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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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Sun, 09/18/2011 - 03:37 | 1681440 Rahm
Rahm's picture

Yuck.  Europe's net is gross.

Sun, 09/18/2011 - 04:30 | 1681471 Id fight Gandhi
Id fight Gandhi's picture

That Web graph hurts my brain

Sun, 09/18/2011 - 06:42 | 1681547 spiral_eyes
spiral_eyes's picture

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

Sun, 09/18/2011 - 08:00 | 1681589 sqz
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.

Sun, 09/18/2011 - 08:00 | 1681604 AldousHuxley
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.

Sun, 09/18/2011 - 09:20 | 1681680 BorisTheBlade
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.

Sun, 09/18/2011 - 09:35 | 1681699 falak pema
falak pema's picture

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

Sun, 09/18/2011 - 09:49 | 1681720 i-dog
i-dog's picture

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

Sun, 09/18/2011 - 10:35 | 1681794 PY-129-20
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:

Sun, 09/18/2011 - 10:57 | 1681830 libertus
libertus's picture

Beautiful women? 

Sun, 09/18/2011 - 10:57 | 1681831 libertus
libertus's picture

Beautiful women? 

Sun, 09/18/2011 - 11:11 | 1681853 falak pema
falak pema's picture

yes after a few beers...

Sun, 09/18/2011 - 12:31 | 1682034 horseguards
horseguards's picture

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

Sun, 09/18/2011 - 10:37 | 1681797 BorisTheBlade
BorisTheBlade's picture

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

Sun, 09/18/2011 - 12:28 | 1682024 horseguards
horseguards's picture

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

Sun, 09/18/2011 - 09:37 | 1681698 Raynja
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.

Sun, 09/18/2011 - 09:38 | 1681705 Thomas
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.

Sun, 09/18/2011 - 14:20 | 1682310 L G Butz PhD
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.

Sun, 09/18/2011 - 07:50 | 1681598 WestVillageIdiot
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. 

Sun, 09/18/2011 - 04:36 | 1681474 i-dog
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!

Sun, 09/18/2011 - 05:21 | 1681497 Id fight Gandhi
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.

Sun, 09/18/2011 - 08:02 | 1681606 WestVillageIdiot
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. 

Sun, 09/18/2011 - 05:58 | 1681521 Soul Train
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?)


Sun, 09/18/2011 - 06:18 | 1681535 Snidley Whipsnae
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.

Sun, 09/18/2011 - 06:50 | 1681542 falak pema
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. 

Sun, 09/18/2011 - 14:29 | 1682333 L G Butz PhD
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.

Sun, 09/18/2011 - 14:58 | 1682400 slewie the pi-rat
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!

Sun, 09/18/2011 - 18:13 | 1682997 LowProfile
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...

Sun, 09/18/2011 - 18:46 | 1683068 slewie the pi-rat
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???

Sun, 09/18/2011 - 08:50 | 1681653 Smiddywesson
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.

Sun, 09/18/2011 - 11:21 | 1681871 Life of Illusion
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.


Sun, 09/18/2011 - 10:41 | 1681805 Mad Marv
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.

Sun, 09/18/2011 - 11:20 | 1681867 Pegasus Muse
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.

Sun, 09/18/2011 - 13:45 | 1682200 cranky-old-geezer
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.

Mon, 09/19/2011 - 01:21 | 1683721 Idiocracy
Idiocracy's picture

petrodollar warfare.  The new Crusades

Sun, 09/18/2011 - 03:42 | 1681444 Miles Kendig
Miles Kendig's picture

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

Sun, 09/18/2011 - 03:49 | 1681448 Pretorian
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.

Sun, 09/18/2011 - 03:56 | 1681452 spiral galaxy
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?

Sun, 09/18/2011 - 04:39 | 1681479 i-dog
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!

Sun, 09/18/2011 - 07:47 | 1681591 Bendromeda Strain
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. 

Sun, 09/18/2011 - 08:59 | 1681663 Smiddywesson
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. 

Sun, 09/18/2011 - 11:00 | 1681836 Hulk
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...

Sun, 09/18/2011 - 03:57 | 1681451 madgstrader
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.



Sun, 09/18/2011 - 07:47 | 1681592 TGR
TGR's picture

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

Sun, 09/18/2011 - 04:00 | 1681457 jmaloy5365
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.

Sun, 09/18/2011 - 04:08 | 1681458 jeff montanye
jeff montanye's picture

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

Sun, 09/18/2011 - 04:17 | 1681459 Snidley Whipsnae
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.

Sun, 09/18/2011 - 05:43 | 1681511 AnAnonymous
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.

Sun, 09/18/2011 - 09:23 | 1681683 Smiddywesson
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.

Sun, 09/18/2011 - 10:18 | 1681769 Idiocracy
Idiocracy's picture

Didn't Keynes say "buid surplusses during good times and run deficits during bad times"?  

Maybe the fools are the psuedo-Keynesians or the neo-Keynsians.  But the advice from the original man seems pretty reasonable to me.  Common sense really.

Sun, 09/18/2011 - 10:44 | 1681809 AnAnonymous
AnAnonymous's picture

Common sense? in this US world order, it means nothing.

The US has pushed a game of consumption, meaning that the one who has consumed the most when the depletion line is hit is the winner.

Building up surplusses means nothing in this context. You cant conserve in such an environment.

The optimal path was chosen: in dire times, use them as an excuse to consume more and in good times, sell them as everlasting to consume even more.

Non consumption is no longer an option in this US driven world and any plan including non consumption is doomed to fail.

Sun, 09/18/2011 - 09:14 | 1681676 Smiddywesson
Smiddywesson's picture

Well there you go.  Snidley gave a succinct view of End Game.  I like Rickards' use of the phrase "gold referrence" rather than "gold standard" because it cuts off the arguments of all the idiots who want to cite that there's not enough gold to mint coins for a gold standard.  We are going back to a gold reference.  It will be a system the banksters can manipulate.  It won't be a monetary Valhalla, but it will push the reset button and make for a more sustainable way to  steal from us.  

Snidley's warning is worthy of reposting:

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.

TPTB are not going away.  They are not going to transfer their wealth to you.  You are going to transfer your wealth to them, instantly, and without your consent.  If all wealth is related to gold by edict, and then they ramp the price of gold, then every thing else drops in value in relation to that measuring stick.  They are going to drastically raise the wealth and living standard of those with gold, and drastically lower the living standard of the citizens of the West who don't have any gold.  In doing so, they will be able to forge a more sustainable system of trade and more stable currencies referrenced to gold.

