If anyone doubts me, just look at all the bond markets over there. France is in this boat now too. Time to short.
French Bond Yields
Posted on 11/28/2011 7:42:21 AM PST by SeekAndFind
In virtually all the debates about the eurozone I have been engaged in, someone usually makes the point that it is only when things get bad enough, the politicians finally act – eurobond, debt monetisation, quantitative easing, whatever. I am not so sure. The argument ignores the problem of acute collective action.
Last week, the crisis reached a new qualitative stage. With the spectacular flop of the German bond auction and the alarming rise in short-term rates in Spain and Italy, the government bond market across the eurozone has ceased to function.
The banking sector, too, is broken. Important parts of the eurozone economy are cut off from credit. The eurozone is now subject to a run by global investors, and a quiet bank run among its citizens.
This massive erosion of trust has also destroyed the main plank of the rescue strategy. The European Financial Stability Facility derives its firepower from the guarantees of its shareholders. As the crisis has spread to France, Belgium, the Netherlands and Austria, the EFSF itself is affected by the contagious spread of the disease. Unless something very drastic happens, the eurozone could break up very soon.
Technically, one can solve the problem even now, but the options are becoming more limited. The eurozone needs to take three decisions very shortly, with very little potential for the usual fudges.
(Excerpt) Read more at ft.com ...
AUTHOR CONCLUDES WITH THESE OMINOUS WORDS:
Italy’s disastrous bond auction on Friday tells us time is running out. The eurozone has 10 days at most.
We’re broke - we don’t have the money to prop them up... The IMF has to stay out of this - unless they want to do bake sales to raise the money...
Trader days!
Mike
Questioning the premise of the headline - does anybody (outside of Wall Street traders) really believe that a Euro collapse (or worse) can still be avoided - without unintended consequences making things even more dire - at this late date??
The loan rates have been kept artificially low so that the politicians could borrow more and more.
The Fed will just print more money and lend it to the ECB.
Some things need to collapse. The only thing worse than collapsing is not to collapse (by artifically propping it up).
I believed that the European economic union and its single currency were doomed to failure from the very start.
I’m just an ordinary person with no advanced understanding of banking, finance, and currency markets, but even I understood that it was a mistake for the stronger countries to tie their currencies to the weaker, more fragile economies of their sister nations.
They were going to be dragged down by sluggards, sooner or later.
Time for some FAZ, SDS, QID, maybe throw in some YANG and TYP for good measure, too...
(more coffee...)
Investors pulling out of EU? Money looking for someplace safe?
Overly hysterical commentary.
I think it is completely and utterly safe to say the Eurozone won’t collapse in 10 days. Nor will it collapse this month, or anytime in the very near future. The Eurozone is in serious trouble, but there is still room for them to kick the can down the road further.
If anyone doubts me, just look at all the bond markets over there. France is in this boat now too. Time to short.
French Bond Yields
No.
Two reasons:
- Politicians won’t do what their constituents will drive them out of office for doing, no matter how vital it is to survival. Any imposing an austerity budget will be thrown out.
- Wealth must be created to sustain life. Wealth cannot be created fast enough to overcome the rate of consumption entrenched in Europe.
Just like here. The numbers I’ve crunched tell me we’re not getting out without a crash: too many are dependent on wealth redistribution, and there isn’t enough wealth being created to distribute to sustain the population anywhere close to what’s considered a viable society.
To wit: they, and we, are running out of other people’s money.
The answer is another question. If you have money, where do you put it? Real estate is no good as are treasuries. That leaves gold and the stock market. Investors probably don't want to have everything in gold so what is left over goes into the American stock market, particularly if you are an foreign investor. Put another way, the Dow going up is a sign of just how bad things are overseas.
Somehow the IMF and Germany will come up with enough cash to kick the can down the road for another 6-12 mos. They all know its going to come crashing down just like it will here but they just keep stretching it out a leetle longer. More time to buy food.
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