"The Disease Is Incurable"

Tyler Durden's picture

From Mark Grant, author of Out of the Box

The Disease Is Incurable

“I can get no remedy against this consumption of the purse:
Borrowing only lingers and lingers it out,
But the disease is incurable”


                 -William Shakespeare, Henry IV                           

We have left the “can kicking” stage in Europe. It is now behind us and we have entered a whole new paradigm while no one was looking or paying attention. In fact I believe we have entered the final stage of this multi-act play where Europe is running out of money!

One of the reasons that Europe is so difficult to assess is the tremendous amount of jargon and hype that comes pouring out from all across the Continent. Each separate nation sends out stuff and then Brussels sends out their fluff and then the ECB makes proclamations and there is no harmonization as each group has its own distinct platform. We are bombarded daily with national interests, Federal interests and finally an ECB that supposedly is beholden to no one but is, in fact, beholden to everyone and especially Germany as the paymaster. Almost every day there is a new bandwagon to jump on and a new disappointment to be found some days later as one plan after another does not come to fruition. So to make sense of it all you have to stop, come to a full halt and give due consideration to the totality of what is happening in Europe.

There are several legitimate ways to add up the numbers but basically Europe is in a recession and the combined economies are shrinking so that growth is not a methodology for success. At the same time the ECB has loosened and then loosened again and again the collateral requirements so that it must be said that the ECB, in its own admission, is becoming a riskier proposition. We are given very little data but I think it is safe to assume that the ECB now holds a very large amount of questionable if not worthless securitizations including all kinds of loans and mortgage obligations that are no longer paying that have been placed with them by the Spanish, Portuguese, Greek and Italian banks. They are also holding sovereign debt in large amounts of all of the troubled nations in Europe and just the default of Greece alone will wipe out all of their equity capital so I believe it is quite rational to state that the ECB is in trouble.

Next let us consider what has happened during the last two years. Every place you look Europe has tried to solve their problems by adding more and more debt. This is true in the bank sector and it is true in the sovereign sector and the debts are piling up faster than Europe can pay for them which is not just a matter of the return that must be paid to finance them but the aggregate amount of new debt that has been added. Leaving aside contingent liabilities totally and just including Target2 funding, the Stabilization Funds’ loans and the debt at the ECB Greece has $461 billion of obligations that cannot be met. By the end of this year Italy will have added an additional $141 billion worth of new debt which is about 7.05% of their GDP. Spain is about to take on $125 billion in new loans which is approximately 9.3% of their GDP and Europe is verging, in my opinion, on an inability to pay their obligations. One country after another in Europe is rolling over and Germany, France, the Netherlands and a few other smaller nations only have so much capital to go around. I assert, in fact, that Germany given its sovereign debt, its funding of Target2, which continues to expand, and its obligations to the EU, the ECB and the Stabilization Funds is already in an over extended position that is careening out of control for this $3.5 trillion dollar economy. If Germany is the safest of what is available in Europe then not only is there not a clean shirt in the house but there is not one that is not ripped and torn.

As a distinction I point to the United States with a $14.3 trillion economy that is 125% larger than its major banks. The country, during the American financial crisis, was able to bail-out the financial system. In the case of Europe the bedrock is France and Germany with a combined economy of $6.3 trillion that is trying to support a $15.3 trillion European Union and where the banks are three times the size of the sovereign nations. The flight trajectory is not sustainable in my opinion as more and more debt is added at the national and Federal level so that while recognition has not fully come to the bond markets it will and then increased difficulties will mount and eventually topple the current structure in some yet unknown fashion. The underpinnings cannot support the weight and one day, someplace, the construct will crack because it must.

Just stop and look at the numbers. Put your prejudices and your hopes and prayers aside and stare at them. Place whatever desires you have to one side of the desk and take a very, very hard look at the data; all of it. Then reach a conclusion on the sustainability of the European Union and I do not believe that your answer will be so different than mine.

My journey examining Europe began with Greece which seems wholly appropriate given its historical precedence. It started simply enough with the addition of their real assets and their real liabilities. It ended simply enough with the realization that the numbers did not add up. There was no prejudice then and there is none now. The numbers just don’t work; not for Greece and not for Europe and so a moment of disembarkation is coming because it has too and it is as simple as that.