It's not that TPTB hate you because you are powerless and ignorant, and they are so much better than you or I, it's just that they need to impoverish you for your own good.

Sun, 09/18/2011 - 14:16 | 1682297 cranky-old-geezer
cranky-old-geezer'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.

Rickards is flat wrong.

The Anglo banking oligarchy will not allow any sort of official currency peg to gold, neither fixed nor floating, nor any sort of official peg to any other real world commodity.

Keeping their central bank currencies completely free of any real world valuation is essential to their long-term plan of looting everybody's wealth, the core reason these fiat currencies exist.

And yes they're buying gold, quietly, a little at a time, to keep the price down.  Ditto for silver.  Their hope is to buy up most of the world's gold supply, plus confiscating sovereign gold supplies anywhere they can, like Lybia for example, and Greece and other PIIG nations eventually, one reason they'll keep loaning these governments money ...for a while.  But a few strong governments are catching on and buying gold too, like China for example, also quietly.

Why?  Because smart people have figured out what's going to happen eventually.   These Anglo bankers are going to print their currencies down to worthlessness.

Sun, 09/18/2011 - 14:55 | 1682393 L G Butz PhD
L G Butz PhD's picture

Not sure what Jim was referring to specifically.

My understanding of the "gold reference" was not an agreement to some sort of new gold standard.

What's more likely long term is an agreement to reset with a new global currency. The gold reference plays its part in the basket of sovereign weightings assigned to participating nations, where central bank gold holdings, among other things, are used to bargain for power and position. So, they'll still be able to print/inflate/cheat, whatever you want to call it. Hell, they could even agree to vary the weightings over time if it took that to get buy in.

As far as higher PM prices, have you weighed the probabilities for a temporary, engineered price plunge to shake out weak owners so that central banks can increase their holdings less expensively? Have you stress tested your emotions for that possibility and to which level of pain? Jus askin'.

Sun, 09/18/2011 - 19:09 | 1683122 slewie the pi-rat
slewie the pi-rat's picture

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

did he rilly?  huh?

someone tell the fuktard that all the currencies are already convertible to gold, silver, oil, wheat, T's, and NFLX & APPL, already.  or does he want to "fix" everything?  like a swissie is "fixed" to the euro? 

we have a ton of relly good parrots here on zH:  the "what he said" crowd gets bigger every day.  try thinking, snidley!  you can do it!  i know you've got enuf PMs to need a tandem axle on yer pick-up truck, man, so please stop w/ the deus ex machina where rickards = deus, ok?

i have pointed this out at least 1/2 dozen times:  all currencies are convertible to PMs all day every day, during "business hours" anywhere in the world, w/ very few "exceptions" (plus any "charges") RIGHT NOW

right now, the "US Dollar" = 1/1825th t.oz of Au = 1/40.7th t.oz Ag

no shit!  trust me

Sun, 09/18/2011 - 04:18 | 1681460 Troy Ounce
Troy Ounce's picture



Buy, buy, buy?

Sun, 09/18/2011 - 04:26 | 1681463 Snidley Whipsnae
Snidley Whipsnae's picture

Definitely, Troy Oz...

I have been patiently accumulating, awaiting a payday since 1968... I can wait a few more years, or months, or days.

I only wish we had never gone down the unbacked fiat road. Hard money, PMs, are a difficult task master. They allow for little of the frivolity that the Western Consumers have become accustomed to... this transition is not going to be easy for the current generations.

Sun, 09/18/2011 - 04:24 | 1681462 Banjo
Banjo's picture

Problem is you can't just cancel out the debts.


That's real money sitting in someones pension fund they are hoping to retire on.What if your grandma is the unlucky individual who's bonds just get erased to nett nett.  Therefore this has zero chance of happening.




Sun, 09/18/2011 - 04:29 | 1681469 Snidley Whipsnae
Snidley Whipsnae's picture

" Therefore this has zero chance of happening."

Only fools say never. It is going to happen because it's the only solution other than all out global nuclear war.

Which option would you prefer?

Sun, 09/18/2011 - 04:43 | 1681483 i-dog
i-dog's picture

Haircutz, bitchez!!

Bring out the barber poles.

Sun, 09/18/2011 - 04:39 | 1681478 PaperWillBurn
PaperWillBurn's picture

Re-value gold. Diminish debts. No more debt problem.



Sun, 09/18/2011 - 05:02 | 1681492 Troy Ounce
Troy Ounce's picture



A gold price revaluation would suit our political leaders: a paper solution to a real problem. And they can keep their cushy jobs.

Rather let the free markets solve the price setting of gold; after the civil war that is.



Sun, 09/18/2011 - 06:27 | 1681539 PaperWillBurn
PaperWillBurn's picture

A physical solution to a paper problem.

Sun, 09/18/2011 - 05:25 | 1681499 Lord Welligton
Lord Welligton's picture


Ireland does not "owe" Britain €93.32bn.

Ireland has sovereign debt.

€93.32bn of that debt is held by British Government/Institutions/Private Hands.

It simply cannot be done.

Sun, 09/18/2011 - 08:23 | 1681611 falak pema
falak pema's picture

If Ireland has "sovereign" debt, Ireland's government can strucutre debt resolution as they seem fit. Its their sovereign privilege. All banks and Institutions have to follow suit especially if they're hocked to their eyes. Don't understand why "It simply cannot be done". It can if you have the will.

As for "theft on a massive scale"...its like saying making the financial oligarchs/institutions, who have participated in this ponzi responsible for their acts, is "theft". The only real theft is what the innocent people suffer as a result of governmant and banking collusion in the past.  Present governments should make those private institutions now share in the hair cuts. Its all interconnected this private sector ponzi. Its the people's future which should be first government priority NOT those of the financial institutions. The netting operation has the result of making each sovereign government take on the responsibility of DEFINING the priorities of how its OWN private sector shares the collective pain of their INTERCONNECTED particiapation in this financial scam. That's the LEAST they can do to clean the international financial maze and let the world move on to solving OTHER structural issues than the current Euro banking crisis thats feeds the pockets of speculators and fleeces more and more the people.

Sun, 09/18/2011 - 08:23 | 1681625 Lord Welligton
Lord Welligton's picture

It can if you have the will.

Ireland is no longer sovereign. Passing various EU treaties saw to that.

Sun, 09/18/2011 - 08:28 | 1681628 falak pema
falak pema's picture

That's too superficially asinine as statement. They have choices, they are a sovereign state; one of which is to default; the second of which is to accept staying in the Euro scheme but in a controlled fashion as this netting scheme could imply. But its not Ireland alone that has to cooperate, its the UK, and that's where the key resistance is today. In the City.

