Two different views but thy come to a similar place - the shit hits the fan by the Fall of this year for europe and the West...
FRANKFURT CONTACT TELLS SLOG: “EUROZONE WILL SHATTER BY AUTUMN”
“Spain and Italy cannot be contained”
Incompetent mendacity still a la mode throughout Europe
As ECB President Mario Draghi declared the eurozone out of the woods yesterdays, The Slog’s Bankfurt Maulwurf offered a diametrically opposed opinion. And more details emerged of how French security services botched the monitoring of scooter-killer Mohammed Merah.A brief thank you to Trolls throughout the Globe who emailed and threaded at The Slog to relish me “being wrong about” the Greek default planned for today. We still have some time to go before 7 pm GMT guys and gals, but just to reiterate for the zillionth time, I was informed about a plan in the US financial Establishment to work with eurozone leaders on the fast-track amputation of Greece. It appears the plan failed or was abandoned – as I have suggested several times over the last ten days. I would maintain that a lack of European balls and probably deranged American hubris ensured its demise. But that hardly makes me ‘wrong’.
What it does suggest is incompetent indecision and double-cross on a massive scale, and there is yet more ample evidence of that from the last 24 hours.
“The worst is now over,” proclaimed Mario Draghi yesterday. An excellent comment thread here suggested that this was a misunderstanding, in that Signor Draghi is fond of German sausages, and as he swallowed the last of his snack, said “the wurst is now over”.
But The Slog’s Frankfurt Mole is of a different opinion.
“What we are now seeing,” he began, “is instability in the larger [EU] sovereigns. We always knew this was going to happen, and it is coming to pass. Spain has clearly decided to kick back, and there is an interdependence between Iberia and Italy that is not well understood. We are also going to see massive losses throughout all EU and US banks this time. Further obligations and so forth will then emerge, and for the eurozone it will be the end. Signor Dragi could try and print his way through further bailouts, but we hold all the cards now. Berlin simply will not allow it. It doesn’t matter any more that the [EU] Central Bank is legally beyond the law….it is not beyond reality. The eurozone will shatter once this impasse is reached. In my estimation the situation will be critical before the winter comes.”
Readers new to this saga need to realise that our Maulwurf represents the archetypal hawkish Frankfurt/Bundesbank view of life. But at the same time, their view is gradually gaining ground in Germany….and equally, the evidence for the accuracy of their predictions grows apace.
A stream of bollocks emanated from Madrid yesterday, led by the Spanish finance minister, who called comparisons between Spain and Greece ‘completely ridiculous’. He’s right, too: this time it’s going to be much, much worse. But it is happening: Spanish yields on 10-year bonds are up to 5.47% after rising all week (in March, the yield was below 5 percent) and the 10-year Italian bond yield climbed 12 basis points to 5%. German bund yields, on the other hand, are falling as the safe haven factor kicks in again. The inherent bond spreads problem in the ezone is just as marked as it ever was.
Portugal is the one ClubMed that has been literally running on empty for some three months now. Yesteday, it emerged that town halls there face default amid 9 billion euros of debt unless the government provides aid soon. So said Fernando Ruas, president of the nation’s association of municipalities…but I’m afraid the last train to San Fernado left ages ago: there simply is no money left.
But most of the news media flocked to Toulouse in order to witness another Islamist leave en route for the 77 virgins. After the bloke jumped from a bathroom window while still firing his sten gun, French interior minister Claude Guéant revealed that Mohammed Merah had been on the radar of the DCRI — France’s domestic intelligence agency — “for years”. It has also since transpired that Merah was questioned by the intelligence service as recently as November 2011, after being summoned to explain trips he had made to Afghanistan and Pakistan. Astonishingly, Merah was reportedly granted freedom to leave by his French intelligence questioners after providing them with photographs supporting his claims of having merely been on an innocent tourist holiday.
