Saturday, November 26, 2011

Black Friday, and not the good kind

The stock market had its worst Thanksgiving week since 1932.

Interest on Italian bonds topped 8% at a time when the US and Germany are paying less than 2%. Italy is the 8th largest economy in the world and was operating with a budget surplus.

Germany's bond auction Wednesday failed to sell even 2/3 of its offering at any price, and Germany is one of the strongest economies in world. Italy has no problem selling bonds even if the prices are outrageous. Why would this happen? The big banks who purchase the bonds wanted to let the dog know that the tail is in charge. Germany has been insisting that the banks take a haircut on the Greek debt. The banks don't like that arrangement, no matter that they are entirely to blame for this mess and continue to profit from it. They don't pay for their mistakes, that's the job of the taxpayer. When I say "mistakes", I really mean their deliberate fraud and corruption.

By Friday the Rottweiler had gotten the message and the German Fiance Minster was saying that Germany may reconsider its position on Greek debt. Greece and Italy both have un-elected bankers as Prime Minister and Germany doesn't want to be next.

It's often said that he who has the gold, rules. In this case rule is by they who control the mountain of interlocked derivative contracts.   $1,200,000,000,000,000 give or take a few hundred trillion.


Ronmac said...

Speaking of fraud, while this Eurozone business was getting off the ground in the late 1990's weren't they just repealing the Glass-Steagel Act in the U.S.?

prairie2 said...

Yes de-regulation or really de-decriminalization of corrupt practices including the "modernization" of commodities trading allowed them to load everybody up with over leveraged debt. Then create derivatives to "insure" against the risk. Creating the bubble to end all bubbles, the end all of us bubble.