The End Of The Euro

By Peter Boone and Simon Johnson – this post is the first two paragraphs of a column that appears this morning on

Investors sent Europe’s politicians a painful message last week when Germany had a seriously disappointing government bond auction. It was unable to sell more than a third of the benchmark 10-year bonds it had sought to auction off on Nov. 23, and interest rates on 30-year German debt rose from 2.61 percent to 2.83 percent. The message? Germany is no longer a safe haven.

Since the global financial crisis of 2008, investors have focused on credit risk and rewarded Germany with low interest rates for its perceived frugality. But now markets will focus on currency risk. Inflation will accelerate and the euro may break up in a way that calls into question all euro-denominated obligations. This is the beginning of the end for the euro zone.

To read the rest of this column, please use this link:

79 thoughts on “The End Of The Euro

  1. Helocoper Ben is once again under pressure to save anothers Economy, just as he and others tried to do back in 08. This could get interesting.
    This from the GATA.

    The dam is breaking in Europe. Interbank lending has seized up. Much of the financial system is paralysed, setting off a credit crunch just as Euroland slides back into slump.
    The Euribor/OIS spread or “fear gauge” is flashing red warning signals. Dollar funding costs in Europe have spiked to Lehman-crisis levels, leaving lenders struggling frantically to cover their $2 trillion (L1.3 trillion) funding gap.
    America’s money markets are no longer willing to lend to over-leveraged Euroland banks, or only on drastically short maturities below seven days. Exposure to French banks has been slashed by 69 percent since May.
    Italy faces a “sudden stop” in funding, forced to pay 6.5 percent on Friday for six-month money, despite the technocrat takeover in Rome.
    German Bund yields have risen to 59 basis points above Swedish bonds since Wednesday’s failed auction. German debt has been relegated suddenly against Swiss, Nordic, Japanese, and US debt. As the Telegraph reported two weeks ago, Asian central banks and sovereign wealth funds are spurning all EMU bonds because they have lost confidence in a monetary system with no lender of last resort, coherent form of government, or respect for the rule of law.
    Even if EU leaders could agree on fiscal union and joint debt issuance — which they can’t — such long-range changes cannot solve the immediate crisis at hand. The push for treaty changes has become a vast distraction.
    Unless Germany agrees to the full mobilization of the European Central Bank very fast, the eurozone will spiral out of control. As The Economist put it, “The risk that the currency disintegrates within weeks is alarmingly high.”
    Theoretically, EMU can limp on though the Winter until the Italian debt auctions of E33 billion in the last week of January, and E48 billion in the last week of February. The reality is that sovereign contagion to the financial system may well bring matters to a head more swiftly.
    If breakup occurs in a disorderly fashion, with Club Med states and Ireland spun into oblivion one by one, the chain reaction will cause an implosion of Europe’s E31 trillion banking nexus (S&P estimate), the world’s biggest and most leveraged. This in turn risks an almighty global crash — first-class passengers included.
    So the question arises: Should the rest of the world take over management of Europe to prevent or mitigate disaster? Specifically, should the US Federal Reserve assume leadership as a monetary superpower and impose policy on a paralyzed ECB, acting as a global lender of last resort?
    In essence, the US would do for EMU what it did in military and strategic terms for the Europe in the 1990s when Washington said enough is enough after squabbling EU leaders had allowed 200,000 people to be slaughtered in the Balkans. The Pentagon settled matters swiftly with “Operation Deliberate Force,” raining Tomahawk missiles on the Serb positions. Power met greater power.
    I have not made up my mind about the wisdom of a Fed rescue. It is fraught with dangers, and one might argue that resources are better deployed breaking EMU into workable halves with minimal possible damage.
    However, debate is already joined — and wheels are turning in Washington policy basements — so let me throw this out for readers to chew over.
    Nobel economist Myron Scholes first floated the idea over lunch at a Riksbank forum in August. “I wonder whether Bernanke might not say that ‘we believe in a harmonized world, that the Europeans are our friends, and we know that the ECB can’t print money to buy bonds because the Germans won’t let them. And since the ECB will soon run out of money, we will step in and start buying European government bonds for them.’ It is something to think about,” he said.

    This is not as eccentric as it sounds. The Fed’s Ben Bernanke touched on the theme in a speech in November 2002 — “Deflation: making sure it doesn’t happen here” — now viewed as his policy “road map” in extremis. Berkeley’s Brad DeLong said it is time for Bernanke to act on this as the world lurches straight into 1931 and a Great Depression II. “The Federal Reserve needs to buy up every single European bond owned by every single American financial institution for cash,” he said.
    The Fed could buy E2 trillion of EMU debt or more, intervening with crushing power. The credible threat of such action by the world’s paramount monetary force might alone bring Italian and Spanish yields back down below 5 percent before one bent nickel is even spent.

    “The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt. Potentially, this class of assets offers huge scope for Fed operations,” he said.

  2. @ owen_owens: The “solution” proposed is only a shifting of the debt and puts off the necessary reset: Cleansing the system of unsustainable debt.

    It makes me think of a Monopoly game where most of the money is in the hands of one player, and the kids run down to the playroom to grab the money out of the extra game in order to keep playing.

    Now is the perfect time to start a new game – and it starts by massive debt deleveraging and letting the cards fall where they may.

    Now is the time to end the largest transfer of wealth from the non-elite to the uber-rich and their political allies.

  3. Please note, I am an progressive independent and I have no intention, under any circumstances, to cast my vote for Obama, just another bankster huckster. I will vote for Bill Still if he is the Libertarian candidate. I will consider voting for Ron Paul or Jon Huntsman. Most likely I will end up writing in Bernie Sanders.

  4. I concur with your arguement, I only wrote the first paragraph, not the rest. And most kids just take from under the $500 stack when they get to become the banker.

  5. “[Germany] was unable to sell more than a third of the benchmark 10-year bonds it had sought to auction off on Nov. 23”

    So, of those up for auction, did more than a third go unsold; or were fewer than a third of the bonds sold? The one is worrying; the other is disastrous.

