Switch on the printing presses

A couple of things lining up here. Keep in mind we are dealing with Sovereign, Credit crunch and bank default here.

Greece is screwed. Papaendrea is simply trying to be populist and abdicate responsibility for what happens next by calling a referendum. It's looking more likely that an interim govt. is going to be formed. Either way Greece is screwed because they are looking at 10 years of austerity right now as things stand. The Greek population understand this. The whole country may abdicate from Europe  which will of course leave them in an even worse position as no one would lend them a damn thing. They would be left to fend for themselves much the same way as Argentina and more recently Iceland have done. Decisions, decisions.

By forcing a haircut no one in their right mind wants to lend to lend to them so Greek bonds will have to be bought directly from the ECB or the Chinese lend and get get some sort of concessions. maybe a port or two or a shipping fleet as the Chinese specialize in Junk when it comes to ship building. Pun intended.
As soon as the EU late night meeting meeting was over on Wednesday there were flights headed to Bejing looking for 1.6 Trillion Euros.

What the Chinese had to say was telling. I'm paraphrasing here but they said "We support the Europeans but they need to get their house in order politically". In other words centralize your govt. and get your shit together. There has been no mention of going to the Fed.  It would be political suicide for the US govt to lend more money to the Europeans right now.

Portugal and the rest of the PIIGS figure this is as good a time as any to point a gun at their own heads in order to renegotiate their terms to get a similar deal etc. and threatening to pull the trigger. The rest of the PIIGS are also in a sad state as is the UK etc. To expect politicians to act rationally and in the greater interests of the EU is not going to happen. Please invert the picture below and remember if I owe you a thousand bucks I have a problem but if I owe you a Billion bucks you have the problem. So the rest of the PIIGS are pulling the "Nobody move or the Nigger gets it" con.

But there is one more piece of info to take note of and this chart says it all.
The Chinese might be ready to crank their own printing press right about now. The pressure is on as their own forced contraction appear to have worked.

So where are we at. Germany and France have tried to play hard ball but now they are dealing with Greece and Italy. If France Sovereign debt and Bank problems start to spin out of control then the ECB will print. Hell everyone else does it.
USA Printed. Swiss printed. Japan printed. China will print. Next up ECB and the UK. Then it's Ben's turn again.

EDIT: Just to be clear Europe needs, by their own estimation, 1.6 Trillion.
China needs Europe as it's their biggest market. Nobody right now is willing to lend that money. Solution: Print it. One last kick of the can. Or issue debt that cannot be repaid. 


phage said...

UK is already printing. Extra 75 billion announced. last month. probably same again next year.

Louis Cypher said...

That's not printing that's just a little easing :) Hell, Ireland did that amount with ECB permission.