World Economy Rolling Toward 'Total Collapse': Faber

 

 

Explaining How The Just Announced ECB Market Rescue Pledged 133% Of German GDP To Cover All Of Europe's Bad Debt

Two weeks after Zero Hedge readers were informed about it, slowly the sell side is coming to the realization that not only will the EFSF have to be expanded (that much was known), but that Germany, and specifically the outright economy, will be on the hook by an unprecedented amount of money. And expanded it will have to be: not by two, not by three, but by a cool four times, to a unbelievable €3.5 trillion which according to Daiwa's Head of Economic Research, Grant Lewis, an action which will be necessary to convince financial markets of euro area resolve to save Italy and Spain. Says Lewis: "France, Germany contribution to EFSF’s capital would increase to 80% if Spain, Italy had to drop out of guarantee structure. Says France, German contingent liabilities would be > 50% of GDP if EFSF expanded; added to France, Germany current debt may trigger downgrades to both countries." Actually no. As we explained when we referred to a far more accurate report by Bernstein, merely a €1.5 trillion expansion in the EFSF, would mean that Germany is on the hook to the tune of €790 billion or 32% of German GDP. If France is downgraded, Germany essentially becomes the sole backstopper of the entire Eurozone, to the tune of €1.4 trillion or 56% of its GDP. Now let's assume Daiwa is correct, and the full amount under the EFSF has to increase to €3.5 trillion. That means that Germany "continent liabilities", in the worst case scenario where France again gets downgraded, and it likely will eventually, would surge to about €3.3 trillion, or an insane 133% of German GDP!







As The World Turns, The Contagion Spreads: I Can Hear The Pitter-Patter Of Feet Running From European Banks - Are YOU Ready For

Posted by: Reggie Middleton

Post date: 08/05/2011 - 12:30

More evidence of European bank runs as both banks AND sovereign domicile states start to pull liquidity at the same time that said banks are trying to pull liqiodity from their customers. How do you... 

Where The Markets Are Today...

Posted by : Phoenix Capital...

Post date: 08/05/2011 - 12:50

Indeed, the only thing that could really kick off a rally for stocks would be the announcement of QE 3 (or hint of it) from the US Federal Reserve. However, even this would be short-lived. The market...

Dow Drops More Than 200 Points, Vix on Track for Highest Close Since July 2010 (click for more)

Stocks, Euro Surge On Another Central Bank Intervention Announcement: ECB Ready To Buy Italian, Spanish Bonds

More central bank intervention headlines, and the euro and stocks surge:

• ECB says ready to buy Italian, Spanish bonds.
• ECB expects Italy to fast-track welfare reform, fiscal rule for bond purchases according to sources close to talks
• ECB ready to buy Italian and Spanish bonds if Berlusconi commits to bring forward specific reforms according to sources
• EU leaders applying intensive pressure on Berlusconi to make an announcement according to sources

Said otherwse, open the QE floodgates. Globally. Central banks now control it all.

Capitulation Redux Or August 2010 Deja Vu: Goldman Downgrades US Economy, Sees One In Three Risk Of Recession, Expects Some QE3 Announcement Next Week

In a carbon copy of Goldman's action from exactly one year ago, Goldman's Jan Hatzius has just killed his outlook for the remainder of the year, said there is a 33% chance of a recession and is now looking forward to some QE3 announcement next week. "As foreshadowed in recent publications, we have lowered our US real GDP growth forecast to 2% (annualized) through 2012Q1 and 2½% thereafter.  We now see the unemployment rate edging up to 9¼% by the end of 2012, and see a one-in-three risk of renewed recession.  On the monetary policy side, we expect no rate hikes or changes in the size of the Fed's balance sheet until 2013 or later; moreover, we now expect the FOMC to provide more guidance about the future size of its balance sheet at next week’s meeting." Recall that 3 weeks after last year's such downgrade, we had a rather unpleasant announcement at Jackson Hole. Deja vu.... all over again.

Watch Berlusconi And Tremonti's Press Briefing On Italy's Economy And Markets Live

Here is your chance to see Italy's troubled PM FinMin Giulio Tremonti and even more troubled Prime Minister Berlusconi hold a press briefing on the topic of Italy's economy and market, and attempt to soothe stocks. Judging by the ongoing flash crash across various open markets, they better have something convincing to say.

It Just Got Worse: Italian Treasury Just Announced It Will Not Sell 3 Month Bills At The August 10 Auction

Little by little, Italy's self-imposed exile will completely isolate it from capital markets. Here's to hoping that €60 trillion in previously undiscovered money last the country for a looooong while.

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