  6. A serious mistake has been made in the market over the last 20 to 30 years, and it changed the economic environment and created an economic death spiral in the economy. Strangely, our economic experts have not considered this at all in their ruminations about the economy. What mistake? Please see this article: “The Real Cause of the Current Economic Crisis and a Suggested Solution”

  7. One mistake was putting aside mkt to mkt economics, figureing why bother keeping up with the mkt when you can simply pay, jump start, and drive on.

  8. A serious mistake has been made in the market over the last 20 to 30 years, and it changed the economic environment and created an economic death spiral in the economy. Strangely, our economic experts have not considered this at all in their ruminations about the economy. What mistake? Please see this article: “The Real Cause of the Current Economic Crisis and a Suggested Solution”

  9. @Simon Johnson “This is the beginning of the end for the euro zone. Here’s why. Until 2008, investors assumed that all euro- zone sovereign bonds, as well as bank debt, were risk-free and would never default. This made for a wonderfully profitable trade:”

    What made it a profitable trade was only that the regulators also assumed this (and still do) and allowed the banks to hold little or no capital at all when lending to the infallible sovereigns.

    It was indeed failed technocrats (a group to which Simon Johnson also belongs) that did Europe in. The sad part is that these failed are now even strengthening their stranglehold on Europe.

  10. CELS 2011: 6th Annual Conference on Empirical Legal Studies
    The CELS 2011 conference is sponsored by the Society for Empirical Legal Studies (SELS), the Searle Center on Law, Regulation, and Economic Growth at Northwestern Law, and the American Bar Foundation. The conference features original empirical and experimental legal scholarship by leading scholars from a diverse range of fields.

    You can browse all abstracts for publicly available papers to be presented at CELS 2011 in the SSRN database at:

    You may also visit the CELS 2011 conference website at:

  11. I disagree with the assumption that allowing the ECB to finance European soverign debts will trigger inflation.

    This would be the case if the money was spent to generate demand, but here…? Also take a look at the money printed by the Fed or the Japanese bank. Where is this inflation everyone talks about?

    Printing Money for paying off debts will not trigger inflation as long as the countries profiting from it do not redistribute this new money in the real economy. So it is still time to save Europe if each country commits strictly to balance its budget in order to benefit from these buy backs.

  12. This was essentially triggered by a calculated default that came at the onset of a long Thanksgiving weekend where no “market” response or reaction could spontaneously occur. See the many different initial takes on the 2009, November 26th Dubai scenario that initiated a reverberating default line across the tectonic plates of the economic global currency wars:
    The destruction of the Euro may well be endemic to the risk bonanza that has floated capital gains in less than honest ways, but it part and parcel of the global peg wars that have threatened the dollar supremacy and overall…can not be fully understood outside of that contextual 21st century real politk…or is that “zealous politico-Economik” and the nested interests of an insidiously emergent global banking structure.
    …How many European based governments have had quiet coups in their governments? I count 8. Why are we not sizing up what is emerging in empirical reality instead of explaining what we dared not predict in the first place…after the fact. this is just engaging in retrospective ratiocinating and begging the questions. It is teleological historicism as we place it all on a justifiable (even if undesirable) grid of monetary salvation.
    I don’t buy it…track the money influences and quit telling us how much the elites are suffering to come up with answers…they are floating themselves well above the survival line…while they are essentially taking over entire government superstructures across Europe by installing their crony people into a systemic control fraud that will crush the demographics of a united European working class under a self-sustaining system of “justifiable” and legitimated austerity…the language of tyranny itself. Forget about Democratic rule, it is economic order that has become the prioritizing agent of domination under a false flagging of a “technocratic finance” oligarchy of Imperial order. This essentially mimics the galaxy order in the political structure depicted in the Movie Star Wars…only here the audience is not the ones being served. The only question here, is what ever happened to the good guys side of the polemical struggle? It used to be good and evil…now it seems to be just pure evil against evil. Another indiscreet fallacy of distinction…but of course we are still given a Free “choice” between the two.

  13. Re Jon Corzine’s MFGlobal from Barry Riholtz today:

    How on earth could $633 million in customer accounts simply disappear?

    As it turns out, quite legally.

    The regulations governing these customer accounts are 25 plus years old, according to a few insiders I spoke with. They gave the firms an ability to hypothecate (lend) client money, so long as it was only used to legally purchase investment grade sovereign debt.

    So that was what MF Global did.

    As originally conceived, client monies were only supposed to purchase US Treasuries. However, so as to not offend trading partners (and other reasons), the regs were written so as to include any “investment grade sovereign” in the rules. Hence, AA rated European sovereign debt, despite the obvious fact that in 2011 they are obviously not the equivalent of US Treasuries, technically qualify. Whether this violates the obvious spirit and intent of the law will be for a judge to decide.

  14. @Owen Owens: Great assessment above! If I might try to compliment this with some further rogue evaluations:
    I sense that your analysis comes closest to the “empirical” measure of what is happening in the structural process itself, but perhaps it is assessing the horse of a different color at observable but most neglected transaction machinations in the global environment of offset balances of power economics.

    If I might try to characterize the “meta” levels:
    Placed in a dynamic and “diachronic” context against ultimate global (universal) “synchronic” political economy the game-plan and aggressive technical models of exploitation and extraction of “monetarized” (rationalization by digital divisions or derivatives) “wealth” that has exceeded its expansive limit and is seeking to sustain a degree of hegemonic advantage under competitively exclusive hostile environments in a balance of forces that are epi-centric to the norms of an asset based social economy (let alone a globally sustainable economy). The overall ecological base is ignored and the crisis of true subsistence (distribution of misery and poverty etc) has been pandemic and ignored as a lack of “systems” in place to provide ever more sprawling central economies under capital markets that have been essentially colonized by distant control fraud.
    Here is the basic scenario…with different levels of application that move from local to universal applications across the grid-work that maps the transnational playing field:

    Pardon me if it is only presenting the abstract scaffolding:
    1. Capital intensive currency raiding to pump and dump infrastructural dependency assets followed by some form of profit taking and /or capital flight leading to a crisis modality of phase II capture and exploitation. The dependency trap

    2. Selective liquidation ingeniously contrived to appear normative and self-confiming necessity … the dependency capitulation.

