EU Goes KA-BOOM

[Gipper]

Looks like the EU is about to go KA-BOOM...and all thanks to socialist economic policies. And, libs here in America want to follow them...CRAZY.

FACT #1: Europe’s entire banking system is leveraged at 25 to 1.
This is nearly two times the US’s leverage levels. With this amount of leverage you only need a 4% drop in asset prices to wipe out ALL equity. These are literally borderline-Lehman levels of leverage (Lehman was 30 to 1).Mind you, these leverage levels are based on asset values the banks claim are accurate. Real leverage levels are in fact likely much MUCH higher.

KA-BOOM.

FACT #2: European Financial Corporations are collectively sitting on debt equal to 148% of TOTAL EU GDP. Yes, financial firms’ debt levels in Europe exceed Europe’s ENTIRE GDP. These are just the financial firms. We’re not even bothering to mention non-financial corporate debt, household debt, sovereign debt, etc. Also remember, collectively, the EU is the largest economy in the world (north of $16 trillion). So we’re talking about over $23 TRILLION in debt sitting on European financials’ balance sheets.

KA-BOOM.

FACT #3: European banks need to roll over between 15% and 50% of their total debt by the end of 2012. That’s correct, European banks will have to roll over HUGE quantities of their debt before the end of 2012. Mind you, we’re only talking about maturing debt. We’re not even considering NEW debt or equity these banks will have to issue to raise capital.Considering that even the “rock solid” German banks need to raise over $140 BILLION in new capital alone, we’re talking about a TON of debt issuance coming out of Europe’s banks in the next 14 months. And this is happening in an environment prone to riots, bank runs, and failed bond auctions (Germany just had a failed bond auction yesterday).

KA-BOOM

FACT #4: In order to meet current unfunded liabilities (pensions, healthcare, etc) without defaulting or cutting benefits, the average EU nation would need to have OVER 400% of its current GDP sitting in a bank account collecting interest.

KA_BOOM

http://www.zerohedge.com/contributed/four-facts-prove-efsf-doesn%E2%80%99t-matter%E2%80%A6-all

 

[dogtowner]

Merkle is nervous as a cat since Germany is the only onwe close to being solvent.

 

[GenSeneca]

Who could have ever seen that coming!?

Awesome video if you haven't watched it.

 

[Gipper]

Who could have ever seen that coming!?

Awesome video if you haven't watched it.

Excellent video. Too bad it is not shown in every public school rather than Fat Mikey Moore and Fat Albert Gore movies.

And, it is too bad every school kid is not reading Atlas Shrugged. Imagine what a great country we would have if logic trumped the illogical.

I suspect Atlas Shrugged is considered similar to Mein Kampf by the leftist establishment that now runs the entire American educational system.

 

[Gipper]

Nice graphic showing the EURO going KA-BOOM and all thanks to socialism. Yet, is anyone saying socialism is an utter and complete disaster?

I have summarized the fundamentals in this one graphic: the European dominoes of debt. Simply put, there is no way the EU authorities can stop the first domino--Greek default or equivalent writedown of its impossible debt load--from toppling the over-leveraged banks which will be rendered insolvent when forced to recognize their losses.

That leaves each nation with the politically unsavory option of bailing out its premier banks with taxpayer money, and squeezing the money out of its citizenry via higher taxes and austerity. That assumption of bank debt will in turn trigger downgrades of heavily indebted sovereign nations such as France, moves that will raise rates and make the bailout even more costly to taxpayers, who will also be suffering from reductions of income due to global recession.

Once the banks and bondholders accept a 50%-75% writedown in Greek debt, then the other debtor nations will be justified in demanding the same writedown in their crushing debts. This dynamic leads to estimates that 3 trillion euros will be needed to bail all the players out. Alternatively, total losses will equal 3 trillion euros, wiping out banks and bondholders of sovereign debt.

The German economy is simply not big enough to fund a 3 trillion-euro bailout. Germany has 81 million people and its GDP is $3.3 trillion; the EU GDP is roughly $16 trillion. Compare those with the U.S., with 315 million people and a GDP of around $14.6 trillion.

