French Connection: The Eurozone Crisis Worsens Sharply

By Peter Boone and Simon Johnson

The big news is France.  With sentiment worsening across Europe, France has lost its relative safe haven status – credit default swap spreads on French government debt were up sharply today.

The trigger – oddly enough – was Hungary’s announcement that its budget is worse than expected (blaming the previous government; this is starting to become the European pattern) and in the current fragile environment discussed yesterday, this relatively small piece of news spooked investors.  But these developments only reinforced a trend that was already in place.

It did not help that the Irish Minister of Finance announced Ireland has 74.2bn euros of guaranteed bank loans, bonds, and systemic support falling due between now and Oct 1.  This is around 55% of GNP.  It sounds like everyone backed by the Irish government had the “clever” idea to roll over their debts to just before the guarantees expire. 

The big losers are Portugal-Ireland-Italy-Greece-and-Spain as always, but Belgium is now in the line of fire, and France is clearly under pressure.  The spread between French and German credit default swaps (measuring the relative probability of default) is up – yesterday this was 40 basis points, today it stands at 44 (up from just 5 basis points at the end of 2009; most of the increase is since mid-March, with a sharp acceleration recently).  French bonds have become illiquid, with wide bid-ask spreads; not what is supposed to happen in a safe haven.  This is going to make the French angry – watch for more market slanders from top French politicians over the weekend; you know they would just love to ban trading in something. 

Earlier today the French Prime Minister came out with a quote for the ages:

“I only see good news in parity between euro and dollar”. 

Be careful what you wish for – such statements will drive the Germans crazy as they see further evidence that inflation lovers are clearly winning influence and might just gain control at the European Central Bank (ECB).  

This has the potential to become a run on most non-German bonds in the euro zone.  Next we will see pension funds and reserve managers stepping back and waiting to see what happens – there is no profit in buying French bonds for a 40 basis point spread over Germany given the risks and illiquidity that we have seen in other markets. 

The eurozone leadership may be tempted to address the short-term issues by providing much greater Quantitative Easing (i.e., putting a lot more money into circulation through buying government bonds) than the ECB has already promised.  However, the ECB does not have the fiscal backing necessary to take that sort of sovereign risk, as this is ultimately a mix of a bank run and serious private and public sector solvency problems. 

These solvency problems will worsen as they are allowed to fester.  And if the ECB announces it will buy French bonds, investors will probably step further back and just let them buy.  We are beyond the point where mere expressions of intent-to-support will lead to a private sector rally.

Investors increasingly fear that it is simply unsustainable – economically and politically – for the ECB to support the rollover of public and private debts.  If investors – acting on this belief – refuse to rollover bonds, the entire policy disintegrates into uncontrolled money issue.  Quantitative Easing on this basis will fail. 

The ECB is going to be forced to show a deeper hand, potentially along three dimensions.

First – the euro authorities have to let the euro truly collapse, e.g., below parity with the US dollar. This reduces solvency issues across the eurozone.  Ironically, by doing nothing, and bickering within Europe as Rome (and Madrid and even Paris) burn, this is one measure that Europe seems set on delivering.

Second – if the euro devaluation does not come fast enough (or does not promise enough immediate future growth), the ECB and others will push for a “Plan B” within which at least some of the weaker eurozone countries implement “voluntary” debt restructurings (of the kind more common and not necessarily so traumatic in emerging markets; see Kazakhstan) – in which they make offers to bondholders to restructure and threaten to default if they are not accepted. 

This will end rollover risk among these sovereigns – particularly as the banks will be forced to follow suit.  European bank regulators need to work with each major European bank to ensure it is adequately capitalized post-restructuring.  This is a good time to change management/directors and look at imposing losses on at least some unsecured creditors, although the fear at such moments is always that systemic panic will set in; vulnerable financial structures induce bailouts (and future moral hazard, as President Obama can attest).  The ECB will need to provide liquidity to prevent bank runs.

Third – the eurozone nations that remain without a restructuring will need G20 support to roll over their public debts while rolling over or – failing that – restructuring some private financial sector debts. This includes France.

Progress on steps 2 and 3 require consensus within Europe and determined actions with international support.  This remains nearly impossible until nations face the obvious risk of national financial collapse. 

We are not there yet but this is the dangerous glide path.  As the bond market moves towards a buyers strike and with Europe’s leaders doing nothing – simply hoping all their problems will melt away by themselves – the path of least resistance is to spiral downward.

Pressure from other governments will quickly mount and offers of international help will appear without any difficulty.  The G20 will soon be desperate, again, to get Europe to seriously sort itself out. 

And think of the diplomatic coups that await China when it figures out how to throw its more than $2 trillion of reserves into the fray. 

Surely the White House finally understands what is going on – they must lift their heads from the compelling tragedy of the Gulf coast and determine whether American global economic leadership rises or falls.

Update (revised): the exact quote from the French PM is “”Je n’ai pas d’inquiétude quant à l’actuelle parité entre l’euro et le dollar”.  He may be referring to the current euro-dollar rate but there is some potential ambiguity here. Saying this on a day when the euro is collapsing, he is clearly condoning further collapse.

140 thoughts on “French Connection: The Eurozone Crisis Worsens Sharply

  1. Default, dear Brutus, lies not in our stars, but in ourselves.

    However, the ECB does not have the fiscal backing necessary to take that sort of sovereign risk,

    Who needs fiscal backing when you have a printing press? If you really want to weaken the Euro…

  2. Simon is correct: German commentators brought up
    the looming ECB’s problem: its equity capital is 70
    billions euros, it has purchased at least 40 billions
    of sovereign bonds as of last week, 25 billions worth(less) of Greek sovereign bonds ( presumably to get them off the books of the French banks ) that it also has on its books has collateral for repo-loans to banks. And now comes the issue of the Hungarian bonds.So in the event of a Greek debt restructuring, foreseen unavoidable by most analysts, the ECB needs to be recapitalized, and Germany’s share in the bank is 17%. Angry they already are…

  3. There was a clear initial mistranslation. This just means “I am not worried by the current EUR/USD exchange rate”, which is just a blinding glimpse of the obvious. The problem isn´t so much the level as the trend and macro outlook

  4. The G-20 along with the ECB are truly now forming some new systems as Far-fetched, but “Welcome to the Global Power-Ball, May Be Your Only Ticket Too Enter The Elite’ New Economic World Order Being Developed– On The Planet (MA & PA).

    Take a Number folks, Because You may be all adjusting for the next Experience Testing the very nature of mans ability to have economic empathy and compassions to be hand and hand with that of the ability to also live has neighbor. Living in a social order as to be in union with a Creator, God that in this case has been mostly absent for a majority of this global world.

    This missing God, who also is known by many other names, but the one he called out was, “I AM”, has been made absent from the equation for some time now as seen from this economics student working the formulas.

    These are becoming in the 2010 to 2013(s, the challenges for all nations of the globe.

    Plenty of books have been written from the angles on Si-Fi. Sorry, not SI-FI today…

    I chose my pen of Far-fetched Themes based upon wanting to keep them to be fiction, but to challenge the facts of the topics of subjects.

    Unfortunately, the use of the theme and the resurrection and combining of four theorems simply stated as the COASE Oppression Theorem, the professors rewarded me with finding the key for uncovering and showing truth for ones to think and bring thought to academia and all to ponder.

    The theorems have economics with North Korea and South Korea near setting off what is seen could be global in nature as WW III in a regime, or be it off in Iran, or involving Israel or some other country or dictator’s or administrations using the systems of COASE Oppression economics as their forms of theorem.

    A theorem that seems to be revealing the depths of all the weak points of true unrest breaking along the fault lines of a societies mapped globally that are connected for their very survival now on one another.

    Regions fragile natures as the G20 fears should be marked and underlined. I further note the measures of austerity for all nations are on the table now for the G-20 as well, as it seems even we are hearing rumblings that their may be only the true strength of what some in media calling the G-2.

    Let us hope and pray, if you are one that believes in the Creator, “God” that the Asia, meaning North and South Korea; along with other hot spots of unrest will settle in to changes. Allow Economic debt structural change and continue to slow down and measure in to GDP growth and consumption with acceptable global social debt repayment austerity confinement restraints with the possible acceptance of a Creator.

    This all started for the history lesson, back between 1958 – 1971 when President Nixon with than Fed Paul Volker sealed it. The Gold Standard was ended.

    This was the fall of the World Gold Standard. The ERA to be born to the “New Economic & Social World Order” now we all live by the promise of a note, the ERA of the bonds, the derivatives, and all the other forms of free levels of what has now become known best has the global Liars Poker Table of Sovereign Debts.

    One who has written great articles and helped investors try to stay safe is the who is Todd Harrison.

    Todd has hit on many themes, but one of his themes is, “Phantom Deflation”. I sent him an e-mail recently, and it was based upon him hitting the cover off the ball on his Buzz & Banter post on moral principles of life and trading.

    You can bet in the next months that are untold numbers of defaults of the high end of the upper end of the homes being abandoned and the ones sitting on the edge of the fence will start to fall in the coming year once the stimulus is gone.

    The theorems further stress the facts that the ability, and it is showing from the news releases of many now walking away from their mortgages now after learning the housing market is “Now Officially up Side Down” when reports were released during this first week of June 2010.

    Yet, I remind you, when this occurs, the veracious spending, and consuming habits are raised per economic formulas of the theorem due to a few serious factors that bring on COASE Oppression testers on Samuelson based economic use of GDP normalized growth metric models.

