Podcast: Nearing the Tipping Point of the Euro's Demise

In this week's podcast -- a feature that will in future only be available to members of Panzner Insights -- I discuss why I believe the collapse of the euro as it exists now is imminent, as well as its broader implications.

The truth is, while there has been plenty of commentary about how individuals and institutions in, say, Greece might be affected if that country exits the eurozone and brings back the drachma, less has been said about how such a scenario will affect those based outside the region. I've tried to address that shortfall with today's broadcast.

[Note: click to play or right mouse-click and save to download].

Panzner Insights 093012

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Comments

[roger]

Necessity is the mother of change.
Europe is going thru some traumatic changes, no ifs and buts, but in the long run , I believe there will be a Federal Europe, it's a matter of survival. The civil war in the US had the strong possibility of splitting this country in two, but it did not because the economic situation of the times required unity and the forces of unity prevailed. Looking at Europe to day, I see strong similarity's. Has I've said many times, it's a material world, not a world ruled by ideals.

[No savings, no income, no buying power]

The Tawdry Tycoon Who Hosted That ‘47 Percent’ Party

At the moment, Leder is under investigation by New York State Attorney General Eric Schneiderman, who subpoenaed internal records from Sun Capital, Bain Capital, and several other private equity giants last July.

Issued by the Attorney General’s taxpayer protection bureau, the subpoenas were evidently designed to probe whether Leder and other executives had misused “carried interest,” a method of reducing tax liability by converting management fees into investment income—which is taxed at the lower capital gains rate of 15 percent that keeps Romney’s taxes lower than the rate paid by many middle-income families. (Tax analysts say that Bain Capital records released last August indicate that the firm may have saved more than $200 million in federal taxes thanks to the carried-interest maneuver.)

If Leder did benefit from such aggressive practices, he would merely be typical of executives in an industry where tax manipulations are not just widespread, but fundamental.

Equally common in private equity is profiting from bankrupted companies in which other stakeholders—especially workers and government—are left to cope with the loss. During the Republican primaries, Romney’s rivals helped to make Bain notorious for such practices—and his fundraiser Leder seems no different.

Although roughly 25 firms held by Sun have gone bankrupt, perhaps the best known example involves Friendly’s, the family restaurant and ice cream chain that went under at the hands of Sun Capital in 2010 after more than 70 years in business. After acquiring Friendly’s in 2007 for a premium price, Sun took the company into bankruptcy only three years later, supposedly due to rising milk prices.

http://www.truthdig.com/report/item/the_tawdry_tycoon_who_hosted_that_47_percent_party_20120930/

Greece will put through the ringer by these types and then so will others...write down the debt and start over!

[Financial con]

The Petro-Dollar Explained

As I have written about for many years now, our increasingly aggressive foreign policy overseas revolves around one thing and one thing only: The Petro-Dollar. The problem is the Petro-Dollar doesn’t represent freedom or American values, it is the heart of a Federal Reserve and financial oligarch scam, and they are willing to burn down the whole world to protect their wealth and power. This is a very well done video on the Petro-Dollar that I think can help wake up many people still asleep or only partially awake and looking for more answers.

http://libertyblitzkrieg.com/2012/09/30/the-petro-dollar-explained/

[Money Market Flush]

Have A Money Market Fund? Geithner Has You In His Sights!

Ever since, the push has been on for reform. These efforts have largely been led by the SEC, but have been stymied by the mutual fund industry. Players like William Dudley, the President of the NY Fed, have been active in these efforts. However, when progress seemed to stop recently, Geithner stepped in, as head of the Financial Services Oversight Committee (FSOC). Put Dudley and Geithner together, and you should be afraid - very afraid! The direction of their efforts is quite illustrative.

Their proposals center around two specific items:

1. Floating NAV's: This would allow MMFs to adjust their share prices down as the value of their assets deteriorate. In today's ZIRP environment, where no safe asset delivers any yield to speak of, many MMFs have taken to subsidizing their funds in order to maintain the $1.00 NAV. According to Barclays, "the number of actual instances of direct sponsor support between 2007 and 2011 is much smaller – 123 – and of this, there were only 21 instances in which the direct support exceeded 0.5% of AUM (assets under management). The total amount of support across all 123 instances was $4.4bn." With floating NAVs, these subsidies would stop, and the $10,000 in your MMF "checking account" might suddenly be worth $9,000.

