One Thing is Shoring Up Europe

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May 10th, 2012 | By Shah Gilani


Europe, Europe, Europe…
I know, you’re sick of hearing about Europe’s problems.
But the problem with Europe is that it won’t go away. And if it does go away, we’ll have even bigger problems. What a mess.
Of course, I’m talking about the Euro-currency zone and the European Union, not Europe itself.
I love Europe. I love every country in Europe. I love the different cultures. I love the different languages. I love the different societal models. I love the history of Europe.
And no doubt all the Europeans love all the same things about their Europe – except maybe some of their history. But even more than loving Europe, Europeans love their own countries. Why? Because they have different cultures, languages, societal models, and differing views of their history. Vive la différence!
So, whose bright idea was it to gloss over (with shiny promises and, later, a shiny new currency) thousands of years of differences and shove all Europeans into a funnel in the hopes that they’d all come out the other end as one homogeneous mass of humanity?
Oh, that would be the bankers and financiers who wanted a United States of Europe so that the free flow of goods and services payable with a common currency would make everyone better off, and make themselves better, better off, by a lot of betters.
And now, what a surprise! There are differences all across Europe about, well, Europe and what it has become and where it has to go to get out of the mess it’s created for itself.
How that’s going to end is playing out right before our eyes.
And if there’s any comeuppance in the world, the bankers and political brokers who sold Europeans on “Funnel Europe” may just end up bankrupt.
Anyway, the gloss is coming off the game very quickly, and we’re seeing what’s going on. You already know if you’ve read anything I’ve written about what’s really going on.
But, once again, today, we’ve got another piece of the puzzle that’s fallen into our hands, so let’s look at it as a microcosm of what’s going on across Europe.
The double fantasy is that the little game that was played with Spain’s third-largest bank (by assets) is being played by the European Union’s euro-currency promoters. What’s the game? It’s more of a scheme than a game. And it has a name.
It’s called a Ponzi scheme.
The Spanish government is going to have to bail out Bankia, the No. 3 bank in the country, with a €188 billion book of “assets” which consists of €51.5 billion worth of property assets. (Don’t you love calling non-performing property loans “assets?”)
What you may not know is that Bankia is only two years old. It was formed by rolling up seven large, in-trouble cajas (essentially “local” savings banks or savings houses) who were in trouble because of – guess what – bad property assets. (Yeah, assets, as in ass sets.)
But it gets better…
The bank was all glossed-up, like putting lipstick on a pig, and was taken public with a wink and a nod of the pompom-wielding and cheering government. Fully 60% of the stock that was sold was sold to savers – yeah, the same savers who were the cajas’ own customers. They were duped into believing that the property problems that they helped create, had been solved. Their stock is now down 40%. Nice.
The government has been saying, emphatically, that Spain’s banking system doesn’t need any additional money.
Everything is cajalicious. NOT.
What the crooks did was “renegotiate” non-performing, bad loans so their capital position looked better and they could draw in equity capital investors. “Renegotiated” means flim-flammery accounting. It means lying and cheating.
And guess what? Now Bankia has problems. And it’s going to have to be bailed out.
Yeah, bailed out by the same government that supported renegotiating assets, rolling up the cajas and floating stock in the new Bankia. That’s a Ponzi scheme, folks.
And that’s what’s happening all across Europe. It’s a Ponzi scheme.
European banks are being given euros (okay they’re borrowing the money, but very cheaply) by the European Central Bank to buy the sovereign debts of their respective countries, which are backing the ECB and the banks that are in trouble.
Hmmm… Insolvent sovereigns backing illiquid banks buying sovereign debts with borrowed money from a central bank that’s backed by the same sovereigns?
Ponzi scheme. Goodnight.

Leave the lights on; it’s going to get a lot darker out there.

http://www.wallstreetinsightsandindictments.com/2012/05/one-thing-is-shoring-up-europe/
 
Superfreak said:
Europe just needs to keep spending more and more. That is the only way to solve a debt crisis.
Click to expand...


Contracting their way out of debt is working just swell.

What has to happen is large transfer payments from rich countries to poorer ones through the ECB. The ECB should pour money into the poorer countries and wipe away the debt while forcing the banks to take substantial haircuts. But he rich countries don't want to do that, they just want the ECB to make sure that their banks, holding large amounts of sovereign debt from the poorer countries, are supported through low-interest no-strings attached loans from the ECB. Instead, the ECB kind of supports the poorer countries but while imposing conditions on the funding that render the poorer countries unable to grow their economies whatsoever, leading to higher debt notwithstanding fiscal tightening and the need for more ECB money (because, of course, no growth and more debt means higher interest rates from the bond market, which in turn means more debt through higher interest payments).

