Of course, what would a weekend be without another installment in the Grecian soap opera: Greece Bailed Out.....Again: Bloomberg

  • European governments have offered up a $61 billion Greek rescue package, meanwhile (and of course), Greece has not asked for any sort of package, insisting it can pay its debts
  • Greece plans to offer €1.2 billion in 6 month and 1 year notes tomorrow (April 12th)
  • So, the EMU pledges aid that Greece does not want to accept right before a bond auction that would have otherwise failed, and Germany after months of demanding Greece be punished for its profligacy, has backed off and agreed to an emergency plan that offers aid at a significant DISCOUNT to the market rate. How does this pass the mainstream smell tests?
  • Here are some choice quotes from the story:
    • "The package “sends a clear message that nobody can play with our common currency and our common fate,” Greek Prime MinisterGeorge Papandreou told reporters in Larnaca, Cyprus." Actually, the package sends a clear message that moral hazard abounds over there in Euroland and their will be no market discipline for financial profligacy.
    • Germany “has lost the competition,” said Carsten Brzeski, an economist at ING Group in Brussels who used to work at the European Commission. “All that fuss and talk about not putting taxpayer money at risk has been made obsolete.”

      ... the European loans would be tied to Euribor and priced above rates charged by the IMF, a nod to German opposition to subsidizing a country that lived beyond its means. The EU will offer a mix of fixed- rate and floating rate loans. Tis not much of a nod since it substantially undercuts the market rates. Yes, its more than the IMF rates, but the IMF rates were closer to zero, not withstanding the fact that the IMF would cause them to contort the spending.

    • Greece last week raised its estimate of the 2009 deficit from 12.7 percent of gross domestic product to 12.9 percent, the highest in the euro’s history and more than four times the EU’s 3 percent limit.
    • While rules dictated by Germany in the 1990s foresee fines for countries that go over the limit, no penalty has ever been imposed. Germany also led the charge to loosen the rules in 2005 after three years of excessive deficits. Basically, the rules are a joke and there is no wonder why not even a single country in the EU has respected them.

      While all euro-region governments vowed to contribute, some would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require “national legislation,” Finance Minister Brian Lenihan said in an e-mailed statement.Ireland is quite the interesting case in and of itself. Subscribers who have not done so are strongly recommended to carefully review the Ireland public finance review thatI will be posting later on. It's a doozy! It will be very interesting to see how a country such as Ireland who actually needs a bailout, will be bailing out another country that needs a bailout. For a sneek preview, see Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe and Reggie Middleton on the Irish Macro Outlook.


    image009.png

    Notice how Ireland is the nation with the second highest NPA to GDP ratio.

     

    eurodebt2.png

    Overall, in terms of total financing needed for 2010 (which includes 2010 bond maturities, short-term roll over debt and fiscal deficit), France and Germany top the list with € 377.5 billion and €341.6 billion, respectively while the total finance needed as percentage of GDP is expected to be highest for Belgium and Ireland at 26.3% and 22.4%, respectively.

    Now, to focus on the contagion effect of Ireland, specifically, let's borrow from our yet to be released foreign claims model in order to see who may be effected from the rush to pull capital out of extant positions to fill the leveraged NPA holes left by the banks...

     

    claims_against_uk.jpg

    Ireland has the largest claims against the UK as a percentage of the its respective GDP, the largest in the world. In the rush to raise cash to sell assets, expect some fire sales in the UK. For those who may be wondering how this may affect the UK, see our premium subscription report on the UK's public finances and prospects (recently updated to include the last round of government projections): UK Public Finances March 2010 UK Public Finances March 2010 2010-03-29 06:20:38615.90 Kb

     

     

     

    ireland_claims_against_piigs.jpg

    Ireland can also be expected to pull assets our of the ailing PIIGS group as well, since they are, bar none, the biggest lender to that group as a percentage of GDP. No wonder their banks are having problems.

