Tick Tick Tick

From Reuters:

Is the euro zone running out of time on debt crisis?

The euro zone debt crisis is moving at a such a pace, with pressure now mounting on several countries simultaneously, that European Union institutions may find it impossible to get ahead of the markets.

After Greece's deficit and debt problems emerged in late 2009, there were five months of steadily rising Greek sovereign bond yields and efforts by EU officials to contain the threat before a 110 billion euro ($140 billion) bailout was arranged.

The lag was understandable because the EU had never had to deal with such a crisis since the euro's introduction in 1999. Once a rescue mechanism was agreed for Athens, it was only a matter of days before the funds were disbursed.

In the case of Ireland, it took weeks of market pressure driving bond yields higher -- with the spread over German bunds widening -- before Ireland requested help, an EU-IMF team was dispatched, and an 85 billion euro bailout was assembled.

But now financial market pressure is being brought to bear on Portugal, Spain, Belgium and Italy all at once.

In theory the EU has a mechanism in place to try to stave off the pressure, and can act within hours via conference calls to take decisions. However, there are doubts about whether it is nimble enough to outwit or get ahead of the markets, and whether there is enough money to douse the spreading flames.

"When it comes to EU politicians and the markets, there is definitely an asymmetry of arms," said Hugo Brady, a senior policy analyst at the Center for European Reform, a think-tank.

"One criticism has been that political leaders move incrementally, rather than in big steps, for understandable reasons," he said, pointing out that politicians have voters and other constituencies to consider, which markets do not.


As we noted yesterday with the amusing video of Mr. Putin suggesting Russia could join the sinking Euro ship, this idea is mere political posturing.

The real issue within the Euro-zone remains the rapid growth of sovereign debt partially due to bank bailouts.

We will soon see sovereign nations default on their debt if history is any indicator. In the 1930s we saw a large stock market correction - the crash of 1929, followed by a rebound. Once the rebound was completed in April 1930, the market ground steadily lower to bottom out in 1932 as many nations defaulted on their debt, including the United States through a revaluation of the dollar to gold ratio.

Once the Euro crisis reaches its peak, it is my belief that an attempt to introduce Special Drawing Rights (SDRs) will be attempted by the UN and IMF as an "alternative currency" to both the Euro and US dollar.

We will examine this in more detail at a later date.


  1. Interesting times we live in PW. Glad I found my eyes early on and Accumulated Gold and Silver, as well as the necessities of life, Food, water and so on. That is not Gloom and Doom that is reality, of which many are about to see in the months ahead...Reality.

  2. Yes Bill, we are living in interesting times. I wish others would follow your lead with respect to gold and silver. To date, my persuasion of those close to me has not born fruit. As we get closer to the reality of debt based currencies perhaps more people will see the truth.

  3. I managed to convince one PW, so I feel I have done my good deed. The rest refuse to see, so I speak no more.

    The famous last word replies are:

    " Oh I don't pay attention to things like that "

    And these are what some would consider educated individuals...You know, the stupid smart
    ( Wink )



Post a Comment