were one year ago and the actual debt to GDP ratios are higher. All that stands between these countries and the guillotine is a promise by Mr. Draghi that will likely be put to the test during the next twelve months. When the white knights are talking backwards and the dormouse is threatened with keeping his head it is unwise to keep playing Croquet!
 
Municipal Bonds
 
The Federal tax exempt status of these securities goes back to the Constitution under the various provisions that separate the powers of the Federal government from the States. Much is to be found in the “Commerce Clause” but that is not the only repository of the separation of powers. The 1895 Supreme Court case, Pollock v. Farmers' Loan & Trust Co., is the basis for much of the law since then and while the 1988 case South Carolina v. Baker seemed to open the door for Congress to tax these securities if they so desired the outcome is hardly clear. As much is bandied about in the Press indicating that the laws could be changed at will; this is not the quite the case nor has it been tested. Any attempt by Congress to tax Municipal Bonds would undoubtedly be met by a hue and cry from many State governments and the legal challenges would take a good length of time so that the outcome of such a political move is not only unclear but the time that it would take to effectuate it, if possible, is years out into the future. This is why I feel that the ownership of Municipals continues to be relatively safe and that the definition of tax-exempt versus Federally taxable does not rest with Congress alone. There is a lot of legal minutia that applies to the purpose and function of Municipal Bonds and quirks abound but when it comes down to General Obligation Bonds and Revenue Bonds for general public use then to tax them would require an overhaul of the Securities Acts of 1933 and 1934 which would be problematic enough in itself. I do not say that the rabid and carnivorous in Washington won’t try but I do say that legislative changes would be formidable and that the Supreme Court would have the last word on the subject. Consequently any fears can be somewhat postponed due to the length of the process if attempted. 

The old paradox: Can God make a stone so heavy that he can´t lift it?”

 

            -Stephen Hawking

 


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Mon, 01/14/2013 - 10:18 | Link to Comment GetZeeGold
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Just hope it doesn't take too long.....we might not survive

Mon, 01/14/2013 - 10:19 | Link to Comment CH1
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It has already taken too long. Therefore, there are factors involved that we either do not know or haven't properly accounted for.

Mon, 01/14/2013 - 10:25 | Link to Comment toady
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I sometimes wonder if waiting forever isn't a good strategy. I mean, the debt must be jubileed or forgiven at some point, so who cares if its a quadrillion or a quintillion or infinity?

Mon, 01/14/2013 - 10:49 | Link to Comment SheepDog-One
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The books are only re-written after world war and millions die, thats all.

Mon, 01/14/2013 - 11:59 | Link to Comment gtb
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Would your opinion change if you were the one "forgiving" the debt?

Mon, 01/14/2013 - 14:51 | Link to Comment CPL
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What good is having all the cash IOU's in the world if there's nowhere worthwhile spending it.  The meaning of capital loses it's primary meaning and influence at that point.

Mon, 01/14/2013 - 15:16 | Link to Comment AldousHuxley
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capital tend to accumulate in the hands of psychopaths who love making others miserable for fun and that's the influence of capital.....power to control others' happiness

Mon, 01/14/2013 - 10:23 | Link to Comment hooligan2009
Mon, 01/14/2013 - 10:26 | Link to Comment wisefool
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On January 22nd. Timmothy Geithner will be assigned ambassador of greece such that he can explain to them the importance of proper taxation in a modern Keynsian economy.

Mon, 01/14/2013 - 12:01 | Link to Comment rqb1
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better yet Germany

Mon, 01/14/2013 - 10:30 | Link to Comment yogibear
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"The Europeans say the crisis is mostly over"

For Krugman and Bernanke the solution is simple, print.

Mon, 01/14/2013 - 15:21 | Link to Comment AldousHuxley
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for Spitzer the solution is simply.....fuck

Mon, 01/14/2013 - 10:34 | Link to Comment orangegeek
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"...The Europeans say the crisis is mostly over but given the hard numbers I say the worst of the crisis has not yet begun. ..."

 

Not yet begun - pretty much.

 

Markets won't stay up for much longer.

 

Dow Weekly looking interesting.

 

http://bullandbearmash.com/chart/dow-jones-weekly-stalled-long-term-resi...

Mon, 01/14/2013 - 10:52 | Link to Comment SheepDog-One
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There's really no point in their ongoing game, other than public crowd control. 

Mon, 01/14/2013 - 15:01 | Link to Comment CPL
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There are no retail investors anymore therefore it's cultural status as the money maker gets forgotten and ignored.  We are, right now, acting as historians to the conclusion of a past age of USD hegimony and it's decline.  It just hasn't been passively understood yet by those dependant on the current system that they are in deep trouble.

Otherwise Only time people want to surprised with their stupidity with money is when they head to Vegas.  When it's the nicely dressed fellow in the Brooks Brother's suit and 500 dollar tie, they are less inclined to shake it off as bad luck when the same fellow smiled and promised they would take care of it.

All the crowd control aspect is now is making sure the public and private sector citizen don't understand what's been done to the pensions.  Big money I suppose if counting potential paper gains, in reality all of them have been looted and with exceptional demographic pressures forcing the pool of funds to drain faster than anticipated.

Mon, 01/14/2013 - 15:43 | Link to Comment MrSteve
MrSteve's picture

The crisis is almost over in Venezuela too- see this report from the LA Times

http://articles.latimes.com/2013/jan/11/world/la-fg-venezuela-economy-20...

Mon, 01/14/2013 - 10:37 | Link to Comment mikmid
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The corrution is so deep in the Fed gobermint, state gobermint, finance, judical and regulatory areas that they will change the rules as they wish, steal as they wish and crush decent.

Mon, 01/14/2013 - 10:47 | Link to Comment SheepDog-One
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So then they've figured out how to kill the Golden Goose, and still have it lay golden eggs? I'm not buyin it.

Mon, 01/14/2013 - 10:56 | Link to Comment GreatUncle
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Don't care about the goose, it's cooked in the pot but are those golden eggs or tungsten filled shells?

Mon, 01/14/2013 - 10:44 | Link to Comment yogibear
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Evans of the Federal Reserve banksters said they will just continue to print dollars to buy debt. Legal counterfeiting. 

Bernanke and Evans are congratulated for debasing the US currency and essentially financialixzation  of the country.

Why produce? Everyone becomes a money skimmer. Just take products produced from Asia and resell. As long as people still accept the US dollar, that's the model. 

Mon, 01/14/2013 - 10:57 | Link to Comment Shizzmoney
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Flash Mob Playing 'Here Comes the Sun' in a Spanish Unemployment Office

http://t.co/QpndHdxG

The hope and positive sentiments are certainly a nice sign.....but the reality is much grimmer for working class folk in Europe....and will be here in the US, soon.

Mon, 01/14/2013 - 11:01 | Link to Comment TooBearish
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Retro engineered Alien Anti Gravity technology being employed in Europe, Japan and the US...fukking awesome!

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