Just to Help You Visualize One Trillion
May 9, 2010
E.U. Details $957 Billion Rescue Package
By JAMES KANTER and LANDON THOMAS Jr.
BRUSSELS — European leaders, pressured by sliding markets and doubts over their ability to act decisively, agreed on Monday to provide a huge rescue package of nearly $1 trillion in a sweeping effort to combat the debt crisis that has engulfed Europe and threatened markets around the world.
In an extraordinary session that lasted into the early morning hours, finance ministers from the European Union agreed on a deal that would provide $560 billion in new loans and $76 billion under an existing lending program. Elena Salgado, the Spanish finance minister, who announced the deal, also said the International Monetary Fund was prepared to give up to $321 billion separately.
Officials are hoping the size of the program — a total of $957 billion — will signal a “shock and awe” commitment that will be viewed in the same vein as the $700 billion package the United States government provided to help its own ailing financial institutions in 2008. The package represented an audacious step for a union that had been criticized for acting tentatively, and without consensus, in the face of a mounting crisis.
Underscoring the urgency of the situation, President Obama spoke to the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, on Sunday about the need for decisive action to restore investor confidence. And in a sign of the spreading anxiety, the United States Federal Reserve, along with the European Central Bank and the central banks of Canada, Britain and Switzerland, announced the re-establishment of instruments known as swap lines through January 2011. The swaps are intended to help ease pressure on the euro, whose value against the dollar has fallen as fearful investors have bought up dollars.
Stock markets in the Asia-Pacific region rose early on Monday. The leading stock indexes in Japan and South Korea were both up about 1.3 percent soon after the deal was confirmed, recouping some of the losses they had suffered last week. The markets in Singapore and mainland China also opened higher, with the market gauges there up 0.5 percent soon after the open.
New political complications in two of Europe’s most important countries added to the challenge. In Germany, voter anger at the effort to save Greece cost Ms. Merkel an important regional election Sunday, undermining her leadership, and in Britain, the government remained in a state of suspended animation because of the inconclusive Parliamentary elections last week. [Pages A4 and A8.]
The package comes at a time of mounting financial unease. Riots in Greece, ever-tightening terms of credit and the unexplained free fall in the American stock market last Thursday have compounded the sense that the European Union’s inability to address its sovereign debt crisis might lead to the type of systemic collapse that followed the fall of Lehman Brothers.
Olli Rehn, the European commissioner for monetary policy, described the arrangement as “a consolidation pact” that would be “particularly crucial for countries under speculative attacks in recent weeks.” He specifically mentioned Portugal and Spain.
Mr. Rehn said the I.M.F. would provide “half as much as the European Union” following lengthy talks with fund officials.
“We shall defend the euro whatever it takes,” Mr. Rehn said.
What appeared to be emerging from the discussions represented a partial retreat from a system discussed earlier in the day that would have radically expanded the powers of the European Commission to raise funds.
Instead the ministers came up with a system that would speed up the pace at which states that use the euro currency could lend to one another, but on a bilateral and voluntary basis.
One of the crucial decisions that ministers made was to create what they called a “special purpose vehicle” to disburse the 440 billion euros in new loans, should that support be required by member states in economic difficulties.
The use of such a financial instrument reflected the difficulties that individual European governments — and Germany’s in particular — have in committing huge sums to a central authority like the European Commission to oversee the economic management of the bloc, seen as a clash with national sovereignty.
In a statement following their meeting, the ministers underlined that the special purpose vehicle would expire after three years and that its use would be strictly dependent on “national constitutional requirements.”
Ministers said their first line of defense against financial turmoil was to offer loans of 60 billion euros to member states in need, and to use the further loans of up to 440 billion euros as a “complement” as required.
While the sums being discussed are eye-catching, some bankers questioned whether they would be enough to calm the markets. One banker said that with more and more European economies coping with rising deficits that raising, guaranteeing or backing such a large number would not be an easy task — unless the European Central Bank stepped in in a more forceful and specific manner. The bank has so far rebuffed calls to inject liquidity into the markets by buying back European bonds.
