Stock markets may be rising as a result of possible short-term news (short-term as in the 24 hour news cycle short-term). But, this has not changed what’s happening in Europe, despite suggestions that everything is going to be OK.
As is generally the case in the financial community, the big investors which include large sovereign wealth funds and behemoth financial institutions, are one upping the public by getting out while the gettin’ is good. While mainstream media makes it seem like we are moving in a positive direction with respect to Europe, one thing should be clear: it’s a sham. This the same thing we were being told two years ago, a year ago, a month ago, a week ago. Nothing could be further from the truth.
Business Inside reports that a run on Europe has begun, and large institutional players are liquidating their exposure to European bonds and other assets:
Until recently, the concern about Europe has been mostly theoretical–a potential train-wreck that would occur if/when the world’s lenders decided that the continent’s problems extended beyond the basket case known as Greece and cut lending to Europe’s “core.”
Well, that concern is no longer theoretical.
The world’s lenders are increasingly deciding that it’s better to be safe than sorry, and they’re pulling their money out of Europe.
As a result, the borrowing costs of many European countries are rising fast. And so are inter-bank lending rates, because the second huge problem with the Euro-train-wreck is that Europe’s banks have Euro debts coming out of their ears.
Importantly, once runs like this get started, they can accelerate fast. Recall how quickly Bear Stearns and Lehman Brothers went from angry denials and “exploring options” to bust. Recall how quickly, a month ago, MF Global went from confident to flailing to broke.
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