European Union / U.S.A. Debt Crisis

[FeStealth]

I met someone the other day who is doing their PHD at UBC and is an advocate of "social justice" issues. She regularly goes out and protests various left leaning agendas. She's 27 years old, working a part time near entry level job, her tuition is 12,000 dollars a year which she has taken out numerous student loans for. She had the audacity to preach to me and a few others about how the government doesn't do enough for the disabled and the marginalized in society and that the "rich" should be taxed more to help those less fortunate...

I don't even know why I'm writing this, I just felt like ranting and getting the absurdity of it all off my chest. The sense of entitlement in the west has is dangerous to the sustainability of our society. Can we not all agree that governments should follow the basic principal of not running deficits that have no end in sight? I feel ostracized when I voice the opinion that services need to be cut back that we can't afford.

[key2thecup]

U.S. loses $1.3 billion in exiting Chrysler

NEW YORK (CNNMoney) -- U.S. taxpayers likely lost $1.3 billion in the government bailout of Chrysler, the Treasury Department announced Thursday.

The government recently sold its remaining 6% stake in the company to Italian automaker Fiat, wrapping up the 2009 auto bailouts that were part of TARP.

http://money.cnn.com/2011/07/21/autos/chrysler_government_exit/index.htm?cnn=yes&hpt=hp_t2

[Wakeupmrbains!]

Ron Paul must win in 2012

[Navyblue]

Ron Paul must win in 2012

[key2thecup]

Global Meltdown: Investors Are Dumping Nearly Everything

With no solution in sight for Europe and new fears of a global recession, investors dumped stocks and commodities and ran to the safety of U.S. Treasurys.

Treasury yields , as a result, slipped to historic lows with the 10-year yielding 1.75 percent and the 30-year at 2.86 percent.

The dollar was also a beneficiary of a massive fear trade that sent U.S. stocks sharply lower, on the heels of steep sell-offs in equities markets around the globe.

The worst performing stock market sectors mirrored the sell-off in global commodities markets, with materials down 4.6 percent and energy stocks down 4.1 percent.

Copper, hit by concerns of a Chinese slowdown, tumbled 7 percent to a 1-year low. Gold, usually a safety play, was sold into the maelstrom as investors raised cash. The euro [EUR=X 1.3497 -0.008 (-0.59%) ], broke below 1.35, a recent bottom of its range. It was trading in the 1.346 area, an eight-month low against the dollar. The dollar index [.DXY 78.32 0.98 (+1.26%) ] was 1.4 percent higher.

"People are finding it really isn't gold. It isn't precious metals. It's not currencies. U.S. Treasurys are where people are flocking to at a time of extreme concern about risk, and we continue to see Treasurys continue to get bid up," said Zane Brown, fixed income strategist at Lord Abbett.

The selling in risk assets picked up momentum after the Fed's statement Wednesday, in which it characterized risks to the economy as "significant" and noted that "strains in global financial markets" (or Europe) could be a catalyst. Then overnight, a preliminary China manufacturing data showed moderating growth.

The Fed unveiled the much anticipated "Operation Twist" program in an effort to drive down rates. The program got a lukewarm reception even though the Fed surprised markets with a plan to also buy mortgage securities.

The Fed intends to swap $400 billion in shorter dated Treasurys for the same amount in the 6-year to 30-year range. For the most part, traders worry the "twist" will do little to help the struggling economy.

"The Fed will have to go on a publicity tour over the next few weeks, coming out and stating what is the metric by which they will judge this as a success or failure," said Kevin Ferry of Cronus Futures.

"The metrics we look at—the financial conditions index—it's worse today," Ferry said. Spreads on a whole range of credit market indicators widened, including investment grade corporates, emerging market sovereigns, high-yield corporates, and municipal bonds.

Brown said he does not see the U.S. falling into recession , as the markets fear.

"The combination of consumers spending what they can, durable goods improving just at the margin, exports improving just at the margin and what the Fed does to promote lending should help us avoid a recession," he said. Brown said the Fed may spur some increase in bank lending, driving some economic activity.

