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Chinese vice finance minister said details on the expansion of the European bailout fund is still unclear, adding that purchases of EFSF bonds are not on the G20 agenda. Also, EFSF’s Regling said he does not expect to reach a conclusive deal with Chinese leaders during his visit to Beijing
There are several things that you need to know about the eurozone crisis and Wednesday's Summit agreement:
It isn't over.
The European Monetary Union's (EMU) "architecture" is a failure.
They spent too much and can't possibly repay the debt.
Banks will need to be bailed out.
They will print money.
Last week a leaked confidential assessment of the problem that was prepared by the IMF was published by Linkiesta's Fabrizio Goria. The document revealed the IMF's private assessment of Greece and the requirements for a bailout. We were tipped off to the document by our friends atTrumanFactor.com. The complete document can be found here.
Here is the problem: they all know that the €440 billion won't be enough. So the French are out raising money from non-EMU members with the hope they can increase the fund from €780 to €1 trillion.
Thus their trip to China to beg Hu Jintao for money. The Chinese are experiencing a kind of schadenfreude over this whole thing, secretly enjoying their new power role in international finance as the Europeans go hat in hand to them for contributions for the EFSF. They have said they will contribute but they have also said they want their kilo of flesh: stop complaining about the Chinese currency exchange rates. Fair enough since they fear that it will be perceived as a bailout of the West and that won't be popular with Chinese citizens. They are entirely correct in that assessment.
The bottom line is that the Europeans are piling debt on top of debt except that the new bonds will be paid on demand with the sovereign guarantees of EFSF. This is not popular with German and French taxpayers since they will account for almost 50% (48.51%) of the Facility. Add in Italy's 18% and these three countries are on the hook for a potential €530 billion.
You can be assured that ultimately some part of this will be monetized by the ECB.
I have little faith in Papandreou's socialist PASOK government's ability to adhere to the agreement. (See "Greece: The Problem With Socialism.") I feel it may be one, if not THE, stumbling block in this whole eurozone mess.
The EMU is built on a weak foundation. They allowed in countries that according to the Maastricht Treaty were not supposed to run deficits of more than 3% of GDP, yet they all did, even Germany. They allowed their members to spend and borrow without regard to economic reality and now the money has run out. At some point one wonders if Germany will be outvoted and they elect to bail out debt through inflation by printing money.
It's a mess
For the first time in the modern history of Greece, the President of Greece Karolos Papoulias is forced to leave from the military parade for the celebration of the national day of October 28th!
Hundreds of thousands of people gathered in Thessaloniki, where the celebrations took place, and shouted "TRAITOR, TRAITOR" at the first citizen of Greece. He was forced to leave, stating that a small group ruined today's celebrations.
We address this European issue, because soon it will debut in the US. The comprehensive policy response, which we have been told existed, really doesn’t exist. We found that out last Friday. All the lies of the past two weeks by various European governments and bureaucrats, as well as Mr. Sarkozy and Mrs. Merkel, were just more delaying tactics to attempt to find a solution to Europe’s financial dilemma. As part of this display of smoke and mirrors, these hopeful signs, generated large gains in US and European stock markets, of course, with the assistance of the “President’s Working Group on Financial Markets.” At the same time as usual gold, silver and commodities markets were attacked viciously. This is how markets and economies are manipulated when in control of our corporatist fascist government.
Originally posted by Shenon
reply to post by Vitchilo
YES YES YES
I hope thats true
The first kicker in the just released S&P statement on the revised and AAA-rated EFSF is the following: "In our opinion, there is an "almost certain" likelihood that the EFSF's 'AAA' rated member governments would provide timely and sufficient extraordinary support to the EFSF if needed." So, uh, S&P is determining the fate of trillions worth of securities on the basis of a hunch, a whim, if you will. A strong one, but a hunch nonetheless. Swell. And the second kicker: "If we lowered the ratings on one or more of the 'AAA' rated member guarantors, we would also likely lower the ratings on funding instruments that the EFSF had issued before the date of the downgrade, if the lower ratings on the member guarantor were to lead to less than 100% 'AAA' rated coverage for the relevant EFSF funding instrument." This, in the parlance of our times, is known as a springing downgrade, which sets off the kind of cataclysm that only AIG could achieve once the investing community realized it had a rating-based collateral schedule. So once again the fate of the free world depends on FrAAAnce. Swell2.
Have you heard the good news? Financial armageddon has been averted. The economic collapse in Europe has been cancelled. Everything is going to be okay. Well, actually none of those statements is true, but news of the "debt deal" in Europe has set off a frenzy of irrational exuberance throughout the financial world anyway. Newspapers all over the globe are declaring that the financial crisis in Europe is over. Stock markets all over the world are soaring. The Dow was up nearly 3 percent today, and this recent surge is helping the S&P 500 to have its best month since 1974. Global financial markets are experiencing an explosion of optimism right now. Yes, European leaders have been able to kick the can down the road for a few months and a total Greek default is not going to happen right now. However, as you will see below, the core elements of this "debt deal" actually make a financial disaster in Europe even more likely in the future.
