Another Bailout?Another Bailout?Part 2Part 2

If you had read about “Another If you had read about “Another Bailout?”, this is its part 2. There are Bailout?”, this is its part 2. There are many things to talk about this topic many things to talk about this topic

and I think the information is and I think the information is valuable for to valuable for to learn to tradelearn to trade Don’t Don’t let you wait for long, now just be let you wait for long, now just be

back with Larry Levin!back with Larry Levin!

Yesterday I wrote “European Yesterday I wrote “European officials promised something big to officials promised something big to happen this weekend. Some happen this weekend. Some expected the announcement of the expected the announcement of the Greek default, while others Greek default, while others expected another (mega) slush expected another (mega) slush fund…another bailout of broke fund…another bailout of broke sovereigns.sovereigns.

I am looking for the answer early I am looking for the answer early Sunday morning and I have found Sunday morning and I have found this, which would suggest the this, which would suggest the latter: another bailout. latter: another bailout. http://www.telegraph.co.uk/financehttp://www.telegraph.co.uk/finance/financialcrisis/8786665/Multi-/financialcrisis/8786665/Multi-trillion-plan-to-save-the-eurozone-trillion-plan-to-save-the-eurozone-being-prepared.html”being-prepared.html”

European officials are working on a European officials are working on a grand plan to restore confidence in grand plan to restore confidence in the single currency area that would the single currency area that would involve a massive bank involve a massive bank recapitalisation, giving the bail-out recapitalisation, giving the bail-out fund several trillion euros of fund several trillion euros of firepower, and a possible Greek firepower, and a possible Greek default.default.

German and French authorities German and French authorities have begun work on a three-have begun work on a three-pronged strategy behind the pronged strategy behind the scenes amid escalating fears scenes amid escalating fears that the eurozone’s sovereign that the eurozone’s sovereign debt crisis is spiralling out of debt crisis is spiralling out of control.control.

Their aim is to build a Their aim is to build a “firebreak” around Greece, “firebreak” around Greece, Portugal and Ireland to Portugal and Ireland to prevent the crisis spreading prevent the crisis spreading to Italy and Spain, countries to Italy and Spain, countries considered “too big to bail.”considered “too big to bail.”

That article was longer and went on That article was longer and went on to describe almost exactly what to describe almost exactly what caused today’s rally: more debt, caused today’s rally: more debt, more leverage, and more hopium. If more leverage, and more hopium. If the Eurozone central planners get the Eurozone central planners get their way, they will somehow use 8 their way, they will somehow use 8 to 1 LEVERAGE to continue bailing to 1 LEVERAGE to continue bailing out the insolvent nations of Europe.out the insolvent nations of Europe.

They will buy the debt of these bankrupt They will buy the debt of these bankrupt counties, repackage them as debt counties, repackage them as debt instruments and sell them, which sounds instruments and sell them, which sounds an awful lot to me like a CDO – squared. an awful lot to me like a CDO – squared. Maybe it will be different, but those Maybe it will be different, but those CDOs and CDO squared “securities” were CDOs and CDO squared “securities” were a disaster in the US banking system…but a disaster in the US banking system…but “this time will be different – promise!” “this time will be different – promise!”

““Not so fast” says a German Not so fast” says a German judge! judge! http://www.telegraph.co.uk/fihttp://www.telegraph.co.uk/finance/financialcrisis/8790785nance/financialcrisis/8790785/German-turmoil-over-EU-bail-/German-turmoil-over-EU-bail-outs-as-top-judge-calls-for-outs-as-top-judge-calls-for-referendum.htmlreferendum.html

Germany’s top judge has issued a Germany’s top judge has issued a blunt warning that no further fiscal blunt warning that no further fiscal powers may be surrendered to powers may be surrendered to Europe without a new constitution Europe without a new constitution and a popular referendum, vastly and a popular referendum, vastly complicating plans to boost the complicating plans to boost the EU’s rescue machinery to €2 EU’s rescue machinery to €2 trillion (£1.7 trillion).trillion (£1.7 trillion).

Andreas Vosskuhle, head of Andreas Vosskuhle, head of the constitutional court, said the constitutional court, said politicians do not have the politicians do not have the legal authority to sign away legal authority to sign away the birthright of the German the birthright of the German people without their explicit people without their explicit consent.consent.

