From Marg Grant, author of "Out of The Box and onto Wall Street"
The Fool's Game
Bank Bonds Guaranteed by their Sovereign Nations
Spain: 79.039 billion euros ($103 billion)
Italy: 78.032 billion euros ($102 billion)
Portugal: 18.225 billion euros ($ 24 billion)
Ireland: 27.707 billion euros ($ 36 billion)
Greece: 67.244 billion euros ($ 88 billion)
TOTAL 270.247 billion euros ($353 billion)
“Black markets will always be with us. But they will recede in importance when our public morality is consistent with our private one. The underground is a good measure of the progress and the health of nations. When much is wrong, much needs to be hidden.”
Now in the curious world we live in today; this only came out in public as the answer to a question raised in the German Parliament. Some reflection on the nature of these guarantees, that the European Union had decided not to tell us about, causes me to think of them as “Ponzi Bonds.” These are the seeds of a great scheme that has been foisted upon us. Bonds of a feather that have flocked together and arrived with the black swans one quiet Wednesday afternoon. The quoted and much ballyhooed sovereign debt numbers are now known to be no longer accurate and hence the lack of credibility of the debt to GDP data for the European nations. Stated more simply; none of the data that we are given about sovereign debt in the European Union is the truth, none of it. According to Eurostat, as an example, the consolidated Spanish debt raises their debt to GDP by 12.3% as Eurostat also states, and I quote, that guaranteed debt in Europe “DO NOT FORM PART OF GOVERNMENT DEBT, BUT ARE A CONTINGENT LIABILITY.” In other words; not counted and so, my friends, none of the data pushed out by Europe about their sovereign debt or their GDP ratios has one whit of truth resident in the data.
If we just take the newest figures for Spain, which were released this morning, we find an admitted sovereign debt of $732Bn and a touted debt to GDP ratio of 68.5% which is up 10.7% from last year. Then, according to Phoenix Capital Research, the private sector debt is 227% of GDP while the Spanish banking system is levered 19 to 1. Danske bank points out this morning that the drop in home prices for Spain was -4.2% last quarter which marks the biggest drop ever and they note a record high vacancy rate of 24.3% while further stating that the fall in Real Estate prices is so steep that it is equivalent to a 10% loss in GDP. In a report issued on 2/29/12 and apparently ignored by everyone including the ratings agencies, Eurostat reports that Spain has total sovereign guarantees of “other debt” which is 7.5% of their total GDP which would total around another $72.2 billion in uncounted debt. Then if we consider the “known” debt for Spain, only someone in La Mancha may know the “real” answers, we find:
Admitted Sovereign Debt $732 Billion
Admitted Regional Debt $183 Billion
Admitted Bank Guaranteed Debt $103 Billion
Admitted Other Sovereign Guaranteed Debt $ 72 Billion
Total Admitted Debt $1.090 Trillion
A More Accurate Debt to GDP Ratio 113.2%
What Difference Does It Make
Now the world is a funny place these days. We have somehow come to the conclusion that since Europe can print all of the money they want, as in the LTRO scheme, that whether the combined ECB/EU loans are $3 trillion or $10 Trillion that it will make no difference as they can print all of the money they will ever need. They can print money, they can buoy their currency through central bank purchases, they can accept collateral that has the value of a nugget of fool’s gold so that they can rig the game to their heart’s delight and everything will be just fine. Now let me assure you, after almost thirty-nine years of engaging in the Great Game let me assure you, that this type of momentary nonsense will not prevail past the briefest of times and that the truth always emerges in due course. In the same Eurostat report, by the way, of 2/29/12 we also find that Belgium’s sovereign guarantee of “other debt” is 21.3% of their GDP, for Italy it is 3.6% of their GDP and for Portugal the number is 7.7% of their GDP. This does not include any guarantees of bank debt which would also have to be added in to the totals to reflect some sort of accurate fiscal picture. Consequently, as investors, we are not in some murky place but smack dab in a carefully engineered plan of outright Fraud where we are given manipulated and inaccurate numbers in the hopes that we will fund based upon them. We are being played as suckers as I state once again that I would not put one red cent in any of the European sovereigns or their banks as none of their data is real; only a consistent illusion created for fools.
“A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. With consistency a great soul has simply nothing to do.”
-Ralph Waldo Emerson