- More debt agreed on exacerbates an out-of-control problem.
Only its final resolution is delayed. The longer crisis conditions continue
and grow, the worse they'll be when day of reckoning time arrives.
- Nemesis, the goddess of vengeance and punisher of hubris
and arrogance in Greek mythology, may have final say.
- She's here among us, unseen, patiently stalking, and
awaiting when she'll make her presence known. Wagner's Brunnhilde in Der
Ring des Nibelungen collects heros, not fools and hypocrites. However,
they both announce themselves the same way, saying "Only the doomed
- Predatory Wall Street and Eurozone bankers will feel
their sting. It's just a matter of time. Rage across hundreds of US and
European cities hastens their day of reckoning. Hopefully it's coming soon.
Nemesis will decide, but won't announce it.
- Pledging an "ambitious and comprehensive" debt
crisis solution, Eurozone leaders sold out to bankers. Europe's debt problem
is too great to solve. Throwing good money after bad compounds it.
- Greece and other troubled countries owe up to $6 trillion.
Germany, France, other donor countries, and the European Financial Stability
Facility (EFSF) don't have enough resources to contribute without wrecking
- As a result, doubts are being raised about optimistic
assumptions, sketchy details, and important unanswered questions.
- On October 28, the Wall Street Journal's Matthew Karnitschnig
headlined, "Cheers and Skepticism Greet European Deal," saying:
- Doubts remain about how the plan will work. "European
leaders offered few details....signaling that it would take weeks, if not
months, to work out the fine print."
- As a result, many experts are skeptical. Speaking in
Munich, Bundesbank president Jens Weidmann said:
- "The envisaged leverage instruments are similar
to those which were among the origins of the (2008) crisis, because they
temporarily masked the risks."
- RBC Dominion Securities currency strategist Stewart Hall
believes funding the package "may prove a tough sell." Bond Vigilantes
already expressed skepticism. More on that below.
- Even if investors embrace the deal, bailing out out banks
won't fix sick economies. As a result, economic weakness will deepen and
remain protracted with no policy measure considered to boost growth.
- Britain's Financial Times (FT) headlined, "Italy
gives EU a post-party hangover," saying:
- "Italy's borrowing costs have climbed to euro-era
highs a day after European leaders agreed on a new plan to reverse the
region's spiraling debt crisis, a worrying sign they have failed to regain
the confidence of key financial markets."
- Bond investors know that raising debt levels compounds
an out-of-control problem. As a result, they responded negatively to the
- Because of its size, Italy's troubled economy threatens
contagion if it needs a Greece-type bailout package as many expect.
- Senior Italian financial officials warned Eurozone leaders
that "plans to recapitalize banks have not been properly thought out
and risk pushing Italy, and other economies, into recession, by forcing
banks to withhold funding from businesses and consumers."
- According to one unnamed official:
- "This situation has not been fully considered and
there is a severe risk that half (or more) of Europe ends up in recession."
- Spain faces similar problems. As a result, bond yields
jumped there as well to a deal investors believe falls short of resolution.
- Germany's powerful constitutional court issued an injunction
requiring full Bundestag approval for any urgent European Financial Stability
Facility bond-buying operations.
- Moreover, Eurozone finance ministers haven't agreed on
ways to implement their announced leverage plan to provide around $1.3
trillion in bailout aid.
- An end of November deadline was set to approve final
details, but many experts doubt the viability of what's eventually announced.
Moreover, some think months will pass before anything substantive is known.
- On October 28, FT's Peter Spiegel headlined, "Deal
widens Paris-Berlin divisions," saying:
- Differences between the two countries run deep. During
negotiations, they occasionally flared. An unnamed European official said:
- "It is not about day-to-day things. There is a political
and economic structure behind the two countries that is just too different."
- As they go (along with Britain), so goes Europe. Since
the crisis began, German officials "pushed for Greek bond investors
to take losses on their holdings as a way to lance the boil of Greece's
unsustainable debt levels."
- Berlin worries about moral hazard risks. Germany finally
got bondholders to take a 50% haircut, but not as announced. If enforced,
it only applies to some Greek bonds.
- Moreover, troubled banks in greater trouble from haircuts
will get bailout help to compensate. In other words, taxpayers will bear
most pain, not bankers responsible for today's crisis.
- On October 28, New York Times writers Jack Ewing and
David Jolly headlined, "Hitches Signal Further Difficulties for Euro
- Friday "(s)obriety displaced (Thursday's) euphoria,"
signaling a debt crisis far from resolved. Interest rates in troubled economies
are rising, exacerbating conditions there. Bond vigilantes reacted negatively
to a bad deal, even though details are unclear.
- Investors lost confidence in Greece, Italy, Spain and
other Eurozone countries. Fragile conditions signal trouble. Wednesday's
deal solved nothing. According to UBS economist Martin Lueck:
- "If you ask someone (in Germany), they'll say they
want the Deutschemark back." Authorities already printed a supply
just in case.
- Regular Progressive Radio News Hour contributor Bob Chapman
said "Europe doesn't know what to do and neither does the Fed and
Bank of England." Their solutions exacerbate the mess they made, so
they keep throwing money at it counterproductively instead of taking constructive
- Conditions now are so out-of-control, "there are
no solutions offered to solve the problem." Major US and European
banks are insolvent. "Many carry two sets of books. Without a total
audit one does not know the actual condition of these financial institutions.
Market players and investors don't want the truth because they can't handle
it. It means the game is over."
- "Almost everywhere we look, problems are being extended
and thrown into the future. How long it will take for the world monetary
system to collapse no one knows, but it's inevitable."
- Creating more of it can't solve debt problems. Economies
are wrecked to save banks. Eventually, Greece will default. When it goes,
so does Europe and America because financial systems in these countries
- A Final Comment
- Kentwillard.com headlined "Euro Bailout Failure,"
- "Have so many ever been so enthusiastic over a plan
to beg, borrow, and steal $1.5 trillion?"
- These type policies don't instill confidence. Most important,
they don't work. At best, they buy time, creating a greater problem instead
of solving current crisis conditions.
- As explained above, the agreed Greek bond 50% haircut
is far less than announced. Private investors were asked voluntarily to
go along. Some will. Others won't. Moreover, default is certain.
- Excluding German and French banks, others have to recapitalize.
Italian, Spanish, Portuguese, Irish, and Greek banks need lots of help.
Where it's coming from isn't clear. Who'll buy their countries' depreciating
debt? Who'll buy theirs?
- Eurozone leaders want China and Japan to help. They have
their own troubles to resolve. Neither will throw good money after bad
without something in return. Moreover, no nation will guarantee another
$1 trillion in debt, especially from troubled economies.
- Out-of-control debt isn't resolved by more of it. So
far, proposed solutions offer little else. In other words, years of failed
policies are being repeated.
- Nemesis will have final say on when culpable bankers
and corrupted officials will be held accountable. Everyone, however, will
share pain more severely than already. Expect hard times indeed to get
- Stephen Lendman lives in Chicago and can be reached at
- Also visit his blog site at sjlendman.blogspot.com and
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