    3. Hostile takeovers of every variety, Land grabs (progressively appearing all over the globe oddly coincidental with the past several years of so-called crisis management); Progressive increases of rent/ownership economies of infrastructural acquisition and asset “management” accoutrements of power enforcements in legislated facilitation, accompanied by a systemic and systematic breakdown of legal restrictions.

    4 the final acquisition of political power centers and communications (Information Technology) to establish a “rational systemic power scalar with a blueprint narrative of instrumentalist and utilitarian coordinates of legitimation.

    5. In the abstract the crisis mandate is a systemic market management model of political economic rationalization under a segmented and stratified ranked status order
    of corporatist shares under competitive finance; where market stakeholders have access to capital while the rest of society becomes and industrial resource for creating new market colonies of scaled path dependency and desperation gratitude for basic survival needs to sustain their families.

    Ultimately it is a power grab for global supremacy and it is not a quest for a perfectly balanced system.
    If absolute power corrupts absolutely, the rudiments start with the fact that raw power brings raw carnage and an unspecified outcome of winner takes all.

  15. In short…the elites are not fighting for their lives…

    They are fighting for control over OURS.

  16. The Euro-Zone is merely the scrimmage line…in the currency war playoff between transnational systems that will determine the near future systemics of global capitulations (right or wrong for the long run doesnt seem to matter). Economic buoyancy = political survival ; and vice versa. It is a self sustaining counterbalance of destruction for everything below it.

  17. @Woych – “In short…the elites are not fighting for their lives…

    They are fighting for control over OURS.”

    Considering the collective IQ of the SELF-PROCLAIMED *elites* based on their math:

    More misery for others = More $$$$ for ME ME ME

    and their ideological (nay, *religious*) anchoring:

    “….In the beginning there was $$$$ and then came LIFE….”

    What are they going to do to *our* lives now that the push back is on regarding who *owns* what when the leverage was 100 to 1….?

    They are going nihilistic – destroy everything through *austerity* so that there is nothing left to *control*…

    C’mon, this is the moment where just one operational human brain cell functioning as a normally evolved coordinated entity for life-maintenance is screaming to the rest of the brain cells – “This is NUTZ!”.

    Last time wackos tried to pull this crap in Europe? Concentration camps. What are the *RISKS* in an extreme response by We The Stupid to the extreme collective insanity of the *prophets* of banking who did nothing but p_ss all over the place as a way to say – this is MINE MINE MINE…?

    If you’re not making it, you’re taking it…

    No one is *buying* their *perception* – to destroy the Euro is to – symbolically – destroy basic human life-sustaining commerce relationships.

    Pure NIHILISM.

  18. @Annie: There is no method to the madness coming from one evil mind. That is part and parcel with the germ theory that seems to permeate all the Western concepts of disease.

    The systemic is pushed to the limit (the bubble) by aggregated layers of people who are attempting to get into the bubble or get out of it, or are desperately trying to save it at all costs for the “bosses” and the layer upon layer of bosses that make up a relatively sadistic chain of control and command. The ones sacrificed are usually the ones caught on the periphery who take the greatest risk and get rewarded for such if they succeed. Of course this is played until it is played out and that “particular” layer of onion skin is rejected as the entire “cause” of the problem.

    If you want a true analogy you can’t use “finance” because it has too much money behind the brainless few who control it so therefore it is “lawyered up” and “delegated down” to administrators or techno-orchestrators that facilitate and enable the system to have many layers of protective deniability and distance form the externalized (banal) damages that might be separated surgically from the accrued interests. I suppose ENRON has served to illustrate how that all works but now it tends to “limit” the analogy to “containment frameworks” rather than illuminate the inner workings of the larger concentricity of the core magnates of power money.

    If you want the best example look at Murdoch and what he got his people to do in the name of a “free press” under pure capital aggressive incentives. All excusable with a few firings…the outer shell…but it is all rotten to the very core.

  19. I can hear it now…The Euro is dead…Long live the Euro! Laissez Faire stability will be founded by classical economics…and confounded by classical political will.

    Premise/ Axiom : Classical economics is a mainstream accomplishment of the enlightenment and represents best practices in the history of ideas. In fact, what goes by that name is merely a recapitulation of the business cycle theory where the indiscriminate measure of aggregate business flow charts become the standards of HEALTH in an economy of unspecified but glorified wealth as a standard bearer. Yet this only substituted one monarchy for a systemic practice of monopoly formation among competing nested systems.

    At the present time we are being digitized and monetized into grid units of measured, controlled and tracked demographic markets. These so-called “markets” are essentially the same as transactive fields that are colonies floated by financial exploiters prioritizing capital gains production. Economic society is seen more and more as succession phases (as we once measured environments and ecological phases…gratis…coincidentally from the University of Chicago School) for levels of exploitation to capture the working capital of the overall grid or mesh networking operational sequencing. Social stability measured as per-capita-occupational contribution to the revenue streams of the “healthy” economy essentially converts individuated labor markets into industrial systems of exploit in the competitive succession of wealth formation that progressively degrades the system away from actually servicing the subsistenc or equity base but towards sustaining the TBTF upper tiers (ranking stratification has demographic ramifications in the population that I have not seen reverse measured in a proportionate ratio…because no one is looking at the effects towards the base economy…only at the consolidated elite prosperity at the upper tiers of this distortion). In my opinion the theories are loaded and the “critical thinker” is immediately tagged marxist or in some school bank of default from the preferred platform or “narrative” that legitimates the process. The theoretical frame becomes bifucated and reinvestment becomes a narrow strip of “liquidity” in a self serving circle of strikes that reminds me of sharks circling the survivors of a ship sunk at sea.

