Ten questions about the European crisis Commentary: Two years in, the crisis still makes no sense

NEW YORK (MarketWatch) — I must be very stupid.

I have been watching this European financial crisis for two years now. And it still doesn’t make any sense to me whatsoever.

When it started out, I figured that it would soon become clear. But it hasn’t. It’s getting worse.

Am I alone? Am I the only person baffled? Does everyone else understand this?

Here are my questions.


Reuters
A commercial street in Athens. Greece has repeatedly flirted with bankruptcy in recent months.
1.Why would anyone lend their money to Greece for 30 years at 3.5% interest? That’s the rate being insisted on by the Greek government in the current negotiations with its bondholders. But that’s less than the rate Australia and New Zealand — countries with some of the strongest finances in the world — pay for 10 year money. Would Greek prime minister, Lucas Papademos, lend his money on these terms? If so, will he agree to do so as part of the negotiations? And if not, why should anyone else?

2.If Greece gets to pay 3.5% interest on its debts, as a reward for defaulting, why would the Irish continue to pay 7.2% for not defaulting? Why would the Spanish pay 5.7% and the Italians 6.5%? Why won’t they look at this deal and say, “We’d like the same thing”?

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3.Why on Earth did the European Union leaders try to make a big stand over Greece in the first place? It was always a lost cause. And it is a tiny country anyway. Its economy accounts for less than 2% of European Union’s gross domestic product, and its debts for less than 3%. Why didn’t they draw the line around somewhere more defensible, like Ireland?

4.Am I mistaken, or couldn’t we have reached this point two years ago? It seems that we have spent the last two years hearing about the European Union’s attempts to prevent Greece from defaulting. Unless my eyes deceive me, this looks like Greece defaulting.

5.How exactly is the imposition of new austerity rules on depressed countries like Greece, Italy, Spain and Portugal going to help them recover? You don’t have to be a raging Keynesian to think that bringing in “tough new budget rules” at this moment is like throwing an anvil, instead of a life preserver, to a drowning man.

6.Owners of Greek debt are being told that unless they accept haircut on their loans as part of a “voluntary” agreement, they will have a deeper haircut imposed upon them by fiat. Could someone in the European Union please explain the use of the word “voluntary” here, and how it differs from the word “blackmail”?

7.Why don’t the Greeks just leave the European Union and relaunch the drachma? They could devalue, regain their autonomy, and restore growth. Great Britain boomed after it left the European currency union in 1992. And being outside Europe hasn’t hurt the Turks: Their economy and their stock market have done much better than the E.U. since their talks to join the union got bounced five years ago.

8.Why do we keep talking about “bailing out Greece” when we are really bailing out the French and German banks who lent them money? The Greeks have already had the money, and spent it. They aren’t really being bailed out at all — least of all if the “bail out” means making their lives even more miserable. Shouldn’t Angela Merkel and Nicholas Sarkozy be required to admit that we are talking about bailing out some of their constituents, and not the Greeks?

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9.If you come right down to it, why are the European Union, the European Central Bank and the International Monetary Fund even intervening in this at all? If some banks were foolish enough to lend to the central bank of Greece on the same terms they lent to Germany and Sweden, isn’t that their problem? And if Greece must renegotiate the terms of the debt, isn’t that really a private matter between the Greek government and the banks? Why shouldn’t Greece just be allowed to default and go through Chapter 11, the way American Airlines is doing? We would not expect the EU to intervene, say, to settle a contractual dispute between the Greek government and a company hired to collect the trash in Athens or run the airport. Certainly, international institutions can reasonably step in to settle markets in a panic, or to provide emergency liquidity, but that is a totally different matter from intervening in these contracts.

10.People who bought credit default swaps — insurance — on Greek debt did so in order to insure themselves against a Greek default. Counterparties sold them these CDS insurance contracts in order to earn a return on their money in exchange for taking a risk. Clearly Greece is going to default by any common sense definition. If the European authorities rig this process so that it is not a “technical” default, simply in order to avoid triggering payouts on these credit default swaps, how is that not an act of theft against the owner of those contracts, and in favor of the seller?

I’m sure the answers to these questions must be obvious. I look forward to hearing them.

GOLD Reserve the only solution for Greek Debt

Gold Reserve the only solution for the European market to get out of all the financial mess and the last resort for ending the financial crises.

France Italy and German stand in top five countries holder of gold in the reserve and this can be used for bring fund in the liquidity market and support the bank and on the bottom line money in circulation.

France (French National bank) is holding 2435 tones which is 66.2% reserve
Italy is holding 2451 tones which is 71.2% of the reserve and
German the largest economy in the Euro zone is holding 3400 tones which is 71.4% reserve

According to me if only 10 – 15% of the reserve is shed by this country which will bring good liquidity in the market ands flood the bank with liquid cash where the cycle of the flow will start.
In the European summit which is expected to be hold on 30th Jan 2012 I feel this point should also be the strong point to discuss..

