Mish's Global Economic Trend Analysis |
- International Monetary Research says "Eurozone Break-Up Certain"; I say Embrace the Fact "Banks Cannot Be Saved"
- Intuit: U.S. Small Business Hiring Slows in August, Wages Dip
- Greece 1-Yr Rate 60%; Finland Retains Collateral Demand; Multiple Veto Points; ECB "Litmus Test" Coming Up; Germany Accuses ECB of Treaty Violations
Posted: 28 Aug 2011 08:57 PM PDT Echoing what I have been saying for years, Christine Lagarde, the new head of the IMF says "Banks Need Urgent Recapitalisation". Unfortunately, much of the rest of what she says is pure nonsense, including the way she wants to achieve that mission. Please consider European banks set cash test by IMF chief Christine Lagarde, the IMF's new chief, set off tremors at the Jackson Hole summit over the weekend with warnings that the global financial system is on very thin ice and vulnerable to the slightest shock.Embrace the Fact "Banks Cannot Be Saved" This mess cannot be saved. Tim Condgon bemoans the fact. I say, embrace the fact! Tim Congdon wants to kick the can down the road. Christine Lagarde is clearly angling for more taxpayer bailouts. Just what the hell does it take for people to realize that throwing more money down the drain cannot solve a damn thing? Banks are going to take losses. That means bondholders are going to take losses. It is nonsensical to assume anything but that. It is equally nonsensical to suggest there is a way around it. The sooner we embrace the simple facts of the matter, the better off everyone but the bondholders will be. Attempts to shove more bailouts on the backs of already over-leveraged taxpayers will stunt the recovery for years more to come. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Intuit: U.S. Small Business Hiring Slows in August, Wages Dip Posted: 28 Aug 2011 06:50 PM PDT Intuit says U.S. Small Business Hiring Slows in August, Wages Dip Hiring by U.S. small businesses slowed in August and employers reduced hours, an independent survey showed on Sunday, suggesting the recent stock market turmoil may have dampened job creation.Odds are US Already in Recession I am increasing amused at the number of analysts and forecasters who think the US will avoid a recession. I think it is odds on the US is already in a recession. Others have "gone out on a limb" forecasting a recession within a year. Is that going out on a limb? Of course not. Going out on a limb was when Dave Rosenberg forecast a 99% chance of recession several months ago. I was not that brave. He was and he deserves the credit for it. Most of the recession callers are Johnny-Come-Latelys. What's more amusing are those who see little chance of it at all. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 28 Aug 2011 11:40 AM PDT Once again the bond markets have spoken, and once again the message is the same: default. Greek two-year bonds are near 44%, having touched as high as 46%. The interest rate on 1-year Greek government debt is a stunning 59.8%. Greek 1-Year Government Bonds Greek 2-Year Government Bonds 44% a year, for two years or whopping 60% for one year, unless of course there is a default. Not only does the bond market say Greece will default, but the implied haircuts are huge given those interest rates. Greece Not Saved Supposedly "Greece was Saved" on that blue circle when yet another bailout (throwing more good money after bad) was approved. The deal unraveled for numerous reasons but demands by Finland for collateral are at or near the top of the list. Austria, Slovakia, and the Netherlands now want collateral as well. Under great pressure from Germany, the EU, and IMF, Finland allegedly dropped those demands. It was a lie. Finland did not drop demands for collateral, and that shows you the effect of multiple veto points where such decisions must be unanimous or they fall apart. 17 Veto Points Please consider A Small Country — Finland — Casts Doubt on Aid for Greece Finland is just one of 17 euro zone countries whose parliamentary approval is needed for the expanded bailout fund and whose domestic politics could upset the process. The case of Finland points to a bigger governance problem in Europe, said James Savage, a professor at the University of Virginia who has published a book on European monetary union.Greece Has Failed Nobel prize winner Aumann says "Greece should be allowed to fail". Not quite. Greece failed long ago. It is only stubborn idiots at the ECB, EU, IMF, and leaders of various countries who insist otherwise. They insist otherwise to protect their banks. Yet, by throwing more money into the pot that will now clearly be defaulted on, they have made matters far worse. ECB "Litmus Test" Coming Up Now that Finland wants collateral for Greek loans, it will do the same if Spain or Portugal needs more loans. Moreover, I keep wondering when the citizens of Spain, Portugal, and Ireland have had enough, given the success of Iceland in telling the ECB, EU and IMF to go to hell. Iceland is recovering. The PIIGS are not. German President says ECB Bond Purchases "Legally and Politically Questionable" How much more Italian bonds can the ECB buy before it runs out of cash, willpower, or completely drains the EFSF €440bn pool of money? While pondering the above question please note that German President, Christian Wulff, leader of the Christian Democratic Union, says that ECB bond purchases are "legally and politically questionable". The Telegraph reports on the accusation by Wulff in Germany fires cannon shot across Europe's bows In a cannon shot across Europe's bows, he warned that Germany is reaching bailout exhaustion and cannot allow its own democracy to be undermined by EU mayhem.Kiss a Larger EFSF Goodbye
In other words, kiss a larger EFSF goodbye, expect a test of the ECB's Italian, Spanish, and Portuguese bond purchasing power, and expect a German court test that in-and-of-itself would settle this matter once and for all. Even if the German courts approve the deal, there are still more than 17 points of failure, counting investors. One way or another Greece will default. The sooner the better, actually. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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