Sun, 09/18/2011 - 09:39 | 1681707 Lord Welligton
Lord Welligton's picture

Might I ask what country you are from?

Sun, 09/18/2011 - 10:57 | 1681823 falak pema
falak pema's picture

why is that an issue to the argument? All Eu states HAVE retained their sovereignty within EU monetary union. Only delegated what they felt was worth sharing. The Irish are still in charge of their own destiny in legal, and  political terms, their governments are sovereign. If there is a way of resolving this private banking debt problem which alleviates pain for the people, for democratic institutions and their future,  but not for private financials, then that is the way to go!

I don't know all the dirty financial facts about this convoluted ponzi, its banking and political ramifications, its incestuous combinations. But if there is a feasible netting scenario it should be considered.

Sun, 09/18/2011 - 05:32 | 1681503 TJ00
TJ00's picture

Yes! That is the point I was going to post, they are not netting out sovereign against  sovereign but sovereign against private capital in pensions, banks and other funds, which is theft on a massive scale.

Sun, 09/18/2011 - 05:36 | 1681505 AnAnonymous
AnAnonymous's picture

Problem is you can't just cancel out the debts.


Trading debt for debt only works when the agents are solvent. Meaning they have wealth to pay back their creditors.

As the west has been growing a Ponzi scheme to concentrate the wealth of the rest of the world into the Western world, well, the very idea of trading debt for debt is rather a funny one.

Sun, 09/18/2011 - 12:16 | 1681981 horseguards
horseguards's picture

That's the truth, isn't it? The bankster fucks' attitude of "I'm alright, Jack, my arse is fireproof".


Sun, 09/18/2011 - 13:48 | 1682215 FeralSerf
FeralSerf's picture

"What if your grandma is the unlucky individual who's bonds just get erased to nett nett. Therefore this has zero chance of happening."

Not! It's happening right now before your eyes in the form of negative interest rates! The after tax, after inflation interest rates on savings and bonds are at historic negative (read confiscatory erasure) levels. Grandmas are applying for food stamps and other assistance at record levels.

Sun, 09/18/2011 - 04:27 | 1681464 k1000o
k1000o's picture

Nice excercice bu it seems a big picture approach, if we go to a lower level of granularity into the countries and analyze who are the creditor and debtors the equation will not be so simplistic.

Sun, 09/18/2011 - 04:27 | 1681466 hansg
hansg's picture

Wait, but how is this supposed to work? The debt is not between countries, but rather between countries and private (or semi-private) entities like banks, isn't it? So let's say country A owes a billion to a bank in country B: why would that bank agree to drop its claim on country A if it gets nothing in return? Or would it get a similar claim on its own country in return? If so, debt would not be reduced at all, it would be localized. Which may not be a bad thing, depending on which country you are in of course...

Sun, 09/18/2011 - 04:31 | 1681472 Snidley Whipsnae
Snidley Whipsnae's picture

"why would that bank agree to drop its claim on country A if it gets nothing in return?"

We cannot get agreement between US Banks and US Mortgage holders that are underwater. How then would we see more complex debt agreement.

An exercise in futility, once again tilting at windmills.

Sun, 09/18/2011 - 04:47 | 1681485 i-dog
i-dog's picture

"An exercise in futility, once again tilting at windmills."

No. IMO, it's a disingenuous puff piece sttempting to steer opinion towards fiscal union. It's also a false dichotomy.

Mon, 09/19/2011 - 06:48 | 1683877 Bringin It
Bringin It's picture

i-dog Consider this a token green arrow as it's not working on your post above.

Sun, 09/18/2011 - 04:28 | 1681468 k1000o
k1000o's picture

Nice exercise but it seems a big picture approach, if we go to a lower level of granularity into the countries and analyze who are the creditor and debtors the equation will not be so simplistic.

Sun, 09/18/2011 - 04:41 | 1681480 Mr.Sono
Mr.Sono's picture

I thought united states also held some of the EU debt. where are thy in this chart?

Sun, 09/18/2011 - 04:58 | 1681491 DaBernank
DaBernank's picture

The FED just provides liquidity when needed, they don't even bother buying any assets, they'll just print more.

Sun, 09/18/2011 - 07:15 | 1681561 Chaffinch
Chaffinch's picture

The awful truth is that these charts (which make my head hurt too) have been hugely simplified. The US does not feature, neither does the rest of the EU, let alone the rest of the world. The BIG picture would be far too confusing to present in this way - and, yes, we would need more granularity so we could see the banks and other players in each country.
Maybe some kind of horrific spreadsheet would help us (and them) see what a mess they have created.
It has got to be painful to sort out this mess - there will have to be haircuts / theft / forgiveness - and there will have to be some new rules to set up before the game gets re-started or we will end up in a similar mess all over again.

Sun, 09/18/2011 - 04:42 | 1681481 SHRAGS
SHRAGS's picture

Debt creation, care & feeding is in the interest of the banksters, I'm sure they'll throw up as many roadblocks as possible to stop something like this happening.


Sun, 09/18/2011 - 04:43 | 1681484 UK debt marsh
UK debt marsh's picture

So if I hold a Spanish bond, I should stick it in the shredder, if a Spanish pension fund holding a UK bond agrees to do the same.  A mutual financial suicide pact, so that the borrowers can.....well, go out and borrow some more later.  Thelma and Louise meets the IMF.

I like it!  Anyone know of some good bridges for sale?

Sun, 09/18/2011 - 07:17 | 1681563 Chaffinch
Chaffinch's picture

Yeh there's a really nice one from Brooklyn to Manhattan.

Sun, 09/18/2011 - 11:42 | 1681913 edotabin
edotabin's picture

Yeah my real estate agent sent me the MLS listing on that bridge yesterday

Sun, 09/18/2011 - 13:58 | 1682239 FeralSerf
FeralSerf's picture

I suppose, if your government agrees, you might be get some public assistance from the UK taxpayer.  You did help reduce his debt load, eh?  Do they have food stamps in Britain?  You sound like a deserving bloke.

Sun, 09/18/2011 - 05:14 | 1681493 TheLooza
TheLooza's picture

That interesting.  That's fucking interesting, man.

Sun, 09/18/2011 - 05:17 | 1681496 Troy Ounce
Troy Ounce's picture



Perhaps an old one, but I understand it works more or less like this: 

 A German walks into an Irish Inn and inquires about a room.

The inn keeper tells him they have several different rooms available.

