Guest Post: Waiting For Lehman

Tyler Durden's picture

Submitted by Gonzalo Lira

Waiting For Lehman

In Samuel Beckett’s play Waiting for Godot, the four main characters wait in vain—Godot never arrives.

In the financial markets, the same thing is happening now—we are all waiting for Lehman: That sudden bankruptcy-crisis-calamity which sets off a whole series of credit events, which in turn causes massive sell-offs, plunging markets, collapsing confidence, and ultimately—just like the bankruptcy of Lehman Brothers did back in 2008—shoves the entire global financial edifice right up to the very edge of the cliff.

To the edge—and perhaps this time over it.

We have good reason to be waiting for Lehman—our current situation is simple and stark: Sovereign nations and individual citizens are over-indebted—to the point where they cannot pay back what they owe. We all know that this overindebtedness at the sovereign and individual level is going to end, and end badly: Worse than 2008.

So along with everyone else, I’ve been waiting for Lehman—and fruitlessly trying to guess which will be the Lehman-like event this time around. Will it be the bankruptcy of Dexia? BofA? UniCredit or SocGen or one of the Spanish banks? Will it be a war in the Middle East? Bad producer index numbers from China? A fart by a day-trader in Uzbekistan?

When will Lehman arrive!?!?

But lately, my thinking has changed: Like the characters in Godot, I think that we’re waiting in vain. The Lehman-like event will never arrive because it won’t be allowed to arrive. So this miserable slog we are going through will continue—indefinitely. (Yeah, I know: Sucks to be us.)

My thinking is based on two assumptions: One, that the central banks and government financial authorities and regulators around the globe are absolutely terrified of a repeat of a Lehman-type bankruptcy or trigger event. And two, that those self-same central banksters and government drones will do absolutely anything to prevent another Lehman-like credit event from setting off another cascade of consequences.

And when I say “absolutely anything”, I’m not using hyperbole: Fuck principles, fuck the law, fuck legal constraints, fuck even basic long-term economic and fiscal health—or sanity. The clowns running the circus were so freaked out by the effects of the 2008 Lehman bankruptcy and the domino-effect that it triggered, that they will not let it happen again—ever. Come what may.

Hence, this endless Waiting for Lehman: This endless slog of ad hoc solutions and fiscal half-measures that brings us only tension and misery—and erodes our economy even further.

But this certainty that the bureaucrats in Washington and the eurocrats in Brussels and Frankfurt will do absolutely anything to avoid a Lehman-like event adds something key to the equation:

Predictability.

Since we know how the central banks and economic leadership will react—that is, if we start from the assumption that the political/economic leadership will do absolutely anything to prevent a major credit event from taking place—then we can predict what they will do in the three main areas of weakness:

  • Sovereign debt and the possibility of default.
  • Financial sector weakness and the possibility of insolvency.
  • Geopolitical crisis and the possibility of another Oil Shock.

What follows is a discussion of those three areas of weakness—and what the central banks and economic leadership will do about each of them.

A Sovereign Debt Default

We all know the score, insofar as sovereign debt is concerned:

National governments—as well as local ones—went on a spending spree during the good times before 2008. They over-promised entitlements and services, while at the same time cutting taxes—thus placating the electorate with the promise of something for nothing. They financed the inevitable shortfall with cheap sovereign debt. Hence the massive fiscal deficits during boom years.

Now, of course, we’re dealing with the hangover.

Because of the recession and the concomitant high unemployment, tax receipts have dropped—drastically. Hence the hole of the governments’ balance sheets—which was big to begin with—becomes massive during these bad times, requiring even more money—

—thus pushing sovereign nations closer to default and bankruptcy.

The nations most in debt, and therefore most likely to default, are well-known—Greece, Portugal, Spain, Italy. But there is also the issue of local government over-indebtedness and default in the United States, China, the various “strong” European nations, etc. No nation is exempt from this problem—which will come due.

Or will it?

If we assume that the central banks and government regulators will do absolutely anything to prevent a Lehman-like event—in this case a sovereign debt default—then their course of action becomes abundantly clear: They will do for the big economies what the Europeans have been doing for Greece. They will hand out more loans, backed by assets that are less and less trustworthy, in exchange for more promises of austerity and fiscal responsibility that everyone knows will not be kept.

