European Sovereign Debt - Can't We All Just 'Net' Along?

Tyler Durden's picture

It is seemingly clearer and clearer that with the current structure and membership, the Euro does not work. The market seems to be driving the change in the direction of membership changes (via restructurings and temporary devaluations - e.g. GRE CDS and WI Drachma) while the euro-zone-'management' seem prone to structural changes (i.e. EFSF umbrella, Euro-bonds, and fiscal union). While the cost of either approach is likely extremely high, some research from early Summer by ESCP Europe suggests a non-trivial approach that reduces aggregate debt for the European sovereign complex by almost 64% is possible. The solution:- bi- & tri-lateral netting, and free-trading.

Clearly, there will be winners and losers in this 'free exchange', and the game-theoretical bargaining process of 17 self-indulgent, self-interested career politicians is unlikely to resolve in an optimal direction. However, if nothing else, it is evident just how Gordian-knot-like any resolution is likely to be.

Europe's Web of Debt (as it stood in May 2011)

After three rounds of 'bargaining' including bilateral netting, trilateral netting, and then free-trading (in order to manage different maturities), the complexity reduces dramatically - leaving it very evident where the debt really lies.


The main results were as follows:

The EU countries in the study can reduce their total debt by 64% through cross cancellation of interlinked debt;


Six countries – Ireland, Italy, Spain, Britain, France and Germany – can write off more than 50% of their outstanding debt;


Three countries - Ireland, Italy, and Germany – can reduce their obligations such that they owe more than €1bn to only 2 other countries.



Around 50% of Portugal’s debt is owed to Spain;


Ireland and Italy can write off all of their debt to other PIIGS countries, and Ireland can reduce its debt from almost 130% of GDP to under 20% of GDP;


Greece can reduce their debt by 20%, with 60% owed to France and 30% to Germany;


Britain has the highest absolute amount of debt before and after the write off (owed mostly to Spain and Germany) but can reduce their debt to GDP ratio by 34 percentage points;


France can virtually eliminate its debt (by 99.76%) – reducing it to just 0.06% of GDP;

The authors summarize their findings thus:


This exercise does not solve the problem of the EU debt crisis, and raises more questions that it answers in terms of data reliability. However the revelation about how interlinked debt might net out (possibly even to zero) is a policy option. And indeed if this exercise leaves some countries with a large remainder it points to where the real problems are. Either way, it sheds light on the issue and uncovers information.


The fact that so much debt is interlinked presents a real opportunity to solve the problem. The web of interlinked debt is too thick to be dusted away by classroom games, however policymakers should attempt to replicate this study, and they may find that instead of spinning further webs they might get out a duster to clean things up.


The bottom line for us that while breaking up the Euro will be extremely expensive and potentially dramatically destabilizing from more than a simple market-perspective (as monetary-union disruptions have historically tended to end in civil hostility), this study provides a simple way to see how a fiscally-joined and central Treasury-based system 'could' come out stronger. However, the path to that 'potential' strength will be littered with the bodies of financial and non-financial equity holders, senior- & sub-debtholders, CDS traders, and FX jockeys thanks to risk-free rate re-adjustments, subordination, ringfencings, forced recapitalizations, and implicit austerity.

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Rahm's picture

Yuck.  Europe's net is gross.

Id fight Gandhi's picture

That Web graph hurts my brain

spiral_eyes's picture

This plan.. at least in the short to medium term... actually works. Way better than the EFSF bullshit, anyway 

sqz's picture

No, it wouldn't.

1. All that debt is owned by a multitude of different types or organisations including private hands (e.g. especially pensions). While it is trivial to identify the source of the debt, simply *identifying* the destinations/owners is non-trivial.

2. The graphs do not cover non-EU members who have significant exposure, e.g. US, Japan, China. This also compounds No. 1.

3. The graphs do not show derivatives, derivatives on derivatives, insurance and other structured products built on the debt. Given its sovereign debt, its likely to have a very elaborate and huge derivative and structured markets.

