The Euro Emperor Has No Clothes

This chart, courtesy of Moody's, shows the degree to which bank equity is exposed to the peripheral markets of the EU.

Anyone familiar with accounting, will recognize that banks are reluctant to mark their assets to market value as such actions would severely impact their balance sheets.

In the event of a Greek default, which may happen as soon as the middle of March, we can expect to see bank lending slow or even freeze as banks attempt to preserve capital.


Due to the potentially catastrophic impact of such an event, we can expect to see desperate Eurocrats racing around the clock to find some way to stop or slow the contagion.


Several ideas have been floating around including a massive liquidity (bailout) fund on the order of One Trillion up to Ten Trillion Euros.