It’s getting grim out there.
PIMCO CEO Mohamed El-Erian says many institutions have “sharply reduced short-term lending to French banks” and we could be seeing “an institutional run on French banks.” Further, there are two connected problems, sovereign debt and insolvent banks.
It’s gangrene, not contagion (emphasis added)
What we have is gangrene. Doctors with leather aprons covered in blood and saws are the images that come to mind. Whether it was a genteel Confederate soldier or a grizzled Roman legionnaire, there was only one treatment. It was disfiguring and ugly, but effective. We have waited so long that the choice is no longer above or below the elbow. We have let it spread too long, things like EFSF have done nothing but let the disease spread. It is now time to amputate (let defaults occur) and begin the real process of recovery. It won’t be easy, but it is better than continuing to ignore the real problem and avoiding taking the hard, painful, but necessary steps.
The banksters are fighting the possibility of default every inch of the way, insisting on being paid in full for bonds they bought and loans they made knowing they were garbage. They claim to be capitalists but refuse to let the sick institutions (their banks) fail. Thus, they are not capitalists at all but parasites who will kill the host (us) if we let them.
Yes, this is class war.