Earthquake strikes Wall Street, Finland backing out of Greek bailout
Posted on 24 August 2011 with 4 comments from readers
Yesterday the biggest earthquake in 100 years shook Wall Street and Washington, while across the Atlantic came the bombshell that Finland may not be supporting the Greek bailout, a potential tipping point for the eurozone debt crisis.
As forces from nature shook up stock brokers, the markets turned volatile. Two more sets of awful US economic data perversely rallied markets that reasoned QE3 from Ben Bernanke was therefore more likely this week. Asian markets took the more obvious reaction and fell on the bad housing and manufacturing data.
Volatility rules
Gold reached another all-time high of $1,913 before plunging back to $1,837 as the S&P 500 rallied 3.4 per cent from recent lows. In short the markets are still highly volatile and unsure where to go, although the general trend is still downwards.
Meantime, Finnish prime minister Jyrki Katainen has threatened to withdraw support for the Greek bailout if Finland’s $1.5 billion bilateral collateral agreement with Greece was overruled. This has the potential to jeopardise the whole bailout plan for Greece whose financial position is widely recognized as completely hopeless.
At current interest rates debt charges account for 24 per cent of GDP which is contracting at eight per cent per annum. Finland is not prepared to lend to such an economic basket case without collateral. Who in their right mind would?
Somebody clear has to stand up and call a spade a spade in such circumstances. Finland is right to call a halt to the madness. Greece has maxed out its last credit card and insolvency is the next step.
Debt contagion
Not surprisingly the entire global banking system fears the contagion effect as the eurozone debt crisis is far bigger than the Lehman insolvency that triggered the 2008 global financial meltdown. Mr Bernanke can throw some more QE3 into this pot later this week but this will be just more good money after bad.
If he does markets will rally a bit more, and then crash when the real news about the eurozone debt crisis finally breaks. Would Bernanke not be best placed to keep his fire-power back for a really bad day?
Does it take the Finnish PM to bring the other European leaders to their senses? For it is to them that this problem is really addressed, and all they do is duck the blame for it.
4 Comments posted by readers:
“Mr Bernanke can throw some more QE3 into this pot later this week but this will be just more good money after bad.”
I take the point, but we can hardly describe The Bernank’s freshly printed digital notes as “good” money. It is rotten inflationary cash which robs normal people and bails out the filth and scum that got us into this mess.
I have to concur with Simon Bennett’s comment. It would be more appropriate to characterize it as “more bad (fiat) money after bad”.
One thing I know for sure, Ben Bernanke work has always been full of outrite lies and superior incompitant actons. Get ready for more of the same,
case in point. Gold is not money.
How about this great one: The USA will not loose it’s AAA credit rating.
The up side is, the outher countries of the world have model not to follow.
Brian Sutton:
It was Timothy Geithner who boldly asserted that the US will never lose it’s AAA rating. Now get back to the mail room and ask your colleagues about a wondrous tool known as a “spell checker”.