9-May-10 News -- Europeans to make historic announcement to stop global panic - 9-May-2010 - Generational Dynamics

I don't know for sure, of course, whether Sunday's announcement will be truly historic. What I know for sure is that all the financial experts are saying that there MUST be a historic announcement on Sunday, or there will be market chaos on Monday.

In fact, I've never seen anything like this. Bloggers and journalists who used to call people like me "apocalyptic" are suddenly echoing me.

The following statement by Mohamed El-Erian, CEO of Pimco, the largest bond fund in the world, was posted on FT Alphaville late on Saturday:

"Yesterday night’s important news out of Europe points to renewed efforts to rescue Greece and safeguard the Euro. The news will undoubtedly be accompanied by additional announcements out of Brussels and Berlin, as well as Washington DC. In the process, the stakes are getting even bigger…for Greece, Europe and the global economy.

As the announcements multiply, it is even more important to be clear about the key question. This is best summarized by a simple, and disturbing image, that a friend alerted me to:

With Greece (as well as Portugal and some other countries) now visibly drowning in a sea of debt, the question is whether the rescuer (EU/IMF) can pull off the rescue or, instead, get pulled down with all parties drowning.

So far, the attempts at rescue-including last Sunday’s dramatic EUR 110 billion announcement-have have been incomplete with respect to both design and implementation. They were thus viewed as insufficient and not credible by analysts and markets. As a result, the Greek crisis morphed in the following days into something much more sinister for Europe and the global economy.

This explains this weekend’s shift in the EU to a “whatever it takes” mindset. We are seeing evidence of a significant step-up in crisis management. Yet the question is not whether a step-up is required-it clearly is. The question is whether the strengthened rescue attempt will prove sufficient. ...

Even with this critical uncertainty, we should not under-estimate the historical relevance of what is happening this weekend; and the stakes for Europe and the global economy are huge.

If this rescue attempt does not work, there will be a material acceleration in the process of change to Europe’s economic, financial, and institutional landscape; and the reality of the debt explosion in industrial economies will become even more of a destabilizing factor for the world economy."

Statements of this sort also appeared on the web sites for the Wall Street Journal and NY Times on Saturday.

"The fear that began in Athens, raced through Europe, and finally shook the stock market in the United States is now affecting the broader global economy, from the ability of Asian corporations to raise money to the outlook for money-market funds where American savers park their cash.

What was once a local worry about the debt burden of one of Europe’s smallest economies has quickly gone global. Already, jittery investors have forced Brazil to scale back bond sales as interest rates soared and caused currencies in Asia like the Korean won to weaken. Ten companies around the world that had planned to issue stock delayed their offerings, the most in a single week since October 2008. ...

The crisis is so perilous for Europe that the leaders of the 16 countries that use the euro worked into the early morning Saturday on a proposal to create a so-called stabilization mechanism intended to reassure the markets. On Sunday, finance ministers from all 27 European Union states are expected to gather in Brussels to discuss and possibly approve the proposal. ...

A decade ago, it took more than a year for the chain reaction that began with the devaluation of the Thai currency to spread beyond Asia to Russia, which defaulted on its debt, and eventually caused the near-collapse of a giant American hedge fund, Long-Term Capital Management.

This crisis, by contrast, seemed to ricochet from country to country in seconds, as traders simultaneously abandoned everything from Portuguese bonds to American blue chips. On Wall Street on Thursday afternoon, televised images of rioting in Athens to protest austerity measures only amplified the anxiety as the stock market briefly plunged nearly 1,000 points."

These "apocalyptic" kinds of remarks are occurring because even mainstream journalists were shocked by what happened on Thursday, when the Dow Industrials fell by almost 1000 points in a few minutes, and then partially recovered.

And we aren't hearing these things just from journalists. Politicians are also expressing a great deal of alarm.

President Barack Obama is quoted by AFP as saying, "I am very concerned about what's happening in Europe. ... I think it is an issue that the Europeans recognize is very serious. If we can stabilize Europe that will be good for the United States."