2. Redemption Restrictions: Currently, MMF investors can remove as much of their investment as they want from a fund instantly, as long as that fund is not in danger of breaking the buck. Under the proposed guidelines, investors may only be able to withdraw 95% of their holdings, having to leave 5% in the fund for thirty days, where it would be put in a first-loss position.

Dudley and Geithner's efforts are not motivated by a desire to preserve your MMF wealth. Rather, by combining floating NAVs with redemption restrictions and minimum balances at risk (MBRs), they are attempts to lock your money up as a liquidity buffer to keep the financial system operating the next time there is a crisis. Furthermore, they may be paving the way for more financial repression from the Federal Reserve.

http://www.testosteronepit.com/home/2012/9/30/have-a-money-market-fund-geithner-has-you-in-his-sights.html

[recessions into depressions]

Nobel laureate Joseph Stiglitz says austerity almost never works to resolve economic downturns

He said austerity instead turns downturns into recessions and plunges recessions into depressions.
Professor Joseph Stiglitz was speaking at the opening of the International Bar Association annual conference in Dublin last night.
The Nobel laureate in economics said there must either be more Europe, through a common banking system, or less Europe, through a partial eurozone breakup.
Professor Stiglitz said the present "half-way" position is not viable.
He warned that the speed of political change is currently too slow for economics and that Europe will stay in or near recession for "an extended period of time".
Former president Mary Robinson is also to address the conference.
About 5,000 legal professionals from around the world have travelled to Dublin to attend the week-long gathering.

http://www.rte.ie/news/2012/1001/joseph-stiglitz-austerity.html

[roger]

Nobel laureate Joseph Stiglitz says austerity almost never works to resolve economic downturns. yes absolutely!
Austerity can come in varying degrees of severity, depending on when and how it's applied, just like credit, well managed it's a positive thing, in to great a quantity like a drug it can kill. Austerity in a Democracy is always administered way to late, politics dominate over rationalism. At this stage of the game, it guaranty's bloody uprisings. But with or without this problems there are other negatives that forecast a Geopolitical hurricane , category 5.

[you might want to ask yourself?]

Ireland is a case study in why not to accept money from the Troika to bailout your banks

Recently, finance ministers from Germany, the Netherlands and Finland took the position that the European Stability Mechanism could not be used for legacy assets and the cost of bank bailouts would be left to each country.

This was a very important statement as it cutoff Ireland from the possibility of having the ESM take over 20 billion euros of debt. Debt that was incurred specifically to bailout the Irish banks so that they could repay unsecured debt owned by banks in countries like Germany, the Netherlands and Finland.

Given this example, Spain might want to ask itself why it would want to accept funds from the Troika to bailout its banks.

A bailout that helps banks from countries like Germany, the Netherlands and Finland avoid losses while saddling the Spanish taxpayer with more debt.

The Spanish banking system is designed so that banks do not need to be recapitalized even after the banks recognize all the losses on the excess debt in the financial system.

With deposit insurance and access to central bank funding, Spain's banks can continue to operate and support the real economy while they are rebuilding their book capital levels.

The big powers in Europe are treating us shabbily. For a short while they even cruelly allowed us to indulge the fantasy that they would pay us €20bn for equity in our pillar banks when it was worth less than €8bn.
We will hear no more of that.
The Government needs someone with the bottle of Roisin Shortall to stand up to our European colleagues, someone who is neither captured, nor in denial.

http://tyillc.blogspot.com/2012/10/ireland-is-case-study-in-why-not-to.html

[Italian "Austerity"]

Italian "Austerity"

We say "not really" because as we have shown, Europe has yet to actually implement austerity. And yet the people suffer. Or rather, once again, it is the common man who suffers, and because of that is convinced that the government is spending less. It certainly isn't as we showed in the case of Spain whose tax revenues have increased even as spending has increased, promises to the contrary notwithstanding. But where is the money going then? Surely if the common man is suffering, everyone else must be too. Turns out the answer is no. As the following picture below shows, where previously a simple Lancia with the license plate "ITA1" once stood, the car that is now proudly parked in the same spot and drives around Italy's ambassador to the UK, Alain Giorgio Maria Economides (read his heartfelt message to all here), is a new Maserati Quattroporte.

http://www.zerohedge.com/news/2012-10-02/italian-austerity-action-maserati-its-uk-ambassador