- “China Accounts For Nearly Half Of World’s New Money Supply” (ZeroHedge, Feb 8, 2013):
When it comes to the creation of money in China, and specifically the asset side of the ledger, or loans, there is much more confusion than consensus, primarily because nobody knows who it is that is creating the money: private or public entities, SOEs, the PBOC, regional banks, shadow banks, or your next door neighbor.Another thing that is largely misreported: what the actual assets pledged as collateral to new loans are. Because while it is well-known that corporate debt in China is now greater as a percentage of GDP than in any other country, the comprehensive picture is still confusing (albeit GMO did a fantastic summary recently of what is known) as reporting standards are still non-existent, and the government flat out lies about its balance sheet.
Yet one very simple shortcut to get a sense of what is truly happening in monetary China is to peek at the liability side of the consolidated balance sheet, and one line in particular, namely deposits. Because unlike in the US, where the vibrant equity Ponzi scheme has rarely been stronger, in China it is still all about the cash and as a result the bulk of the newly created money once again return back to the banking sector in the form of a deposit. Ironically, that is what banking should be about (instead of the entire industry being a glorified hedge fund) although in China even this practice has gone on way too far, and like in Europe, has long passed the point where there is real collateral value backing up the new money created (which explains the emergence of various letters of credit collateralized by copper still not dug out of the ground which reappear every time Chinese inflation spikes above 5%).
So how do deposits look when comparing the US and China? Well, after having less than half the total US deposits back in 2005, China has pumped enough cash into the economy using various public and private conduits to make even Ben Bernanke blush: between January 2005 and January 2013, Chinese bank deposits have soared by a whopping $11 trillion, rising from $4 trillion to $15 trillion! We have no idea what the real Chinese GDP number is but this expansion alone is anywhere between 200 and 300% of the real GDP as it stands now. Continue reading »
Tags: Austria, Banking, Ben Bernanke, Central Bank, China, ECB, Economy, EU, Europe, Fed, Federal Reserve, France, GDP, Germany, Global News, Greece, Ireland, money supply, Politics, Portugal, Spain, World Bank, Yuan
- The Sovereign Debt Bubble Will Continue To Expand Until – BANG – The System Implodes (Economic Collapse, Jan 20, 2013):
Why are so many politicians around the world declaring that the debt crisis is “over” when debt to GDP ratios all over the planet continue to skyrocket? The global economy has never seen anything like the sovereign debt bubble that we are experiencing today. The United States, Japan, and nearly every major nation in Europe are absolutely drowning in debt. We have heard a lot about “austerity” over in Europe in recent years, but debt to GDP ratios continue to rise in Greece, Spain, Italy, Ireland and Portugal. In general, most economists consider a debt to GDP ratio of 100% to be a “danger level”, and most of the economies of the western world have either already surpassed that level or are rapidly approaching it. Of course the biggest debt offender of all in many ways is the United States. The U.S. debt to GDP ratio has risen from 66.6 percent to 103 percent since 2007, and the U.S. government accumulated more new debt during Barack Obama’s first term than it did under the first 42 U.S. presidents combined. This insane sovereign debt bubble will continue to expand until a day of reckoning arrives and the system implodes. Nobody knows exactly when that moment will be reached, but without a doubt it is coming. Continue reading »
- Eurozone crisis has pushed millions into poverty (France 24/AFP, Dec 10, 2012):
Crushed by an austerity squeeze and towering unemployment, millions of Europeans joined the ranks of the newly poor in 2012 in a crisis that showed no mercy for the old, women or children.An arc of misery spread pitilessly across southern Europe’s middle classes, engulfing bailed-out nations Greece and Portugal and tottering heavyweights such as the eurozone’s number four economy, Spain, and number three, Italy.
Most countries in Europe are already in depression.
Ask Gerald Celente and others if you don’t believe me.
The big reset, the greatest economic collapse in world history is coming.
This is the ‘Greatest Depression’.
And many people seem not to get what I am really talking about when I say ‘prepare for collapse’ and what I mean by ‘total collapse’ and the resulting consequences.
(You need food, water and full survival gear [And don't forget that sleeping bag for extreme cold conditions!], gold & silver and if possible a fully equipped, self-sufficient remote farm … and friends.)
