Europe's New, New Math

Tyler Durden's picture

From Mark Grant, author of Out Of The Box

A Novel Approach

The focus of the markets these days is driven by the headlines that are pumped out by the European Union. Hope is promised, the next big summit to fix all issues is touted, Germany is going to come around any day is offered up as Ms. Merkel denies any such thing and “muddling through” holds up prices as the by-word of belief  as the blinders of the great propaganda machine direct everyone’s attention away from what is most important. As one example of this is some firewall, no matter what size, that does not do one thing to address the core issues of Italy and Spain which both have too much debt and too many other liabilities in a time of recession where contingent liabilities become outright liabilities and hidden in a vast variety of ways. These firewalls accomplish nothing except to dissuade investors from being involved and their capitalization weakens the finances of the countries providing the capital, whether counted or not, and ends up weakening the balance sheets of the core countries of Europe as we roll from promises and guarantees to moments when real money must be put up. If you stand far enough back you can visualize what is going on; “look at our firewall and do not pay attention to the countries which are having severe economic declines” and so the head fake continues until it cannot any longer as the bills overcome the ability of a nation to pay them.

“Pay no attention to the man behind the curtain.”


                                     -The Wizard of Oz


The recent focus on Spain has been their banks. Europe is trying to come up with some approach which will not involve the sovereign credit. The talk is $125 billion for the troubled Spanish banks to come from some source that is either not yet in existence or that has no provisions to lend any money to anyone but sovereign credits. This, then, would all have to be changed of course and modified which would take weeks if not months but no one seems to mind this too much. This is Europe where reality gets slurred and, to be polite, no one is supposed to notice.  The amount of money being contemplated is nowhere near what is really needed but then the assumption for the capital required is based upon balance sheets that do not accurately reflect the real losses in Real Estate of both value and defaults as so much is securitized and resides at the ECB under the cover of darkness. So it is garbage in and garbage out and the audit results promised by the end of June were just postponed yesterday to September as I laughed out loud when I read this because I had just commented to one large institution that this would surely happen just moments before. There was no wizardry exercised here just some understanding of how Europe operates so that expectations can match reality and not rest upon European promises that most times have all of the solidity of some passing wisp of cloud.

Back at the ranch, however, are the regions of Spain and their debt. Spain is talking about guaranteeing their debt in some fashion which will not be counted as part of Spain’s debt to GDP ratio because guarantees are not counted. Fascinating; this manner of arithmetic. One plus one can mean anything Europe likes and then everyone is offended when it is challenged. I never did well with spoon feeding my mother has told me and I suppose it has not changed in all of these years.

Spain’s regional debt is now $183 billion which is up about 4% in the last three months or 12% on an annualized basis. This represents 13.5% of Spain’s GDP. This is not all of their debt of course as many of the regions do not pay their suppliers who then borrow from the banks against the regional liabilities and so the charade continues. Now the largest region in Spain is Catalonia who debt burden is up by 15% in the last year. While no one is paying attention the two year debt for Catalonia is now trading at thirteen percent (13.00%) which is higher even than bailed-out Portugal. Bank debt, regional debt and whatever fancy schemes are proposed; Spain is going to have to be bailed out because they can no longer afford to pay their bills.

I formally apologize to Spain and Europe this morning. I offer my sincere confession to the Inquisitors and in public. I am unable, both ethically and morally, from using your new, new math and I am afraid that I am only capable of the old “one plus one equals two” type of arithmetic. Therefore, using the banal and the ancient, Spain is going to have to welcome the Men in Black and pay due homage. The new European math is a odd thing, it tells you one thing but then when you walk into the counting house to see your wealth; it isn’t there. Funny how that works.

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Bam_Man's picture

You can't even call it a "circle jerk" anymore. There aren't enough solvent countries left to form a circle.

potlatch's picture

/agree sir.  that is the feel of it.  the circle jerk phase is actually over; this is some very creepy post-circle jerk phase, in which there is this absurd sloshing of nothing as people just plain fall out.  It's sick.  The metaphor is not inapt, so this is just too disturbing a market. 


The people are not infinitely stupid.  That is bankable.  And seriously, things are becoming nearly infinitely stupid.


I would add the following note: people use the term "obscene" not simply as a carry-over from vocabulary about pornography: much rather, the people do realize there are multiple forms of obscenity, and this is getting.....

LouisDega's picture

I showed this to my wife and she replied, You know Regis and Kathie Lee are having a reunion show... I give up.

Waffen's picture

Repeal the 19th amendment and no I am not joking.

Azannoth's picture

I don't think there's ever going back to pre-feminists times however we should learn to manage this better,

have at least some benchmarks as to who can vote, being a taxpayer would be a bigger step then denying women  the right to vote or having at least 95IQ score

The Yids are managing democracy by lowering the standards and buying off(or conning) the idiots into voteing their way, we would undo much of the damage by simply going the other way and putting higher standards in place

francis_sawyer's picture

What's the difference whether they have the right to vote or not?

The choice still would come down to Obomney or Robama... Hell ~ maybe you could convince the old lady that Regis & Kathy Lee were on the Ron Paul ticket...

Azannoth's picture

.. ofc this would not change the outcome in the long run as democracy is by definition a death spiral, only at the start it looks like a straight line going somewhere because the circles are so big but then the cyclical nature of democracy begins to show more and more untill you finaly cross the event horizion

Bam_Man's picture

Of course it is completely ridiculous that those receiving a monthly cash benefit from the government should be allowed to vote. When the Constitution was written, you had to be a LAND OWNER in order to be eligible to vote. We have now moved a full 180 degrees away from that. And people wonder why the rich don't want to pay more taxes...

