We Are Witnessing The Largest Financial Bubble In History

"The biggest bubble in human history is in sovereign debt, the obligations of governments around the world. The classic signs of a bubble are present. Despite the fact that virtually all governments are insolvent (the Reality), there exists an almost universal belief that sovereign debt is safe (the Perception). There is a massive gap between reality and perception.

What we hear is that gold, silver and oil are in bubble mania. Nothing could be further from the truth. The perception is so far below the reality that we effectively have a negative bubble. Buyers of these three assets are speculating fools according to the mainstream media. The only thing that is foolish is not holding onto positions and not adding as nominal prices periodically come down.

The bubble is in paper assets, particularly sovereign debt. Historic lows in interest rates mean that prices are at historic highs as rates and prices move inversely. Take into account the solvency factor, and the conclusion is inescapable that such paper assets are in the biggest bubble in history. Sadly, the vast majority of people will not understand this until it is too late and their savings have been destroyed.

The current pricing for gold, silver and energy assets is a gift to those with the ability to look at the facts as presented and take a longer-term view.”

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/19_We_Are_Witnessing_The_Largest_Financial_Bubble_In_History.html

Bill Gross: You Can't Trust An Auction In Spain, Or Anywhere In Europe

"The Spanish Treasury auctioned €3.18 billion of 12-month and 18-month Treasury bills this morning. While borrowing costs surged at the auction, demand stayed strong. Markets rallied after the auction and Spanish 10-year yield fell on the news.
But PIMCO's Bill Gross told CNBC that he doesn't trust Spanish auctions because they are just a function of Spanish banks:

"It is an artificially controlled market for the most part. That doesn't mean private investors like PIMCO wouldn't buy Spanish bonds but for the most part the bills offered today, and the twos and tens offered later this week basically are bought by Spanish banks, as a function of the Spanish economy, and the Spanish connectivity in terms of simple banking. So you can't really trust an auction, not only in Spain, but in Portugal, Ireland, anywhere in Europe basically, it's a function of what their banks are doing as opposed to what we are doing from the outside."

Gross also compared Spain to a tumor saying it didn't have to be cancerous, but it would inhibit the "normal function of other organs."

at  http://www.businessinsider.com/bill-gross-spanish-auction-2012-4?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29#ixzz1sKf1CZ4T

Deja Vue All Over Again; ECB Says Bond Buying Program Available; Sweet Talkin' Guys

"ECB Says Bond-Buying Program Available

The ECB went from loading up on sovereign debt and making a huge mess of it when Greece defaulted, to the LTRO program which has not made a big mess yet but will. Things are about to go full-circle as the ECB threatens once again to make another mess of things with sovereign bond purchases.

The Bundesbank, Germany's central bank protested bond purchases the last time (correctly), and will do so again, likely to no avail, and with the same predictable results.

CNBC reports ECB Official Says Bond-Buying Program Available

ECB Executive Board member Benoit Coeure, the ECB board member in charge of market operations, said the central bank still had the Securities Market program (SMP) in place allowing it to purchase debt of euro zone nations, should the need arise.

"We are seeing today growing signs of normalization on a whole group of market segments ... but the situation in recent days shows that this normalization remains fragile," Coeure told a conference in Paris.

Referring to Spain, where sovereign debt yields have spiked amid concerns over the government's ability to cut its deficit, Coeure said: "The political will is there, which makes me think that what is happening at the moment in the market does not reflect the fundamentals."

at  http://globaleconomicanalysis.blogspot.com/2012/04/deja-vue-all-over-again-ecb-says-bond.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

CHART OF THE DAY: THE TRUTH ABOUT EUROPE

"The economy is getting worse.

We just got a big slew of PMI numbers, and a few things are clear in Europe.

• The periphery is hurting badly. What countries like Spain, Italy, and Greece so desperately need is growth, and they're not getting any of it. This not only is bad from a societal standpoint (as the jobs picture gets worse and worse) but it makes sovereign debt dynamics worse, as the GDP part of debt-to-GDP shrinks.
• Core is not doing so hot either. The French number showed a particularly steep drop. Germany has dropped below 50 as well.
• Surprisingly, the only real "bright spot" was Ireland, which saw a big pickup in New Orders and exports. Somehow it continues to avoid the curse of the rest of the PIIGS.