4. Debt is money. Writing off so much debt, including derivatives on it, would be hugely deflationary for any given region. That is, you're netting *into* economies not across a single economy. In addition, it would likely cause substantial credit shocks.

5. Even if you did put in all the extensive multilateral legal, financial and administrative work to execute such a plan and by some miracle in isolation it was considered "successful", now what? You've just enabled a reset of the system, re-booted the PC but all your hardware is still corrupted, so-to-speak. You still have ludicrous unsustainable structural imbalances in a monetary union that should never have existed in its current form. You still have TBTF entities structured specifically to take advantage of moral hazard, right down to their compensation systems. You still have societies in which the markets and their dominant players control all that matters and growing extreme wealth inequality and public debt is just an irrelevant side-effect. You haven't actually improved anything at all ...

This paper and its pretty graphs are just an interesting academic exercise or a way to help cognitively capture the interconnectedness of the system.

AldousHuxley's picture

Just focus on who has the thickest arrows. It ain't the is the old Sterling.


British banksters are fucked. US banksters' best friends are brits.


US may no longer be #1, but this depression is going to kick UK in to the gutter.

BorisTheBlade's picture

British banksters are fucked. 

And German pensioners. The moment they realize their pensions have to be sacrificed because Brits owe them the money that cannot possibly repaid, they will probably regret Fuhrer didn't send more Panzer divisions West and not East.

falak pema's picture

they tried with their Messers and their Henkels but the Spits and the radar beat them.

i-dog's picture

Perhaps Germany could request a live re-match at Dunkirk!?!

PY-129-20's picture

As a German I respect the British. A tough enemy in that war, beautiful women and great humour. I would not want to fight them. Let's focus on punishing the Banksters for their misdeeds.

Never forget the Christmas Truce of 1914:

horseguards's picture

As a Brit, I respect the Germans. Unfortunately, the Brits have no respect for each other.

BorisTheBlade's picture

They might, with Soviets playing one their side this time. As we already know, Bad Vlad is the president of Germany:

horseguards's picture

As De Gaulle recognised, the UK is the US's trojan horse.

Raynja's picture

i'll give you #5, other than that try reading and understanding an article before putting up bullet points.

concerning #1 "This exercise does not solve the problem of the EU debt crisis, and raises more questions that it answers in terms of data reliability."

#2 this idea is about netting out debt, ie, i have a bond from you and you have one from me, so lets exchange bonds and retire them. no you will not eliminate all the debt, but they may be able to make it so the debt can be repaid.

#3 " However, the path to that 'potential' strength will be littered with the bodies of financial and non-financial equity holders, senior- & sub-debtholders, CDS traders, and FX jockeys thanks to risk-free rate re-adjustments, subordination, ringfencings, forced recapitalizations, and implicit austerity."

#4 paying off debt is not deflationary as it makes more money available for consumption and investment, instead of debt repayment.  additionally, deflation is only bad for debtors, it is good for creditors and savers.  this leads into #5 if (i don't believe deflation occurs from netting debt) deflation occurs it is a restraint on borrowing.  this occurs because you know the debt will be more expensive to service in the future making you less inclined to borrow in the first place.

Thomas's picture

New SQZ's analysis is spot on. To identify the country of origin does not allow the debt to netted--not practically and certainly not legally.

L G Butz PhD's picture

Actually, that TYPE of analysis is more real than you think.  Those players with exposure in that game are assessing their risk/reward payoffs, which by the way, have been changing  dramatically with each new headline.

In addition to application to what's happening now in Europe, similar such games are already being conducted for a new global  currency.

So pooh pooh it however you like, but people who see and understand how these machines work know better.

WestVillageIdiot's picture

Where is the proof of that?  Do they really know how things would shake out if they tried to unwind this mess in such a fashion?  What happens to all of the "benefits" that citizens had counted on.  One man's debt is another man's asset.  I just can't see anything happening so simply. 

i-dog's picture

"as monetary-union disruptions have historically tended to end in civil hostility"

That's a blanket statement! Examples please?