LawsofPhysics's picture

...and productive labor and capital are saying "fuck you" to all of it.  Crash the whole fucking thing so that compensation (in many forms) can actually return to people who's labor is actually worth a shit. 

Azannoth's picture

"I give up" - you should if you want to keep being married, nothing kills a relationship quicker than a political, religious or economical debate and above all a FACTUAL debate,.... just keep it to the small talk

l1b3rty's picture

Germany is getting after it! That is...getting after Europe....

ACP's picture

Goes to show a good educational system means nothing if you're in a state of denial.

LawsofPhysics's picture

ALL systems that reject the rule of law and real consequences for BAD behavior will fail.

God forbid we let little johnny FAIL and actual be forced to learn from his mistakes or pay the consequences of failure.

Seems to apply to banks and private corporations as well.

Azannoth's picture

Nothing does, I am a Software Dev and my colleagues are also meaning they are more than average smart, yet very few (try to) understand the problems and draw the correct conclusions most just prefer to stick their heads in the sand and hope for the best even when I try to enlighten them they usually dismiss me and change the subject to football.

If this is the case with above average intelligence people I have little hope in the population at large

potlatch's picture

As a college educator, I can share with you my end.  Students are often talented or at least skilled, at following instructions.  In my classes, I ask them to find problems, to develop what it is they even want to find worthy of their work....


What some people call "being creative".  I call it "being a fucking human being."


Their skills in that latter type, are often very weak, very atrophied even.  But some get it. 


Enough?  <shrug>  I'm doing my bit.  But I can only send em out as best I can.

DaveyJones's picture

you see, new new math is a double negative which makes it a positive gain.

Caviar Emptor's picture

Once Germany has completed it's pre-ordained domination of Europe they can take on America, the sick old man totally dependant on German exports (and Chinese and Japanese and Saudi) and money printing. Now that we know that Germany is manufacturing nuclear subs with warheads it won't be long. 

falak pema's picture

what is the fed doing? Eur/USD = 1.269. 

rwe2late's picture

On the eve of WW1, many predicted it would be avoided because the royalty of Europe were related by blood. That hope was misplaced because the first loyalty for each member of the elite royalty had to be to his/her source of power, then within the nation-state of residence. WW2 was primarily again a struggle for nation-state based power.

Nowadays, much has changed. The ruling elite of the US, Japan, and western Europe are economically, militarily, and politically connected on a global scale. Pentagon-NATO, IMF, BP oil, Goldman Sachs, Walmart, Halliburton, Royal Bank of Scotland, et al operate globally, and derive wealth and power because they operate globally. The interests of those global organizations and those who most benefit by them converge. Inexorably, their solutions are always to transcend “nationalism” with their version of globalism, to promote their self-enrichment as “free trade”, to make binding multi-lateral alliances, multi-state unions, and to break apart any nation-states that impede their plans.

Outlandishly, their version of globalism is promoted as a means to bring the world together in peace and well-being.

Sovereignty is to be quashed, but jingoism and ethnic hostilities are not being curbed by any so-called ‘globalist’ inspired cooperation and understanding. Instead, prejudices and divisions are being manipulated and fomented for exploitation, invasions, and repression.

The goal is to reduce sovereignty and gain control of a greater share of wealth. ‘Bankrupting’ a nation’s government and imposing austerity (except for corporate bailouts and military expenditures) seems ideal. However, to avoid resistance, the bailouts are best done discreetly and sold as being for the “public good“. A little economic shock doctrine methodology may be useful to promote tightened financial and social control under a banner of monetary austerity. Similarly, conflicts, scare tactics, and concealment of costs will promote military expenditures.

Glib politicians act as “middle managers” and public relations front men for this interconnected global system. They are vetted by and beholden to their sponsors and could not “buck the system” even if they wanted.

Germans will be told "their" prosperity depends on the euro. The deal will be framed as a minimal temporary sacrifice to get bigger future reward. The Germans will "blink" (as did the Greeks) and Merkel (or her replacement) will fall in line.

The French will be told some sacrifice is necessary to "save the euro" (for the banksters as Hollande has pledged to do), preserve European cooperation (especially NATO militarism as Hollande has also promised). The French will back Hollande as he mimics Obama and talks the talk for hope and "growth".

There is more financial control to be seized, and more wealth to be squeezed out. The international power elite will not be deterred by rumblings of nationalism. In fact, they will use it to their advantage, to deflect attention away from themselves, divide opposition, and manipulate fears about possible nationalistic excesses.

100pcDredge's picture


What's so funny?

Spain is working very hard to get out of debt:

A long long long long time ago the Spanish village of Rasquera has leased a plot of land to grow cannabis in an effort to clear its 1.3 million euros debt.

But take a look at every inch of Spanish soil today:

As far out as I can see things are going *TOTALLY AWESOME* in Spain!

Check out this new Spanish SuperDuper Grand Filibuster of Finance:

And you still talk about "odd things" and math?



You can find these everywhere in SPANISH SCHOOLYARD:

Spain certainly is no Uganda... yet.

But HEY! when the cactusses come in - UcanBET it will be!

Spain's new flag is ready already:


Sing, oh oh oh oh

In the blue painted something

Happy to see eh... something

That's Italian, no?

Eh... comprendo?

I had this perfect dream -Un sueño me envolvió.

This dream was me and you -Tal vez estás aquí.

I want all the world to see -Un instinto me guiaba.

A miracle sensation

My guide and inspiration

Now  my  dream  is  slowly coming true

The wind is a gentle breeze
-Él me hablo de ti
The bells are ringing out
-El canto vuela
They're calling us together
Guiding us forever
Wish my dream would never go away