By John Galt
November 29, 2011 – 22:40 ET
As someone who once enjoyed the sport of skydiving in my youth the phrase “terminal velocity” was often misinterpreted by many of my friends to believe it was a term regarding the endangerment of one’s life when jumping out of a perfectly good airplane. However once you achieved the maximum speed during free fall, it was easy enough to control and enjoy the descent unless of course the parachute fails to open.
Welcome to the European nightmare as the primary and emergency parachutes failed to deploy properly.
The first article from Reuter’s references a speech given by the European Central Bank’s governing council member, Christian Noyer:
This excerpt from the article by Kevin Lim and Saeed Azhar sounds eerily like U.S. Treasury officials in 2008:
“The situation in Europe and the world has significantly worsened over the past few weeks,” Noyer said at a conference in Singapore. “Market stress has intensified.”
“We are now looking at a true financial crisis — that is a broad-based disruption in financial markets.”
Despite popular belief on this side of the Atlantic, a disruption in the European markets would have far ranging impacts on the U.S. financial system as the ties between Africa and the Middle East to the European system would cause a ripple throughout that region, then into all of Asia and North America. Much like Bernanke’s response during the summer and fall of 2008, Noyer speaks plainly about using whatever means are necessary to prevent instability or worse:
“In a period of intense market disruption, it is essential to ensure that the monetary policy transmission mechanism actually works. This may involve temporary and exceptional interventions on those market segments where dysfunctions are most apparent,” Noyer said.
Those excerpts are terrifying in the context of the downgrades by Standard and Poor’s earlier this evening and the next story from the U.K. Telegraph tonight:
In this story by Louise Armitstead the crisis atmosphere is highlighted by this excerpt:
Mr Schauble said eurozone finance ministers, who are meeting in Brussels, could not agree on the terms of the European Financial Stability Facility (EFSF). He told Germany’s Handelsblatt that although Europe needed a fund “capable of action”, plans for the EFSF were too “intricate and complex” for investors to understand.
The finance ministers, who were meeting ahead of a full Ecofin summit today, acknowledged the €440bn (£376bn) fund would not win support to leverage it up to €1 trillion. Its capacity would be betwen €500bn and €700bn instead – a total that is unlikely to be big enough to rescue Spain and Italy.
In other words the “bazooka” hyped up by the permabulls and some members of the Bubblemedia is nothing more than a spitball which will ultimately lead to a fracturing of both the monetary and political union which will result in nationalist fervor returning to those nations who feel they were exploited by the northern European banking elites. Is this the moment where the bankers once again realize or enhance the possibility of conflict to reap the profits one more time from the old continent or will they simply surrender to maintain the Pax Aerarian where the peasant class continues to support those who vote to control their lives in exchange for a pittance of financial security.