Greek Fire, Part 19

The details of that massive, near $1 trillion package in loans, direct aid, and bond repurchases for Greece are becoming clear.  It's got Zero Hedge's Tyler Durden scared out of his socks.

In other words, total and unprecedented monetary lunacy, as every cental bank, under the orchestration of the Federal Reserve, will throw money at the problem until it goes away, which it won't. As we have long expected, Bernanke is now willing to sacrifice the dollar at any cost to prevent the euro unwind. This is nothing than a very short-term fix, whose half life will be shorter still than all previous ones. 
 
The race to the currency devaluation bottom is now in its final lap. And gold is the only alternative to the now imminent collapse of the fiat system: the world had a chance to take writedowns on losses, punish those who took risk and failed, and refused to do so. There is now no risk left, but it only means that eventually all the risk will come back and lead all capital markets to zero. The result will be the end of Keynesian economics as we know it. Do not trade in this broken market, do not hold your money in a bank as they are all now one hour away from a terminal bank run - buy and hold real, FASB mark-to-myth independent assets. 

Canned food and shotguns time?  It could be.  The point is Europe doesn't have an extra trillion bucks just lying around.  Meanwhile, the Fed has quietly opened the currency swap window with the world's other leading central banks, and that means trading the dollar just became Disneyland.  Barry Ritholz is a bit more subdued.

When the US began its massive bailout plan in October 2008, markets had been falling for 10 months, and were down 20% from peaks. Ultimately, the liquidity added was rocket fuel to the markets, and after they fell a total of 55%, a 75% rally ensued over the next year.

Europe has now gone down the same path — but from a very different location in the market cycle. I would not expect the reaction to be identical, but one must be very cognizant of the impact a trillion dollars will have on markets.

We have seen this movie before.

Felix Salmon makes the rounds too and finds a lot of information for the hungry:

Is the massive EU bailout a case of “too much, too late”? At $1 trillion, give or take (depending on the highly-uncertain value of the euro), it’s certainly enormous: Mohamed El-Erian calls it “a completely new level and dimension” in terms of European policy response. But the late-night negotiations of European finance ministers might yet fail to pass muster with national governments. After all, as Kevin Drum notes, the $700 billion TARP bill was initially voted down by the House of Representatives, and this deal has to be ratified by not one but many different legislatures.

Meanwhile, Peter Boone and Simon Johnson have some very scary numbers about Greece in particular: it will have to cut spending by a whopping 11% of GDP; its debt-to-GDP ratio will rise to at least 149% of GDP in a best-case scenario; and realistically Greek GDP could fall by 12% between now and 2011. Now that’s a recession.

The bottom line is that the difference between the Greek Fire and the U.S. TARP plan is that one depends on the economy of the United States, and the other depends on the economy of Greece.  (And actually, there are those who will argue that both depend on the economy of the United States...)  Greece just got Too Big To Fail status.

The obvious question is "Who's next and when?"