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Geithner Plan for Europe is last chance to avoid global catastrophe

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posted on Sep, 25 2011 @ 08:49 PM
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Europe, the G20, and the global authorities have one last chance to contain the EMU debt crisis with a nuclear solution or abdicate responsibility and watch as the world slides into depression, endangering the benign but fragile order that has taken shape over the last three decades.

"The threat of cascading default, bank runs, and catastrophic risk must be taken off the table," said US Treasury Secretary Tim Geithner over the weekend.

"Sovereign and banking stresses in Europe are the most serious risk now confronting the world economy. Decisions cannot wait until the crisis gets more severe."

Euroland's dysfunctional arrangements are no longer a local affair. As the European Central Bank's Jean-Claude Trichet said in Washington, EMU is at the epicentre of a global sovereign debt crisis that risks engulfing all, and is more intractable than 2008 because governments themselves are now crippled.

China, India, Brazil and the world's rising powers will not escape lightly this time if leaders let events spiral out of control. European banks have lent $3.4 trillion to emerging markets (BIS data), or three quarters of external loans to these countries.

The International Monetary Fund warned last week that emerging markets face the risk of "sharp reversals" or even a "sudden stop" if there is further spill-over from Europe. This comes at a time when Asia and parts of Latin America are already in the topping phase of a credit boom, one of epic proportions in China where loans have doubled to almost 200pc of GDP over the last five years.

Warning signs have been flashing red for the last three weeks. Shares of China's top property developer Greentown have crashed by a third this month. The currencies of Indonesia, Brazil, Korea, South Africa, and Hungary have all buckled, and central banks have begun intervening to stop the slide. "A continued flight from risk raises the growing possibility of investor capitulation in emerging markets," said Neil Mellor from BNY Mellon.

The reserve powers would be well advised to pull out all the stops to save Europe and its banking system. Together they hold $10 trillion in foreign bonds. If they agreed to rotate just 4pc of these holdings ($400bn) into Spanish, Italian, and Belgian debt over the next two years, they could offer a soothing balm. None has yet risen to the challenge. It is `sauve qui peut', with no evidence of G20 leadership in sight.


Cited only in part, but an interesting article worth the read, particuarly highlights the seriousness of the situation amid some outright blatant and blind optimism.
It also outlines how they will leverage 440 billion euros to create 2 trillion in bail out funds, all public moneys of course.




posted on Sep, 25 2011 @ 09:04 PM
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I increasingly think the EU will end up in a war. Ironically, or not, given that the foundational agreements which eventually resulted in the EU were meant to stop the wars in Europe. I have not yet decided if the Europeans will turn on each other and pick up where they left off at the end of WWII (Germany is in good shape for it), or if they will stay banded together and pick a new target. Neo NeoColonialism which will look much more like actual colonialism than the plain NeoColonialism...
In all, major conflict is the only way out.
I don't think there is a bail out big enough to stop this slide.
I am pleased that the Chinese have fallen on the "american dollar is safer" view. That will provide the U.S. some protection for now.
If the EU does go to war (with each other or somebody else), sad to say but the U.S. should sit back and make weapons. Then, sweep in like they did before near the end of the war when whichever side they pick will be put into the victory zone by their entry and support.
Hey, we achieved hegemony that way once before...
Ever think somebody is looking to go back to the well?
edit on 25-9-2011 by watcher3339 because: (no reason given)



posted on Sep, 25 2011 @ 09:12 PM
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I hope he is not bringing his personnal copy of Turbo Tax to show them how to budget themselves.

Maybe not funny, but I found it amusing.




 
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