So, yeah, the richer countries are going to have to bail out the poorer countries and their banks will have to accept the fact that their sovereign debt holdings aren't worth much and move on. But that ain't gonna happen.
 
General Buck Turgidson said:
Contracting their way out of debt is working just swell.
Click to expand...

ONCE again dung... they are not contracting their spending from pre-crisis levels. They simply aren't. No matter how much you want it to be so, the spending data shows it is not the case.

What has to happen is large transfer payments from rich countries to poorer ones through the ECB. The ECB should pour money into the poorer countries and wipe away the debt while forcing the banks to take substantial haircuts.
Click to expand...

That is the single dumbest idea you have put forth... and that is saying a lot given the number of completely stupid things you say on a daily basis.

Why would anyone invest in a bank if the governments could just force banks (and thus shareholders) to pay for the overspending habits of governments?

Why would anyone ever buy a government bond to begin with?
 
General Buck Turgidson said:
Contracting their way out of debt is working just swell.

What has to happen is large transfer payments from rich countries to poorer ones through the ECB. The ECB should pour money into the poorer countries and wipe away the debt while forcing the banks to take substantial haircuts. But he rich countries don't want to do that, they just want the ECB to make sure that their banks, holding large amounts of sovereign debt from the poorer countries, are supported through low-interest no-strings attached loans from the ECB. Instead, the ECB kind of supports the poorer countries but while imposing conditions on the funding that render the poorer countries unable to grow their economies whatsoever, leading to higher debt notwithstanding fiscal tightening and the need for more ECB money (because, of course, no growth and more debt means higher interest rates from the bond market, which in turn means more debt through higher interest payments).

So, yeah, the richer countries are going to have to bail out the poorer countries and their banks will have to accept the fact that their sovereign debt holdings aren't worth much and move on. But that ain't gonna happen.
Click to expand...

The PIIGS have had access to cheap money and EU subsidies for a long time now, what needs to happen now is a managed exit of countries like Greece from the Euro.
 
Superfreak said:
ONCE again dung... they are not contracting their spending from pre-crisis levels. They simply aren't. No matter how much you want it to be so, the spending data shows it is not the case.
Click to expand...

Their economies are contracting.


Superfreak said:
That is the single dumbest idea you have put forth... and that is saying a lot given the number of completely stupid things you say on a daily basis.

Why would anyone invest in a bank if the governments could just force banks (and thus shareholders) to pay for the overspending habits of governments?
Click to expand...

Sovereign debt is priced according to perceived risk of default. You seem to think that there should be no risk for a bank to loan to a government and all of the information regarding government revenues and expenditures is available to these banks when they purchase the bonds. And getting repaid something on debt that is essentially worthless (like Greek bonds) financed through the ECB is a whole hell of a lot preferable to getting nothing. Also, too, the ECB can't force the banks to accept the deal, but when the alternative is default and the Greek (or Spanish) equivalent of the figure, a substantial haircut is often preferable.

So, this is probably the dumbest fucking thing you have written on the subject and that is, indeed, saying a lot.


Superfreak said:
Why would anyone ever buy a government bond to begin with?
Click to expand...

Depending on the government, for a whole lot of reasons. But where you're buying debt of poorer countries to begin with, you ought to know the risks involved, including the risk of non-payment.
 
Aoxomoxoa said:
The PIIGS have had access to cheap money and EU subsidies for a long time now, what needs to happen now is a managed exit of countries like Greece from the Euro.
Click to expand...

And that money flows back to the holders of the debt of the PIIGS, which are banks in Germany and the other rich countries in Europe, not into the economies of the PIIGS. Also, too, the money comes with substantial strings that have crippled the ability of the economy of the PIIGS to grow, which further reduces revenues and required additional injections of money.
 
General Buck Turgidson said:
And that money flows back to the holders of the debt of the PIIGS, which are banks in Germany and the other rich countries in Europe, not into the economies of the PIIGS. Also, too, the money comes with substantial strings that have crippled the ability of the economy of the PIIGS to grow, which further reduces revenues and required additional injections of money.
Click to expand...