    These forces consumer spending though is poised to increase to levels that are going to go off the charts. Call them; the generations of the lost souls who have seem to of lost who created all things in the first place, if you again, believe in the Creator.

    That is the missing part of all economic equations learned by this student of economics.

    Professor Joseph Stiglitz has reached most likely the farthest distance with his latest push of theorems trying to measure what is the happy factor of the, “Human Unit” that is critical to measure for the countries well-being.

    I would say, Wow, timely theorem to add to GDP, CPI as this is a measure of the Austerity factor and was added myself as part of the equation of the COASE Oppression Theorem overall insurability for reliability of data markers.

    Balance their lives and their family’s lives. That previous statement is not good for the markets!

    The other one is much more likely as generation X, Y, and z as they just cannot control their consumption appetite.

    They are on the spending spree and also part of the plan that is wrong of the elite’ for the continued fall within the social decay of our ways of allowing such decay to be written into laws around the globe.

    I want it all, stays on this econ-students mind that leaves the radar for investors looking for plays all over the disposable world of gadgets.

    Gadgets and what can make someone happy for the moment and they move on to the next thing because it is just that simple now.

    Until I see no ad running on the Internet or a TV(s), I think I will go with this as a sure answer that corporate and the governing bodies of our Countries must move on with the COASE Oppression standards of the new Economic Social Orders.

    So what does this mean for your financial advisors or if you’re taking care of your own investments along with if, you’re the market maker fund manger professional?

    It will or should fuel the markets in the next 2 years, but not the way MA & PA were sold on their don’t worry everything alright.

    They as well as the pros can’t relax anymore in this COASE Oppression market. MA & PA need active managing your funds, but in truth, if you’re not over a certain value within your account, you might not be active at all and go down as a holding long stuff that should of been sold and adjusted.

    James Cramer made great comments off his MAD Money show last week on this point. The message is you will need to be very active with watching all the laws and changes in tax laws along with keeping up with your money and what it is doing now.

    I said this once, I have to say it again, and “MA& PA this is not Kansas Any More!”

    With that said folks, have you ever been on the ride you have to sign a paper that says, “You may experience a Heart Attack, or could have a serious injury after the ride?” Strap on your seat belts, MA & PA America and the Pros on Wall Street.

    This market will offer the biggest of returns in the next three years, but with this caveat. It will also savagely offer consumers spending in despair lost due to the COASE Oppression Theorem driving markets. Wow, this will be making even the most seasoned non-emotional veteran Wall Street Pro.

    A Pro that if he or she has a belief of the Creator walk away from what they have done from the sure ugliness they will be the first to see since they are the trigger that assisted the action.

    I hope that the counter reaction is they will come to the aid of many of their fellow friends and neighbor because they have figured it out finally it was the rich that actually were in the radar of the COASE Oppression theory.

    The sovereign spread of debt to credit in the new economic order is a non-equation once the Gold standard of 1971 was wiped out. The signals are clear folks, being adjusted and organized into packages of laws for use globally by G-20, and what is also called G-2, the canary as Greece, Spain, Public Sector Workers of New York and the list will grow, but the laws of America are yet killed the American dream yet folks. We are close though.

    Words like Dhimmitude and other prime choice entry are place in documents all throughout recent laws. (Go Google the word and review the Health Reform Document)

    This word was part of the Health-care reform bill. It actually separates a nation and does not bring a nation together.

    I would love to know who forced and truly added this verbiage of Dhimmitude. Take time to look at the document and the word. Then you will get the message.

    Last thought about the health-care reform, be concerned for the affect for all current workers, future workers, those without work, and retired.

    The why is held with the fine writing and the flag for corporate America to cut many workers from their benefits rolls when the green light of the year they are allowed to take their $2,000 dollar tax penalty per employee released off their health insurance roll.

    Also imagine this is why we see such a build-out in the could computer connections and IT boom as this offers an ability to lesson even more of the work force.

    These American Constitutional Laws and any New Laws that change any of them are critical now to MA & PA America.

    They are considered and to be considered by all unions now as protective due to austerity coming as sacred ground and the area that needs most protection.

    We cannot rest and your Votes Still Count MA & PA America as Laws for the rights of how families are on the table as to tax laws affecting pensions, retirements, and a host of austerity we need to understand.

    The message is clearly sent, Votes Count for MA & PA to survive the New America with what is already a new Health Reform and New ERA of High tech and jobs with sciences.

    This is an America in transitions with strategies that are being written as we go.

    Education in the high tech areas and making the young get Math and Sciences down as foundation as this will be their only key to future job survivability along with some of the normal service sector and assembly areas.

    This means long-term jobless folks and changes. An America re-building of what is GDP? An America corporate market asking, what level of production and CPI figures and type employment is really at play for our folks, and what is the real HUMAN UNIT need for the corporate build for producing ROI?

    Until then, austerity could mean many pains and deep changes of retirements for MA & PA America.

    Ma & PA might see lock outs too areas once thought scared and untouchable from the government or corporate pension boards along with other taxing authorities previously protected by Union contract or other such federal or state laws.

    To end this article post. Make no mistake. The Coase Oppression Theorem affects not only the middle as normally seen as well as the usual poor rung. This time, it goes directly for the crust of the rich.

    The rich of the upper crust of the higher middle class to lower elite’ class that normally consumes and uses and does not pay attention to the systems, but is not truly in charge of the systems as the upper elite of the select are the ones running this show with the help of the great deceiver himself.

    They are the ones marked as this theorem raise from the results. The theorem clearly pulls out the other lower classes in this next journey feeling the true affect of what is to be the economic pecking order.

    A pecking order of real dollars coming from the rich of the upper crust of the higher middle class to lower elite’ class their legacy’s or wealth affecting their lives and ultimately, if they have a belief in a creator being God, a challenge with a loss of their very soul this being the true loss as well.

    Far-fetched, I hope not, Get to be mindful to live within your means… Bring the Creator, of “I AM”, back as a friend within your daily life and your family’s life.

    You might be comfortably surprised, it might not change the Oppression or possible conditions personally you are experiencing within this existence.

    Since I am an Econ Student trying, become a Professor, and may help with the financial area by throwing in my hat as many have asked for my assistance. You can survive many of these days coming ahead and the challenges placed upon you financially, health, the raw facts of what makes us a human soul.

    I say this because When you can just say yes to the Boss of, “I AM” as to trust with all of your heart, mind, thought, and soul, you have just entered the ability to adapt to survive the passion to survive changes of decay of Man moving away from God.

    The next steps are that you than are open to the facts, that you can make the best without making the greed and fear a problem. This is where one can mark always and have the market edge over those who seek the ruin over those with that as their unconscious mission.

    To end this article post, you really need to bring this to focus on what made it all happen. This is all about moral, ethical, and morals with the loss of virtues that continue to erode our nation and many other nations around our world.

    This is the time to stand up and make a change individually first, then within your family, to invite back a calmness of knowing a creator that can be part of your daily life and bring yourself and the ones you love to live within their means.

    It is that simple, it starts first from there; and it goes forward. I call it as certainly a few before me have, “paying it forward”, and mentality. A paying forward of helping your neighbor as this builds a village to a nation to a global world of sustainable growth as I think we all seek.

    As far as investing and winning in the stock market, just try to take risk and make it a smaller portion of what is considered a manageable risk.

    What is a manageable risk?

    Risk defined for those who think they know the answer. It is when you feel you are no longer afraid that anything can ever be taken away from you and the house always wins. It is the end of the story in the Bible if it’s a book you have ever read. The bet has already been set and the hedge is set.

    The smart minds can run the options and all the numbers in the markets and this is OK.

    It is considered wrong though when they take measures to, PONZI and all the other conditions that have now occurred that have caused the world of MA & PA to become open to Coase Oppression Economics.

    We know God in the equation will equal a social order that will consume with a sense of not wanting it all and living more within their means.

    The Risk for the market bets are taken care of through taking emotion out and entering the math of no greed and no fear. Just what is needed to get what is too establish the life style within an actable social order of a creator that would be within the equation.



    Best way I know of explaining of being on the side of risk when it comes to the ultimate side of risk. Eternal, Risks…

    May you keep yourself or your families calm, in what seems a sea of storms…

    Peace for Now I am Out of Here for Now…

    James Gornick

  5. French President Threatened To Pull Out Of Euro

    |May 14, 2010 – Wall Street Pit – excerpt

    “According to a report in Spain’s El Pais newspaper, French president Nicolas Sarkozy is seriously considring reinstating the franc after threatening to pull his country out of the Euro at a meeting of European leaders deciding Greece’s aid package last Friday.

    The newspaper cited comments by Spanish Prime Minister Jose Luis Rodriguez Zapatero who revealed details of Sarkozy’s threat at a closed-doors meeting of leaders from his Spanish socialist party on Wednesday.

    Sarkozy, reportedly banged his fist on the table and demanded a “commitment from everyone to support Greece…or France would reconsider its position in the euro…That obliged Angela Merkel to bend and reach an agreement,” according to one El Pais source.

    Another source present at the meeting between Zapatero and his party told El Pais that “France, Italy and Spain formed a common front against German and Sarkozy threatened Merkel with a break in the traditional Franco-German axis.”

    “First we take Manhattan, then we take Berlin
    I’m guided by a signal in the heavens…”

    – Leonard Cohen

  6. Mr. Johnson wrote:

    “Surely the White House finally understands what is going on – they must lift their heads from the compelling tragedy of the Gulf coast and determine whether American global economic leadership rises or falls.”

    Double Dip recession anyone?