    ireland_claims_against_cee.pngIreland also has the second highest claims (as percent of GDP) against the central and eastern European nations, who happen to be in a full blown depression. The withdrawal of assets, banking support and credit will exacerbate both Ireland's problems and that of these nations. See The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious! to find that Ireland can exacerbate the problems of Austrian, Swedish and Belgian banks by pulling capital out of the CEE region, and yes, they are truly in a depression:

    • The Greek government has yet to request a European lifeline, confident that this year’s planned budget cut of 4 percentage points will stem speculation that it is heading for the euro region’s first-ever default. Fitch Ratings highlighted that risk by shaving Greece’s debt rating to BBB-, one level above junk, on April 9.

    • A combination of higher taxes, lower spending and salary cuts for public workers have prompted strikes and protests against Papandreou, a socialist elected in October on promises of raising wages.

    • greek_strikes.png
      • The EU showed no sign of demanding further Greek austerity measures. Rehn hailed the Greek government for implementing “a very bold and ambitious program.”This is interesting since our analysis shows that the plan as Greece has announced it, just won't be able to cut the butter. Either the guys at the EU didn't read the plan, their spreadsheets need to be recalibrated, or they aren't being totally upfront. Then again, maybe I can be totally wrong and all of the EU/IMF/Greek government super rosy estimates illustrated below will turn out to be different this time around????
      Greece needs to raise 11.6 billion euros by the end of May to cover maturing bonds, and another 20 billion euros by the end of the year to pay debt coupons and finance this year’s deficit. The debt agency plans to offer 1.2 billion euros of six- month and one-year notes tomorrow, in a test of investor confidence. So far, all of the recently issued bonds are totally undewater. Is this really a worthwhile investment?

      Greece is likely to need money by the end of April, said Erik Nielsen, London-based chief European economist at Goldman Sachs Group Inc. Noting that the budget cuts threaten to cripple the economy, he said in a research note that “this thing is unlikely to go to bed anytime soon." "Cripple" the economy is right. They will throw themselves into a deeper depression, and it is doubtful that the cuts go anywhere near far enough, thus they will either have to cut deeper or face the fact that they will still be running an inappropriate deficit anyway.

    • These are the email addresses of the reporters that worked on this story (James G. Neuger in Brussels atThis email address is being protected from spambots. You need JavaScript enabled to view it.Jonathan Stearns in Brussels atThis email address is being protected from spambots. You need JavaScript enabled to view it.). I challenge anyone (including them or their sources) to demonstrate how Greece will be able to pull out of this, even with the EU subsidy that was just announced. This are just too bad. Subscribers can reference Greece Public Finances Projections Greece Public Finances Projections 2010-03-15 11:33:27 694.35 Kb. while those that don't subscribe can simply review the anecdotal evidence I have gathered, see Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!

    Let's take a visual perusal of what I am talking about, focusing on those sovereign nations that I have covered thus far.

    image005.png

    Notice how dramatically off the market the IMF has been, skewered HEAVILY to the optimistic side. Now, notice how aggressively the IMF has downwardly revsied their forecasts to still end up widlly optimistic. image018.png

    Ever since the beginning of this crisis, IMF estimates of government balance have been just as bad...

    image013.png

    The EU/EC has proven to be no better, and if anything is arguably worse!

     

    image031.png

    Revisions-R-US!

    image044.png

    and the EU on goverment balance??? Way, way, way off.

    image040.png

    If the IMF was wrong, what in the world does that make the EC/EU?

    The EC forecasts have been just as bad, if not much, much worse in nearly all of the forecasting scenarios we presented. Hey, if you think tha's bad, try taking a look at what the govenment of Greece has done with these fairy tale forecasts, as excerpted from the blog post "Greek Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on Fire!...

    greek_debt_forecast.png

    Think about it! With a .5% revisions, the EC was still 3 full points to the optimistic side on GDP, that puts the possibility of Greek  government forecasts, which are much more optimistic than both the EU and the slightly more stringent but still mostly erroneous IMF numbers, being anywhere near realistic somewhere between zero and no way in hell (tartarus, hades, purgatory...).