The German says he would like to see them. So the Inn keeper gives him a handful of keys and the German puts down a 100 euro note on the bar for security and walks away to begin his inspections.

The Innkeeper takes the note and runs down the street to the brewer and gives it to him to pay the brewery tab he's been behind on.

The Brewer takes the note and goes next door to the butcher who he owed money to for some time and pays him off.

The butcher takes the note and drives out to the farmer who sold him his livestock to butcher and pays him off.

The farmer runs back into town to the feedstore and pays his bill that he was owing for some time.

The feedstore owner slips out to the alley and finds the lady of the evening that's been running a tab on him.

The lady takes her note and walks to the Inn and pays her bill for several rooms she's been borrowing now and then and promised to pay soon.

The 100 euro note is barely on the bar a few seconds when the German walks back in and says he's really not interested in any of the rooms, picks up his note and walks out of the Inn.

  • All debts have been paid
  • Optimism returns
  • We thank the Germans.
Sun, 09/18/2011 - 05:31 | 1681501 AnAnonymous
AnAnonymous's picture

This little circulation money scheme explains why the burden of saving the world aka the western world is currently shouldered by commodities rich countries.

The West has put no wealth on the table, only promises to be paid and the coercion structure going with it that ensures circulation of wealth.

Funnily enough, but not surprising, US citizens (to be found mostly in US, Japan and Europe population) love to depict themselves as the victims in the story, with third worlders leeching from them.

Once again, the collapse is not to be found investigating within that is the US, Europe and Japan, but by investigating the exterior and its resiliency to perpetuate the western ponzi scheme.

Once this capacity is over, then collapse is a credible threat.

Kicking the can down the road till there is no road left and the road is made of material taken from third worlders...

Sun, 09/18/2011 - 06:02 | 1681524 Snidley Whipsnae
Snidley Whipsnae's picture

"The West has put no wealth on the table, only promises to be paid and the coercion structure going with it that ensures circulation of wealth."

What was really being put on the table before?

The promise that US Consumers would continue to consume! I repeat... The promise that US Consumers would continue to consume.

That was the promise that the low cost producer countries wanted... They didn't buy into the Full Faith and Credit of the US Government.

The US undercut this promise by adopting policies that insured wages would stagnate since ~ 1980.

It was always a Ponzi Scheme from the time that the dollar link to gold was servered...But, it worked ok for a time as most Ponzi Schemes do. Hey, printing dollars backed by nothing and with a cost of zero?...Who wouldn't like that idea?  

US Consumer wages remained stagnant for 30 years while world commodities costs were rising. It was only a matter of time until the commodities costs for low cost production countries rose to make their exported goods more expensive (leaving out the fact that labor costs were rising in low cost producers). This is now showing up in reduced sales at companies like Wal O Mart, Circuit Biddy, auto parts, et al. Because the so called middle class in America is now unable to afford housing, food, and energy PLUS buy more consumer crap from off shore.

Everyone can't be an exporter.

The US chose the roll of consumer and off shored production. The US allowed wages to remain low while productivity gains were given to the couple of per cent at the top of corporations and big banks. We are now facing the end game of those decisions.

Reset time. Call it a paradigm shift, a new financial model, whatever... This model is broken.


Sun, 09/18/2011 - 06:14 | 1681533 AnAnonymous
AnAnonymous's picture

The promise that US Consumers would continue to consume! I repeat... The promise that US Consumers would continue to consume.

That was the promise that the low cost producer countries wanted... They didn't buy into the Full Faith and Credit of the US Government.



The promise that the US consumers would continue to consume is not a promise, or it has been delivered on. In cases, it is a reality.

Low cost producers countries certainly do not want that promise. Actually, most of them would gladly consume their own production as it would ease their internal tensions big time.

But they have to cope with the fact that they live in a US world order, that they need resources to support themselves and that these resources are traded in USD.

At the present point, commodities selling countries need USDs to buy back the commodities they extract from their own soil (free market economy)

They would do gladly without the reality that the world has to be organized to support, maintain, expand the consumption made in the West and more largely in the West.

But to survive, they need USD and one can only get USD by trading with the US.

Sun, 09/18/2011 - 06:26 | 1681538 Snidley Whipsnae
Snidley Whipsnae's picture

LOL... The dollar is toast. On borrowed time. Finito. Kaput...

The idea that the dollar, in current form, will be the world reserve currency 10 years from now is amusing.

The only reason that the US dollar is still used extensively in trade is because most oil is transacted in dollars. That is changing as we type.

Oil for dollars is maintained by US military. No military can remain strong if there is not a strong economy behind it.

The US economy is anything but strong.

Sun, 09/18/2011 - 08:04 | 1681609 AnAnonymous
AnAnonymous's picture

The idea that the dollar, in current form, will be the world reserve currency 10 years from now is amusing.

The only reason that the US dollar is still used extensively in trade is because most oil is transacted in dollars. That is changing as we type.


So the Dollar would have served its purpose.

If somebody buys all the wealth possible using fiat and debt, fiat collapsing and being unable to go into debt no longer matters.

Nothing left to be bought. This is a kind of end game.

Sun, 09/18/2011 - 11:51 | 1681930 Snidley Whipsnae
Snidley Whipsnae's picture

"So the Dollar would have served its purpose.

If somebody buys all the wealth possible using fiat and debt, fiat collapsing and being unable to go into debt no longer matters.

Nothing left to be bought. This is a kind of end game."

Not really... Since all commodities have not been bought... Oil continues to be extracted, wheat continues to be harvested, copper continues to be mined, lumber continues to be harvested.

But you have put your finger on the crux of the problem... We are approaching the point at which no one will accept dollars (and some other fiat currencies) for commodities.

So, yes, in a way the dollar has served a useful purpose for several generations of Americans. But, like all fiat currencies it has a 'use by date'.

All we are now witness to are schemes built on schemes to avoid the 'use by date'.

Sun, 09/18/2011 - 07:40 | 1681585 Steroid
Steroid's picture

This is exactly what Real Bill would do.

Read Fekete!

Sun, 09/18/2011 - 11:59 | 1681943 Buckaroo Banzai
Buckaroo Banzai's picture

Fekete is a genius. Without a return of Real Bills, we are screwed.