    It is a mistake to keep looking backwards with polemical theory from the past. Empirical reality is that basic subsistence systems are being supplanted with claims of inefficiency. Small productive adapatations and variations have even been made illegal with patents and intellectual property claims among other items of crushing counter-pressures against the age old localized exchange and bartered world of community based self-reliance and independent self sufficiency…(which threaten the grand scale invisable market claims of fiat efficiency endorsed by this “mainstream” and “class-driven” “classical” apologia for the laissez-faire global expansionists). The grand scale expansionist model devours the small variation that emerges at localized levels, and the sprawling dependency monopoly of Walmart style expansion is now targeting to coral all local markets and annihilate their authenticity with a scope and scale dependency upon their own effective mandates for survival and ultimate reliance upon them…and $ocial supremacy.

    And now we can thank technology for computational designs programed by the C-class orchestrates of power economics while the State tracks every dime for tribute and the air you breath at work time and wake up ultimately is subject to the efficiency of this market realism. This “realism” is nothing more than colonializing realms that create and exploit capital domains…where they make the rules and we consume the consequences…both beneficial and polluted.

    Generic “CRITICAL” THINKING should not be instantaneously equated with still another realism of theoretical thought, no matter how humble. The turnover is still the same. If a true ECONOMICS” is to come to the forefront it will have to define its terms and those terms must reflect the empirical world of events in situ and in vivo; not vitro, not in a test tube formula bought and sold from economic departments (Rx Americana = the banana republic growing under our feet as Rex Americana) or a media tube of influence seeking vested interests buying advertising.

  20. Simon (and Peter, defacto), thanks for your latest Bloomberg. It is prescient and well-written, and scary, but then many of us have been terrified for some time. Anyone who hasn’t been is either completely jaded, wears rose colored non-removable contact lenses, or simply prefers to be an ostrich. The EuroZone is in far worse condition than almost any would be willing to admit. Part of that is that those who would most likely spill those beans know that there would be a massive run on banks if they said anything, and, that run would not just be European, but international. The markets, would, of course collapse, etc. So, this disease’s upshot will not be a global heart attack or stroke, but rather massive economic cancerous malaise followed by a fairly sharp dip into a comatose state following the actual collapse of the essential bodily functions (i.e. banking, etc.). In the following article just posted to my blog, I try to make the connection between the Euro crisis and the greater American and global economies. The essential nexus, of course, is the international banking community, grossly over-leveraged, undercaptialized and naked of meaningful collateral, and the massive coincidental corruption of most governments by resident oligarchies, led by the financial sectors. This is the link to my ruminations:

  21. @Waterbury

    Yup, sure is scary to be on the planet – Earth – that fits the description of the opening line of this clip :-))

    Jedi Warriors didn’t file a patent, did they? LOL

    1. Save the commerce numbers – deal with the alien *derivative* CRAP later…

    2. Lie on the internet – screw up THEIR *data*, after all, they’ve been lying to us about everything they *know* about us…psyche ops – repeat it over and over again – “you are stupid” – what part of a functioning government is that? Judicial, legislative or executive? Who gets ahead – politically – by calling everyone listening to the minutia details of an *ism* his monkey brain concocted in which the conclusion you are to believe is that “I am a *god* to you for all intents and purposes because I can made up so much CRAP” from a TV studio? Money certainly can’t buy class, can it?

    3. Darth Vadar lost. :-)) It’s obvious the media propaganda machine is getting more desperate in making sure we don’t have that important bit of *new facts for decision making consideration* – so let’s just go with the yellow cake story…?

    Yes, the approach to problem solving among cooperative free women is coming at it all from a different perspective. Dump a pile of 7 billion diapers on us, tell us to be efficient about cleaning them up, and then give us a day to figure it out because tomorrow morning there will be another delivery of 7 billion. You don’t approach that kind of LABOR problem solving in the *abstract* – taking time to research what someone in 202 B.C. had to say about irrigation and accumulate an impressive think-tan load of other cherry-picked historical details to concede the point, on all the way to pleasing – and I quote from your post – these people as *god’s workers*:

    “….The essential nexus, of course, is the international banking community, grossly over-leveraged, undercaptialized and naked of meaningful collateral, and the massive coincidental corruption of most governments by resident oligarchies, led by the financial sectors….”

    LABOR p-ssed on it first in USA…go figure. At 100 to 1, you can’t prove you owned any of it at any point during the transaction…all 50 state AGs are on it.

    Sharing *power* in a democracy means that when 99% are in agreement on what the problem is (not necessarily the immediate solution, though, because the 1% are not INTERESTED in saving commerce – how crazy are they, eh?), the jig is up with CRAP like *derivatives*….no more game boyz at the table…

  22. Bottom line here folks is someone built more than they can afford to maintain. Eventual migration to the cities is expected as the status que can no longer afford to travel bad roads with even more expensive to maintain cars. It will be States rights -vs- US inflation.

  23. Yeah, Dr. Zhivago migrated to the city to survive the game-boyz war lords of communism…everyone back to Detroit…

    Europe’s Crisis Lies Beyond Finance
    George Friedman
    “The European crisis is one of sovereignty, cultural identity and the legitimacy of the elite. The financial crisis has several outcomes, all bad. Regardless of which is chosen, the impact on the political system will be dramatic.”