    Now, if the Greek government's macroeconomic assumptions are overstated when compared with EU estimates, and the EU estimates are overstated when compared to the IMF estimates, and the IMF estimates are overstated when compared to reality.... Just who the hell can you trust these days??? Never fear, Reggie's here. Download our "unbiased, non-captured, empirically driven" forecast of the REAL Greek economy - (subscribers only, click here to subscribeGreece Public Finances Projections Greece Public Finances Projections 2010-03-15 11:33:27 694.35 Kb. Related banking research can be downloaded here:

    It really is a shame when you have to pay for the truth, isn't it? If you think you've witnessed an example of social unrest in Greece, you ain't seen nuthin' yet. Wait until the reality of these faked numbers start hitting home...
    greek_strikes.png

    The Pan-European Sovereign Debt Crisis, to date (free to all):

    1.     The Coming Pan-European Sovereign Debt Crisis - introduces the crisis and identified it as a pan-European problem, not a localized one.

    2.     What Country is Next in the Coming Pan-European Sovereign Debt Crisis? - illustrates the potential for the domino effect

    3.     The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. - attempts to illustrate the highly interdependent weaknesses in Europe's sovereign nations can effect even the perceived "stronger" nations.

    4.     The Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western European Countries

    5.     The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!

    6.     The Beginning of the Endgame is Coming???

    7.     I Think It's Confirmed, Greece Will Be the First Domino to Fall

    8.     Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!

    9.     Financial Contagion vs. Economic Contagion: Does the Market Underestimate the Effects of the Latter?

    10.   "Greek Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on Fire!

    11.   Germany Finally Comes Out and Says, "We're Not Touching Greece" - Well, Sort of...

    12.   The Greece and the Greek Banks Get the Word "First" Etched on the Side of Their Domino

    13.   As I Warned Earlier, Latvian Government Collapses Exacerbating Financial Crisis

    14.   Once You Catch a Few EU Countries "Stretching the Truth", Why Should You Trust the Rest?

    15.   Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!

    16.   Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe

    17.   Moody's Follows Suit Behind Our Analysis and Downgrades 4 Greek Banks

     

     

    The EU Has Rescued Greece From the Bond Vigilantes,,, April Fools!!!

    How BoomBustBlog Research Intersects with That of the IMF: Greece in the Spotlight

    Grecian News and its Relevance to My Analysis

    A Summary and Related Thoughts on the IMF's "Strategies for Fiscal Consolidation in the Post-Crisis

     

     

     

    Ireland has finally admitted the horrendous condition of its banking system. I actually give the government kudos for this, and await the moment when the US, China and the UK come forth with such frankness. That being said, things are a mess, I have forewarned of this mess for some time now.First, the lastest from Bloomberg: Ireland's Banks Will Need $43 Billion in Capital After `Appalling' Lending

    March 31 (Bloomberg) -- Ireland’s banks need $43 billion in new capital after “appalling” lending decisions left the country’s financial system on the brink of collapse. The fund-raising requirement was announced after the National Asset Management Agency said it will apply an average discount of 47 percent on the first block of loans it is buying from lenders as part of a plan to revive the financial system. The central bank set new capital buffers for Allied Irish Banks Plc and Bank of Ireland Plc and gave them 30 days to say how they will raise the funds.

    “Our worst fears have been surpassed,” Finance Minister Brian Lenihan said in the parliament in Dublin yesterday. “Irish banking made appalling lending decisions that will cost the taxpayer dearly for years to come.”

    Dublin-based Allied Irish needs to raise 7.4 billion euros to meet the capital targets, while cross-town rival Bank of Ireland will need 2.66 billion euros.Anglo Irish Bank Corp., nationalized last year, may need as much 18.3 billion euros. Customer-owned lenders Irish Nationwide and EBS will need 2.6 billion euros and 875 million euros, respectively.

