ARRA News Service
News Blog for social, fiscal & national security conservatives who believe in God, family & the USA. Upholding the rights granted by God & guaranteed by the U.S. Constitution, traditional family values, "republican" principles / ideals, transparent & limited "smaller" government, free markets, lower taxes, due process of law, liberty & individual freedom. Content approval rests with the ARRA News Service Editor. Opinions are those of the authors. While varied positions are reported, beliefs & principles remain fixed. No revenue is generated for or by this "Blog" - no paid ads - no payments for articles. Fair Use Doctrine is posted & used.
Blogger/Editor/Founder: Bill Smith, Ph.D. [aka: OzarkGuru & 2010 AFP National Blogger of the Year]
Contact: editor@arranewsservice.com (Pub. Since July, 2006)
    Home Page
   

One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors. -- Plato (429-347 BC)

Tuesday, July 12, 2011

The Euro’s Last Gasp

Dominoes
By William Warren
By Bill Wilson : While Obama sits here and plays rhetorical games with the $14.294 trillion debt ceiling, attempting to sucker Republicans into increasing taxes, there are strong headwinds from across the Atlantic that threaten the U.S. economy.

Greece’s default is inevitable. And the fate of the euro is in question.
The only real question currently facing policymakers in Brussels is whether banks foolish enough to lend money to a bankrupt socialist government will take losses, or if the European Central Bank (ECB) will simply print more money to bail out Greece’s creditors.

That decision will have major ripple effects. If bondholders take losses on Greek debt, American financial institutions like Bank of America, Goldman Sachs, and AIG are said to be on the hook for honoring credit default swaps sold to insure against Greece’s default on its €340 billion debt.

If, on the other hand, the banks are bailed out, and the ECB buys back the Greek bonds with printed money, then it is the central bank that is on the hook for any Greek default.

At that point, a Greek default would in principle lead to the ECB’s insolvency. The European Central Bank (ECB) is already on the hook directly for over €120 billion in Greek debt, including tens of billions of Greek debt it accepted as collateral when making other loans.

So, whether the ECB further intervenes at this point or not, a Greek default would hurt the ECB — and the euro — most of all.

Even if U.S. financial institutions foolish enough to insure against Greek default were still to be the ones on the hook to honor the swaps, nobody expects the global banking ruling class to really take any real losses on sovereign debt, no matter how richly deserved. The assumption is that these institutions cannot afford to honor the credit default swaps. So, who would bail them out?

The Federal Reserve, as usual. As in 2008 and 2009, the Fed’s emergency facilities would once again likely bail out financial institutions all over the world deemed too big to fail. Or, perhaps the newly minted, FDIC-operated, so-called “orderly liquidation fund” under Dodd-Frank — really, an unlimited bailout fund — would be invoked.

One way or another, institutions that purport to be private will be made whole by the public treasury, just as creditors of Greece, Portugal, and Ireland already have been. Soon too Italy’s creditors will try to get a piece of the action. They won’t lose a cent.

However, that does not make a Greek default any less damaging economically. Yields on Italian and Spanish debt are soaring, and Portugal, Ireland, and Greece are already dramatically high as the crisis continues. A default in Athens would force markets to price in potential defaults for the other states, which means punitively high interest rates.

This will place even more pressure on the ECB to paper over the debts of the other European states. Meanwhile, the crisis will claim new victims that have, as a matter of political choice, spent far beyond their means.

The ultimate casualty may be the euro itself. If the monetary union breaks up — How does Greece default and remain in the eurozone anway? How does the European Central Bank go bankrupt and the euro remain a viable currency? — gone will be a cushion the U.S. has relied on economically for the past two years.

As the financial crisis turned from bad to worse, there was a flight to safety in two havens: gold and U.S. treasuries. In 2010, the same flight occurred in the heels of the sovereign debt crisis in Europe. The euro plunged, and the dollar, treasuries, and gold went up.

Sadly, the exchange rate is only a matter of relative weakness. Both the euro and the dollar are racing to the bottom.

Without the euro, attention would be more centrally focused on the unsustainable U.S. Treasury bubble, where already the Fed is intervening to purchase trillions of U.S. debt with printed money. So heavy has the Fed’s hand been in treasuries markets that creditors have not yet begun pricing in a U.S. default.

When they do, watch out for the falling dominoes, even if Uncle Sam hasn’t.

Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.

Tags: Euro, Europe, financial collapse, Portugal, Ireland, Greece, Greek Default, Bill Wilson, AIG, Economy, European Central Bank, Fed, Federal Reserve, Goldman Sachs, Government Debt To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. Thanks!
Posted by Bill Smith at 5:28 PM - Post Link

0 Comments:

Post a Comment

<< Home


View U.S. National Debt

Don't miss anything!
Subscribe to the
ARRA News Service
It's FREE & No Ads!

You will receive a verification email
& must validate you subscribed!

You Then Receive One Email Each AM
With Prior Days Articles / Toons / More


Also, Join & leave conservative posts & comments on
Facebook.com/ARRANewsService


Recent Posts:
Personal Tweets by the editor:
Dr. Bill - OzarkGuru - @arra
#Christian Conservative; Retired USAF & Grad Professor. Constitution NRA ProLife schoolchoice fairtax - Editor ARRA NEWS SERVICE. THANKS FOR FOLLOWING!