Most people have no idea that Wall Street has become a gigantic financial casino. The big Wall Street banks are making tens of billions of dollars a year in the derivatives market, and nobody in the financial community wants the party to end. The word "derivatives" sounds complicated and technical, but understanding them is really not that hard. A derivative is essentially a fancy way of saying that a bet has been made. Originally, these bets were designed to hedge risk, but today the derivatives market has mushroomed into a mountain of speculation unlike anything the world has ever seen before. Estimates of the notional value of the worldwide derivatives market go from $600 trillion all the way up to $1.5 quadrillion. Keep in mind that the GDP of the entire world is only somewhere in the neighborhood of $65 trillion.
Just about 48 hours after it was duly noted as the greatest threat to the Eurozone in the post bailout world, Germany finally grasps the enormity of what global moral hazard truly means. As we said before, the biggest risk facing Europe, and by that we mean undercapitlized French banks (all of them) obviously, is not Greece or what haircut is applied to the meaningless €100 billion in Greek debt when all the exclusions are accounted for. It is what happens when everyone else understands they now have a carte blanche to pull a Greece at will. And while until now we had some glimmer of hope there was a behind the scenes agreement for this glaringly obvious deterioration to not manifest itself, Merkel just opened her mouth and proved our worst fears wrong. As Reuters reports, "Chancellor Angela Merkel said on Friday it was important to prevent others from seeking debt reductions after European Union leaders struck a deal with private banks to accept a nominal 50 percent cut on their Greek government debt holdings. "In Europe it must be prevented that others come seeking a haircut," she said." Too late, Angie, far, far too late. Because, just as expected, here comes Ireland and literally a few hours ago, launched the first warning shot that will imminently lead to what will be demands to pari passu treatment with Greece.
If you want to know what the early stages of an economic collapse look like, just walk around some of the downtown areas of our major cities.
Today, nearly all large U.S. cities are either flat broke or they are on the way to being flat broke. Yes, New York City and Washington D.C. (and a few others) are still doing fairly well, but for most U.S. cities economic reality is catching up with them very quickly.
Right now, there are a number of major cities that are so broke that they cannot keep the street lights operating. Down in St. Louis, parents in some areas are carrying golf clubs with them as they walk their kids to school in order to fend off roving packs of wild dogs. In other major U.S. cities, open-air drug markets conduct business without fear. All over the United States, cities that used to be clean and prosperous and full of hope are now being transformed into post-industrial wastelands. We are certainly not in "Mad Max" territory yet, but it doesn't take too much imagination to see where all of this is headed.
But it is not just Detroit that is having a major problem. Over in Highland Park, Michigan the majority of the street lights have been repossessed because the city was not keeping up with the electricity bill.
The Australian airline Qantas is to ground all international and domestic flights with immediate effect due to an industrial dispute.
Chief executive Alan Joyce called his decision "unbelievable".
The airline has been hit by a series of costly strikes.
Baggage handlers, engineers and pilots have been involved in the action which the company says is costing A$15m (US$16m) a week.
Relations between the unions and Qantas management started deteriorating in August after the airline announced plans for restructuring and moving some operations to Asia.
The restructuring is expected to mean the loss of 1,000 jobs from its 35,000-strong workforce.
The Australian minister for transport, Anthony Albanese, said the government would take action to intervene in the dispute.
"We are very concerned about Qantas' actions, of which we were notified only mid-afternoon, with no advance notice from Qantas at any stage," he said.
"The government is making an urgent application to Fair Work Australia [an industrial court] to terminate all industrial action at Qantas. This will be aimed at both actions by unions and by Qantas management."
German troops storm Greece. Putin's tanks crush Latvia. France humbles the British Army. Unlikely, yes, but as Angela Merkel says euro meltdown could endanger peace, a historian's imagination runs riot...
For by February 2012, it was terrifyingly obvious that the latest eurozone package had failed. In Greece, protests against the government’s austerity measures had turned into daily running battles, while much of Western Europe had now sunk back into recession.
A month later, after an angry mob had invaded the Greek parliament itself, Greece announced it was withdrawing from the euro. Almost overnight, the European markets were hit by the biggest losses in financial history.
As law and order collapsed on the streets of Athens, France and Germany sent in 5,000 ‘peacekeepers’ to restore calm. But when they came under attack from petrol-bomb throwing demonstrators, it was clear that more drastic action might be needed.
Meanwhile, the Greek collapse was sending shockwaves across Europe.
With the markets turning their attention to Italy, and Silvio Berlusconi’s beleaguered government struggling to maintain order, Europe’s fifth largest economy was suddenly at risk.