“There is a history in all men's lives,
Figuring the nature of the times deceased,
The which observed, a man may prophesy,
With a near aim, of the main chance of things…
We have heard the chimes at Midnight.”


                -William Shakespeare, Henry IV

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Jlmadyson's picture

And it shall be the end of us.

GetZeeGold's picture



And that after this is accomplished, and the brave new world begins

When all men are paid for existing and no man must pay for his sins,

As surely as Water will wet us, as surely as Fire will burn,

The Gods of the Copybook Headings with terror and slaughter return!


 - Rudyard Kipling

Decay is Constant's picture

Incredible poem....way ahead of his time.

The smooth tongued wizards are already beginning to slowly withdraw.

BigJim's picture

Unless the German electorate discover their cohones, their government will eventually give the ECB the nod, and they'll print.

And so will The Fed, the BoJ and BoE. I really can't see what else they'll do.

In fact, given the slight possibility the Germans rebel, the euro is, in the medium to long term, the major currency least likely to hyperinflate.

But that's not saying much.

RiverRoad's picture

Only a currency backed by gold will not hyperinflate while the rest of the world prints itself right out of existence.

Ljoot's picture

"Doo bee doo bi doo bee doo." - Frank Sinatra

GetZeeGold's picture



Too bad the Chairman isn't still with us. He'd send a couple of the fellas and this would be fixed in no time.

Jena's picture

Jilly Rizzo alone would be enough to do plenty of fixin'.

HD's picture

On the NBC sitcom "Family Ties", the character Alex P. Keaton (who lusted for a job on Wall Street the entire show run - the final episode had him leaving for New York) had his own take on Frank's classic:

"Strangers in the night, exchanging money"

queen mama's picture

to bail or no to bail, that is the question

stocktivity's picture

"It's all Bullshit!"  - Stocktivity

proLiberty's picture

One reason the disease is incurable is that Europe rejects liberty in favor of soft fascim.  It is even hard-coded into its founding documents.  The Lisbon Treaty states that the economics system is "social market economy".  This is not just a nice sounding phrase, it is a phrase that has a whole body of definition.    It means that Europe's economy is like that in China: at the lowest levels, people are generally free to engage in free exchange but as soon as a business gets big enough, government wnats to be able to have its say in how it is run.   Government, in short, is a self-serving parasite that is attuned to maximizing how much it can skim off the economy without killing it.  

Part of that soft-fascism is the incest it conducts with the banks through which it sells its own debt and funds futher vote buying (er, "spending").  



ATM's picture

and so it is in the US as well, only we're supposed to be legally immune from that government power grab but sadly are not.

bank guy in Brussels's picture

On the real practical level there is much more 'liberty' in Continental Europe than in the USA, whatever you want to say about on-paper theories ...

It is quite clear that right now the US is much more 'fascist' in reality.

Here there is almost no one in jail, very little legal or police harassment of common citizens, very little abuse of common people by the courts or lawsuits

1 out of every 140 Americans is in prison, in the world's biggest gulag ... here in Continental Europe it is like 1 out of 1000 ... and 1 out of every 140 Belgians is a millionaire

In 'socialist' Europe, people's personal assets are actually much more secure from seizure by banks or crooked lawyers

There is much less fear among people here than in America, our people hit the streets much more to protest ... we have much more political openness with many more political parties having a bigger range of views in our Parliaments

In North-West Continental Europe there is essentially no poverty among legal residents, and little fear of or abuse by 'the system' ... It is still the best place to live in the world

In the US you have a paper Constitution totally null and void with American crooked judges ... Here we like a stronger role with government because our governments are much less evil and actually do a lot of good, our governments actually 'work' without raping the common folk

ATM's picture

For now they "work" because that good you say they do is all on borrowed money that can never be paid back. The good is a phantom that will come back and destroy the people just as the US government is destroying it's people.

The reason the US govt is so much more direct in imprisoning and being heavy handed is they have to deal with a population that is far more mobile, far better armed and I would suggest far more ornery than the Europeans. It's a cultural thing.