As an act of self-preservation, Germany will be forced to either exit the euro outright or cloak its withdrawal with a "euro 1 and euro 2" scheme, a scenario I first laid out in March 2010: Why the Euro Might Devolve into Euro1 and Euro2 (March 2, 2010). (Other recent entries on the end-state of the European debt crisis
The Eurozone's Three Fatal Flaws (September 21, 2011)
The Dynamics of Doom: Why the Eurozone Fix Will Fail (July 25, 2011)
Why The European Union Is Doomed (March 28, 2011)

In any event, the last domino, the artifice of a single currency, will fall one way or another.

It's important to understand that the supposedly "prudent" economies of France, Germany, South Korea and Canada are just as heavily indebted as the U.S. or "drowning in debt" nations such as Italy. In the long view, is Germany's load of 284% of GDP really that different from Italy's 313%? Yes, the mix of debt is different, but the point is that all of Europe, and indeed the developed world, is overloaded with debt: state, bank and private.

The idea that leveraging more debt can resolve this gargantuan over-indebtedness is beyond absurd.
http://www.oftwominds.com/blog.html

The Left is responsible for the Euro economic disaster, which likely will very negatively impact the USA. And, what is the Left's answer to this problem? MORE SPENDING.

 

[Gipper]

so true...

 

[Gipper]

Here is a great article that describes the hardships faced by ordinary Greeks and the terrible economic conditions in Greece from Saturdays WSJ.

For Ordinary Greeks, Big Bailout Adds Up to Years of Hardship
But it is hard to see a solution that doesn't involve more cuts. Alongside its debt relief, Greece will get years of more EU rescue aid, which comes with Teutonic fiscal strictures. Greece's debt currently equals 164% of its gross domestic product. Even if things go according to plan, Greece's debt will fall to 120% of GDP in 2020—twice the EU's limit and roughly where troubled Italy is now.

All this has Greeks staring at years more of pain. Unemployment is high. Retirees are squeezed by pension cuts and rising prices. "The government has managed to improve two things," says Giorgos Athanasiadis, a retired hotel and shipyard employee who had come to a dark café in Athens where men play chess and smoke, their cigarettes yellowing the newspaper clippings and faded tourism posters that pass for decoration. "One is traffic, because cars don't drive around because of the cost of gas. The second is cholesterol, because we don't have money to buy food."

Mr. Athanasiadis lists the dour statistics: hundreds of thousands unemployed and thousands newly homeless.

"I don't expect it will go back to normal at least for the next 10 years," says Christos Athanasopoulos, a civil engineer in Athens. Government contracts have slowed, he says, and the cash-poor state has fallen chronically behind on its bills. That has decimated his firm. In 2005, it had 50 employees. Now it has five.
http://online.wsj.com/article/SB10001424052970203554104577003892831820960.html

The Greeks are facing very tough times as are other EU nations with TONS OF DEBT, HUGE UNIONS, GIGANTIC WELFARE SYSTEMS, and ENORMOUS CENTRALIZED GOVERNMENTS.

But what I would like discussed or at least mentioned, is what is the root cause of the problem. I have not seen it discussed in the big media (no surprise) or by our political leaders. Have you seen the root cause discussed?

THE ROOT CAUSE IS SOCIALISM!!!!

 

[Gipper]

Look at the skyrocketing number of people riding in the wagon of government dependency.

By the way, Greece’s population only increased by a bit more than 16 percent during this period. Yet the number of bureaucrats jumped by far more than 100 percent.

And don’t forget that this chart just looks at the number of bureaucrats, not their excessive pay and bloated pensions.

With this in mind, do you agree with President Obama and want to squander American tax dollars on a bailout for Greece?
http://biggovernment.com/dmitchell/2011/11/05/helping-to-explain-greeces-collapse-in-a-single-picture/

Isn't liberalism grand? It is obvious Europe is falling apart due to liberalism and yet, liberals in America want what Euros have. CRAZY!

I do not think it a good idea to squander American tax dollars on Greece. But, then I do not think BO should squander tax dollars on ANY OF HIS SOCIALIST schemes.