"The activity on the part of the Fed is really going to make it difficult for banks to make money unless they start lending. That's what the Fed hopes will happen. Their rationale for doing this is to promote risk taking," he said.

The lack of resolution on Europe , however, remains the biggest culprit as investors worry the exposure of European banks to the sovereign crisis will kick off a global banking crisis. The EU, IMF and European Central Bank put off until October to determine what will be done about the next payment to Greece, without which it will default. Markets have been disappointed with the lack of a bigger plan of action from European leaders.

"I think it's about the lack of leadership anywhere in the world. We're seriously distressed about the lack of leadership and constant squabbling in Washington," Brown said.

The animosity between political parties was once more in the headlines Thursday as the House defeated a spending billi that would keep the government running. Republican majority leader Rep. John Boehner said he expects the bill to pass and blamed Democrats.

http://www.cnbc.com/id/44626413

[Carpe Diem]

I met someone the other day who is doing their PHD at UBC and is an advocate of "social justice" issues. She regularly goes out and protests various left leaning agendas. She's 27 years old, working a part time near entry level job, her tuition is 12,000 dollars a year which she has taken out numerous student loans for. She had the audacity to preach to me and a few others about how the government doesn't do enough for the disabled and the marginalized in society and that the "rich" should be taxed more to help those less fortunate...

I don't even know why I'm writing this, I just felt like ranting and getting the absurdity of it all off my chest. The sense of entitlement in the west has is dangerous to the sustainability of our society. Can we not all agree that governments should follow the basic principal of not running deficits that have no end in sight? I feel ostracized when I voice the opinion that services need to be cut back that we can't afford.

[Electro Rock]

The price of commodities, the strength of the $CDN and general Canadian economic competitiveness are all up compared to earlier in the decade so it shouldn't be a surprise that we can afford more than we once could.

Also it must help also that so much money isn't being poured into sponsorship scandal style political donations for contracts scenes any longer.

[aGENT]

Well I'm still investing in Europe, Asia and the US. Buy low, sell high

And if the worst happens and the global economy collapses sparking the apocalypse (or even something slightly more restrained) I doubt my investments will be my biggest worry Otherwise I figure in 5-10 years when the dust settles I should be sitting fairly pretty.

[aGENT]

Also it must help also that so much money isn't being poured into sponsorship scandal style political donations for contracts scenes any longer.

[aliboy]

"Too big to fail" is the problem of dealing with Greece. Too much foreign money lies in that country. All of their debt is held by foreign banks. They fail all that foreign money fails. Many of those foreign banks fail. That includes Banks in Canada and the US. Greece HAS to be propped up because the financial penalty for them defaulting would be disastrous to a world economy still weakened by dealing with the ongoing financial crisis. The interconnectedness of all things.

[JonnyDraft]

We'e in for a world of hurt. Investors don't learn easily. Case in point: the loonie dropped approx. 2 cents today as a result of the stock market decline - which was spurred by an economic forecast suggesting the American economy was in for rough days. Investors, being creatures of habit, pull their monies out and invest in the traditional safe-haven: U.S. bonds.

Essentially, because a "panic" was spurred on by potential American decline, the safe money ran to U.S. bonds. Connect the dots for what will eventually happen.

Ir is my opinion that we're wandering down a black-hole to which no one really knows what's going to happen. Sort of scary when the world's collective economic powers are all tied to the eventual end-game.

[FeStealth]

We'e in for a world of hurt. Investors don't learn easily. Case in point: the loonie dropped approx. 2 cents today as a result of the stock market decline - which was spurred by an economic forecast suggesting the American economy was in for rough days. Investors, being creatures of habit, pull their monies out and invest in the traditional safe-haven: U.S. bonds.

Essentially, because a "panic" was spurred on by potential American decline, the safe money ran to U.S. bonds. Connect the dots for what will eventually happen.

Ir is my opinion that we're wandering down a black-hole to which no one really knows what's going to happen. Sort of scary when the world's collective economic powers are all tied to the eventual end-game.

