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Europe fiddles on the edge of a financial Event Horizon

6:05 pm in Uncategorized by cmaukonen

While we are all engaged in the OWS protests and hating those financial institutions that made this all possible,  the economic crisis that brought us all this entertainment still bubbles on. Still on the verge of blowing it’s top. This time brought to you by the European banks and the money they have tied up in countries like Greece, Italy, Spain and yes even France.  With France being the latest to get its debt downgraded.

With the likely hood of a Greek default being around 97% these days and the reluctance of the Germans and French to want to continue funneling money their way, the plan now is to re-capitalize the European banks that would be a risk when this occurs.  But the people of Germany and France now have little stomach for that either and both Merkel and Sarkozy are on shaky political ground now. And in my opinion this would be like closing the barn door after the horse has left, kicked over the lamp, set it on fire and burned it to the ground.

Merkel herself flopping in the wind like a flag in a hurricane. First saying that any resolution would take a while to implement and then announcing that a solutions is nearly at hand.  But the banks themselves are not happy about this solution saying that it puts a strain on them to keep so much capital on hand. Of course we all know that the real reason is that accepting the money would be tantamount to admitting they are in deep  trouble and continued investing in them would be a really bad idea.   By the way, continued investing in them would be a really bad idea.

Meanwhile Sarkozy and the French government are yelling that letting the banks fail and the governments default would mean the end of the Euro and Eurozone, that this would result in the return to the economic and political environment prior to WWII.   (cue Glenn Miller and Arty Shaw music)

Add to that the Chinese economy is now contracting and of course the financial sector is blaming the decisions of the Chinese government on that.  (Funny how they blame the government when things go sour and take full credit when they don’t)

What has this got to do with us ? Read the rest of this entry →

Not Chess Mister Spock…Poker

12:22 pm in Uncategorized by cmaukonen

With Obama calmly announcing that seniors may not get their Social Security checks. Geithner saying that a default would lead to economic chaos.  And McConnell deciding to fold. We now have a situation where the economic situation sounds more like a high stakes Las Vegas card game. And now Bachmann insists on Obama showing his hand and accuses him and the dems of playing with a marked deck.  Obama of course just wants to continue the game.

But can he win with a busted flush ?
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Default – Reprise…I was wrong.

1:32 pm in Uncategorized by cmaukonen

All right…OK…I’ll admit it. I was wrong in my original post. The consequences of a default  would be rather severe. And Robert Powell in Market watch explains further.

It’s no joke. The sky over the investment world and everything under it, including bonds, stocks, money markets, commodities, you name it, will fall unless lawmakers raise the $14.3 trillion Federal debt ceiling by Aug. 2.

It could be nothing less than catastrophic and worse than the financial meltdown of the late 2000s should Uncle Sam fail to raise the legal limit on government borrowing and default on U.S. debt, according to Greg McBride, a CFA charterholder and senior analyst with “There will be no safe haven,” said McBride, from his perch in Florida.
In a press conference Monday, President Obama called for compromise as party leaders seek to craft a deal that raises the legal limit on how much the U.S. government can borrow while slashing projected deficits over the next decade. Democratic and Republican leaders held talks Sunday, but discussions broke down over taxes.
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