[QUOTE=Fusion_power;301545]The only other alternative would be to restrict fractional reserve lending and that is NOT going to happen.[/QUOTE]It's very far from being the only alternative.

Other alternatives include:

each European nation returning to a national currency --- the status quo ante;

a "strong Eurozone" consisting of Germany, the Netherlands, Denmark, Austria and perhaps a few others, the remaining current Eurozone countries reverting to national currencies;

a "weak Eurozone", consisting of all except Germany, the Netherlands, Denmark, Austria and perhaps a few others, that selection reverting to national currencies;

two separate currency unions consisting of the strong and weak Eurozones outlined above.

With a bit of thought you could probably come up with yet more alternatives.

[QUOTE=xilman;301550]each European nation returning to a national currency --- the status quo ante;[/QUOTE]

Indeed.

I think a lot of people forget that a nation having its currency shared with other nations (or tied to another nation's currency, as it is here in Barbados) means the (nation's) central bank can't adjust interest rates. This is a serious constraint in financial management.

Mish has a pair of excellent posts today -- I am pressed for time so will punt on commenting on those and just give the titled links, followed by material which I compiled in the past few day:

[url=http://globaleconomicanalysis.blogspot.com/2012/06/hollande-about-to-wreck-france-with.html]Hollande About to Wreck France With Economically Insane Proposal: "Make Layoffs So Expensive For Companies That It's Not Worth It"[/url]

Make sure you read this second one at least as far as the Yogi Berra quote: :)

[url=http://globaleconomicanalysis.blogspot.com/2012/06/monopoly-money-vs-bernanke-money-is.html] Monopoly Money vs. Bernanke Money, is there a Difference? [/url]


[b]Michael Lewis Princeton Commencement Addresses:[/b]

[url=http://www.princeton.edu/main/news/archive/S33/87/54K53/]Princeton University: Michael Lewis 2012 Baccalaureate Remarks[/url]
[quote]I listened and waited for Professor Childs to say how well written my [Princeton senior] thesis was. He didn't. And so after about 45 minutes I finally said, "So. What did you think of the writing?"

"Put it this way" he said. "Never try to make a living at it."

And I didn't — not really. I did what everyone does who has no idea what to do with themselves: I went to graduate school. I wrote at nights, without much effect, mainly because I hadn't the first clue what I should write about. One night I was invited to a dinner, where I sat next to the wife of a big shot at a giant Wall Street investment bank, called Salomon Brothers. She more or less forced her husband to give me a job. I knew next to nothing about Salomon Brothers. But Salomon Brothers happened to be where Wall Street was being reinvented—into the place we have all come to know and love. When I got there I was assigned, almost arbitrarily, to the very best job in which to observe the growing madness: they turned me into the house expert on derivatives. A year and a half later Salomon Brothers was handing me a check for hundreds of thousands of dollars to give advice about derivatives to professional investors.

Now I had something to write about: Salomon Brothers. Wall Street had become so unhinged that it was paying recent Princeton graduates who knew nothing about money small fortunes to pretend to be experts about money. I'd stumbled into my next senior thesis.[/quote]

Lewis uses his own career "happy accident" to open a discussion on the role of luck in life's suceess stories. Continuing the "luck or skill?" theme, earlier this week we had the following story out of Asia:

[url=www.nytimes.com/2012/06/05/world/asia/anniversary-of-tiananmen-crackdown-echos-through-shanghai-market.html?_r=1&src=me&ref=world]Market’s Echo of Tiananmen Date Sets Off Censors[/url]
[quote]HONG KONG — Maybe it was just a coincidence, but when the Shanghai Stock Exchange fell 64.89 points on Monday — uncannily echoing the date of the Tiananmen Square crackdown on pro-democracy students on June 4, 1989, exactly 23 years earlier — the Chinese blogosphere went into a tizzy.[/quote]


[b]Friday Funnies:[/b]

[url=http://www.princeton.edu/main/news/archive/S33/88/33K92/]Princeton University: Steve Carell 2012 Class Day Remarks[/url]
[quote]I "Googled" myself this morning. Yes, I know that sounds like a euphemism for something gross … and it should, I suppose, because it too is an exercise in self-love.

