Nov. 26 (Bloomberg) -- Borrowing costs for Europe’s most indebted nations are at record highs as Ireland’s capitulation in accepting a bailout of its banking industry stokes concern that other countries also will have to seek aid.

The average yield investors demand to hold 10-year debt from Greece, Ireland, Portugal, Spain and Italy reached 7.52 percent yesterday, a euro-era record. The average premium investors demand to hold those securities instead of German bunds widened to 480 basis points, approaching this year’s 485 basis-point high reached on Nov. 11. The average cost of insuring against a default by the five nations using credit- default swaps reached a record 517 basis points on Nov. 23.

“It’s no longer taboo to speak about a restructuring,” said Johannes Jooste, a portfolio strategist at Bank of America Corp.’s Merrill Lynch Global Wealth Management in London, which oversees about $1.4 trillion for clients. “The fact that bond yields continue to rise and put pressure on countries that have to fund from the market makes investors less and less confident, and it’s bringing forward the day of reckoning.”

The Nov. 22 relief rally after Irish Prime Minister Brian Cowen conceded that the nation needed financial support proved transient. Irish 10-year bond yields fell 4 basis points, before jumping 88 basis points through yesterday, exceeding 9 percent for the first time since 1995. The euro’s respite was still more fleeting; the bailout inspired a 0.8 percent gain for the currency before it slumped to a two-month low.

Storm, Not Calm
“When Ireland accepted help, the general feeling in the market was that this could restore some calm; that hasn’t been the case,” said Michiel de Bruin, who oversees about $35 billion as head of European government debt at F&C Netherlands in Amsterdam. “Authorities should be doing their utmost to calm the situation.”

Analysts at Morgan Stanley said in a Nov. 11 report that any move by Ireland to use the European Financial Stability Facility would boost the euro and be a “circuit breaker” for the European sovereign debt crisis. While Ireland has enough money to pay its debts until the middle of next year, it has requested a bailout from the European Union and International Monetary Fund amid concern the cost of bailing out its banks would overwhelm government finances.

Sharing Pain
The most recent leg of the debt crisis that started a year ago in Greece kicked off after EU leaders on Oct. 29 agreed to consider German Chancellor Angela Merkel’s demand for a crisis- resolution mechanism that forces bondholders to share the cost of future bailouts. The Stoxx 600 Banks Index of European shares has declined almost 7 percent in the past month.

Adding to the pressure is the European Central Bank's push to begin scaling back liquidity support for banks.

“This tough stance is reigniting a euro debt crisis,” Greg Gibbs, a Sydney-based currency strategist at Royal Bank of Scotland Group Plc, wrote in a research report dated Nov. 23. “The recent problems in Europe may relate to fears that weak banks in the periphery will lose access to cheap funding from the ECB, and their deteriorating position will in turn put more pressure on the sovereigns.”

Greece agreed to a 110 billion-euro ($147 billion) rescue program in April before the creation of the 750 billion-euro European Financial Stability Facility in May as a backstop for the common currency. Cowen said yesterday a bailout of 85 billion euros had been discussed for Ireland.

Policy makers must head off a “spreading disaster” in the euro region, said Mohamed El-Erian, chief executive officer at Pacific Investment Management Co. “The comforting statements issued by European ministers in recent days must be urgently translated into meaningful actions,” he wrote this week in an article for the Financial Times.

‘Huge Haircuts’
Analysts also say more needs to be done. Portugal should request a preemptive bailout to stem the widening yield spreads between high-deficit nations’ debt and German bunds, according to WestLB AG. Bondholders of European banks need to accept “huge haircuts” on their assets, said currency-trading firm FXPro. Germany may pull out of the euro to allow the currency to devalue, wrote Graham Turner, chief economist at GFC Economics, a London-based consulting firm.

“Time is of the essence,” a team of London-based analysts at Nomura International Plc led by Nick Firoozye wrote in a Nov. 24 investor note. “The continued confusing political rhetoric is driving investors out of Europe. Once the euro area issuance cycle gets under way in 2011, unless many of the issues surrounding collective action clauses, crisis resolution mechanisms and their timing have been resolved, policy makers could lose the battle.”
Link -
http://noir.bloomberg.com/apps/news?pid=20601087&sid=aL2ng3dJdc7A&pos=3
==============
If this were an ordinary Recession, it would be over by now.