  7. If I were China, I would be moblilizing the army on North Korea’s border right about now. Publicly. On face book.

    Either Kim steps down peacefully or he is forced to. Establishing China’s world leadership as the other Super Power.

    Perhaps, the Western World will get its act together in the face of a dynamic not under their control.

    Talk about a gathering of sinner’s down by the river side confessing and pledging toward salvation. Given the lack leadership on our part, what’s left?

  8. Peter and Simon have been so spot on about this crisis that the headlines unfold like an emerging, slow motion train wreck…..and we’re anticipating a real leader to step up and do the right thing and………Nothing.

    Total Corporate Capture of world governments seems to have ocurred.

    This portends some Extremely Dramatic events about to unfold brought to us by our sponsors——-the 13 Bankers.

    Demosthenes may still be looking, but the only candidates are the (usual suspects) all ‘liars’ from

  9. ”Je n’ai pas d’inquiétude quant à l’actuelle parité entre l’euro et le dollar.” Literally means: “I’m not worried about parity between the Euro and the dollar.” He’s saying he doesn’t think it will happen. He’s not saying if it happens it’s good news.

  10. ‘credit default swap spreads on French government debt were up sharply today’

    Purely technical question here. I thought CDS were unregulated and for some reason I also thought they were private transactions. Is there some public exchange for them? How does one go about finding out about CDS spreads?

  11. “Parité” in French usually refers to “exchange rate” and is most accurately translated that way. The PM is saying that he is not worried about the “current exchange rate between the euro and the dollar.” You are reading too much into something he did not say.

  12. Simon – just to say that there is no ambiguity at all in Sarkozy’s use of the phrase “l’actuelle parité.” In French it clearly means the present level of the exchange rate and has no connotation of “parity” at all. The Europeans say enough self-destructive things that there is truly no need to add to the list by misinterpreting the ones that are not.

  13. “The company provides independent data, valuations and trade processing across all asset classes in order to enhance transparency, reduce risk and improve operational efficiency. Its client base includes significant institutional participants in the financial marketplace.”

  14. Oil Spill: How Bad It Could Get

    June 4, 2010 – CNN – excerpts

    “If the well was left unchecked, it would flow for years, he said. Deep sea offshore wells generally produce oil for 5 to 20 years.

    BP wouldn’t say how much oil is in the reservoir below the failed well, saying it was too early in the exploration process to make such estimates.

    But it’s at least tens of millions of barrels, according to Dave Rensink, president of the American Association of Petroleum Geologists. Hovecar said that even if the Gulf Stream stayed well offshore, significant amounts of oil could get spun off by eddies, and ultimately end up onshore as far north as Maine.

    The oil could then follow the Gulf Stream to Europe, although by the time it made landfall over there he said the amount would be significantly reduced.”

  15. “I only see good news in parity between euro and dollar”.
    So, we are off to the competitive devaluation, beggar-thy-neighbor trade policy races. Bernanke started it (if you don’t count the ongoing currency interventions in Asia, which started before the recession) with his swaps and beating Trichet to the interest rate cutting. On the bright side, maybe now we will also finally get effective action against currency manipulators.

  16. Dow Drops 324 Points As Euro Sinks

    June 4, 2010: 4:26 PM ET – excerpt

    NEW YORK ( — “Stocks slumped Friday after a government report showed employers added fewer jobs than expected last month and the euro plunged to a new 4-year low, reviving worries about the health of the European economy.”

    The metrics I use to evaluate the short-term direction of equity markets, Stochastics, ADX, MACD, TRIX, Keltner Channels, CCI, Money Flow(s), Fibonacci, etc., suggest Wile E. Coyote has fallen off the cliff again. I would focus on asset preservation and proceed with extreme caution till the smoke clears. My 2-cents.

  17. Should have read the immediately prior posts. However, my point remains, as the statement still implies that the recent fall in the euro is not troubling to the French PM.

  18. Off topic—I found this indirectly over at Zerohedge blog. The NYFRB is apparently now in the business of bailing out people who sit on their own board (the NYFRB board). Namely—Jerry Speyer.

    I wonder what the odds are that the next time William C. Dudley makes a public appearance that any of what we now call television “journalists” will stick a microphone in Mr. Dudley’s face and ask him how Jerry Speyer was chosen for his multi-million dollar loan from the NYFRB???? (Hey Katie Couric, Diane Sawyer, are you too busy showing a cute cat video??? or too busy getting your slobber on the morning set of Good Morning America???)

    Or how about the folks at the New York Times who always act like they are “above the fray” and performing the last existent journalism?? Any chance of getting the female reporters at NYT to quit applying lipstick and put a tape machine in William Dudley’s face asking him how Jerry Speyer was magically chosen for an NYFRB loan???????

  19. Thanks for the post. If additional proof was needed about how INCOMPETANT virtual reality is

    when it meets


    (relationship between LIFE MAINTENANCE, cosmic physics and the LIMITS TO PROFIT TAKING)

    well, here it is :-) – all in one post.

    We have a 19 year old with 4 bullets in the brain as the symbol – sacrificed during a cement shipment…

    Did “I AM” ask for blood atonement?

  20. There is a lot more market efficiency in play surrounding the French and the Eurozone crisis. Today, a rumor that Soc Gen has a massive derivative loss took down the Eurozone banks and Soc Gen itself over 8 %. So far as I can determine it is still up in the air that Soc Gen actually has such a loss. Obviously, we are seeing panic market reactions.

    Does anyone have other inputs about there being or not being a massive Soc Gen loss?

  21. Impossible. I saw Christine Lagarde on Charlie Rose, and she says the French Government doesn’t allow those things…. unless of course she’s full of crap…. then my answer is I don’t know.

  22. “The eurozone leadership may be tempted to address the short-term issues by providing much greater Quantitative Easing (i.e., putting a lot more money into circulation through buying government bonds) than the ECB has already promised. However, the ECB does not have the fiscal backing necessary to take that sort of sovereign risk, as this is ultimately a mix of a bank run and serious private and public sector solvency problems.”

    I am confused. Could somebody please explain a couple of things to me? Thanks. :)

    “sovereign risk”? Is the ECB (European Central Bank) a sovereign institution? I thought that Europe has at best a confederation of sovereign states. And what is at risk?

    “fiscal backing”? Where does the Euro come from? Can’t the ECB create Euros at will? What fiscal backing does it need?

    Thanks. :)

  23. “If you really want to weaken the Euro…”

    Who? The ECB governors, or the debt-plagued governments/households/banks?

    So intent was the ECB on preserving its precious Euro strength that it drove its member governments into fiscal disaster – which, in the long run, actually threatened the currency even more.

    Had the ECB aggressively eased 18 months ago, EU finances would not be in the sort of disarray we observe. They made their bed, now they sleep in it.

    But make no mistake, once the Pack has perfected and profited from its derivative-leveraged attack on France (which was supposed to be safe until after the attack on Greece, then the other ‘weak’ states), it will set their sights on others. The US is not invulnerable. China’s 2 trillion sounds like a lot, but not against the notional firepower in the international finance markets.

  24. Jerry J,
    My guess is it is related more directly to Hungary and Eastern Europe sovereign debt. Also Greece. Although if anyone can prove me wrong I would be very happy to be wrong, because I really hate those French pansies. Either way your stock (Soc Gen) doesn’t drop 11% in one day unless you got some problems. Next week is gonna be a B_tch for stock market players.

  25. JUNE 4, 2010, 7:54 A.M. ET

    PARIS (Dow Jones)–” French banking group Societe Generale SA (GLE.FR) Friday declined to comment on an unconfirmed rumor about possible losses on derivatives that traders said was driving the company’s share price sharply lower.

    “We won’t comment on market rumors,” a spokeswoman for France’s third-largest bank told Dow Jones Newswires, adding, “if we had something to say, we would have said it.”

  26. I think IMF is totally wrong to fund the trouble countires in EU and eatern EU like Hungary without concrete policy response. At the end, the borrowing countries will default all IMF debts and this will create bigger problem on global currency stability. IMF must change to use sricter rules and oversight to improve the public and external debt in the borrowing countriesring and bring confidence to every country. Without doubt, no one is confident on IMF to solve the crisis on any country.

    For the EU problem can be solve if EU currency drop enough to improve Greece competitiveness to global market. If EU currency drop to cause the current accout surplus on Greece, the Greece external problem will be solved, although the public debts will take longer time to solve. The voluntary restructuring including no interest payment and debt payment delay to 5-10 years under Roubini is the right option for Greece to improve public debts more quickly than do nothing.

    I also think Johnson is right that every country except Germany faces risk of soverreign debt default and Germany also know the problem. Germany cannot bail out all countries in EU and the only way Germany do is to let EU currency drop much as possible to improve Germany export with the cost of debt problem in other EU countries under high funding cost from expectation of currency depreciation. However, if EU currency drop much enough, the balalce sheet and competitiveness in other EU countries will improve maybe more competitive than China and US. That’s why I think EU countries will choose currency depreciation to solve the problem but if Johnson is right, this policy will not be solve the real problem in EU at the end andfrom higher funding cost to compensate the currency depreciation, we could see rising public debt even if EU currency drop to competitive level but surely if it is competitive enough, the public debt that may be higher than this level will drop at the end. EU depreciation process may cause uneasy path but that is good for Germany.

  27. May 31, 2010

    “Greek politicians have played down the prospect of abandoning the euro, which could lead to the break-up of the single currency.

    Speaking from Athens yesterday, Doug McWilliams, chief executive of the CEBR, said: “Leaving the euro would mean the new currency will fall by a minimum of 15%. But as the national debt is valued in euros, this would raise the debt from its current level of 120% of GDP to 140% overnight.

