[Sixstrings]

It Just Went From Bad To Far, Far Worse As Germany Says Italy Is Too Big For EFSF To Save, Refuses To Carry Euro Bailout Burden

Remember when we said (yesterday) that Germany will soon balk over the fact that it is pledging its entire economy to bail out an insolvent Europe? Well, that moment has come.

Dow Jones just hitting the tape referencing Spiegel

German Govt: Italy Too Big For EFSF To Save - Spiegel
German Govt: Doubts Whether Tripling EFSF Would Help It Save Italy
German Govt: Italy Must Make Savings, Reforms To Exit Crisis - Spiegel
Italy Debt Guarantee Could Raise Doubts Over Germany's Finances - Spiegel
German Govt: EFSF Should Only Help Small, Mid-Size Countries - Spiegel
As a reminder, yesterday's stopgap announcement by the ECB to expand its SMP purchases of secondary market Italian and Spanish bonds was merely as a precursor to full EFSF monetization until its comes fully online in September (or sooner) in a vastly expanded format (between €1.5 and €3.5 trillion).

If Germany is now against this, which appears to be the case, it pretty much means, well, game over.

Add the uncerainty over the unwind of the Europe rescue "gamechanger" as one of the more naive CNBC anchors said yesterday, and Monday is now guaranteed to be a bloodbath.
http://www.zerohedge.com/news/it-just-went-bad-far-far-worse-germany-says-italy-too-big-efsf-save-refuses-carry-euro-bailout-

Maybe our European forum members can enlighten us on this. The ECB's announcement of quantitative easing to save Italy saved the markets on Friday. Now Zerohedge says Germany is backing out..

If the European quantitative easing deal breaks down, along with the US downgrade news.. does this mean total market meltdown on Monday?

[eXpat]

If the European quantitative easing deal breaks down, along with the US downgrade.. does this mean total market chaos on Monday?

Dunno about total market chaos, but ain´t gonna be nice

[prajeshbhat]

Feel bad for German taxpayers. They are left holding a bag of dead beat countries. Germany should get out of the Euro and enjoy the fruits of their own labor.

[prajeshbhat]

The biggest fear is that as one by one the countries start failing, it might remind them why they hated each other not so long ago. Past 65 years have seen astonishing peaceful relationships between major countries. All that could be wiped out.

[Sixstrings]

Feel bad for German taxpayers. They are left holding a bag of dead beat countries. Germany should get out of the Euro and enjoy the fruits of their own labor.

But on the other hand, the Germans along with French were the big EU statists to begin with. They wanted this.. and have kept pushing for tighter union, including a "president" and EU anthem etc. etc.

Well, if you're in a union then you can't just let a member state collapse down a black hole. Either you're a union or you're not. And that's the one advantage the US has. We don't have Arkansas fighting North Dakota. We have one central bank, one unified monetary policy for all our 50 states. Whereas the EU is a confederation, and confederations are weak in crisis.

Since the Germans are EU statists.. I would think they'll go along in the end, to keep the EU together. Maybe they just want tougher austerity on Italy.

EDIT: if zerohedge is right though, if Germany backs out of the QE, then this is a very bad news combo along with the US downgrade..

[prajeshbhat]

Since the Germans are EU statists.. I would think they'll go along in the end, to keep the EU together. Maybe they just want tougher austerity on Italy.

Exactly the dangerous stuff I am talking about. The last thing you want in the continent that has seen two world wars is two rich countries imposing austerity on every one else. This time the tables seem to have turned though. It's Germany that's calling the shots this time.

[EnergyUnlimited]

Maybe our European forum members can enlighten us on this. The ECB's announcement of quantitative easing to save Italy saved the markets on Friday. Now Zerohedge says Germany is backing out..

If the European quantitative easing deal breaks down, along with the US downgrade news.. does this mean total market meltdown on Monday?

I wish SO MUCH for the meltdown of unsustainable European system to proceed... but you must understand that European Union is full of entirely undemocratic self entitled bodies and elites.
They are calling themselves "Progressive elites" but they are really in banksters pockets and in any case they are big money clowns.
Perhaps they are going to be defeated in coming days and Nature will take its course but it is more likely that they are going to meddle a bit longer before an ultimate defeat.

