May 20 Peter Schiff on Stock Market, Economy, Financial Regulations, Exchange Controls

Schiff says the financial regulations (that passed the Senate today) will make things worse - not addressing Fannie, Freddie, FHA, giving more power to the Fed instead of reducing the power, taxpayers on the hook for more losses. Lawmakers are clueless.

Commenting further on the new regulation about foreign brokerage firms, Schiff says that the US citizens can no longer have an account with foreign brokerage firms. Under the current law, foreign brokerage firms cannot solicit business from US citizens but if they are contacted by US citizens then they are allowed to do business with them. Not any more.

Why? The government is closing off the 'escape valves'. One step closer to exchange controls. The government knows their policies will destroy the value of US dollar, that massive deficit spending and huge tax increase are on the horizon, and Americans will want to move their assets out of the US to protect. The government is taking away our freedom to manage our own financial affairs.

What the US government has been doing is to limit (if not outright stop) the flow of money and capital - lifeblood of a free society - in the name of financial "security". As Schiff says, if the government is worried about the flight of money and capital, they should remove the root cause of the flight - stifling and costly regulations themselves.

(But nooo, no way! Lifeblood of a government (and this particular government) are more regulations over more aspects of human existence.)

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Senate Approves Financial "Reform" Bill by 59-39

Look out below, look out below, Main Street ...

I am firmly convinced now that the word "reform" has changed its meaning in the last year or so. It used to mean, I think, to change something that's not working and create something that will work. But now, it means to keep on doing something that's not working and make that something even bigger and see if that changes anything.

Now the Federal Reserve will have all the power to do whatever it wants to do over just about anything. They can write any regulation so that they can change the very definition of "financial firms" so that they can regulate them at their will.

Just like any bill that has passed under Obama, I bet no one in the Congress even read the entire bill. I am sure they will pass the cap and crap climate bill soon, to be followed by the immigration "reform". Cram down hard and fast. They (Dems) must know they are going to lose so big in November. "We did it (everything) for the good of the country" will be their heroic speech. Uh huh. I guess they've changed the definition of "good", too.

Along with usual defectors from the Republican side (Olympia Snowe et al), the new Senator from Massachusetts Scott Brown voted yes. (So much for his campaign promise of transparency or accountability or small government; to vote for expanding the Fed's power and for a vast, new bureaucracy!)

Not that it mattered. All Harry Reid needed was a simple majority. A bill that will unleash the biggest change since FDR's era, and all it took was a simple majority. And no one read the bill. What a joke.

Big bankers have won. Losers? They are us, the rest.

Senate passes sweeping Wall St. reform (5/20/2010 Politico)

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Battle of Euro: Pols vs Evil Speculators Update

Zero Hedge speculates that:

"The negative here is that Germany will look at the Eur response and pitch its naked short ban to all other European countries, which will now gladly accept the proposal, myopically hoping for another 1-2 bp move in the EURUSD. We believe there may well be an announcement of a Europe-wide naked short covering ban this weekend, coupled with the imposition of a transaction tax." [Emphasis is mine.]

Stock market participants around the world, LOOK OUT BELOW...

The Zero Hedge article also thinks today's massive intervention was by the ECB, not the Swiss National Bank.

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Battle of Euro: Pols vs Evil Speculators (the Market)

They are at it again, it seems. The central banks of certain countries - Switzerland, probably Japan, and the US - seem busy dumping their own currencies to support euro. Look at this huge spike on the intraday euro chart today. If they think this will instill confidence in euro, they are deranged.



(BTW, this is my 1,001 posts since I started this blog. Thanks for reading!)

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OT: Teach Your Children Well

Crosby, Stills and Nash.

You who are on the road
Must have a code that you can live by
And so become yourself
Because the past is just a good bye.

Teach your children well,
Their father's hell did slowly go by,
And feed them on your dreams
The one they picks, the one you'll know by.

Don't you ever ask them why, if they told you, you will cry,
So just look at them and sigh and know they love you.

And you, of tender years,
Can't know the fears that your elders grew by,
And so please help them with your youth,
They seek the truth before they can die.

Teach your parents well,
Their children's hell will slowly go by,
And feed them on your dreams
The one they picks, the one you'll know by.

Don't you ever ask them why, if they told you, you will cry,
So just look at them and sigh and know they love you.

