$1 Trillion Was Not Enough
Kurt Nimmo
Prison Planet.com
Tuesday, May 11, 2010
The dizzy honeymoon created by the EU and IMF pledge yesterday to throw a trillion dollars at eurozone debt has faded as predicted. Investors realize the “fiscal tightening” — pensions looted, social services slashed, standards of living sent into free fall — will negatively impact growth in the euro zone and result in central bankers cranking up interest rates in anticipation of looming default.
Following a euphoric surge of the Standard & Poor’s 500 Index yesterday on the announcement, U.S. stock future tumbled 1.1 percent to 1,143.5 at 9:01 a.m. in New York this morning. The euro lost all of yesterday’s gains. The euro weakened 0.7 percent against the dollar at 8:44 a.m. in New York, trading below the level it was before the European Union-led aid package was announced early yesterday, according to Bloomberg.
“The euphoria of 24 hours ago has passed,” Derek Halpenny, European head of global currency research at Bank of Tokyo Mitsubishi UFJ Ltd. in London, wrote in a report today. “We are in little doubt that steps taken will offer the euro little support and the aid package does not change the fact that Spain and Portugal in particular will still have to undergo further painful austerity measures.”
Expect the central banks and EU apparatchiks to call for even more money in the days ahead. Banker “long term solutions” invariably require long term fleecing of producers.
Zero Hedge notes that European banks are betting against the beleaguered euro. “Zero Hedge has received confirmation that several of the largest French banks are now actively shorting the euro to take advantage of globalized moral hazard, which with every ensuing bailout does nothing but make the bonuses of French FX traders surge.”
In other words, the very banks the EU plans to bailout in part with U.S. taxpayer money (or tax payer long term debt) via the IMF are placing bets against the survival of Europe.
In response to the almost instantaneous cynicism about the effectiveness of throwing a trillion bucks down the black hole of engineered debt, investors are smartly moving into gold. Gold hit afive month high today and moved to within $10 of its December record peak in response to eurozone risk aversion.
“The euphoria we saw yesterday has almost ended. Gold has remained well supported on safe-haven demand, and we think it will drive further from here,” Commerzbank analyst Daniel Briesemann told Reuters. “Market participants are still concerned about the financial positions of a number of countries of the euro zone and their debt problems, despite last weekend’s aid package.”
International bankers will continue to exploit the economic crisis they unleashed with the U.S. sub-prime mortgage fiasco with its mass of derivatives and toxic waste. The contagion rapidly moved into Europe and will soon gnaw away at Spain, Portugal, and Britain, to name but three. Greece and Iceland stand as precedents.
The previous $147 billion bailout package and the current proposed one trillion giveaway will not be enough to stem the growing tide. Is it not meant to stem the tide. It is meant to compound debt and the slavery it ultimately produces.
“From now on, depressions will be scientifically created,” declared Congressman Lindberg after the Federal Reserve was established.
The current crisis was also scientifically created. It will continue its ravenous course until the banksters are rulers of us all, as Congressman Louis McFadden, Chairman of the House Banking Committee, declared in the wake of the last Great Depression.
Max Keiser Reveals 1000 Point Plunge was Digital Financial Terrorism
Prison Planet.com
Tuesday, May 11, 2010
Alex talks about the recent plunge of the Dow and other financial issues with film-maker, broadcaster and former broker and options trader Max Keiser.
Related articles, background features and opinions about this topic.
NOURIEL ROUBINI
Nouriel Roubini is considered the prophet of the financial crisis. Four years ago, he was one of the first to warn that banks and national economies could be in for trouble. Roubini, 52, was born in Istanbul to a Jewish-Iranian family before growing up in Iran, Israel and Italy. Since 1995, he has been an economics professor at New York University. In addition, he operates a consulting firm of 80 employees, which provides financial analysis to clients in the finance industry.
SPIEGEL Interview with Economist Nouriel Roubini
'We Will Have Even More Crises in the Future'
SPIEGEL: Professor Roubini, you have a cameo role in the upcoming sequel of the movie "Wall Street." Who are you playing?
