Yes of course they can! The problem is, they already are. This is why Bernie Madoff must be sitting there with his eyes bleeding. A Sovereign Govt props up a bank so that Bank can buy that Govt's sovereign debt, you couldn't make this stuff up! But they are doing it. Every sane person can see this will end in tears but they refuse to, or do they. In my honest opinion, see my last sentence below.
BigBallinStalin wrote:Can't their governments and/or the ECB simply create new credit and dump it into those banks--whenever they become insolvent?
Or maybe the EU can simply buy up securities of whatever seems to be causing the problem (e.g. the Fed buying $50bn/month of MBS)?
Of course, this can't last forever, and this will make the 'end game' much more difficult and costly--but such steps may delay your 1-year prediction, right?
GreecePwns wrote:Surely they will delay his prediction, but then what?
Figured I'd bring another political update to this thread since it popped up (thank you, Fruitcake, for that interesting and certainly credible position).
There is a debate whether or not Cyprus should accept Greek-style austerity and troika bailouts/intervention. The two major non-economic issues were the still-unresolved Cyprus unification issue and Cyprus potentially joining NATO (an idea previously passed in Parliament but vetoed by the outgoing communist president Christofias). There were three major candidates for this election:
Nicos Anastasiadis: Supported by a New Democracy equivalent in Cyprus and an "old guard" establishment politician. Pro-auterity, pro-EU bailout, pro-NATO membership, and pro-Annan Plan*. Got 46 percent in the first round.
Stavros Malas: Supported by the incumbent communist party and a newcomer to politics (a career geneticist and former Health Minister). Anti-austerity, pro-EU bailout, anti-NATO, pro-Christofias plan**. Got 27 percent in the first round.
Giorgios Lillikas: An independent former member of the communists. Anti-austerity, anti-bailout, anti-NATO, anti-Annan plan and vehemently anti-Turkey and TRNC. Advocate of selling Cypriot oil reserves immediately to fix budget problems. Got 25 percent in the first round.
The first two will go to a runoff election which will take place this Sunday. Malas is aggressively courting Lillikas' endorsement, without which he will of course have no chance of winning.
*essentially, Cyprus and the TRNC joining in an American-style government with two states: one Greek and one Turkish. The President and VP would be 1 Greek and 1 Turk elected together to 5-year terms and swapping positions every 20 months.
**a highly-centralized federal government, ending geographic separation of Greek and Turkish populations, rapprochement.
Now to Greece, where the government continues to fall to pieces. The elected government of New Democracy, PASOK and Democratic Left initially had 179 seats. Rampant resignation and forced ejection from the three parties have brought it down to 163, meaning a party leaving the coalition will trigger an election. Because of this (and the fact that their coalition pledge lasts only until the 2014 EU elections), opinion polling has still been done by major firms. The latest ones give us this:
SYRIZA 126 (+55)
ND 72 (-55)
Golden Dawn 31 (+15)
PASOK 20 (-13)
KKE 18 (+6)
Independent Greeks 17 (-3)
Democratic Left 15 (-2)
Taking the Cyprus point for my answer: There is more to this than meets the eye. For instance, did you know that Cyprus is now in the top 3 investors in Russia? Interesting times huh. The reason for this is simple. Cyprus is full of Russian billionaires and their companies because Cyprus made it so advantageous to position there. Now, I tend to avoid doing too much business with Russians. They are a lovely people but I like to keep my thumbs or any other appendages if the deal goes tits up. They do give me the screaming abdabs.There are some real horror stories that do the rounds and can be verified with digging. Notwithstanding this, the Russians have propped up London for many years so I cannot hold too much against them. This is where Cyprus comes in. For many years now loads of moolah has been hitting the property/assets, spending in London...what not many people know is that the source of those funds in the first instance is.....Cyprus!
How this has happened is simple. Pre 2008 Iceland was the favoured home of Russian moolah. After 2008 Cyprus became home of choice. This incensed Turkey but it was not to matter. Cyprus became a vassal state of the Greater Russia empire. Cypriot companies are dirt cheap to set up, very few dollars are used as holding companies because the corporate tax rate is only 10% (although word is that you can negotiate this downwards if you are Russian). So now, little ol' Cyprus is officially the third largest investor in Russia. But the real kicker in this is the small inalienable fact that has the Russians creaming themselves. Cyprus is an EU country! This is not some banana republic with wars and coup d'états happening on a regular basis, nor is this Iceland with it's most odd set of financial rules (pre 2008). Once again, you couldn't make this stuff up.
What makes this situation ever more fascinating and something of an irony that has the Anglo Saxon rolling around on the floor clutching his/her sides as he/she gasps for breath through laughter is the small fact that the Germans may be having to bail out Cyprus very soon! The dear Germans are livid, furious, puce with rage over this. Cyprus, which is full of dirty laundry, which used to be in London being washed but has moved house, so London gets Euro cleaned sheets, the technocrats in the EU know better than to start questioning the Russians about their money, so we are all happy (apart from a few notable exceptions of course). Mind you the technocrats wont question anybody, their moolah is being freshly washed, starched and pressed through Luxembourg anyway, but that's another story completely.