There were many complications in trying to forge a consensus on a new package. They included defining the role of Britain, which lies outside the euro zone and had said it would not help in propping up the euro, as well as the European Central Bank. The fractiousness underscores the frailty of a monetary union in which its richest member, Germany, is also the most opposed to a financial rescue.
“The fact that they are worried is clear,” said David Marsh, the author of “The Euro,” a book on the history of monetary union. “But I don’t think that there is enough commitment or economic firepower in Germany to provide the massive loan guarantees to satisfy the markets.”
Predictably, politicians blamed speculators for the market upheaval. The Swedish finance minister, Anders Borg, said immediate action was needed to tackle “herd behaviors in the markets that are really pack behaviors, wolf pack behaviors.” Mr. Borg warned that volatility in markets could “tear the weaker countries apart.”
Since it became clear that Greece would not be able to meet its financial obligations and fears spread that other indebted nations like Spain, Portugal and Ireland would have similar troubles, Europe, hampered by Germany’s opposition to a bailout, has responded with measures that have been seen as too little too late.
Even now, despite the lashing rhetoric and the Sunday night meeting, there is still a feeling that Europe should be doing more — notably with regard to freeing the European Central Bank to go against its charter and print money by buying back distressed European bonds from the secondary market.
Sunday’s meetings represented an extraordinary convergence of diplomatic activity, crammed into a tight time frame. Political leaders including Mr. Sarkozy of France said early Saturday morning, at the end of an earlier summit meeting, that a loan mechanism intended to restore confidence should be ready by Monday morning. That effectively left the European Commission and finance ministers a single weekend to change the way the European Union operates its finances.
Ms. Merkel of Germany attended a victory parade on Red Square in Moscow on Sunday, a sign of how seriously Germans consider reconciliation with Russia. Mr. Sarkozy and the Italian prime minister, Silvio Berlusconi, opted not to attend, regarding the financial crisis as more urgent.
Mr. Sarkozy held a strategy meeting with ministers on Sunday.
“At stake is the euro and the euro zone,” a French official said. “We need to give a clear signal to markets.”
Sewell Chan contributed reporting from Washington.
desert rat said...ReplyDelete
While the Israeli that post here, they seem happy to have their military take on the Syrians, rather than start a war with Iran.
It's all good, and getting better.
Fri May 07, 10:26:00 PM EDT
First, DR, I guess you meant to say "Israelis".
Second, and for this please sit down: The Normandy invasion took place in...Normandy, not Berlin. As the pygmies used to say, "You eat an elephant one bite at a time."
Third, as said about one hundred times already, the US will maintain a strong presence in southern Asia for decades to come or until someone finds a better way of crippling China and a potentially hostile EU.
Gates is correct: There are far too many flag officers. Indeed, the Second World War was fought with fewer. Somehow, we managed to win, despite this appalling lack of brass.
Major Hasan will be a major embarrassment and demoralizer to the Army and public when the truth is told...nowhere to run, no place to hide...foot dragging will merely prolong the pain and raise the level of public suspicion. Trivializing his crime by demeaning critics of the government’s mishandling of the case changes nothing.
I do not recall calling anyone’s spouse a pencil pusher; but if the shoe fits wear it.
Okay, someone who understands the Euro please explain to me what they've done.ReplyDelete
In little bitty words, if you don't mind.ReplyDelete
Okay, this is what I know. No country has ever remained solvent after taking an action like the EU has just taken. NEVER.ReplyDelete
The Euro will jump. The "markets" will surge. There will be champagne toasts all around.
And, in a year the global financial system will be in tatters, and the Euro will be a not-so-fond memory.
No Country has ever bullied the "markets" into "liking" it's prospects. If your finances suck, and your bonds tank you can do one of two things: 1) You can fix what is wrong with your financial system, or 2) You can try to prop up your currency, and in the end take "Bankruptcy."
