Jim Rickards, Senior Managing Director of Omnis spoke to CNBC this morning about the European sovereign debt crisis.
- 1:00 This bailout thing goes back to 2007-2008, when Bear Sterns was lifted, TARP happened, then Fannie and Freddie were bailed out. Next it was Dubai, then Greece, now Ireland. Nothing has been resolved, it’s just being moved along. The debt hasn’t been written off. Where is the IMF getting its money? They print it in SDRs and they get a lot from the U.S. And this is exactly what the Fed doesn’t want, with the dollar rising against the euro, crushing QE2.
- 2:25 It’s getting harder and harder to find markets. These things have the form of markets, but there is no real price discovery going on, because the government is interfering so much.
- 3:20 Bond holders of Irish banks are actually other banks, in this case German banks.
- 4:05 Spain looks a lot more like the United States, with its property bubble, underwater mortgages.
- 4:35 The flight to quality right now looks like that scene in the Titanic, when the ship is down at the bow, and DiCaprio and Winslet go to the top. That’s the flight to quality in this case.
- 5:20 Germany are getting a great cost advantage by bailing out Europe, and are taking advantage of a weakening euro in the U.S. and China.
- 5:50 Calpers is buying California government debt. This is just keeping all the balls in the air.
- 6:10 Either the bondholders and the banks take the losses. Or the tax-payers and savers take the loss through the inflation of the currency.
- 6:30 No evidence to that self-sustaining recovery. Is it all just stimulus and spending?
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