    “So part of the package of leaving the euro must be to convert the debt into the new domestic currency unilaterally.”

  28. Perhaps this is the wrong forum but I do have a question to all the great minds on this blog.

    It seems everyone (ok, almost everyone) is predicting disaster — the end of Western civilization as we know it and no savior in sight.

    So, I ask (with my tongue nowhere close to cheek), what would you do if you had $100,000 cash to invest?

  29. Buy gold? An down payment for a home? Invest in Bollywood? The Bollywood film industry seems to be thriving. Hollywood thrived during the Depression because the glamour and fantasy life on the “silver screen” made people feel better.

  30. Sir, pse see Alessandro L.’s translation above, the anglo saxon press are either using the dictionary (or Babel Fish) to translate, or there is a strong desire among the press core to add ambiguity and ride with the negative momentum in the market.

    Whatever it is, it serves only the big operators in the market. What cannot see how a plunging euro can a) help reduce government debt burden as yields soar b) who would be buying German BMWs, French submarines or go island hopping in Greece (certainly not american, unless they are priced at the same level as GMs and Fords or Geelys in Shanghai) c) what would Obama do when the trade data before the mid-term elections show American exports plunging after his promise to double American exports? d) what would China do?

  31. it’s the end, of the world, as we know it,… and I feel fine…..

  32. tippygolden wrote:

    “Buy gold? A down payment for a home? Invest in Bollywood? .”

    Invest in broader shoulders. :-)

  33. China should turn their vendor financing from the US to southern Europe, which is even more needed today. The ‘reserves’ amassing in US Treasuries are guaranteed to experience losses in real value, so the loss risk is not that different buying Spanish bonds and the macro economic returns to China would be larger.

    If it is possible, and I don’t quite get how the ECB operates, which seems to be fairly common, the ECB may need to radically change their posture with explicit announced levels of support for Euro bonds buying enough bonds to hit their pre-announced interest target for each country. That seems like the best chance of preventing a continent wide debt-deflation.

  34. Hi, Annie:

    I happened to catch Bloomberg late this evening, Oh guess whose name was being used for approximatively 15 minutes of a 60 minute show? I was impressed.

    Could it be the cosmic or brain dead guy you were touting about above. The one you put as the face of one linked to profiteering, seemed you put him as he was a God Freak working the crowd…

    Quick little hint… The show did not go that way at all. In fact, the show really gave a better side and the theorems Annie, they actually are real.

    I am a college kid also Annie. To bad, but I am in my late 40(s) so I am not a kid and I am in my final years heading for my doctorate.

    Now with that said, Annie, you were way off on this one today. This guy is being followed all the way around the world right now.

    I happened to walk in and caught James theorem being talked about on Bloomberg and his plea for slowing down Global Growth and for all to get their spending within limits of living within their means. I do not see anywhere in this piece Crazy Man, God Freak.

    I turned off the broadcast to look for his posts to read them and found your post here and now here I am.

    Did you know this guy happens to be a true hero. A Firefighter hurt in the line of duty. He further as exemplified his status by serving in the communities and still helps countless amount of people as an advocate enduring many hardships, but still returning to finish his degrees holding honors as seen in at his college.

    Annie, really; to anyone else, James is the real deal. A guy who has been Paying it forward and getting everyone to getting right again; may be the right call for all of us to start doing.

    James has actually helped out so many people that I was proud to be able to of learned about what one man with the love of a divine providence can do.

    Notice I did not use the God thing or the Creator thing or what else bothered you Annie.

    Annie what made you go off in such a ruffle, because actually his theorems at the university have been worked out and have full merit…

    Have you worked all the theorems?

    The God part, I think is self evident. People gotta want to either go to a heaven or a hell the eternal part to work out as James has point out nicely for all of us. If no belief than don’t worry about it.

    What made you afraid of James’ Challenge?

    In ending Annie;

    So Annie,

    The only part I will agree that is good within your post as with merit holds with

    “Thanks for the post”.

    The rest of it Annie,

    “If additional proof was needed about how INCOMPETANT virtual reality is

    when it meets


    (relationship between LIFE MAINTENANCE, cosmic physics and the LIMITS TO PROFIT TAKING)

    well, here it is :-) – all in one post.

    We have a 19 year old with 4 bullets in the brain as the symbol – sacrificed during a cement shipment…

    Did “I AM” ask for blood atonement?”

    I think James has given long time ago Annie, the question is turned to you as have you?

    Those can go down in history as what many will see as I saw. Actually more questions for you than for James.

    He has given direct links to the formulas and all levels of connections needed to be able to solve the worlds problems.

    What have you done lately Annie???


    P.s. I would love to see Simon chirp in on this one. The why is since James has sent the whole world to his door step from what I found in my research…

  35. Even if he meant “current exchange rate” instead of “parity”, this is still said in the context of the Euro falling to new lows. I still interpret this as a sign of the French being happy with the debasement of the European currency.

  36. Simon and Peter, I didn’t take the time to read all of the posts, especially since at least a few were seemingly non-germain to the post (unless I missed something, and at my age, I sometimes do). Suffice it sto say, as has at least one of my co-bloggers, the world’s leading economies are substantially plutocratically controlled, having fallen into the hands of the vast, globally connected, oligarchs, who now seem to be running the planet. It is to the benefit of the wealthiest that the world be kept at or near the brink of financial chaos, since that is the razor’s edge that enables them the most potential for profitable arbitrage, where only manipulators can gain greatly, while the rest sit substantially on the sidelines wondering how and when to enter the fray. Sadly, for the broader global citizenry, no matter the country, at this point, even China, this sort of economic chaos threatening the engulf us is the scariest thing I have ever seen. Not only is recovery far away for almost everyone, but there is an intensely looming spector of societal anarchy, as more and more become aware that all personal financial security is completely imperiled by the great plutocrats. God save us, for they know not what they do. All I know is that the hugely negative undercurrents are, like the Gulf Oil Spill, threatening to subsume all order and rationality.

  37. “We are not there yet but this is the dangerous glide path.”

    This is a nice way of saying, “The Hindenburg is now descending in preparation for docking.”

  38. Yeah, I was thinking the same re: China. How much is sitting in derivatives markets world wide? Something 200-400 trillion or some ridiculous number? What are they going to against a rising tide like that?

  39. Grain, corn, soya etc.

    People need to eat! Doesn’t matter if food prices go up and people in some parts of the world will need to spend 50-100% of their disposable income on food.
    Sometimes you need to teach the plebian a lesson i.e. Less bread and more circuses.

  40. It’s flatly ridiculous for China to be bailing out anyone with the kind of poverty they have. (per cap $6,000 or so) The writers ignore the serious internal political consequences from hard line CCP were their Finance factions even to think of this)

    China cannot bail out the world any more than their consumers can save the world.

  41. Instead of building reserves through currency devaluation, China should be putting the money into their citizens hands.

  42. Agreed. The “rising consumer class” in China is such a small part by percentage that I just can’t see there being much left over to bail themselves out of any trouble, much less anyone else.

  43. Take classes on farming, sewing, and basic mechanical engineering. Learn to hunt with a gun and with a bow and arrow. Purchase both, of course. Work on building a self-sufficient little bubble as a hobby. The skills will be useful around the house if things turn out fine, and a save your life if things really fall apart.

    Gold is a dumb idea, if the real collapse of money and civilization comes. Who cares about little pieces of shiny metal that you can’t eat?

  44. Assuming theoretically for the moment that things devolve in to the “end of our civilization” like some predict, when will that actually happen? What’s the tip over point for violent upheaval usually?

    I’m not totally a tin foil hat here, I’m not 100% sure it’s coming. I’m just curious what the general conditions and triggers are for such an event.

  45. BIS figures for June 2009 put the value of all outstanding OTC trades at $604 trillion. Probably a bit lower now, but still a financial WMD. Comments on preserving the strength of the Euro are justified and show that we learn nothing from history (remember Britain and the Gold Standard inter-war?), but they are still looking at just one symptom of what is a slo-mo global systemic meltdown. For us socialists, what’s really fascinating is that this is happening so slowly that you actually see each individual rivet on the Titanic pop… what will be the next rivet? Peak re-set of option ARMs in the US, 2011? The retreat of the TARP/bail-out tide when the money runs out? The first European country to default? A popping Chinese property bubble? Ah me, the list is endless! But of course, the ‘adults’ on Wall Street won’t be listening to us ‘children’, will they….

  46. “I am not worried about the current parity between the euro and the dollar”

    Parity definition:

    1. In general, a situation of equality. Parity can occur in many different contexts, but it always means that two things are equal.

  47. There’s nothing like Paris in June. Besides, it gets a little hot in Greece, Italy, Spain, and Portugal this time of year…..

    The teaming pack of international financial vultures, having succeeded in its effort to spread mayhem and destruction in southern Europe has moved on to greener pastures.

    Fois gras anyone?

  48. invest in Boeing…if the world descends into war & chaos Boeing will benefit mightily from their military business…if peace and prosperity will eventually prevail (hopefully) then they make tons of money selling their new Dreamliner series of commercial aircraft – the nicest jetplane ever made…there are not very many companies that have their bases covered both in War & Peace…Boeing is one of the few…

  49. Just like Golden-Sacks is a pseudo bank. They may not know the price of eggs, they simply bet on if you can afford them.

  50. tell it like it is. make sure to thank goldman sachs for their marvelous demonstration of international shennanigans.

