In this week’s Off the Cuff with Mish & Chris podcast, Chris and Mish get things back in gear to talk about:
Europe
- Just went from ‘worse’ to ‘worser.’ To the tune of one trillion euros.
- Derivative Risk
- Why we should be extremely concerned by the $100+ trillion in outstanding derivative contracts
- Market Exuberance
- How can markets justify powering higher given such dire risks to the global economy?
It’s a new year, but Europe’s problems haven’t changed. In fact, they’re getting larger and more urgent. Greece is already in default, though no one is willing to call it that yet, and Portugal is almost certainly next. And while this should be of extreme concern to our European readers, it has a very good potential to trigger a cascading failure that could cause global markets to seize. So everyone has a stake in how this unfolds.
The first big news of the year is that the International Monetary Fund (IMF) is proposing a trillion-euro expansion in lending to deal with its ongoing credit crisis. All while the European central bank (ECB) has been in the markets buying bonds trying to stabilize things. So we can pretty heavily discount the claims from Europe’s leaders that quantitative easing won’t happen this year.
The latest chapter in the Greece tragedy sees a new proposal for a 68% write-down on Greek bonds (up from 50% In October ’11 and 20% in April ’11).
by cmartenson