Roubini: I'm playing myself. But it's just a small role. There is a scene right after Lehman has collapsed where I'm being interviewed as "Dr. Doom," worrying about the global financial system.
SPIEGEL: We understand you also acted as a consultant for Oliver Stone, the director of the movie?
Roubini: I was not a formal consultant, I just helped him with some advice. We met on a couple of occasions and he asked me about the financial crisis. He also came to a social event with clients of my firm; he wanted to meet hedge fund managers. I came rather accidentally to my role in the movie as "Dr. Doom."
SPIEGEL: You got your nickname, of course, because you were predicting the financial crisis at a time when many other economists were still full of optimism. Are you still pessimistic about the future of the global economy?
Roubini: First of all, I'm not a perma-bear. I am not always negative about the future. Rather, I want to assess the situation correctly. But if I look at the economic picture of the world now, I still see plenty of dark clouds.
SPIEGEL: According to the International Monetary Fund, economic activity is picking up again with forecasts of 4 percent growth this year. Isn't this cause for Dr. Doom to surrender to Dr. Boom?
Roubini: I'm a realist. I can only see a few bright spots in some countries like China, India or Brazil. But the rest? The US economic recovery has been anemic, Japan looks comatose, and Europe is facing a double dip. The Continent is vulnerable to falling back into recession. Even before the Greek shock, the outlook was rather moderate, but now euro zone growth is closer to zero.
SPIEGEL: What do you think about the dangers presented by Greece?*
Roubini: Today the markets are very worried about Greece, but that's only the tip of the iceberg. Increasingly, bond market vigilantes have woken up in places like the UK and Ireland. Even the US and Japan will have problems because of their huge budget deficits. Maybe not this year, but they will eventually. In the US, states like California, Nevada, Arizona, New York and Florida have immense fiscal problems. The growing budget deficits and the huge government debts are really what worry me most.
SPIEGEL: Is it really the right thing to do for the IMF and the EU to help out Greece with €110 billion?
Roubini: That is only kicking the can down the road for a year. I am afraid that Greece, more likely than not ,isn't just illiquid, but insolvent. And providing an insolvent country with money and forcing it to make painful cuts isn't going to do it. Even if taxes are raised and spending is cut, Greece won't necessarily become more competitive. On the contrary, output might fall, unemployment might rise and market share will be lost. We need a plan B.
SPIEGEL: What should that plan B look like?
Roubini: It is necessary to start with a pre-emptive debt restructuring. We have to find an orderly solution for debtors and creditors. And we also need to work out fiscal adjustments for other euro zone countries like Portugal or Spain.
SPIEGEL: Do you think the German government would agree to that? German banks would have to come up with billions once again.
Roubini: Indeed, more than €300 billion of Greece's public debt is held by non-residents, mostly financial institutions from Germany, France and Switzerland. They will have to forego a part of that. Too much time has already been lost by ignoring the Greek crisis. Without such a plan B, if Greece collapses in a disorderly way then the domino effect hitting Spain, Portugal and other parts of the euro zone could be very rapid and dangerous. Eventually, this could lead to a destruction of the monetary union.
SPIEGEL: Did German Chancellor Angela Merkel make things worse by not reacting fast enough to the crisis?
Roubini: Yes, the EU wasted several precious months in designing a support package for Greece in part because of German political resistance to such a package. Domestic German politics and growing skepticism about European monetary union led to a delayed policy response that damaged the efforts to contain the Greek crisis and prevent it from infecting other parts of the euro zone.
SPIEGEL: Was monetary union a mistake?
Roubini: I wouldn't go that far. But it might have been a mistake to allow so many countries in so early. A smaller core of countries that are economically more homogenous, fiscally more sound and committed to structural reforms would have made for a more successful monetary union. The trouble is, once they are in there is no exit without causing a lot of damage.
SPIEGEL: Today, it's a debt crisis. Before that it was a banking crisis. And before that a real estate crisis. Must we get used to constantly being hit by new crises?