Action Links!
State Upper & Lower House Members
State Attorney Generals
State Governors
The White House
US House of Representatives
US Senators
GrassFire
NumbersUSA
Ballotpedia

Facebook Accts - Dr. Bill Smith
Pages:
ARRA News Service
Arkansans Against Big Government
Alley-White Am. Legion #52
Catholics & Protestants United Against Discrimination
End Taxpayer Funding of NPR
Overturn Roe V. Wade
Prolife Soldiers
Project Wildfire 4 Life
Republican Liberty Caucus of Arkansas
The Gold Standard
US Atty Gen Loretta Lynch, aka Eric Holder, Must Go
Veterans for Sarah Palin
Why Vote for Hillary (Satire)
FB Groups:
Arkansas For Sarah Palin
Arkansas Conservative Caucus
Arkansas County Tea Party
Arkansans' Discussion Group on National Issues
Blogs for Borders
Conservative Solutions
Conservative Voices
Defend Marriage -- Arkansas
FairTax
FairTax Nation
Arkansas for FairTax
Friends of the TEA Party in Arkansas
Freedom Roundtable
Pro-Life Rocks - Arkansas
Republican Network
Republican Liberty Caucus of AR
Reject the U.N.

Patriots
Exchange
Links

Request Via
Article Comment

Links to ARRA News
A Patriotic Nurse
Agora Associates
a12iggymom's Blog
America, You Asked For It!
America's Best Choice
ARRA News Twitter
As The Crackerhead Crumbles
Blogs For Borders
Blogs for Palin
Blow the Trumpet Ministry
Boot Berryism
Cap'n Bob & the Damsel
Chicago Ray Report - Obama Regime Report
Chuck Baldwin - links
Common Cents
Conservative Voices
Diana's Corner
Greater Fitchburg For Life
Lasting Liberty Blog
Liberal Isn't Amy
Marathon Pundit
Patriot's Corner
Right on Issues that Matter
Right Reason
Rocking on the Right Side
Saber Point
Saline Watchdog
Sultan Knish
The Blue Eye View
The Born Again Americans
TEA Party Cartoons
The Foxhole | Unapologetic Patriot
The Liberty Republican
The O Word
The Path to Tyranny Blog
The Real Polichick
The War on Guns
TOTUS
Twitter @ARRA
Underground Notes
Warning Signs
Women's Prayer & Action
WyBlog

Editor's Managed Twitter Accounts
Twitter Dr. Bill Smith @arra
Twitter Arkansas @GOPNetwork
Twitter @BootBerryism
Twitter @SovereignAllies
Twitter @FairTaxNation

Editor's Recommended Orgs
Accuracy in Media (AIM)
American Action Forum (AAF)
American Committment
American Culture & Faith Institute
American Enterprise Institute
American Family Business Institute
Americans for Limited Government
Americans for Prosperity
Americans for Tax Reform
American Security Council Fdn
AR Faith & Ethics Council
Arkansas Policy Foundation
Ayn Rand Institute
Bill of Rights Institute
Campaign for Working Families
CATO Institute
Center for Individual Freedom
Center for Immigration Studies
Center for Just Society
Center for Freedom & Prosperity
Citizens Against Gov't Waste
Citizens in Charge Foundstion
Coalition for the Future American Worker
Competitive Enterprise Institute
Concerned Veterans for America
Concerned Women for America
Declaration of Am. Renewal
Eagle Forum
FairTax
Family Research Council
Family Security Matters
Franklin Center for Gov't & Public Integrity
Freedom Works
Gingrich Productions
Global Incident Map
Great Americans
Gold Standard 2012 Project
Gun Owners of America (GOA)
Heritage Action for America
David Horowitz Freedom Center
Institute For Justice
Institute for Truth in Accounting
Intercollegiate Studies Institute
Judicial Watch
Less Government
Media Reseach Center
National Center for Policy Analysis
National Right To Work Foundation
National Rifle Association (NRA)
National Rifle Association (NRA-ILA)
News Busters
O'Bluejacket's Patriotic Flicks
OathKeepers
Open Secrets
Presidential Prayer Team
Religious Freedom Coalition
Renew America
Ron Paul Institute
State Policy Network
Tax Foundation
Tax Policy Center
The Club for Growth
The Federalist
The Gold Standard Now
The Heritage Foundation
The Leadership Institute
Truth in Accounting
Union Facts



Blogs For Borders

Reject the United Nations

Presidential Prayer Team

Thousands of Deadly Islamic Terror Attacks Since 9/11


FairTax Nation on FaceBook
Friends of Israel - Stand with Israel
Blog Feeds
Syndicated - Get the ARRA News Service feed Syndicated!
ARRA Blog Feed

Add to Google Reader or Homepage

Add to The Free Dictionary

Powered by Blogger


  • To Exchange Links - Email: editor@arranewsservice.com!
  • Comments by contributing authors or other sources do not necessarily reflect the position the editor, other contributing authors, sources, readers, or commenters. No contributors, or editors are paid for articles, images, cartoons, etc. While having reported on and promoting principles & beleifs beliefs of other organizations, this blog/site is soley controlled and supported by the editor. This site/blog does not advertise for money or services nor does it solicit funding for its support.
  • Fair Use: This site/blog may contain copyrighted material the use of which has not been specifically authorized by the copyright owner. Such material is made available to advance understanding of political, human rights, economic, democracy, and social justice issues, etc. This constitutes a 'fair use' of such copyrighted material as provided for in section Title 17 U.S.C. Section 107 of the US Copyright Law. Per said section, the material on this site/blog is distributed without profit to readers to view for the expressed purpose of viewing the included information for research, educational, or satirical purposes. Any person/entity seeking to use copyrighted material shared on this site/blog for purposes that go beyond "fair use," must obtain permission from the copyright owner.
  • © 2006 - 2020 ARRA News Service
Creative Commons License
Creative Commons Attribution Noncommercial Share Alike 3.0 Unported License.