An Explanation Of What Is Really Going On Behind The Scenes As Rome Burns

Submitted by Tyler Durden
07/11/2011 19:17 -0400
56 comments

Unable to keep with the events in Europe which are now literally changing on an hourly basis? Fear not: SocGen's James Nixon has compiled the most succinct explanation for why we are where we are, and why things will get much worse, before they get even remotely better. In a nutshell, everything you know about the existing proposals is finished: what is currently on the table is "a wider strategy which includes lowering the interest rate on lending to Greece and returning to the idea of bond buybacks." Ah, yes, the Goldman proposal. However did we know we may end up precisely here. The problem with this proposal is that all bond buybacks at prices below par are, and always have been, considered by the rating agencies as immediate events of technical default. How this eliminates the ECB liquidity scramble bogeyman we have no idea. At this point we are absolutely certain that the only thing on the Eurozone and ECB's plate is to baffle everyone with steaming pile after pile of bullshit so unbelievable, that people are stunned for days, buying bankers valuable time to convert even more freshly printed paper into hard assets. In the meantime, there is no actual plan to deal with the problems of untenable debt, or at least not one that does not involve the outright monetization of debt and thus, the spurring of hyperinflation, which unfortunately is the last recourse to wipe out the tens of trillions in bad debts dispersed proratedly across Europe's insolvent banking system.

From SocGen:



No easy way out: Europe still considering bond swap for Greece. The fault lies not with the rating agencies; rather it is the inability of European’s political leaders to agree a new financing package for Greece and the insistence of private sector involvement that has pushed Europe’s sovereign debt crisis to new highs. There is now a very real risk that contagion will engulf Italy and Spain. Germany’s Der Spiegel captures the mood when it argues that, “The fears that are turning investors against Italy are vague and are being exacerbated by the failure of euro area finance ministers to agree on a second bailout for Greece.â€