So I Googled myself, looked up my name, curious to see what others might be saying about me ... and you know what I found? Lies. Conjecture. Half-truths. Then I went on Facebook: More of the same Internet mendacity: groundless accusations, blatant falsehood, gross inaccuracies, hurtful slander. So hurtful, in fact, that I had to take the painful, but necessary, step of un-friending my 86-year-old mother.[/quote]

Spain is preparing a formal request for a bank-bailout loan from the EMU/ECB/IMF "capped at $100 billion Euros", and "with no strings attached", according to [url=http://www.nytimes.com/2012/06/10/business/global/spain-moves-closer-to-bailout-of-banks.html?ref=world]the accompanying pack of lies[/url]. The "cap" is similarly a lie - oh sure, *this* tranche might be capped at that amount ... but it is sure to be followed by requests for more money, in short order. Just like politicians, operators of insolvent banks *always* lie, apparently following the maxim of Luxembourg PM and President of the Euro Group (the group which exercises political control over the Euro currency) Jean-Claude Juncker: [url=http://globaleconomicanalysis.blogspot.com/2012/05/mr-lie-when-its-serious-juncker-tells.html]"When it becomes serious, you have to lie"[/url].

As to where the money would actually come from, (President of the European Commission José Manuel) Barroso assured reporters that "Yeah, we gonna be holding a really, really big bake sale outside my villa in Portugal..."

-----------------

The German [i]Die Welt[/i] has a good article on the U.S. "hunger games" related to record food stamp usage, which one expect to be one of the political footballs to be in play leading up the the US November elections - link is to German article, I applied Google Translate followed by a manual smoothing to the quoted snips:

[url=www.welt.de/wirtschaft/article106483150/Das-traurige-Hunger-Schauspiel-in-US-Supermaerkten.html]The sad hunger spectacle in U.S. supermarkets[/url]: [i]On the last day of each month hundreds of thousands of Americans stand in line for food at night. As of midnight, the new food stamps take effect. Never before were so many U.S. citizens dependent on them.[/i]
[quote]Slowly the queue in front of the supermarket checkout in the Wal-Mart in North Bergen, New Jersey begins to move. Many customers yawn from boredom. Jessica Morsch is at least distracted by her three year old son who is well-behaved despite the late hour.

Like so many others in the neighborhood that night, the 21-year-old drove out shortly before midnight to go shopping. Her shopping cart is so full that the food almost falls out: a huge sack of rice, bread, bottled water, cold cuts, some vegetables, baby food.

"I have to pay close attention to the prices," said Morsch. "Luxury items are not an option for me with my $500 monthly food stamps for three people."

Always on the last day of the month, there is a sad spectacle in many supermarkets in America. On that day Wal-Mart makes even more sales than usually. "If you wonder why people go to our supermarkets in the middle of the night on this special day, there can only be one explanation for it," says Wal-Mart manager William Simon . "They are hungry."

At the stroke of midnight, when the next month begins, the new "food stamps" can be redeemed. "Food stamps" is still the common term, but in actuality the needy have long since stopped receiving paper vouchers - instead they possess plastic cards, which are automatically reloaded each month.
[b]
One in seven need state support
[/b]
In the wake of the financial and economic crisis, the number of Americans who carry such cards in their wallet has shot through the roof. As of March, 46.4 million people were food stamp recipients - 70 percent more than before the financial crisis.

Meanwhile, one in seven Americans is dependent on federal aid for food purchases - a new record. And the demand is likely much higher, because many people have not applied, either out of shame or ignorance.[/quote]

Actually, €100 Billion will be about enough to recapitalize the banks. It won't be enough to get the local and regional governments off the hook. Catalonia's request for €16 Billion is just a drop in the bucket to the roughly €250 Billion that the rest of Spain will need over the next 3 years. I can see that bailing out the banks will bring a measure of relief. I can't see that bailing out the banks will make things any easier for the Spanish people.

As for the food stamp shoppers, I see roughly 1 in 10 people in this area carrying cards. They don't tend to shop just on the first day of the month though, but they shop a lot in the first week of the month.

DarJones

note that this is not all that Spain will need before it is over. This just covers the immediate bank and regional govt needs. The long term potential is for up to a €1 Trillion bailout.

[QUOTE=Fusion_power;301880]Actually, €100 Billion will be about enough to recapitalize the banks.[/QUOTE]

Until the true extent of their bad lending becomes clear, you mean?