There will certainly be winners and losers ... with the losers getting indignantly hostile for being left behind. But, in the alternative case of fiscal union, the fiscally responsible are the ones who will be rightfully hostile for being dragged into a forced marriage with a junkie wife and her litter of needy kids!

Id fight Gandhi's picture

Why are we up so late on a Saturday looking at graphs?

I know get a handle, plan the next move. Some politician will come along and kick it all down like a sand castle.

WestVillageIdiot's picture

They have to scare us with apocalyptic predictions.  Just think of all of the wars and disasters that were predicted at teh end of the Soviet Union.  There were some ugly things but mostly in the satellite countries.  All in all not nearly the end of the world that we would have been led to believe.  The European nations in question are no longer the enemies they were in the age of fighting for colonial domination. 

Soul Train's picture

Not to be mistaken, Timmy Geithner believes that growth comes through the extension of credit, which is synonymous with the expansion of debt. For Geithner, the two worst things that could happen in the markets are:

1. Deflation, as it would lead to a relative increase in the value of debt with respect to the collateral underpinning it.

2. A crisis of confidence, as the whole idea of ever-expanding debt levels as the engine of growth requires both continuous inflation and unwavering confidence in order to not collapse as a Ponzi scheme.

With this background in mind, Geithner undoubtedly perceives the European sovereign debt crisis as a crisis of confidence. He correctly understands that Europe is not politically ready to commit to the degree of fiscal and political union that would be required to instill confidence. Hence, as is his modus operandi, he seeks a way around the politicians and elected representatives that can lever funds they have already set aside for one purpose to be used in a way not originally intended. He did the same thing with TARP funds, and proposes that Europe do a similar bait-and-switch with the EFSF.

The EFSF, as originally established, and soon to be amended, is a fund to directly backstop sovereigns unable to borrow in debt markets. For now, assuming the amendments go through, it will be able to loan directly to foreign banks and buy government debt on the secondary markets. However, with the recent spectre of possible Italian and Spanish funding difficulties, markets have lost confidence that the EFSF is anywhere near large enough to meet the challenge. It currently has a lending capacity of around 450 billion €, and would need to be expanded to roughly 1.5 trillion € to credibly meet the funding needs of Italy and Spain. However, since Italy and Spain are the third and fourth largest economies in Europe, that expanded EFSF funding would have to come primarily from France and Germany. Such a large additional fiscal obligation would effectively put these two countries, particularly France, in the same over-extended boat as the PIIGS.

Enter Mr. Geithner, who proposes that the EFSF, at its current levels of funding, no longer be used to directly support sovereign debt, as it is woefully underfunded to do so credibly, and its expansion to reach credible levels is both politically and fiscally unfeasible. Instead, Geithner would have the ECB vastly expand its Securities Markets Program (SMP), which buys sovereign bonds on the secondary market. The new role for the EFSF would be to serve as a capital buffer to absorb any losses the ECB suffered in the execution of its SMP. In this arrangement, rather than the EFSF using all of its resources to buy debt directly, the ECB could essentially print Euro’s to buy the debt. Assuming that the ECB would buy debt at a discount to par, and that eventual losses in case of default would be generally well below 20% of par, this would allow the ECB to buy debt totalling over 2.5 trillion €! IF the ECB would go along with such a scheme, it may be able to put a floor under distressed sovereign debt and restore market confidence without having to ever massively expand its SMP.

Examining this proposal critically, I have assembled a surely incomplete list of potential concerns, which I list below.

