"Slowly, painfully, the world is coming to grips with the realization that the Euro, as we know it, is entering its last days, and what consequences we are likely to see."
"Many people, especially those that trade stocks, have been having trouble believing that the Euro will die. After all, just a few years ago the Euro was considered the alternative reserve currency of the world. So much work and money has been spent on this unproven endeavor, not to mention the complete lack of a "Plan B", that few could picture its demise. Yet, just like the inability of so many to foresee the end of the housing bubble, reality is intruding again. The farther we get down the road of failure, the more clear the picture becomes."
"European banks have found themselves in the same position that Wall Street banks were in back in the fall of 2007 - with Trillion of assets that no one wants. Just like Bear Stearns, Wachovia, and Washington Mutual before them, European banks can't price their assets to what the markets will bear because it will mean instant insolvency if they did. So they "mark-to-myth" instead, hoping against hope that the asset markets will turn around before they are forced to declare bankruptcy."
"Probably the most disturbing event of the past week happened at the core of Europe. Germany's bond auction was an outright failure. To put this into perspective, recall how so many policy-makers and economists are calling for Germany to "save" the Euro. Germany is the most credit-worthy member of the union. So if Germany can't find enough investors to buy its own debt, how could it possibly borrow enough to save the rest of Europe? The answer is obviously: it can't."
"I got news for you: credit is already freezing in western Europe. Eastern Europe depends on western Europe for credit, and Austrian banks are already pulling back from the region by order of the Austrian government."
"That's just Europe. What do we have to worry about in America, right?"
"Well, consider that the derivatives market (Remember the derivatives market? That thing that caused AIG to fail, not to mention Enron and LTCM. That huge market that Congress refused to regulated after the 2008 economic shock. Remember that?) is between $250 Trillion and $707 Trillion in size (depending on who is counting)."
"Those numbers hopelessly dwarfed the GDP's of Europe and the United States combined."
"Consider that 94.4% of that $250 Trillion in derivative contracts were sold by just four banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion. Those are Trillions with a T. Their exposure to the derivatives market increased $5.3 Trillion in just the first quarter of this year. The overall derivatives market increased a record $107 Trillion in the first half of the year - more than the GDP of the entire world."
"You read that right: $107 Trillion in just 6 months."
"The bankers are absolutely bat-sh*t insane! In the face of an economic crisis they've doubled down their bets. They've gambled the entire world's economy for bigger bonuses, as if their bonuses will be worth anything if they crash the world's economy and bring down the Euro."
"Because this is as much a political crisis as an economic one, it is impossible to make accurate long-term predictions. The size of the problem is almost beyond comprehension. After all, we are talking about multiple countries going bankrupt and the failure of the second-largest currency in the world. To think that the problem could be even larger than the 2008 crisis, when the only sector of the economy that has recovered is corporate profits, leaves one thinking "This can't be true. They can't have done this to us again." And yet the numbers speak for themselves."
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