This chart from Markit summarizes the situation up nicely, as it shows the core of Europe rapidly meeting the periphery in the recession zone.


at http://www.businessinsider.com/chart-of-the-day-european-pmi-numbers-2012-4?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29#ixzz1qtGMOPOl

READ MORE

European Bailout Stigma Shifts From Banks To Sovereigns As Bundesbank Refuses PIG Collateral

"Back in early February, the ECB's Margio Draghi told a naive world when discussing the implication of taking LTRO bailout aid, that “There is no stigma whatsoever on these facilities." We accused him of lying. Additionally, we also suggested to put one's money where Draghi's lies are, and to go long non-LTRO banks, while shorting LTRO recipients. In two short months the spread on that trade has doubled...



... which intuitively is not surprising: after all, as a former Goldmanite (and according to some - current), Draghi is merely treating Europe's taxpayers like the muppets they are. As such, fading anything he says should come as naturally as Stolpering each and every FX trade. Yet what that little incident shows is that despite all their attempts otherwise, the central planners can not contain every single natural consequences of their artificial and destructive actions. Today, we see learn that the same Stigma we warned about, and that Draghi said does not exist, is starting to spread away from just the bailed out banks (becuase we now know that the LTRO was merely a QE-like bailout of several insolvent Italian and Spanish banks), and to sovereigns. From Bloomberg: "Germany’s Bundesbank is the first of the 17 euro-area central banks to refuse to accept as collateral bank bonds guaranteed by member states receiving aid from the European Union and the International Monetary Fund, Frankfurter Allgemeine Zeitung reported." And where Buba goes, everyone else is soon to follow. And what happens then? Since it is inevitable that Spain and Italy will be next on the bailout wagon, what happens when over $2 trillion in bonds suddenly become ineligible for cash collateral from the only solvent central bank in the world (aside for that modest, little TARGET2 issue of course). Will it force the ECB to be ever more lenient with collateral, and how long until the plebs finally realize that the ECB has been doing nothing but outright printing in the past 5 months? What happens to inflationary expectations then?..."

at http://www.zerohedge.com/news/european-bailout-stigma-shifts-banks-sovereigns-bundesbank-refuses-pig-collateral

It's Official - The Fed Is Now Buying European Government Bonds

"As if the 'risk-less' dollar-swaps the Fed has extended to any and every major central bank were not enough, William Dudley just unashamedly admitted that the Fed now holds 'a very small amount of European Sovereign Debt'. Explaining this position, as Bloomberg notes:

• *DUDLEY: FED HOLDS OVERSEAS SOVEREIGN DEBT TO MANAGE RESERVES
• *DUDLEY: HIGH BAR FOR ADDITIONAL PURCHASES OF EUROPE DEBT

Dudley, testifying to a House panel, noted that he doesn't see more efforts by the Fed to buffer the US from Europe's tempests and believes European banks are deleveraging in an orderly manner. So not only is the US taxpayer bailing out Europe via the IMF (as we noted here a week ago using Greece as an intermediary) and the Fed is providing limitless USD swap lines but now we join the ECB in monetizing European government bonds - something we warned might happen back in December 2010. As for being a small amount - wasn't MF Global's holding relatively small too? And aren't we getting a little full from all this buying?"

at http://www.zerohedge.com/news/its-official-fed-now-buying-european-government-bonds

Portugal’s Insolvent Town Halls and the Trouble with Greece’s New Bonds

"It appears Portugal's municipalities have a debt problem that is a spitting image of that plaguing Spain's regional governments. As remittances from the central government decline, many have reached the point where they would normally be considered insolvent. Some € 9 billion in municipal debt are apparently threatening to default unless some aid comes forth from the central government. The problem with this is of course that the government needs to hew to its 'troika'-imposed deficit targets and therefore can not help them.

As Bloomberg reports:

“Portugal’s town halls face default amid 9 billion euros ($12 billion) of debt unless the government provides aid soon, said Fernando Ruas, president of the nation’s association of municipalities.

“At a company we call it insolvency,” Ruas said in a telephone interview from Lisbon on March 21. “It could happen that some town halls could have to restructure their debt if the government doesn’t intervene.”

Ruas blamed a decline in money transfers from the government in Lisbon to municipalities for their growing financial woes. Portugal last year became the third euro-area country to request external aid, following Greece and Ireland. Prime Minister Pedro Passos Coelho is cutting spending and raising taxes to meet the terms of the 78 billion-euro rescue.

“A sharp decrease in money transfers has made it harder for many town halls to comply with their ongoing commitments,” said Ruas. His association estimates town halls face about 9 billion euros in liabilities. About 1.5 billion euros of the total is in bills to suppliers overdue by more than 90 days while the remainder is mostly made up of debt banks, he said.”

at  http://www.acting-man.com/?p=15800

Ugly European Sovereign CDS Rerack

"An ugly day all around as European sovereign CDS jump the most in three weeks...