GEAB N°63 is available! Global systemic crisis – The five devastating storms in summer 2012 at the heart of the world geopolitical swing
- Public announcement GEAB N°63 (15 mars 2012) -
In its January 2012 issue, LEAP/E2020 signalled the current year as that of the world geopolitical swing. The first quarter 2012 has, to a large extent, started to establish that an era was in fact coming to an end with, in particular, the Russian and Chinese decisions to block any Western attempt at interference in Syria (1); their stated desire, associated with India (2) especially, to ignore or circumvent the oil embargo fixed by the United States and the EU (3) against Iran; the increasing tensions in relations between the United States and Israel (4); the acceleration of the policy of diversification out of the US Dollar led by China (5) and the BRICS (but also by Japan and Euroland (6)); the premise of change in Euroland’s political strategy at the time of the French electoral campaign (7); and the intensification of actions and statements fuelling the rising strength of trans-bloc commercial wars (8). In March 2012, we are far from March 2011 and the “hustling” of the UN by the USA/UK/France trio to attack Libya. March 2011 was still the unipolar world of after 1989. March 2012 is already the post-crisis multipolar world hesitating between confrontations and partnerships.
Chinese foreign exchange reserves and holdings of US Dollar securities (2002-2011) (in trillions USD) (in green: total; in salmon: US securities; red line: % of US securities as a share of the total) - Sources: People’s Bank of China/ US Treasury / The Wall Street Journal / Dollar Collapse, 03/2012
Thus, as anticipated by LEAP/E2020, the handling of the “Greek crisis” (9) has quickly caused the disappearance of the so-called “Euro crisis” from the media headlines and market participants’ concerns. The mass hysteria maintained by the Anglo-Saxon media and the Eurosceptics during the second half of 2011 on this subject hasn’t lasted long: Euroland is increasingly asserting itself as a sustainable structure (10); once again the Euro is in vogue in the markets and for emerging countries’ central banks (11), the Eurogroup/ECB functioned effectively and private investors will have to accept a haircut of up to 70% on their Greek assets, thus confirming LEAP/E2020’s 2010 anticipation which then spoke of a 50% haircut when almost no-one imagined such a possibility without a “catastrophe” signalling the end of the Euro (12). Ultimately, markets always yield to the law of the strongest… and the fear of losing more, whatever the students of ultra-liberalism may say. It’s a lesson which political leaders will jealously guard because there are other haircuts to come, in the United States, in Japan and in Europe. We will come back to this in this GEAB issue.
Central bank held sovereign debt (as a % of GDP) (2002-2012) - United States (in violet), United Kingdom (in grey), Euroland (in violet dots), Japan (in grey dots) - Sources: Datastream / central banks / Natixis, 02/2012
Contemporaneously, and that contributes to explaining the gentle euphoria which feeds the markets and many economic and financial players these last few months, due to it being an electoral year and from the need to make a good impression at all costs against a Eurozone which isn’t collapsing (13), the US financial media have given us a remake of the “green shoots” story from the beginning of 2010 and the “recovery” (14) from the beginning of 2011 in order to paint a picture of an America “exiting the crisis”. However, the United States at this beginning of 2012 really resembles a depressing scene painted by Edward Hopper (15) and not a glowing 60s chromo in the style of Andy Warhol. Just as in 2010 and 2011, the spring will for that matter be the moment of the return to the real world.
In this context all the more dangerous, as all the players are lulled by a dangerous illusion of a “return to normal”, in particular of the “restarting of the US economic engine” (16), LEAP/E2020 considers it necessary to alert its readers to the fact that summer 2012 will see the shattering of this illusion. In fact, we anticipate that summer 2012 will see the crystallization of five devastating shocks which are at the heart of the current process of world geopolitical swing. The black clouds which have been accumulating since the beginning of the crisis around economic and financial issues have now been joined by the dark clouds of geopolitical confrontation.
Therefore, in LEAP/E2020’s view, five devastating storms will mark the summer of 2012 and thus accelerate the process of world geopolitical swing:
. US relapse into recession against the background of European stagnation and BRICS slowdown . dead end for the central banks and interest rate increases . storm on the foreign exchange and Western sovereign debt markets . Iran, the war « too far » . new crash in the markets and financial institutions.
In this GEAB issue our team analyzes these five shocks of summer 2012 in detail.
At the same time, in partnership with the Anticipolis Editions, we are publishing a new excerpt from the book by Sylvain Périfel and Philippe Schneider, “2015 - The great fall of Western real estate”, at the time of the French version going on sale; dealing with the prospects for the American residential real estate market.
Lastly, we give our monthly recommendations targeting gold, currencies, financial assets, stock exchanges and commodities in this number.