Tuesday, May 11, 2010

European Bailout Is A Giant Ponzi Scheme And Giant Moral Hazard; Euro To Suffer

Europeans are waking up. Quoted by Bloomberg, the European bailout package is “a kind of Ponzi game at the highest level,” Stephan Kolek, a strategist at UniCredit SpA in Munich. It risks creating “more debt instead of cutting debt, as it obliges EU countries to buy troubled debt from member states.”

The Euro is dropping badly today back to "pre-bailout" package. FXE straddles anyone?

Did they really expect to make the Euro stronger by flushing Euroes down the toilet of the fiscally irresponsible countries?

"Germany, France and the three other largest top-rated euro area states may compromise their AAA grades by standing behind the debts of weaker members with their 750 billion-euro ($955 billion) stabilization fund".

Moral Hazard Increased Exponentially

The Germans are fuming too. According to Jim Reid, head of fundamental strategy at Deutsche Bank AG in London, the rescue package, risks compromising the independence of the European Central Bank, It is also part of a process that is increasing so-called moral hazard “exponentially”.

The package “is not particularly pro-growth,”. It may “be looked back on as a landmark day for the ECB. Their total independence may now be increasingly questioned.”

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