  51. The problem is that in a complex system the tipping point is hard to spot ahead of time. As to the end of civilization, the commentary on this website has gotten more and more dire as the realization has set in that the website’s consensus view is not prevailing in the halls of government. Civilization ground to a slow crawl in the 1930s (and similar shocks happened in the late 1800s), but civilization didn’t end – it just got rather nasty for a while, until citizens with a sense of balance and an understanding of the utility of the commons and the courage to endure necessary change decided to re-engage in society.

  52. john ward wrote:

    “You ain’t seen nothing yet”

    Agreed, the Gods must be crazy.

    “The Gods Must Be Crazy, is a 1980 film, written and directed by Jamie Uys…. Despite the film having grossed over $100 million worldwide, Nǃxau reportedly earned less than $2,000 for his starring role.

    The film is a collision of three separate stories—the journey of a Ju/’hoansi bushman to the end of the earth to get rid of a Coca-Cola bottle, the romance between a bumbling scientist and a schoolteacher, and a band of guerrillas on the run.”

  53. Since when is the “end of civilization” at hand

    simply because an international cabal of liars, thieves and murderers with one trillion in “Cash”

    roaming around the planet playing virtual reality nanosecond trading games

    fell off the cartoon cliff?

    Agree about asset preservation, which, theoretically, could be considered the whole infrastructure of the USA…

    time to water REALITY in the USA with some kind of “currency” that is equivalent to what money used to be – a symbol of how LIFE MAINTENANCE activities keep flowing…

    some very witty comments – love the one about the Hindenburg (sp?) coming in for docking…

    meep meep…

  54. If you fear inflation and/or devaluation then you want to leverage that $100k with a long term fixed rate loan to buy durable property, income producing real estate being the usual (obvious) opportunity.

    If you’re wrong and we have deflation, the investment will not work well and, if there is high unemployment, could turn into a disaster if this results in your property having low occupancy and you can’t cover the payments. (You could partially hedge against this outcome by not leveraging to the max. For example, you could leverage now with LTV 50%. That way even if the value fell, say, 20%, you could probably still refinance the loan at even lower long term rates.)

    Even if you’re right, you still need to assure sufficient occupancy, though as time goes on inflation reduces the break even occupancy rate.

    A meaningful decline in population is difficult to hedge against and could crush this investment whether there is inflation or deflation. Population decline may be hedged by purchasing far out of the money puts on stocks, but it’s not perfect.

    No free lunch.

  55. I’m trying to understand what is going on here.

    – the world is at risk for another global financial meltdown, this time triggered by the European debt crisis
    – the United States, Canada and Western Europe may be headed into a long period of stagflation similar to what happened in Japan for the last 15-20 years
    – TBTF is holding onto assets at inflated values, rather than writing down the losses
    – governments have and are socializing the losses in TBTF by purchasing “toxic” assets and thru bond guarantees

    – Canada (population 33 million) socialized $125 billion in mortgages held by our large banks. Our government claims there were no bank bailouts in Canada, but in effect our country lost $125 billion in public services in this bailout

    In the mean time:
    – some are advocating breaking up TBTF and regulating the financial system in the public interest
    – the political will to truly reform the financial system is debatable

    In the mean time:
    – tar balls from the BP oil spill in the Gulf of Mexico have started to wash on to the white sandy beaches of Florida

  56. Dear Mr. Brennon,

    First off, there is no such being as “I AM” who asks for the blood of the innocent so that iniquitors “graciously” are forgiven at the expense of mercy being granted to VICTIMS. That’s all made-up crap about “god” and it is a sign of great progress that people do not have “faith” in that kind of god. However, just because that kind of “I AM” does not exist, does not mean that there is no “I AM”.

    About 95% of what you e-slapped me with, I MUST STRESS to you that I have no idea what the heck you are talking about.

    As far as I know, there is no mathematical theorem being applied to the ECONOMICS of life maintenance that is based on the LAWS of PHYSICS programmed into the creation of this planet a BILLION years ago in eternity – probably longer, but when “nanosecond” physics meets billion year physics, we can stop at a billion years, no?, in our “save the planet” ideations.

    Since I am not currently involved in any scheme that is destroying the planet,

    but I can go into great length about how all of my time now is 100% devoted to fighting against every single scheme that is currently underway.

    Where would you like me to begin?

    Weakening the SUSTAINABILITY of LABOR’S FRUITS was akin to short-circuiting a body’s IMMUNE system…

    I know of NO ONE who lived beyond their means.

    My good deed for the day in saving the world is this advice – for anyone living off the savings they set aside for 2 years of possible hardship, slow down the artery bleed – stop paying the bills on time. They’re going to take it ALL, anyway, so stick it in the mattress and go after the LOCAL “government” – throw those bums out first….


    What have YOU got?

  57. in a nutshell, the world is now locked in an ever tightening “chain of pain” – financial, environmental and political upheavals everywhere…and there is no “safe harbour” with which anyone can wait out this stormy weather we are about to go thru…brace yourself and pray…surely it can’t hurt, even if you’re not the religious type…

  58. Yeah, and in the meantime National Socialist Israel kills an American citizen on a ship traveling in international waters carrying humanitarian supplies to an ethnically cleansed and ghettoized Gaza and the American government applauds. And you thought ownership of the Congress and White House was confined to the financial and oil lobbies?

  59. I agree that there is not 100% accuracy about what was tapped into BP’s hole in the Gulf of Mexico – seems a lot more natural gas in with the oil than they knew!

    INDEPENDENT science question is this – is there 100% certainty that there will be no unintended consequences (ie. – “sinkholes”) when ALL the gas, oil, coal, etc is sucked out of the planet’s mantel layers…?!

  60. tippygolden wrote:

    “I’m trying to understand what is going on here.”

    Too many balls in the air.

  61. Annie wrote:

    “Since when is the “end of civilization” at hand….simply because an international cabal of liars, thieves and murderers with one trillion in “Cash”…..roaming around the planet playing virtual reality nanosecond trading games…..fell off the cartoon cliff?”

    “History never repeats, but it often rhymes.” — Mark Twain

  62. Euro Zone Faces Zero Growth, You’re Damned If You Save And Damned If You Don’t : Roubini

    Sat Jun 5, 2010 7:30am EDT – excerpts

    (Reuters) – “The euro zone is facing a period of zero growth if not recession, and the United States is heading for financial trouble, U.S. economist Nouriel Roubini was quoted as saying on Saturday.

    Roubini, known as Dr. Doom and best known for predicting the U.S. housing crisis, said there was a risk of a second financial crisis, with countries becoming insolvent and being forced out of the euro, and banks collapsing.

    Countries such as Spain and Greece were now under pressure to cut spending and raise taxes to retain access to the capital markets, even though they had no growth to speak of.

    “You’re damned if you save and you’re damned if you don’t,” he said.

    Roubini said that a Japanese-style period of deflation, stagnation and high unemployment was a much greater risk to Europe for the next two or three years than inflation.”

  63. Stats Guy: “But make no mistake, once the Pack has perfected and profited from its derivative-leveraged attack on France (which was supposed to be safe until after the attack on Greece, then the other ‘weak’ states), it will set their sights on others. The US is not invulnerable.”

    And then what would they do? Weaken the dollar? That would be a boon, wouldn’t it?

  64. Debtors’ Prism: Who Has Europe’s Loans?

    June 4, 2010 – NT Times

    “IT’S a $2.6 trillion mystery.

    “That’s the amount that foreign banks and other financial companies have lent to public and private institutions in Greece, Spain and Portugal, three countries so mired in economic troubles that analysts and investors assume that a significant portion of that mountain of debt may never be repaid.

    The problem is, alas, that no one — not investors, not regulators, not even bankers themselves — knows exactly which banks are sitting on the biggest stockpiles of rotting loans within that pile. And doubt, as it always does during economic crises, has made Europe’s already vulnerable financial system occasionally appear to seize up.

    Early last month, in an indication of just how dangerous the situation had become, European banks — which appear to hold more than half of that $2.6 trillion in debt — nearly stopped lending money to one another.” – excerpts

  65. What is going on here?

    I do not pretend to understand the Euro mess, but otherwise, I think it is class warfare. Having gotten their bailout, the oligarchs want to prevent ordinary people (their victims) from getting theirs. So they spread scare stories and raise the specter of debt and default, which may be true for Euro countries, but is not true for Canada, the U. S., Australia, Japan, China, and the U. K. These fears have hamstrung efforts for needed economic stimulus, so that the weight of the financial crisis falls on ordinary people. To what extent that is a conscious tactic by those spreading fear, I do not know, but some people are lying.

  66. Blind obedience to any dogma (religious or otherwise) in a rapidly changing world only supports the staus quo. What we need are free thinkers and a population that is willing to give the unconventional solutions they brainstorm a try – not condemn them for impiety.

    I’m not just picking on religion – this applies to economists and politicians. Reality trumps dogma.

  67. They don’t even need to actually mobilize, just look like it very publicly. Think of Patton landing at Calais in 1944 – it never happened but OKW was certain it was going to even after Overlord was almost a week old.

  68. “The truth is rarely pure and never simple.”

    Oscar Wilde (1854 – 1900), The Importance of Being Earnest, 1895, Act I

  69. “Sometimes lies are more dependable than the truth.”

    Ender’s Game – Orson Scott Card

  70. This blog, Steve Keen, Karl Denninger, Reggie Middleton, Nate Martin, are now all saying that the inflection point has been reached or is imminent. While most of the above have been warning about this for a while, this is the first time I have noted them all essentially calling the same warning about the same problem at the same time.
    They could very well be wrong, although I wouldn’t bet on it.

