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Guest Post: Europe Needs Debt Relief And Structural Reforms, Not Hyperinflation

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Mon, 11/21/2011 - 11:45 | 1898590 GeneMarchbanks
GeneMarchbanks's picture

That made too much sense, you sir, are on notice.

Mon, 11/21/2011 - 12:01 | 1898648 eureka
eureka's picture

It takes a cool mind, say, like an Icelandic one, to exercise logic, here, the logic that when equity is gone investors do, and should and must, lose.

Investing is called "risk-reward" positioning for a reason - it is for adults, not babies.

Stop whining, all investors all over the world, and take your loses like men.

Your positions, anyway, are invariably leveraged up by fiat and fiat-game inflation/deflation strategies - i.e. you created nothing, but gambled. With the livelihoods of billions of people.

Multi-lateral defaults to follow. Cheers.

Mon, 11/21/2011 - 12:20 | 1898750 DaveyJones
DaveyJones's picture

and don't forget to take over your corrupt government and run your criminal bankers out of your country

Mon, 11/21/2011 - 12:32 | 1898841 GeneMarchbanks
GeneMarchbanks's picture

You too! On notice you logician you...

Mon, 11/21/2011 - 12:02 | 1898657 JR
JR's picture

The disappointing results of central planning...

Mon, 11/21/2011 - 11:47 | 1898601 transaccountin
transaccountin's picture

too honest. must rape the sheep with price stability

Mon, 11/21/2011 - 12:10 | 1898688 Libertarian777
Libertarian777's picture

"zee price stabilateee"


there corrected for you

Mon, 11/21/2011 - 11:48 | 1898603 Long-John-Silver
Long-John-Silver's picture

The Bankers no longer worry about installing puppet leaders. Italy now has Bankers in direct control of the country.


Mon, 11/21/2011 - 11:56 | 1898619 dwdollar
dwdollar's picture

"Another method is to turn on the printing presses. This will also relief most of the debtors from their debt burdens, because the real values of these loans will drop significantly. However, it leaves the current status quo and financial system intact, does not provide the much needed lesson on productive capital allocation, provides no incentive for governments to put in real structural reforms because of tighter credit conditions and it will only benefit debtors and not savers."

This is why, this will be the "solution" to our problems. Most people will "benefit" for awhile. Does it hurt savers? Of course... but who actually saves anymore? Not many. There isn't enough savers to stand up against the debt horde, that's for sure.

Mon, 11/21/2011 - 14:06 | 1899297 JR
JR's picture

Who actually saves anymore?

The Fed’s artificially low interest rates not only have robbed savers for the benefit of Wall Street, but the minuscule returns on fixed income are stifling consumption. There cannot be a functioning free market economy without sound money, nor future investment without savings. And contrary to Bernanke’s statements, savings in CDs, etc., are not “investments” and should not be there for the taking by central bankers and Wall Street risk takers.

Todd E. Petzel, chief investment officer at Offit Capital Advisors, a private wealth management concern, characterized the Fed’s interest rate policy last year as an invisible tax that costs savers and investors roughly $350 billion a year (based on the Fed’s artificially-low manipulated inflation numbers), according to No Money, No Worries.

He notes that this invisible tax is more than 2 percent of gross domestic product and almost 3 percent of disposable personal income. That is robbery, pure and simple.


Mon, 11/21/2011 - 11:53 | 1898620 RSDallas
RSDallas's picture

The market participants have already started the default process.  The governments and financial firms that try to buck the market will be wiped out.  The banksters (Bernanke) think that they can mask over the effects of too much bad debt.  They won't be able to, just like they couldn't do it in 1929.

Mon, 11/21/2011 - 11:54 | 1898622 jm
jm's picture

Should have been harping about this over a year ago.  We are at the point where monetization is needed to prevent collapse.

Mon, 11/21/2011 - 12:14 | 1898710 CPL
CPL's picture

Sometimes the object isn't worth saving.

Mon, 11/21/2011 - 11:54 | 1898627 Azannoth
Azannoth's picture

You are only looking at the perspective of the Drug Dealer(the Banks) but what about the Drug(debt) addicted populace?!