5Y 10Y 5/10's
ITALY 374/382 +15 365/385 -10/0
SPAIN 432/440 +15 426/446 -5/5
PORTUGAL 34.5/35.5 0 37.75/40.75 3.5/6.5
IRELAND 608/620 +6.5 529/599 -90/-10
GREECE 66%/76% 0 66%/79% 0%/3%
BELGIUM 225/235 +7 213/233 2/14
FRANCE 174/178 +9 198/206 22/26
AUSTRIA 164/170 +9 182.5/192.5 18/23
UK 63.5/66.5 +2.5 81/87 17/21
GERMANY 74/77 +5.5 97.5/103.5 22/26

Italy, Spain, Ireland, and Belgium remain inverted - i.e. not bullish!





Note Spain is now getting back close to record wides again...

Charts: Bloomberg"

at http://www.zerohedge.com/news/ugly-european-sovereign-cds-rerack

Uncertain Future for the Euro: The Plight of the Netherlands. Staggering Unemployment in Spain and Greece

"A report by the London-based Lombard Street Research, which says the Netherlands is badly handicapped by euro membership, and as a result the Dutch Freedom Party has called for a return to the Guilder. Leader Geert Wilders has become the first political movement in the euro zone with a large popular base to opt for withdrawal from the single currency. The Freedom Party is a conservative populist party. We do not read Dutch, but the very fact that this information was only picked up by a few sources outside of the Netherlands shows you what managed news is all about.

Needless to say, the Hague disagrees with the report, which puts the cost for subsidizing and bailing out of the six nations in trouble at $3.2 trillion. We set the costs months ago at $4 to $6 trillion. Mr. Wilders’ answer is if they disagree with the report, why don’t they have the guts to hold a referendum? Let the Dutch people decide.

The report says as we have said so often, that the euro zone cannot survive in its current form. Dealing this year with Ireland, Portugal and Greece should be relatively easy by letting them slide away. Spain and Italy have partially been shunted aside and by the time they are dealt with they will be even weaker than they are now. The socialist mind set is to push problems into the future, which only worsens the problems. The big question is will Europe strive for world government and allow it to thoroughly destroy the EU financially and economically?..."

at http://www.globalresearch.ca/index.php?context=va&aid=29817

Special Series: European Economies At Risk - Italy

"After a turbulent 2011, Italy regained some financial stability when the technocratic government of Prime Minister Mario Monti came to power. Monti's government introduced a rapid series of economic reforms that, along with the purchase of government bonds by the European Central Bank (ECB), temporarily took Italy away from the center of the European crisis. The government also benefits from a political environment in which the main parties want to preserve the status quo. However, Italy has economic, social and political issues that are far from resolved. Slow economic growth, a large public debt, high levels of tax evasion and persistent illegal activities undermine Italy's chances to exit the current crisis..."

at http://www.stratfor.com/analysis/special-series-european-economies-risk-italy

The Big Fat Greek Lie Is Now Obvious to Spain… So Who’s Next to Debt Default?

"The big fat Greek lie being spread throughout the financial community is that Greece has been saved. It’s a lie for the following reasons:

1) Greece did in fact default

2) Greece now has more debt than it did before the bailout (how does writing off €100 billion Euros in debt and taking on €130 billion Euros in more debt improve this situation?)

3) The Greek economy continues to implode (youth unemployment over 50%, one in ten Greek youth looking for jobs abroad, Greek GDP fell 7% in 4Q11)

4) This Second Bailout was indeed a “Credit event” which the markets have yet to discount (though German investors are already lining up litigation)

5) Germany’s finance minister has already admitted Greece may need a third bailout.

Anyone who thinks that Greece is better off, let alone “saved” is out of their minds. The Euro may have been saved for a few more weeks/ months. But Greece is in worse shape than ever..."

at http://www.marketoracle.co.uk/Article33626.html

About Those Foreign-Law Greek Bonds...

