Thursday, June 23, 2011

PIMCO is banking on defaults and forced restructuring in many countries, Greece alone is manageable, but the Domino effect is certainly not...

PIMCO's El-Erian predicts Greece, others will default......

PIMCO is banking on defaults and forced restructuring in many countries, Greece alone is manageable, but the Domino effect is certainly not...!

The head of PIMCO, the world's biggest bond fund, predicted that Greece and other European economies would default on their debts to resolve their problems as the euro area deals with its debt crisis.

Greece's government won a vote of confidence late on Tuesday, a crucial step toward securing further short-term and longer-term financial aid from the European Union and the IMF as the country tries to avoid the euro zone's first sovereign debt default.

"For the next three years, we're going to see different economies work out different problems. For European economies, especially Greece, it would be through default," Mohamed El-Erian, chief executive of PIMCO, told reporters in Taipei on Wednesday via a video conference.

He didn't identify which economies other than Greece he was referring to.

El-Erian has suggested in the past that Greece would default and that Europe risks wasting money for nothing by pumping billions of dollars into the ailing economy.

"Nothing has been done to enhance growth," he said. "No single (Greek) indicator has shown strength. They are afraid a restructuring would hurt European banks."

He doubted a Greek default could trigger another global financial crisis.

"Ireland, Portugal, Italy and Spain would have to be involved. But Greece is too small in terms of economic impact," El-Erian said.

PIMCO, or the Pacific Investment Management Co, is based in California and is the world's biggest bond fund manager with nearly $1.3 trillion in assets under management.

Horacio Valeiras, chief investment officer of fund firm Allianz Global Investors Capital (AGIC), predicted that Ireland and Portugal, countries that also received financial bailouts in the wake of the global credit crisis, will have to restructure their debts.

PIMCO and AGIC are units of German insurer Allianz, which organized briefings for the media and investors.

"We are not investing in Greece, Ireland, Spain and Portugal," said Valeiras, who appeared in person at the press briefing. He said default in Greece was "inevitable".

The confidence vote in Athens came after a European ultimatum requiring the debt-choked state to agree to a five-year austerity package of measures within the next two weeks or miss out on a 12-billion euro tranche of aid money.

Without the loan, Athens will run out of cash next month and policymakers fear a default would send shockwaves through the global financial system.

European officials are also considering a second bailout package worth an estimated 120 billion Euros that is meant to extend Greece's year-old 110 billion euro deal and fund it into 2014.

Sovereign debt elsewhere in the developed world has also soared since the global crisis, affecting investment decisions.

The fiscal weight of the global financial crisis prompted PIMCO to dump U.S. sovereign bonds. The fund's $236.9 billion PIMCO Total Return Fund said in March it had completed a move in February to drop all its investments in U.S. government debt.

Earlier this month, Tomoya Masanao, the head of Japan portfolio management for PIMCO, said the fund manager had cut holdings of Japanese and U.S. government debt to shift money into more attractive investments, such as debt issued by the likes of Australia, Canada, Brazil and Mexico.

The American economy is going to go over the falls by Autumn. Britain will go with it. That is why oil futures are down.

Wall Street and the City are caught in a trap of their own making: they tried to divert the public's attention away from American and British financial problems by getting their finance media whores to focus on European problems, so we now have the spotlight focused again on the Greek sideshow.

The trouble with that strategy is that when one makes comparisons between the British, American and Greek economies using the criteria developed for Greece, it is immediately apparent that American and Britain are much further up the same river in the proverbial barbed wire canoe than Greece is, and, unlike Greece, there is no "uncle sugar" capable of bailing out the U.S..

America is going to default on its sovereign debt which immediately reduces its world wide relevance and authority. The Europeans are already planning what their post crash financial infrastructure is going to look like (eg; Two tiered sovereign debt with different rates and risk profiles). Europe has already opened dialogue (last month) with the BRIC group to start planning a post crash world financial order.

These discussions pointedly do not include America and Britain, who will no doubt try and sabotage these moves if they can, because the failure of the American and British economies is a given.

The task for all of us (including myself) at present is to get the heck out of any financial assets with U.S. dollar exposure, and also prepare for the 10%+++ T-bond rates that will appear within weeks of the U.S. crisis surfacing, that means getting out of property, shares, etc. so as to loose as little as possible.

The European view appears to be that there is no hope of getting financial sanity out of Washington or London. The financial elites are too busy looting what they can out of the public purse via new infrastructure funds - privatizing public assets - toll roads, parking meters, airports, etc.

The sad part is that the fundamentals of America are still good, if you could get the hands of the rich of the levers and start economic reform and reconstruction across the entire society, but, sadly, there is no Roosevelt in sight....

A point that needs to be emphasized is that the US can never default on its dollar denominated debt as it has the printing press. Creditors will always be paid back in nominal terms. Of course there is no guarantee what they can purchase with those dollars. The question is when do creditors rebel at the debasement and refuse to extend additional credit in dollars and insist that the US borrow in Yuan or Roubles, or Dirhams....

This time its Bonnie Faulkner on Guns and Butter who interviews Max Keiser. Another excellent discussion you can listen to here:

George Kenny has recorded yet another most interesting interview, this time with Dr. Richard Wolff. They discuss the economic crisis in Greece, of course, but also the larger implications of the latest manifestation of the crisis of capitalism.

Excellent stuff, I highly recommend it! Check it out here:

More generally, George churns out one interesting interview after another, week after week. Keep an eye on his "Electric Politics"!

Interesting comment from Bonnie Faulkner in the comments below the podcast link:

Another great interview. Max Keiser talking about Germany reminded me of the mystery of THE GERMAN CARD.

I wish you could find a reliable person who has read
and researched this book written a few years ago
by a former head of military intelligence for West
Germany. The book has not been translated into
English except for it's title which is:

THE GERMAN CARD by Gerd-Helmut Komossa.

The author asserted-I believe truthfully--that under
dire threat, post WW II West Germany signed a
secret agreement with the [secret] government of
the US that gave control over the German military, political process and media to the US government until 2099. This book is vitally important, yet it is never mentioned.

Russia Today did a brief review of the book when it
was translated from German to Russian. The book was banned in Germany, I believe, and was published in Austria initially in 2008 or 2009.

link to the RT piece on YouTube is and a better site with text and video news piece dated 11/2009 including:

"In Gerd-Helmut Komossa’s book “The German Card”, he claims Germany has, until now, been controlled by the United States and its allies, and was even viewed as a possible target.'

from RT.

[I have read that The national Security Act in 1947
that created the DOD and the Pentagon apparently
created a secret government within the US government that has no oversight or accountability. I would assume it is this element of the US government that would have managed the secret agreement with Germany. but I do not know what the author says.]

I always knew that the German government are ZOG puppets (as are most European governments today) and that the CIA and Annenberg Foundation were instrumental in appointing Frankfurt School Jews to head most social sciences departments and endowing their departments with money by way of the Annenberg Foundation (Annenberg was a Jewish gangster and head capo of the Lansky Bronfman 'Supermob' crime syndicate) & CIA. But I had never heard of this book.

It looks promising. Understanding how Jews pull the strings of Western governments is something that deserves closer scrutiny. Perhaps this book deserves its rightful place along side Professor Tony Martin's book
The Secret Relationship Between Blacks and Jews as one of the great banned books of our time....

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