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Thursday, February 16, 2012

Newsworthy Economic Headlines for Feb. 16, 2012

Blogman’s Notes:

We are living in historical times but as has happened in the past, few people living through momentous historical times actually realize what is going on in their world until they feel the full force and brunt of the consequences of the events that they were oblivious to, even as they were happening. The Economic / Political / Geophysical face of our world is set to undergo dramatic and historic changes, and not for the better for the majority yet the masses remain sedated on TV entertainment and Sports. The sedation will wear off one day but by then it will be too late for the majority.

Greece is bailed out, Greece is not bailed out! This drama that has been ongoing for over 2 years now has become a farce. As the following report reveals, a deal announced today will be dead tomorrow. Are all the players in this game totally incompetent Keystone Cops or are they just pretending to play the game, knowing full well the outcome of the game: A complete and total 100% Greek Debt Default that will shake the Global Financial / Banking System to its knees! 

Greece said that Europe’s wealthier countries are “playing with fire” by toying with the idea of expelling it from the 17-nation euro area as talks over a second aid program ran into new obstacles.
Finance Minister Evangelos Venizelos leveled the accusation after a decision slated for tonight on aid totaling 130 billion euros ($171 billion) was postponed until at least Feb. 20 and possibly until after a full-time Greek government emerges from elections later in the year.

 Europe is on the wrong path because its prescription for the sovereign debt crisis, so-called expansionary fiscal consolidation, is a failed economic paradigm. The thinking has been that sacking government workers and cutting government spending would eliminate the budget deficit in countries like Greece and Portugal and, therefore, restore market confidence in their sovereign debt. The reality has turned out to be quite a bit different. Instead of reduced debt loads, we are witnessing higher government debt burdens as the reduced economic output from cutting government is met with cuts in the private sector. If Europe continues on this path, the euro zone will break apart entirely with unpredictable political and economic repercussions.

 The Eurozone will be mortally wounded and the world will suffer a significant recession – maybe as deep as 2008. European banks will lose much of their capital base and many should be bankrupt, but just as in the Lehman aftermath, the governments will try to save the banks and the banks’ bondholders, solvent or not. As the bank appetite for Eurozone sovereign paper will be decimated, austerity will probably follow shortly, followed by deflation and uncontrollable money creation. The European recession should be one for the record books.

 Here’s the link to a video by William Rochelle of Bloomberg News explaining how the safe harbor in Section 546(e) of the Bankruptcy Code likely will prevent MF Global customers from ever getting their $1.6 billion back -- even when it’s located, as it has been evidently.

The MF Global bankruptcy provides yet more evidence that the 2005 bankruptcy reform legislation passed by Congress is an abomination, but the cancer goes even deeper than the years of Bush II.  The big banks who earn the lion's share of their profits in the quantum world of derivatives are literally looting the real economy and real investors, all with the full approval and complicity of the Fed.

Debt Crises are everywhere and though the PTB keep harping, as they have for the past 4 years, that recovery is just around the corner, the facts on the ground belie their claims. The Debt balloon keeps getting more and more inflated and it is only a matter of time before it explodes and ends the world as we know it. This scenario is now being openly discussed and presented by leading bankers and Economists, at least in Europe, as for instance in the report from Deutsche bank cited below.

" As we (ZH) have been vociferously noting, LTRO did nothing but solve a very short-term liquidity crisis in bank funding, and the reality of insolvent sovereign and now more encumbered-bank balance sheets is starting the vicious circles up again. Deutsche's base case remains that peripheral growth will disappoint and the sovereign crisis will re-emerge shortly - we tend to agree.

1 comment:

  1. You put your trillion dollars in
    You take your trillion dollars out
    You put your trillion dollars in
    And you shake it all about
    You do the hokey pokey and turn yourself around
    That's what it's all about