Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20
AMD is KILLING Intel as Ryzen Zen 3 Takes Gaming Crown, AMD Set to Achieve CPU Market Dominance - 13th Oct 20
Amazon Prime Day Real or Fake Sales to Get Rid of Dead Stock? - 13th Oct 20
Stock Market Short-term Top Expected - 13th Oct 20
Fun Stuff to Do with a Budgie or Parakeet, a Child's Best Pet Bird Friend - 13th Oct 20
Who Will Win the Race to Open a Casino in Japan? - 13th Oct 20
Fear Grips Stock Market Short-Sellers -- What to Make of It - 12th Oct 20
For Some Remote Workers, It Pays to Stay Home… If Home Stays Local - 12th Oct 20
A Big Move In Silver: Watch The Currency Markets - 12th Oct 20
Precious Metals and Commodities Comprehensive - 11th Oct 20
The Election Does Not Matter, Stick With Stock Winners Like Clean Energy - 11th Oct 20
Gold Stocks Are Cheap, But Not for Long - 11th Oct 20
Gold Miners Ready to Fall Further - 10th Oct 29
What Happens When the Stumble-Through Economy Stalls - 10th Oct 29
This Is What The Stock Market Is Saying About Trump’s Re-Election - 10th Oct 29
Here Is Everything You Must Know About Insolvency - 10th Oct 29
Sheffield Coronavirus Warning - UK Heading for Higher Covid-19 Infections than April Peak! - 10th Oct 29
Q2 Was Disastrous. But What’s Next for the US Economy – and Gold? - 9th Oct 20
Q4 Market Forecast: How to Invest in a World Awash in Debt - 9th Oct 20
A complete paradigm shift will make gold the generational trade - 9th Oct 20
Why You Should Look for Stocks Climbing Out of a “Big Base” - 9th Oct 20
UK Coronavirus Pandemic Wave 2 - Daily Covid-19 Positive Test Cases Forecast - 9th Oct 20
Ryzen ZEN 3: The Final Nail in Intel's Coffin! Cinebench Scores 5300x, 5600x, 5800x, 5900x 5950x - 9th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Euro Debt Crisis, Greece, Portugal, Spain Debts Are Unpayable

Interest-Rates / Global Debt Crisis May 30, 2011 - 05:09 AM GMT

By: Bob_Chapman

Interest-Rates

Best Financial Markets Analysis ArticleWe hope all of our appearances on Greek TV, radio and in the press have helped the educational process and to allow the Greeks to identify who the real culprits are, and what to do about it. It has just been over a year since this tragedy became reality, but we reported on Greece and Italy ten years ago. They both bent the rules to enter the euro zone. We knew then that Goldman Sachs and JPMorgan Chase were assisting them by creating credit default swaps. There were a few European journalist who reported on the issue, but the elitists control the media and few noticed that Greece and Italy were beyond bogus.


The events of the past year remind us of the onslaught of the credit crisis, which unfortunately is still with us. What finally brought about trouble for Greece and other euro zone countries was the zero interest rate policy of the Fed and slightly higher rates by the EC. These policies encouraged speculation and caused problems that would have never happened otherwise. In addition, the stimulus measures by both banks were embarked upon to save the financial sectors and in that process promote speculation by the people who caused thee problems in the first place. That began with QE1 and stimulus 1, which we now recognize as our inflation drivers. Wait until QE2 and stimulus 2 appear next year. It will be very shocking.

Just to show you what a loser lower rates are just look at economic progress. There has been no recovery under either QE1 or QE2. Even 4.60% 30-year fixed rate mortgages have not encouraged people to buy homes. They are either broke or they don’t know whether they will be employed five-months or even one year from now, so how can they buy a house? Consumer spending is falling along with wages. The small gains you see are for the most part the result of higher inflation.

Growth moved from the fourth quarter of 2010 of 3.1% to 1.8% in the first quarter of 2011. We had forecast 2% to 2-1/2% growth for 2011. That is little to show for a minimum of $1.8 trillion spent in QE2 and stimulus 2. Without that we probably would have been at a minus 2%. Just think about that. Trillions of dollars spent with little results. Obviously such programs do not work very well. You would have thought the Fed would have found a better way after two such failures. They know what the solution is, but they won‘t put it into motion and that is to purge the system and face deflationary depression. That will happen whether they like it or not, but in the meantime the flipside is 10% inflation headed to 14% by yearend and another greater wave next year, and another in 2013. Unimpressive results is not the word for it. It has been a disaster and the Fed keeps right on doing it. As a result of the discounting of QE3 we wonder what the stock market has in store for us? We would think that a correction would be in the future. If that is so could that negatively affect the economy? Of course it could. All the good news coming, further stimulus by the Fed, will have been discounted. What does the Fed do for an encore? Create more money and credit – probably? Does that mean hyperinflation, of course it does. If the Fed stops the game is over. We are also seeing fewer results from additional stimulus. It is called the law of diminishing returns. In the meantime the dollar goes ever lower versus other currencies, but more importantly versus gold and silver.

If you can believe it, even though the Fed has provided financial flows and assisting speculative flows so Wall Street, banking and hedge funds can glean mega-profits, it still has not provided enough liquidity for additional GDP growth. The small and medium sized businesses have been shut out. The latter participants do not play those games, it is the propriety trading desks, hedge funds and the remainder of the leveraged speculating community that takes advantage of the excess liquidity and the Bernanke put of keeping bonds and stocks up artificially. The Fed and the others are sustaining this process. There are negatives for the Fed and their friends, higher commodity and gold and silver prices. The Fed and banks temporarily took care of that and haven’t quite finished their latest short-term foray in that sector. There are still fears as well regarding Greek debt fears and their CDS, Credit Default Swaps, and those of other euro zone members. They could still blow up in everyone’s faces in a partial if not total default, which is very likely. Banks are on the wrong side of this trade as well as the bond trade, not only with Greece, but with five other nations as well.