These Bozos are opting for in-the-not-too-distant-future "Bankruptcy."
This is DERANGEMENT of the Absolute, Highest Order.
I repeat, No Country has Ever succeeded in "propping up its currency" after the Markets have decided it must go lower. Never in the History of the World.ReplyDelete
We are, through the IMF, getting sucked into this "BIG TIME," Now.
Every single dollar that leaves our treasury to "prop up" a failing Euro country is GONE FOREVER.
It won't be like bailing out Goldman, or Citi, and getting your money back a year later. THAT MONEY WILL BE GONE. Adios. Ciao. Hasta Luego. Sayofuckingnara. Gone.
This is Mass Suicide on a Global Scale.
NOW, I need a beer.
United States Army Major Hasan killed thirteen (13) personnel at Fort Hood, mostly active duty military. Adding insult to injury, Major (Dr.) Hasan was tasked with treating troops suffering PTSD.
FORT HOOD MASSACRE
…sorry if this fact creeps you out…but facts is facts
Re: Assassination of President James Garfield
Shot on 2 Jul 1881
Died on 19 Sep 1881
Assassin hanged 3 June 1882
Justice was swift and certain back in the bad old days.
There is no record of prosecutorial obfuscation.
This will no more work than bundling a Bunch of subprime mortgages together and calling them AAA will work.ReplyDelete
You can't "bundle" a half dozen "junk" countries, and call them AAA. They are still junk. They were junk, separately, and they're "junk" as a group.
Unless, and this is the only way this can work (it might be what they're planning:) Hold Greece's feet to the fire. Tightly. Make sure they adopt the budget cutting necessary.ReplyDelete
Then, when the Portugal, or Spain, whichever is next, starts shaking, do the Exact Same Thing. But, they need to realize this is going to work its way right on up the food chain. And, it's going to get Godawful expensive along about the time they hit Italy.
And, you can bet your sweet bippy a good part of that money is going to be ours. And, we're Not going to get it back.
Obama, the Dems, and half of the Republicans want that Euro model to work. Cause, that's where they want to take us.
That 360 Billion IMF money? Who do you think HAS that kind of money? (hint: the entity I'm thinking of doesn't have it either, but the entity's banker, China, does.)
And, don't think that "pledge" isn't going to be called in. The chances of that are exactly Zero.
The U.S. Federal Reserve also confirmed is had opened a program to ship U.S. dollars to Europe in a move to head off a broader financial crisis on the continent.ReplyDelete
The Fed said it will ship U.S. dollars overseas through the Bank of Canada, the Bank of England, the European Central Bank (ECB)and the Swiss National Bank.
ECB said the facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and other financial centres.
Currency Swap Agreement
1 silver dollar = 8.1 gr.ReplyDelete
56 silver dollars = 1 lb
1 trillion silver dollars = 18 billion lbs or 9 million tons
15 tons = 1 truck
9 million tons = 600,000 trucks
1 truck = 30 ft long
600,000 trucks = 18 million ft long or 3,409 miles long
On this day, especially, remember: No one knows how to truck like Mother.
The question for the E.U is: Are you up for it?
First, you have to vilify someone. We'll call the Bond Traders, Investors, "The Wolf Pack."ReplyDelete
Then, we'll "Step In," and help "Protect" our friends from the "Wolf Pack." The "Wolves" will be Repelled, and they won't ever bother "Our Frinds," or "Us," again.
What fucking blithering nonsense. Their bonds are becoming fucking worthless. No one wants to buy them. Some Traders will hasten the end by "shorting" them, but, make no mistake, if they weren't allowed to sell them short they would still become worthless.
The fast way is to short them. The slower, but just as inevitable in the end result way is to just "Wait, while nobody buys them." The end point is the same.
There Is No Wolfpack. There is just you, and me, buying what we want, and not buying what we don't trust.
All Fucking Politicians should be Hung by the Testicles, and set on fire.