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Gold Is Also Crashing Today - Carry-Trade Unwind

thanks to Germany's ban on naked shorting (bank shares and CDS on eurozone sovereign debt).

Gold Prices Dip as Investors Go for Cash (5/20/2010 The Street)

"NEW YORK (TheStreet ) -- Gold prices Wednesday were falling as investors sold gold for cash to cover losses as Germany's ban on naked short-selling spooked markets.

"...Germany's sudden ban on naked short-selling was weighing on the euro, which sunk to a low of $1.21 in Asia. Traders worried that the midnight ban signaled impending disaster and without the ability to short European bonds and stocks, investors were left few choices but to bet against the euro.

"The European Commission reportedly wants all European Union nations to follow Germany and restrict naked short-selling of certain assets. Any unilateral move could put continued pressure on the euro and support higher gold prices over the long term as investors buy gold as paper money loses value. The U.S. dollar is currently seen as one of the safest fiat currencies. The yield on U.S. 10-year bonds fell to 3.38%, which means that investors are more willing to lend the U.S. money." [Emphasis is mine. The article continues.]

It looks like a dumb bomb exploded over Europe.

As the article says later, the world today is more uncertain than yesterday, and fund managers think it is a good opportunity to buy gold "at a discount", thanks to this unwind.

In case you haven't heard, it's not just about Germany's stupid ban; there's a rumor that Greece may leave the EU, which has caused euro to jump.

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Australian Dollar Is Also Crashing - Carry Trade Unwind?

in case you haven't noticed...

While we are mesmerized by the spectacular collapse of euro after the announcement of the bazooka $1 trillion "rescue" plan, Australian dollar has been on a steep decline since the beginning of May. From May 3rd to May 18th, it lost 6.9%, dropping from 0.9265 to 0.8630. In Asia, A$ is currently trading at 0.8566.

Why?

It seems like an unwind of carry trade. As the market uncertainty increases by the day (the latest being Germany's ban on naked CDS and naked short selling) if not by hour, investors seem to be dumping high-yielding currencies like A$ and NZ$ (which is also declining rapidly). They are putting the money into "safe haven" - US$, Japanese yen, and gold. I personally don't think the first two are necessarily "safe", but comparatively speaking they may be. Besides, they have been the funding currencies for carry trade.

The line chart below is the comparison of major currencies since May 3rd.


Unlike euro, A$ is only taking out the low of February (0.8582) this year, and nowhere near the October 2008 low of 60. Technically, what's ominous to me is that A$ has crashed through both 50-day moving average and 200-day moving average. The last time it happened was July 2008. By the end of October 2008, the currency lost more than 30%, going from 93 to 60.

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Germany Bans Naked Shorting, and Euro Tanks

Germany announced the ban on naked short selling of financial stocks, and on holding CDS on euro sovereign debt without holding the underlying bonds. So the investors are expressing their negative view by selling the currency, euro.

Let us all blame the 'speculators', shall we? That will solve any problem, won't it?

Germany to Ban Naked Short-Selling at Midnight (5/18/2010 Bloomberg)

"May 18 (Bloomberg) -- Germany will temporarily ban naked short selling and naked credit-default swaps of euro-area government bonds at midnight after politicians blamed the practice for exacerbating the European debt crisis.

"The ban will also apply to naked short selling in shares of 10 banks and insurers that will last until March 31, 2011, German financial regulator BaFin said today in an e-mailed statement. The step was needed because of “exceptional volatility” in euro-area bonds, the regulator said.

"The move came as Chancellor Angela Merkel’s coalition seeks to build momentum on financial-market regulation with lower- house lawmakers due to begin debating a bill tomorrow authorizing Germany’s contribution to a $1 trillion bailout plan to backstop the euro. U.S. stocks fell and the euro dropped to $1.2231, the lowest level since April 18, 2006, after the announcement.

"“You cannot imagine what broke lose here after BaFin’s announcement,” Johan Kindermann, a capital markets lawyer at Simmons & Simmons in Frankfurt, said in an interview. “This will lead to an uproar in the markets tomorrow. Short-sellers will now, even tonight, try to close their positions at markets where they can still do so -- if they find any possibilities left at all now.”" [The article continues.]

Here in the US, we know what happened after the SEC banned not just naked short selling but also short selling of 'financial' stocks (which included GM and IBM).

The embattled German Chancellor said "In some ways, it’s a battle of the politicians against the markets” and “I’m determined to win. The speculators are our adversaries."