Sun, 09/18/2011 - 09:02 | 1681666 tomreagan
tomreagan's picture

Great story, however this assumes that nobody has levered up. If everyone owed each other $100, well then case closed. If alldebts were of equal size in Europe and only owed to each other (i.e.not globally held), also case closed. Alas, too many phd's at workn here. There is one overriding problem to this whole mess in Europe. THERE ARE RULES TO THE GAME AND RULES TOTHE CLUB THAT DEMAND ADHERENCE WITHOUT A PUNISHMENT MECHANISM FORTHOSE WHO DO NOT. Fix one of those, I am afraid I know which one they will change.

Sun, 09/18/2011 - 05:23 | 1681498 Byte Me
Byte Me's picture

So, you're telling us that -- all things being equal -- the lender of last resort to the entire EUROZONE - is BRITAIN?

If this web of debt that you illustrate is for EURO 'assets' -- then the data must be faulty.

Sun, 09/18/2011 - 05:37 | 1681506 Snidley Whipsnae
Snidley Whipsnae's picture

We already know the data is faulty because it doesn't include the soverign debt held by US Banks... and, theres is some exposure because US Banks have admitted it.

What about derivative exposure? How about all the derivative bets that have been made?

Estimated to be $600 Trillion, I believe that this toxic derivative cloud should be included in the chart. Of course, no one will know exactly what the derivative bets are until the financial system implodes...just as we don't know if the US has any real, unemcumbered gold left, and we won't know till it has to be put on the barrel head for soverign backing of the USA.

So much paper, so few real assets.

Sun, 09/18/2011 - 05:57 | 1681519 wandstrasse
wandstrasse's picture

until the financial system implodes... it has been imploding since a while now - and will go on imploding; all happens ultra slow-mo. Do not wait for a big bang moment. We are in the middle of that bang.

Sun, 09/18/2011 - 06:16 | 1681534 Byte Me
Byte Me's picture

Certainly the derivative angle is important (sic) -- how could it not be. But 'they' keep this off book in SIVs in the Shadow Banking arena and it's never marxed to market or brought out into the open, probably because the various +/- really sucks and they have to perpetuate this endlessly.


But as I see it the REAL tangible assets are what sensible people are accumulating. They're real currency and will be tradeable/barterable if there's a market dislocation.

Banknotes are commonly held media that we all use to settle in place of barter -- but they're still a derivative asset.

Sovereign bonds OTOH are higher order derivatives since someone is trying to inject 'money' into an economic system out of thin air -- usually to spend what they don't currently bloodsuck in tax, and the acceptance of this 'miraculous concatenation of non-existence' , as sold to the gullible peeps is largely the root of our collectiveproblems.

All the fancy-dancy CDOs, CDSs, and an endless stream of other crap that constitutes 600tril of make-believe are yet another degree of derivation, created by pathological lunatics who never understood what the term "Enlighteded Self Interest" meant semantically.

I do not disagree with you at all in your reply, but would say this -- the solution for the 600tril is simply to cancel the whole lot. Period. Since it exists in the Shadowlands and is comprised of figments of peeps perceptions of symbols of true value -- then there's ZERO loss in the real world.

Would the Banks scream? Would some (all) go to the wall? You bet. But the system would clear -- and then we could get down to implementing sime acceptable version of Sound Money.

Sun, 09/18/2011 - 07:33 | 1681581 Chaffinch
Chaffinch's picture

You said "what about derivatives exposure" Snidley - this is a very good point - the charts are merely an introduction to the problem. The world is trading pretty close to 24/7 and so no charts could ever keep up. New inter-linking debts are created virtually every milli-second. All we can ever help to see is a moving snapshot of a blurred fast-moving mess of debts.
Until the music stops.

Sun, 09/18/2011 - 05:41 | 1681509 desirdavenir
desirdavenir's picture

actually, it would be *debtor* of last resort (whatever that means). If the arrow goes from A to B, then A owes money to B.  

And yeah, french have a big tendancy to spare a lot, which shows in this graph...


Sun, 09/18/2011 - 06:39 | 1681543 Byte Me
Byte Me's picture

Yeah -- highly suss that France ends up as a "scratch".

And even more unlikely is the implicit "Italy is actually a good Guy" when their Byzantine governments have endlessly 'Done a Greece' and bought everyone off.

(Case in point  --- in Afganistan, the Italian contingent of NATO forces pays the Taliboobs NOT to attack the Italian troops...)

Sun, 09/18/2011 - 14:05 | 1682262 FeralSerf
FeralSerf's picture

It's cheaper than buying bullets and paying pensions to the disabled vet.  Afghans are a lot cheaper than Italians.

Sun, 09/18/2011 - 05:41 | 1681507 Youri Carma
Youri Carma's picture

Why not the Tulip Mania solution?, 29 April 2010, by Youri Carma (FPP)

Tulip Mania solution meaning Force Majeure, void debt, stripe away against each other all bogus solely paper derivative debts.

My major solution, and I have been saying that from the beginning of this crises, is the Tulip Mania solution but that has to be done on a great platform in which all the problem dependent countries stick there heads together to stripe away the insane on and off balance sheets debts against each other which mainly were created by the “synthetic” derivative system created to serve the banksters not the real economy.

FORCE MAJEURE! – Call Void All Bankster Bogus Derivative Debts! Because paying off these trough fraud induced debts have become a technical and practical impossibility.

Sun, 09/18/2011 - 07:36 | 1681583 Lord Welligton
Lord Welligton's picture

Difficulty is that the banks have captured the State.

If one goes the other follows.


Sun, 09/18/2011 - 08:04 | 1681608 falak pema
falak pema's picture

If it's true then that's the most damning statement I've read on ZH about the state of western governance...Caesar's palace is open to all gamblers...'cos Caesar is waiting in the aisles.

Sun, 09/18/2011 - 13:04 | 1682119 Prometheus418
Prometheus418's picture

That's not a difficulty- that's a bonus.

Sun, 09/18/2011 - 14:10 | 1682279 FeralSerf
FeralSerf's picture

I suggest that the State was originally organized as a subsidiary of the Banks.  There was no capture necessary, only occasional enforcement and payoffs.

Mon, 09/19/2011 - 03:27 | 1683775 Youri Carma
Youri Carma's picture
You can kick the can down the road for a while but ...

You can kick the can down the road for a while but everybody knows that it’s a blind alley so that in some point in time you gonna hit the wall. Even technicaly the debt hidden away in the shadow banking sytem can’t be payed back let alone even have to think about acting out the thought of talking such a immense, mainly true fraud induced debt and putting it on taxpayer’s shoulders. Everybody can see now where this is leading us too, these auterity measures and the money printing. We see countries’ economies destroyed by insane austerity measures purely for holding up the twisted ego of some banksters who didn’t get any cut. On the contrary, bankster bonuses increased while main street is rotting away. These creatures are real hyana’s who like to pick of a bare bone cause that’s all that is left of the real economy by now.