Well, at least we'll wake up to a stock market rally in the morning.ReplyDelete
Champagne, Garcon. Champagne all around. The Good Stuff. S'il vous plait.
“The important point common to all these agreed elements today is that we will defend the euro whatever it takes,” European Commission Head Barroso declared in a statement before the eurozone leaders.ReplyDelete
The European Commission chair also highlighted the lines along which eurozone members have united: better economic coordination with the help of the European stabilization mechanism to preserve financial stability in Europe; reinforcement of budgetary surveillance and increasing economic policy coordination; and urgent completion of financial market reforms.
Eurozone leaders agreed to take rapid steps to defend the euro from speculative attacks and to restore long-term investors' confidence in the EU currency. This happens amid fears that the debt problems of Greece, which forced the country to seek assistance from the EU and from the International Monetary Fund, are possible in Portugal and Spain.
Man, man, man; when "This" sucker blows it's gonna smart.ReplyDelete
Well, I'm going to bed. They'll just have kill me in my sleep.
Jeez, what a bunch of fucking Maroons. Just incredulating.
The action reopens a program put in place during the 2008 global financial crisis under which dollars are shipped overseas through the foreign central banks. In turn, central banks can lend the dollars out to banks in their home countries that are in need of dollar funding to prevent the European crisis from spreading further.ReplyDelete
The US Federal Reserve said it opened a program to ship US dollars to Europe through the Bank of Canada, the Bank of England and the European Central Bank.
A so-called “swap” line between the US Federal Reserve and the Bank of Canada provides up to $30 billion.
It is truly stunning.ReplyDelete
oil is up $3 and gold is down $21.ReplyDelete
Does anyone know what the Federal Reserve has just committed the US to do during the middle of the night on a weekend?ReplyDelete
the shorts are getting murdered.ReplyDelete
The Dow futures are uo $400 !!!ReplyDelete
The power of the pen. This will destroy George Soros. Is that good?ReplyDelete
I only wish that I too were too big to fail.ReplyDelete
Think about this. Anyone who bought the deeply market discounted Greek Bonds just made a fortune.
The tax payers in all these countries got killed.
All the unions in th EU got saved, for two or three years.
We just gave the Taliban and AQ great leverage to do damage and committed all the financial reserves that would have been available after a 911 type attack.ReplyDelete
Whirled Socialism, Deuce, brought to US by our unelected Federals, at that private institution, the Federal Reserve.ReplyDelete
Thank the "Progressives" of 1913.
They were Republicans.
This is getting close to Nirvana. The EU is going to set up their own credit rating agency.ReplyDelete
Gold standard, here we come.ReplyDelete
because when this blow up, which it will, there is no where else to go.ReplyDelete
When the IMF moves into other "Third Whirled" economies, to 'save" them from defaulting on their debts, it is often done with rather severe conditions.ReplyDelete
Demands for budgetary austerity from those that refinanced the sovereign debts owed to New York and City of London bankers.
The results of mixing capitalist banking with Socialist governance.
At home and abroad.
We are reaping the results of decades of combined effort by the "Boners" of the whirled.
From the open border policies, to fighting "Long Wars" against border bandits, in places of slight importance, except to the heroin trade.
While the possibilities for terror attacks, coordinated and propagandized for maximum psych war impact on the US population, easy pickin's, if there was a "real" enemy.
If there is a sleeping threat, it is the millions of USD that the oil rich Islamoids could pay to mercenary US gangs, like MS-13 or to cross border operators like Los Zetas.
There is already a large population, here in the US, for those fellows to swim in.
ROBERT, La., May 10 (Reuters) - BP Plc (BP.L) said on Monday it had incurred $350 million in costs so far from the huge oil spill in the Gulf of Mexico as fears mounted of a prolonged and growing environmental and economic disaster.ReplyDelete
New York TimesReplyDelete
LONDON - The Bank of England decided Monday to hold steady on monetary policy after last week's general election failed to give any party a governing majority and amid the recent turmoil in European debt markets ...
