I came across an interesting quote recently in The Gartman Letter. Dennis Gartman quotes Charles Biderman of TrimTabs fame.
"European leaders are searching for a relatively quick and easy way out of the government debt bubble that has been building for decades and just started to burst a few years ago. Unfortunately, there is no quick or easy way out.
"Debt has to be reckoned with one way or another. It either has to be repaid, or someone has to bear the losses on what cannot be repaid, either through default or inflation and currency debasement. If it were otherwise, everyone could be rich.
"The bailouts proposed for the Eurozone do not solve the underlying solvency problem. Instead, they are little more than shell games to shift losses on bad debt from bondholders to taxpayers."
That of course is a variation of my very important concept that all debt gets paid, either by the borrower or by the lender.
Greece is a serial deadbeat and has not even the slightest intention of paying their bills. The EU can play games until the cows come home but the Greek debt is not going to get paid. Greece defaulted many months ago and the governments of the EU and the financial media keep pretending there is a solution. There is none.
Here are the facts. There is $195 trillion dollars of debt in the world but only $150 trillion in assets. That assumes there isn’t trillions more of debt hidden in the $600 trillion in derivatives. I suspect the debt may be far higher than anyone anticipates today.
The debt cannot be paid, even if the entire load is dumped like bales of hay onto the backs of the taxpaying camels. The debt must be written off and governments, like corporations and families, must learn to live within their budgets. We cannot float in a sea of debt attached to an anchor of unpaid obligations.
No one in the United States has done the math on the obligations the Federal Reserve dumped on the backs of Americans since 2008 else they would be carrying pitchforks and hot tubs of tar to the local OWS rally. If you assume 330 million Americans and $16 trillion in loans from the Fed, that is $48,000 and change per every American. Will that ever be paid back? No.
I made the comment years ago that the $600 trillion in derivatives is like a game of musical chairs in a giant casino with people playing with Monopoly money. Well, the music stopped in September of 2008 and there ain’t no chairs.
The world economy is in a minefield where each day another unforeseen mine explodes. The Dexia Bank, Belgium’s largest, which passed the fake stress tests with the highest ratings, crashed a few weeks ago. I cannot help but be reminded of the failure of the Credit-Anstalt Bank of Austria that crashed in May of 1931 and led to a series of cascading bank failures and eventually to a total shutdown of all US banks in March of 1933.
I’m going to crawl out on a limb and suggest that 2012 is going to go down in history as the year of the bank failures. Every bank in the United States has been underwater since 2008 and the only reason the doors remain open is a mob psychosis insisting the King is indeed clothed. Well, he ain’t and the banks will collapse.