1. The ECB already has a de facto capital backstop through its NCB’s. It could pursue this course if it chose to, and has, although markets are not confident it would do so to the extent that may be necessary to support Italy and/or Spain.
2. In fact, the theory behind this gambit exposes the ECB to potentially monetizing sovereign debt, with an explicit EFSF capital backstop. To my view, this could transform the ECB into a “bad bank. ”
3. If markets test the ECB’s resolve, it will soon run out of “good” assets it could sell to sterilize its purchases. Would this not destroy the credibility of its price stability mandate? Would it not “tank” the value of the Euro?
4. Would this potential ECB role as guarantor of European sovereign debt be within its current remit, or would it require a treaty change?
5. As the ECB’s primary funding source, what would the Bundesbank think of this potential role for the ECB?
6. Should this little debt shell game work, it would effectively restore the status quo mispricing of risk assets that led to this situation in the first place. What does this mean for Northern European economies longer term?
7. What does this program do to actually address solvency? (For that matter, what has any program Geithner has conjured up ever done to address solvency?)


Snidley Whipsnae's picture

Excellent observations ST...

"the ECB could essentially print Euro’s to buy the debt"

This says it all. Geitner want Europe in full 'can kicking' mode.

Geitner's problem is that the Germans have not forgotten Weimar hyper inflation.

falak pema's picture

Merkel has to get the EURO BANK financial debt bubble imploded in EU....What happens to the USD is secondary from HER perspective. That message was made clear to Geithner this week. There has been teeth gnashing in the City and in PAris as this German near unilateral lead in EU is seen as enfeebling USA's friends in Europe and could affect FED/ECB cooperation through swap lines etc. Hotting up the currency war. All that is part of the Schizophrenic play of financial Oligarchs who are both poachers and game keepers within the current financial ponzi, mad hatters' suicidal party.

Merkel is determined to impose the type of banking sector recapitalisation evoked in this article. Lets see if its feasible. Sarkozy will HAVE to comply to Germany...and the others will have to follow. The ball then will be clearly in the Anglo saxon camp and Cameron will be front line as the City. 

You can be sure that they will balk at this German type financial goulash...Uk banking exposure is at the heart of this netting play. They don't like taking their orders from Berlin. 

L G Butz PhD's picture

In spite of statements made for public consumption and negotiative bargaining, the serial resignations of German hawks tells me that she has already agreed that she is a prostitute. They're just negotiating on price.

slewie the pi-rat's picture

hey snidley!

"the ECB could essentially print Euro’s to buy the debt"

unfortunately for the waste of what you guys are smokin, and as tyler put up here, yest, it is illegal for the ECB to do this.  no cigars for you guys, but i do invite you to find the article yourselves, and maybe even read it...

...the "market" must buy the debt!...not the ECB, so other CBs will hafta do the printing (& swapping and prestidigitation) if the "market" won't "buy" that this EFSF paper is "worthy"...

...also, what happened with the "feasibility study" as to whether the EFSF expando pants would fit this porcine banksters' ass or not? 

i wld say it is still a "work in progress" and that the "new" debt to re-fi the "old" debt will probably be "printed" but also prob not by the ECB, ok? 

look @ what the SNB has been up to for two weeks, now.  the CBs and their banksters have the "inventions" to "fix" anyfukingthingie they wish to, but the political will to stop the indebtedness of the nations for the benefit of the corpo-fascist elite may not be so eaZy to control in the EU as in japan, china, switzerland, the US, and The City, er, gr. britain, i mean...

maybe the EU should just form a "supercommittee" of bankster-owned pols and "save" europa for the NWO, too! 

the nannies need to be paid, too, dammit.  janet.  otherwiZe, the "efficiency" of the wealth-extracting "system" will fail.  again

the sheep will not flee the "system".  ever.  they have been hypnotiZed by a an evil magician and/or Prince "Charming" so they are either fuked into bread + circus slavery or fuked into "living happily ever after" slavery.  then we have those who think their minds are free b/c the own guns!  now, those guns may come in useful to certain interests, someday, but they aren't much good for the psychology of getting one's mind a bit freer, as some of us have shown by confronting the toy-boyz, right here...

hey!  shit happens, right? 

enjoy your day, everybody!

