If you can’t grow, you can’t pay back what you owe

The CEO of Deutshe Bank echoed today what many of us know but European officials and the ECB don’t want to admit as evidenced by the historic bailout plan. In an interview he said “I would doubt that Greece over time will be in a position to come up with the economic potential” to pay its debts. If Greece, Portugal and others can’t generate nominal GDP growth above its cost of funding, they enter a debt death spiral that can only be rescued by debt extinguishment thru restructuring which then lays the foundation for future growth. With another day of European stock weakness, global growth concerns, and capital requirement uncertainties in the banking system (due to both European authorities and the US Congress debate on Fin Reg) US$ 3 mo LIBOR rose to a fresh 9 month high, rising to .445%. Retail Sales, IP, Consumer Confidence and Business Inventories flood the wires this morning.

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