And let's not forgot that other countries which have already accepted similar bailout packages on far-more-onerous terms are watching. This was completely predictable:

[url=www.france24.com/en/20120609-ireland-wants-rescue-deal-negotiated-match-spains?utm_source=dlvr.it&utm_medium=twitter]Ireland wants rescue deal negotiated to match Spain's[/url]

----------------------------------------


[b]Friday Funnies, Sunday Edition:[/b]

[url=http://www.zerohedge.com/news/hot-tip-convicted-ponzi-master-join-my-ponzi-it-better-feds]Hot-Tip From Convicted Ponzi Master: "Join My Ponzi: It Is Better Than The Fed's"[/url]
[quote]What's the difference between today's global finance system and a Ponzi scheme? This is the question that a 56-year-old veteran Russian financial scammer has been asking his victims. As [url=http://www.bloomberg.com/news/2012-06-06/is-global-finance-a-ponzi-scheme-ask-a-russian-expert.html]Bloomberg points out[/url], chillingly, he almost has a point. Sergei Mavrodi is one of the most infamous names in Russia's recent history. Back in February 1994, amid the turmoil of the country's transition to a market economy, the mathematician organized a Ponzi scheme called MMM. Now he's back with an even more audacious endeavor: the honest scam. Last year, he announced the new project, MMM-2011, by stating boldly that it would be another Ponzi scheme. Depositors would be paid solely from funds invested by other depositors. There would be no attempt to generate income in any other way. This, he said, was perfectly all right, and no different than the way some of the largest institutions in global finance operated, from the Russian pension fund to the U.S. Federal Reserve. Perhaps most notably, Bloomberg reports his perspective on "What is money?" he wrote. "Nothing! Nihil. A phantom. … It is backed by nothing at all and printed by the masters in any quantity, at will."[/quote]

The referenced [url=http://www.bloomberg.com/news/2012-06-06/is-global-finance-a-ponzi-scheme-ask-a-russian-expert.html]Bloomberg article[/url] tries mightily to intimate that the global-banking money-printing is not in fact a Ponzi, but alas facts are not on its side, so it resorts to innuendo accompanied by a "clarification" which sounds more or less like the textbook description of a Ponzi scheme, just one centered around government money-printing and debt issuance:
[quote]Such a case might have been hard to make back in 1994, when Russians saw the U.S. dollar as an unassailable store of value. But in today's post-financial-crisis world, it's easy to see how Mavrodi's arguments [u]could convince an uninitiated observer[/u]. [b]The U.S. is paying back its bondholders with money freshly printed by the Fed. Greece is paying back investors with money the European Union has borrowed from other investors -- or maybe some of the same investors -- via its bailout funds. The developed world's central banks have printed the equivalent of trillions of dollars in new money to keep their financial systems and economies afloat[/b].[/quote]
Bloomberg's usage of the word "uninitiated" would appear to be some kind of financial-insider code for "numerate", because anyone capable of doing basic math understands that permanent exponential real-economic growth in the context of finite-resources is impossible, and that printing more money to chase after a finite supply of goods does nothing to increase the inherent value of the goods, nor to increase their stock, except perhaps by encouraging bubble-style speculation in some subset of the goods. Of course becoming "initiated" in modern economic theory means suspending any numerate instincts one might possess and embracing multiple quasi-religious delusions about "efficient markets", "money multiplier theory" and the like.

As to the success of the scheme? Back to Bloomberg, which once again whiffs when it states that Mavrodi's scheme emulates multi-level marketing - no, MLM in fact makes use of "Ponzi theory", it just occasionally decides to sell some actual goods and services along the way:
[quote][u]Mavrodi's sales pitch worked. On May 31, MMM-2011 claimed 35 million participants throughout the world[/u]. The number may be wildly inflated, but there were certainly hundreds of thousands of people in Russia, Ukraine and other post-Soviet nations who invested with Mavrodi. Their money allowed him to buy outdoor advertisements (this time avoiding TV) and open up chains of “consulting offices.”

The operation employed a structure borrowed from multi-level marketing. Early investors recruited new ones. A member who brought ten people into the fold could become a foreman and take a small cut from each investment by his “clients.” The first adopters could end up running an army of 100,000 or even a million. They offered returns from 20 percent for a one-month deposit up to 60 percent monthly for a 12-month deposit.

This time around, the mathematician was careful to mitigate the risk that he would be accused of fraud, or of operating a financial business without a license. MMM-2011 was not a legal entity. Money was moved strictly between people's private bank accounts or electronic wallets. The network made extensive use of communication technology: Potential foremen were interviewed via Skype, and each member was required to use a Gmail account.

