"The Disease Is Incurable"
We have left the “can kicking” stage in Europe. It is now behind us and we have entered a whole new paradigm while no one was looking or paying attention. In fact I believe we have entered the final stage of this multi-act play where Europe is running out of money!
One of the reasons that Europe is so difficult to assess is the tremendous amount of jargon and hype that comes pouring out from all across the Continent. Each separate nation sends out stuff and then Brussels sends out their fluff and then the ECB makes proclamations and there is no harmonization as each group has its own distinct platform. We are bombarded daily with national interests, Federal interests and finally an ECB that supposedly is beholden to no one but is, in fact, beholden to everyone and especially Germany as the paymaster. Almost every day there is a new bandwagon to jump on and a new disappointment to be found some days later as one plan after another does not come to fruition. So to make sense of it all you have to stop, come to a full halt and give due consideration to the totality of what is happening in Europe.
There are several legitimate ways to add up the numbers but basically Europe is in a recession and the combined economies are shrinking so that growth is not a methodology for success. At the same time the ECB has loosened and then loosened again and again the collateral requirements so that it must be said that the ECB, in its own admission, is becoming a riskier proposition. We are given very little data but I think it is safe to assume that the ECB now holds a very large amount of questionable if not worthless securitizations including all kinds of loans and mortgage obligations that are no longer paying that have been placed with them by the Spanish, Portuguese, Greek and Italian banks. They are also holding sovereign debt in large amounts of all of the troubled nations in Europe and just the default of Greece alone will wipe out all of their equity capital so I believe it is quite rational to state that the ECB is in trouble.