It’s an Insanity

It’s an insanity and it’s killing this economy which can’t lend at a zero% rate. Why not lend money at a zero% to mainly small businesses who, and everybody knows that, are always creating more jobs in general while big businesses can generate their own capital but sitting on it and, more importantly, are cutting back costs by sacking personal and lowering wages.

Fraud and Corruption

What most people don’t seem to understand is that this true fraud induced debt never will go away nor will the fraud and corruption if people don’t stand up and let their voice be heard. We’re not alone anymore, we are the majority but our voices must also be represented in the mainstream media so that a public discussion can take place about how to actually solve this mess the banksters left us in. Most certainly you can’t solve this problem by giving more power to a failed class of banksters and corrupt politicians who brought us into this mess in the first place. One must be realy out of his mind to even want to acomplish this, knowing you destroy complete societies and leave their economy in shambles. It happened in Argentina and other countries but now it’s happening in U.S., Great Brittain, Greece, Spain, Portugal and even now in Germany and the Netherlands. Unmployment went up and housing prices declined for an other 3th year after starting in 2008.

Why not the Tulip Mania solution?

Tulip Mania solution meaning: ‘Force Majeure!’ Void debt, stripe away against each other all these bogus paper derivative debts. Because paying off these trough fraud induced debts have become a technical and practical impossibility. Simply stripe away these insane on and off balance sheets debts which were created by and for the banksters not to serve the real economy. These synthetic and non-synthetic derivative weapons of mass destruction are a great danger to society and have to be banned out at any cost. These costs will easely be returned by a far better working society in which actual jobs are created.

“debt moratorium”

There gotto to be an organised “debt moratorium” (term coined by Webster Tarpley) somehow cause one simply can’t solve this debt crises by creating more and more of it. Of course this has to be arranged on the biggest platform possible in which all the problem dependent countries can stick there heads together in order to finaly provide us with some real solutions.

Derivatives are banksters ‘weapons of mass destruction’

Derivatives are banksters ‘weapons of mass destruction’ attacking countries driving up oil and food prices. These weapons of mass destruction have to be disarmed before they blow us all up. That’s crazy and only will lead us to death and destruction also if these lunatics, again, are able to lead us into WOIII. And nobies’ waiting for that to happen.

  IMF Same Exact Four-Step Program

1.0 Privatization ‘Briberization.’

2.0 IMF/World Bank capital market deregulation allows investment capital to flow in and out the “Hot Money” cycle.

3.0 Market-Based Pricing, a fancy term for raising prices on food, water and cooking gas

3.5 IMF and World Bank call their “poverty reduction strategy”: Free Trade- “The IMF riot.” 

'Countries can reduce their total debt by 64% through cross cancellation of interlinked debt, taking total debt from 40.47% of GDP to 14.58%.'

Sun, 09/18/2011 - 05:40 | 1681508 Crash N. Burn
Crash N. Burn's picture

 Forgive my rookie ignorance but, if as outlined by Mike Maloney in this vid:


Debt is money (to a bankster), if you erase the debt, does it not collapse the ponzi faster?

Sun, 09/18/2011 - 05:54 | 1681513 Achilles
Achilles's picture

if you erase debt, then money supply will fall by a huge amount and it will cause deflation on an gigantic scale. money is debt.

Sun, 09/18/2011 - 06:21 | 1681537 Crash N. Burn
Crash N. Burn's picture

Tks Achilles.

Sun, 09/18/2011 - 06:30 | 1681540 falak pema
falak pema's picture

The ISSUE NOW is not deflation per se, its geting out of the mega debt crisis, and then trying to minimise the deflation collapse AFTER the debt bubble has imploded, both in EU and in the USA with its banking sector derivative pile up. As for asset  deflation after debt implosion, it is INEVITABLE. The new financial architecture must then ensure we are never taken back to where we are today by these same criminal Oligarchs who run current finance. Burn them and their ponzi institutions FIRST, then worry about inflation resolution ONCE the cancer has been extirpated. But first things first.

Sun, 09/18/2011 - 08:20 | 1681622 Nate H
Nate H's picture

removing the cancer would cause heart attacks and bubonic plague (widespread trade outages for key goods)

Sun, 09/18/2011 - 08:34 | 1681632 falak pema
falak pema's picture

so...? which way do you want to die?

Sun, 09/18/2011 - 05:52 | 1681515 valuetrader
valuetrader's picture

I don't believe this data. It is impossible to collect good data concerning this issue. In addition to government debt there is bank, corporate and other obligations. I suspect that some of the debt is not accounted for properly. How do you account for Greek debt held by the London office of BNP. Is this UK or France? Where is the ECB held debt? Don't believe anyone has a clue what is going on. Of course, the EU can analyze this but they probably don't want to ... I think they should even if the results cause a severe headache. Just make sure you have a lot of aspirin in advance ...

Sun, 09/18/2011 - 06:52 | 1681520 falak pema
falak pema's picture

Can the euro politicians impose banker transparency and then a federated banking solution along these net worth lines? 

If they can't in this eleventh hour play then Euro zone is condemned by its own weak political will and financial squabling.

Having a figure president who is a non-identity like Van Rompuy is a clear indication that MErkozy does not think collective. 

And that maybe the City and the Bankstas don't want to open their books. UK banking is central in this netting play...

BTW :  It would be nice to have RM's opinion on this as he has placed FrencH/Italian/Belgian banks as central to euro banking exposure, not UK.

Sun, 09/18/2011 - 06:33 | 1681541 Martin T
Martin T's picture

Glad somebody finally started to look at debt compression and it is not a new idea. CDS compression already exists and is a great solution to reduce risk as well as credit exposure.


Thursday, 9 December 2010- Europe - The end of the Halcyon days

"A way of reducing the burden of debt for peripheral countries, would be to create a European Compensation house and to do some debt compression. They would need to allow creditors to swap the debt of peripheral countries into more solid Euro-bonds issued at the ECB level, provided their is a haircut on the existing peripheral debt. Unfortunately the game of kicking the can down the road is still well alive with French and German politicians. At some point restructuring of the debt for some peripheral countries will have to happen."

Sun, 09/18/2011 - 06:41 | 1681545 godzila
godzila's picture

Sorry to ask a seemingly dumb question but how do we know who actually owns this debt ? I'm pretty sure that there is not stat as of who is that actual final investor, just that bank X is holding Y amount of bonds for it's customers.