Authorities were nonplussed. “The law enforcement agencies have a very high sensitivity threshold,” Russia's financial ombudsman Pavel Medvedev told TVRain. “They worry when someone gets killed, not when fraud is being perpetrated.” Criminal proceedings were started against Mavrodi in Novosibirsk, where he was accused of “aiding illegal enterprise,” but no move was made to arrest the MMM mastermind, who communicated with his followers only by posting videos on his website.

In Ukraine, Prime Minister Nikolai Azarov promised that the government would “check on what grounds this company started operating” and warned citizens that [u]“there is no such thing as a free lunch.”[/u] No decisive action was taken. Alexei Plotnikov, a parliamentary deputy from the ruling Regions Party, argued that action wasn't necessary: “There is a general rule that you should not stick fingers in an electrical outlet, but there will always be people who do that," he said. "It's the same with Ponzi schemes and other questionable operations. All the government should do is issue a warning.”[/quote]
Right - free-lunch promises must be reserved for politicians to make, and only government-run Ponzi schemes should be sanctioned.

Mavrodi clearly has a wickedly funny sense of irony, because after the inevitable collapse of last year's Ponzi, he did just the same as governments worldwide have done post-2008 crisis, namely double down and try to reflate the Ponzi:
[quote]MMM-2011 halted payments on May 31. “Unfortunately, I have to admit that a panic has started within the System,” Mavrodi wrote, blaming the media for spreading malicious rumors. “This is a pyramid! If everyone rushes to withdraw the money, there is no way there will be enough money for everybody. In fact, it would be the same with any bank.”

Undaunted, Mavrodi launched a new pyramid, MMM-2012, saying that it would be used to prop up MMM-2011. “Don't worry, don't be nervous, we will fix everything, and you'll get paid in full,” Mavrodi wrote, adding immediately: “This is not a promise, just a feeling I have.”[/quote]

Ernst, it is a bit funny that you do not see the connection between the food stamp usage and what Hollande is doing. The US has done the exact opposite for 35 years and what has it led to? One in ten needing food stamps. The US is the worst developed country to be poor in. Maybe you and Mish should think twice before criticising Hollande for doing the opposite of what has led the US down this path. The decline of private-sector unions has made layoffs really easy in the US so the 1% grab more and more of the pie and no one complains because if they do, you are fired!

One of the predictable results of the Spain bank bailout is backlash from the people of Spain.

[url]http://www.cbsnews.com/8301-18563_162-57450102/spains-bailout-met-with-protests-in-madrid/[/url]

[QUOTE]Protestors in Madrid demanded to know why billions in aid would go to prop up broken Spanish banks, instead of helping people who are suffering because of their mistakes.

Moody Analytic's Mark Zandi said the reason Spain's in so much trouble may sound familiar to Americans.

"Spain had a bigger housing boom and bust than we had here in the United States and that means a lot of bad mortgage loans bad real estate loans that undermined the capital positions of the banks. They are broke, they need help from the European Union," Zandi said.

Spanish officials refuse to use the words "rescue" or "bailout" to describe the $125 billion package, referring to it as line of credit instead.

That may be a point of pride, but the distinction is an important one: Spain's package doesn't come with as many strings attached as the cash given to Greece, Portugal and Ireland.[/QUOTE]

The problem is that fixing the banks is only one small step in fixing the Spanish economy. Bursting economic (housing) bubbles create so much drag that even if the banks have money to lend, nobody will want to borrow it. This brings on the problem of stimulating an economy that can be likened to a heart attack victim. Unless you get the heart beating again, there is no way that plugging the banks balance sheets will help the overall economy which means Spaniards are set for at least 20 years of doldrums.

DarJones

[QUOTE=garo;301954]Ernst, it is a bit funny that you do not see the connection between the food stamp usage and what Hollande is doing. The US has done the exact opposite for 35 years and what has it led to? One in ten needing food stamps. The US is the worst developed country to be poor in. Maybe you and Mish should think twice before criticising Hollande for doing the opposite of what has led the US down this path. The decline of private-sector unions has made layoffs really easy in the US so the 1% grab more and more of the pie and no one complains because if they do, you are fired![/QUOTE]
I see the obvious connection between the hollowing-out of the US middle-class wage base resulting from 30 years of Reaganomics (which includes the Clinton presidency in the deregulatory and reward-the-looters sense, but less so in the let's slash-taxes-while-blowing-out-spending) and the resulting symptoms such as record food st amp usage.

