Challenging the Wolfpack of Debt
As usual, Jim Sinclair hits the nail on the head with his reaction to the "nuclear option" employed by Europe over the weekdend to combat the present phase of the global crisis:
A nuclear solution to Europe’s debt problems is simply another way of saying "Quantitative Easing to Infinity."
All national debt will be bailed out. All states of the USA will be bailed out.
Paper currencies are headed to dust.
Regardless of the first knee jerk market reaction, gold is going to $1650 and beyond due to nuclear suggestions of adding more debt to entities failing because of debt. This is the EU Helicopter Drop coming up.
Credit default swaps are herein called the "Wolfpack." About that they are totally correct.
Now that they have challenged the "Wolfpack," whatever additional funds might be required will have to be provided or the "Wolfpack" will slaughter the EU.
EU Preps $645 Billion Fund to Fight ‘Wolfpack,’ Debt Crisis
May 10 (Bloomberg) -- European Union finance ministers moved toward agreement on an unprecedented loan package worth at least $645 billion to prevent Greece’s fiscal woes from triggering a broader sovereign-debt crisis and shattering confidence in the euro.
Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, the 16 euro governments sketched out plans to make 440 billion euros ($570 billion) available, with 60 billion euros more from the EU’s budget, according to three officials at the talks in Brussels. An additional, unspecified sum may come from the International Monetary Fund, the officials said.
“We are going to defend the euro,” Spanish Economy Minister Elena Salgado told reporters as she arrived to chair the meeting yesterday. “We think we have a duty for more stability for our currency. We will do whatever is necessary.”
That last statement captures the underlying problem in a nutshell, and it is no different from the strategy still in play on this side of the pond.
“Europe is getting its act together,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
So, that's what "getting your act together" looks like these days. Can you see the inconsistency in that line of thinking? Quantitative easing does not represent a financial house that's in any semblance of order or strength.
Perhaps now Europe will continue to follow the U.S.'s lead and will follow up this massive measure with additional, ineffective stimulus spending. Or better yet, perhaps they'll choose this moment in history to grapple with some multi-generational challenge with a multi-trillion-dollar program for "change we can believe in".
Those in charge of sovereign spending within the old-guard economies have flown completely off the handle. The closest thing to payment that will ever be collected on these debts will be paid in blood, sweat, and lots of tears.
We'd have been better off to let the wolfpack devour us while they were still relative pups. The rabid, bailout-fed pack can not be repelled, but by making it stronger we only further sealed our economic fate.