[لني]

Yeah, it's kinda looks contradicting that when there's market turmoil, people flock to the safety of the US..... even though the US economy is in shambles too. It's like choosing the least ugly girl to the dance.... and the USA is the least ugly, lol.

[nucklehead]

Papandreou Budget Hole Threatens to Swallow Europe

[JonnyDraft]

Risk is relative.

In the whole scheme of things the US is less risky than many of the options out there.

[aliboy]

Risk is relative.

In the whole scheme of things the US is less risky than many of the options out there.

[Donky]

Isn't that great. Each Briton now carries nearly $20000 in Grecian debt because their banks own that debt.

Hey, Cameron!

"Two minutes for looking so good!"

[key2thecup]

Largest ever EU rebellion rocks British PM

http://www.breitbart.com/article.php?id=CNG.a78af65cc128f522f558eaa64f38258c.461&show_article=1

[key2thecup]

Next up: Italy!

Berlusconi to step down

European debt crisis spiralling out of control

Reports that Germany and France have begun talks to break up the eurozone amid fears that Italy will be too big to rescue

Fears that Europe's sovereign debt crisis was spiralling out of control have intensified as political chaos in Athens and Rome, and looming recession, created panic on world markets.

Reports emerging from Brussels said that Germany and France had begun preliminary talks on a break-up of the eurozone, amid fears that Italy would be too big to rescue.

Despite Silvio Berlusconi's announcement that he would step down as prime minister once austerity measures were pushed through parliament, a collapse of investor confidence in the eurozone's third-biggest economy sent interest rates in Italy to the levels that triggered bailouts in Portugal, Greece and Ireland.

Italian bond yields surged through the critical 7% mark, at one point hitting 7.5%, amid concern that the deteriorating situation had moved the crisis into a dangerous new phase.

In Athens talks to appoint a prime minister to succeed George Papandreou were in deadlock, and will resume on Thursday morning. The Italian president, Giorgio Napolitano, sought to reassure the markets by promising that Berlusconi would be leaving office soon.

Angela Merkel, the German chancellor, said the situation had become "unpleasant", and called for eurozone members to accelerate plans for closer political integration. "It is time for a breakthrough to a new Europe," she said. "Because the world is changing so much, we must be prepared to answer the challenges. That will mean more Europe, not less Europe."

The president of the European commission, José Manuel Barroso, issued a new call for the EU to "unite or face irrelevance" in the face of the mounting economic crisis in Italy. "We are witnessing fundamental changes to the economic and geopolitical order that have convinced me that Europe needs to advance now together or risk fragmentation. Europe must either transform itself or it will decline. We are in a defining moment where we either unite or face irrelevance," he said.

Senior policymakers in Paris, Berlin and Brussels are reported to have discussed the possibility of one or more countries leaving the eurozone, while the remaining core pushes on toward deeper economic integration, including on tax and fiscal policy. "France and Germany have had intense consultations on this issue over the last months, at all levels," a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions.

Financial regulators across Europe were last night carefully monitoring the health of their heavily exposed banks, amid concern that the turmoil could lead to a debt default, or even the break-up of the euro.

George Osborne, just three weeks away from delivering his autumn statement on the health of the economy, believes Europe's problems are blighting the UK's growth prospects, but he will use the sell-off of Italian bonds to insist there is no alternative to his austerity plans.

Nick Clegg, the deputy prime minister, spent Wednesday in Brussels urging the council president, Herman Van Rompuy, and a clutch of EU commissioners to focus on growth, and not further treaty changes, warning that if Europe does not become more competitive it will end up in a spiral of perpetual decline. Both he and David Cameron are urging EU integrationists to recognise that EU Treaty changes in the next few months would be a massive distraction and no cure for the underlying economic crisis. He pointed out that they would require referendums in at least four countries.

The latest chapter in the ongoing sovereign debt crisis came as Bank of England policymakers gathered for their monthly two-day interest rate-setting meeting. The monetary policy committee announced £75bn-worth of quantitative easing last month in an effort to prevent a recession.

