Oh Gentle Ben??? Ben? Or Is That HAS BEEN?
Courtesy of Karl Denninger at The Market Ticker
With the FOMC announcement just a couple of hours away I’d like to put forward a few things.
First, as anyone with a pulse knows, Greece is in serious trouble. Yesterday Portugal was downgraded and today Spain got hit, the latter by S&P.
This of course makes "contagion" no longer a theoretical exercise, and as market rates back up it will make rolling government debt "over there" more and more difficult – read: expensive.
When you’re running huge deficits, of course, making your debt funding more expensive just makes the deficit problem worse. As Greece has discovered this can quite-easily go from being "manageable" to "oh crap" in the space of a few weeks – or days.
Ben’s usual reaction to such a sovereign snowball getting some speed would be to cut rates.
But wait – Bernanke is at zero. Oops.
Quantitative easing? Of what? Greek and Spanish bonds? Do you think Congress (not to mention the American people) will sit for that? Me neither.
Europe, by the way, is a preview of what is coming here given the actions of our government. Spending 10+% of GDP in deficit spending is exactly how Greece, Portugal and Spain got into this mess – and it is exactly why we’re going down the same road.
The reality of our condition in 2007 and 2008 could not be avoided folks. It could be and was "postponed", but by doing so we took what was at the time a Depression-level problem and turned it into something nearly twice as bad.
This madness must stop right now or will find that once the Euro Zone disintegrates the next point of attack will come here to America (and Japan) – that is, if our banks don’t blow sky high due to European exposure first.
The lies must STOP.
Attempting to prop up the economy to the tune of 10%+ of GDP with deficit spending MUST STOP.
Those banks that have excessive exposure, either directly to European debt or worse, due to mark to fantasy games that our government enabled and countenanced over the last year and change, must be forced to sell off those assets or be broken up RIGHT NOW, before this tsunami comes ashore in America.
The mistakes we made this time – refusing to force those with losses to eat them and be liquidated, clearing the market, are exactly the same errors made in 1929 and 1930. When Creditanstalt blew up in 1931 our fate was sealed for The Depression and, ultimately, that disintegration led to the rise of the Nazi Party in Germany – and we all know where that ultimately led.
We are on the same road traveling at 100mph right now and must turn off immediately, as around the next corner is the same granite wall that existed in 1931!
Photo courtesy of Jr. Deputy Accountant
