Greece, Ireland, Portugal, Spain, Italy, UK...?????

[Joanne98]

(edited for copyright purposes proud patriot Moderator Democratic Underground)

It is now common knowledge that there is a potential domino effect of European sovereign debt contagion in roughly the following order:

Greece → Ireland → Portugal → Spain → Italy → UK


While some people have been writing about this for well over a year, many others have joined the party late (there are now over 600,000 hits from a Google search discussing this topic.)


It is also now common knowledge that while Greece and Ireland have relatively small economies, there will be real trouble if the Spanish domino falls.

Iceland has the world’s 112th biggest economy, Ireland the 38th, and Portugal the 36th. In contrast, Spain has the world’s 9th biggest economy, Italy the 7th and the UK the 6th. A failure by one of the latter 3 would be devastating for the world economy.


As Nouriel Roubini wrote in February:

But the real nightmare domino is Spain. Roubini refers to the Spanish debt problems as “the elephant in the room”.

“You can try to ring fence Spain. And you can essentially try to provide financing officially to Ireland, Portugal, and Greece for three years. Leave them out of the market. Maybe restructure their debt down the line.”

“But if Spain falls off the cliff, there is not enough official money in this envelope of European resources to bail out Spain. Spain is too big to fail on one side—and also too big to be bailed out.”

(snip)

As Roubini wrote in February:

“We have decided to socialize the private losses of the banking system.

http://www.nakedcapitalism.com/2010/11/guest-post-greece-%e2%86%92-ireland-%e2%86%92-portugal-%e2%86%92-spain-%e2%86%92-italy-%e2%86%92-uk-%e2%86%92.html

[xchrom]

1. roubini is so cool. nt

[seafan]

2. Roubini: “We have decided to socialize the private losses of the banking system."

The corporate media enablers keep a very tight lid on the banksters' escapades, dutifully serving their masters, you see. So, the effect is that people have very sparse amounts of accurate and timely information readily presented to them, to make decisions about their future. And it is shaping up to be a very uncertain one.


But, THIS is a super piece that explains what we aren't hearing about on our teevees. Thanks, Joanne98, for bringing it to our attention.



More from contributor George Washington at nakedcapitalism:

November 27, 2010

.......

But nations had no choice but to bail out their banks, did they?

Well, actually, they did.

The leading monetary economist told the Wall Street Journal that this was not a liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach (as are other central bankers).

Nobel economist Paul Krugman and leading economist James Galbraith agree. They say that the government’s attempts to prop up the price of toxic assets no one wants is not helpful.

BIS (Bank for International Settlements--the “central banks’ central bank”) slammed the easy credit policy of the Fed and other central banks, the failure to regulate the shadow banking system, “the use of gimmicks and palliatives”, and said that anything other than (1) letting asset prices fall to their true market value, (2) increasing savings rates, and (3) forcing companies to write off bad debts “will only make things worse”.

Remember, America wasn’t the only country with a housing bubble. The world’s central bankers let a global housing bubble development. As I noted in December 2008:

… The bubble was not confined to the U.S.

There was a worldwide bubble in real estate.
Indeed, the Economist magazine wrote in 2005 that the worldwide boom in residential real estate prices in this decade was “the biggest bubble in history“. The Economist noted that – at that time – the total value of residential property in developed countries rose by more than $30 trillion, to $70 trillion, over the past five years – an increase equal to the combined GDPs of those nations.

Housing bubbles are now bursting in China, France, Spain, Ireland, the United Kingdom, Eastern Europe, and many other regions.

And the bubble in commercial real estate is also bursting world-wide. See this.

***

BIS also cautioned that bailouts could harm the economy (as did the former head of the Fed’s open market operations). Indeed, the bailouts create a climate of moral hazard which encourages more risky behavior. Nobel prize winning economist George Akerlof predicted in 1993 that credit default swaps would lead to a major crash, and that future crashes were guaranteed unless the government stopped letting big financial players loot by placing bets they could never pay off when things started to go wrong, and by continuing to bail out the gamblers.

These truths are as applicable in Europe as in America. The central bankers have done the wrong things. They haven’t fixed anything, but simply transferred the cancerous toxic derivatives and other financial bombs from the giant banks to the nations themselves.


Caveat: Even though Italy’s debt/GDP ratio looks high, it has a high household savings rate and virtually all of its government debt is owned internally, by households. So it may not be vulnerable as one might think.

Digging out information like this is the only way to get at the truth that is buried under six feet of concrete by the corporate-controlled MSM.


And dig, we must.

[roamer65]

3. I doubt the UK will have a problem.

Since the UK stayed out of the Euro, they have much more flexibility in monetary policy. The Bank of England can devalue and debt monetize as needed...unlike Ireland, Spain, Portugal and Greece.

[Crazy Dave]

4. All of the Eurozone could collapse

And the US (tax payers) will help bail them out.