City analysts believe the renewed turmoil in the eurozone is pointing to a deep recession in Europe. "It's unavoidable that there will be an outright contraction in the fourth quarter of this year, and a 60%-70% chance of another decline in the first quarter of next year," said Nick Parsons, head of strategy at National Australia Bank.

Shares fell heavily on both sides of the Atlantic. The Italian stock market lost 4% of its value. The FTSE100 index of leading shares closed 106.96 points down, at 5460.38. The Dow Jones closed 389 points down at 11,780.94.

Christine Lagarde, head of the IMF, told a financial forum in Beijing that Europe's debt crisis risked plunging the global economy into a Japan-style "lost decade" of weak growth and deflation.

"Our sense is that if we do not act boldly and if we do not act together, the economy around the world runs the risk of a downward spiral of uncertainty, financial instability and potential collapse of global demand … we could run the risk of what some commentators are already calling the lost decade."

Simon Derrick, currency strategist at BNY Mellon, said: "We're at the point of asking the question, if I put my money into Italy, am I going to get it back? The fact is, there isn't a safety net." He added that the mood in the City was reminiscent of Black Wednesday, in September 1992, when the UK crashed out of the European Exchange Rate Mechanism.

The surge in Italian bond yields was eventually capped by the European Central Bank, which intervened in the markets to buy limited quantities of Italian debt. But analysts say the ECB will eventually have to step up its action, and act as a lender of last resort to bring interest rates down to pre-crisis levels. Sony Kapoor, director of Brussels-based think-tank Re-Define, said: "We may be fairly close to the point where an existential threat to the eurozone, and hence the ECB, is on the horizon. This could easily spiral out of control."

The ECB is seen as the only institution with the firepower to rescue Italy, because the EU lacks the resources to bail out such a large economy. Ben May, of Capital Economics, said Italy would need a €650bn bailout to keep it out of financial markets for the next three years or so. "The European Financial Stability Facility will not be able to provide a bailout of this size," he said.

Officials in Brussels insisted on Wednesday there would be no rescue package for Rome, saying, "financial assistance is not on the cards". A key test will come on Thursday morning when Italy has to raise €5bn from investors on the bond market.

Economic and monetary affairs commissioner Olli Rehn ratcheted up the political pressure on Italy with a strongly-worded letter to finance minister Giulio Tremonti. In it, Rehn demanded concrete written details of how Italy will implement each of the 39 separate reform measures it has promised to undertake.

In Rome the head of state, Giorgio Napolitano, insisted that Berlusconi would be leaving office soon, and that his departure would not be the prelude to a lengthy period of political instability.

His intervention came after hurried consultations with the speakers of both houses of parliament to ensure the speediest possible approval for a package of economic reform and austerity measures agreed with the European institutions. On Tuesday evening, after losing his majority in the chamber of deputies, Berlusconi told Napolitano he would resign.

But, to prevent the economic measures being blocked by the fall of his government, he said he would only go once the package had been approved.

As concern grew that he might delay the passage of the legislation, which has become a litmus test of Italy's credibility in the markets, Berlusconi said he would insist on holding new elections and one of his ministers speculated that could be next February.

After the yield on Italy's benchmark bonds soared above 7%, taking interest rates to a level beyond which previous euro zone debt crisis victims have sought a bail-out, the president issued a statement to say the new economic measures would be "approved in the space of a few days" and that there was "no uncertainty over the prime minister's decision to resign".

Napolitano, who cannot begin consultations with party leaders until Berlusconi leaves office, said that either a new government would be formed "to take every necessary decision" or an election would be held "within the shortest time".

That would still mean a vote was not held until January. But a source close to the president stressed to the Guardian that "early elections are not a foregone conclusion."

http://www.guardian.co.uk/business/2011/nov/09/european-debt-crisis-eurozone-breakup

[FeStealth]

Once Italy and Spain defaults, the game is over. Now looking back, the EU was doomed from the start.