Is The Euro Toast?

First, a round-up of a few important stories on the long-festering economic crisis in Europe:

Frau Merkel, it really is a euro crisis: Ambrose Evans-Pritchard is someone to take very seriously. He identified very early on what was happening in the US.

Germany Approves Expansion of Euro Bailout Fund.

Finally, this story by economist L. Randall Wray. A quote:

The economies of the West (at least) are stumbling. In addition to the residual (and growing) problems in US real estate, the commodities speculative bubble appears to have been pricked. Since fools rush in on the belief they can take advantage of sales prices, the air will not rush out quickly. But with prices at 2, 3, and even 4 standard deviations away from the mean, the general trend will be down. That leads to vicious cycle margin calls, which will have knock-on effects as those with long positions in commodities have to sell out other asset classes. The stock market will be next””and there is plenty of reason to sell bank stocks, anyway.

And US and European banks are already insolvent. When Greece defaults and the crisis spreads to the periphery that will become more obvious. US money market mutual funds will break the buck””again””and this time they will not be rescued (Dodd-Frank makes that difficult). Further, US banks are beginning to lose civil lawsuits on their rampant fraud””securities fraud, mortgage lending fraud, foreclosure fraud, insider trading fraud. Fraud is essentially the only business that big US banks know””the only thing keeping them in business. If that line of business is taken away, they are toast. In GFC 1.0 it took $29 trillion to prop up Wall Street’s banksters. They are not going to get a second chance.

As Ian and Stilring and Numerian and I all argued in late 2008-2009: they were trying to reflate the economy without restructuring the banks and making bondholders suffer like stockholders. Now everyone will suffer. This won’t end well.

And the Euros are repeating the same mistakes we made in the US. The bondholders need to take a haircut like the rest of us.

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Sean Paul Kelley

Traveler of the (real) Silk Road, scholar and historian, photographer and writer - founder of The Agonist.

4 CommentsLeave a comment

  • is a centuries old ideal that is currently reality. The continent will do everything in its power to maintain that Carolinian ideal. Germany at the end of the day is the entity that has historically sought the continent and now it is essentially in their hands. No way they would walk away from what is a 1,300 year ideal.

  • that Strauss-Kahn, who structured the euro concept in the first place, is presently caught up in salacious top-o-the-nooz entertainment, courtesy of a headline seeking “author” and her handlers, while the European economy moves closer to the brink of disaster. Why, by the way, did Sarkozy choose to visit Marrakesh, where Strauss-Kahn’s primary residence is located, during the past few days while he was also there? Oh right. Something about Moroccan rapid transit achievements needing recognition. Yes, that’s it. That’s the ticket. Or could that little jerk simply not resist the opportunity to stupidly gloat vis a vis with his political nemesis? My lord, the 300 or so people who actually wield political power in the world sure have figured out how to keep the rest of us distracted, confused and helpless.


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