This page has been archived and commenting is disabled.
The Restaurant At The End Of Europe
Via Mark J. Grant , author of Out of the Box,
Le Palais du Sorcier
This is the name of the restaurant at the end of Europe; the Palace of the Wizard. This is where I sit and watch the long story unfold until the day when the folding stops and the fabric tears. After almost forty years on Wall Street I understand both the joke and the punchline and you cannot pay off old debt with vastly greater amounts of new debt without consequences and, I assure you, there will be consequences. This paradigm does not work for a corporation or a sovereign nation and the borrower is eventually brought to his knees by the sheer weight of the debt that he has laden upon his back. The interest rate paid is only part of the equation with the rest being the absolute size of what is undertaken.
Germany, with a GDP of $3.55 trillion cannot hope, in any terms, to support a European construct that is over $15.2 trillion without the hammer of fiscal reality at some point whacking her backside with a very loud bang. The remaining economically sound nations of the Netherlands, Austria, and Finland also do not have the capacity or the desire, according to the Prime Minister of the Netherlands and the Finance Minister of Austria, to support the rest of the Continent that is sliding into the pit of fiscal morass. “No more money for other nations” is the hoot and the holler resounding from Vienna to Amsterdam. The ECB, who resolutely tied their own hands and rather firmly behind their back, will do nothing, which is their own condition of liability, without a nations asking for help and receiving it and being given the green light from a Europe that grows more reluctant with each passing day. The European Central Bank’s recent announcement was not Nirvana but a last ditch dug side by side with the last hole if it gets to it and if the political leaders of Europe decide that the twin foxholes must be used to protect and shield the Continent. It is not “unlimited” or “no cap” that are really the operative words for the scheme but the “condition” of use that is the most important part of the recent “Save the World” speech of Mario Draghi. Europe and the IMF have spun the speech and I smile and watch it go round but it is the “Condition” that is important regardless of the way the top is turned in the blistering heat of the European crisis.
“I was to learn later in life that we tend to meet any new situation by reorganizing; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralization.”
-Petronius
The Euro and the equity markets rally upon misperception and I have witnessed this many, many times before in all kinds of different circumstances and then the light dawns and the great fizzle begins. The European banks stress tests were a failure and the markets initially rallied upon their announcement. The grand Firewalls were a failure and the markets rallied upon their declaration. Now we have the next “nouveau cuisine” and the flop in the pan will soon be realized for what it is; French Fries parading as “Pommes Frites” but the oil used to fry them is stale from constant usage. Allow me to be repetitive; the ECB has told us they will do nothing, nothing without formal application for aid and without all of the European nations agreeing as all twenty-seven countries own part of the ECB and not just the predominant seventeen so often discussed. They have also exempted Greece, Portugal, Ireland and Cyprus from any assistance and so the only nations under discussion are Spain, Italy and possibly France. In fact, what the ECB has done by lowering the yields on sovereign debt of these troubled countries is exactly the opposite of what should have been done as they can limp on a little longer now and try to avoid the yoke of fiscal responsibility while doing so.
“It is dangerous to let the public behind the scenes. They are easily disillusioned and then they are angry with you, for it was the illusion they loved.”
-W. Somerset Maugham
Spain is an admitted user of “dynamic provisioning” which is a long and academic argument for shifting reserves but in the end it means but one thing and one thing only and that is they are admittedly fiddling with their books. Spain is scared to death of the “Obermeisters of the Troika,” the refrains of the three brothers Reich, that will show up in Madrid and demand explanation and sacrifice. The financial windmills will be scrutinized and termed what they are and not accepted for what they have so long been presented as which is a myth created by Don Quixote and carried on by Mr. Rajoy and his predecessors. The rain in Spain has been useful for keeping the plains from the accuracies of the sun drenched light. Spain will take the money and all they can get without conditions but that possibility was ended by the ECB in another unforeseen and unintended consequence of the ECB’s decision. The European Central Bank closed the loophole with the condition for their assistance and Spain is now twisting in the winds of the tact the European Central Bank has signed up for and pledged allegiance.
The limit of the “unlimited” and the cap of the “no cap” is clearly defined in the condition. Any nation must apply for aid to the Stabilization Funds of the European Union and it then must be granted by all twenty-seven nations that own the ECB and not one Euro’s worth of bonds will be bought by the ECB until this process has taken place and been approved. The timeline here is not weeks but months and any decision will rest firmly upon the fact finding of the Troika which will be called in to assess and report to their Masters. I assert, regardless of the current misconception, that there is a cap and there is a limit and both are narrowly defined.
“In my youth, I, too, entertained some illusions; but I soon recovered from them. The great orators who rule the assemblies by the brilliancy of their eloquence are in general men of the most mediocre political talents: they should not be opposed in their own way; for they have always more noisy words at command than you. Their eloquence should be opposed by a serious and logical argument; their strength lies in vagueness; they should be brought back to the reality of facts; practical arguments destroy them. In the council, there were men possessed of much more eloquence than I was: I always defeated them by this simple argument; two and two makes four.”
-Napoleon
»
- 7479 reads
- Printer-friendly version
- Send to friend
- advertisements -
You can order anything you like....as long as it's nothing.