Roubini: I am afraid so. In my new book, I show that crises are part of capitalism's DNA. They are not the exception but rather the rule. Many elements vital to capitalism, like innovation and risk taking, also trigger frequent collapse. And what we just went through could get much worse in the future.
SPIEGEL: You make it sound as though crises were inevitable.
Roubini: They are not inevitable. But if you look at history, you will see patterns repeated -- such as excessively loose monetary policy, leveraged vulnerabilities and weak regulation. And we will see them again. Probably we will have even more crises in the future.
- Part 1: 'We Will Have Even More Crises in the Future'
- Part 2: 'We Have to Starve the Beast'
Bailout Is `Nail in the Coffin' for Euro, Rogers Says
Rogers Holdings Chairman Jim Rogers speaks at a news conference in Seoul last year. Photographer: Seokyong Lee/Bloomberg
May 12 (Bloomberg) -- Jim Rogers, chairman of Rogers Holdings, talks with Bloomberg's Haslinda Amin in Singapore about the $1 trillion European loan package to stop the sovereign debt crisis, and the outlook for the euro. (This is an excerpt of the full interview. Source: Bloomberg)
Investor Jim Rogers said Europe’s bailout of indebted nations to overcome the sovereign-debt crisis is just “another nail in the coffin” for the euro as higher spending increases the region’s debt.
The 16-nation currency weakened for a second day against the dollar after rallying as much as 2.7 percent on May 10, when the governments of the 16 euro nations agreed to make loans of as much as 750 billion euros ($962 billion) available to countries under attack from speculators and the European Central Bank pledged to intervene in government securities markets.
“I was stunned,” Rogers, chairman of Rogers Holdings, said in a Bloomberg Television interview in Singapore. “This means that they’ve given up on the euro, they don’t particularly care if they have a sound currency, you have all these countries spending money they don’t have and it’s now going to continue.”
U.S. and European stocks fell yesterday on concern the plan to rescue debt-laden governments in the region will fail to reverse the euro’s worst start to a year since 2000, forcing the European Central Bank to keep rates at a record low for longer.
New York University professor Nouriel Roubini said Greece and other “laggards” in the euro area may be forced to abandon the common currency in the next few years to spur their economies. The euro will remain the currency for a smaller number of countries that have “stronger fiscal and economic fundamentals,” he said in an interview on Bloomberg Television.
Greece’s budget deficit of 13.6 percent of gross domestic product is the second-highest in the euro zone after Ireland’s 14.3 percent. As part of the bailout plan, Spain and Portugal also pledged deeper deficit reductions than previously planned.
Lagging Growth
The euro weakened against 13 of its 16 major counterparts and fell to $1.2644 from $1.2662 in New York yesterday. Last week, the currency fell to the weakest level against the dollar since January 2009 as stocks dropped globally and borrowing costs soared in nations from Greece to Portugal and Spain.
Economic growth in the nations that share the euro will lag behind the U.S. by almost 1.5 percentage points next year, Bloomberg surveys of economists show.
All paper currencies are being “debased,” with the euro currency union at risk of being “dissolved,” Rogers said, adding that he continues to own the dollar, the Swiss franc, the Japanese yen and the euro.
“It’s a political currency and nobody is minding the economics behind the necessities to have a strong currency,” Rogers said. “I’m afraid it’s going to dissolve. They’re throwing more money at the problem and it’s going to make things worse down the road.”
Shorting Emerging Markets
Investors should instead buy precious metals including gold or currencies of countries that have large natural resources, Rogers said. Among other asset classes, he favors agricultural commodities as the best bet for the next decade as well as silver because prices haven’t rallied.
Rogers started short-selling emerging markets in the past two weeks after last year’s rally, he said. Still, the investor will seek to add to his Chinese holdings if shares fall further.
Chinese stocks are the world’s second-worst performers this year as government officials sought to curb accelerating inflation and speculation in the nation’s real estate market. The Shanghai Composite Index yesterday entered a bear market after falling 21 percent from its Nov. 23 high.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net
Posts