LowProfile's picture

""the ECB could essentially print Euro’s to buy the debt"

unfortunately for the waste of what you guys are smokin, and as tyler put up here, yest, it is illegal for the ECB to do this."

Three guesses as to for whom it's not illegal to do such, and who ultimately will...

slewie the pi-rat's picture

i mentioned a few CB's above: US, japan, china, switz, GB, and there are others, too, but not "heavyweights"

the FED hasta be careful, tho. under dodd-frank (which the right-wing uber-wealthy corpo-fascists are trying to "amend" in this respect, according to jn mauldin, last week) the FED can not "prop up/bailout" insolvent banks, so they must use "channels" of "healthy banks" as a pipeline.  i don't think they've had to print, yet, and go LSAP for the EU;  i think they are just having their commercial banksters banks use the "excess & unused" money for the "swaps" for the fecal matter from their EU "cousins"

the last depression, we had to deal w/ "interlocking directorates" and now we have "interlocking debt/'assets' "for da big boyz.  under US anti-trust laws, how tf did these asswipes get TBTF???  huh???  yep, they bought the pols and paid off the "regulators" and possibly more than a judge or three, too! 

ms erica holder fit right into the slot where fukface gonzales usta "work", eh???

Smiddywesson's picture

Wow Soultrain, lots of good stuff in your post.  However, I don't think Mr. Geithner or TPTB view objections 6 and 7 as a  problem:

6. Should this little debt shell game work, it would effectively restore the status quo mispricing of risk assets that led to this situation in the first place. What does this mean for Northern European economies longer term?
7. What does this program do to actually address solvency? (For that matter, what has any program Geithner has conjured up ever done to address solvency?)

Since when have these two issues been relevant in any other actions taken to date?  Kicking the can and buying gold is all they care about, so they will continue to kick the can and not fix a single thing.  Analysis of the events cannot assume that the current system is salvageable.  The actions taken by the central banks and soverign nations don't make sense if viewed as steps to save this system.  They make complete sense if one assumes they know the system is doomed and they are just stalling for time.

Life of Illusion's picture





Geithner floated a variation of a 2008 policy he developed while at the New York Federal Reserve that would expand the reach of the 440 billion-euro ($607 billion) European Financial Stability Facility using leverage in a partnership with the ECB, said Irish Finance Minister Michael Noonan.

“The EFSF’s sole purpose is the financing of states and that’s in order as long as it’s done via the capital market,” Bundesbank President Jens Weidmann told reporters today. “If it’s done via the central bank it constitutes monetary state financing,” which is forbidden under European Union rules.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of euro region finance ministers, said yesterday: “We’re not discussing the increase or the expansion of the EFSF with a non-member of the euro area.” Instead, the ministers recommitted to a July 21 decision to empower the fund to buy bonds in the secondary market, offer precautionary credit lines and create a bank-recapitalization facility.

“We don’t think that real economic and social problems can be solved by means of monetary policy,” said German Finance Minister Wolfgang Schaeuble, speaking alongside Weidmann after the meeting of EU finance ministers and central bank governors. “That has never been the European model and it won’t be.”

Weidmann said he would put “big question marks” on proposals to give the EFSF a license to let it operate as a bank that could tap the ECB for its refinancing.


Mad Marv's picture

This will never happen. People will not give up something for nothing. There's no way to quantify debts/investments as equal.

Pegasus Muse's picture

Time For Europe’s Bond-Burning Party

Jeff Nielson


In 1948, with Europe a smoldering and financial ruin, the United States bankrolled the “Marshall Plan” – a comprehensive “reconstruction” plan for Europe. The program was an unequivocal success. After the four-year plan had run its term, the economies of Europe had surpassed their pre-war economic output, and it was the beginning of the greatest economic boom in European history.

