Facing the Music: Europe Is Bankrupt
This article is a good summary of a growing consensus among financial analysts that Europe is bankrupt. The EU’s actions against Cyprus is another confirmation that the EU is bankrupt and hunting money wherever they can find it regardless of fairness.
What was done to the tiny nation of Cyprus questions the competency of the EU policy makers. Their requirements for a “bailout” by levying depositors money is arguably financial theft. Why should depositors pay for the mismanagement of third parties who received substantial bonuses and fees for their malfeasance? Shouldn’t they be putting the banks in question into some form of receivership and investigating whether there are civil actions, or potentially financial crimes committed by those financial institutions and corporate management bankers?
This was a de facto torpedo fired against Cyprus citizens and its financial institutions. You can bet anyone half way sane will not deposit their hard earned money there.
One cannot help but wonder that the EU’s solution to their economic woes will be more banks in other countries having financial levies. Even if the US government does not initiate a bank financial levy against depositors, the fact that this was done along with the current mismanagement within the financial system is bound to affect the US banking and financial sectors.
Although I share Mr. Summers analysis, this is not an endorsement for you to buy any of his financial products. As with any service you must do your own due diligence. It’s your money and you alone should make the decision of what to do with the fruit of your hard labor.–No Name Attorney
Europe is Now Out of Options AND Money
By Graham Summers of GainsPainsCapital.com
March 27, 2013
The big news out of Europe is whether or not Cyprus will be a template for future bailouts.
Having seen that issues like personal property, rule of law, and democracy got thrown out of the window in Cyprus as soon as things got hairy, investors and depositors throughout Europe are panicked as to whether they will be targeted next when the next European Domino starts to fall.
EU politicians are out claiming the usual fluff “don’t worry, Cyprus is a one off deal, this won’t happen again!” Sure. Greece was a one off deal until it needed another bailout. Spain was a one off deal. So was Ireland and Portugal.
Obviously, European bureaucrats are the sorts of folks you can trust.
Let’s cut through the nonsense here.
Europe is totally and completely bust. The European banks are leveraged at 26 to 1 because they CANNOT raise capital… because no one in their right mind wants to invest in them… not even European countries.
European nations are bankrupt because AGAIN no one in their right mind wants to buy their bonds UNLESS they believe they can dump their investments on the ECB at a later date. Who is the greater fool there?
At the end of the day, the reason Europe hasn’t been fixed is because CAPITAL SIMPLY ISN’T THERE. Europe and its alleged backstops are out of money. This includes Germany, the ECB and the mega-bailout funds such as the ESM.
Germany has already committed to bailouts that equal 5% of its GDP. The single largest transfer payment ever made by one country to another was the Marshall Plan in which the US transferred an amount equal to 5% of its GDP. Germany WILL NOT exceed this. So don’t count on more money from Germany.
The ECB is chock full of garbage debts which have been pledged as collateral for loans. If anyone of significance defaults in Europe, the ECB is insolvent. Sure it can print more money, but once the BIG collateral call hits, money printing is useless because the amount of money the ECB would have to print would implode the system.
And then of course there are the mega bailout funds such as the ESM. The only problem here is that Spain and Italy make up 30% of the ESM’s supposed “funding.” That’s right, nearly one third of the mega-bailout fund’s capital will come from countries that are bankrupt themselves.
What could go wrong?
At this point, Europe is literally beginning to run out of options. It’s only a matter of time before the Crisis goes into hyperdrive and we have an event even worse than 2008.
In simple terms, this time around, when Europe goes down (and it will) it’s going to be bigger than anything we’ve seen in our lifetimes. And this time around, the world Central Banks are already leveraged to the hilt having spent virtually all of their dry powder propping up the markets for the last four years.
Given what is happening in Europe right now, we wanted to alert investors to a major development we’ve noticed in the markets.
The markets look to be setting up for the next Crisis. Indeed, multiple metrics we track are flashing RED ALERT.
To read more about this…
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Chief Market Strategist