““The sovereignty of the The sovereignty of the German state is inviolate and German state is inviolate and anchored in perpetuity by anchored in perpetuity by basic law. It may not be basic law. It may not be abandoned by the legislature abandoned by the legislature (even with its powers to amend (even with its powers to amend the constitution),” he said.the constitution),” he said.

““There is little leeway left for giving There is little leeway left for giving up core powers to the EU. If one up core powers to the EU. If one wants to go beyond this limit – wants to go beyond this limit – which might be politically legitimate which might be politically legitimate and desirable – then Germany must and desirable – then Germany must give itself a new constitution. A give itself a new constitution. A referendum would be necessary.referendum would be necessary.

This cannot be done without the people,” This cannot be done without the people,” he told newspaper Frankfurter he told newspaper Frankfurter Allgemeine.Allgemeine.

The extraordinary interview comes just The extraordinary interview comes just days before the Bundestag votes on a bill days before the Bundestag votes on a bill to revamp the EU’s €440bn bail-out fund to revamp the EU’s €440bn bail-out fund (EFSF), enabling it to purchase EMU (EFSF), enabling it to purchase EMU bonds pre-emptively and recapitalise bonds pre-emptively and recapitalise banks.banks.

Tensions are running high after it Tensions are running high after it emerged over the weekend that emerged over the weekend that officials are working on plans officials are working on plans sketched by the US Treasury and the sketched by the US Treasury and the European Commission to “leverage” European Commission to “leverage” the firepower of the EFSF to €2 the firepower of the EFSF to €2 trillion, in conjunction with lending trillion, in conjunction with lending from the European Central Bank.from the European Central Bank.

Carsten Schneider, finance Carsten Schneider, finance spokesman for the Social spokesman for the Social Democrats, demanded that Democrats, demanded that Chancellor Angela Merkel and Chancellor Angela Merkel and finance minister Wolfgang Schäuble finance minister Wolfgang Schäuble clarify their “true intentions” before clarify their “true intentions” before the vote on Thursday.the vote on Thursday.

““A new multi-trillion A new multi-trillion programme is being cooked up programme is being cooked up in Washington and Brussels, in Washington and Brussels, while the wool is being pulled while the wool is being pulled over the eyes of Bundestag and over the eyes of Bundestag and German public. This is German public. This is unacceptable,” he said.unacceptable,” he said.

Prince Hermann Otto zu Solms-Prince Hermann Otto zu Solms-Hohensolms-Lich, the Hohensolms-Lich, the Bundestag’s deputy president Bundestag’s deputy president and finance chief for the Free and finance chief for the Free Democrats (FDP) in the ruling Democrats (FDP) in the ruling coalition, expressed outrage coalition, expressed outrage over the secret plans.over the secret plans.

““Unless the German finance minister Unless the German finance minister can give an immediate assurance that can give an immediate assurance that there will be no leveraged formula, I there will be no leveraged formula, I will not vote for this law. We might as will not vote for this law. We might as well dispense with months of well dispense with months of negotiations if all this means is that negotiations if all this means is that the Bundestag will be circumvented the Bundestag will be circumvented and served cold left-overs,” he said.and served cold left-overs,” he said.

The accusation that German The accusation that German leaders are conspiring with EU leaders are conspiring with EU officials to emasculate the officials to emasculate the Bundestag is highly sensitive, going Bundestag is highly sensitive, going to the core of the raging debate in to the core of the raging debate in recent months over EU recent months over EU encroachments on German encroachments on German democracy.democracy.

……Her task has become that Her task has become that much harder after Standard & much harder after Standard & Poor’s hinted Germany itself Poor’s hinted Germany itself might loose its AAA rating if might loose its AAA rating if the rescue machinery is the rescue machinery is greatly expanded.greatly expanded.

““There is no cheap, risk-free leveraging There is no cheap, risk-free leveraging option for the EFSF any more,” said option for the EFSF any more,” said David Beers, David Beers, S&P’sS&P’s head of sovereign head of sovereign ratings. “We’re getting to a point where ratings. “We’re getting to a point where the guarantee approach .. is running out the guarantee approach .. is running out of road,” he said, adding the various of road,” he said, adding the various options under discussion could have options under discussion could have “potential credit implications”….“potential credit implications”….This isn’t over by a long shot.This isn’t over by a long shot.

Trade well and follow the trend, not Trade well and follow the trend, not the so-called “experts.”the so-called “experts.”

Behold the age of infinite moral Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in forced FASB to suspend rule 157 in favor of deceitful accounting for the favor of deceitful accounting for the TBTF banksters.TBTF banksters.