    ‘Truly Shocking’

    The asset agency aims to cleanse banks of toxic loans, the legacy of plungingreal-estate prices and the country’s deepest recession. In all, it will buy loans with a book value of 80 billion euros ($107 billion), about half the size of the economy. Lenihan said the information from NAMA on the banks was “truly shocking.”

    ...

    Capital Target

    Lenders must have an 8 percent core Tier 1 capital ratio, a key measure of financial strength, by the end of the year, according to the regulator. The equity core Tier 1 capital must increase to 7 percent.

    AIB’s equity core tier 1 ratio stood at 5 percent at the end of 2009 and Bank of Ireland’s at 5.3 percent. Those ratios exclude a government investment of 3.5 billion euros in each bank, made at the start of 2009.

    ...

    Credit-default swaps insuring Allied Irish Bank’s debt against default fell 6.5 basis points to 195.5, according to CMA DataVision prices at 8:45 a.m. Contracts protecting Bank of Ireland’s debt fell 7 basis points to 191 and swaps linked to Anglo Irish Bank’s bonds were down 3.5 basis points at 347.5.

    Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A decline signals improving perceptions of credit quality.

    State Aid

    If Allied Irish can’t raise enough funds privately, the state will step in with aid, Lenihan said. It is “probable” the government will then end up with a majority stake, he said.

    ...

    Ireland may not be able to afford to pump more money into the banks. The budget deficit widened to 11.7 percent of gross domestic product last year, almost four times the European Union limit, and the government spent the past year trying to convince investors the state is in control of its finances.

    The premium investors charge to hold Irish 10-year debt over the German equivalent was at 139 basis points today compared with 284 basis points in March 2009, a 16-year high.

    Ireland’s debt agency said it doesn’t envisage additional borrowing this year related to the bank recapitalization. It is sticking to its 2010 bond issuance forecast of about 20 billion euros, head of funding Oliver Whelan said in an interview.

    “The bank losses, awful as they are, represent a one-off hit. It’s water under the bridge,” said Ciaran O’Hagan, a Paris-based fixed-income strategist at Societe Generale SA. [What is the logic behind this statement? Has the real estate market started increasing in value? Are the banks credits now increasing in quality? Will the stringent austerity plans of the government create an inflationary environment in lieu of a deflationary one for the bank's customer's assets???] “What’s of more concern for investors in government bonds is the budget deficit. Slashing the chronic overspending and raising taxation by the Irish state is vital.” [This is a circular argument. If the government raises taxes significantly in a weak economic environment, it will put pressure on the bank's lending consituents and the economy in general, presaging a possible furthering of bank losses!]

     

    and...

     

    Juckes Says Outlook `Frightening' 
    March 31 (Bloomberg) -- Kit Juckes, chief economist at ECU Group Plc, talks with Bloomberg's Linzie Janis about the outlook for Ireland's banks after the government set out plans to revive the country's financial system.

    Now, notice how prescient my post of several months ago was, The Coming Pan-European Sovereign Debt Crisis: 

    Ireland has finally admitted the horrendous condition of its banking system. I actually give the government kudos for this, and await the moment when the US, China and the UK come forth with such frankness. That being said, things are a mess, I have forewarned of this mess for some time now.First, the lastest from Bloomberg: Ireland's Banks Will Need $43 Billion in Capital After `Appalling' Lending

    March 31 (Bloomberg) -- Ireland’s banks need $43 billion in new capital after “appalling” lending decisions left the country’s financial system on the brink of collapse. The fund-raising requirement was announced after the National Asset Management Agency said it will apply an average discount of 47 percent on the first block of loans it is buying from lenders as part of a plan to revive the financial system. The central bank set new capital buffers for Allied Irish Banks Plc and Bank of Ireland Plc and gave them 30 days to say how they will raise the funds.

    “Our worst fears have been surpassed,” Finance Minister Brian Lenihan said in the parliament in Dublin yesterday. “Irish banking made appalling lending decisions that will cost the taxpayer dearly for years to come.”