It is not & it is not!

This Economic downturn, IS NOT cyclical & it is not a simple matter of restoring confidence!

This downturn IS Global, Structural and its driving forces are two of the the same three Basic, Macro Factors that have driven Global Economic Growth
for the last 150-200 years -
1) Demographics
2) Cheap & Available Energy
3) Innovation

Do You Have a Growth Mindset? (Cont)

Relationship-building. A fixed mindset fosters a zero-sum view of the world: if you win, I lose. With a fixed and finite set of value, the only question is how to allocate it. This perspective fosters conflict and mistrust and, not surprisingly, relationships governed by relative power, tend to be transactional and are rigidly defined to protect each party's share of the value.

A growth mindset fosters a broader view of the possibilities: by working together, we can create more value than if we work individually. While there are still issues around allocation, relationships are cultivated based on a goal of creating an even bigger pie. These relationships center on improving the performance of all participants, and the process of creating value together fosters trust. The levels of collaboration and trust deepen with time, creating a more valuable relationship.

Mindset may be destiny but it is changeable. While mindset has a profound impact on our ability to harness the power of pull, Dweck (displaying her growth mindset) offers hope: "Mindsets are an important part of your personality, but you can change them. Just by knowing about the two mindsets, you can start thinking and reacting in new ways."

The future belongs to those who can adopt a growth mindset. Those with a fixed mindset will likely be increasingly stressed and overwhelmed by mounting performance pressures and sustained uncertainty. Worse, the more they avoid failure, the more susceptible these individuals and organizations can be, not learning from mistakes and missing opportunities.

What assumptions do you make about the world and how do they play out in your decisions? What techniques have been useful for exposing your unexamined assumptions? Have you succeeded in actually changing your mindset?
Link -
http://noir.bloomberg.com/apps/harvardbusiness?sid=Hb5e0729f46218ab5856726a2048a...
======================
This article says quite a bit about the basic thought patterns & assumptions of those who wrote it, many of those in business (Big Business particularly) & those in Politics!

The basic idea is that Perceptions dictate everything -
1) In a fixed mindset, "your qualities are carved in stone."
2) In a growth mindset, "your basic qualities are things you can cultivate through your efforts...everyone can change and grow through application and experience." Qualities like intelligence are a starting point, but success comes as a result of effort, learning, and persistence.

The inference being that "a fixed mindset" will have greater difficulty in growing to meet the challenges of a changing & challenging world and that may well be correct!

However, whilst "a growth mindset" is good to an extent, the inference that  can overcome any & all obstacles is part of the reason we now find ourselves between a rock & hard place.  

Not only is it unlikely to be always true, it is positively a danger, if left unchecked, to run rampant thru Politics & Big Business, as a basic given, because it gave & continues give those in power, the thought that "something" will come along to fix our future problems, simply because we (they) say it will be!  

The current set of circumstances, which we are now living thru, are testament to the fact the several generations (of Politicians & The Powers That Be) have assumed that "something will come along to fix our future problems".

In short, there has been an inherent assumption that "human innovation" would fix the problems created by the last four generations of human Demographics and the last 200 years of Energy usuage?

That fix has not eventuated! The reason why it did not eventuate, was because TPTB assumed something, but did not invest in the time or effort to bring it to Reality!

We are now living thru a failure to properly Plan for the future!

As has been said, a failure to plan, in effect is planning to fail!  

Funny, but true, Bernanke would still be raving about the benefits of quantitative easing.

Sounds like an ad for the benefits of buying gold and silver.

I believe that something similar to that scenario could well happen. What's to stop it? after all they give China crap all the time, they'll get sick of it and pull the plug sooner or later.

But we mustn't forget that Australia is immune, it wouldn't affect us......lol

The glass is half FULL, the glass is half FULL

gizmo_2655 wrote on Nov 30^th, 2010 at 1:55pm:


It's all about Perceptions?

The glass may be half full, but if we were talking about Peak Oil, the Oil GLASS IS HALF FULL, but the trend is that the glass is emptying and there is no way to re-fill it!

Shortly, the Energy to GDP ratio will again rise, aided & abetted by an aging Demographic and the Global Economy will again collapse.