Greece is the poster-child for this pernicious approach: Ever since April of 2010, when the Greek issue first reared its anencephalic head, the European Commission, the IMF and the European Central Bank—the so-called “Troika”—have been struggling to “fix” the Greek situation by giving Greece more debt with which to tide the country over until their situation “turns around”.

But the problem, of course, is that the Greek economy is not getting any better.

And every fix has failed, because the Greeks fail to live up to their side of the bargain: They fail to implement the austerity measures they promise, they fail to raise the taxes that they say they will (tax avoidance in Greece is on a par with Argentina, or Delaware-based corporations)—

—yet the Troika still tries to fix Greece with more loans! Every time! Even now, this past week, Angela Merkel and Nicolas Sarkozy say they are close to “fixing” Greece. The very epitome of Einstein’s dictum that insanity is doing the same thing over and over, yet expecting a different result—the Troika’s living it in the flesh!

So: Is the Troika crazy, under Einstein’s definition?

No: Because the Troika’s aim is not to fix the Greek situation—the Troika’s aim is to prevent Greece from becoming the Lehman-like event.

This is exactly what the Federal Reserve, the European Central Bank, and the assorted financial bureaucrats will do with every other major sovereign debt that is out there: They will keep on lending it money, so long as it prevents a default.

So what’s the upshot for us small fry?

Here comes the boring money-grubbing stuff, where I discuss what the above policy approach will mean for small investors—which I have thoughtfully edited out for you Gentle Readers uninterested in such mundane affairs. For you Godless materialists, you can read the full version here.

A Major Bank Bankruptcy

The major European and American banks are all exposed to the bad European sovereign debts—the European banks directly by way of actually owning this crap, the American banks indirectly via their sale of credit default swaps on the bad European sovereign debts.

The weak banks seem to be Dexia, Bank of America, UniCredit, Société Générale, BNP Paribas—though nobody really knows.

Why doesn’t anybody know for certain how weak these guys actually are? Because following the 2008 Global Financial Crisis, the financial authorities made the banks’ balance sheets more opaque—that is, less transparent.

In the United States, the suspension of FASB 157—which essentially allowed American banks to mark to make-believe—was just one of the policies implemented to, quote, “shore up the financial sector”. A similar process took place in Europe.

The Orwellian/Absurdist rationale was, “If nobody can see how weak a big bank really is, then it is no longer weak—therefore, it is strong”. (Beckett would have been so proud.)

Hence Bank of America: It is impossible for anyone outside the bank to really say for sure how weak BofA really is—but there are some mighty powerful clues. In the last two months, Warren Buffett lent them $5 billion, at usurious terms—then BofA sold its very lucrative stake in China Construction Bank for $8.3 billion—then BofA announced the lay-off of 30,000 employees, representing a yearly savings of some $5 billion.

All told, Bank of America raised north of $18 billion. Does anybody ever raise that kind of cash just because they feel like it?

No they do not. Likely as not—though this I cannot prove—someone must have told BofA to raise that kind of capital. (Methinks it was Tiny Timmy Geithner, but again, I have no proof, merely a speculative mind.)

On the European front, the Belgians and the French have just finished nationalizing Dexia. They didn’t call it “nationalization”—I would characterize it as “cannibalism”: The French, Belgian and Luxembourger governments essentially bought the local (profitable) pieces of Dexia for a song, and left all the crap in “Dexia”, de facto creating a bad bank carrying all the euro-trash. The bullet-points of the deal are here.

Q.: Was there a Dexia credit event?

A.: No. There was no Dexia bankruptcy—hence no Dexia default—hence no Dexia credit event.

Hence no crisis. The Dexia nationalization/cannibalism wasn’t big on the radar of the American commentariat, but it was important: One of the biggest banks of Europe was broken up over a weekend, with nary a ripple in the global credit markets. Significant? Very. Now that the strong parts of Dexia have been stripped away, and the bad parts are locked into the much small “Bad Dexia”, the unwinding and ultime bankruptcy will not wreak havoc on the French, Belgian or Luxembourger economies. There will be no triggering of American-written credit default swaps.

