The Patient Lives On

“The Disease Is Incurable” | ZeroHedge.

Everyone knows a relative or a friend diagnosed with a horrible disease who only has a few months to live. Then, this person will live for years defying the doctors. The eurozone is like that person.

People, including your humble author, have been calling the euro crash for two years. It’s amazing how long they have been able to keep this thing on the rails.

As long as the Europeans keep up the flow of funds, they should be able to maintain this dysfunctional equilibrium indefinitely. Basically, the ECB has been funding banks in exchange for “collateral,” which the banks use to fund the sovereigns by buying their debt. When the banks run out of collateral, the governments are more than happy to print more, which the banks pledge to the ECB in exchange for loans that are used to buy more sovereign debt.

Yes, this system is shady, but it has endured this long. The system is very prone to a panic-inducing shock; however, when or how that happens is anyone’s guess.

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s