By Michael D. ShearReplyDelete
Why is President Obama choosing his solicitor general, Elena Kagan, as his second nominee to the U.S Supreme Court? By all accounts, Obama wants someone who can serve as a counterweight to the intellectual heft of Chief Justice John Roberts. Regardless of how strong a liberal Kagan would prove to be, as a former dean of Harvard Law School, Kagan practically defines legal gravitas.
I can't get the picture out of my head of Neville Chamberlain getting off that plane waving that piece of paper,ReplyDelete
"Peace in our Time."
What was "our time?" Six months?
Talk about your "Moral Hazard."ReplyDelete
There is no more doubt that we have to return to Gold. There may be argument, but to gold we must return.ReplyDelete
It can't be done, Deuce. What we need to return to is common sense.ReplyDelete
A little gold in the "personal" portfolio makes a lot of sense, though.
As I said last night, there is a way this could work. If they, actually, ENFORCE the IMF terms against Greece, and then apply the same regime to Spain, Portugal, and whoever pops up next it will be a successful play.ReplyDelete
However, let's be honest; the chances of that are just about nil.
Rick Santelli is the only one telling the obvious truth. We're on the hook for $50 Billion, and counting.ReplyDelete
So, right from "jump street" we borrow $50 Billion from China, and give it to Greece, and Spain.ReplyDelete
How ya like them apples?
If there was Ever, in the history of the world, One Danger Signal, one tip-off to head for the door, quickly, and without reservation, it's when a Country says "We're going to do everything Necessary TO SUPPORT OUR CURRENCY.ReplyDelete
You CANNOT, CANNOT, CANNOT "Support" a busted currency, or a busted country. You can merely delay a trip to the poorhouse. You can't avoid it.
We are, quite likely, witnessing the "beginning of the end" of the Euro.
Re: gold standardReplyDelete
Even if the major economies adopted some sort of standard, even a commodity, there is no guarantee that all participants would behave.
There is a long history of defaults and currency debasement when the world was on a gold and/or silver standard. Entire histories have been written on the Roman dilution of their currency.
In the absence of moral courage and character of the players, the gold standard would have no more value than any contract, i.e. it has no more value than the integrity of the participants. I think quality of that character during this systemic crisis is obvious.
The only sure way to preserve the value of our money is through our election process. Therefore, there is little hope of change until our fortunes are more drastically impacted.
You can't debase gold. You can debase coinage and lie about certificates of deposit and print paper.ReplyDelete
The problem lies within the Federal Reserve and is exasperated by allowing foreign countries to hold US debt.
China runs a trade surplus and instead of using the money to buy US goods, puts it on deposit with the Fed/Treasury and receives an interest bearing note and cash is created.
There is no discipline. With such a system China never has to buy any US goods, especially if the US Government
is always borrowing the money.
Gold freely convertible, by anyone anywhere would set the value and currencies would be priced accordingly.
Processed elemental gold cannot be debased without design. It should be understood, though, that in its mineral form this noble metal is found as compounds from which nearly pure elemental gold is extracted.ReplyDelete
Since I was addressing money, which is a convenient construct, rather than the chemistry of gold, elemental gold can be readily and easily debased by making it an alloy. Many institutions over the centuries have done this. When that ploy was found out, the size of the coinage was reduced, yielding money of some specified value, while the actual gold content was less than specified.
Whether true, I cannot say, but some authorities give credit Sir Isaac Newton, one time superintendent of the mint, for having developed reeding to prevent private sector thieves from shaving gold coins.
A major problem with using metals as the reserve for paper is that economic/manufacturing efficiency cannot be accurately determined by the accident of availability of the metal within a country's territorial boundaries rather than the efficient use of capital, labor and land.
During its hay-day, Spain was extravagantly rich monetarily. It was not, however, wealthy, failing to invest in a capital secured economy. Consequently, Spain became one of the poor countries of Europe.