In 2011 Europe is once again in financial ruins, however this time the cause is not a war, nor even some form of natural catastrophe. Rather, the architects of this destruction were multinational bankers and the shadowy bond-parasites lurking behind them, holders of $10’s of trillions in sovereign debts. Their tools were fraud and deceit, and their original victims were the corrupt and/or weak-willed “leaders” of Europe who were ensnared by the banksters’ “revolutionary” new ways for these governments to (supposedly) finance their growing debts.

Now the victims of these arch-villains are virtually all the peoples of Europe – either facing their own, imminent bankruptcy, or being strong-armed into squandering their wealth through utterly futile “bail-outs”. I have already chronicled in a multi-part series this mass “economic rape”.

The bail-outs are obviously and inevitably futile, because the moment another infusion of loaned money is advanced to one of the debt-sinners, Wall Street’s economic terrorists quickly claw-back every penny of it – by driving up the interest rates on that nation’s debt through their fraudulent manipulation of the credit default swaps market.

A year and a half ago, I suggested it was time for “benign default” in Europe. What I meant by that term was interest forgiveness – since it is the interest on these debts which is bankrupting all of these nations, not the “principal” itself. Bond-holders would be made whole (since they would recover their principal), while the debtor nations would be rendered solvent.

That was then and this is now. A lot has changed over the past eighteen months. Wall Street’s economic terrorism now literally threatens to lay waste to the economies of most of Europe’s population. Interest rates on Greek debt have been pushed up to more than ten times the interest which the United States pays on its debts – despite the fact that the U.S. is at least as insolvent as Greece.

Meanwhile, the economies of Ireland, Portugal, Spain, Italy, and even France are now also at risk. Put another way, every time (over the past two years) that the U.S. propaganda machine has “mused” that a particular European nation might be about to have a “debt crisis” credit default rates have magically begun to spike higher (in the rigged casino which Wall Street calls “the derivatives market”) – which directly leads to higher interest rates on that nation’s debt. Et voila! A “debt crisis” becomes a self-fulfilling prophesy.

As a matter of simple arithmetic (and compound interest) any nation with a large debt can be rendered “insolvent” if their interest rates are forced (manipulated) high enough. Now France is the latest “target of speculation” by major U.S. media sites.

Consequently, we are long past the time for a “benign default” for Europe. I offer instead “the Nielson Plan”: nothing but “scorched Earth” – or should I say scorched bonds? A new, economic Golden Age can be ushered in for Europe, and all it requires is to put a torch to some of the bankers’ paper.

Here’s a question for all the “math whizzes” among readers. If Greece burns all its bonds, how much money will it cost the Greek government (and the Greek people) if the Wall Street terrorists push-up interest rates on 10-year Greek bonds from the already usurious 20+% to 50% or 75% or 100%? Congratulations to all of you who answered “zero”.

That’s right, burn the bonds and the “terrorist threat” is over. And it wouldn’t even be necessary for anyone to drop bombs on the head of anyone else. Hmmm, if Barack Obama can win a Nobel Peace Prize for the bomb-dropping, maybe I should submit my name (and the “Nielson Plan”) to the Nobel Prize committee?

At this point it would have been nice to simply wrap-up this commentary (and then just wait for my Nobel Peace Prize to roll in). Unfortunately I can already hear the deafening cacophony of the ‘Chicken Littles’ (i.e. the friends of the bankers).

“Europe can’t default on any of their bond debts, because all these bonds are spread out among nearly every major bank in Europe. If European nations defaulted on these bonds, virtually all of these banks would be wiped out.”

Yes. Quite right. While it isn’t as just (and as satisfying) as wiping-out all of the Wall Street fraud factories which were directly responsible for this scenario, it would exterminate all of their brethren. For performing such an enormous “public service” for Europe, I should probably get “knighted” – or get some sort of title (“Baron of Bond-justice” perhaps?). For the enormous financial relief of having all of those massive leeches detached from the various treasuries of Europe, that should be enough to earn me a Nobel Prize for Economics (as a book-end for my Peace Prize).

Sadly, the Chicken Littles haven’t yet winded themselves, and they seem to be becoming a little more sly.