Indian Govt hike custom duty by 2% on GOld & 6% on Silver

Indian Govt hike custom duty by 2% on GOld & 6% on Silver

Rupee Over View 12 Dec. 11

Rupee tested the level of 51.5 as expected ?: reversal is expected from here and is expected to test 52.5 - 53 immediately,,, from Monday onward upside rally to resume.. may also test 54.5

Nifty & Rupee Overview for 10th Jan 2011

Nifty: Nifty yesterday after the gap down opening failed to trade below previous day low and on higher side 4775 was tested where the closing was around the level of 4754 and flat trading was seen through out the day. Today as the Asian stock markets as Japan emerged from a Monday holiday to trade on better-than-expected U.S. jobs data that broke last Friday, and also Reports that European leaders remain united in keeping the currency zone intact also bolstered Asian equities markets. On lower side if sustain trading is seen below 4720 will open the door for 4680 to 4620 immediately, where as further 4200 can be expected in near term, whereas on higher side resistance is seen at 4780 on closing basis. It’s not expected to cross the higher resistance of 4850 and till the time its holding the same selling at rise is advisable, where in medium term 4350 is the target which is 100% expansion of a - b from point c and can also test 3900 which comes to 161.8% in medium term. Stochastic which has reverted from the overbought zone is just below 80% zone and is expected to give short correction in market.



USD/INR: Rupee last trading session closing was seen at 52.8 and on higher side 53.05 was the resistance taken and was trading negative as some buying pressure is seen at the level of 52.75 around. Today opening was seen down side around 53.75 per$ with the spike where some negative move is expected where on lower side support is seen at 52.2 per$ and on higher side immediate resistance is seen at 53 per$ where till the time support of 52 per$ holds buying at dips is advise around 52.25 and above 52.6 per$ will further move to 53 in near term. In short term trading range bound to down move is expected where it will move slowly to test 52.2 per$ and on higher side resistance is seen at 53 per$. Stochastic which has given negative intersection near lower zone which indicates price will move side way to down side and lower target can be tested soon.

10 Largest Gold Reserves By Country

Gold definitely has caught the public’s attention; for proof, just look at the number of cash for gold ads. Gold has been rising since 2001 and its near vertical rise over the last two years helps explain some of the recent fascination, but political actions have helped as well. In the United States, Rep. Ron Paul and others have called for a return to the gold standard. Elsewhere, Venezuelan President Hugo Chávez recently nationalized his country’s gold industries, and some analysts have said countries should dip into their gold reserves to alleviate the sovereign debt crisis. With all these recent stories, we wanted to see which countries actually have the most gold in their reserves, based on information from the World Gold Council. [Take a look at the list below.] Words: 565
So says Michael J. McFarlin (www.futuresmag.com) in excerpts from his original article* as further edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) where deemed appropriate to provide clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
McFarlin goes on to say:
Honorable Mention: Venezuela
Although Venezuela technically is number 13 on the list behind Taiwan [#11] and Portugal [#12], Venezuela President Hugo Chávez’s move to nationalize his country’s gold industry was the catalyst for this list. With gold and oil under his control, perhaps now he can possess that pinnacle of dictatorial decadence…
Tonnes: 322.9
% of reserves: 60.8%
#10: India
The world’s second most populous country barely made the top 10 list…[even though it] consumes more gold than any other…
Tonnes: 557.7
% of reserves: 8.7%
#9: Netherlands
Although known for being a fairly liberal society, the Netherlands is fairly conservative in its financial reserves…
Tonnes: 612.5
% of reserves: 58.9%
#8: Japan
Gold only constitutes a very small percentage of Japan’s overall reserves. Like another Asian country on this list, Japan holds a significant number of U.S. dollars in its reserves…
Tonnes: 765.2
% of reserves: 3.3%
#7: Russia
As the world’s number five gold producing nation, Russia’s gold reserves have grown significantly over the last couple years…
Tonnes: 836.7
% of reserves: 7.7%
#6: Switzerland
Beyond watches, chocolate and pocket knives, Switzerland is best known as a financial center…
Tonnes: 1,040.1
% of reserves: 17.8%
#5: China
[Although China is] the world’s most populous nation…[its] gold holdings are only 1.6% of its total reserves…[given the fact that] it has more than $3 trillion in U.S. dollars in its reserve.
Tonnes: 1,054.1
% of reserves: 1.6%
#4: France
The French National Bank, Banque De France, is home to the country’s gold holdings…
Tonnes: 2,435.4
% of reserves: 66.2%
#3: Italy
Italy is the only top 10 country to also make the prestigious “PIIGS” list of Eurozone countries with sovereign debt problems (Portugal, Italy, Ireland, Greece and Spain), although Portugal just missed the list at number 12…
Tonnes: 2,451.8
% of reserves: 71.2%
#2: Germany
The largest economy in the Eurozone also has the largest reserve of gold…
Tonnes: 3,401.0
% of reserves: 71.4%
#1: United States
The United States holds nearly 30% of the 27,372.6 tonnes of gold in all sovereign reserves. Although Fort Knox is the iconic location of U.S. gold, more gold actually is stored in the Federal Reserve Bank of New York’s underground vault, although not all of it belongs to the U.S. government…
Tonnes: 8,133.5
% of reserves: 74.2%

Nifty short term out look 6th Jan 2012

Black Friday :: Wait for Blood Bath In Nifty Today ,,, just wait and watch tgt 4620 - 4560 can be tested today.. CMP is 4730 resitance 4765
Nifty will test 4200 this expiryy...


SBIN Sel @ 1667 stop @ 1680 tgt 1640 - 1610 wait for 3 - 4 days

LT sell @ 1072 tgt 1060 - 1040 - 1010 stop @ 1090 hold for few days,,

Reliance Sell @ 702 stop @ 708 tgt 685 - 670 - 650

rest will follow by same percentage..