Let’s create a fund from which the destitute, say Greece, can borrow. Where do we get the money? Well, about a quarter of it comes from Uncle Hans and Aunt Heidi and some more from other moderately well to do relatives like France and Belgium. But a fairly significant portion has to be provided by some ne’er do wells, say Spain, Portugal, and Italy whose solvency is also questionable. And they might just need to borrow from this fund themselves, so essentially the borrowers are to a large extent the lenders.
To confuse the suckers a bit more, we will have a second fund contributing to the rescue. Let’s call it the IMF. Where does it get the money. Well, its’ subscription list is larger and richer, but it ALSO includes funds from those who might be borrowing like, you guessed it, Club Med. And just to make it seem insurmountable, let’s say the IMF pledge is Euro 250 billion which, shhhh, don’t tell, is larger than it’s current amount of subscribed capital by quite a bit. So if we even remotely test it, the borrowers will have to be tapped to lend fairly soon.
Only politicians can come up with the circular logic involved with this rescue package and expect the markets to believe it.
Disclosure: No positions