What You Are Not Supposed To Know!

June 4, 2010

If you read this, have a look at the following links that provide a different story than the emerging official Government propaganda on our recession, namely, return to growth.

All is certainly not well with the euro as evidence mounts for growing pressure and instability particularly from the cajas in Spain. This is bad news for our economy as risk of contagion effects us also. Pressure on the euro and the ECB to mount multiple bailouts and perform financial restructuring for countries unable to trade out of their difficulties because of their bubble economies would appear to be severely compromised.

Bloomberg link http://bit.ly/9bf1zC (ta Deco) info here updated to today Jun 3.

“Banks are parking cash with the ECB amid investor concern that a 750 billion-euro European rescue package may not be enough to stop the crisis from spreading and spilling into the banking industry. The ECB said on May 31 that banks will have to write off more loans this year than in 2009 and their ability to sell bonds may be hampered as governments seek to finance fiscal deficits.

“The banking crisis is back,” said Norbert Aul, an interest-rate strategist at Commerzbank AG in London. “The news flow over the past few weeks has spooked banks and since nobody knows how exposed individual financial institutions are, it’s deemed safer to park cash with the ECB rather than lend it on.”

Banks are the key and it appears a game of hangman is beginning with no one wanting to lend to each other to be the last one caught holding the toxic sack of debt or to be caught being the lender of last resort to another banks going under!

Interesting comments from Goldman Sachs rep on parity discussion in video above. Seemed adamant against euro parity with dollar. Parity would mean a huge competitive edge for European sales into the US auto industry for example or maybe  the edge on naked shorting against the euro is at stake?

Note Spain downgraded from AAA to AA+        http://bit.ly/c58c3g

‘Debt ring of fire, us, uk, italy, japan, italy, portugal, ireland’      http://bit.ly/96TtWr

“They recall that in the early nineties crisis, a fast, housing-led recovery, solved an enormous finantial problem. Now they pray for a similar outcome. But with the highest inventory of unsold houses ever in history, and the international financial unrest, it is more than unlikely that there is a housing-led recovery this time.”

Cajas hold up to 50% of Spains banking business. They have till end of June to do a massive restructuring they must do to qualify for bailouts. They are in serious trouble.

Excellent article here:



“Many cajas are finding it almost impossible to access funds through the international wholesale finance markets, except via the European Central Bank. Spain’s creditworthiness was further questioned on Friday when Fitch, the credit rating agency, downgraded the country’s sovereign debt because of the sluggish growth outlook.”

The question is for how long can the ECB become the lender of choice for cajas and banks throughout the PIIGS zone and hold against mounting pressure from the dry up of interbank lending and the downgrading of Spain by the rating agencies?

What evidence is there that the management of these banks can be relied upon to turn around policies that led to trouble in the first place. With further pressure for Spain of 20.5% unemployment rate and the mounting pressure this puts on Spain’s fiscal deficits, when will the penny drop and crisis begin? With the restructuring of the cajas with end of June time deadline, will restructuring succeed or will the release of bailout money plug the sink hole?

From the evidence above this crisis for Spain and for the euro will be sooner rather than later. Likewise the restructuring of the financial system in Ireland in favour of a system of socialisation for banks and developers is a project that has a mounting pressure against any chance of success as each day goes by as success depends on growth. Growth in the eurozone would appear not to be on the cards for quite some time. The need for the UK and US to tackle their own fiscal deficits in the short to medium term will mean increasing likelihood of recession. Deflation and recession couple with growing employment rates in Ireland make the cost of the bailout of the banks and the cost of NAMA increase their weight upon our debit side and increase the likelihood of a sinking scenario as our economy becomes a debt servicing agency owned by the ECB and French, Swiss and German bondholders who are also exposed because of our financial woes and risk against our plea of inability to pay.

Instead of listening to the band playing on the Titanic, instead of trying to bury such talk under the sand, we should be talking about sinking scenarios and what we need to do if the euro goes under taking us with it!
More thoughts from ‘the crow’s nest’ anon.

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