In the final analysis papering over the problem never works. The problems also reemerge with new additional problems. The combination of excessive speculation and liquidity and too big to fail is going to end badly, as it always has. De-leveraging will eventually rear its ugly head.

As we said, Greece and others could cause extensive bond and CDS problems and that is not only being reflected in a lower euro, but in higher Greek bond yields of 16-3/8% in their 10-year notes and 24-3/4% in two-year yields, and Portugal, Ireland and Spain are not far behind. The socialists just lost the latest election in Spain in a big way showing the public is fed up with the lies of government and the bankers. The euro is attempting to break $1.40 to the downside as a result of those election results and the Greek impasse. It is obvious that Greece cannot service its debt and reduce its deficit and the other deficient nations are in the same boat. The CDS marketplace would be severely disrupted if there were a sovereign debt default. That fear, of contagion, could be seen in higher rates in Spain, some .30%, the highest upward move this year. Greece, Ireland and Portugal have problems that can never be resolved and Spain, Italy and Belgium are not far behind.

Spain is implementing austerity, but that means like in recent weeks millions have demonstrated in 72 Spanish cities. The 17 autonomous regions have doubled their debt in the last 2-1/2 years. The socialists just did not know when to stop, now they are out of office. Spain is going down. There is no way they can sustain. That should bring the CDS situation front and center. It will also increase unemployment for those 18 to 35 to 40% or more. It is not surprising that half of the protestors were in that age group.

Greek PM George Papandreou, who secretly promised Europe’s elitists bankers that he would sell-off and or pledge Greek state assets, wants to sell stakes in Hellenic Telecommunications, Public Power Corp., Postbank, the ports of Piraeus and Thessaloniki and their local water company. All supposedly worth $70 billion. The bankers, of course, say they are worth far less. They want to buy them for 10% to 20% of what they are worth – so what else is new. The Cabinet went along with the giveaway, as expected, and without a whimper. The EU is demanding all the assets be sold off immediately, so the bankers can buy them as cheaply as possible. The threat by the bankers is if you do not sell and sell fast for a pittance, then we won’t fund loans of $42 billion over the next 2-1/2 to 3 years. If not funded it would be “re-profiled” another new euphemism for default and debt restructuring, or perhaps debt extension.

Then there is the threat that the bankers, the ECB-European Central Bank for the Euro Zone, would refuse to supply the Greek banking system with any further liquidity. They would then admit their new word refilling would mean default. This would end with Greece leaving the euro zone and the euro and total default, the issuance of a new drachma at 50% of the value of the euro and perhaps even leaving the EU, the European Union. Jens Weidmann, the Bundesbank’s new president said no compromise on monetary stability and a correction back to normality and a full separation between monetary and fiscal policy. It is obvious to us that in spite of debt of $620 billion that Germany wants to cut Greece loose. The German voters said that in last month’s elections. The Germans should have accepted default for $0.50 on the dollar offered by the Greeks a year ago. Even if the Greeks sold $50 billion in assets it would be a drop in the bucket, when they cannot possibly pay off the remainder of the debt ever. This shows you how derelict the bankers and sovereign countries were in allowing this debt to be accumulated. In addition Goldman Sacks and JPMorgan Chase hid their problems, via credit default swaps and now these same banks and others want to loot the country.

Tuesday Jean-Claude Junker, chair of the euro zone finance ministers committee had to admit he lied about the secret meeting the bankers had concerning Greece. He is another who says Greece cannot pay its debt under its current debt burden. Both he, and Lorenzo Bini Smaghi, Member of the Executive Board of the European Central Bank, said that any partial or total default would put all of Europe and the euro in jeopardy. In fact, some of these apologists for banks, especially the Germans, have entertained having Germany control Greek budgets and collect taxes. That means you would have a financial SS running things not only in Greece, but also in Ireland and Portugal and eventually in Belgium, Spain and Italy.

It should be noted the ECB paid in capital $14 billion and they hold $183 billion in Greek debt. We would say the ECB is already insolvent. It could be the Ponzi scheme, much like that of the Fed’s will soon come to an end. Some believe that a 50% markdown is in store for Greek debt. That could have worked a year ago, but not low. It is 2/3’s or more of a write down. We can just imagine Greece, Portugal, Ireland, Belgium, Spain and Italy recapitalizing the ECB – forget it. This is why partial or full debt default are out of the question. Just to buy time the ECB will kick the can down the road as long as they can. Those six nations in trouble should all go back to their currencies, default by at least 2/3’s and leave the euro zone.

European bondholders with a 50% debt write off are offside $1.2 trillion for Greek, Portuguese and Irish debt. If we include Spain, Italy and Belgium the 50% write off is $846 billion. That should easily destroy the ECB and the euro zone. We predict that by October changes will have to be made not only in the EU and euro zone, but in the UK and US as well. The battle rages in the euro zone, EU, UK and in the US over overwhelming debt. The debts are all unpayable. This dance of debt could go on for 4 or 5 months. Even a temporary solution is not going to work. The debts are unpayable. Once the lending stops the bottom falls out. The same is true in the US.

Theinternationalforcaster.com

Global Research Articles by Bob Chapman

© Copyright Bob Chapman , Global Research, 2010

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Ilda
04 Jun 11, 18:43
Portugal

Here it is again: preview on a mini scale when compared to the US


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules