European Rescue Plans are Variations of the Tommy Boy Solution

You know the reference in the post title, right?  I’ve written about it ten times already:

“Because they know all they sold ya was a guaranteed piece of shit. That’s all it is, isn’t it? Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I’ve got spare time.” – Tommy Boy

No matter what kind of ink you use to stamp “GUARANTEED” on the box of crap, it’s still a box of crap – remember that.  The problem isn’t a liquidity crisis – which could be solved by such craptastic guarantees – it’s a solvency crisis.

-KD

ps – from Lance Roberts, on last weeks’ Euro-TARP rumor:

“The special purpose vehicle could then be used as collateral for borrowing from the European Central Bank (ECB), allowing the central bank to make loans to banks faced with liquidity shortages.  Let me be clear on this.  The European banks which are already undercapitalized and on the brink of failure will buy bonds issued by the SPV that is full of bonds issued by broke countries.  The banks will then used these bonds as collateral to borrow money from the ECB.  The ECB winds up with loans to broke banks and holding bonds backed by debt issued by broke countries as collateral. This is worse than circular logic, its circular borrowing akin to the Credit Default Swap (CDS) markets that helped sink Bear Stearns and Lehman Brothers, just with a European flair.”

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