Time To Whistle A Bit…..


Time To Whistle A Bit…..

Posted by Karl Denninger

As we walk down memory lane back to the first of the year….

  • One or more of the PIIGS (Portugal, Ireland, Italy, Greece, Spain) either defaults technically or is forced into austerity by the ECB.  Further, Eastern Europe becomes dangerously destabilized.  There is a real possibility of outright hostilities in that part of the world next year.  Let’s hope not.  The ECB has a nasty problem on their hands; I have said for quite some time that the Euro is likely to trade at PAR down the road.  This year is probably not the year for it, but the cracks in the dam that ultimately could destroy the European Union should become very apparent in 2010.


May have nailed that one eh?  Recognition is starting to show up too:

May 4 (Bloomberg) — Greece’s bailout “might collapse” and the nation’s debt crisis makes it “hard to see” how the euro will survive in its current form, former Bank of England policy maker Charles Goodhart said.

If this financing deal should collapse, and it might for one reason or another, then there would be a question of what the Greeks could possibly do,” Goodhart said in an interview with Bloomberg Television in London today. “Default would be totally disastrous for them and leaving the euro would equally be disastrous.”

Leave the Euro and default.

I’ll be happy to help the Greeks figure it out.  That’s because anyone with a simple mathematical understanding of compound interest can tell them what has to happen, just as it has to happen in England, Spain, Portugal, Italy…… and The United States.

That is, “borrow and spend” has to end, and the adjustment that must be taken must occur, no matter how ugly it might be.

We have spent the last three years trying to avoid the pain that comes from idiotic and even criminal acts by the banking cartel, all in the name of “financial stability.”  We have bought nothing of the sort; all we’ve done is deluded ourselves and delayed what has to happen.

Unfortunately the flood of liquidity from these “programs” has led to a whole host of otherwise-rational people crowing about “new bull markets” and “V-shaped recoveries.”

I’ll make this simple:

These people are your neighbors who extracted all their alleged “newfound wealth” via HELOCs and cash-out refinances and bought themselves a nice expensive new RV and boat, right up until the housing market blew up.  These people’s “prognostications” are equivalent to that neighbor in 2005, who was living high on the hog and chortling at you when you drove by in your 2001 Accord, while they had a brand new Mercedes and BMW in the driveway molesting each other.

We all had one of those neighbors, and most of them are now flat on their ass broke with their boat, RV and cars repossessed and their house in foreclosure.  Some haven’t been actually kicked out yet (thanks to the banks sitting on the defaulted paper) but they will be, their hopes, dreams, and high-life pretending over for a generation – if not permanently. 

Such it will be at a larger, macro level folks, and if you’re not prepared for it, you’re likely to be “a little shocked”, because just as in 2008, reality will arrive without prior warning.