[deMolay]

Financial Crisis and Collapse of Empires. A lengthy informed presentation. http://www.financialpost.com/news/busin ... story.html

[ian807]

Just finished Ferguson's other book "The Ascent of Money" a few months ago. Quite a read. I'm sure he didn't *mean* it to be depressing, but discovering that all money is debt, and always has been, changes your worldview mightily.

[deMolay]

Here is the transcript of the speech. http://www.iie.com/publications/papers/ ... n-2010.pdf

[sparky]

.
Clear, concise ,well informed , lucid , scary
a must read , thanks deMolay

[deMolay]

Everybody is just kicking the can down the road. Eventual collapse. http://www.cnbc.com//id/40271476

[vision-master]

When? 2012?

[deMolay]

Roubini Maps Out Nightmare Scenario of Domino Debt Collapse in Europe

Robert Harding | Getty Images
Dublin, Ireland
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But the nub of the crisis is this: "We have decided to socialize the private losses of the banking system. Now you have a huge increase in public debt—going from 7 percent to 100 percent of GDP. Soon it will be 120 percent."

And, turning more broadly to the rest of Europe, "Greece is already at 120 percent."

Roubini believes that further attempts at intervention have only increased the magnitude of the problems with sovereign debt. He says, "Now you have a bunch of super sovereigns— the IMF, the EU, the eurozone—bailing out these sovereigns."

Essentially, the super-sovereigns underwrite sovereign debt—increasing the scale and concentrating the problems.

Roubini characterizes super-sovereign intervention as merely kicking the can down the road.

He says wryly: "There's not going to be anyone coming from Mars or the moon to bail out the IMF or the Eurozone."

But, despite the paper shuffling of debt at the national level—and at the level of supranational entities—reality ultimately intervenes: "So at some point you need restructuring. At some point you need the creditors of the banks to take a hit —otherwise you put all this debt on the balance sheet of government. And then you break the back of government—and then government is insolvent."

And then there is the case of France. "Sarkozy came to power saying 'I'm going to do lots of reform.' He has not done it. Right now, he is weak. He might lose the election. And, therefore, they are going to delay fiscal austerity and reforms."

And that, according to Roubini, is a major problem for the fiscally challenged French.



The bond vigilantes may have woken up first in Greece, Ireland, and Portugal. "But France," Roubini says, "does not look much better than the periphery."

In Roubini's view, the probability of the right steps being taken in France soon is not great. "Politically they are constrained from making reforms." For example, after the French made relatively small changes in their social welfare system—raising the retirement age from 60 to 62 —"You had massive riots in the streets."

And that, in Roubini's view, was just the beginning of the necessary austerity.

"What's going to happen when you do more radical reform? That's an open question in the case of France."

Looking beyond France to the future trajectory of the crisis, Roubini says, "The next one in line is going to be Portugal. "Due to the severity of Portuguese debt problems, Portugal is going to lose market access—and that means they are going to require IMF support as well.

But the real nightmare domino is Spain. Roubini refers to the Spanish debt problems as "the elephant in the room".

"You can try to ring fence Spain. And you can essentially try to provide financing officially to Ireland, Portugal, and Greece for three years. Leave them out of the market. Maybe restructure their debt down the line."

"But if Spain falls off the cliff, there is not enough official money in this envelope of European resources to bail out Spain. Spain is too big to fail on one side—and also too big to be bailed out."

With Spain, the first problem is the size of its public debt: €1 trillion. (Greece, by contrast, has €300 of public debt.) Spain also has €1 trillion in private foreign liabilities.

And for problems of that magnitude, there simply are not enough resources—governmental or super-sovereign—to go around.

[dissident]

And, therefore, they are going to delay fiscal austerity and reforms.

The brain dead monetarist mantra. Right now we have too much corporate and bank welfare. The austerity line is always about social programs and incomes of middle and lower class citizens. Obama, Sarkozy and friends are not even trying to reform where it is needed.

Every dollar of tax cuts for corporations translates into 30 cents of GDP benefit. Every dollar spent on the poor boosts the GDP by $1.70. Monetarism is a discredited pile of dogmatic crap designed to make the rich more rich.

BTW, the current fiscal crisis has nothing to do with social programs and real welfare. It is private sector casino games with mortgages and hysterical reaction of the markets to drops in profits (not actual losses). Sure oil prices contributed to bursting the bubbles. It wasn't lack of some IMF austerity program.

[deMolay]

Hogwash.

[Daniel_Plainview]

"But if Spain falls off the cliff, there is not enough official money in this envelope of European resources to bail out Spain. Spain is too big to fail on one side—and also too big to be bailed out." With Spain, the first problem is the size of its public debt: €1 trillion. (Greece, by contrast, has €300 of public debt.) Spain also has €1 trillion in private foreign liabilities. And for problems of that magnitude, there simply are not enough resources—governmental or super-sovereign—to go around.

It will come down to either (1) Spain collapsing under its suffocating sovereign debt, causing the entire house-of-cards to collapse; or (2) Banana Bennie and the Inkjets bailing out Spain so as to keep the house-of-cards intact for a while longer, thereby kicking the can down the road one more time.

Guess which option will be taken?



By the time the bond vigilantes focus on Spain, Banana Ben will have his money printer on overdrive, and Spain will be bailed out. There is no option. The bailouts will continue up until the last dying breath of capitalism.

[cipi604]

"But if Spain falls off the cliff, there is not enough official money in this envelope of European resources to bail out Spain. Spain is too big to fail on one side—and also too big to be bailed out." With Spain, the first problem is the size of its public debt: €1 trillion. (Greece, by contrast, has €300 of public debt.) Spain also has €1 trillion in private foreign liabilities. And for problems of that magnitude, there simply are not enough resources—governmental or super-sovereign—to go around.

It will come down to either (1) Spain collapsing under its suffocating sovereign debt, causing the entire house-of-cards to collapse; or (2) Banana Bennie and the Inkjets bailing out Spain so as to keep the house-of-cards intact for a while longer, thereby kicking the can down the road one more time.

Guess which option will be taken?



By the time the bond vigilantes focus on Spain, Banana Ben will have his money printer on overdrive, and Spain will be bailed out. There is no option. The bailouts will continue up until the last dying breath of capitalism.

capitalism has died in 70's in USA

[Quinny]

Has anyone out there worked out the amount of 'debt' and categorised it by that used in banking support.

The irony of the situation is that the funds being used to target currencies and bonds probably originate from bailouts in current times. If the banking/financing sector had died, then the system would have folded and untold chaos would have arisen, but by refreshing the corpse governments have given them the opportunity to feed on the real economies again.

[dorlomin]

Am I correct in remembering that banks can only have a certain grade of sovereign debt (AAA) held as tier one capital. I have always had at the back of my mind that write downs in sovereign debt ratings will have a large deleveraging effect on the global economy so kinda put the likes of the UK and France into the catagories where write downs would create global liquidity issues in the same order or bigger than the MBS writedowns (which were not even tier one).

Can US banks hold even sovereign debt at tier one? Anyone know.