09 September, 2010

Trichet's "Quantum Leap" About To Create Tremors In Europe

More fireworks out of Europe, following in the footsteps of the disclosure about Deutsche Bank's dramatic underfunding and need to raise capital, is JC Trichet's stunning announcement that Eurozone members that break the region's rules on public finances should be excluded temporarily from Europe’s political decision-making, according to the FT.
And two from the comments:
by Fred Hayek
on Thu, 09/09/2010 - 12:50

No political input if you don't meet the economic rules?

Why not just call it "Germany"? Somewhere in hell the nazis are kicking themselves. That's all we had to do?!?!
by Caviar Emptor
on Thu, 09/09/2010 - 13:29

All too eerily reminiscent of pre-War diplomacy in the 1930s where small countries get all too easily fed to the sharks to allow the bigger countries to party on. Imagine the consequences of a "quasi-expulsion": doing business in such a place becomes a nightmare as a fog of uncertainty descends. Big political risks too.

Bottom line: any threat to globalism, any sign of strain on the frozen smile of governments threatens all other economies, particularly those that are in debt up to their eyeballs. If anybody in the green wall of silence starts to get grouchy, then there's a chance that all bets are off and the hourly recycling of the mountains of debt stops. And that, folks, is the 21st Century equivalent of The Bomb Paranoia of the late 20th Century.

When there's even the slightest hint of a soupcon of a chance that the global system could unravel, that triggers huge anxiety because all the big banks are broke, all the governments are in huge debt and all citizens are feeding on the teat of money printing to support the debt.

There's just not a lot of wiggle room left. Gold is clearly the favored safe haven because there's no telling which currency could blow up. Even those of creditor nations like Japan and Switzerland could get hurt if their trading partners and political cronies are in the soup. They'd have to face a brave new world alone.

And a weak 30 Yr Bond auction today isn't helping boost confidence in the debt system. Were are the troops when you need 'em?
Chuckling, just chuckling...


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