    Dublin-based Allied Irish needs to raise 7.4 billion euros to meet the capital targets, while cross-town rival Bank of Ireland will need 2.66 billion euros.Anglo Irish Bank Corp., nationalized last year, may need as much 18.3 billion euros. Customer-owned lenders Irish Nationwide and EBS will need 2.6 billion euros and 875 million euros, respectively.

    ‘Truly Shocking’

    The asset agency aims to cleanse banks of toxic loans, the legacy of plungingreal-estate prices and the country’s deepest recession. In all, it will buy loans with a book value of 80 billion euros ($107 billion), about half the size of the economy. Lenihan said the information from NAMA on the banks was “truly shocking.”

    ...

    Capital Target

    Lenders must have an 8 percent core Tier 1 capital ratio, a key measure of financial strength, by the end of the year, according to the regulator. The equity core Tier 1 capital must increase to 7 percent.

    AIB’s equity core tier 1 ratio stood at 5 percent at the end of 2009 and Bank of Ireland’s at 5.3 percent. Those ratios exclude a government investment of 3.5 billion euros in each bank, made at the start of 2009.

    ...

    Credit-default swaps insuring Allied Irish Bank’s debt against default fell 6.5 basis points to 195.5, according to CMA DataVision prices at 8:45 a.m. Contracts protecting Bank of Ireland’s debt fell 7 basis points to 191 and swaps linked to Anglo Irish Bank’s bonds were down 3.5 basis points at 347.5.

    Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A decline signals improving perceptions of credit quality.

    State Aid

    If Allied Irish can’t raise enough funds privately, the state will step in with aid, Lenihan said. It is “probable” the government will then end up with a majority stake, he said.

    ...

    Ireland may not be able to afford to pump more money into the banks. The budget deficit widened to 11.7 percent of gross domestic product last year, almost four times the European Union limit, and the government spent the past year trying to convince investors the state is in control of its finances.

    The premium investors charge to hold Irish 10-year debt over the German equivalent was at 139 basis points today compared with 284 basis points in March 2009, a 16-year high.

    Ireland’s debt agency said it doesn’t envisage additional borrowing this year related to the bank recapitalization. It is sticking to its 2010 bond issuance forecast of about 20 billion euros, head of funding Oliver Whelan said in an interview.

    “The bank losses, awful as they are, represent a one-off hit. It’s water under the bridge,” said Ciaran O’Hagan, a Paris-based fixed-income strategist at Societe Generale SA. [What is the logic behind this statement? Has the real estate market started increasing in value? Are the banks credits now increasing in quality? Will the stringent austerity plans of the government create an inflationary environment in lieu of a deflationary one for the bank's customer's assets???] “What’s of more concern for investors in government bonds is the budget deficit. Slashing the chronic overspending and raising taxation by the Irish state is vital.” [This is a circular argument. If the government raises taxes significantly in a weak economic environment, it will put pressure on the bank's lending consituents and the economy in general, presaging a possible furthering of bank losses!]

     

    and...

     

    Juckes Says Outlook `Frightening' 
    March 31 (Bloomberg) -- Kit Juckes, chief economist at ECU Group Plc, talks with Bloomberg's Linzie Janis about the outlook for Ireland's banks after the government set out plans to revive the country's financial system.

    Now, notice how prescient my post of several months ago was, The Coming Pan-European Sovereign Debt Crisis: 

    I am in the process of finishing up the Sovereign Debt Crisis series with a massive global model of the interconnected relationships between sovereign nations. In the building of this model the team and I came to the conclusion that many pundits are truly underestimating the lose-lose situation that the Eurozone, CEE and the UK are in. I have went to lengths to demonstrate the interconnectedness of banks and the risk of global financial contagion that they pose. See this excerpt from "The Coming Pan-European Sovereign Debt Crisis"

