Another must read hmmm report, this week on the US “situation”, Greece, Spain, and much more.
“Well, it’s true: “inevitable” is not the same thing as “imminent.” When people see that something is inevitable — and I’m guilty of this mistake myself — they tend to believe those things are also imminent, even when that’s not so. But the inevitable is inevitable, and that means it must happen. We usually can’t predict exactly when — and such things often take far longer to arrive than we imagine they possibly can — but once things start to unravel, they tend to accelerate quickly.” – Doug Casey
Having taken too long to decide on the previous raising of the debt ceiling amidst a bungled process which led to a botched agreement, Congress will once again find itself having to find a way to make meaning- ful compromises and adjustments in the financ- es of the United States or face a similar situation to last August, when the S&P500 dived 16% as belief that both sides of the House simply had to get something done in time, turned to disbelief that they really were foolish enough not to.
Greece is back
With IBEX down close to -10 percent in two days, the Euro crisis is definitely back. Only now, it is not only SPain dominating the news. The Greek drama revived over the weekend. For all those who thought the Greek mess was sorted out; sorry. The composition of the Greek situation is quite different to the Spanish reverse inquisition. Ekathimerini describes the situation in a splendid way. Look forward to a very hot August in the Med area.
Greece retakes its position at the heart of the European debt crisis this week as its creditors assess how far off course the country is from bailout targets, raising again the specter of its exit from the euro.
Greece’s troika of international creditors — the European Commission, the European Central Bank and the International Monetary Fund — will arrive in Athens tomorrow amid doubts the country will meet its commitments and reluctance among euro-area states to put up more funds should it fail.
“If Greece doesn’t fulfill those conditions, then there can be no more payments,” German Vice Chancellor Philipp Roesler told broadcaster ARD yesterday, adding that he is “very skeptical” Greece can be rescued and that the prospect of its exit from the monetary union “has long ago lost its terror.”
Extraordinary Strains
Guest post by Hussman of Hussman Funds.
Just weeks after the enthusiasm over Europe’s plan to plan for the possibility of using the European Stability Mechanism to bail out Spanish banks, the subtle technicality – that direct bailouts would make all of Europe’s citizens subordinate to even the unsecured bondholders of Spain’s banks – has predictably deflated that enthusiasm. On the growing recognition that addressing Spain’s banking problem will mean taking those banks into receivership, wiping out unsecured debt (much of which unfortunately was sold to unknowing Spanish savers as secure “savings” vehicles), and having the Spanish government sort out the damage, Spanish 10-year debt plunged to new lows last week (see chart below), and Spanish yields hit fresh Euro-crisis highs. At the same time, interest rates in Germany, Finland, Holland, Denmark and Switzerland all moved to negative levels looking 2-5 years out. The world is paying these governments to lend money to them, because the only way to acquire other default-free, non-commodity assets is to hire armored trucks and secure vaults to take delivery of physical currency. This set of conditions is not normal or sustainable, and indicates extreme credit market strains in Europe.
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