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Tuesday, May 11, 2010

This Morning Euro At New Low

Late Sunday and yesterday all the authorities kept stressing the size of the package, writing or saying that it would intimidate "speculators". So this morning the Euro dropped below 1.27. Gold gaining, oil falling....

They can fight this, but no one goes nine rounds against reality. Reality is a big mean dude that feels no pain.

I recommend this Bloomberg opinion piece:
Here is what has scared investors (apart from the riots in Athens): Even if the IMF program were fully implemented, the Greek debt ratio is projected to rise to 150 percent of gross domestic product by 2013. Assuming an interest rate of 5 percent, Greece would pay 7.5 percent of its GDP to bondholders. With more than 80 percent of creditors being foreign by then, the country would transfer at least 6 percent of its GDP abroad.

No Trust

How likely would it be that Greece can generate a structural current account surplus before having to make interest payments of this magnitude? Traders saw little likelihood of this and expected an eventual debt restructuring. And because they didn’t trust the package that the IMF and euro- area governments have offered Greece, they didn’t trust other euro-member countries in fiscal distress to find a viable solution. This, and not a conspiracy of speculators, was the brew that generated contagion.
The authors are European economists.

Or this article:
Germany and France are among top- rated euro-area states that may compromise their AAA grades by standing behind the debts of weaker members with their 750 billion-euro ($955 billion) stabilization fund.

The package is “making debt profiles deteriorate, potentially damaging the ratings of core sovereigns,” said Stefan Kolek, a strategist at UniCredit SpA in Munich. “It’s a kind of Ponzi game at the highest level.”
I think I would describe it as the last possible Ponzi; after this, where could they possibly go?


The IMF is a sham organization. It's true purpose is to protect creditors.

The "credit" the IMF extends is created out of thin air. The IMF's capital comes from member countries that created the "capital" , in large part, out of thin air.

A sham within a sham. Borrowing countries have no shot against such tomfoolery. It's a scam to get over-indebted countries to forfeit their future output.

Look at the misery that Latvia is experiencing thanks to the IMF and its Washington CONsensus.

Only those that believe in usury would endorse such a system.
Trust is the basis of civil society and it is being rapidly eroded globally.Just 3 years ago I can remember discussing systemic risk with a number of very intelligent and worldly people (in the good sense of worldly).about half understood right away and saw it too,but half simply could not believe that those in charge were as selfish and shortsighted as they have proven to be.And the BRAZEN corruption is astounding even to me.
The money never gets to Greece or the other countries but to the banks and bondholders. Everyone else pays
the price. Taxation without representation. Financial

...after this, where could they possibly go?

That question is what has been occupying my thoughts lately. Until I can answer it, I can only think two moves ahead, rather than my preferred three or four.
Don't know a good place to put this post. I spent yesterday at Olympia, deep in the bowels of the bureaucrats. I would encourage any potential Tea Party members to do the same, preferably pouring over the file that has been kept on them. We've got to cut down on the size of government for sure. Too many people, picking up paychecks, for meddling in other people's lives.
The money never gets to Greece or the other countries but to the banks and bondholders. Everyone else pays
the price. Taxation without representation. Financial

The money went to Greece or whomever when they took out the loan (sold the bond). Now they are supposed to make good, to pay back what they owe to the banks and bondholders.

Everyone pays the price for the profligacy, indolence, and greed of those who are paid more in their lifetime than they work for--except those people themselves. The rioting is the act of a spoiled child, and those who believe that socialism represents some kind of higher morality deserve to have their own property facing the riots.
NO, the banks and bondholders should take the pain for the poor loans they made not the taxpayer. The banks and bondholders are privatizing the gains and socializing the loses.

The banks aren't "privatizing the gains." Banks are intermediaries. Destroy the banks and you destroy the financial system. They met the calls of a government-distorted market.

And there is no way to "socialize" the "gain" because there is no gain, unless you mean that a shrinking number of productive people should be made to subsidize a growing number of people who demand more than they produce and pull it off for a generation by "government" employment and pensions.

We see those people now, and they are acting like spoiled brats: spoiled brats with stones and soon, perhaps, with molotov cocktails.
So let the banks make bad loans and hold a gun to our head ? They should have been shut down if they were

Hold a gun to whose head? The government borrowed money, which means that someone got something paid for by that loan. It was the government's promise that "someone"--that is, some taxpayers--would pay for it. If you "forgive" the loan, then the person who loaned the money has lost it. Would you hold gun to his head? If, instead of Greek bonds, it were US Treasury bonds, held by millions of people and part of millions of retirement plans, would you "hold a gun to their heads"?

The Greek government has been running a "borrow from Peter to pay for Paul" scheme. Only nobody has really paid; they've just run up the credit card. Now someone has to start paying for what was spent years ago, and for what has been promised for decades.

Your problem is that you do not understand what money is. Money is a claim against the production of a society or an economy. I have a twenty-dollar bill in my pocket. I go into a store and trade my claim against the value in the economy for some object I value more at the moment. Now the store has that claim.

Borrowing endlessly, as Greece has done, is writing endless claims against that value in the economy, without ever producing anything of value. Eventually either the currency is going to degrade or reality is going to catch up with the bookkeeping and the whole thing is going to collapse.
Banks before taxpayers. Glad you support
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