Given the riches pouring into petroleum exporting countries, one would expect to see wealth. One does not. Saudi Arabia and Iran produce what? Eventually, petroleum exporters will find themselves with the problems of the Spanish empire.
Looking at Greece , this country lied far and wide about its financial stability. It would have done the same thing under a gold standard.
What has made the Capitalist system function, with stops and starts to be sure, is the sanctity of contract law, not the value of some arbitraily determined base. An Englishman doing business with a German, for instance, can do so trusting that the German courts will uphold his rights under the terms of the agreement. When people flippantly talk about just walking away from our obligations, they are talking about destroying a system that has had the most profound, positive effect on the standards of living of billions of earth’s inhabitants.
I agree Allen, that returning to the Gold Standard is unlikely to solve any of the fiscal problems we now face.ReplyDelete
The international agreement (of the elites) to print money to buy up the smelly bonds seems to have done a lot to buoy the markets today but trouble still lurks ahead as the 'people' seem...ummm, discontent:
" German voters bitterly opposed a proposed German 22.4 € billion rescue package to bail out profligate Greece. Chancellor Angela Merkel faced a crucial May 9 election in populous North Rhine-Westphalia state just as opposition Social Democrats voted to oppose aiding Greece.
Merkel's Conservative coalition suffered a pounding in the north German election. The defeat cost her party control of the upper house of the German parliament, meaning her future legislation may well be blocked. The loss may also mark the beginning of the end of the rule of the right-wing German chancellor, known to one and all as, "the Iron Lady.""
This comment has been removed by the author.ReplyDelete
In a different dimension, I would feel sorry for the Germans; after all, how could they know that Greece, Italy, Portugal, Spain and the UK were lying through their badly maintained teeth (bad oral hygiene or poor dentistry seems to go with socialized medicine).ReplyDelete
The problem with the OY-ROW zone (Euro zone) is the lack of a Federal center. It is not possible, in my opinion, to have a common currency without tough, objective, common oversight. Thus, Germany was caught off guard, with few (any) options if the Eurozone were to remain "intact".
In reality, Germany is the heart, soul and spine of the Eurozone, although no one wants to admit it.
Chancellor Merkel did what she had to do, if for no other reason than to buy some time and ascertain how badly the other bad guys in the club have been behaving off the books.
South Korea confirms: explosive chemical found in wreckage of sunken naval shipReplyDelete
So, the Koreans are finding it harder and harder to deny that the North sank their ship purposefully. What is to be done? Keep building ships and allow the North to sink them? That does not sound like a good plan at all.
Let the South decide to just not go there. Forget about it and move on. Have a cold frosty Busch...That's the ticket.
Meanwhile, in western Asia, Israel appears to be rattling again.
Israel primed for war on Iran - Netanyahu deputy
"But its [Israel] veiled threats against foe Iran have been questioned by some independent analysts who see the potential targets as too distant, dispersed, numerous and well-defended for Israeli warplanes to take on alone."
The experts have omitted the usual mantra about having ready thousands of body bags. That is a welcome relief.
This creates a gigantic moral hazard. Now Spain, Portugal and Ireland will flee to the new mechanism, but the austerity-enforcement mechanisms have about as much teeth as a UN mandate against the United States. Only next time the debt will be spread around all the Eurozone countries just as their demographics implode, and there will be no larger entity to save it from default.ReplyDelete
Spain's budget deficit equaled 11.2 percent of gross domestic product last year, and the government months ago announced an austerity plan to reduce it to 3 percent in 2013.ReplyDelete
Italian Prime Minister Silvio Berlusconi's divorce would separate him from more than his wife. Berlusconi is all set to lose his $105 million Villa Belvedere in Macherio near Milan to soon-to-be ex-wife Veronica Lario, reported the Independent.ReplyDelete
The more sand that has escaped from the hourglass of our life, the clearer we should see help of it.ReplyDelete