Please tip your waiting staff......cause we're not paying them.
Hot dog stand, maybe.
you cannot pay off old debt with vastly greater amounts of new debt without consequences and, I assure you, there will be consequences.
- (via?) Mark Grant
You cannot hedge debt risk by owning more debt.
- Antal Fekete
Bernanke: "Hey guys, i have an idea - let's all devalue our currencies concurrently so there's no safe country to park any cash!"
Sure you can. They've been doing it for years. Deficits don't matter. Reagan proved that.
There's always another slick trick, another quick fix, another gimmick. They never run out they use the same ones over and over.
42 Rajoy. The answer is 42.
Call Zaphoid Betlebrox, i'm sure the president of the galaxy have the funds and is eager to take credit for rescuing the euro project.
No, the brilliance of the Restaurant at the End of the Universe was that it took forever to get there so that a penny left on account for forever would easily pay the inflated bill when you were done. It's kicking the can, it's saying that we'll figure it out in time, it's saying that things will work out in the long run. Then J.M. Keynes, bastard that he was, had to have his quote about the long run. And that bastard is right in that situation.
Now i can't edit my post, well i guess that's what you get for misspelling the presidents name. Oh, Deep Thought when is the global economy going to fail? -Week 42. 2012-......oh shit.
or, in binary: 101010
"the Netherlands, Austria, and Finland also do not have the capacity or the desire"
I think you missed out France, how much again are they contributing to the big bazooka? And how about the other big bailout contributors, Spain and Italy?
"you cannot pay off old debt with vastly greater amounts of new debt without consequences and, I assure you, there will be consequences."
Why is this simple concept so hard to grasp?
Why do governments ignore this essential truth?
I'll tell you why. It's because they don't have to pay the bill; you do.
When the citizens are so friggen stupid that they don't grasp that fact then why should those in government even pretend like they do? The people are clamoring for more free stuff and they can't grasp that there is no money for that stuff. The politicians and the bankers are more than happy to oblige as long as they keep a seat at the table. The only inevitable outcome is default.
You mean the same citizens who opposed the TARP bailouts 300 to 1? What have they got to do with it?
Yes corporate welfare falls under begging for "free stuff" too. Cripes you have to qualify everything or else some body might get their feelings hurt.
I sat with my wife at a passable magic act. She was wowed and impressed by the illusion. I knew how the trick was done, so I was not impressed at all. In fact I said it was a boring trick that our three year old could do with the right equipment.
I was yelled at for spoiling the fun.
I get the same reaction when I explain channel stuffing and invetory slight of hand to fake profits, to increase stock prices.
I get yelled at for spoiling all the fun.
The economy is nothing but an illusion with skilled magicians floating P/Es in the air. Everything seems to be incredible until someone spoils the trick by pointing out the crane behind the curtain.
Napoleon for Fed Chairman!
On another note, the concept that the ECB has finally, maybe, reached it's last gasp and can do no more could equally, SHOULD equally, be applied to the Fed. The illusion cannot be continued much longer. Eventually the enormity of the elephant in the room can no longer be denied. And the monstrous steaming pile he leaves on your coffee table will have to be cleaned up.
"Conditions" are just another appeasement of public opinion, when they don't exist at all. The ECB has many chess pieces, one of which is the ELA which stands for unlimited liquidity for banks. Europe and the US for that matter have both painted themselves into a corner when it comes to financing government. Bond purchases are dominated by central bank purchases, whether directly or indirectly. If the Fed doesn't buy treasuries, it gets banks to buy them. If the ECB doesn't buy sovereign debt, the banks do, or the ESM does or the EFSF does or it somehow creates a market for them with buyers we don't know about. This is what unlimited liquidity looks like, and the red carpet to hyper-inflation.
The entire world is focused on liquid, short term paper assets. In the U.S., banks borrow for 0% and loan out at 15% on auto loans to deadbeats. In Europe, banks borrow at 0% and loan out at high rates to sovereign states. It is a short term, high risk game of making precious interest on massive amounts of short term paper.
I think where at the piont where crass comments are the only way to go.
The worst part is they are making them bend over and part there butt cheeks before they will give it to 'em.
There is going to be one almighty shit fight when the pretence of all the solutions finally gives in to reality.
At the moment too many of us are carrying rubber cheques in our pockets which we need to tear up if we hope to move on from the present mess. The great disconnect between debtors and creditors, manipulated markets and reality as well as sacrifice and means, is tearing eonomies and humanity apart.
Douglas Adams might posit in this current economic meltdown that what's needed is a hoopy frood who really knows where his towel is.
this out-of-the-box guy mking another fuzzy cocktail of different pieces of rubish.
add three quotes randomly chosen from the oddest egregious personalities ( they have to be not connected to finance from different ages i.e petronious+napoleon+somerset)
+
add your own reading of reality based on your pretended unrivalled experience in Wall Street
+
combine two or three unrelated market data.
+
add a mention of dynamic provisioning ( cleverly spotted by this guy ) in Spain as the reason for all problems
conclusion= a total asshole throwing out total bullshit
Dear Mark Grant : get back to the Box.