The only way they can grow is by being outside the Euro straightjacket, you only need to look at our experience when we left the ERM, the forerunner of the Euro.

http://news.bbc.co.uk/onthisday/hi/dates/stories/september/16/newsid_2519000/2519013.stm
 
Aoxomoxoa said:
May 10th, 2012 | By Shah Gilani


Europe, Europe, Europe…
I know, you’re sick of hearing about Europe’s problems.
But the problem with Europe is that it won’t go away. And if it does go away, we’ll have even bigger problems. What a mess.
Of course, I’m talking about the Euro-currency zone and the European Union, not Europe itself.
I love Europe. I love every country in Europe. I love the different cultures. I love the different languages. I love the different societal models. I love the history of Europe.
And no doubt all the Europeans love all the same things about their Europe – except maybe some of their history. But even more than loving Europe, Europeans love their own countries. Why? Because they have different cultures, languages, societal models, and differing views of their history. Vive la différence!
So, whose bright idea was it to gloss over (with shiny promises and, later, a shiny new currency) thousands of years of differences and shove all Europeans into a funnel in the hopes that they’d all come out the other end as one homogeneous mass of humanity?
Oh, that would be the bankers and financiers who wanted a United States of Europe so that the free flow of goods and services payable with a common currency would make everyone better off, and make themselves better, better off, by a lot of betters.
And now, what a surprise! There are differences all across Europe about, well, Europe and what it has become and where it has to go to get out of the mess it’s created for itself.
How that’s going to end is playing out right before our eyes.
And if there’s any comeuppance in the world, the bankers and political brokers who sold Europeans on “Funnel Europe” may just end up bankrupt.
Anyway, the gloss is coming off the game very quickly, and we’re seeing what’s going on. You already know if you’ve read anything I’ve written about what’s really going on.
But, once again, today, we’ve got another piece of the puzzle that’s fallen into our hands, so let’s look at it as a microcosm of what’s going on across Europe.
The double fantasy is that the little game that was played with Spain’s third-largest bank (by assets) is being played by the European Union’s euro-currency promoters. What’s the game? It’s more of a scheme than a game. And it has a name.
It’s called a Ponzi scheme.
The Spanish government is going to have to bail out Bankia, the No. 3 bank in the country, with a €188 billion book of “assets” which consists of €51.5 billion worth of property assets. (Don’t you love calling non-performing property loans “assets?”)
What you may not know is that Bankia is only two years old. It was formed by rolling up seven large, in-trouble cajas (essentially “local” savings banks or savings houses) who were in trouble because of – guess what – bad property assets. (Yeah, assets, as in ass sets.)
But it gets better…
The bank was all glossed-up, like putting lipstick on a pig, and was taken public with a wink and a nod of the pompom-wielding and cheering government. Fully 60% of the stock that was sold was sold to savers – yeah, the same savers who were the cajas’ own customers. They were duped into believing that the property problems that they helped create, had been solved. Their stock is now down 40%. Nice.
The government has been saying, emphatically, that Spain’s banking system doesn’t need any additional money.
Everything is cajalicious. NOT.
What the crooks did was “renegotiate” non-performing, bad loans so their capital position looked better and they could draw in equity capital investors. “Renegotiated” means flim-flammery accounting. It means lying and cheating.
And guess what? Now Bankia has problems. And it’s going to have to be bailed out.
Yeah, bailed out by the same government that supported renegotiating assets, rolling up the cajas and floating stock in the new Bankia. That’s a Ponzi scheme, folks.
And that’s what’s happening all across Europe. It’s a Ponzi scheme.
European banks are being given euros (okay they’re borrowing the money, but very cheaply) by the European Central Bank to buy the sovereign debts of their respective countries, which are backing the ECB and the banks that are in trouble.
Hmmm… Insolvent sovereigns backing illiquid banks buying sovereign debts with borrowed money from a central bank that’s backed by the same sovereigns?
Ponzi scheme. Goodnight.

Leave the lights on; it’s going to get a lot darker out there.

http://www.wallstreetinsightsandindictments.com/2012/05/one-thing-is-shoring-up-europe/
Click to expand...
It's refreshing to see a hardened liberal acknowledge problems in Europe. Thank you, xoxox.
 
General Buck Turgidson said:
And that money flows back to the holders of the debt of the PIIGS, which are banks in Germany and the other rich countries in Europe, not into the economies of the PIIGS. Also, too, the money comes with substantial strings that have crippled the ability of the economy of the PIIGS to grow, which further reduces revenues and required additional injections of money.
Click to expand...

From what I've read, the people themselves, specifically the German people will go nuts on any politician who puts money into one of the poorer euro countries. I guess they are all like superfreak, achtung baby. If that is the case do you think the solution is for some of the struggling countries to just abandon the euro?
 
Darla said:
From what I've read, the people themselves, specifically the German people will go nuts on any politician who puts money into one of the poorer euro countries. I guess they are all like superfreak, achtung baby. If that is the case do you think the solution is for some of the struggling countries to just abandon the euro?
Click to expand...

LOL. Achtung baby! I love it.
 
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