Regardless to what the solution is debt forgiveness vs. not, austerity will come home to roost and that means social upheaval no matter what,

I suggest you shore up all your assets preferably in a no EU/US jurisdiction and ride out the storm that is coming no matter what in a friendlier climate

Mon, 11/21/2011 - 11:54 | 1898628 kito
kito's picture

Europe Needs Debt Relief And Structural Reforms, Not Hyperinflation


yes, and that means........................downnnnnnn goes gold and silver.......downnnnnn goes everything not naliled to the floor, except physical cash.............

Mon, 11/21/2011 - 12:03 | 1898661 achmachat
achmachat's picture

Sure. You are right. Logic demands it. But for how long? Few weeks? Few days?
You really want to risk ending up with worthless paper just because you weren't able to time it right?

Mon, 11/21/2011 - 12:04 | 1898664 mayhem_korner
mayhem_korner's picture



Sure.  Wipe out all of the debt in just the right places so as not to crash the system, then re-start with the same ol' fiat that was used last go-round. 

I think you're a bit optimistic, Gen. Custer.  The numbers in play here have 4 commas in them.

Mon, 11/21/2011 - 11:55 | 1898634 Segestan
Segestan's picture

With no industry and no ponzi ... they will live in poverty... forever and ever .. amen.

Mon, 11/21/2011 - 12:17 | 1898731 linrom
linrom's picture

With landed-aristocracy living high in the Alps being entertained by Kyle Bass playing with his guns and gold coins.

Mon, 11/21/2011 - 12:06 | 1898636 CPL
CPL's picture

Debt relief?  Why?


No more of this dog and pony show, all that'll happen in that situation is we'll be right back to where we are in ten years.  People want Kenysian economic policy then jack up interest rates to where they should be.


Like 37.4%.


People discuss this like you get to pick from the salad bar of Keynesian and Austrian schools.  You can't they are diametrically opposed in terms of their capitalization.


Offering debt relief...how well do you think that will go over?  It'll be a exercise in cherry picking.  We all know it.  Who gets the hit, it'll be little people.  Who gets to keep the lions share of capital?  Largest dogs do.


So when people talk about the haircuts why?  Honestly why are they even considered?


One more inch, one more day to accumulate more debt?  Trillions of dollars of LABOUR, not money.  The Money is a direct reflection of the LABOUR put in to make the money.  So all that labour is now at a discount?


No, that is the path to hell that is paved with good intentions.  Just let it die.  Worse than the nonsense with the woman seven years ago that was a complete vegetable where the courts were getting involved on pulling her plug.

Mon, 11/21/2011 - 12:00 | 1898646 mayhem_korner
mayhem_korner's picture

Another method is to turn on the printing presses. This will also relief most of the debtors from their debt burdens, because the real values of these loans will drop significantly.


Not necessarily.  The real value of the loans only drops if the debtor is a beneficiary of the increased fiat.  There is no way of providing any assurance that the flow of fakebux will allocate according to the topography of the debt distribution. 

Mon, 11/21/2011 - 12:07 | 1898673 CPL
CPL's picture

That and we'll be right back to the same problem in ten years.

Mon, 11/21/2011 - 12:01 | 1898652 farmerjohn2112
farmerjohn2112's picture

The current government of the US seems, to me, also a puppet of the banking system.

Mon, 11/21/2011 - 12:08 | 1898677 CPL
CPL's picture

for the last 60 years...JFK was the last president to bitch about the banking system and look how well that turned out.

Mon, 11/21/2011 - 12:23 | 1898779 DaveyJones
DaveyJones's picture

and the dollar has no strings to hold him down

Mon, 11/21/2011 - 12:07 | 1898675 lynnybee
lynnybee's picture

The current government of the US seems, to me, also a puppet of the banking system.    ...gee, ya think so !   this is the most corruption i've ever seen in my lifetime, & i've seen a lot.     god deliver us from debt peonage.     a good time to repeat my signature statement:   

My grandma Jo (born 1915, god rest her soul) said :   Never trust the government & do not go into the stock market.    I get it now, grandma Jo ......... i finally get it.

