Friday, August 5, 2011

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

...the EFSF [European Rescue Fund, will] 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.

...the ECB gave a green light to use the SMP program to buy Italian and Spanish bonds:
the two countries which recently put themselves into a self-imposed capital markets exile...

And expanded it will have to be: not by two, not by three, but by a cool four times,
to a unbelievable "$5 TRILLION" an act which will be necessary to convince financial markets of euro area resolve
to save Italy and Spain.

..."France, Germany contribution to EFSF’s capital would increase to 80%
if Spain, Italy had to drop out of guarantee structure.

...That means that Germany "contin[g]ent liabilities", in the worst case scenario
where France again gets downgraded, and it likely will eventually,
would surge to about $5 TRILLION, or an insane 133% of German GDP!

And here is where Germans get angry,
because explicitly they end up backstopping everyone in europe!

So the ball is now basically in Germany's court:
will the German export sector be ok with leaving the country on the hook
to a complete implosion once the final European house of cards implodes,
or, will German practically once again take over, and tell the ECB,
the bureaucrats and every other insolvent European country to go shove it[?]

Oddly enough, our money is on the latter.


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