I do *not* see a connection between pandering free-lunch pols like Hollande buying votes by promising untenable things - "you, too can work a 35-hour week at a generous state-mandated wage and retire at 60 with a generously-paid-and-benefited 20+ year pension awaiting you!" - and prevention of poverty. Sure, you can live beyond your means and pretend things are great for a while, even decades - but once your credit line gets yanked, you have made things worse than before, because not only are you facing poverty, you are doing so with a nation of entitlement addicts clamoring in the streets for magical solutions.

-----------------------------------

Meanwhile, the market euphoria resulting from the weekend "Spain is saved!" theater lasted all of - well, not at all, because (at least the U.S.) markets had a gap-up open and immediately sold off briskly. The numerous government-connected insiders who front-ran the weekend announcement by going long late last Friday probably made a nice chunk of change by selling at the open, though. Maybe we can recapitalize the Spanish banks by way of a series of such market-manipulating 'weekend surprises".

Well if we all worked efficiently and cooperatively, a 35-hour workweek is more than sufficient. It would also employ more people than a 65 hour work week.

[QUOTE=ewmayer;302029]
Meanwhile, the market euphoria resulting from the weekend "Spain is saved!" theater lasted all of - well, not at all, because (at least the U.S.) markets had a gap-up open and immediately sold off briskly. The numerous government-connected insiders who front-ran the weekend announcement by going long late last Friday probably made a nice chunk of change by selling at the open, though. Maybe we can recapitalize the Spanish banks by way of a series of such market-manipulating 'weekend surprises".[/QUOTE]


Yeah. The effect of interventions now lasts hours. This is so not going to end well.

[url]https://twitter.com/gareth_gore/status/212147530794930177/photo/1[/url]

[QUOTE=garo;302032]Yeah. The effect of interventions now lasts hours. This is so not going to end well.[/QUOTE]
Well, we dead-cat-bounced right back up to Friday's close today - maybe "Napoleon dynamite" Barroso - I call him that because he has a fiscal Napoleon complex and look like he's got a short fuse, temperamentally speaking - leaked a rumor of that bake sale I mentioned.

---------------

ZeroHedge's Bruce Krasting discusses some of the interesting strategic aspects of another Euro-region soon to be negotiating a bailout, [url=http://www.zerohedge.com/contributed/2012-06-12/interesting-bailout-offing]the island nation of Cyprus[/url].


Interesting take on the Spanish bank bailout -- one of the discussants invoked Monty Python, so I had to share that with our readers, obviously:

[url=www.marketplace.org/topics/world/european-debt-crisis/spanish-bailout-wont-alleviate-eurozone-crisis]Spanish bailout won't alleviate the eurozone crisis[/url]
[quote][b]Moore:[/b] Well you know that Monty Python line, 'No one expects the Spanish Inquisition'? Well, everybody expected a Spanish bailout. Which is what this is -- [u]it's not a bailout of the banks, it's a bailout of Spain's government[/u]. Try to wrap your mind around this: it's the banks bailing out the government, which is bailing out the banks.

[b]Ryssdal:[/b] You've got to explain that, help me out.

[b]Moore:[/b] Yeah, here's how we can tell. So about two weeks ago, we were hearing about a Spanish bank bailout that would be about $37 billion euros, right? Last week: $60 billion euros. Today: $100 billion euros. What does that tell us? The banks aren't swallowing that much bad debt. It tells us that there's a bigger use and that's probably the government's use. The Spanish government is in trouble. It's the fourth largest economy in the eurozone, and so they want to avoid this look of another bailout, so calling it a bank bailout makes it look better.

...

[b]Ryssdal:[/b] ...let me ask you another sort of more macro thing. You and I talked about this: In the financial crisis here, you know, you can recapitalize and bail out bad debt until the cows come home, right? [u]But until somebody takes the loss, it's a bad debt on the books[/u]. Has this done anything to alleviate the fundamental problem in Spain and in Europe?

[b]Moore:[/b] No, because the fundamental problem is, as you mentioned, denial. And this does nothing to avoid that denial. Spain's property bubble popped -- think about this -- around the same time as ours, back in 2008. And they're just taking those losses now. So they pushed off that pain for four years, that's the extent of European denial.

I asked somebody in Europe about this, who's been watching this carefully. His name is Anthony Peters; he's a chief strategist with SwissInvest in London, and he told us not to even try to compare this our property bubble -- that's how big Spain's problem is.
[i]
[b] Anthony Peters:[/b] Ireland and Spain makes the property bubble in the United States look like a kid's toy. We are talking really, really serious problems.
[/i]
And by way of example, he pointed out there's a house in Ireland for every single Irishman -- that's how much they overbuilt.[/quote]