Sun, 09/18/2011 - 06:50 | 1681548 pamriallc
pamriallc's picture

governments do not owe the CDS speculators anything. in fact we wrote about just such a solution with a contribution via Stiglitz almost two years ago. by netting-away all of the unsustainable liabilities, we have nothing more than a numerator/denominator cancellation. this leaves countries dramatically stronger with the need to tax their people substantially less, and as a result, grow so much more.  the question would be "will they do it" and not weather or not its a good idea.  its a brilliant idea, written over two years ago.  solutions delivered daily.  even a couple of years ago.

Sun, 09/18/2011 - 07:30 | 1681580 lolmao500
lolmao500's picture

A solution is the last thing they want. Solutions do not bring control, nor enslave the people to the bankers.

Sun, 09/18/2011 - 07:48 | 1681595 tradewithdave
tradewithdave's picture

Convincing the constituency that there are only two expensive choices is the key when you want the banker to be the hero in the end.

Dave Harrison

Sun, 09/18/2011 - 09:17 | 1681605 NuYawkFrankie
NuYawkFrankie's picture

Aaaahhaaa! Just figured it out!!!

For all youse NFL fans out there, if you look closely at that first graphic then you might notice that it's nothing more (albeit cleverly disguised) than a collage of successful offensive plays by the NY Jets in last weeks Dallas Demolition Derby! In the schema Jets QB Sanchez, for instance,  is represented by France whilst TE Dustin Keller is Britain and wide receiver Plaxico Burress is Germany. I dont think I'm giving too much away in revealing that the thickness of the connecting lines represents the relative frequency of corresponding passing plays (with the actual percenbtage completion given by the numerics x 1,000) in that Cowboys game

Now here's the interesting part: It seems that Coach Rex Ryan has distilled the game-plan for todays demolition of the Jacksonville Pussycats in that 2nd graphic - as you can see, it's a no-holes-barred offensive smash-fest with tight-end Jeff "Jeffie" Cumberland as Spain being the main point man and, of course, Plaxico - sporting a Greek persona this time around -  again being the wide-receiver of choice.

Now the question remains: Why would Rex reveal his game-plan - although cannily disguised - on ZH of all places?

Well, try putting yourself in Coach Ryan's rather ample tracksuit. Not only Jacksonville, but the eyes of the world are on you trying to decipher your every move. Lets also assume that 1/2 the Jets team is in transit and Coach Ryan - for fear of being hacked - doesn't want to contact them via phone - landline or cell. What better way to pass along his gameplan than disguising it as a ZH posting on the European Cross-Country Debt Crisis? I mean - think about it: Who the f. is gonna go looking there for NFL offensive lineups? Also, you can stick graphics in that sucker to your hearts content - with almost no-one the wiser!

Wow! Can you think of a more mind-bendingly inventive plan? Has ZH unwittingly transmorgified before our very eyes into some sort of clandestine NFL coaching battleground of wits? Only time will tell - and at this stage, of course, we can only conjecture; but who in their wildest dreams wouldathunk! Sheer genius!

In the meantime - Go Jets- you-gotta-beleef!!!

Sun, 09/18/2011 - 09:29 | 1681692 WmMcK
WmMcK's picture

Wake me up when we're in punt formation.

Sun, 09/18/2011 - 08:07 | 1681610 gwar5
gwar5's picture

Netting out crosslinked debt is an interesting excercise. But I still hope the EU crashes and dies. The EU is the spawn of supranationalist elites who depise democracy and self determination of the people.

The interdependency is supposed to make us think our problems are all irreversibly interlinked and that the solutions require supranational/global government and banking.  Don't fall for it.


Sun, 09/18/2011 - 08:14 | 1681618 Nate H
Nate H's picture

for this to work it would have to be global (and it really would be a great idea (given the options), but USA, UK and Japan signing on would be nigh impossible

Sun, 09/18/2011 - 08:34 | 1681635 Sudden Debt
Sudden Debt's picture

How easy it might seem, it isn't.

Those loans provide a revenue stream and it sometimes is more logic to loan at 4% and lend at 5%.

If you cut away the net, GDP will go down 3 to 4% in total and the banking sector would bleed beyond belief.

We're a society of debt. Take away the debt and you take away the revenue.


Sun, 09/18/2011 - 08:53 | 1681641 Georgesblog
Georgesblog's picture

I agree with Harmon Taylor's position.

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Commercial problems require commercial solutions. The central banks want the debtor nation's gold holdings. History says that they will start wars and undermine governments to get what they want.Gold is the measure of independence and Sovereinty. Europe has a unique problem. Their governments have track records of being extorted and blackmailed by the central banks for hundreds of years. The solution will not be as simple as revaluing gold.  The objective of Commerce is always conquest. It follows the same pattern, throughout history. It begins with blockade and embargo. Invadion follows. Evenyually, the result is subjugation. Over time, an increasingly coercive form of slavery develops.  The proof is in the fact that governments act as agents of the central banks and the debt  is never repaid. We saw this play out, this past week. When a government can be told that it must commit more taxpayer funding to support the debt system, that is demanding tribute. Conquered nations pay tribute to the conquerer. The debtor shall be servant to the lender. 

Sun, 09/18/2011 - 09:01 | 1681665 pamriallc
pamriallc's picture

this all depends on how the "debtor" feels about the lender.... once the debtor has gotten past "feeling" like he owes the creditor anything, well, then it begins to not matter anymore.  there is no debtors prizon where sovereigns are found.  furthermore, as russia so aptly discovered.... once defaulted, the world is quick to lend to the people again once liabilities have been "renegotiated" and it took what?  5 years?  yes the hard truth is that through default, things turn around with almost surreal speed.  that's the nature of groing while debt free.

Sun, 09/18/2011 - 10:22 | 1681773 the PTB
the PTB's picture

@ Georgesblog:

Some one has finally noticed.  This is exactly what has happened and is happening to all of us lemmings.

Sun, 09/18/2011 - 08:55 | 1681657 DeadOnArrival
DeadOnArrival's picture

The only plausible solution to all these "unsustainables" is a balance budget amendment. Any other solution/action addresses the symptoms and is not a cure.

Sun, 09/18/2011 - 08:55 | 1681658 ??
??'s picture

There is a new post by London Banker

I must admit to being delighted that the EU finance ministers have found unity on one point: dismissal of Tim Geithner as officious, ignorant and unaccountable. He is an example, right up there with George W. Bush, of the privileged American elite who "fail upwards" throughout a career.