In short, there will be a big yawn, when “Bad Dexia” finally goes under in a year or two—which is precisely what everyone wants.

Thus these are the twin models of how other teetering banks will be managed: In Europe, their profitable units will be stripped off the cancerous skeleton of the bank, and then grafted onto existing (and State-controlled) local banks, leaving behind the “bad bank” with the name of the failed institution—like Dexia.

In America, the bank will be recapitalised, even as it is shrunk. Insofar as Bank of America is concerned, apart from all the cash they’ve raised through these deals, there is a lot of talk that the Merrill Lynch investment banking unit—which BofA bought at the height of the 2008 crisis—will be spun off and/or sold. My bet is Merrill will indeed be spun off—and right soon.

So once again: What’s the upshot for us small fry?

Once again: Boring stuff about money and contrarian bets. For you rubberneckers, you can go here to read what I wrote about where the money’s at. For everyone else: Move along, nothing to see here folks.

A Geopolitical Crisis

At this time, the most obvious potential crisis is the Middle East—specifically, a possible war with Iran.

At SPG, we already discussed in detail the financial effects of such a war. So I won’t bother going over it again here.

Needless to say, the conclusions were not pretty.

Is there the real possibility of such a war? Well, considering all the noise and trial balloons coming out of Israel, war with Iran seemed at one point inevitable—

—but lately, the tide has most definitely turned. Any notion of “all options on the table” insofar as Iran is concerned is starting to go over like a lead zeppelin.

Take this latest “Iranian plot”—the supposed attempt to assassinate the Saudi ambassador to the U.S. (huh? I mean really, why bother): Some people behind the curve are still growling about attacking Iran, and using this “plot” as an excuse to beat the War-with-Iran drum.

But this latest “Iranian plot” has been met by the American government and Capitol Hill with calls for sanctions and more diplomatic isolation—but not with calls to bomb Tehran. The more plugged in of the American nomenklatura aren’t taking seriously any talk about war with Iran.

Why? Because an American (or Israeli) war with Iran would break Europe. The U.S. doesn’t import Iranian oil, much less depend on it—but Europe does, especially Italy. Recall the oil consumption figures of the SPG Scenario. And anyway, a cut in Iranian oil supply would hit global oil prices equally—disastrously.

An Oil Shock brought about by a war with Iran would hit Europe—which would hit American banks, due to their exposure to Europe. An Oil Shock—as the name implies—would drive up oil prices, further eroding the global economy. An Oil Shock that hits Europe would likely kill the euro, as inflation would skyrocket.

In fact, any hiccough in the Middle East which hits oil prices would be disastrous for the global financial sector, as well as the global economy.

And the Western central banksters and assorted bureaucrats and eurocrats know this.

Therefore (and of course, barring any unforeseen calamity), there will be no war with Iran any time soon. The financial leadership will make sure to quell any such notion of war with Iran.

In fact, now that Gaddafi is dead, not only will there be no war between the West and Iran—the United States and/or Europe will actively help wipe out any Middle Eastern protests that threaten oil production. In other words, the West will try its utmost to end the Arab Spring.

Increasingly—especially as the Libyan rebels show themselves to be less pro-Western than people have fooled themselves into believing—there will be the notion of “better the Devil you know than the Devil you don’t”. And if this approach means siding with bloody dictators and betraying quaint notions of democracy, human rights, etc., in order to shore up the availability of oil, well . . . too bad: The global economy and the banksters’ bonuses are more important than the lives of a few million ragheads.

So once again, and for the third and final time: What’s the upshot for us small fry?

Once again—and for the third and final time—I won’t bore you with the details. It’s just a tedious discussion of oil prices, and where they will likely go in the near-term future. But if you want to bore yourselves silly, read the full post here.

Conclusions

The situation we find ourselves in reminds me of the First World War: The European diplomatic situation back then was tied up among all the nations of the continent by way of a series of pacts, alliances and coalitions of mutual assistance. They were wrapped up so tightly that, when a relatively minor event happened—the assassination of Archduke Franz Ferdinand—it set off a chain reaction of obligations and consequences that eventually led to the whole continent going up in flames.