    John Maynard Keynes on the potent weapon of capturing the money system: 1919

    “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. In the latter stages of the war all the belligerent governments practised, from necessity or incompetence, what a Bolshevist might have done from design. Even now, when the war is over, most of them continue out of weakness the same malpractices…

    In this autumn of 1919 in which I write, we are at the dead season of our fortunes. The reaction from the exertions, the fears, and the sufferings of the past five years is at its height. Our power of feeling or caring beyond the immediate questions of our own material well-being is temporarily eclipsed…. We have been moved already beyond endurance, and need rest. Never in the lifetime of men now living has the universal element in the soul of man burnt so dimly. For these reasons the true voice of the new generation has not yet spoken, and silent opinion is not yet formed. To the formation of the general opinion of the future I dedicate this book…”

    Well now, I think the generation to heed his warning has arrived…Power to the American People…
    ….God Bless the OWS generation!

  26. At this time, the only thing that can save the world from financial armageddon is a miracle. “This is the beginning of the end for the euro zone.”

    “In every crisis there’s a point of no return….I’m increasingly convinced we’ve already passed that point of no return in Europe. The banks won’t lend to each other, the Germans won’t do Eurobonds, and the ECB won’t act as a lender of last resort. The confidence fairy has left the continent, and she isn’t about to return. Which means, as we used to say in 2008, that things are going to get worse before they get worse.” –Felix Salmon, Reuters

    “Which is why we can expect an economic catastrophe of historic proportions.”

  27. @anonymous Seemingly what may happen is what happened in late 2008 and early 2009, and that is that our FED will act (as always) unilaterally to put as much money in (mostly by buying the better bonds available) the European Union. Back in ’08 and ’09, it spent several billions propping up US and European banks, even as Congress was constructing TARP. This came to light recently when Bloombergs FOIA filing with the FED was upheld by the Supreme Court. The total “lent” at that time to member banks and European “non-member” banks came to a cool $7.7 billion. Why not now. After all, even if it is supporting the Euro, it would be done, theoretically to support the member banks which, if the Euro goes bust, would probably be forced under in the ensuing financial chaos, and the FED would, at that time be forced to spend more trillions even as we were heading into the Second Great Depression. My guess is that Ben et al, are ready, willing and able, and it might actually work. Sadly, though, perhaps only temporarily (likely), as a collapse, all things considered is nearly completely inevitable.

  28. Bayards right, the Fed has already committed some 200 billion Dollars to help leverage Euros, the problem is that it aint enough, and the timer is a tickin. As for the timing on Lennins book, could he have known then, that the 100 years of war or famine,(there was a short period in the twentys of flappers) had fully begun just one year prior to that? Imagine the strength tapped from humans then, who needed rest but got none, they whom yearned for bright souls yet got dimly lit ones, those who believed in a future voice, but instead recieved an arrogant and hypocritical one. Imagine all the things they can’t do today, having passed the point of no return,[for now].

  29. @ Bayard, @ Owen

    The syndicate (aka Fed) will no doubt print increasingly obscene amounts for Europe, motivated by a resolve to rescue the malefic system spawned by the banksters. However, the point of no return means exactly that. The digital presses will stimulate systemic collapse via another pathway, aggravating the disaster as confidence in the fiat currencies (USD, EUR) leads to irrepressible bank runs.

  30. @Owen Owens:”…As for the timing on Lennins book,…”

    John Maynard Keynes on the potent weapon of capturing the money system: 1919
    Please note that this was NOT Lennin’s book but it is Keynes’ (sarcastically or reverently is not clear) citing Lennin’s quotation which is essentially pointing out that the Bankers were sabotaging and subverting the system better then, or at least precisely along the methods pointed out by, Lennin himself. It does seem that he is weighing into an ironic fact trying to underscore the very strict and undesirable self-destruction of the free world economy that was being orchestrated by its own hand. I guess that says a lot about the so often quoted “invisible hand” and its consequences in real life!

    The main point, so as not to be misunderstood (click on the link) is that this is actually KEYNES speaking to us in 1919. Yet the words could be directed to the past 5 years with very little alteration or amendment.

  31. Think about it Owen…1919…the same ‘BASELINE SCENARIO” !

    That’s why I titled that posting:


    (a play on the phrase ‘Raising CAIN’ of course…with a double entente meant for the Keynes’ application)

  32. @ Anonymous “…At this time, the only thing that can save the world from financial armageddon is a miracle.”
    Celine Dion & Elvis Presley – If I Can Dream

  33. Suprising the all the Central banks decided to keep doing what they are doing. Amazing that these are suppose to be the best and brightest. WOW!

  34. For those interested in sustainable human commerce, this is just one comment from THAT conversation, “The global financial system and banking systems are totally broken and loaded with fraud because of fiat money and fractional reserve pyramid schemes. Global economies can no longer generate real prosperity without purging the fraud and the bad debts and re-instituting commodity money so that genuine and reliable price signals are transmitted to economic actors.”

    So now we know what the p_ss on the tree marking that tree as MINE MINE MINE is worth – and we the stupid people have to scoop up their poop and properly dispose of it…

    “….banks got bailed out, we got sold out…”

    From Homestead Act to CDSs – that’s more than a 180 game change…

  35. Regardless of the author, my statement stands. I am well aware of todays circumstances and either the next or last 5 years, but a run on banks is not particularly in the cards. Nor is my objection to so many of todays and unfortunitly tomorrows laws. Lessons never really get learned, implications or not, and dead beats rarely change their ways, is something I do understand, and disagree with. But that’s between me, and the future.

  36. In my reply to anonymous, I confidently speculated on the FED’s next action in Europe by extrapolating my recollection of their actions in ’08 and ’09. Looks today as if they were listening, along with many of the world’s other central banks. Look, let’s face it, this is about saving the world’s financial oligarchs. At this point there is little question. We still here no serious talk about breaking up the monstrous TBTF banks around this planet. You know, the ones operating at previously inconcievable levels of leverage and a paucity of real capital (uncorrupted stock holder money, not tainted assets of every kind). There is no sincere talk of real bank reform amongst our world’s political leaders or regulators, or even financial leaders like Ms. LaGarde. But, sadly, when it comes to the world’s largest successful countries, it seems that we are living in a global plutocratic scourge, where the richest and most powerful seem to control the planetary economic universe more each day. Sure, the financial behemoths are at the top of that list, but just below them are the rest of the oligarchs in energy, manufacturing, media, etc. I have yet to see any of the world’s most powerful nations enact fiscal policies which benefit their core populations. At least 90% of propounded policies everywhere are aimed at the top. America is just a member of this global society. Nothing unusual here. Think of America as a child of the CFR, at this point. Think on that and you may catch my drift.