"With Greece seemingly well-and-truly in the mainstream media's rear-view mirror, we thought it useful to go over a few details that are 'evolving' as we approach the CDS auction and foreign-law bondholder participation deadline. In a nutshell, there are now seven (count them seven) classes of debt in the Greece capital structure ranging from Old GGB holdouts to Troika- and EFSF-subordinated 'loans'. Critically though, just as we have written extensively, it is the size of the holdouts that will become a growing headache for the European Greek government. As BNP notes today, there are at a minimum EUR2.5bn but potentially up to EUR11bn of holdouts that leaves the Hellenic Republic with the chance of achieving 100% participation practically impossible and some very difficult choices between a disorderly failure-to-pay default on these holdouts (with all the ugly ramifications of out-of-control bankruptcy and litigation) or 'unfairly' pay this 'small' group of desperadoes out as normal (i.e. pay interest and principal to Par at maturity - no haircuts). This is exactly the 'blocking-stake-Foreign-Law-bond' strategy we suggested that hedge funds would undertake and it appears successful given the record price differential that now exists between Greek- and Foreign-Law bonds.


The spread between Foreign-Law and Greek-Law bonds has risen from EUR18 to EUR27 currently since we posted our original insight Subordination 101.
Of the Greek SOEs, only EUR 0.47bn of the EUR 3bn outstanding tendered for exchange or voted in favor. This means that a minimum of EUR 2.5bn from this category will likely end up being holdouts, unless they change their mind by the extended deadline of 23 March..."

at http://www.zerohedge.com/news/about-those-foreign-law-greek-bonds

Buy Gold Because a Currency Crisis is Coming

"We have long warned that a consequence of a sovereign debt crisis in various countries and coming in the US , would be currency devaluations and an international monetary crisis. Slowly but surely various commentators are now coming to that conclusion.
According to a new book launched this month, 'In Gold We Trust?' a currency crisis is coming and people should buy gold to protect themselves.
Michael Green, co-author with Matthew Bishop of ‘In Gold We Trust?’, explains to Gregg Greenberg of The Street in the video why a currency crisis is unavoidable and investors need to protect themselves with gold.
Bishop is the US Business Editor and New York Bureau Chief of The Economist and Green is an economist and an author who has written books with Bishop.
"There is a crisis going on in money that is going to run and run and run. So there is a pretty good case for being long on gold" says Green.
"We have got used to the idea that paper money issued by governments is what money is but if you don't have confidence in that money people are going to be looking for alternatives.”
“So I think the point we want to make in the book about gold is don't think about gold is going back to some historic past, some true money. Think of gold as being the first mover in the new evolution of money where we are going to have to find lots of different monies if government backed money collapses.”
Green says that he believes that “the crisis is only really starting”

at http://www.marketoracle.co.uk/Article33582.html

Eurozone Debt Crisis: Hope for the Best, Plan for the Worst

"...With all major countries printing money, the problems in the eurozone may ease for now. Add to that the large degree of short positions previously built up in the euro that still need to be wound down, and the single currency should do just fine for the time being.
There's a price to be paid, though: we don't see how the ECB, in three years' time, will be able to mop up the trillion-euro liquidity it has provided. The ECB has now introduced a structural rigidity into its monetary policy, akin to what the Fed is faced with. In many respects, central banks have disrupted the natural transition of market-ascribed economic health by imposing their colossal might (balance sheets) onto the markets. This should be alarming. Central bankers are increasingly manipulating rates all along the yield curve.
Such policies take away crucial economic gauges (market-based interest rates across the yield curve) from investors and policymakers. As result, policymakers can no longer rely on these metrics in setting appropriate monetary policy.
Politicians, too, no longer get market feedback to encourage reform. Spain has already indicated it will further soften its budget goals. Yet, without the ECB's liquidity provisions, the bond market might have responded with its own "encouragement" to run less of a deficit, by selling Spanish debt.
This is not just a European problem. Look at the proposed 2013 US Budget and it becomes clear that, without the encouragement of the bond market, policymakers may have little incentive to pursue fiscally sustainable policies. With its significant current account deficit, the US dollar may be much more vulnerable than the euro should US bond markets act up.
In the meantime, Greece is experimenting with a carrot and stick assortment of incentives. That approach may be doomed to failure as each time a target is missed the ire will be directed at creditors, most notably Germany. To move beyond planning for the worst, Greece and others must learn to own their own problems rather than rely on central banks and other people's money."

at http://www.marketoracle.co.uk/Article33584.html

Japan's Shocking Keynesian Slip: "We Are Worse Than Greece"

