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We’re all Greece – and on fire

A French bank says US banks have stopped lending to them. The chart shows spreads on credit default swaps (CDS) for Portugal, Ireland, Italy, Greece and Spain (the PIIGS.)

CDS are psuedo insurance that big players buy and sell on the health of a company or in this case, on whether a country will default. A widening spread between bid and ask means traders are getting very nervous. The spread here is up 60% in one day.

Karl Denninger says it’s game over:

We used currencies, offshoring and other means of market manipulation to cover up that which could not work on a sustainable forward basis. We built the pyramid ever-higher, driving asset prices to the moon, and yet none of these “asset price” gains were real and underpinned by actual returned cash earnings.

The check is on the table folks. Europe was just as profligate as we were, and their banks were just as immature in their “analysis” before buying up debt – that is, lending people money who had no prayer in hell of ever paying it back.

This is the same game that was run in the 1980s, the 1990s with the Internet bubble, and then in the housing bubble in the 2000s.

But now the game is involving nations, not companies. The toxic slop on the books of the TBTF banks needs to be is written off. The federal government must stop sending the banksters trillions. Then and only then will things start to recover.

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