Monday 28 November 2011

Every Man For Himself

At first it was a drip drip, but now the messages warning of an Euro breakup - or euphemistically called 'a major event' - is gathering pace. The Financial Times warns that there are only 10 days left:
Italy’s disastrous bond auction on Friday tells us time is running out. The eurozone has 10 days at most.
The Organisation for Economic Co-operation and Development (OECD) gives very chilling forecasts that the Eurozone is rapidly deteriorating (my emphasis):

THE OECD says the eurozone crisis is now one step away from plunging advanced economies into an abyss of recession and even depression, with waves of bankruptcies and wealth destruction in Europe.

"The euro area crisis represents the key risk to the world economy at present," the OECD said in an unusually stark outlook report.

"A large negative event would... most likely send the OECD area as a whole into recession."

"If not addressed, recent contagion to countries thought to have relatively solid public finances could massively escalate economic disruption,"
Not only that but there's a large scale 'quiet' bank run on Eurozone banks and a very visible one a la Northern Rock in an another EU country - Latvia. Money is pouring out of the Eurozone at an alarming speed and the Euro banks are rapidly reaching a liquidity crisis. Welcome to credit crunch 2.0.

Those warnings continue with Zerohedge's post here (my emphasis):
Moody’s and others are indicating that time is running out and it may be a matter of days. ICAP, the currency trading facilitator, said it is testing its systems for a return to the drachma or even the Deutsche mark. Italian PM Monti admitted that the breakup of the Eurozone has been broached at meetings with top leaders.

This morning European stocks and U.S. futures are spiking sharply. The pundits are trying to pin the spike on everything from Black Friday sales to an IMF bailout of Italy. We think the spike is the reaction of a very oversold market to the resurfacing of the Sarkozy based rumor of a treaty deal for fiscal linkage. But, even if it’s true, can it be implemented quickly enough for a situation thought to be days away from crisis or climax?
Normally I'm reluctant to take the apocalyptic view, however clearly there seems panic behind the scenes. As this piece for the Telegraph asks, why haven't the supposed FCO warnings of possible riots and chaos in the event of a Euro collapse been published officially?

The radio silence from the EU (apart from some recent desperate unworkable announcements) lead to the suspicion that, like a falling dictator who quickly takes as much money as possible before he scarpers, the EU etc are desperately sandbagging to save themselves.

In short now it's every man for himself.

Update: Just seen that Richard North has more.


  1. Just read the BBC economic news and according to them the markets are up on the hope of the Dec 9 meeting.

    They have nothing negative to say instead going with Wolfgang Schaeuble's increasing speed in the hamster wheel.

    Whilst I may take some schadenfraudian satisfaction among my peers if it happens, I can't help but look at the word 'if' and be mesmerised by it.

    I think they are prepared to go as far as it takes to keep the project afloat. Maybe even unto war, as the Fat Frau hinted at.

    Hopefully the markets pull the plug soon, thereby making any final, foul attempt to defraud the taxpayers by giving debt forgivness to the banks, null and void.

    I won't, if you don't mind, be holding my breath.

  2. @Xen the markets (FTSE) are not normally a good indicator - short term ups and downs usually mean nothing.

    You have to use longer term trends. The key measures are, bonds for example and where the money long term is going and that currently is 'out' of the Eurozone double-quick.

    The problem is the EU have reached an impasse. There's only two real solutions on the table - Germany agrees to fiscal union which it cannot legally do or an orderly breakup of the eurozone which is unpalatable to the EU.

    Personally I suspect a blame game is in operation because the main EU players know what's coming - the inevitable.

    The only reason the Euro still exists is because the markets are worried that that the consequences of the alternative (a Euro collapse) will be worse - but we have very nearly reached the point where that will no longer be the case - then it's game over.

  3. Again, I hope you're right.

    I've withdrawn the pittance in savings that we possess and we've enough food for six months, nine if we're careful.

    The only 'luxury' item is a bag of popcorn...

  4. @Xen You're not the only one thinking in those terms. I'm rather worried to say the least

  5. Europe entered a depression in 2008, but just as in the "great depression" it will be many years before we realise just what has happened. And as then when it was 1939 before it was acknowledged as being a depression we could be heading for something very nasty

    Capitalism has been broken by the liberal Left collusion with the big corporates, and we have seen this global economy emerge that many call corporatism. It has concentrated wealth in the hands of a few and enslaved the middle classes in debt, whilst trapping many working class people in benefits. Freedom has gone

    All the money that has been printed and given to the banks has been wasted. It has achieved nothing.

    Again the pond life in Westminster are looking at big ticket infrastructure projects to kick start the economy. All this will do is benefit lawyers and consultants, and give us loads of Edinburgh trams

    What they should do is pay our dept, reduce taxes and ditch regulation. This won't happen though as they are all thick, really really thick. We used to joke about them being one step behind events, but today they are 10 steps behind. And whilst we see stories in the telegraph about preparing for the breakup of the Euro, none in the Westminster bubble really believe it will happen. It is this that will cause us the most pain, not the breakup itself which will quite quickly become of benefit to us.

  6. Sorry to do this...

    '... Germany agrees to fiscal union which it cannot legally do...'

    Whatever it takes

    They're not going to let go of the project and won't let a little matter of 'legality' get in the way.

  7. @Xen, thanks and very interesting and I agree with your sentiments that the project is not going down without a big fight.

    A couple of problems at first glance - can they enact any changes in time - a major change of the German Constitutional would take a long time to facilitate as well as be political dynamite particularly amongst German voters.

    Then there's this:

    If the constitution were to be replaced with another version through a popular referendum, this would be radical, but couldn't be criticized.

    Referendums are outlawed in the German Constitution due to their usage by Hitler. So I can't see any of what are enormous changes happening in time with the current markets as they are. But as you suggest the will of our politicians to do what is absolutely necessary to stay in the EU knows no bounds.

    However certainly something to keep an eye on. Many thanks

  8. I think you've hit the nail on the head with the, 'can they enact any changes in time?'

    However, I cannot fathom what the plusses are in floating an idea that would take too long to implement and thereby negate the intended result.

    Keep an eye on Herr Schaueble, for it is he that is attempting to drive this particular Tiger through the constitution.

    After reading Zerohedge, The Slog and the Talking Man I am becoming more convinced than ever that absolutely no-one knows what's going on or where it will end.

    I see that Germany have asked Fitch to take a look at the UK's triple A rating. On the basis that we shouldn't have it. I've no idea what stunt they're pulling but it won't be for the benefit of the UK that's for sure.

    As my head hurts from information overload I'm going to call it a night. Wake me when it's all over.

  9. @Xen You're right about no-one really knowing. My guess (and it is only a guess albeit educated) is that they are propping up the system for as long as possible to give them time to prepare for the collapse. I wonder whether this Constitutional Court proposal is part of the same strategy.

    It seems from the continuous 'chatter' that panic is starting to set in