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Originally Posted by mobertol
Tantalising A-B -give us a clue as to the kind of surprises - have you been polishing up your Crystal ball? 
Should we be setting a date for the Party to end all parties, before the end of the world as we know it?
Seems a lot of wool is being pulled over the collected eyes of Europe...
Not helped by terrible translaton - on SKY News 24hr (Italian version) yesterday, The Daily Express headline:
"Britain Close to EU Exit"
"Close" was translated as "terminate", instead of "near to " -so effectively the message was that Britain has closed with Europe and is already pulling out!!
This became, as you said, the big story of the day....!
Today they are running " Cameron -hero of the Eurosceptics in Britain" |
Fiscal Union is a long term project and does nothing to solve the problems that face Europe; stalling growth, unemployment and colossal debt.
It is said that austerity measures adopted in the PIIGS countries will have an effect opposite to that intended. How can you have growth, which you need to pay off the debt, when businesses are closing right left and centre? When the average person who pays taxes is out of work and instead of paying taxes to satisfy the debt is instead claiming benefits, which have to be borrowed thus increasing the debt?
I came across a good wheeze the other day. Have you ever heard of Hypothecation?
"…hypothecation is when a borrower pledges collateral to secure a debt. The borrower retains ownership of the collateral but is “hypothetically” controlled by the creditor, who has a right to seize possession if the borrower defaults." (reuters)
"Why do this? It’s in part about who gets to show what assets as still being on their books while others get to use said assets as collateral for their own loans. Which brings us to ‘re-hypothecation“. Who says an asset that has been “hypothecated” once can’t be “re-hypothecated”? Well actually no one. The UK and the US authorities have spent a decade removing any restraint of Hypothecation to bring us to where we are now.
So, Bank 1 has an asset. It badly needs cash because it’s nearly broke. It hypothecates its asset to bank 2. Bank 2 also needs/wants a loan.So it turns to bank 3 and says, I happen to have a lovely asset which I hypothetically control, would you like it? Bank 3 says great. So bank 2 gets its loan which it probably uses to make other loans, while the asset it got from bank 1 is re-hypothecated to bank 3. Now bank 3 hypothetically controls the asset. Bank 3 turns to bank 4 and does the same.
We now have 4 banks three of whom hypothetically control the original asset which is in fact still where it started, in bank 1 – a bank which was in such trouble it had to hypothecate its assets. Along the way, however, three banks have used the asset to get themselves loans and all of those loans rest on hypothetical control of the original asset. A pyramid of loans and obligations rest on a single asset whose control is now not at all clear should any one along the chain need to assert their control or need it back to pay off their debts – should anything go wrong in the the ventures into which they put the money they borrowed on the strength of the ‘asset’. And THAT my fellow citizens is why the bankers insist they get paid so much.
So now we have a whole new bag of questions. What assets do you think have been hypothecated and rehypothecated recently? European bonds perhaps? And which banks might be heavily involved and exposed to the trade? German banks and British Banks? French banks. American Banks?"
(Credit to David Monroe for the explanation)
This is only a tiny part of what has been going on and is still going on. Sooner rather than later in this game of pass-the-debt-parcel the music is going to stop.
Maybe it will be the market reaction to Thursday's summit that will stop the music. Who knows?
But whatever it is, the consequences will be catastrophic and global.