French president Nicolas Sarkozy said, "The eurozone is going through the worst crisis since its creation. The leaders have decided to put in place a European intervention mechanism to preserve the stability of the eurozone. The decisions taken will have immediate application, from the point that financial markets open on Monday morning." Scotsman

German Chancellor Angela Merkel said they will send "a very clear signal" to market speculators, according to Deutsche Welle. Merkel has been strongly condemned for "dithering" in approving the bailout of Greece, and now polls show that her party is going to suffer a major defeat in Sunday's regional elections.

The spreading crisis

All of this is a reaction to the riots this week in Athens and to the 1000 point plunge on Wall Street on Thursday. But that's only a small part of what's been going on.

I wrote a couple of weeks ago that it was obvious, based on the bond yields and credit default swap prices for Greece and Portugal, that there was already a major panic in full swing. You don't have to be a psychic to see this -- you just have to open your eyes. But the mainstream press and bloggers barely say a word about it. Since then, the panic has spread to stock markets in Europe, Asia and the U.S.

Here's what an otherwise anonymous person named Margaret wrote to me a couple of days ago:

It's very flattering to receive messages like this, of course, and they go to the heart of what I've been trying to do, in terms of giving web site readers the knowledge to prepare for what's happening.

You, Dear Reader, can depend on my web site to tell you what's going on in the world, and based on what we've seen in the mainstream media and among the mainstream bloggers, this may well be the only place you can find out what's going on in the world. At any rate, it's worth a few minutes of your time each day to read what's posted here.

Recall that credit default swaps (CDSs) are insurance policies that pay off when the underlying debt payments default. A couple of weeks ago, it was only the CDSs for Greek and Portuguese debt that were in trouble. But now debt for all of Europe is surging:

As I'm writing this on Saturday evening, the BBC is reporting the first details of the planned announcement on Wednesday: A 90 billion euro stabilization package for all of Europe. This hardly seems enough, given that the stabilization package for Greece alone was 110 billion euros.

Perhaps there won't be a historic announcement on Sunday after all. In that case, there may well be historic results when the markets open on Monday.

Whatever happens on Sudan and Monday, the important thing for you, Dear Reader, is to be prepared. As I've told you dozens of times, you can't prevent what's coming, but you can prepare for it. Treasure the time you have left, and use the time to prepare your self, your family, your community and your nation.

Palestinian Liberation Organization agrees to 'proximity talks' with Israel

The phrase "proximity talks" refers to talks between opposing parties indirectly through an intermediary.

In this case, the opposing parties are the Israeli government, headed by Prime Minister Benjamin Netanyahu, and the Palestinian Liberation Organization (PLO), headed by president Mahmoud Abbas (also known as Abu Mazen). The PLO agreed on Saturday to begin the talks, according to Haaretz.

These two people do not get along, and there are bitter disagreements between them that will make the talks almost an empty gesture for show.

From the point of view of Generational Dynamics, these talks cannot succeed, and the region is headed for a major war re-fighting the genocidal war between Jews and Arabs that followed the partitioning of Palestine and the creation of the state of Israel in 1948.

There have been three "minor" wars in the Mideast in the last four years, the last one being the early 2009 war between Israeli and Hamas in Gaza. There are widespread fears that a new war could begin at any time, and this is one of the motivations for the agreement to the proximity talks.

Additional links

The U.S. military has been getting things doen in Haiti, every since the January 12 earthquake. but now the U.S. military is pulling out. NY Times

With Iceland's Eyjafjallajokull volcano wreaking havoc in Europe again, it's well to remember that another Icelandic volcano erupted in 1783-84, almost shutting down Europe completely, and causing problems that helped spark the French Revolution. Guardian. (Hat tip to Nebraska artist Lia Machel for pointing this article out.)

Generational Dynamics Web Log for 9-May-2010
9-May-10 News -- Europeans to make historic announcement to stop global panic

European leaders will be making a historic announcement on Sunday evening

The spreading crisis

Palestinian Liberation Organization agrees to 'proximity talks' with Israel

Additional links

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Generational Dynamics Web Log for 9-May-2010 9-May-10 News -- Europeans to make historic announcement to stop global panic

European leaders will be making a historic announcement on Sunday evening

The spreading crisis

Palestinian Liberation Organization agrees to 'proximity talks' with Israel

Additional links

Web Log Pages

Generational Dynamics Web Log for 9-May-2010
9-May-10 News -- Europeans to make historic announcement to stop global panic