The same thing is going on today, with regards the global financial markets: Everyone is obligated to everyone else, by way of credit instruments. Therefore, if one of these obligations is broken—that is, a default by one of the European countries, or a cash hole in one of the banks, or a spike in oil prices that creates a hole in someone’s balance sheet—the entire rickety structure is going to go up in flames.

The central banks and the government authorities and regulators have made it clear that they will do absolutely anything to prevent this outcome: They will prevent a Lehman-like event from taking place, no matter what.

In other words, they have made things predictable for us all.

Insofar as these three areas I have outlined above—sovereign debt, weak banks, geopolitical crisis—there are tremendous opportunities, bought and paid for by way of this predictability.

The fact that the markets will be waiting for Lehman allows people like us—who realize that Lehman will in all likelihood never arrive—to make some bets which could pay off big. The investment strategies I outlined above for each of those cases make it clear how lucrative it could potentially be.

So long, of course, as Lehman never arrives. But caveat emptor: If Lehman does arrive, all bets are off.

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Taint Boil's picture

I got a feeling the "deer in the head lights" pic is coming soon

slaughterer's picture

The author is forgetting how tremendously profitable the "Lehmann event 2008" was for some in the market.  When IB and HF trading desks need a boost (as in now), the market will produce its next Lehmann.

spiral_eyes's picture

Yawn.

The coming "Lehman" event will be a loss of confidence in US Treasury debt causing the biggest bubble in history to end in the biggest crash in history. I don't know what events will lead up to this, but I know its coming.

http://azizonomics.com/2011/10/23/gold-in-2012-the-coming-bond-crash/

spiral_eyes's picture

Oh yes — of course — and we need a global government to carry out mass forced sterilizations, forcibly reduce the population, keep the lower classes servile (some guy with a tinfoil hat said fluoride helps), and clear savage humans out of vast swathes of the planet (re-wilding).

Sound familiar? 

Don't spew that Al Gore, Maurice Strong, George Monbiot bullshit please. The world can support vastly more people with the right infrastructure (food, energy, water, manufacturing). If we get a massive population crash, I blame bad central planning and resource/capital misallocation (war spending, crony capitalism, etc)

Fate's picture

Your grandchildren will appreciate your sentiments as they sit down to their 1,000th meal of tree bark soup.

spiral_eyes's picture

Malthusianism (via Ehrlich) has made precisely how many correct predictions about human history? Zero. 

Whereas those who have believed human ingenuity can win out have been consistently right.

Obviously humans are drastically changing our environment. What most environmentalists forget is that humanity is not separate from nature, but a product of nature, of billions of years of evolution. Earth has been through giant extinctions before, and if humanity is nature's change agent then so-be-it. But 'til I see real hard evidence of a coming population crash — not just the warblings of peak oil devotees — I will believe that humanity will continue to successfully bend Earth to its desires. 

malikai's picture

On a long enough timeframe...

Fate's picture

Human ingenuity has so far failed the bulk of the current human population.  Ask, say, India.  Populations crashes have occurred since the beginning of civilization.  Ever heard of Easter Island?  The Maya?   

So "humanity is not separate from nature," yet "humanity will continue to successfully bend Earth to its desires."  This is called magical thinking -- in your case, tinged with Western uber-optimism and Judeo-Christian man-vs-nature traditionalism. 

Time to venture outside the box.

 

spiral_eyes's picture

Human ingenuity is the reason why the bulk of the current human population today is alive. Antibiotics, the germ theory of disease, the green/oil revolution, etc.

Humanity is a part of nature. One part of an organism (Gaia, as Lovelock thought it) can domineer the other parts. That should be completely obvious. 

The biggest "box" is the box that says resources on Earth necessarily set an upper-bound to population close to current population. Malthus did the exact same thing when the population is less than a tenth of what it is today. 

Populationists need to consider that their "THE POPULATION IS TOO HIGH" response/delusion may in fact be an evolutionary impulse. Humans may naturally want to reduce global population to open the ecosystem for their own descendants carrying their genetic material. 

BigJim's picture

I have noticed that people calling for a reduction in the numbers of humanity rarely offer up their own families for culling.

centerline's picture

You already answered your own question in a way.  It is social complexity.  Maximum social complexity that is, based on our current ability to exist together in our current, collective state of instinct / intellect.