What will the half full glass do, then?

<<What will the half full glass do, then? >>
...........................................................

Will it be 1/4 full or 3/4 empty?

Extend and Pretend: Hitting the Maturity Wall

With $492 Trillion outstanding in the notional value of global Interest Rate Swaps it is reasonable to conclude that, since one party on either side of these counterparty trades WILL GET HURT when rates rise, there is going to be a lot of hurting in a total global economy of only $45 Trillion.

All indications are that by 2012 the global economy is going to run headlong into a funding wall.

Markets always anticipate events at least 6 months in advance. This wall is so huge I doubt the market will wait and likely will begin adjusting 12- 14 months ahead!

All bets are off if we get another sovereign or possible US State surprise. This would move our Maturity Wall even 'closer in'.



Link -
http://www.safehaven.com/article/16303/extend-and-pretend-hitting-the-maturity-w...
==========
This is only one issue of concern, in a wall of worry, which is currently heading our way!

The Ugly Truth Within the Fiscal Commission Report

( Not happy Jan)


The National Commission on Fiscal Responsibility and Reform's report entitled "The Moment of Truth" might as well be pronounced "D.O.A." even before it's voted on. An excerpt:

Our challenge is clear and inescapable: America cannot be great if we go broke. Our businesses will not be able to grow and create jobs, and our workers will not be able to compete successfully for the jobs of the future without a plan to get this crushing debt burden off our backs.

Ever since the economic downturn, families across the country have huddled around kitchen tables, making tough choices about what they hold most dear and what they can learn to live without. They expect and deserve their leaders to do the same. The American people are counting on us to put politics aside, pull together not pull apart, and agree on a plan to live within our means and make America strong for the long haul.

We have?

After 99 weeks of unemployment, the majority of the unemployed don't drop their $100 cellphone plans and $100 cable and Internet service. This despite the fact that essentially every town in the nation nowdays has Internet access available in the public library for those times you really do need it, and cell phones hadn't been invented yet in the 1970s and '80s -- yet somehow I managed to live and travel all over the nation without one.

"Black Friday" features the proletariat again bowling one another over at the door to get that latest piece-of-crap Chinese bauble. And yet there's not one word about austerity from our government -- or, for that matter, from our monetary authority at the Fed. Instead, what the Fed proposes (and does) is to devalue the currency by directly monetizing the profligacy of the U.S. Federal Government.

Independent central bank? Think again.

As members of the National Commission on Fiscal Responsibility and Reform, we spent the past eight months studying the same cold, hard facts. Together, we have reached these unavoidable conclusions: The problem is real. The solution will be painful. There is no easy way out. Everything must be on the table. And Washington must lead.

Washington will not lead. Nor will it follow. Washington will do nothing about this because doing so means telling Bernanke to stick a sock in his mouth and literally suspending his ability to monetize. It means recognition of the fundamental fact that I have been talking about for the last three-and-a-half years -- that one cannot expand credit at a rate that exceeds the expansion of GDP, as doing so both debases the currency and results in negative real borrowing costs, which always causes asset bubbles.

This game -- the lie that comes from ignoring exponents -- is what our government and, indeed, our media promote. Turn on Bloomberg, CNBC, any of the other major outlets -- or listen to Congress. This is all you hear: "Growth and more growth."

Yet growth on a compound basis into the indefinite future is impossible. We live on a planet with a finite land mass and in a nation with a finite mass and finite resources. While we can expand to fill that on a permanent forward basis, the idea of five percent growth annually is insane; that would double output roughly every 15 years. How many doublings do you think we can really manage to pull off?

In point of fact, we haven't pulled off nearly as many as we claim. What we've done instead is cheated by creating more credit and debasing the currency. This is false growth. It is a lie. It destroys the savings of Americans and trashes their ability to provide for their own security, and nobody cares. Not initially, anyway.

Ultimately everyone will care, which is what this report claims to be the case. But "caring" means we have to take this bull by the horns and deal with it. And there's no evidence -- at all -- that we will.

After all the talk about debt and deficits, it is long past time for Americas leaders to put up or shut up. The era of debt denial is over, and there can be no turning back. We sign our names to this plan because we love our children, our grandchildren, and our country too much not to act while we still have the chance to secure a better future for all our fellow citizens.