S+P downgraded various sovereign debt last Friday. They also downgraded the EFSF one notch over the weekend, thus stripping their pristinely stupid “AAA” rating. But just one notch?
This is ridiculous because we could wake up on any given day facing an outright “run” and the EFSF would be exposed as the Ponzi engine that it is.
How could it have been rated AAA in the first place? Various sovereign debt from Greece, Italy and today Portugal …which if …when… were to fail will take the Spanish banking system down… could not issue new debt OR survive without EFSF purchases of said debt. But what happens… if the EFSF were to have problems issuing debt of their own?
Do you see where this all leads to?
A buyers strike, all owners selling and outright panic.
This has actually already started to some extent and has been covered over here in the States and in Europe by clandestine purchases with “newly created” money. THIS sadly is the “new normal”. …And the worst part? The markets are just begging for more more more of it!
Monetization has ALWAYS lead to ruinous hyperinflation. This try will be no different, but what amazes is how many “smart people” they trot out in Wahington and on CNBC to tell us that this time will be different.
It won’t be. …Well…maybe a little different.
THIS time the monetization is not in one country or one region, it is everywhere! We now face the prospects where even the ratings agencies are telling us that “risk” of non payment is rising everywhere … way after the obvious fact… and even IF investors went totally mad and decided to invest ALL new monies into sovereign debt, well, there just wouldn’t be enough money!
The debt “appetite” …actually , debt addiction that is now mandatory just to roll over old debt and pay interest… has gotten so large that the system is no longer generating …nor has the ability to… enough cash flow to sustain the debt necessary for the sovereign’s to continue.
No problem though, central banks will magically create what is needed!
“Debt saturation” levels had been reached as individuals and corporations needed to delever… sovereign govenments would bankrupt themselves to prolong the fantasy. Well, here we are and “they” have bankrupted themselves. Now, we have reached debt levels that are no longer sustainable on a “payback” basis by the sovereign’s, NOR sustainable in amounts that the financial system can even provide.
The wall has been hit and THE only thing left is for central banks to magically create credits to provide to various treasuries. This “new normal” that exists is not sustainable. Just because no one wants to acknowledge it doesn’t mean it does not exist. Math is math and the amounts of debt necessary to continue cannot be funded “internally”, the money is just not there. We have arrived at Jim Sinclair’s “QE to infinity” not out of desire, no, it is now out of necessity!
The numbers are just getting beyond stupid!
Our president has asked for another $1.2 Trillion increased debt ceiling to get us through the year …probably only August… and the ECB has just run through 250 Billion Euros since Dec. 21 …less than 3 weeks… and rumored to be announcing another 1 Trillion LTRO …long term refinancing operation… very soon. The whole thing is toast beyond toast mathematically while CNBC parades the goatheads to tell us “tech is cheap” or “Pharmaceuticals are a buy”.
The entire system is 100%, completely and totally bankrupt!
The governments are bankrupt which means their currencies are worthless and thus, everything saved in those currencies are worthless! Period! When all is said and done, history will remember this “new normal” as more infamous than when Fisher said back in 1929 that “we have reached a new and permanent higher plateau”.
How could a “tulip bulb” be worth 30 houses?
How could a tech stock with no earnings have a larger market cap than Exxon in 1999? … How could “no one” …in the mainstream… not see this one coming?
It will all be so obvious after the fact…as it always is!
