Halo fellows not entirely well-met


Those reading beyond the daily lies emanating from Athens will be aware that a screeching cat is now out of the bag and smelling of poo. Hellenic accountancy being what it is, whatever deal is ‘done’ with bondholders in the end, officials calculate that to maintain the country’s debts at a ‘sustainable’ level (allegedly 120% of GDP) the EU/IMF axis of confusion is going to need an extra €15bn. The truth is – and always has been – Greece is millstoneed with too much debt, too little growth and as of earlier this week, an even bigger budget hole.

Greece is broke. Does the EU have the stomach for this?

The OECD says no. The total bailout cost for Greece standing at €130bn, OECD boffins think the European Financial Stability Facility’s (EFSF) €440bn firepower is woefully underfunded, adding that the EU ‘has not found it easy to raise funds’. Or indeed, any funds at all. Somehow – and there’s still nobody with a sane answer to this beyond debt forgiveness – Greece, Portugal, Italy, Ireland and Spain need to repay a total of €700bn this year and €400bn next year.

The EU is broke. Does Germany have the stomach for this?

Angela Merkel’s Bundesbank has already coughed up €496bn to peripheral countries in trouble. Figures released last week show how its asset base has been depleted by the need to raise bailout monies….and as you’d expect, The Slog’s  Bankfurt Maulwurf is both angry and anxious. This morning, he told me:

“I have always maintained this would happen. Every month the cost of this disaster goes up and up. The German people are not being told the truth, and in my view the CDU is playing fast and loose with the Bundestag and the media. Attitudes in my industry are hardening against this madness. She [Merkel] has this massive patriotic wave behind her, but it will end in German insolvency. The time is now….or never. We must cut the cord. The dream is over.”

Although Angela Merkel has the stomach for it, Germany doesn’t have the money. Hence her appearance in Beijing, asking Wen Jaibao for help now. But he isn’t going to do anything unless the West piles in first. He has said this over and over again – but neither the MSM nor Merkel are listening.

Germany is broke. Does the US have the stomach for it?

No, it emphatically does not. A number of States are still in the red very badly; California, for instance, is relying on the tax revenues to be gained from its citizens benefiting from the Facebook flotation. Without those, chief accountant John Chiang admitted yesterday, the State will go bust – again – for a whopping $3.3 billion.

The emergence of the Tea Partiers (those folks who can see only the cup’s darkness plus some tealeaves) means that the GOP has had to come over all Ebeneezer Scrooge or lose millions of votes….and with the deficit hovering as ever perilously close to the ceiling, Obama has no room for maneouvre.

Above all, 2012 is an Election year: Obama needs every cent he can get his hands on to make things look good. The word has gone out from the Obamites in Washington: sure, we don’t want contagion blowback from Europe – but we don’t want to lose the White House either. For the politicians, Europe is a sideshow.

It isn’t for Geithner at the Fed or Lagarde at the IMF: they know perfectly well what will happen….because they too can see the mortgage chain. But I understand that Christine Lagarde has been told to extricate the IMF from further Greek exposure that involves American money; and Geithner turned up to the Poland debt session last year with his pockets immaculately sewn up.

America is broke. Does Wall Street have the stomach for it?

You bet. For eighteen months now, the Reptile House has been lobbying Washington and the regulators to let it bet on bond defaults. They are mad of course – but encouragingly, the Washington set has been holding back the pressure by saying they just can’t see how it could be safe….in the sense that if they let the bankers do such a thing, the American people might lynch them. Wall Street’s big bananas now admit that the ruse is going nowhere.

Wall Street is being told no. Does the Stock Market have the stomach for it?

In a real world, probably not. But we must factor in the fact that Ben Bernanke is not of this world. In Ben’s Universe, beard neatness and facial stasis are everything. They create confidence, and confidence can achieve anything when accompanied by more free money from the Government. Armed with a 50mg shot of Valium, Ben will descend unto the multitudes pretty soon, stare through those catatonic eyes, and spray everything with dollars. Then the banks and multinationals will hoover it all up, dividend results will be even better….and stock prices will rise.

America’s faux recovery will be in place, and an Obama White House thus ensured by a winning combo of feelgood bollocks and Mitt Romney. The flaw in this theory is that once contagion starts, it isn’t going to pay much heed to arbitrary stuff like elections and dud Presidents in search of second terms.

I believe now that the sale of the White House will very probably fall through, because the pressure from the mortgage chain won’t wait until next September. It’s possible that an international geopolitical event will intervene to change all this dramatically: there are plenty to choose from – Chinese Yuan jiggerpokery, Iranian lunacy, Israeli frustration-fuelled blood to the head, Russia deciding to turn the screws on an EU peripheral….and so on and on and on.

But one thing I think can no longer be put off by daily announcements that a deal is only days away is the ClubMed debt crisis. The situation is very, very clearly laid out for anyone to see, because the option mirages are fading rapidly in the cool light of dawn. There is no more money to be found without printing the stuff on a massive scale.

This doesn’t mean I can guarantee that there won’t be printing on that scale: there are plenty of folks in Brussels mad enough to do it. But there are no people like that in Frankfurt or Berlin. The Germans remain fixated with the Weimar Inflation: if the price to be paid for eurozone survival (in anything like its current form) is a repeat of it, not even Angela Merkel will be up for the mission. Eurozone defaults are now, in my view, a certainty.

Greece is going to break the mortgage chain, and other ClubMeds will then scupper the entire process. Whether Obama gets a Second Term is down to how skillfully Merkel, Draghi and Sarkozy can skate on thin ice while being pelted with stones by peripheral Sovereign bondholders. Sarkozy faces an election, and the German Chancellor is facing a serious rebellion from her own business and financial community. I don’t think even Mario Draghi can pull this one off alone.

As I keep saying, the Tulip Moment is coming.

Related: Why the Tulip Moment can no longer be postponed.

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