Background: (Reuters) In what S&P calls a ‘Perfect Storm’, the next four years will see a minimum of $30 trillion in companies’ refinancing needs related to maturing bonds and loans and further they expect $13-$16 trillion more debt will be required to finance growth. “This global wall of nonfinancial corporate debt will potentially compound the credit rationing that may occur as banks seek to restructure their balance sheets, and bond and equity investors reassess their risk-return thresholds” which “raises the downside risk in global markets” as an inability to finance growth may well be the catalyst for another risk flare. “Governments and central banks have less fiscal and monetary flexibility to prevent serious problems emanating from future market disturbances. A perfect storm scenario would likely cause financing disruptions even for borrowers that are not highly leveraged.”
Pivot Point: Marc Farber stated in a Bloomberg interview, “unless we get a huge QE3, there will be a crash, like in 1987, noting he believes we have seen the highs for the year ; on the likelihood of QE3 (agreeing with us that the Fed won’t act unless asset markets plunge first); on Greece’s exit of the Euro and whether policy-makers can manage the exit properly. Bureaucrats in Brussels and the media are brainwashing everybody that if Greece exited the euro, it would be a disaster. My view is the best would be to dissolve the whole euro zone. On the difference between investment markets and economic reality (thanks to financial repression); and on the global race-to-debase, I do not have a high opinion of the U.S. government, but the bureaucrats in Brussels make the government in the U.S. look like an organization consisting of geniuses. The bureaucrats in Brussels are completely useless functionaries’”.
Trigger: (Zerohedge) Back on May 5th, before the shocking outcome of the Greek elections was known, and before anyone had even heard of the May 15th €430 million bond maturity, we explicitly warned that in the case of continued lack of government in the country (predicting the inability to form a government) that, “it is unlikely that Greece can persist under anarchy, especially with another critical event coming due: a €430 million payment on an international law bond that matures on May 15,
Charge: The ESF debate which continues to boil in the background, will be brought to a head in the absence of a ‘well regulated’ Greek response to the 15May Payment. If Greece fails to honor the commitment, then Germany, France, and Italy will have to take sides… there is no “walk away clause”.