Happened before on smaller scales and with lesser complexity.

steve from virginia's picture

 

Malthus only has to be right once ...

Element's picture

Steve, you're smarter than that (usually). The fossil record shows very clearly that you don't need to be a Malthusian to know that ALL animals go extinct, at some point.

Just like on a long enough timeline ... we all kark.

For every birth there is a corresponding death, that's what life does, and life apparently likes it when organisms over bred and go extinct.

At these population levels, we are all along for the ride.

The very suggestion that we can change the outcome is delusional at this point. Malthusian sentiment shits me mostly because they always wag their finger, and say, "Time is running out", as if we could change the trajectory much.

Sorry, all that green policy options crap is a drop in the ocean.

We are along for the ride, always have been, so making the most of the oportunities seems the most sensible approach, rather than ideologically retarding what our biology is set to do, to breed and develop this world to our NET benefit. The tamed and domesticated agricultural English landscape looks pretty good to me, and it seems to me they managed that transition pretty well.

That is what we are doing to the rest of the planet, and it will continue, and millions of obscure critters, that no one knows or cares about, will go extinct. Some people need to come to terms with that totally natural process. The self-appointed eco-warriors and dip-shit University experts are ever inclined to treat us as an ignorant and dangerous introduced pest, rather than the dominant planetary predatory omnivore that we clearly are, and which the environment itself created, as the greatest part of its natural process.

 

I'm not going to act all sorry for being here, or for doing what humans do.

Element's picture

What most environmentalists forget is that humanity is not separate from nature, but a product of nature, of billions of years of evolution.

 

Totally agree, humans and our tech culture development is 100% natural. We use natural materials, brain power and intellect, and observed physical properties, and lever natural forces/energy to survive and thrive.

We're damned good at it, way ahead of every other organism, and millions of people worked hard for millenia to win this state of ease.

We are the greatest anything this planet ever produced.

We need conserving ... those smarmy greenie turds tried for years to make us all feel 'artificial' and 'foreign' on our very own world! ... to alienate us, and make us feel like we must be locked out of the natural world, via making state(ist) parks that you needed a permit to enter, because a dirty human might degrade its pristine Giah sacredness.

Well fuck all that.

This is my home. Humans are optimised to live on THIS planet and nowhere else, because we actually belong here.

We in fact earned the right to exist and breed and thrive. And I don't know about you, but the manicured English meadow and a Tropical fruit orchard in Australia looks a whole lot more inviting to me than anything 'green' and 'eco-ish' that existed there prior.

Show me an ecologically crucial fruit bat that can put a Hubble telescope in space and observe a gravitational lens, then maybe I'll take seriously the idea that they should be conserved at all costs.

And if we breed-up and mismanage we will pay for it, and adjust, ... and so will everything else because this is our place, and we aren't going away. And if the other parts can't adjust then they have not earned the right to exist.

C'est la vie ... we don't make the rules ... the greenies can go to Mars and freeze and starve and hypoxiate, if they feel so strongly about humans not being100% a vital and natural part of this 'environment', and this 'ecology'. 

They can play in that intellectual swamp of ecology all they want, and brey like phoney-asses, because the basic facts of what we are, and where we belong, and the basic trajectory we are on, won't alter.

redpill's picture

Wrong.

The biggest bubble is the bubble in bubbles!

Eventually everything will be a bubble, you see.  When that happens we have a bubble bubble, and when THAT bubble pops....  Oh mama!

gwar5's picture

I read that piece, interesting article. Population is something to think about, but the author (Farrel) is a lefty establishment shill, and he gives credit for his inspiration for that article from another confirmed NWO type shill.

Rather than admit socialism has failed and once again been thoroughly discredited, they hide behind Neo-Malthusianism. What they are really saying (absurdly) is that Socialism would still work if they could just find a way to get rid of all those bread-eating poor people so they don't have to share.

 

 

 

 

 

 


 

 

Hot Apple Pie's picture

would still work if they could just find a way to get rid of all those bread-eating poor people so they don't have to share.