  71. not only interesting…but profitable…Boeing stocks appreciated 20.93% plus $1.68 dividend @ 2.75% yield over the last 12 months…this when many stocks have stagnated or lost value…not bad…

  72. Dear Simon,

    there is no ambiguity whatsoever in the French PM comment. He is just not worried about the current exchange rate, that’s all.

    So, if you weren’t able to get that simple fact right, why should I believe the rest of what you’re saying?

    Are we really stumbling into a European (world) wide crises just because Yanks don’t learn French at school?

    Huh, what a minute Wikipedia claims you’ve been the chief economist of IMF, oohh my god, if people as competent as you are running IMF we’re indeed all cooked!

  73. Congress and the White House do not represent what USA is all about. As a matter of fact, the “government” was structured in such a way as to PREVENT oligarchs from doing GENERATIONAL damage.

    “Chaos”, in a way, was built in to the “system”. No one does temporary chaos better than USA born and bred citizens :-)

    As noted, REALITY trumps any and all dogma.

    Feel free to cut and paste the following in whatever “dogma” is choking any government on the planet at this time:

    In Congress – July 4, 1776

    “When in the Course of human Events, it becomes necessary for one People to dissolve the Political Bands which have connected them with another, and to assume among the Powers of the Earth, the separate and equal Station to which the Laws of Nature and of Nature’s God entitle them, a decent Respect to the Opinions of Mankind requires that they should declare the causes which impel them to Separation.”

    I believe I got the direct attack ON WHO WE ARE

    more than once in the past 2 years from the “economist” institutions…

    They have PRIVATIZED the profits

    And SOCIALIZED the losses

    OF WAR – all the way to the IRS slapping a fine on you for NOT buying “health insurance” from a FOR-PROFIT PRIVATE scam that is machine programmed to say “nyet” to any and all costs associated with MAINTENANCE of superior gene pools…

    There is NO END to how many different ways we can screw each other over with DETAILS…

    New word among the non-institutionalized – the “economy” is being called “HATEronics”…

  74. Generally I like Professor Johnson, but I’ll be damned if I can figure out why Simon Johnson and also the IMF thinks that throwing money at comprehensively corrupt bankers in Europe is the answer to the problem.

    Does Simon Johnson and the IMF think giving a 2nd credit card to European bankers after they wasted the 1st credit card at the craps tables is going to be helpful to the situation???? You give European bankers money, they will do the same thing the large U.S. banks did: keep it in reserves while depositors lose their jobs and lose their houses. The “QE” and all that do nothing but help big bankers continue on with their games. Look at these numbers in the NYT report.
    $2.6 Trillion of foreign debt in Greece, Portugal, and Spain. Any person (including cute boy scout Timmy Geithner, or our Professor Johnson here) who thinks opening a loan window to the European Central Bank, or Swiss Central Bank and telling France and Germany to inject money is going to solve $2.6 trillion in debt with European leaders sluggishly debating whether or not they even want to look at their banks’ portfolios for deep fear of what they will find, has spent too many days locked away in IMF corridors, or too many hours reading college textbooks. They are not dealing in reality.

    Merkel is the only person on the government side of this making any sense at all until Trichet’s comments today. I almost fell out of my seat seeing a Frenchman speak logic.

  75. In fact let me add—if Bernanke and Geithner were worth more than their own weight in cow crap–they would have demanded to look at European banks’ portfolios before they extended the US taxpayers’ money to the European Central Bank and/or Swiss National Bank.

    And based on this type behavior I don’t think Ron Paul’s arguments for a Federal Reserve audit are a fringe idea. A Federal Reserve audit may be the most sane thing we’ve done in awhile.

  76. Min’s right about the European stuff being overblown. The real problem spooking markets is in the US and the impending “re-implosion” of the RE market and the financial destruction it will cause. With no political will to bailout the next wave, the economy will collapse and lead toward rioting and gang warfare. The weak will always go toward the strong and that is how it begins. Then they confiscate the “richs” money through plundering and pillaging with the people hanging on for survival as their “assets” of power.

    The rich can go and try to hide in the gated communaties(communes?) and stuff, but they will eventually be routed out and their wealth confiscated. When civilization breaks down because of greed, it isn’t a pretty site.

  77. “Auditing” the FED is state sanctioned rebellion. Nothing fringe about it, also won’t do or mean a thing”.

    Until structural change is had on the economic level, nothing will change. Ron Paul is the tails to Bernanke’s heads. We need another coin altogether.

  78. Well, Annie, I don’t know about “the maintenance of superior gene pools”, but clearly the insurance care bill just passed couldn’t have been a more obvious mechanism to funnel revenue from the people to the paymasters of the whores that structured that little gift for them. Guaranteed premium revenue to the insurance companies or you get fined? Mussolini’s corporative state couldn’t have done any better.

    I don’t know about you, but when I consider the degree to which the bacteria that run our political life have become bursars for interests that have all but declared war on the American people my stomach turns. A couple of days ago an American citizen on a Turkish boat in international waters took four bullets in the head from Isreali Einstatzgruppen and our botoxed Vice President couldn’t manage one word of criticism when interviewed on Charlie Rose. As Ben Smith of Politico captioned it: “Now Batting For Israel, Joe Biden”. But wouldn’t you thnk it would be reasonable to expect Joe Biden to be batting for the United States? Think again. Our politicians are so utterly owned by the Israel Lobby that they’ll willingly set aside sworn obligations to those that voted for them in order to serve the interests of a foreign power. In my view that’s arguably treason, and one day the same people that will assemble to secure justice for the economic abuses they’ve endured for too long because of swine like these will insist on including Israel firsters like Biden in the dock when the public show trials begin.

  79. It will continue to get worse. However, in the U.S. it will just be doom and won’t even compare to Europe. This piece sums it up: “the real unemployment rate is over ten percent because we don’t count most of the college grads who don’t have jobs.”

    Even then, the unemployment rate is more likely to be 20%.

  80. Re: @ Anonymous____Europe would be smart to seize up! Wow…I can’t believe I just said that – how can I make a statement like that? Say what – if push comes too shove, let em` fail, period! Call their faux pas` bluff – these paradoxial opaque mired, and quasi-mysterious ubiguitous – “mired in self-inflicted debauchery” phantom oligarchy’s. Where are they going to park their fortunes from the past decade – China, USSR (that’s right, it’s now called Russia – funny?), Saudi Arabia, or even Brazil – flip a deck of cards, and call only one of those, player-cards, “Spade’s-Up”, and they’ll lose this time around – its that simple? What inflation? This is how simple it is for Europe in the next few years to right themselves:___ GDP = C + Inv. + G + (eX – i) ,where “C” will equal “Inv.”, and “G” will offset “(e)” ,et.el.)needing immediate regulatory (clean-up & self police) response, the “Underground (% of total/GDP) Economies of the “PIIGS” eg.) Greece 25%/GDP~$85bn; Ireland 13%/GDP~$25bn.; Italy 22%/GDP~$416bn.; Portugal 19%/~$271bn.; Spain 19%/~$271bn. Fini! Note: This is not as dire as most say ie.) the United States says that the underground economy is ;USA 7%/~$1tn. which is absolutely why our country is in denial, and headed down the path of defaulting first before Europe. The USA is more like 19%/~$2.7tn. of a now revised $13.8tn GDP. PS. The european’s “Money Matching-Maker’s” magical-tour of “Rotting Loans”, will catch their breath trickling-up, thus choking off any semblance of cutting their own throats regarding a temporary set-back, thus filling their coffers in double time, lest anyone worry? finally, worthy of mentioning is China’s Reserves of ~ $2tn which is not much when the vast amount of their educated working population is making near industrial (G-20) country wages, and were talking ~ 100mn. The Pac-Man cometh?

  81. T-bills short-term. If Simon is right, this is a time for preservation of capital, not investment. Not wanting to seem too sane for this discussion, let me add that I think it is a better time to short Senators. The health care and financial reform legislative processes seem to have bid up the price to the top of the range. If your Senator is tossed out in November, you suffer a total loss. Of course, the traditional answer to your question, Chandrashekar, is you should buy canned goods and ammunition. But societies don’t collapse over financial crises or worse so please understand the preceding sentence is a joke. On a more serious note . . .

    Thanks to all of you who weighed in on the French translation issue.

    If I may presume to contradict many of you, the implication of what Simon describes is massive deflation and unemployment. Gold handles chaos reasonably well, but not high interest rates. Before loading the gold boat, compare prices during the Great Depression with those of the Volcker years, at least 1980-83. When we Americans start paying a risk premium on our bonds, ala California, gold may follow the path of the 1980’s.

    Deflation is also the implication of the competitive austerity plans that are all the rage on the continent. True to form, the Germans plan to use frugality to get through the mess, while we Americans will keep trying to borrow and spend. Whatever we do, land and labor costs seem to me to be very likely to decline, which means more deflationary pressures, at least for this year and likely next. And last week’s action in Congress to limit the IMF’s ability to bail out Greece, is another vector pointing to deflation. Similarly, bank failures caused by defaults among several EU countries, were multiple defaults to occur too soon, would be deflationary.

  82. 20% real unemployment in the United States? School is out for summer break? The BP oil spill is washing ashore. The ecological disaster from the BP oil spill and global financial crisis are caused by the same mind set. The ecosystem damage underway is depressing and criminal.

    Living here in Vancouver I am mystified. Is there any mobilization by local citizens in Lousiana, Alabama, Florida to work together to try and protect their beaches and wetlands?

