Euro-Fiction: Titanic Is Saved! ~ The Risk Averse Alert

Thursday, July 21, 2011

Euro-Fiction: Titanic Is Saved!

"Most of all, there’s no leverage, or rather, far less leverage than a few years ago. The regulators have seen to that. You have crashes when market participants are compelled to sell levered positions. No-one has big positions any more. They can’t get the financing. There’s no structuring activity underway, and the old bonds lie moldering in the grave of buy-and-hold portfolios."
Not a Crisis, But a Negotiation (Inner Workings, 7/21/2011)

No leverage, Dave? What, then, is this...

Fixed Income Market: Total

Oh, these are just "the old bonds ... moldering in the grave of buy-and-hold portfolios." Yet are these not debt securities — leverage, indeed — whose very viability once was largely sustained by "structuring activity" — Adam Smith's Leveraged Ponzi Scheme? And now, sans a vibrant physical economy, which in bygone days otherwise had safely anchored these securities — now shut down and replaced by a casino, where money chases money for money's sake, indifferent to the elevation of labor's productivity — Goldman expects these to continue moldering in the grave?

NEWS FLASH! As debt comes due amidst a hyperinflationary breakdown whose overriding dilemma brings continued shutdown of the physical economy — otherwise called "excess capacity" by the Federal Reserve's incompetent chairman — lacking new wealth being created, then, what ever holdings find liquid markets will be sold to meet a mountain of unsustainable obligations that, as you can see with your own eyes, was built up during the era of structured finance.

Fixed income securities, therefore, will rise from their grave ... and in so doing, accelerate the trans-Atlantic financial system's spiral into the abyss, as interest rates reach for the moon, taking the place of the Apollo Project.

Not to fear because any thug worth his jackboots knows...

"There’s no crisis–not when all of the problems are transparent, on the table, and subject to negotiation. Instead, there is a change in lifestyle underway for Greek railway conductors, Minnesota firemen, New York City teachers, and a great many other people."

But most emphatically no swindler included, because, of course, these are all about due diligence: which for any railway conductor, fireman, or teacher simply infers having picked the wrong profession. Speaking of transparent problems, what vile social commentary from the London School!

Which brings us to the European continent, where there's good news to report ... particularly for fiction lovers: "Europe Approves Bailout Plan For Greece, Other Nations"

Here's the catch...

"... the plan [has] many hurdles to overcome."

Now where have we heard that before? Oh yeah, with every other recent attempt to continue bailing out the collapsing Ponzi scheme the ECB, like its brethren at the Fed, allowed to run wild throughout the European banking system.

Not to worry because, "Europe Eyes Expanded Powers for Rescue Fund." Trouble is this so-called "power" hinges on the one nation that, once suffered terrible loss in an externally imposed, hyperinflationary looting of its economy, whose indignation paved the way for National Socialism:
"The proposed expansion of the EFSF's role would have to be ratified by national parliaments, and could fall foul of critics in Germany..."

Ya think?

"Many economists believe the only way out of the euro zone's debt crisis in the long run may be closer integration of national fiscal policies -- for example, a joint euro zone guarantee for countries' bonds, or issuance of a joint euro zone bond to finance all countries.

"Germany has firmly ruled out such steps, but [Britain's finance minister] Osborne said the second Greek bailout would only be a step toward a necessary fiscal union in the euro zone."

Inasmuch as the United States has failed to shed its Herbert Hoover-like belief in the magic of markets, the British in Neville Chamberlain-like fashion apparently still think that, simply by redrawing the map "peace in our time" will be had. Fantasy-filled, romantic saps.


So, a euro-fiction well-promoted earns a short squeeze whose consequence, technically speaking, changes absolutely nothing. Titanic still is doomed.

Fast Money
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