    What happens if a country goes bust?
    If Greece, Portugal or Italy fails, America should watch out.
    David Wroe July 20, 2011 05:22

    ““If you work backwards and look at Greek public debt and try to understand who owns what, you have a hole of $198 billion held by asset managers, pension funds and the like, but there is very little information on the details of those holdings,” Gilles Moec, an economist at Deutsche Bank in London, recently told the New York Times. “It’s a much bigger pot than what is actually held by banks, but we don’t know who owns how much, or in which country.”
    ——————————————————————some details on known debt levels from July 2011:
    Greek Debt:
    BNP Paribas (France) — $7.4 billion

    Dexia (Belgium) — $5 billion
    Commerzbank (Germany) — $4.2 billion

    Societe Generale (France) — $4 billion

    ING Groep (The Netherlands) — $3.4 billion

    Deutsche Bank (Germany) — $2.5 billion

    Groupe BPCE (France) — $1.8 billion
    Portuguese debt?

    The same European banks would hit by a Portuguese default, the stress tests show.

    BNP Paribas (France) — $3.3 billion

    Dexia (Belgium) — $2.8 billion

    Commerzbank (Germany) — $1.4 billion

    Credit Agricole (France) — $1.7 billion

    Societe Generale (France) — $1.3 billion
    So what about Italy?

    Italy is the big kahuna in the debt crisis. It is Europe’s third largest economy. It owes $2.2 trillion, or 120 percent of its GDP, making it one of the most indebted nations on Earth. Worse, much of its debt is coming to maturity soon — $500 billion in the next three years. About half the total is held domestically but that still leaves huge amounts owned by banks around the world.

    French banks are exposed to Italian debt to the staggering tune of $393 billion, German banks of $162 billion. The stress tests show:

    BNP Paribas (France) — $40 billion

    Dexia (Belgium) — $22.3 billion

    Commerzbank (Germany) — $15.7 billion

    Credit Agricole (France) — $15.3 billion

    Societe Generale (France) — $12.4 billion

    Deutsche Bank (Germany) — $10.9 billion

    Hypo Real Estate (Germany) — $10 billion

    British banks, who don’t have a lot of Greek or Portuguese debt, would be heavily affected by an Italian default. They have $77 billion in Italian debt, according to the Financial Times.
    Credit default swaps, which banks buy to offset their risk, are a murky area that banks and insurance companies don’t have to report on in detail. However it is clear that they make U.S. institutions vulnerable.

    “The immediate problem is that with a lot of the bank debt … they’ve bought insurance for this debt and a lot of the insurance is from American companies. If the debt was defaulted … it would be a hit on the American insurance industry,…
    …According to the Bank for International Settlements, while U.S. creditors have just 5 percent of the direct exposure to Greek debt, they have 56 percent of the indirect exposure through CDSs. Similarly, the United States has 25 percent of indirect exposure to Ireland and 44 percent to Portugal. That equals about $33.6 billion for Greece, $54 billion for Ireland and $41 billion for Portugal.
    all data here @
    What happens if a country goes bust?
    If Greece, Portugal or Italy fails, America should watch out.
    David Wroe July 20, 2011 05:22

  38. @Anonymous: Very nostalgic existential Statement with the DOORS quintessential version of the END, my Friend,…but I think you miss the big picture of the playing field:
    Dr. Strangelove’s Theme Song

  39. Just to note that the observations above are not entirely consistent with views presented earlier…

    Notably, that Germany very much needed to press Greece to pass severe austerity. For some time, many have been arguing that Greece badly needed a devaluation even if it meant leaving the Euro. However, the IMF and Germany and the ECB and – I think, though I can’t tell for certain, Baseline Scenario – has been advocating a hard line against moral hazard implied by greek access to euro based debt issuance.

    Having said that, the views above seem quite on the mark now. I do wonder whether this means that Baseline has come to the formal conclusion that austerity packages without strong monetary and currency adjustment (even monetization, if necessary) are more or less doomed to fail?

  40. @Waterbury, “Look, let’s face it, this is about saving the world’s financial oligarchs. At this point there is little question. We still here no serious talk about breaking up the monstrous TBTF banks around this planet. You know, the ones operating at previously inconcievable levels of leverage and a paucity of real capital (uncorrupted stock holder money, not tainted assets of every kind).”

    Those *tainted assets of every kind* are unacceptable to all the races and all the countries on this planet.

    There is universal human hatred for the war lords and drug lords and slave lords – and their flying monkey mercenaries.

    Heck, if they weren’t so massively insane for power over others, they’d be slithering off to spend their billions on each other and stop extracting everything from everybody, everywhere from their mobile game boyz gizmos…

    Taking out 1% is not cause to bring out the nukes. It’s more like Al Capone knowing where they are eating out tonight…what’s the multi billion $$$$ homeland insecurity apparatus doing – looking the other way when whistle-blowers get killed because they provided EVIDENCE of theft and fraud and corruption and WORSE…?

    Who is paying them to do what with TAX PAYER MONEY….? Haven’t said it in a while – it’s still front and center, no doubt about that – “BURN THE PATRIOT ACT”.

    This is what Homeland Insecurity if doing to us over here while they were making sure – whom’ever – didn’t come to get us over here – they’ve just been find another way to shake down the *poor* for more tax revenue!!! Latest legislative victory? IRS fining the individual for NOT buying for-profit health insurance. That’s just so freekin’ LOW. Slimeballs…

    Let’s be clear – that 1500 *tax holiday* for 150 million Americans is CRAP. You are out 4,800 a year for buying health insurance that doesn’t start helping out with costs until you’re out 2,000 deductible – so that is $6800 of money at $7 an hour salary that goes to SHAREHOLDERS who do NOT do anything – one on one or with research or manufacturing – to help you out when you get sick. That’s EXTORTION of the worst kind!