  83. This is really strange. The guy runs the most powerful and secretive financial institution in the world, BIS, but his IMF bio neglects to mention it?

    Also, anyone know how closely related he is to the Caruanas who founded banking in Malta and Spain 1,000 years ago? Or to the Caruanas who smuggle drugs around the world?

  84. Sinkholes shouldn’t be a problem in most cases. In order to keep pressure up in most wells, you pump something (water, mud, etc) in to the well you’re digging to keep the pressure up so the oil keeps coming out at a usable rate. We’re replacing the oil with something else to take up the space, basically.

    Studying how well that works in the long run is a good idea, yes, but the techniques used to keep up pressure should also ensure that the ground itself won’t collapse in the end.

  85. The real unemployment rate, measured the same way it was measured when the Great Depression showed 25%, is around 20% already (counting the same types of workers AND freshly graduated students that can’t find work). That 10% is a convenient number politicians use to tell the populace “Oh it’s nowhere near as bad as the Great Depression. Buck up, you whining sissies!”

  86. I support President Obama 80% of the time, but on extending a loan window to corrupt bankers in Europe, I think President Obama should be slapped upside the head in a loving yet headache inducing way.

    If the Federal Reserve is going to loan money to corrupt European banks, what is the point of even having an IMF bureaucracy filled with useless salary budgets??? If you’re gonna be that dumb about it, just fire all the people in the IMF and give money directly to the corrupt bankers. Does anybody at IMF now know where the bad loans are in the corrupt European bank system are??? NO!!! THE IMF DOES NOT KNOW WHERE THE BAD LOANS ARE!!! So why pay people high salaries who do nothing, and can’t even tell us where the worst loans are???

    Let’s save some time. Just put a red phone in Bernanke’s office, and any time corrupt European bankers need money, they can call Bernanke and tell him how much they need. Obviously Bernanke doesn’t care how large the corruption is, or which bank/country has the worst corruption/bad loans, or he would have insisted on an audit of the European banks portfolios before he granted an endless pipeline of cash to corrupt European banks.

  87. This is like asking a state’s social worker, if the budget for welfare should be increased. Just what the H_LL do they think these IMF people will answer!?!?!?!?! The IMF won’t be happy until we hand over world GDP to the most corrupt banker in Europe on a silver platter and asking him if he wants second and third servings.

    Make “the beast” (the corrupt European banking system) larger by feeding it more, or starve the beast until he stops killing villagers???

  88. Lost Decade, Here We Come

    June 6, 2010, 3:00 AM – NY Times – Paul Krugman – excerpts

    The deficit hawks have taken over the G20:

    “Those countries with serious fiscal challenges need to accelerate the pace of consolidation,” it added. “We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions”.

    It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US.

    Yet the conventional wisdom now is that these countries must nonetheless cut — not because the markets are currently demanding it, not because it will make any noticeable difference to their long-run fiscal prospects, but because we think that the markets might demand it (even though they shouldn’t) sometime in the future.

    Utter folly posing as wisdom. Incredible.”

  89. Roubini Says Greece Needs Orderly Debt Restructuring

    June 4 (Bloomberg) — Greece should restructure its public debt “in an orderly way” in the next six to 12 months to avert greater damage to the global economy, New York University professor Nouriel Roubini said.

    “What we need to do to avoid having massive losses for the financial system is an orderly restructuring of the public debt of Greece,” Roubini said in an interview at the Zermatt Summit in Switzerland today.

    A disorderly default would lead to “much worse” damage to the European economy and risk global contagion, he said.” – excerpt

  90. To the Tea Partiers, Libertarians, and free-marketers reading this blog:

    What should be the role of government in dealing with the BP oil spill?

    Will the oil industry clean up the mess in the Gulf? Should the government step aside and further deregulate safety and environmental standards because the markets are the proper mechanism to ensure the highest goods?

  91. “You give European bankers money, they will do the same thing the large U.S. banks did: keep it in reserves while depositors lose their jobs and lose their houses.”

    This is just nuts.

    Which means that money is no longer tied to life maintenance activities.

    And everyone has the right to defend themselves, right?

  92. We’re going to get off of oil BEFORE it all gets sucked out of the ground.

    Bet on it.

  93. It depends. If the dollar weakens as part of a deliberate Fed policy, and is _perceived_ to be weakening toward a target in a controlled manner, yes that’s a boon (IMHO – others may disagree).

    But if the dollar weakens as a result of lack of confidence in the ability of Treasury to sell securities in the private markets (and due to increasing volumes of US debt), and the Fed intervenes because it is _forced_ to intervene because private capital markets refused to fund (aka, a failed auction), then we have a full fledged sovereign debt crisis – and every asset backed by US pledges likewise comes under threat. 2008 will look like a walk in the park, particularly if the Fed decides to play chicken with US federal finances and refuses to fund a failed auction.

    I half expect that the reason Treasury wants to keep big banks around is to give it access to the leverage-tools it needs to deal with a speculative attack on the dollar.

    It’s impossible to know what’s really going on inside the minds of the Fed/Treasury overlords, currently. Perhaps they think they can hold onto independence and force the Federal government to (finally) address its off balance sheet obligations (social sec, medicare, etc.), which we seem entirely unable to contain. Indeed, it seems like the only thing that is forcing EU countries to address fiscal problems is crisis. But the US (and particularly the generation that incurred the obligations by refusing to fund their own entitlements) may refuse to budge until they have absolutely no choice. It increasingly seems like the only way to avoid a slow spiral down into being _forced_ to make painful adjustments is to implement a grand bargain between fiscal and monetary policy authorities. Sadly, the leadership for such a bargain does not seem to exist within the current administration.

  94. Simon Johnson has challenged the proponents of TBTF to debate and defend their position. Another serious debate would be for a Chicago School economist to debate and defend their theory on what role, if any, government should have in the response to the Gulf oil spill.

  95. It seems clear to me that the only reason any “biden” is saying what they are saying is because if they didn’t say it, they would have the 4 bullet holes in the head – right?

    So what we must do is neutralize the ones holding the “social engineering” guns to our heads….

    Apologies for the lame sarcasm – “superior gene pool”…

    A man to land ratio – REAL allocation of resources for the human species – has to be established. Without that REALITY, “money” is a meaningless symbol, at best, and nothing but a tool for sadistic entertainment, at worst…seriously, betting on whether the sheeple can “afford” to pay the bill with 4000% leveraged over and above the printed coinage released in circulation (what’s the mysterious buzzology…fractional reserve banking)?

    This is the sickest game humanity has invented to date…building an “economy” that depends on the worst in people – HATEronics…

  96. tippygolden wrote:

    “Will the oil industry clean up the mess in the Gulf? Should the government step aside and further deregulate safety…

  97. Could someone explain, Why when so much needs to be done and so many are out of work, it’s not happening?

  98. Why do you need to recapitalize a central bank?
    Nothing prevents it from working with negative equity or with assets worth nothing and carried on its books with inflated values.

  99. “For where the instrument of intelligence is added to brute power and evil will, mankind is powerless in its own defense.”

    Dante Alighieri 1265 – 1321

  100. StatsGuy: “But if the dollar weakens as a result of lack of confidence in the ability of Treasury to sell securities in the private markets (and due to increasing volumes of US debt), and the Fed intervenes because it is _forced_ to intervene because private capital markets refused to fund (aka, a failed auction), then we have a full fledged sovereign debt crisis – and every asset backed by US pledges likewise comes under threat. 2008 will look like a walk in the park, particularly if the Fed decides to play chicken with US federal finances and refuses to fund a failed auction.”

    I do not know the niceties of the law, but my impression is that the independence of the Fed does not extend that far. IIRC, in the 50s the Fed was required to buy bonds directly from the Treasury, if need be. The current setup is more indirect. In any event, if the Fed were to play chicken all hell would break loose in Congress, with the Fed itself in jeopardy.

  101. “Min’s right about the European stuff being overblown.”

    I just do not understand it.

  102. Because our leaders do not want it to happen. (Oh, many Dems think that it would be nice, but they don’t really want it. What are the unemployed going to do? Vote Republican?)

  103. To elaborate a bit on the question of the Fed’s playing chicken and not buying (indirectly) Treasuries not sold to the public in an auction:

    We are talking about a situation where the Congress has authorized the debt and the associated spending. For the Fed to refuse to cooperate would lead Congress to assert its authority. The Fed is only quasi-independent. Its powers are delegated to it by Congress, which can take them back at any time.

  104. The irony of the “free market”:

    Wall St is no longer a free market, but our Senators are for sale.

    Buy a couple of Senators, they are cheap and getting cheaper.

  105. I do hope it works out that way. And yeah, on a bit of perusing as many sources as possible, there is no absolute certain moment when violent upheaval occurs. However, we are well on the road to the kind of conditions that are ripe for it. I guess the only mystery is when that might happen, what might cause it, and if (as you’re guessing) people might wise up before it happens.

  106. Lies. No modern government understands that concept. Not if they want to get re-elected, at any rate.

  107. Hoping for it. Not betting on it. There’s too many powerful, rich people that are counting on us staying on it, and too much infrastructure for us to afford a quick move to anything else. Could you imagine telling every unemployed, underemployed, or otherwise impoverished American barely able to afford the old beater they’re driving right now: “Hey, we’re phasing out gasoline. You got a year to buy a BRAND NEW vehicle that runs on this alternative fuel.”

