Markets closed today. And not much from us either. We’ve got family chores to attend to.
As expected, Europe is falling apart. Yields are rising. France’s debt no longer looks safe. And Germany can’t sell its bonds.
The failure of the German bond auction earlier this week was the latest shock. It tells us that pressure on the ECB is mounting.
It’s one thing when Greece and even Italy can’t finance their debt. Who cares? But it must surely get German bankers’ attention when nobody wants to buy their bonds.
And why should they? Guess how much growth the Eurozone has had over the last 4 years? Zero. Less than zero. The euro economy has shrunk. Not as much as Japan’s 5% decline, but it’s still down.
And guess which bank is safer — a solid German bank such as Deutsche Bank…or one of Wall Street’s finest, J.P. Morgan? Grant’s Interest Rate Observer compares the two and finds the American bank ahead by almost every measure. In terms of leverage — measured by assets-to-equity — Deutsche Bank has more than 3 times as much.
And Germany has almost as much debt, compared to GDP, as the US. Practically all the rest of Europe has even more. No wonder people don’t want to buy their bonds.
So what gives? Our guess is that the ECB — Europe’s answer to the Fed — gives. Here’s the report from The Daily Crux:
Statist billionaire George Soros calls for massive euro inflation
The European Central Bank (ECB) must pump liquidity into the 17-member financial system to stop a run on bonds and even slap a ceiling on yields to avoid a breakup of the currency zone, says billionaire financier George Soros.
Soros writes in a Financial Times column that policymakers should use the European Financial Stability Facility — an emergency assistance fund — to help the European Central Bank flood the economy with liquidity, a move that would aim to curb skyrocketing yields on sovereign bonds issued by indebted southern European nations. “The financial markets are testing the ECB and want to find out what it is allowed to do. It is imperative that the ECB should not fail that test.”
Will the ECB fail to inflate? Will its printing presses remain silent…deaf to the cries of so many bankers and rich people? How could it be so hard-hearted? So insensitive?
No, dear reader, the best bet is that the ECB will come to the rescue — whether it is legal or not…whether it is sensible or not — and buy the bonds itself. This is classic “monetization” of debt…because the ECB would have to create the money out of thin air to do so. It’s not authorized to counterfeit money like that, but you know what happens in a crisis. People forget the rules.
Just this… You know how we always take the part of the underdog…we always champion the lost cause…and stand up for the die hard. Well, we’re beginning to feel a responsibility to defend the “1%”…the poor people who, through no fault of their own, got rich!
More on this…when we pick up our labors…on Friday.
Bill Bonner,for The Daily Reckoning
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010.
Finally someone brave enought to defend us 1%ers.
It’s a sad day when people not only vilify all rich people, but they don’t even aspire to get rich themselves. They have given up.
We still seem to think it is A-okay to get stinkin’ filthy rich as a sports or movie hero. But the successful businessman is reviled.
… Well I must get back to my Turkey, Cavier and fine wine. You have a fine whine now too, ‘ya all.
Waiting with bated breath.
Why I can not express
If Soros is pressing the ECB to flood the region with “liquidity” I think I will be buying gold and silver in a Freaking Mogambo Panic (FMP).
Whatever this joker says you can bet he’s playing the other side of the card. I wonder if the reason he liquidated his large GLD holdings several months back was to take possesion of the metal itself.
Bill, I have follow you a long time… and I see a curve ball coming when you say.. Well, we’re beginning to feel a responsibility to defend the “1%”…the poor people who, through no fault of their own, got rich!
Now Bill is turning into Rhett Butler. I’m a sucker for a lost cause to Bill, but like Rhett, it has to be lost when I get on board. It is why I love the K.C. Chiefs and Tim Tebow. TT is a donkey, but that’s not his fault. And folks, sorry to inform you that many of the rich just analyzed the insanity coming from DC and yes, played their cards right. So get over it! Go after Congress since their the real culprit, but they have too many guns and your afraid of them.
Congress the “real culprit”? Harumpf. The real problem is universal suffrage. How do you think the members of Congress got there?? Why is everybody always whining about Congressmen “just wanting to get re-elected”? How do they DO that? HOW do they get re-elected? There’s the answer. The root cause is universal suffrage. As long as anybody–ANYBODY–18 or older can decide how to disburse money from the public treasury WHETHER OR NOT THEY CHIPPED IN, well…I leave it you you. See?? It’s high time SOMEBODY said the truth out loud.
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