Pols and technocrats vs evil speculators. Place your bets.

Gold reversed hard upward on the news, US Treasuries gained more. Euro reversed downward on the news, and it continues to tank. Right now, euro is 1.2170. When they announced the $1 trillion rescue plan, it was around 1.28. Next support is around 1.20.

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Dow Theory's Richard Russell: Sell Sell Sell!

and batten down the hatches!

Business Insider reports that Richard Russell, famous for his Dow Theory Letters, issued an extremely dire warning to his subscribers:

Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year (Joe Weisenthal, 5/18/2010 Business Insider)

"Richard Russell, the famous writer of the Dow Theory Letters, has a chilling line in today's note:

Do your friends a favor. Tell them to "batten down the hatches" because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, "How the dickens does Russell know -- who told him?" Tell them the stock market told him.

Update: By popular demand, here's more on what he sees in the market. The gist is that the markets recent gyrations are telling him that the economy is in trouble:

And I ask myself, "Am I seeing things? The April 26 high for the Dow was 11205.03. The Dow is selling as write at 10557 down 648 points from its April high. If business is even better than expected, then why is the Dow down over 600 points? And why, if there were 674 new highs on the NYSE on April 26, were there only 20 new highs on Friday, May 14? And if my PTI was 6133 on April 26, why is it down 17 points since its April high?

The fact is that I've been seeing deterioration in the stock market ever since early-April, and this in the face of improving business news. The D-J Industrial Average is composed of 30 internationally known top-quality blue-chip stocks. These are 30 of "America's biggest companies." If Barron's is so bullish on the future of America's biggest companies, then why isn't the Dow advancing to new highs?

Clearly something is wrong. But what could it be? Much as I love Barron's, I trust the stock market more. If I read the stock market correctly, it's telling me that there is a surprise ahead. And that surprise will be a reversal to the downside for the economy, plus a collection of other troubles ahead.

About Dow Theory -- First, we saw the recent April highs in the Averages. Then we saw a plunge in both Averages to their May 7 lows -- Industrials to 10380.43, Transports to 4298.12, next a short rally. If ahead, the two Averages turn down and violate their May 7 lows, that would be the clincher. Such action would signal the certain resumption of the primary bear market.

Just as for years I asked, cajoled, insisted, threatened, demanded, that my subscribers buy gold, I am now insisting, demanding, begging my subscribers to get OUT of stocks (including C and BYD, but not including golds) and get into cash or gold (bullion if possible). If the two Averages violate their May 7 lows, I see a major crash as the outcome. Pul - leeze, get out of stocks now, and I don't give a damn whether you have paper losses or paper profits!"

Dire warning, indeed. But I have one problem.

Richard Russell clearly thinks this is still a stock market of old, more or less, which is a price-finding mechanism. After what happened on May 6, more and more people have realized that it is no such thing; it is a playground for high-frequency algo bots.

Those bots may or may not be reacting to the real world, but when they seems to be doing so they tend to run to the same side all at once (thus the 'flash crash', as May 6 event is now called). When they are not reacting to the real world, they tend to run to the same side all at once, anyway. And these high-frequency trading firms who account for as much as 70% of daily volume at stock exchanges are paid by the exchanges for putting in a trade.

That kind of reminds me of a website that gives reviews on shops and restaurants, and those shops and restaurants will get favorable reviews or have negative reviews moved down if they advertise on the site.

Just as that site is not an independent, peer review site, this stock market is not a market where information about the companies, the economy, new government regulations, etc. gets priced.

The stock market started ramping up in March 2009 and kept on going nearly a year, while the real economy continued to struggle and the unemployment remained (still remains) high. Russell could point that out and say the market is forward-looking.

I'd say the stock market is not looking anywhere in particular. If anything, it is reactive. What is it reacting to? I'd say the credit market and the foreign exchange market. The stock market by itself doesn't mean much in the age of algo bots.

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UK's Conservatives Acting Like Labour, Want 50% Capital Gains Tax

or like Dems under Obama.

If the UK voters thought it couldn't be worse than Gordon Brown, well they may be in for a surprise. (Just like many US voters thought it couldn't be worse than George Bush.)

Higher taxes for a million as George Osborne's emergency Budget hits investors (5/17/2010 Telegraph UK)

"More than a million people could be dragged into paying capital gains tax after George Osborne confirmed that he would use his emergency Budget to hit investors.