Sun, 09/18/2011 - 11:56 | 1681938 Snidley Whipsnae
Snidley Whipsnae's picture

??... Excellent quote.

Sun, 09/18/2011 - 09:15 | 1681669 Die Weiße Rose
Die Weiße Rose's picture

“We don’t think that real economic and social problems can be solved by means of monetary policy,” said German Finance Minister Wolfgang Schaeuble.

The Global Financial Crisis was caused by US Ninja Loans and too much Debt. Tim Geitner and the US FED want to solve their 15 trillion Deficit problem by taking on more and more Debt. It is clear that this experiment is bound to fail for the US. The US will not get their fiscal Deficits under control without Revenue, ever more spending and by taking on even more Debt.

“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.

The US has caused the Global Financial Crisis and so far has done nothing to rectify the real problem, which is too much Debt.

There is no Consensus and no Idea at all in US Congress about how to get the US Budget Deficit and the balloning US National Debt of 15 trillion under control and so far the only answer from the Central US Bank was to debase the reserve currency ,the USD by quantitative easing and endless schemes to keep Interest rates at Zero in the hope that China and others will bear it and beggar thy Neighbor might work for a while longer.

The US has no fiscal discipline and by now is morally, financially and economically bankrupt. You don't even talk about Unemployment anymore, so Europe becomes a welcome distraction, to take the focus from the real problems at home.

About 428,000 Americans filed for their first week of unemployment benefits last week.

Geitner and Bernanke are fools who should keep their bad advise to themselves, because noone is listening to such fools any longer. The reason why Empires must fall is usually caused by two factors : Ignorance and Greed.



Sun, 09/18/2011 - 10:49 | 1681817 AnAnonymous
AnAnonymous's picture

The US has caused the Global Financial Crisis and so far has done nothing to rectify the real problem, which is too much Debt.


No. The major problem is the end of expansion. It has turned to scrapping the barrels.

Debt is irrelevant, expansionists are used to bidding debt against the future earnings a successful expansion will input.

The future earnings are existent as expansion (at least of the West) is something of the past as the West is reaching the limit of global expansion.

Got to love US citizens. The problem is screaming right in their face, but as usual, they prefer their propaganda over facts.

Sun, 09/18/2011 - 11:21 | 1681872 Hulk
Hulk's picture

As Denninger states, debt and growth are two exponential functions that run away from each other. We are experiencing that now. The 400k+ prints for the past 23 or so weeks is quite alarming...

Sun, 09/18/2011 - 09:54 | 1681696 Earl of Chiswick
Earl of Chiswick's picture

Live Americas Cup Series (Plymouth) Final  Day 7

youtube live stream (sailing starts in about 40 minutes)

Live in HD

Sun, 09/18/2011 - 09:46 | 1681715 bugs_
bugs_'s picture

net along or debt along

Greece you can end this for us.  Tear down this net.

Sun, 09/18/2011 - 09:52 | 1681729 fdisk
fdisk's picture

Easier and more logical just to inflate DEBT bubble.
Print, Print, Print. So when prices and salaries rise
10x, 600 billion Greek debt will look like a pocket change.

Sun, 09/18/2011 - 10:04 | 1681748 PulauHantu29
PulauHantu29's picture

Everybody walks away from their debt. That's simple. Americans are way ahead of you walking away from thier mortgages, credit card bills, hospital bills...not paying anything to anyone while they continue spending....


I think we have a plan!

Sun, 09/18/2011 - 10:07 | 1681755 RobotTrader
RobotTrader's picture

They better print. And print big.

Otherwise, the dollar could rally and risk assets could get destroyed on this news.

However, if Greece just outright defaults and gets it over with, we could have a huge short squeeze after an initial selloff.

Sun, 09/18/2011 - 10:25 | 1681781 cocoablini
cocoablini's picture

They would print if they could- exactly the problem with the euro- they can't just release bonds and print like US. Its a political currency not a financial. So, what happens is the FED prints for them and extends these idiots huge swaplines and credit. So diluting dollars to save the unsavable

Sun, 09/18/2011 - 10:16 | 1681765 the PTB
the PTB's picture

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


This is just what the PTB want, a more perfectly centralized and powerful union.  All roads lead to Brussels.

Sun, 09/18/2011 - 10:28 | 1681786 kito
kito's picture

Is tyler advocating this??? This "simple solution"????

Sun, 09/18/2011 - 10:46 | 1681813 Hannibal
Hannibal's picture

The US is in the shit. Blame it on the Europeans!

Sun, 09/18/2011 - 10:59 | 1681827 cranky-old-geezer
cranky-old-geezer's picture



History tells us cross-cancellation of debt like this will not happen, because it never has happened.

What history shows us HAS happened is hyperinflation with resulting currency debasement and eventual currency collapse. Wikipedia documents 33 modern-day instances of this very thing.

So according to history, this proposal has a 0 in 33 likelihood of happening, i.e. no likelihood of happening.

Then there are practical realities, like bank bond holders never taking a haircut, much less total loss.

Oh yes, banking oligarchs will force private bond holders (like pension funds) to take haircuts and total losses, but no, bank bondholders never take haircuts.

At least in nominal terms. It's why banks will never do mark-to-market and write down the nominal value of debt they hold, again, just as history of the past three years shows us.

But yes, banks do and will take haircuts in the real value of debt they hold as currencies gradually debase from out-of-control currency printing ...done so those bonds can be rolled over and more debt issued to prevent sovereign defaults.

Because there's no private capital left for governments to borrow. Everybody's tapped out or afraid to loan governments any more money.

So central bank currency printing is the only way left. And currency printing gradually debases the currency.

And yes, this game can go on a lot longer. The US dollar has a lot of debasement left before it's worthless. The Euro has a lot of debasement left before it's worthless.

And yes, these banking oligarchs are silently stealing everybody's wealth and giving it to governments. Actually they're giving it to themselves. The new debt is owed to them.

And THAT is the REAL reason they keep on printing currency and loaning it to governments. They're silently stealing everybody's wealth and giving it to themselves.

Oh yes, these central bank oligarchs are GLAD to keep printing currency and loaning it to governments. Because they're silently stealing everybody's wealth and giving it to themselves.

Printing currency and loaning it to governments is just the "crisis" cover story. Oh yes, they carry on about these sovereign debt "crises" that just have to be solved. And they know currency printing is the only way left to "solve" them.

It's the ole "don't throw me in that briar patch" con. They act like printing currency and loaning it to governments is some horrible thing, like Bernanke not wanting to do QE3, or the EZ not wanting to do Eurobonds.

But yes, that's exactly what they want to do.

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