Posted on 09/05/2011 4:20:03 PM PDT by TigerLikesRooster
Tero Kuittinen
9/05/2011 @ 6:10PM |1,338 views
Europe Is Finally Forced into a Corner
The author is a Forbes contributor. The opinions expressed are those of the writer.
After a lull of few weeks, markets are suddenly starting to demand a decision from Europe. EU countries may have only days or weeks to finally agree on how to handle the rapidly escalating sovereign debt mess.
As America celebrated Labor Day, Europe lurched decisively towards a culmination of its long-brewing debt crisis as several different plot lines started converging into a single, grim narrative.
Greece’s 2-year bond yields finally cracked the apocalyptic 50% threshold. But what is far worse, Italy’s 10-year yields seem to be breaking out well above Spain’s. This could imply that markets have started putting special emphasis on Italy as the next target for debt vigilantes.
What makes the latest Italian bond market melt-down so serious is the news that ECB spent more than 13 B euros to buy peripheral market bonds last week – nearly twice as much as markets had assumed. Does this mean that Italian bond yields shot up on Monday even while ECB was making massive new purchases? Or could ECB now be pressuring Berlusconi into deeply unpopular new austerity measures by withdrawing its assistance in a dangerous game of brinkmanship? Neither option is appealing.
On Wednesday, Germany’s constitutional court will deliberate on the legality of EU’s various bail-out initiatives – Ambrose Evans-Pritchard’s column on the matter is a must-read. Markets may have started pricing in bad news on this front during Monday’s stock market rout in Germany. DAX slumped a massive 5.3% during the day.
(Excerpt) Read more at forbes.com ...
P!
So what’s on the back side of the coin?:
“Resistance is futile” ?
Another socialist dream shattered to pieces.
Isn’t this what has been said will be the precursor to US interest rates going up.. and then the whole domino effect leading to the dollar being dumped as reserve currency..?
Plum ran outta the free fairy skittles.
Here comes reality carrying a big stick and a frown.
bump.
The only country left in the world that wants to prove that socialism is a viable alternative is America.
Isn’t this what has been said will be the precursor to US interest rates going up.. and then the whole domino effect leading to the dollar being dumped as reserve currency..?
"Parker Brothers"
We are very close to the day when US Treasuries are no longer seen as a safe haven. That is the day that gold and silver will really shine.
Here’s the closing of Ambrose Evans-Pritchard’s column that is referenced in the story.....
“The IMF must know from its errors in Argentina a decade ago that Greece needs a 40pc devaluation and 50pc debt forgiveness to claw back to viability. Yet the EU has blocked both, and the Fund has until now acquiesced.
Perhaps there was no choice. Argentina was an isolated case in 2001. Greece is the detonating pin for EMU. Going to the root of Greece’s problem risks trauma and instant contagion to Portugal, and from there a systemic chain reaction through Spain and Italy to France.
Yet this is where we no find ourselves as the Bundestag draws its line in the sand. Greece will be pushed into default, with ever larger haircuts for bondholders.
Needless to say, battered banks, insurance companies, and pension fund will not wait for further rounds of punishment. They know that Italy must redeem €14.6bn of debt this week and €62bn by the end of September, the highest ever in a single month. It must roll over €170bn by December.
The ECB can in theory hold the line by soaking up the entire public debt of Italy, the world’s third largest at €1.84 trillion. The question is whether it can plausibly act on such a theory when the president of EMU’s dominant power deems this to be illegal.
Germany is not a banana republic. It is a sovereign democracy under the rule of law. Europe is belatedly discovering why this matters. “
Gonna be a rough winter....
Ha, I just heard on the MSM that Italy needs to pass a balanced budget amendment. I wonder why they fight our lawmakers trying to give us a balanced budget? Hmmmmmmmmm, I’m confused.
No brainer. Zero cannot defend himself against this issue.
Have they learned anything in the ensuing 70 years?
| One World Currency - it won't be long now.
Trying to do the same thing across the entire world is preposterous. You think you're going to get the Chinese to join a monetary union with Rwanda? Think again. |
We are so lucky to live in such an incredible time. Future generations, for centuries to come, will talk and write about these times. However, there is one most serious and pressing question that is yet to be answered: will we be able to preserve our great constitutional republic?
I see what you are saying. I wish I knew more, like what Bill Gross was doing moving all PIMCO dollars to european corporate bonds (I think I am getting this right). These do not act the same as treasuries which are government issued promises. So much these days depends on what governments and IMF are doing with bailouts and regulations. Maybe its always been this way.
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I take it you don't understand what this article is about. The Yurps can't even make a single currency work for a dozen countries. Putting nose-to-the-grindstone countries like Germany in a monetary union with more laid-back places like Greece cannot last. That's why it's not lasting.