“These nations can’t default on their debts or they won’t be allowed to borrow any more money. And with the large deficits these nations have, this would crush their economies.”

Let’s start by reminding the Chicken Littles why these nations have “large deficits”: because of all the interest they pay each year to the bond-parasites. Currently, somewhere over half of every dollar of revenue taken in by the Greek government now goes directly to the bond-parasites as interest – nothing less than permanent, absolute, debt-slavery.

Burn the bonds and those interest payments magically disappear – and so does the Greek “deficit”. Here’s another question for the math whizzes: how much money does the Greek government need to borrow when it’s now running a surplus? Right again with “zero”!

In fact, burn the bonds and (thanks to “austerity”) virtually all of the Euro “debt-sinners” will now be in surplus. Terrorism over. Debts gone. People free.

Annoyingly, the Chicken Littles aren’t finished yet. In fact they are now trying to sound seductive, which is perhaps even more grotesque than their previous screeching.

“They can’t default on their bonds. Some of that debt is held by pensioners, public institutions, and other innocent, domestic holders of these bonds. Even if you wanted to punish the banks and the billionaires, you can’t do so without targeting innocent victims.


Very possibly, once we subtracted the usurious interest payments which these European governments would no longer be making after their bond-burning party, many/most/all of the “innocent victims” could be immediately indemnified by their own governments. If that wasn’t possible, then for all the innocent domestic victims they could be issued new, “domestic” bonds by their government (billionaires and bankers need not apply).

These would be bonds which would not be transferable or made available to any non-domestic holders. Consequently, while Wall Street could still play their devious games with their fraudulent credit default swaps, the individual Euro governments could simply ignore any further attempts at this economic terrorism – since their new debt market would be a closed system, immune to credit default swaps (and Wall Street terrorism).

It is long past the time for half-measures for Europe. As I have warned previously, the latest and most-evil “proposal” by the bankers (and the bond-parasites for whom they front) is for a “Euro bond”: one bond to immediately enslave all of Europe. Should the “Euro bond” ever become a reality, then the Wall Street terrorists could simultaneously do to all of Europe what they are now doing to Greece (and Ireland, and Portugal, and Spain, and Italy) – for there would be only one credit default swap market to manipulate.

With Wall Street’s economic terrorism now an “existential threat” to Europe (certainly in financial terms), it is time for nothing less than a European bond-burning party: where the slaves free themselves from their shackles. The bankers and bond-parasites would have no one to blame but themselves.

cranky-old-geezer's picture



I agree with what Jeff says here, except I doubt euro governments could walk away from wholesale debt default with no repercussions.  I rather suspect the banking oligarchy would find reasons to send puppet military forces in and overthrow these governments. 

Remember, Kennedy was assasinated merely for wanting to issue silver certificates again, nowhere near proposing massive debt default, and Iraq was invaded and occupied merely for wanting to price oil in Euros rather than US dollars, also nowhere near proposing massive debt default.

Idiocracy's picture

petrodollar warfare.  The new Crusades

Miles Kendig's picture

Gotta clean up the trash to see what needs fixing in a hoarders home

Pretorian's picture

How about making chart of US debt with unfunded liability? And than have Goldman, UBS...(those who got margin call in the last eur/chf intervention) pumping 2 and 10 year US bond rates at >7%  how long can US withstand without default? This is truly amazing that EU PIGGS have sustained for 2 years although I have to agree they stink to the bone.

spiral galaxy's picture

Beat me to my post! sentiments exactly!  Good to know others are awake at 3am worring about this!  ......adding on, what of China, etc. Perhaps a globa debt net?  What of the $600(?) trillion in CDS obligations? And how does forgiving the debt structurally change the politics and entitlement mindsets of the 'forgiven' for the better?  Once 'forgivien', do the very same countries go back to the same ol' same ol' policies and rack up a new debt web?

i-dog's picture

"Once 'forgivien', do the very same countries go back to the same ol' same ol' policies and rack up a new debt web?"