    Not. Happening. The government is out of subsidies to finance it (and really, I don’t want to subsidize somebody else’s purchase of a huge cost like a new car while *I* pay full price), the people don’t have the cash or job to pay for it, and credit is still going to be tight with things getting worse. Nevermind the cost of all the new hydrogen/electric/whatever stations…

    There’s no drop in replacement we can implement in 1, 5, or even 10 years feasibly to replace oil. We need something that can drop in TOMORROW. Ultimately we’ll get off it, most likely before it’s all sucked out of the ground, but not before supply becomes so tight that it impacts society heavily.

  108. Well, the Israeli government just wants peace, that’s why they shot some of the people on the boat execution style in the back of the head. Shooting people in the back of the head is Netanyahu’s version of an olive branch. Hurting 2 of Israel’s better allies—America and Turkey—is of little consequence to a man like Netanyahu.

    Let me say I support Israel as the eternal homeland of the Jews, but where do we cross the line of civilized human behavior in the name of “defense”??? I think it’s a question Israeli voters need to ask themselves when they see the name Netanyahu on the voting ballot.

  109. You know. I have never once said derogatory words about Hebrews on this site, and for the life of me cannot understand why the word that starts with J and ends in W is filtered on this site.

  110. Well, the Israeli government just wants peace, that’s why they shot some of the people on the boat execution style in the back of the head. Shooting people in the back of the head is Netanyahu’s version of an olive branch. Hurting 2 of Israel’s better allies—America and Turkey—is of little consequence to a man like Netanyahu.

    Let me say I support Israel as the eternal homeland of the Hebrews, but where do we cross the line of civilized human behavior in the name of “defense”??? I think it’s a question Israeli voters need to ask themselves when they see the name Netanyahu on the voting ballot.

  111. the above comment was directed as reply to Kliment Voroshilov but were filtered in my original comment.

  112. I would also ask Netanyahu, what does he think the children of Gaza who cannot get clean drinking water when they go to school in the morning, what type people does Netanyahu think those children will be in 20 years??? Will it help the peace of Israel in the future??? I would argue it’s only detrimental to the peace of Israel.

  113. Seems likely to me that the “solution” to the Euro’s value and fortifying Eurozone banks has to await a package deal on the default/resked of Greek sovereign debt. And also that it leave the Euro, making all payments in New Drachmae.

    And so we muddle along while all these moving parts settle into place.

  114. This stuff with Hungary worries me because I feel that not enough attention as been given to the historical dimension to economic cycles.
    As I think I read a while back it is the Austrian banks which have large exposure to these Hungarian
    loans.Should the default rate rise (Hmmm) and the Austrian banks begin to crater,does the name “Credit Anstalt” ring a bell anywhere?
    That was the point when the hyperinflation went out
    of control and the real social instability began.
    But then who reads history books nowadays…

  115. Do you, Ted K, support everyone going back “home” – not just Hebrews to Israel?

    From the website

    “Refugees that have been officially recognized by the United Nations and other international political bodies are generally entitled to a number of legal benefits and to humanitarian assistance. In general, these refugees are individuals that did not want to flee their homes, but were forced to do so. However, once resettled or repatriated, many of these families are reunited to some extent.”

    30 million “jobs not coming back”, suck it all out of them in 2 years of unemployment,

    and make sure you REPEAT a million times a day, hysterically, that there is no $$$ to create new jobs in energy, transportation, architecture, cures besides viagra, farming, etc etc etc

    well, according to the post WWII 20th century definition of “refugee”, economic war is a real WAR.

    I have a photo of a banner peaceful protesters were holding up last summer in a section of rebuilt Warsaw, Poland that said, “Is Poland the next Palestine?”

    I snarked under my own nose, softly, “Nope. USA is.”

    Saw the Biden clip…I think the situation there was more akin to that Blazing Saddles movie scene where the sheriff pulls his gun out, holds it to his own head and holds himself hostage so that he can get away from the angry mob…and the lone empathetic woman in the crowd pleads for the sheriff, “…won’t someone help that man?!…”

    July 4, 1776 Declaration – “…Such has been the patient Sufferance of these colonies; and such is now the Necessity which constrains them to alter their former Systems of Government…”

    At the very least, we should be having a SERIOUS discussion about which USA states can remain with Declaration of Independence in Hand to live free of “…A Prince, whose Character is thus marked by every act which may define a Tyrant, is unfit to be the Ruler of a free People…”

    (and I am NOT talking about OBAMA)

    and which USA states want to live by their made-up OCD-DETAILS channeled into the thousands of pages of wrecking-crew, “institutional constitutional” “law”…and in their end times holy books…

    There has to be some REALITY to social engineering, my friends. Irreconcilable differences are VERY REAL!

    There is only one way people in one culture will deal with the “elite” sociopathic/psychotic horse traders of another culture. Granted, it’s based on the prejudice of experience – over and over and over and over and over and over again…if you don’t LET the psychos/socios get the better of you in the “deal”, eternal peace with them is IMPOSSIBLE…

    Progress is ALSO REAL in “independent-thinking” cultures.

    You wake up one day KNOWING you just can’t live the rest of your life in a global mental institution…hence the call to “Duty”…

    I’d give anything to have the spectacular land, and the non-existent progeny of the young, didn’t have a chance to breed, murdered villagers all together back in one place in “White Russia”…fortunately, most people today lack the kind of intelligence to understand what humanity has REALLY lost FOR ALL ETERNITY…although what’s happening in the Gulf of Mexico is starting to tip over to “gone forever”

    losing the iPod just ain’t the same thing…

    So, yeah, I’m with you Ted K – let’s support everyone going back to their “eternal homeland”….

  116. “At the end of 2009, Hungary had about $117 billion of external debt outstanding, according to While that’s relatively small, the key question is ‘who owns the debt’?”

    06/04/10 – The Street – excerpt

    “We looked at BIS on cross-border banking exposure to Hungary as of the third quarter of 2009, and total was $158.1 billion vs. $302.6 billion for Greece, $286.7 billion for Portugal, and $1.15 trillion for Spain.

    Still, it’s worth noting that 92% of that exposure is held by European banks, with Austria (24% share of total), Germany (21%), Italy (17%), Belgium (12%), and France (8%) accounting for the lion’s share.

    Despite having many loans denominated in Swiss francs, Swiss banks themselves hold only 1% of the total cross-border banking exposure to Hungary. UK and U.S. exposure is negligible.”

  117. You can not spell out the word J.E.W. on this site?

    WTF, how is that possible?

    I say; Christian… and I say; Moslim & Hindu

    Take that you all.

  118. Ted, Kliment and others who might be interested.

    Underneath, some very interesting documentaries about the Israel Lobby and other issues related to the state of Israel. Enjoy. (first minute(s) subtitled…)

    The Israel Lobby (Marije Meerman, VPRO Backlight 2007)

    Endgame: A Future Scenario for Israel (Marije Meerman, VPRO)

  119. The Israel Lobby

    ‘For many years now the American foreign policy has been characterized by the strong tie between the United States and Israel. Does the United States in fact keep Israel on its feet? And how long will it continue to do so? In March 2006 the American political scientists John Mearsheimer (University of Chicago) and Steve Walt (Harvard) published the controversial article ‘The Israel Lobby and US foreign policy’. In it they state that it is not, or no longer, expedient for the US to support and protect present-day Israel. The documentary sheds light on both parties involved in the discussion: those who wish to maintain the strong tie between the US and Israel, and those who were critical of it and not infrequently became ‘victims’ of the lobby. The question arises to what extend the pro-Israel lobby ultimately determines the military and political importance of Israel itself. Colonel Lawrence Wilkerson (Colin Powell’s former chief-of-staff) explains how the lobby’s influence affects the decision-making structure in the White House.
    With political scientist John Mearsheimer, neocon Richard Perle, lobby organization AIPAC, televangelist John Hagee, historian Tony Judt, Human Rights Watch director Kenneth Roth, colonel Lawrence Wilkerson, Democrat Earl Hilliard, Israeli peace negotiator Daniel Levy and investigative journalist Michael Massing.’

  120. U.S. Can Weather Europe Crisis But Needs Debt Plan

    Fed chief Ben Bernanke says policymakers must work now to plan for ‘looming budgetary challenges.’

    June 9, 2010: 2:27 PM ET – excerpt

    NEW YORK ( — “Federal Reserve Chairman Ben Bernanke told lawmakers on Wednesday that the U.S. economy should be able to withstand the effects of the European debt crisis.

    But he warned that Washington policymakers still must make plans now to bring the nation’s own debt issues into line.”

  121. In what was a decisive step for finance ministers of the Western World, most notably Tim Geithner (U.S.) and Wolfgang Schauble (Germany), the G20 has outlined two courses of action for the group that are by definition mutually exclusive.

    Under article #2 of the Communique released after the meeting in Busan, South Korea, the group somehow pledged to “safeguard [the] recovery and strengthen prospects for growth and jobs”, while promising to “deliver fiscal sustainability [by accelerating] the pace of consolidation”. (G20 Communique)

    Sure, it makes since for surplus nations with strong balance sheets to cut costs, and for deficit nations with a deep pool of sovereign bond auctions to stimulate, but what for the countries that really matter. How then should Portugal, Spain and Ireland proceed? And still further, what path should the less developed nations of the group take.

    In our analysis (Korea Economic Slice @, which is also a weekly outlook on the economy in the Republic of Korea, we delved into the messages being sent from this G20 and analysed how Korea might respond. In our opinion, and apparently the opinion of the BOK who today voted to keep their base rate unchanged, it may be best for the host of the 2010 G20 to fold a few hands and wait to see how the chip leaders make their bets.

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