I thought that was the official platform of the Libertarian Party?

gwar5's picture

That's the mother of all bubbles and agree with you. USD WRC goes down, sooner than later. As the smaller bubbles pop along the road to perdition they will be monetized into the Greek-like giant UST bond bubble. Will just take a little Bernanke prick to pop it. No pun intended.

Beware bankers using fear and uncerainty around elections to do mischief like last time.

 

LongSoupLine's picture

I got a feeling the "deer in the head lights" pic is coming soon

 

and/or Donkey Kong...

redpill's picture

 

Gonzolo is thinking too small, too financial.

The next Lehman event is something much more fundamental.  It is going to be something truly disruptive and paralyze everyone.

In my opinion that event is going to be the fall of a major western government, probably in Europe.  And I don't mean voted out of office, I mean complete revolution.  It will spawn chaos the likes of which has not been seen the modern political era.  Sympathetic movements will spring up around the western world, and liberty will hang in the balance, a gun to her head.  The free world, for the first time in many generations, will stop and fundamentally question her way.  Suddenly "free democratic" governments will be more concerned about suppressing internal violence than stabilizing banks or global financial markets, and things will get very ugly.

Prepare accordingly.

 

3x2's picture

More to the point, the above piece would be classed as optomism. That alone should set off alarms everywhere.

 

The only problem I have with it [the piece] is that it doesn't examine the possibility that there comes a point where we run out of "carbon rods" and the reaction gets out of control.

spiral_eyes's picture

Gonzalo's pieces shows an uncharacteristic optimism that central planning can realise its goals. In this instance (and most instances) it just begets a load of unintended consequences.

They'll keep bailing out everything 'til they hit a black swan, and the system will quickly degenerate into "too fucked to bail".

3x2's picture

Central planning - well it worked so well in the USSR didn't it?  The problem I see is that, post running out of carbon rods, we won't see a new era of market driven "capitalism" we will see a new era of 5 year plans and your loot being taken by the collective. Watch for the UN jumping in with their "we have the answer to your nightmare" speech. At that point your wealth is gone - ya just haven't seen it yet.

 

Nothing To See Here's picture

Perhaps it's too "optimistic" of him to believe that the central planners can realize their goals, but he may have a point in the idea that they can make it last longer than we think or can afford. The USSR lasted 80 years, and I am in no mood to live 80 years of this Merkozy show.

3x2's picture

The assumption tends to be that someone, somewhere, knowns what they are doing. That they have a plan that doesn't involve running around like headless chickens until the blood runs out.

 

duo's picture

The WWI analogy was spot on.  How does he think a crisis can be contained when all the kings and prime ministers of Europe couldn't stop the mobilizations and declarations of war in July/August 1914.  The alliances of 1914 are the CDOs and derivatives of today.  An orderly unwind is impossible.

steve from virginia's picture

 

The governments in Europe in the summer of 1914 didn't want to stop war. They all wanted war, they all thought they would win before Christmas, because they had better technology (they thought) than the other countries.

Each European country believed it had the answer or rather, its own particular answer. Britain had its dreadnaughts, France had its 'elan', Germany had its artillery and the Russians, their rapid mobilization. It turned out that all the countries had the exact same advantages but nobody could figure this out for themselves in advance.

WWI had very little strategy involved, it was the first machine v. human war,  and the clear winner was the machine. All the pre-machine institutions were thrown over as failures. The consequences we are all living with now, supremacy of the machines.

Sir Edward Grey remarked before the hostilities began: ""The lights are going out all over Europe: we shall not see them lit again in our lifetime." He was wrong, the lights have never been lit we are monsters groping along in the darkness ...

buyingsterling's picture

If he's right about them doing anything to forestall a crash, they'll start passing out freshly printed cash to the population before they allow a real revolution.

redpill's picture

That's been tried before.  Doesn't end well.

3x2's picture

Ahh ... I just love the smell of freshly minted cash in the morning. The only answer on the financial battlefield. Of course each new munition devalues the rest.

 

3x2's picture

Ahhrrg ... double click

mind_imminst's picture

BINGO! You nailed it. The longer this goes on the more they (central bankers) will print. They WILL hand out money to people on the street before they allow any defaults or systemic economic tremors.

3x2's picture

Dangerous game printing excess money. The debts disappear quickly enough but pot noodles are $150 a pop and nobody trusts you next time around.