Ghordius's picture

regarding your comment on the prison population: in europe, prison space is a governmental issue. the general cultural assumption is that for every 1'000 inhabitants you need one prison place. whenever a law is enacted that would make the prisons burst, the law is challenged and repealed as being de facto not applicable. Example: the "Drug War" Lex Jervolino-Vassalli in Italy. In the US, as far as I understood, prison space expansion is part of this "corporate welfare" thing. If a new law or a new legal principle like the "three strikes and you are in" is enacted and the judges sentence previously unheard of numbers of people to prison, the private corporations that run so many prisons are able to provide for space.

I also disagree with the cultural assumption, IMO if you want to find an historic precedent to this, you have to search for the times when England populated entire continents with convicts. Note that in both occasions you find systems based on Common Law, which in theory looks so much softer and kinder than our "Statist" Roman Law/Napoleonic Codex. Further, note that the US used to have one convict per 1'000 inhabitants not that long ago - until "something" changed. What was it?

see here, the change happened in 1980 (first graph) http://en.wikipedia.org/wiki/Incarceration_in_the_United_States

i-dog's picture

You raise an interesting point, though your choice of the "first graph" leads you to an erroneous conclusion (it's called "confirmation bias" by professionals). That 1st chart just has a simple straight line joining the 1980 datapoint to the 2006 datapoint).

Whereas, if you had gone further and also looked at the third graph, you'd see that the inflexion point was actually in 1972 (the lowest point in 40 years, under your old friend Tricky Dicky) or 1974 (under Mr Nice Guy Ford...if you take the breakout up from the longer-term trend).

Just tryin' to help ... 'cos, in the private sector, we learn to interpret charts. ;)


Ghordius's picture

i stand corrected, and thanks. I have only a very cursory, shallow knowledge about this thing on the US side. In fact, I learned something about it by reading comments on ZH. and I find those trends scary, very scary.

btw, in my whole life I've worked (if this is the correct word) only 8 weeks for a government.

but since you are reading this: WTF! is there no political awareness at all? what is it? sorry to sound like Bank Guy in Brussels, but here we would have mass demonstrations and shutdown for much, much less... I am really clueless, and have not been there since the 80's.

Precious's picture

Hey Brussels Guy.

STFU - you conceited NATO occupied slut.

i-dog's picture

LOL ... if you only knew who really controls NATO!

Precious's picture

Yah.  Fuck.  We all know.  Santa Claus.

BigJim's picture

@ ProLiberty: One reason the disease is incurable is that Europe rejects liberty in favor of soft fascim.

@ Bank guy in Brussels: On the real practical level there is much more 'liberty' in Continental Europe than in the USA...

It's like witnessing two slaves discussing whose master is kinder.

"My master lets me keep a pea shooter!"

"Yeah? Well, my master only rapes me twice a day!"

Keep it up, serfs. You're killing us out here. Literally.

GMadScientist's picture

You just like a different flavor of boot on your tongue...unless you think multinational corporations aren't also self-serving parasites (by definition, no less).

BLOTTO's picture

Read at the 2012 London Olympic Games - Opening Ceremony

William Blake's poem 'Jerusalem':

And did those feet in ancient time
Walk upon England's mountains green?
And was the holy Lamb of God
On England's pleasant pastures seen?

And did the Countenance Divine
Shine forth upon our clouded hills?
And was Jerusalem builded here
Among these dark Satanic mills?

Bring me my bow of burning gold:
Bring me my arrows of desire:
Bring me my spear: O clouds unfold!
Bring me my chariot of fire.

I will not cease from mental fight,
Nor shall my sword sleep in my hand
Till we have built Jerusalem
In England's green and pleasant land.

GMadScientist's picture

Yes, better that we ask, "What Financial Fraud Would Jesus Commit?"

BooMushroom's picture

I would be DELIGHTED if I only had to pay 10% to government in taxes.

falak pema's picture

So now I know the origins of the one square mile of city!

Oligarchy Jerusalem, full of knights Templar doing God's work !!!


GMadScientist's picture

Wouldn't that be measured in cubits?