"The Chancellor is to increase duty on capital gains even though the plan was not included in the Conservatives’ election manifesto.

"CGT on “non-business assets”, including second homes, buy-to-let properties and shares, could rise from the current 18 per cent flat rate to a top rate of 40 or even 50 per cent, to fall in line with the higher rates of income tax.

"The move could double tax bills for hundreds of thousands of investors and has been denounced as “legalised theft”. There has been speculation that the changes may be backdated to stop a “fire sale” of second homes and other assets.

"The Liberal Democrats also want the tax to kick in below the current starting level of a £10,100 profit on any investment income. A threshold of £2,000 has been suggested. Deloitte, the accountancy firm, has estimated that that would mean the number of investors forced to pay CGT each year quadrupling to about a million." [The article continues.]

The sneaky Nick Clegg (who was talking to both Labour and Conservatives) and his party want the tax increase so that the income tax is reduced for lower income families. (Sound familiar?)

Say goodbye to any hope of economic recovery.

In the US, in Japan, and in the UK, people thought they voted for change and each got a new administration. It was a change alright, just not necessarily in the direction they hoped.

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Ron Paul on CNBC Squawk Box

Fed to Blame for Gold Surge, Currency Woes: Ron Paul
(5/17/2010 CNBC)

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Obama Signs Press Freedom Act, and Refuses to Answer Press Questions

deliciously ironic, wouldn't you say?

Press Freedom, Sure. But No Questions. (5/17/2010 CBS News)

"There was some rich irony at the White House today -- President Obama signed the Press Freedom Act, and then promptly refused to take any questions.

"The new law expands the State Department's annual human rights reports to include a description of press freedoms in each country. It seemed a good opportunity to showcase press freedom in this country.

"Recall that last Friday the president refused to take any questions after delivering his angry statement on the oil spill in the Rose Garden. And he has not held a prime-time White House news conference in many months, despite much pleading from pundits and members of the media.

"So after he signed the bill, and as the press "wranglers" began aggressively herding us out of the room, I asked if he still has confidence in BP. He ignored the question so I tried this: "In the interest of press freedom, would you take a couple questions on BP?"

"That did elicit a smile, and he told me I was free to ask questions. Someone else shouted, "Will you answer them?"

"He said he's not holding a press conference today as we were escorted out the door."

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Gordon Brown Is Coming to US for IMF Job

"to tackle world poverty", according to UK's Mirror.

Brown's heading to US for IMF role (5/16/2010 Mirror.co.uk)

"Gordon and Sarah Brown are prepared to make a life-changing move to the USA with their boys.

"The couple indicated to friends they see their long-term future there - with the ex-PM tipped to head the International Monetary Fund in Washington when the job comes up in 2012.

"Former Chancellor Mr Brown was widely praised for his role in fighting the global financial crisis. And before the election, as the Browns discussed their options with friends, Sarah said she expected him to take "one more big job".

"A source said: "The unspoken assumption was it would absolutely not be a Tony-and- Cherie style retirement into riches, lucrative speaking dates and globe-trotting.

""Gordon would relish the IMF job - not for the status - for a chance to tackle world poverty.""

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"Meltup" Video from National Inflation Association

1-hour video, a must see.

For more, visit the National Inflation Association website.

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Oil Spill: Is US Gov Doing Anything?

other than plotting a new tax out of the mess?

(Oh I keep forgetting: Never waste a good crisis.)

Here's a call-out from Lew Rockwell:

Hey, Obama

Posted by Lew Rockwell on May 16, 2010 12:46 PM

Isn’t it odd that the biggest, richest rip-off in the history of the world, the US government, isn’t fixing the oil spill itself? With all its trillions of dollars, millions of minions, hundreds of subs, etc.–not to speak of vast (anti-)energy bureaucracies–why are the feds standing around bitching about the far smaller, poorer BP? Surely the state can fix all troubles, dry all tears, put a bandaid on any boo-boo. Isn’t that your usual line, Obama?

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Cartoon I Saw on Zero Hedge Says It All

The cartoon appears at the end of the article titled "The Selling Out of Germany" by Michael Krieger Of KAM LP, which appeared on 5/13/2010 on Zero Hedge. (I got to it through Lewrockwell.com.)