[The Practician]

My understanding of the German economy is that as far as international trade goes, it is based almost completely on importing cheap raw resources, of which germany has almost none, and exporting expensive high quality goods like $100,000 BMW's and $1400 IGH hubs for bicycles. If Germany gives the big F YOU to the rest of the Eurozone, how are the other members going to respond? I am no expert on trade within Europe, far from it, but I assume members of the EU don't pay much in the way of taxes and tariffs on trade goods. These sorts of arrangements usually work to the benefit of countries like Germany, who make their guns and butter on the value added. I don't see how such arrangements can continue to work if you are giving back all the profit from your industry to the countries you were supposed to be taking advantage of. Free Trade agreements work well only when the country getting the short end of the stick are getting enough out of the deal that there is demonstrable prosperity in it for them. Would the other members of the E.U. really stand for Austerity and a diminished standard of living while Ze Germans continue to enjoy a high trade surplus and all the other benefits an arrangement such as the eurozone brings to their economy at the expense of the other members of the "union?" For some reason I doubt it.

[EnergyUnlimited]

Would the other members of the E.U. really stand for Austerity and a diminished standard of living while Ze Germans continue to enjoy a high trade surplus and all the other benefits an arrangement such as the eurozone brings to their economy at the expense of the other members of the "union?" For some reason I doubt it.

Voluntarily they wouldn't, but if only Adolf Hitler (or his reincarnation...) came back to life...
Ech... dreaming...

[Sys1]

If Stardard&Poor's dared to low USA notation, you can expect many downgrades shots on European countries coming soon...
I expect market chaos monday, but since I'm not the same to do so, there are good chances that strong interventions from countries will prevent any crash. Anyway, if they can't handle the situation, perhabs we will have a "cyberattack" or a gigantic blackout blamed on solar flare that will be the perfect way to prevent a global economic crash and kill the Internet all together.

[EnergyUnlimited]

If Stardard&Poor's dared to low USA notation, you can expect many downgrades shots on European countries coming soon...
I expect market chaos monday, but since I'm not the same to do so, there are good chances that strong interventions from countries will prevent any crash. Anyway, if they can't handle the situation, perhabs we will have a "cyberattack" or a gigantic blackout blamed on solar flare that will be the perfect way to prevent a global economic crash and kill the Internet all together.

Nope.
After few more months of political wiggling and cheating Nature will take its course and parasitic Western economic system will get finally and for good bankrupt.

[smiley]

Maybe our European forum members can enlighten us on this. The ECB's announcement of quantitative easing to save Italy saved the markets on Friday. Now Zerohedge says Germany is backing out.

I think the Zerohedge could do with a German editor. This is the article in question.
Merkels Experten lehnen Italien-Rettung ab

Main issue here is the size of the rescue fund. This is currently at 440 billion. The Germans do not want to expand this at this point because they fear that this would increase inflation (this is essentially monetization). By the way the numbers in zerohedge are quite over the top. True te debt of Italy is very large but it has a favorable average maturity so they do not need to rollover so much debt this year or the next.

What Germany has demanded of Italy is that they would speed up their austerity measures and produce a balanced budget in 2013. Without the need for new debt the draw of Italy on the rescue fund would be substantially reduced. Berlusconi complied to this request.

So I think this was basically a bit of political powerplay by Germany to force Italy to come trough on their auserity promises. That is essentially Germanies role in Europe, to be the bad cop.

But Germany would certainly not blow up Europe. They would also not drop Italy, since Italy is one of their most important trading partners.
http://www.suite101.com/content/germany ... ies-a10156

[eXpat]

This was today (saturday)
Saudi stocks plunge to record low

RIYADH – The Saudi stock market, the largest in the Arab world, began its trading week on Saturday with a nine percent plunge to sink to its lowest point in four years.
The renewed nosedive came as policymakers from Gulf states met in Riyadh to seek a common response to the global economic crisis.
The Tawadul All-Shares Index (TASI) closed 8.7 percent weaker at 5,624.68 after dropping as low as 5,564.96 points, a level last seen in May 2004.
The fresh selling means the index has lost around 20 percent in the past eight days as the Riyadh market continues to reel from the global financial crisis. The fall on one of the few markets open on a Saturday suggested no end is in sight for the rout which caused heavy losses on Friday on most stock exchanges worldwide.
Analysts said major initiatives were unlikely to result from the Gulf Cooperation Council (GCC) conference, as member countries have already made individually tailored moves.
All sectors of the Riyadh bourse were in the red. Petrochemicals, including heavyweight SABIC, fell 9.8 percent while banks shed 7.5 percent.
SABIC’s nine months results a week ago failed to provide a boost and the stock has shed half its value in 2008, a plunge almost matched by the TASI index, which so far this year has fallen 49 percent.
Several listed companies registered losses of up to 10 percent – the maximum threshold permissible under Saudi law.
The Riyadh bourse is open between Saturday and Wednesday, while other stock exchanges in the oil-rich Gulf region operate from Sunday to Thursday.
The Saudi market ended last week down 10.2 percent with the TASI index finishing at 6,160.80 points.
On Wall Street on Friday, the Dow Jones Industrial Average eased 312.30 points (3.59 percent) to close at 8,378.95.
Many other bourses moved even deeper into negative territory, with Tokyo plunging 9.6 percent and European markets diving around five percent.

http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=2008102620230

[eXpat]

Italy says Asia asking why why ECB isn't buying bonds

Aug 4 (Reuters) - Italian Economy Minister Giulio Tremonti said on Thursday that Asian investors are reluctant to buy Italian bonds because it sees they are not being bought by the European Central Bank.