    I am in the process of finishing up the Sovereign Debt Crisis series with a massive global model of the interconnected relationships between sovereign nations. In the building of this model the team and I came to the conclusion that many pundits are truly underestimating the lose-lose situation that the Eurozone, CEE and the UK are in. I have went to lengths to demonstrate the interconnectedness of banks and the risk of global financial contagion that they pose. See this excerpt from "The Coming Pan-European Sovereign Debt Crisis"

    This is the 2nd to last installment in my Pan-European Sovereign Debt Crisis series. After covering western and southern Europe, we are moving eastward. Before we go any further, be sure you have caught up on the previous portions:

    1. Can China Control the "Side-Effects" of its Stimulus-Led Growth? Let's Look at the Facts - Explains the potential fallout of the excessive fiscal stimulus in China. While not European, it is quite likely to kick off the daisy chain effect.
    2.  The Coming Pan-European Sovereign Debt Crisis - introduces the crisis and identified it as a pan-European problem, not a localized one.
    3. What Country is Next in the Coming Pan-European Sovereign Debt Crisis? - illustrates the potential for the domino effect
    4. The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. - attempts to illustrate the highly interdependent weaknesses in Europe's sovereign nations can effect even the perceived "stronger" nations.
    5. The Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western European Countries

    Austria, Belgium and Sweden, while apparently healthy from a cursory perspective, have between one quarter to one half of their GDPs exposed to central and eastern European countries facing a full blown Depression!

    Click to Enlarge... 

    cee_risk_map.png 

    These exposed countries are surrounded by much larger (GDP-wise and geo-politically) countries who have severe structural fiscal deficiencies and excessive debt as a proportion to their GDPs, not to mention being highly "OVERBANKED" (a term that I have coined).  

    So as to quiet those pundits who feel I am being sensationalist, let's take this step by step.

    Depression (Wikipedia): In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen as part of a normal business cycle.

    Considered a rare and extreme form of recession, a depression is characterized by its length, and by abnormal increases in unemployment, falls in the availability of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. Price deflationfinancial crisis and bank failures are also common elements of a depression.

    There is no widely agreed definition for a depression, though some have been proposed. In the United States the National Bureau of Economic Research determines contractions and expansions in the business cycle, but does not declare depressions.[1] Generally, periods labeled depressions are marked by a substantial and sustained shortfall of the ability to purchase goods relative to the amount that could be produced using current resources and technology (potential output).[2] Another proposed definition of depression includes two general rules: 1) a decline in real GDP exceeding 10%, or 2) a recession lasting 2 or more years.[3][4]

    Before we go on, let's graphically what a depression would look like in this modern day and age...

    This is the 2nd to last installment in my Pan-European Sovereign Debt Crisis series. After covering western and southern Europe, we are moving eastward. Before we go any further, be sure you have caught up on the previous portions:

    1. Can China Control the "Side-Effects" of its Stimulus-Led Growth? Let's Look at the Facts - Explains the potential fallout of the excessive fiscal stimulus in China. While not European, it is quite likely to kick off the daisy chain effect.
    2.  The Coming Pan-European Sovereign Debt Crisis - introduces the crisis and identified it as a pan-European problem, not a localized one.
    3. What Country is Next in the Coming Pan-European Sovereign Debt Crisis? - illustrates the potential for the domino effect
    4. The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. - attempts to illustrate the highly interdependent weaknesses in Europe's sovereign nations can effect even the perceived "stronger" nations.
    5. The Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western European Countries

    Austria, Belgium and Sweden, while apparently healthy from a cursory perspective, have between one quarter to one half of their GDPs exposed to central and eastern European countries facing a full blown Depression!

    Click to Enlarge... 

    cee_risk_map.png 

    These exposed countries are surrounded by much larger (GDP-wise and geo-politically) countries who have severe structural fiscal deficiencies and excessive debt as a proportion to their GDPs, not to mention being highly "OVERBANKED" (a term that I have coined).  

    So as to quiet those pundits who feel I am being sensationalist, let's take this step by step.