Mon, 11/21/2011 - 12:14 | 1898715 slewie the pi-rat
slewie the pi-rat's picture

just how do you pronouce the author's name?


i thought so!

still, he may be qualified to run the europeon structural reform school.  it's up to the fuking nannies, now! 

Mon, 11/21/2011 - 12:16 | 1898728 Sophist Economicus
Sophist Economicus's picture

They need a technocratic government that sees that the current debt burden is unsustainable and cannot be serviced, acknowledging that defaults are necessary.

Uhmmm, WRONG!    What is needed is governments, put in place by the people of the country, that actually look after the People's interest.   And while we're at it, the ONLY structural reform required is that governments NEVER, EVER spend more than they are willing to TAKE from their people.   And if a mandarin ever steps across that line, he/she will be prosecuted, imprisoned and all of their assets sold.



Mon, 11/21/2011 - 12:32 | 1898790 rufusbird
rufusbird's picture

Great timing with relevant topic!


Mon, 11/21/2011 - 12:28 | 1898807 guiriduro
guiriduro's picture

Well, aside from the endorsement of technocratic over democratic leadership, I would largely agree.

I think default appears less 'dirty' when some facts are realised, namely, that the huge overleverage of the financial system worked its way into prices of everything, from the cost of land to, e.g. the hospital a local government built, whose suppliers would not have had the pricing power had the demand side not allowed so much money printing (bank debt issue of fiat currency), necessitating competing public sector projects as price-takers to accept inflated costs they had to take on debt to finance.

The whole crumbling edifice of existing debt (existing obligations) needs a reset, and much the better if needed structural reforms both in the financial sector and in the political sphere occur simultaneously.  It won't be pretty of course, many investors will be burned, but that short term pain is hardly a reason to continue the current unsustainable debt burdens continue at par whilst seizing up economic activity solely for fear of the insolvency of counterparties (the trick will be, to borrow a poker metaphor, to 'call' all hands, eliminate the bluffers, eliminate obligations - debt - which inhibits growth, that will finally allow economic actors to re-engage in productive activity with confidence.)

Mon, 11/21/2011 - 15:44 | 1899746 ex VRWC
ex VRWC's picture

You are advocating jubilee.  It will have to be at all levels - you will not stop it at sovereigns or banks.  When debt is meaningless, it will be meaningless everywhere, at all levels, from governments down to the local grocery store credit line.   Once you do this, you devalue debt for a very long time into the future.  You basically kill the credit system, which is entirely predicated on confidence.  

If debt is meaningless where does confidence come from?  You cannot say 'just this one time, we will go ahead and restart the system, but we won't have a jubilee again'.   

Unfortunately, the end result of jubilee is not a return to a productive society that allocates capital effectively.  The end result is an entirely hard asset based financial system.  You are looking at a decades-long reset cycle. 

Just sayin'.  We need to assess the long term results of these answers that sound so easy.



Mon, 11/21/2011 - 16:25 | 1899888 Juan Carlos Cantu
Juan Carlos Cantu's picture

This posts talks nothing about capital mobility. Nothing about labor mobility and the problems Europe faces in those areas...


And as far as monetization, I agree. Politicians are for short term fixes, which is I the situation with Europe in the short term is a game of chicken b/t Draghi & the vigilantes


And finally, to think that savers will be rewarded by cash worth more if deflation ensues, well, that assumes their savings were not deposited in a failed bank that went under with the depression ensued by letting debt be forgiven.

Tue, 11/22/2011 - 02:11 | 1901617 RiskAverseAlertBlog
RiskAverseAlertBlog's picture

Dudes, you are pitching weak tea to a nation whose first Treasury Secretary was Alexander Hamilton. There'll be a restructuring alright, along with sovereign currencies anchored in the productive might of national economies protected and developed with credit uttered from national banks: all in the inexorable need for return to a system of finance whose transparency restores confidence and whose accountability to the posterity of real, live human beings is unimpeachable. The adjustment time necessary to attain discipline will be instantaneous, as opposed to your decade or more. So, it's back to the King's drawing board for you...

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