Utterly fascinating essay by Ashvin Pandurangi – The Collapse of the Tower of Financial Babel – about the complete circularity of the EU’s efforts to stabilize Greece and the EU currency:

On “guarantees” and “default:”

“…in the process of rendering sovereign [credit default swaps] self-referencing (all countries are guaranteeing each others’ debts), meaningless instruments of modern finance, the EU plan has also rendered its own plan for leveraging the [European Financial Stability Facility] through bond guarantees (insurance) meaningless as well….There can be no confidence in a market for insurance that consists of perpetual premiums and no credible prospects for payouts on the policy…”

On “Special Purpose Investment Vehicles:”

“It turns out that those agreements reached by EU leaders in the wee hours of Thursday morning actually consisted of an agreement to travel around the world, hat in hand, asking for people to invest in the most publicized ponzi scheme in human history…”

On “recapitalization:”

“How should [the European banks] raise this cash? Well, that’s still anybody’s guess. They could go to the private capital markets, but the whole problem for the banks is that they are being progressively locked out of these markets as the reality of their exposure to deteriorating sovereign bonds becomes more clear. The plan to allegedly eliminate 50% debts owed by Greece (discussed below), to be followed by the rest of the Euro periphery, doesn’t really help this cause either…”

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