    Depression (Wikipedia): In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen as part of a normal business cycle.

    Considered a rare and extreme form of recession, a depression is characterized by its length, and by abnormal increases in unemployment, falls in the availability of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. Price deflationfinancial crisis and bank failures are also common elements of a depression.

    There is no widely agreed definition for a depression, though some have been proposed. In the United States the National Bureau of Economic Research determines contractions and expansions in the business cycle, but does not declare depressions.[1] Generally, periods labeled depressions are marked by a substantial and sustained shortfall of the ability to purchase goods relative to the amount that could be produced using current resources and technology (potential output).[2] Another proposed definition of depression includes two general rules: 1) a decline in real GDP exceeding 10%, or 2) a recession lasting 2 or more years.[3][4]

    Before we go on, let's graphically what a depression would look like in this modern day and age...

    Wednesday, 20 January 2010 18:00

    Some Light Shown on My Developing China Thesis

    First, in today's news.
    Yen Weakens Against Higher-Yielding Currencies After China Growth Quickens

    Jan. 21 (Bloomberg) -- The yen declined after a Chinese report showed economic growth accelerated to the fastest pace since 2007, damping demand for Japan’s currency as a refuge.

    The yen weakened against all of its 16 most-active counterparts on speculation the nation’s central bank will keep interest rates low as the economy struggles to gain momentum. The euro was near a five-month low against the dollar on concern Greece will default on its national debt as credit-default swaps on the country’s five-year sovereign bonds climbed to a record.

    Wednesday, 20 January 2010 18:00

    Some Light Shown on My Developing China Thesis

    First, in today's news.
    Yen Weakens Against Higher-Yielding Currencies After China Growth Quickens

    Jan. 21 (Bloomberg) -- The yen declined after a Chinese report showed economic growth accelerated to the fastest pace since 2007, damping demand for Japan’s currency as a refuge.

    The yen weakened against all of its 16 most-active counterparts on speculation the nation’s central bank will keep interest rates low as the economy struggles to gain momentum. The euro was near a five-month low against the dollar on concern Greece will default on its national debt as credit-default swaps on the country’s five-year sovereign bonds climbed to a record.

    From CNBC: China GDP Likely Grew by 13% in December: O'Neill

    China's economy likely grew by 13 percent in the last month of 2009 and market fears that the country is manipulating the data are exaggerated, Goldman Sachs' Jim O'Neill told CNBC...

    "I think there are valid concerns out there with regards to economic data in China," Clive McDonnell, a regional strategist at BNP Paribas Securities, said.

    "One is the issue of inflation. China releases its monthly inflation data before the end of the month, and that does raise a bit of skepticism there," he said, pointing out also that although the country reports car sales rises in the double digits, gasoline sales increase by only 2 to 3 percent. Hey buddy, haven't you heard that cars are getting more and more efficient these days. Did you fail to consider the possibility of 2 million Prius's being sold to the Chinese??? Huh! :-)

    O'Neill said fears of asset bubbles in China because of the country's rapid growth and lax fiscal and monetary conditions are "completely overblown." He also pointed out that the Chinese stock market has not made a new high since August. I'm at a loss as to how anyone can fail to consider the potential for a real estate asset bubble in China. Maybe I'm just paranoid...

    "Market fears that the country is manipulating the data are exaggerated". Wait a minute! Isn't this the same nation that killed an untold amount of people for attempting to exercise the obviously "alienable" right of free speech and right to gather in public places???

    From Wikipedia: Tiananmen Square protests of 1989

    The Tiananmen Square protests of 1989, referred to in most of the world as the Tiananmen Square massacre and in the People's Republic of China (PRC) as the June Fourth Incident (officially to avoid confusion with two prior Tiananmen Square protests), were a series of demonstrations in and near Tiananmen Square in Beijing in the PRC beginning on 14 April 1989. Led mainly by students and intellectuals, the protests occurred in a year that saw the collapse of a number of communist governments around the world.

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