 

FinHits's picture

Japan-style zombies slugging along in a deflationary world. Goverment policies being QE-money printing and 0.25% interest rate along the whole curve. The competitive edge is supposed to be stagflating slow-motion FX-race to the infinite bottom.

Sounds like a water torture or an over-ambitious French art house movie.

zeroman's picture

Tyler;

 

This has been my point for some time.  When the rules of the game can be continually changed to assure that one never loses (but also never wins), the charade can never end. FASB 157 was the biggest. Now, we have mortgages that are underwater to tremendous degree which will be able to refi. Next, will be who knows what.  

Europe will cause great dips for buying opportunities along the way.  One thing is certain. Assets and commodiites will rise in price over time as well as physical assets like land and yes houses too. We are seeing prices actually rise in south florida.

A lehman event has to be unfornseen for it to become a lehman event.  No one would have expected that allowing lehman to fail would have caused the chain of events that did occur; at least those in charge believed it wouldn't.  So, the same will be true in the future. There will have to be a miscalculation of some kind.  With paranoia running at high levels, nothing will be taken for granted for a while.

NEOSERF's picture

And mine as well, it has been clear for some time that there are now no rules for any country...the Paulson sky is falling meeting set a new standard in allowing leaders to circumvent the law in the name of saving humanity.  They will not allow any bankruptcy (ala Dexia) without immediately jumping in with statements about backstops being in place.  This all works until the German people (yes them again) rise up and rebel against the fact that their hard earned taxdollars are going to go endlessly into worthless and non-collateral backed enterprises in the name of saving profligage cousins...this is where it ends I think..with the people.  I would also say that if Europe falters in being able to backstop, that like WWII, the US eventually jumps in and backstops for them and then sells it to us once again as "saving the world"...it will end up being a forestalling event because the credit rating agencies will quickly mark everyone down and ongoing austerity will kill any growth and we will find ourselves in the same spot 6 months later...the event will be unforseen and will seem like all the other headlines until traders grasp that they FINALLY will be seeing losses, and the avalanche will begin..

AbelCatalyst's picture

I have not heard much about the Swiss currency peg / buying boatloads of Euro's.  I wonder how long they can continue to peg their currency by buying EUOs?  If Germany was to return to the Mark (which is reasonably possible) then the Swiss will crash and burn.  Can you imagine how many Euro's they've stockpiled to hold the EUO at this level? My guess is fairly soon either the Swiss or the Germans will throw in the towel and all hell will break loose...  I can't imagine it would take too much longer, but I've been amazed it has gone on this long!  

Ghordius's picture

there is a lot of wishful thinking about a breakout of the EUR

ok, let's discuss this incredibly unlikely event - what would happen?

the way the peoples of the EuroZone understand it, every bloody 100 Euro note/account/liability consists in x% of x currency at the rate at begin of the currency union - like every EUR has a bit of every currency in it - nothing that banks could not handle, thanks to the mighty computer system they have

now, I understand there are many countries where this scenario would get mother screaming fits - but again, we are discussing the EuroZone, which seems for many here to be further away than the moon

the Swiss seem that after a couple of hundred billions EUR more convinced everybody that the CHF is not "to be used as a safe haven by too much money" - and I have talked with some Swiss entrepreneurs who tell me that their accounting systems and reporting is anyway now on both CHF and EUR basis, and in most cases they are fully hedged

you are amazed how long this EuroCabaret is going on? they want to drag it to 2013!

now, what would you think if the governor of California or the PM of Scotland would now in earnest talk about having a separate currency? So that they can have a comparative advantage and handle their debt better?

doomz78's picture

So to sum up the article.:  They will not let banks fail, they will print money to bail them out which is bad for the average 99% but good for some of us who invest in Gold, Silver, Oil, Agriculture. 

idea_hamster's picture

That'd be o'siriq in Uzbek -- just so you know when you hear it.

rocker's picture

So Many Options

Libertarians for Prosperity's picture

 

 

I've said it repeatedly.  It never happens when everyone is waiting for it. 

 

HD's picture

You know nothing - the McRib has returned!

jdelano's picture

Just had one.   mmm.  McRib.