"In a stunning turn of events, a Japanese Ministry of Finance official admits to Richard Koo's worst nightmare "Japan is fiscally worse than Greece". Bloomberg is reporting that, at a conference in Tokyo, Yasushi Kinoshita says Japan's 2011 fiscal deficit was up to 10% of GDP and its debt-to-GDP has soared to over 230%. What is more concerning is the Kyle-Bass- / Hugh-Hendry-recognized concentration risk that Kinoshita admits to also - with a large amount of JGBs held domestically, the Japanese financial system is much more vulnerable to fiscal shocks (cough energy price cough) than Europe. Of course, the market is catatonic in its reaction to this - mesmerized by the possibility of buybacks and hypnotized at big-banks-passing-stress-tests - though we do note the small reverse stronger in USDJPY has reversed as this news broke and the USD pushes modestly higher."

at http://www.zerohedge.com/news/japans-shocking-keynesian-slip-we-are-worse-greece

Greece is 'likely to need third bail-out'

"Greece concluded a complex debt restructuring with private sector creditors on Friday, leading to the declaration of a "credit event" that will trigger about €3.5bn of credit default insurance payouts.

There were doubts over the exact impact of the credit default swaps, as Austria said it would need to inject up to €1bn into a state-owned bank as a result.

Even as ECB policymaker Ewald Nowotny hailed Greece's debt restructuring a "clear success", he today admitted a third aid package was a possibility.

"You have to see this very realistically," he said. "It would be negligent to rule such a thing out completely but I don't see any need for this at the moment."

at http://www.telegraph.co.uk/finance/financialcrisis/9136124/Greece-is-likely-to-need-third-bail-out.html

Mark Grant On The Increased Risks of Owning European Sovereign/Bank Debt

"Many lessons are available to learn from the Greek debt crisis. Several more are probably to come as the intended and unintended consequences of what the Europeans have done begin to infect the bond markets. I point this morning to the vast differences now between the ownership of American debt and European debt and, as the immediate effects of the LTRO begin to wear off, several dawning realizations that I think will cause European debt to gap out against American debt regardless of the yields of Treasuries.

The first issue is structural. In exempting the ECB and the EIB from the “Collective Action Clause” the European Union has demonstrated that they are above the law and that they do not share the same consequences as the private sector. It is not just some academic discussion that the Rule of Law has been abrogated but a very real distinction that has now been cemented in the sand for all bond holders. I point out again that if this clause in a sovereign indenture can be applied at will by the EU that then they can do anything they like with ANY clause and if they can do it for Greece then they can do it for ANY country and most probably for any bank. Let us suppose for a moment that a major European bank got into trouble; we could find a retroactive “CAC” mandating that the ECB and then the EU Stabilization Funds got their money back before private debt owners. It is not just the factual comment now that private debt holders have become subordinated to the whims of the European Union but that retroactive measures have been implicitly approved by the EU with no objection coming from any country in the nations using the Euro or even the larger group of nations. British or Swiss law may have the last word but there was not one national voiced raised in objection to the pilferage of the private sector. I think there will also be a very negative reaction to “local law” bonds as investors shy away from anything not governed by American or British law though British law bonds may also trade at a discount as there have been no objections to what was done with Greece from anyone in London.

Now let us turn our attention from structure to credit and from the sovereigns to the European banks. I will state my conclusion first; the credit quality of European banks has massively eroded due to the new European policies and any debt ratios based upon their balance sheets now has zero accuracy. This would be as incorrect, a fallacy and not even close to reality. I make my case:

1. The European banks are, in most cases, carrying sovereign debt at cost and they are not marking the bonds to market.
2. A tremendous amount of “covered bonds” have been issued in Europe and the assets pledged to those bonds is no longer available for senior creditors.
3. The LTRO program concocted by the ECB has demanded collateral and all of the collateral pledged to the ECB is no longer available to the unsecured holders of the debt of the European banks..."

at  http://www.zerohedge.com/news/mark-grant-increased-risks-owning-european-sovereignbank-debt

Portugal Gradually Shuffles Its Way Towards the Front of the Debt Queue

"Well, a weekend during which Greece seems to have been finally able to pass muster on its bond deal, while Mario Draghi has given the official “all clear” on the debt crisis, seems to be as good a moment as any to have a look at the country which many investors consider likely to be the next to enter the restructuring proces.
Speaking after last week’s meeting of the ECB’s governing council Mr Draghi said the recent three-year long-term refinancing operation (LTROs) had been an “unquestionable success” and had “removed tail risk from the environment.” For the uninitiated “tail risk” is defined by Wikipedia as ”the risk of an asset or portfolio of assets moving more than 3 standard deviations from its current price in a probability density function. Such risk is often under-estimated using normal statistical methods for calculating the probability of changes in the price of financial assets”.
Now I’m not exactly sure whether a two percentage point shift in bond yields over a 12% starting point – or a movement of about 16% in two weeks – counts as tail risk in the technical sense, but it sure looks like it should, and this is basically what just happened to Portugal.