    If EU can’t hold together NOW against the GLOBAL enemy of “tainted assets of every kind”, then that is a PERCEPTION problem, and not a look at LIFE – solving the problems of man as a man and not as a *god*.

    Every human being has the RIGHT to make their lives less miserable through honest work.

    No one knows what *right* the banks have – something secret that they can leverage 100 to 1…?

  41. Cramer: We‘re ’Two Stages From a Financial Collapse So Huge It‘s Hard to Get Your Mind Around’

    “Nevermind the stock rally from Monday or the massive sales figures from Black Friday, CNBC’s Jim Cramer had a very grim outlook for the global financial markets going forward. In sum, the European crisis is so bad that the U.S. is grave danger. Business Insider explains:”

    News video (click link to video and full article)
    Germany pushes for fiscal union
    “It seems Germany is more overtly taking charge of the eurozone crisis and the markets like it. Chancellor Merkel says there are already dramatic changes under way to create a “fiscal union” in which there will be strict budgetary discipline agreed across eurozone states. It does mean “we need to change the treaties or create new treaties” according to the German leader.”
    Great Britain:
    Friday 02 December 2011
    Germany’s leader Angela Merkel wants a new treaty and a “fiscal union” to save the eurozone from collapse, but new rules in Europe could see David Cameron face a backbench revolt.
    “…the bottom line for me is always what is in the interest of the UK and how can I promote and defend that.”
    But the reality is that Britain’s interest is now overwhelmingly about economics not politics. George Osborne today said: “We do need the countries of the euro to work more closely together to sort out their problems… Britain doesn’t want to be a part of that integration – we’ve got our own national interests – but it is in our economic interest that they do sort themselves out.” So has Mr Cameron been outwitted by the German axis?”

    …………………….So has Mr Cameron been outwitted by the German axis?”………………………………………
    Back in Britain, Chancellor George Osborne called on the 17 eurozone nations to “stand behind their currency” and find a solution to the sovereign debt crisis to allow “economic recovery across the continent”.

  43. Hows about one sledge hammer to bring the whole stack down? Then we play put up or shut up. Dang, that’s next time, i’m sure it feels like one, but we still have the big one, before the puppet master end.

  44. @ STATS-Guy…what do you make of this data? Well beyond my abilities to judge or qualify, but I know enough to realize there is something quite out of the ordinary about this unorthodox posture and position: Any expertise comment on this?
    There is no Eurozone…. (charts)
    December 3, 2011 merijnknibbe Leave a comment Go to comments

    from Merijn Knibbe

    Two graphs on the Euro-conundrum:

    1. It’s not about deficits. Germany did, until 2011, not have smaller deficits than Italy. And the Eurozone has a much smaller consolidated deficit than the UK (or the USA, for that matter). But nobody talks about the end of the pound (or the dollar) and the UK. And everybody talks about the end of the Euro and Italy-as-we-know-it (while Italy does have a primary surplus, by the way). Technical note: the graph shows a four quarter moving average of government deficits. Data are available up to the second quarter of 2011, except for Germany. Neither Eurostat nor the ECB publishes these data,


    The legitimacy of governments and of economic policies
    December 3, 2011 iettogg Leave a comment Go to comments

    from Grazia Ietto-Gillies
    “In the last few weeks there has been much concern and writing about legitimacy and democratic deficits in connection with the technocratic governments in Greece and Italy. The concern on the latter refers to the fact that the heads of these two governments and (all or most of) their ministers are not members of the respective elected parliaments.” (more…):

  46. “Take a good look: This is the future of European democracy; one country after another stuffed into a fiscal straitjacket while their public assets are privatized, their unions are crushed, and their sovereignty is surrendered to unelected bankers and eurocrats. Europe is being handed over to big finance on a silver platter. This isn’t a crisis; it’s blackmail.”

  47. @anonymous: If you read Naomi Klein’s fantastic book The Shock Doctrine, it will be much easier to understand what is happening there. It is just a part of the Friedman/Hayak prescription. You describe it to a tee. This has been used globally by the neo-cons since the 1960’s, beginning in South America and making its way around the world. Why do you think that nearly half of all government expenditures are now paid to contractors by the Federal Government here? That is the Neoconservative formula. Take a hard look at what Cheney gained in Iraq through KBR, etal. This is essential global destruction, pure and simple.

  48. @Flashback:
    This is a great link you provided! It is the alternative potential strategies that are being ignored. When this all started, I was reminded that China utilizes both gold and silver in a unique way (as I understand it). They maintain gold for the (external) international foundation of their stability, and utilize silver as an (internal) domestic economic stabilizer.

    It seems to me that (perhaps at some % or 100% preferably) the banksters and international finance coalition (conglomerate)…should be required to convert the debt into real asset materials and separate it from the rest of the global economies (of scale). Should inflation appear (inevitably?) in the paper currencies it would necessarily increase the value of the standards, and could be traded off back into currency (at selected / elected rates) to offset that inflation and to advance the actual payment of the debt (at an inflated but controlled rate…not run-a-way pay-off). By utilizing a reverse combination of gold and silver…the standard pegs could be utilized in a similar manner as done by China (perhaps in reverse…to favor stabilizing the autonomy of the actual nations as “states” whuile maintaining a powerful mutual bond between the nationalizing states. Of course careful trading on securities might be managed with extreme scrutiny and regulatory supervision between governments and closed (secured) membership…they could look to Monte Carlo for the rules to who can play that game!

    It is a pipe dream from me way outside of my discipline, but I have to wonder that if I can come up with alternative “scenarios” …why are there no “expert” advisers sitting in the back seat giving us some innovative ideas…at least to stir the pot!