With the current banking system still in place? ... of course!

Bendromeda Strain's picture

Oh no - didn't you read the Happily Ever After?

this study provides a simple way to see how a fiscally-joined and central Treasury-based system 'could' come out stronger.

And there you have it. After Timmay is run out of town on a rail, he can create and run the new EU Treasury. 

Smiddywesson's picture

"Once 'forgivien', do the very same countries go back to the same ol' same ol' policies and rack up a new debt web?"

If anyone thinks TPTB have any intention of stepping aside, they are crazy

If anyone thinks TPTB are going to hyperinflate to zero, thereby abdicating power, they are crazy

If anyone thinks TPTB will sit idly by and be destroyeed by deflation, they are crazy.

Sorry, the end of the world won't come and unseat them.  Yes, they are caught in a debt and derivatives trap, and the current system cannot be saved, but what is that to TPTB?  The current system is controlled by man made rules. They can just change the rules, and they will.  Hence,  they are kicking the can and buying gold.  Anyone left standing with their worthless paper when the music stops will get screwed.  Anyone without gold or silver will be the loser when the music stops. 

Hulk's picture

Green. How could it be any other way???  WAR. As in a fight or ballgame, outcomes are unpredictable. The seemingly  invincible get beat. Very interesting times ahead in the next few years...

madgstrader's picture

couple more headlines on the topic:  

The EU Debt Bubble: The Eurozone is Crumbling

Is another banking crisis looming in Europe?

and look what the chinese are reading this morning:

Silver Set for 14-Fold Price Rise?


Gold may extend its record to as high as $2,500 an ounce in the next year


now thats the kind of propoganda I like.



TGR's picture

Just out of curiosity, where are these headlines in today's press in China being shown? Blogspot is blacklisted in China.

jmaloy5365's picture

With all these smart people on ZH that say they know what's going on but still don't see the BIG picture. Figured someone like Reggie would have figured it out by now. Think Global chess with money.

jeff montanye's picture

perhaps it's time for your extended essay.  this web site invites them.

Snidley Whipsnae's picture

Jim Rickards said in his latest missive that we are going back to a gold reference which all currencies will be valued against.

This makes very good sense although bankers/govs will fight it till it is obvious to all that no other solution will work.

All PMs will need to be revalued much higher in order to return to a gold reference...I think all currencies will float against gold.

As soverign economies weaken/strengthen their currency will revalue vs gold. This should stop the currency wars that are now heating up.

If the world adopts a PM solution get ready for a huge wealth transfer, a lot of paper shredding leading to new winners/losers, and some conflict.

I hope we can bury Keynes once and for all... I hope the world will not forget what unbacked fiat led to because this is going to be a horrific ride.

AnAnonymous's picture

hope we can bury Keynes once and for all... I hope the world will not forget what unbacked fiat led to because this is going to be a horrific ride.


Keynes is irrelevant in the current mixing.

Nothing unlikely nowadays, only the normal progress of an expansion scheme. These days just happen to be the days when expansion becomes less and less a credible option.

Gold or any other hard currency had no different behaviour than fiat when it comes to expansion.

Smiddywesson's picture

They will never bury Keynes because they will never admit they were wrong.  In fact, none of this was ever about being right or wrong, that's just an academic concept and has nothing to do with the reality of keeping TPTB  in power.  TPTB put words in Keynes mouth to get what they wanted for 100 years, and now they are going to flush the toilet and continue to put words in Keynes, or someone else's mouth, to get what they want.  Big historical figures are big historical figures because TPTB in subsequent generations like to use them for their own purposes, otherwise they would be ignored.  Does anyone really believe Mohammed, or Budda, or Jesus really said half the stuff they were attributted as saying?  Keynes left a big enough body of drivil to be misused by TPTB, so they used it. 

When this is over, Ben Bernanke will be worshipped as a genius, or hated as a fool, when in reality he is just doing what TPTB want him to do to keep them in power.