EU Crisis - How to do Trillions in Bailouts with 800 Billion

[Reality Check]

How can Europe do Trillions in Bailouts with only 800 Billion in Bailout funds?

The answer is follow the United States road map.

First, create a European Union Wide Bank regulator that calms the market.

Second, have the regulator certify the banks as sound.

Third, have the regulator allow the banks to carry extremely risky sovereign bonds, and low quality real estate backed securities, on the banks' books at 100% of face value.

Fourth, have your central bank print money, and loan it to the banks at near zero interest rates secured by the assets mentioned above, providing loans of 100% of the face value of the assets.

Fifth, create a regulatory environment that strongly encourages the banks to buy sovereign bonds of the countries within the EU, rather than making other loans or other investments.

Finally, allow the Central Bank to print all the money required to buy the sovereign bonds of individual EU countries on the private bond market to keep interest rates low on the sovereign debt of individual European countries.

[Reality Check]

The U.S. bailout road map appears to meet all of Europe's immediate needs.

It keeps the European banks from collapsing.

It allows the most highly indebted countries in Europe to continue borrowing ever more money at low interest rates for few more years (months?).

It allows the EU governments to claim they are printing money to "stimulate economic growth" and avoid things becoming "much worse".

It transfers risk from the individual banks to the central European Common Bank which calms investors in the banks, at least for a few more years ( months? ).

[Marc]

How can Europe do Trillions in Bailouts with only 800 Billion in Bailout funds?

The answer is follow the United States road map.

First, create a European Union Wide Bank regulator that calms the market.

Second, have the regulator certify the banks as sound.

Third, have the regulator allow the banks to carry extremely risky sovereign bonds, and low quality real estate backed securities, on the banks' books at 100% of face value.

Fourth, have your central bank print money, and loan it to the banks at near zero interest rates secured by the assets mentioned above, providing loans of 100% of the face value of the assets.

Fifth, create a regulatory environment that strongly encourages the banks to buy sovereign bonds of the countries within the EU, rather than making other loans or other investments.

Finally, allow the Central Bank to print all the money required to buy the sovereign bonds of individual EU countries on the private bond market to keep interest rates low on the sovereign debt of individual European countries.

Not a bad list — but, like crushed crackers added to meatloaf to help stretch it as well as add texture to it, you could also add many other types of creative, underlying derivatives to the stew, as well as find other things to anchor the securities to (such as quasi-public entities and even intellectual property). That should add to the Generation-X Indian summer, and hold up the fort for a good while longer.... —Best regards/Peace, Marc