Speaking at a news conference, Tremonti also said it would be desirable for the central bank to follow the lead of the Japanese and Swiss central banks in taking expansionary steps to tackly the euro zone's crisis.

"I note that the Bank of Japan today launched quantitative easing and the Swiss cen bank cut rates to zero, we are waiting for decisions if possible, but desirable (from the ECB)," Tremonti said.

When you talk to Asia they say: "Ae don't understand what Europe is," he continued. "The second point is that they say 'if your central bank doesn't buy your bonds, why should we buy them"?

http://www.reuters.com/article/2011/08/04/italy-cenbank-tremonti-idUSLDE7730Z720110804

[eXpat]

Faber´s forecast, total doom:
Faber: Brace for a Global 'Reboot' and a War

Markets could rebound after Thursday's global market sell-off, but investors should see any bounce as a selling opportunity, as the world economy rolls towards total collapse, Mark Faber, editor and publisher of the Boom, Doom and Gloom Report, told CNBC Friday.
The Dow Jones Industrial Average suffered its worst losses in three years Thursday, shedding more than 500 points.

"My view is that the market has experienced everywhere huge technical damage," Faber said. "As of today, all markets are extremely oversold, so a rebound is going to happen (Friday) or on Monday, but the damage technically is so great that the rebound, no matter whether QE3 happens right here, it's unlikely to lift markets above the May 2 high of the (S&P 500) at 1370."

Faber thinks that by the end of the fall, the S&P 500 will have slid to around 1150, and investors will be hoping that further round of monetary easing will stabilize markets.

"In general, I would be using rebounds as a selling opportunity," Faber said.

Buying Treasurys as a safe haven is no longer a smart play, he added.

"I think Treasurys are perceived still as a safe haven because everybody knows the U.S. has an endless ability to print money. The interest will be paid," he said. "The trouble is that governments can default in two ways. Either they just stop paying the interest and there is a debt restructuring, like Argentina went through; or they just pay the interest and the principle eventually, in a worthless currency. That's the way the U.S. will likely do it."
...
The next crisis will be far bigger, according to Faber.

"The next time we have a global economic crisis, it will be much worse than 2008. Before this happens there will be money printing and there will be war. The whole system will collapse," he said. "That's why I'm advising people that they have to think it through. In a total collapse you don't want to own government bonds and cash."

He added: "Equities—they don't perform well, but at least you have the ownership of companies. Precious metals in that environment do relatively well. And of course, oil would do well if there was a war."

http://www.cnbc.com/id/44031717
His opinion, in my view, was before the downgrade, and he didn´t take into account the situation in Europe. When you throw all that into the mix, is a depressing picture, to say the least.

[JohnRM]

If his scenario comes to pass, no asset on paper will be worth anything. Only what you have in your possession will matter. Fortunately, and we started to see this the last time around, it means that you're unlikely to lose your home, even if you can't pay the mortgage, cause nobody is going to have the time nor the inclination to force you out.

[nobodypanic]

well it could get very ugly, but if you're of the opinion that it could get catastrophic, then hell, buy into the fall! after all, if it isn't armageddon, you'll make plenty on the way back up, and if it is The End, then it won't matter one bit if you lost money.

[Daniel_Plainview]

Faber´s forecast, total doom:
Faber: Brace for a Global 'Reboot' and a War

"The next time we have a global economic crisis, it will be much worse than 2008. Before this happens there will be money printing and there will be war. The whole system will collapse," he said. "That's why I'm advising people that they have to think it through. In a total collapse you don't want to own government bonds and cash."

What does he mean by "war" ... is this a resources skirmish, or WWIII?

[peripato]

What does he mean by "war" ... is this a resources skirmish, or WWIII?

He means a really BIG war, full of the nastiest violence, want and stuff. As he said back in 2009 to an Australian interviewer and to paraphrase; "Dark days are coming, maybe not this year or even next, but certainly within 10 years. If I were you, I would buy a farm and a gun".