Europe's Continuing Debt Crisis

You have to love the determination of the various official players involved in the European debt crisis to proclaim loudly and often that:

1. There won't be any defaults.
2. The Euro is just fine.
3. The crisis is manageable and containable.
4. There's no reason to worry about sovereign European debt.

The prospective solutions from a wide variety of players, including US Treasury secretary Geithner and even former TARP chief, now PIMCO global equities chief, Neel Kashkari, all stress smooth, controlled resolution of the many-faceted European debt crisis.

Meanwhile, you have more riots in Greece. No progress on the privatization of any of the national Greek businesses which, a Wall Street Journal editorial notes, would necessarily lead to lost public sector jobs and corresponding control over those votes. A downgrading of Italian sovereign debt. Continued concerns over French banks and their ability to fund themselves in the money markets.

Oh, and then a cut by the EU in its forecast GDP growth rate.

Personally, I found Kyle Bass' recent comments on CNBC to be the most believable and extensive by any single person. I closed that piece with these observations, as a result of Bass' remarks,

"First, there will be European country defaults. Second, there will be corresponding private sector bank insolvencies. Third, a lot of money will be lost by holders of securities issued by the defaulting countries and bankrupt banks. Fifth, the effect on the US will involve both capital losses and overall economic trade reductions. Sixth, after all this, the global financial and economic systems will then have to pick up and move along, losses absorbed, and work with the resulting situations. "

At present, officials like Geithner and various EU, ECB, French and Greek senior officials keep whistling past the graveyard of defaults in Greece and Spain and likely insolvencies in various European banks.

The longer they insist things will be fine, in the face of Greek riots and continuing deterioration in the Euromarkets, the more one is led to conclude Bass is right.

So why is the US S&P500 Index holding its value? Perhaps a temporary triumph of hope over good sense.