In the article, Mr. Krieger says the $1 trillion bailout plan of multinational bankers just increased the likelihood of Germany leaving the EU in a few years, and that's why euro didn't respond much at all to this new stimulus.

I agree.

He also reports that "Muenze Oesterreich AG, the Austrian mint that makes the best-selling gold coin in Europe and Japan reported that buyers had purchased 243,500 ounces of gold since April 26, compared with 205,300 ounces in the entire first quarter". He says that's how Germans riot - dumping fiat paper currency and buying gold.

How about you? Got gold?

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Trichet Wants 'Quantum Leap' in EU Budget Control

Never waste a good crisis to promote your unpopular agendas.

Jean-Claude "Rahm Emanuel" Trichet wants (barely-)sovereign nations in eurozone to adopt a tighter fiscal union to prevent "bad behavior" like racking up too much debt. The European Commission president José Manuel Barroso, a Portugese, has already proposed a "peer review" process for budget of not just PIIGS but all enrozone members.

Trichet Wants ‘Quantum Leap’ in Euro Budget Control (Richard Weiss and Mark Deen, 5/15/2010 Bloomberg)

"May 15 (Bloomberg) -- European Central Bank President Jean- Claude Trichet called for a “quantum leap” in the way euro- area nations set their budgets and defended his decision to buy bonds from debt-saddled countries such as Greece and Portugal.

"“There is a need for a quantum leap in the governance of the euro area,” Trichet said in an interview with Spiegel magazine published on the ECB website. “There need to be major improvements to prevent bad behavior, to ensure effective implementation of the recommendations made by peers and ensure real and effective sanctions in the case of breaches,” he said.

"Trichet, who said the current crisis may be worse than the Great Depression, is fending off critics who say the ECB caved into political pressure as the sovereign-debt crisis stirred speculation that Europe’s single currency may break up.

"While the 16 members of the euro share a common monetary policy, members are responsible for their own fiscal decisions. That allowed Greece’s budget deficit to reach almost 14 percent of its gross domestic product, exceeding the EU’s 3 percent limit without penalty. Germany’s is 3.2 percent of its GDP.

"Trichet’s move came in tandem with a decision by European Union nations to push through a $1 trillion aid package to support members of the club who face the highest borrowing costs. The ECB’s debt purchases helped push down two-year bond yields over the course of the past week, making it less expensive for indebted nations to finance themselves." [The article continues.]

It is almost absurd to talk about "a common monetary policy" of the eurozone, as there's hardly anything common about the 16 eurozone member countries other than they are located on the European continent.

Euro, a political currency created for wealth transfer from productive nations (think Germany) to not-so-productive nations (think PIIGS) (that's my humble opinion, more in a later post), remains a political tool to force the EU political integration whether the peoples in the member countries like it or not.

The European Commission as executive body, the ECB the central bank, the Council of the European Union and the European Parliament as legislative body, the Court of Justice of the European Communities as judicial body. Sovereignty? What a quaint, 20th century idea!

Never waste a good crisis. Or if there is no crisis, create one.

It should be Germany, not France, who should be threatening to pull out of euro.

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Watch Next Tuesday's Democratic Primaries

in Pennsylvania and Arkansas.

It is good to know that anti-incumbent movement is not confined to the Tea Partyers.

Onetime-Longshots Sestak, Halter May Unseat Incumbent Senate Democrats (5/13/2010 Huffington Post)

"Even a month ago, political insiders scoffed at the idea that progressive challengers could unseat Democratic Sens. Arlen Specter (Penn.) and Blanche Lincoln (Ark.).

"But fundraising and poll numbers have shifted dramatically in both states, and now both incumbents could well lose their party's nominations in primary elections on Tuesday.

"Buffeted by waves of anti-Washington sentiment, both Specter and Lincoln have surrendered their early advantages to Pennsylvania Rep. Joe Sestak and Arkansas Lt. Gov. Bill Halter. A series of polls this week showed Sestak pulling ahead of Specter in Pennsylvania. The latest, from Suffolk University, has Sestak leading 49 percent to 40 percent.

"Lincoln's campaign has acknowledged that she will likely have to face Halter in a runoff -- and Halter could win: New polling from Research 2000/Daily Kos has him trailing Lincoln 46 percent to 37 percent, with 11 percent undecided." [The article continues.]

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Goldman Sachs' Reach in the Current Administration

Firedoglake.com has a list of Goldmanites within the Obama administration, including Elena Kagan.

