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Rebel Traders
asks Americans to Bailout Greece?
(emphasis mine) [my
comment]
Americans
to Bailout Greece?
by Chuck on April 28, 2010 at 6:31 pm
Will the deteriorating conditions in Europe result in American tax payers
digging into their wallets to assist with European nation bailouts?
It was reported today that the U.S. Treasury Department was in
“close contact” with officials in Europe. Whenever I hear
that U.S. officials are in close contact with someone or some
nation I get worried.
Why would we contribute to the bailouts in Europe? First is that American
corporations are very intertwined with the Euro, and as such American
corporations will push the government to make sure bailouts move swiftly in
order to stabilize the Euro currency, even if that means involving American
taxpayer funds.
Another reason goes right back to the banks and investment houses (yea, Wall
Street again). It has been said by some main stream media outlets that
a collapse of Greece or the Euro itself would have little impact on the
United States. That statement could not be further from reality.
Remember that Wall Street banks fought tooth and nail to have their
restrictions reduced over the past decade, and as such these firms are ‘in
deep’ with derivatives, currency swaps, and bonds of various flavors
tied to Europe.
So will American taxpayers be a part of Europe’s bailouts? I expect we
will. [Me too]
Obama concerned about Greek debt, monitoring closely
ABOARD AIR FORCE ONE, April 28 (Reuters) – U.S. President Barack
Obama is concerned about Greece’s debt problems and his administration
is in touch with Europe about the issue, White House spokesman Bill Burton
said on Wednesday.
"This is something that is of great concern to the president and
we’re monitoring it very closely," Burton told reporters on Air
Force One, adding that the U.S. Treasury Department and other agencies
were "in close contact with folks in Europe about the issue."
[…]
--------------------------------
[On
an unrelated note, I am going to start using a slightly darker shade of red
highlighting to make my blog entries more readable:
The RED I have been using. The new RED I will start
using.
If you look closely you can see the difference. (I still want a
fairly bright red)
]
My reaction: As
expect, seems like America is getting ready to bailout Greece.
1) U.S. President Barack Obama is concerned about Greece's debt problems.
2) The US Treasury Department is in "close contact" with officials
in Europe. “Close contact” with the Treasury usually means two
things:
A) Trouble is much more serious than officially believed.
B) A bailout is imminent.
The US can’t allow a Greek default
1) It has been reported by main stream media outlets that a collapse of
Greece or the Euro itself would have little impact on the United States. That
statement could not be further from reality.
2) American corporations are very intertwined with the Euro.
3) More importantly, Wall Street firms are 'in deep' with derivatives,
currency swaps, and bonds of various flavors tied to Europe.
4) Expect a US bailout of Greece through the IMF (to hide what is going on
from the already furious US taxpayer).
Conclusion: On Monday, I wrote about the “Greek
debt crisis”. I predicted that the US would
bailout Greece. This latest piece of news about ‘close contact’ with
the US treasury seems to confirm what I wrote.
Greece
hit the panic button last Friday.
1) Greece on Friday asked fellow euro-zone members and the International
Monetary Fund to bail it out.
2) Investors have been walking away from Greek bonds all year. Greece’s
ten-year bond yields shot to nearly 9%, almost triple what Germany pays to
borrow.
Greek Default would be a disaster for the US
1) The Greek debt crisis highlights the collapse of the traditional G7 growth
model (ie: the US growth model) of high indebtedness and a low share of
exports in the economy.
2) A Greek Default would be a disaster for the US. It would
be the first confirmed sovereign default of a Western US-style economy,
and it would send investors running from the debt of all similar Western
economies, especially the US doubts about treasuries.
German Financial Aid Highly Doubtful
1) According to German Finance Minister Wolfgang Schaeuble:
A) Germany has not yet decided whether it will agree to Greece's request for
financial aid.
B) No German budget funding will be used to bail out Greece.
…
IMF (US) aid virtually guaranteed
1) The International Monetary Fund is speeding up efforts to deliver
funding help to Greece.
2) IMF officials are circulating the story that “today's IMF is a
changed institution from the agency that generated anger in countries around
the world for its devastating austerity programs in previous crises.” This
suggests that IMF officials are embracing to the idea of aid without demand
tough economic/fiscal demands attached.
3) Given the vital importance to the US of preventing a Greek default, the
first tranche of aid will probably come from the IMF (the US) not Germany.
Conclusion: I haven’t been focusing on the “Greek debt
crisis” because I believe it is a non-event in the grand scheme of
things. As I have written before, it wouldn’t be a problem that can
be solved by printing money which will bring down the global financial
system. In the case of the “Greek debt crisis”, the US will
cave, and the IMF will provide enough money to bailout Greece
for a couple of months. Before Greece has the chance to run out
of money again, the 2010 food
crisis will begin this summer, leading to the
default of all countries with the US growth model of high indebtedness.
Eric de Carbonnel
Market Skeptics
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