"Coming into Focus
Earlier in the year I warned of a pending EU crisis that has now arrived in full force. I have been writing about the EU problems over the past month to bring them back into focus, because I believe this is the next, biggest, event on the timeline. While everyone was watching Washington Theater, the EU crisis was raging. This is a real risk to banking, currencies, and sovereign debt that is not easily fixed. Sadly, the public has very little understanding of what shapes their world, content to live ignorant until directly impacted. The majority of my writing has been about the US Money Market Mutual Fund exposure to the EU banks (in the area of 50% for some of the largest). I write about these problems not to scare, but to warn.
Funding Issues within the EU
Over the past few years, the banking industry has funded the majority of sovereign debt buying to keep the EU going. Now that this unsustainable process is coming to an end, interest rates are rising in Spain and Italy - big decisions need to be made soon. Remember the EU banks didn’t get their TARP, yet. Spain’s bond market is bigger than that of Greece, Portugal and Ireland’s combined, at about $900B. Italy’s debt market is roughly 3x the debt market of Greece, Ireland, and Portugal combined, at about $2T. The ECB will need to backstop these debt markets or else face a breakup of the EU. Ultimately the EU will cease to exist, but not yet.
Early Monday morning, August 8th, the ECB promised to “actively implement its Securities Markets Programme.” This decision was made at a time when the banking system was closer to failure than most recognize. One source involved in the talks stated, “I don’t see how we can survive another week like this one.” SocGen, France’s second largest bank, and UniCredit Banca, Italy’s largest bank were both on the brink. While the ECB’s intervention helped stabilize European markets and banking system for now, they will need to significantly expand their efforts in the near future..."
at http://www.zerohedge.com/contributed/unfolding-eu-crisis
Earlier in the year I warned of a pending EU crisis that has now arrived in full force. I have been writing about the EU problems over the past month to bring them back into focus, because I believe this is the next, biggest, event on the timeline. While everyone was watching Washington Theater, the EU crisis was raging. This is a real risk to banking, currencies, and sovereign debt that is not easily fixed. Sadly, the public has very little understanding of what shapes their world, content to live ignorant until directly impacted. The majority of my writing has been about the US Money Market Mutual Fund exposure to the EU banks (in the area of 50% for some of the largest). I write about these problems not to scare, but to warn.
Funding Issues within the EU
Over the past few years, the banking industry has funded the majority of sovereign debt buying to keep the EU going. Now that this unsustainable process is coming to an end, interest rates are rising in Spain and Italy - big decisions need to be made soon. Remember the EU banks didn’t get their TARP, yet. Spain’s bond market is bigger than that of Greece, Portugal and Ireland’s combined, at about $900B. Italy’s debt market is roughly 3x the debt market of Greece, Ireland, and Portugal combined, at about $2T. The ECB will need to backstop these debt markets or else face a breakup of the EU. Ultimately the EU will cease to exist, but not yet.
Early Monday morning, August 8th, the ECB promised to “actively implement its Securities Markets Programme.” This decision was made at a time when the banking system was closer to failure than most recognize. One source involved in the talks stated, “I don’t see how we can survive another week like this one.” SocGen, France’s second largest bank, and UniCredit Banca, Italy’s largest bank were both on the brink. While the ECB’s intervention helped stabilize European markets and banking system for now, they will need to significantly expand their efforts in the near future..."
at http://www.zerohedge.com/contributed/unfolding-eu-crisis
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