For the full updated article click here, and here for the original article.

ALTMAN, ROGER.

BERKOWITZ, HOWARD P.

BIDEN, JOE.

BRAINARD, LAEL.

BUFFETT, WARREN.

CLINTON, HILLARY.

CRAIG, GREGORY. (revolving door)

DONILON, THOMAS.

DUDLEY, WILLIAM C.

EFFRON, BLAIR W.

ELMENDORF, DOUGLAS.

EMANUEL, RAHM.

FARRELL, DIANA.

FRIEDMAN, STEPHEN.

FROMAN, Michael.

FUDGE, ANNE.

FURMAN, JASON.

GALLOGLY, MARK.

GEITHNER, TIMOTHY.

GENSLER, GARY.

GEPHARDT, RICHARD (aka "DICK") A.

GREENSTONE, MICHAEL (revolving door to Hamilton Project)

HAMILTON PROJECT, THE

HORMATS, ROBERT.

KAGAN, ELENA.

KASHKARI, NEEL.

KORNBLUH, KAREN.

LEW, JACOB (AKA "JACK") J.

LIDDY, EDWARD MICHAEL.

LIPTON, DAVID A.

MINDICH, ERIC

MURPHY, PHILLIP.

NIEDERAUER, DUNCAN.

OBAMA, BARACK H.

ORSZAG, PETER.

PATTERSON, MARK.

PERRY, RICHARD.

RATTNER, STEVE.

REISCHAUER, ROBERT D.

RIVLIN, ALICE.

RUBIN, JAMES.

RUBIN, ROBERT.

SHAFRAN, STEVEN.

SPERLING, GENE.

STORCH, ADAM.

SUMMERS, LARRY.

THAIN, JOHN.

TYSON, LAURA D’ANDREA.

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Sarkozy Threatened to Pull Out of Euro If Germany Refused to Help Greece - So What?

was my first reaction. Go ahead was my second reaction.

President Nicolas Sarkozy 'threatened to pull France out of euro' (5/14/2010 Reuters Madrid, via Telegraph UK)

"President Nicolas Sarkozy slammed his fist on the table and threatened to pull France out of the euro at a meeting of European leaders deciding Greece's aid package last Friday, according to Spain's El Pais newspaper.

"The newspaper cited comments by Spanish Prime Minister Jose Luis Rodriguez Zapatero to members of his party on Wednesday as relayed by people present at that meeting.

"...Sarkozy demanded a "commitment from everyone to support Greece...or France would reconsider its position in the euro," according to one source cited by El Pais.

"Another source present at the meeting between Zapatero and his party members and cited by the paper said: "Sarkozy ended up banging his fist on the table and threatening to leave the euro...This forced Angela Merkel to give in and reach an agreement."" [The article continues.]

That's not even a remotely credible threat - that France would pull out of euro. For what?

Here's the French share of PIIGS sovereign debt:

Greece: $75 billion (or 32% of Greece's debt)
Italy: $511 billion (or 37% of Italy's debt)
Portugal: $45 billion (or 16% of Portugal's debt)
Spain: $220 billion (or 20% of Spain's debt)
Ireland: $60 billion (or 7% of Ireland's debt)
Total: $911 billion
France's share of PIIGS debt ($3.89 trillion): 23%
France's GDP: $2.86 trillion
Exposure to PIIGS debt as percentage of GDP: 32%

Here's the German share:

Greece: $45 billion (or 19% of Greece's debt)
Italy: $190 billion (or 14% of Italy's debt)
Portugal: $47 billion (or 16% of Portugal's debt)
Spain: $238 billion (or 22% of Spain's debt)
Ireland: $184 billion (or 21% of Ireland's debt)
Total: $704 billion
Germany's share of PIIGS debt ($3.89 trillion): 18%
Germany's GDP: $3.65 trillion (2008)
Exposure to PIIGS debt as percentage of GDP: $19%

(PIIGS debt numbers taken from "Europe's Web of Debt" May 1, 2010 NY Times)

Now who's in worse shape?

Germany's share of the bailout plan is bigger than France's, even though the exposure is smaller than France.

Merkel probably relented because she didn't want to be accused of breaking up the eurozone and endangering the EU collapse. She should know better, as France cannot possibly afford to go it alone. She should have called Sarkozy's bluff.

But acting like a madman seems to work well...

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