LawsofPhysics's picture

No shit, getting fucking tired of "obviousmen" stating the obvious. solutions?  Here is one;  End this one set of laws for certain people and another set of laws for other people.

The moral hazard is the fucking problem.  Restore real fucking consequences for bad behavior at all levels of society.

This will be done one way or another (Nature is funny like that), the question is whether or not it is done in an orderly fashion or not.  Hedge accordingly.

ATM's picture

How can it be done in an orderly fashion? The fucktards are in power. They won't simply allow themselves to face the consequences of their behavior, will they?

So there is your answer.

LawsofPhysics's picture

Correct, I am asking TPTB to indict themselves.

History rythmes, we find ourselves here...

"The great questions of the day will…be settled …by iron and blood.”

Otto Von Bismarck, Sept. 30, 1862

GMadScientist's picture

Hint: it's not up to them.

waldocktrades's picture

These are just more reasons why, "Cash is King." This piece includes some justification for comments made recently by Richard Russell and John Bogle. We are pushing hard to get our customers to lock in some equity protection at these levels.


LawsofPhysics's picture

"Equity protection"  LMFAO!!!

Paper is paper is paper.

The only "protection" you have can be found in the integrity of those you choose to associate with.

Well that and diversifying your PM portfolio with a little lead and brass.

BigJim's picture

 These are just more reasons why, "Cash is King."

Your cash is getting wiped out by inflation. Or if it's sitting in the bank, and your bank goes under, you'll lose everything over the banking deposit insurance level.

The credit bubble has expanded the prices of everything bought on margin... housing, bonds, stocks, you name it. Barring shifts in the underlying fundamentals, unless our overlords keep up the monetary expansion, the prices of those things MUST experience a reversion to the mean... but that doesn't mean your cash hoard will survive in terms of purchasing power. The value of fiat is too easily manipulated by the people who control its issuance.

In our fascism-lite economies, your best bet is to work out what the 0.1% want, and then bet alongside them.... with a lot of PMs out of the system as insurance.

Nachdenken's picture

Peak demand and Peak employment in Europe.

Mark Grant points once more to the deflationary forces at work in Europe.

The incredible (inverse) ratio of bank to nation size in Europe needs further clarification.

bank guy in Brussels's picture

There is also the fact that, as said on ZeroHedge yesterday, we have nearly triple the bank deposits in Europe as a buffer

Europe is really much richer, and we don't have a net trade deficit either ... we have a big euro-zone farce via the North-South imbalance and various issues more out in the open ... but the deeper level is actually more solid

We will also kick the can big time soon via money printing

Mark Grant can join Graham Summers in a 'Predicting Doom Shortly in Europe' festival


Peter Pan's picture

It seeme to me that the contents of the storage garages on Storage Wars contain better value than the contents of the Federal Reserve and the ECB balance sheets. The characters are much more colourful and much more human because they often cop a loss should they pay too much for what turns out to be rubbish.

When TV is closer to reality than the institutions that supposedly run and serve the nation, then we can expect anything to happen.

fonzannoon's picture

anyone else just hear this fuckface Blodgett on CNBC telling them all we should all be "totally grateful" they are not going to prosecute Corzine?

LawsofPhysics's picture

Same old script of financial terrorism.  "You don't want us to expose the truth, the world will end".

Just like Hank Paulson telling congress to give him a blank check or "the world will end".

ALL of these fuckers should be hanging from the lightposts on K street. 

Winston Churchill's picture

Not enough lamposts in the whole of the Distict of Crooks.

buzzsaw99's picture

blue whoreshoe likes mf global [/falstaff]

Meesohaawnee's picture

yea way to help your credibilty blodget blowhorn. that should get the ratings up. Two miserable entities deserve each other. The day CNBC is off the air will be the happiest of my life. The more and more of this, the closer that dream is

GMadScientist's picture

Why do you keep watching (and thus keeping it on the air)?

RiverRoad's picture

Keep your friends close; keep your enemies closer?

unrulian's picture

Fuck the disease...stallone is the cure

GMadScientist's picture

Shouldn't Stallone fuck the disease?