Portuguese bond yields are rising as investors are busy putting cheap money from the European Central Bank to work elsewhere. The increase in 10-year borrowing costs by almost two percentage points in the past two weeks is stoking concern among investors that the nation will struggle to resume bond sales in 2013. Portugal has been unable to sell debt due in more than a year since it was given a 78 billion-euro ($102.8 billion) bailout in May 2011, following Greece and Ireland……Portugal’s 10-year yield was at 13.83 percent at 12:07 p.m. in London, up from 7.48 percent a year ago. The extra yield investors demand to own the nation’s bonds rather than Germany’s widened 1.1 percentage points to 12.04 percentage points since the ECB announced its program of three-year loans to banks on Dec. 8. Italy’s spread shrank 124 basis points to 3.2 percentage point, and Spain’s narrowed 53 basis points to 3.26..."

at  http://www.economonitor.com/edwardhugh/2012/03/11/portugal-gradually-shuffles-its-way-up-towards-the-front-of-the-debt-queue/

Is Germany Actually Preparing To Leave The Euro?

"For a long time, most analysts have believed that if someone was going to leave the euro, it would be a weak nation such as Greece or Portugal. But the truth is that financially troubled nations such as Greece and Portugal don't want to leave the euro. The leaders of those nations understand that if they leave the euro their economies will totally collapse and nobody will be there to bail them out. And at this point there really is not a formal mechanism which would enable other members of the eurozone to kick financially troubled nations such as Greece or Portugal out of the euro. But there is one possibility that is becoming increasingly likely that could actually cause the break up of the euro. Germany could leave the euro. Yes, it might actually happen. Germany is faced with a very difficult problem right now. It is looking at a future where it will be essentially forced to bail out most of the rest of the nations in the eurozone for many years to come, and those bailouts will be extremely expensive. Meanwhile, the mood in much of the rest of Europe is becoming decidedly anti-German. In Greece, Angela Merkel and the German government are being openly portrayed as Nazis. Financially troubled nations such as Greece want German bailout money, but they are getting sick and tired of the requirements that Germany is imposing upon them in order to get that money. Increasingly, other nations in Europe are simply ignoring what Germany is asking them to do or are openly defying Germany. In the end, Germany will need to decide whether it is worth it to continue to pour billions upon billions of euros into countries that don't appreciate it and that are not doing what Germany has asked them to do.
German Chancellor Angela Merkel’s Christian Democratic Union party recently approved a resolution that would allow a country to leave the euro without leaving the European Union.

Many thought that the resolution was aimed at countries like Greece or Portugal, but the truth is that this resolution may be setting the stage for a German exit from the euro.

The following is an excerpt from that resolution....

"Should a member [of the euro zone] be unable or unwilling to permanently obey the rules connected to the common currency he will be able to voluntarily–according to the rules of the Lisbon Treaty for leaving the European Union–leave the euro zone without leaving the European Union. He would receive the same status as those member states that do not have the euro."

So was that paragraph written for Greece?

Or was it written for Germany?

That is a very interesting question.

What is clear is that the status quo cannot last much longer..."

at http://theeconomiccollapseblog.com/archives/is-germany-actually-preparing-to-leave-the-euro

Sovereign Crisis from Economic Stimulus to Debt Austerity Snowball Effect

"A blockbuster draft report from the European Commission saw the light of day recently, thanks to some reporting from Bloomberg. It highlights an incredibly dangerous Catch-22 facing many sovereign nations — the “Snowball Scenario.”
Let me give you an example how this works …

Suppose country A’s economy goes into the tank. The government responds by borrowing boatloads of money and spending like mad on stimulus packages.
The markets allow it to go on for a while. But then investors start to get antsy about all the debt being added to the government’s balance sheet. So they start dumping its bonds, driving prices lower and rates higher. That, in turn, forces the country to implement austerity measures to get its debt and deficit under control.
The problem?
Those moves send the economy BACK into the crapper! Government spending has to rise yet again to pay for things like unemployment insurance, new stimulus packages, and so on … at the same time tax revenues fall. That drives debts and deficits even higher.
The end game in this snowball scenario? A sovereign default!
And that’s not just a theory. In fact …
Snowballs Are Already Rolling Downhill in Spain, Greece, and Portugal"