  49. Incidentally: Germany has enough gold reserve to initiate such a schema practically on their own, but Germany is apparently unwilling to use it (while the other players would benefit gleefully Germany would be risking its real trump card). It could / might/ (political will versus economic solutions) be worked out with a shared risk potential from the international community; perhaps the special borrowing rights could be divided into tranches and turned into selective “sovereign derivatives” (ha ha ha…) so that these characters can elegantly get out of their not so elegant mess? (sub-prime housing turned into sub-prime nations…hilarious but actually a realistic joker card).
    Just an after-thought…

  50. @bayardwaterbury….of course, bayardwaterury, the caveat to all this is decided under collective intentionality. I agree with you on the fact that this is a conquest, domination, crisis and colonize model.
    Resolving it or creating solutions (creative destruction as “they” like to say…) is entirely contingent on the consensus among them having integrity. Even a smaller power minority coalition of black glove manipulation from the underbelly could easily dictate to the majority; and that does seem to be the order of the day i real politik across the international arena of political finance and economic politics. If the global political economy is seen from the eyes of a goldman sacker…well; …the rest is dark history in the breaking!
    I still say the pressure must come from the “international” progressive and aggressive surge of people in the streets …call it what you may, occupy history is the true course of what we are observing (and being victim or participant is in the making right now).

  51. The economic model solution = Will it work?

    The Political economic solution = Will it work for ME??

    The Political Resolution = WILL ???

    300 economists give support for the Occupy Wall Street movement
    December 4, 2011 Editor Leave a comment Go to comments

    On November 13th 2011, economists from the University of Massachusetts Amherst issued an open statement pledging support to the Occupy Wall Street movement. Since then about 300 economists have added their names. ….
    list is off the link:
    conspicuously missing names…

  53. @ Bruce: Good chauffers are hard to come by, as are good slaves. Their introduction to each other is a timely thing, orbital, or seasonal you might say. So as to not stir the pot in the wrong direction and get a poor result.

  54. @flashback….aloha! Fears are mounting … WHILE ALL EYES WERE ON EUROPE…..

    “In a stunning move that has civil libertarians stuttering with disbelief, the U.S. Senate has just passed a bill that effectively ends the Bill of Rights in America.”
    “The National Defense Authorization Act is being called the most traitorous act ever witnessed in the Senate, and the language of the bill is cleverly designed to make you think it doesn’t apply to Americans, but toward the end of the bill it essentially says it can apply to Americans ”if we want it to.” …..

    ”Bill Summary & Status, 112th Congress (2011 – 2012) | S.1867 | Latest Title: National Defense Authorization Act for Fiscal Year 2012 | Sponsor: Sen Levin, Carl [MI] (introduced 11/15/2011) | Related Bills: H.R.1540 | Latest Major Action: 12/1/2011 Passed/agreed to in Senate. | Status: Passed Senate with amendments by Yea-Nay. 93 – 7. | Record Vote Number: 218. | Latest Action: 12/1/2011 National Defense Authorization Act | Amendment details

    This bill, passed late last night in a 93-7 vote, declares the entire USA to be a ”battleground” upon which U.S. military forces can operate with impunity, overriding Posse Comitatus and granting the military the unchecked power to arrest, detain, interrogate and even assassinate U.S. citizens with impunity.”

    US Senate wants the entire USA to be a ”battleground”
    2 december, 2011 By Mike Adams 400 Comments

  55. somewhat strange to fist suggest cutting up Citi, after that predicting the end of the Euro/EU, the first being a tbtf bank with only survived the onslaught of 2008 with the $2 trillion handout by the Fed via the Primary Dealer Credit Facility (as did the rest of Wall Street), the latter a political union with some designer faults.

    if we let the market dictate the outcome of democratic prosesses, and if we let the market get away with heist upon heist, rip off after rip off, then the term tbtf is here to stay. let us not forget what position those American tbtf-banksers have in the derivativesmarket, nothing but big time gambling, remember the facts coming from the Fed how deep & how short those tbtf-banks are involved in those CDS’: the really big short is about to happen, in only we all keep predicting the end of the Euro (with some help of those criminal CRA and robotic HFG (which is HFT).

  56. Seems that financial activities and status of the EU members will come to the hard control. one more “Greece or Italy” and all EU will be only declaration.

  57. “Here’s how Reuter’s blogger Felix Salmon summarizes the 2 day confab: …it is now, officially, too late to save the Eurozone: the collapse of the entire edifice is now not a matter of if but rather of when….”

    “At least in the most badly indebted countries, European voters are waking up to an oligarchic coup in which taxation and government budgetary planning and control is passing into the hands of executives nominated by the international bankers’ cartel.”

  58. You are close Anonymous, what will occur is that in a matter of a week and a half, Greece will be committed to leaving the Eurozone in March, its a paperwork situation which has a hard deadline in March. Some others will follow after a response is observed. Ireland, Portugal, Spain and the real back breaker is Italy, no one really knows what it will look like or how it will take shape. But leaving will be a better option than being disciplined and sold off piece meal. Throw in an oil straw and it could be time to honker down.

  59. Wow, at least, if this comes to fruition, we know how the global economy will look. Megadisaster is probably too mild an expression. The FED simply won’t be able to print enough money to take care of the massive instantaneous deleveraging which will FINALLY take place. The Great Depression may end up looking like a cakewalk by comparison. Better stock our cupboards.

  60. Wondering what 2012 will bring? Can anyone in their right mind not feel anxious?

    “As always, we have no idea exactly what is going to happen and when, but we can track the various stresses and strains, noting that more and wider fingers of instability increase the risk of a major event. Heading into 2012, there’s enough data to warrant maintaining an extremely cautious stance regarding holding onto one’s wealth and increasing one’s preparations towards resilience.’

    “Mark Faber: “I Am Convinced The Whole Derivatives Market Will Cease To Exist And Will Go To Zero”

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