Denninger: ‘Here it Comes’
Karl Denninger of The Market Ticker asks Is That A Bailout Or A Lit Fuse?:
The lesson here?Â We have not only fixed nothing the so-called “coordinated actions” of so-called “world leaders” have set up a potential catastrophe originating in Europe.
More than two years ago I predicted that Europe was the most likely place where the second leg – the real “Oh…. My…… God” moment – would originate in this economic mess.Â These ratios wereÂ the reason for my prediction, and all that has happened over the last two years is that they’ve gotten worse.
Neither Germany or the rest of the EU can fix this without massive reform – read that as restructuring and/or default – of the external debt in these nations, including Germany itself.
Go ahead and believe this won’t blow up if you want to.Â I look at today’s action, and indeed that of the last couple of weeks, as a clarion call and a warning that when we had the opportunity in the depths of 2008 and early 2009 to take the CDS monster out and shoot him – to lock up the fraudsters – to change the way banking works worldwide – we instead refused and let the “wise guys” off the hook.
As a consequence we have fixed nothing and the fuse has not only been lit, it is now much shorter than it was two years ago and may have gone inside beyond the reach ofÂ a pair ofÂ scissors.
The United States, ironically, is one of the better-positioned nations to survive what is coming.Â No, it won’t be easy for us, but of the developed world there are few who have the internal capacity to pull in the horns and make it – not comfortably, but to survive.
“Here it comes”
Europe is literally on the brink of collapse. Germany and the other big players in the EU have a big decision to make, and that is whether or not they bail out Greece. If they bail out the Greeks, then Spain, Portugal, Ireland and Italy will want a bailout too. But, just like here in the US, the bailouts will only prolong the problem longer, while also destroying serious value in the Euro as the EU would have to print trillions to make this work.
In any case, because nothing is being fixed fundamentally, no long-term resolution will come of it, and Europe will collapse financially in the future anyway.
It’s reminiscent of what happened with the USA and Europe in the mid-1920’s, when Europe was on the brink of collapse and got bailed out by the USA. Various European countries borrowed in excess of $7 billion to help with their economies, but eventually the USA got hit with an economic depression as well, and once the loans stopped, Europe fell apart, leading to the well known hyperinflations of the Weimar Republic, Hungary and Austria.
As was the case in the 1930’s, the current depression is global and this time it will include China and other Asian exporting countries. The economies of the world are interdependent and have yet to ‘decouple’ from each other.
If Karl Denninger is right and it is coming, then it is going to hit just about every developed and emerging nation on earth.
Hat tip Rick Blaine
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Date: February 10th, 2010
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