Monday, November 28, 2011

The Mega Banks: Goldman Sachs, JPMorgan Chase, et. al. Control Europe's Political Landscape


"While this transpires 70% of Americans are unaware of the seriousness of what is taking place in Europe  Wait until 2012.... If the six European countries default on their debt, US banks cannot possibly stay solvent. The knack on contagion could take the US banking system down with it."



One of our subscribers in Brussels sent us a copy of “A European Mechanism for Financial Stability.” The present danger is seen in sovereigns heavily in debt and the heard effect of hedge funds. They say they won’t allow speculators to govern their societies. If they are serious why don’t they ban them from their markets? A universal ban would be even better and they could throw in derivatives for good measure.

Europe still does not have a longer-term structural solution to their debt crisis and none is in the offering. Germany cannot sell its total tranche of bonds and Mrs. Merkel says that if Germany can only sell 65% of its bonds how can Eurobonds or bonds of the six insolvent nations sell theirs? The debt crisis is burrowing even deeper like a large worm undermining the entire continent. Worse yet, we just found out that the Bundesbank usually holds back bonds for market making operations, thus, they only sold about half of the issue. If the crisis continues to deepen Germany and the other euro zone nations will have to reexamine where they are headed. As we know all currencies and debt rates are increasing, which ties the banks of all the participants, including the solvent ones. Even with the German bunds, who is going to want to hold debt in a country that will have to guarantee one-half or more of the debt of other countries? At the same time the call goes out for strict supervision and enforcement of budget discipline. We have lived in these countries and that is not possible for any sustained period of time.

The Spanish election turned out as well as could be expected Calling for a vote on November 20th, the anniversary of Generalisimo’s death, turned out to be the kiss of death for Socialist PM Joe Luis Zapatero. There are too many people who liked Franco. The PP is a pro business party and already governs 11 of 17 of the country’s autonomous regions. If PP beats the Socialists in their stronghold in March, the PP will be in power for a number of years. Zapater’s legacy to the PP will have its work cut out for it with 22% unemployment and almost 7% yields to contend with. They will have to also try to restore the country’s AAA rating. Many voted for the lesser of two evils.

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