- Wake Up! 11 Facts That Show That Europe Is Heading Into An Economic Depression (Economic Collapse, Nov 30, 2012):
Europe is not just heading into another recession. The truth is that Europe is heading into a full-blown depression. The economy of the EU is actually larger than the U.S. economy, and we are watching it melt down right in front of our eyes. Things just continue to get worse in Europe, and yet somehow the authorities over in Europe just keep insisting that everything is going to be “just fine”. Well, everything is not “just fine” over in Europe right now. Unemployment in the eurozone has just hit another brand new record high. In some nations in Europe, the unemployment rate is already significantly higher than anything the United States experienced during the Great Depression of the 1930s. Europe is a continent that is collapsing under the weight of its own debt, and this is just the beginning. A lot more pain is on the way. Officials over in Europe are trying to hold the European financial system together with duct tape and prayers, but it could literally fall apart at any moment. Europe has a much larger banking system than the United States does, so when a financial collapse happens in Europe, it is going to be very significant for the entire globe. Sadly, most Americans do not even pay attention to much of anything that is happening in Europe. They tend to think that the United States is the center of the universe and that as long as we are fine that everything will be okay. Well, all of those people who are not paying attention need to wake up. First of all, the U.S. economy is most definitely in decline. Secondly, the European economy is imploding right in front of our eyes and Europe is going to end up dragging the entire globe down with it.The following are 11 facts that show that Europe is heading into an economic depression… Continue reading »
YouTube Added: 14.11.2012
Hundreds of thousands of Europe’s beleaguered citizens went on strike or snarled the streets of capitals of Spain, Italy, Greece and Portugal, at times clashing with riot police, as they demanded that governments stop cutting benefits and create more jobs.
Gerald Celente, the founder of the Trends Research Institute, at the Marriott Hotel in Munich, Germany, on November 3rd, 2012. Celente was holding a presentation later on on the Internationale Edelmetall- und Rohstoffmesse, the largest precious metals conference in Europe. You can find Gerald Celente at trendsresearch.com and trendsjournal.com.
Tags: Azerbaijan, Bailout, Banking, Ben Bernanke, Bonds, Debt, Economy, EU, Europe, Fed, Federal Reserve, Gerald Celente, Germany, Global News, Goldman Sachs, Government, Greece, Italy, Jose Manuel Barroso, Mario Draghi, Politics, Portugal, Society, U.S., Wal-Mart
Gerald Celente, the founder of the Trends Research Institute, at the Marriott Hotel in Munich, Germany, on November 3rd, 2012. Celente was holding a presentation later on on the Internationale Edelmetall- und Rohstoffmesse, the largest precious metals conference in Europe. You can find Gerald Celente at trendsresearch.com and trendsjournal.com.
Tags: Afghanistan, Al-Qaeda, Al-Qaida, Banking, Barack Obama, Bonds, Bush administration, China, Debt, Economy, Euro, Global News, Government, Great Depression, Greece, Iran, Iraq, Ireland, Israel, Italy, Japan, Lebanon, Libya, Military, NATO, Nuclear, Nuclear weapons, Obama administration, Oil, Philippines, Politics, Portugal, Russia, Society, Spain, Syria, Taiwan, U.S., Vietnam, War, War Crimes, WWW III
- Marc Faber: “Fed Will Destroy The World” (ZeroHedge, Sep 14, 2012):
“Everything will collapse” is the consequence Gloom, Boom, & Doom’s Marc Faber sees from the Fed’s latest ‘stimulus’ (and the fallacy and misconception of how money-printing can help employment). In a wondrously clarifying interview on Bloomberg TV this morning, Faber explained why he was ‘happy’, since “the asset values of his holdings will go up” but as a responsible citizen he is worried because “the monetary policies of the US will destroy the world.“ It truly is class warfare under a veil of ‘its good for you’ as he notes: “the fallacy of monetary policy in the U.S. is to believe this money will go to the man on the street. It won’t. It goes to the Mayfair economy of the well-to-do people and boosts asset prices of Warhols.” Congratulations, Mr. Bernanke.
Must-watch (or read the transcript) – it is truly remarkable.
Faber on more Federal Reserve stimulus:
“It is difficult to tell what will happen. I happen to believe that eventually we will have a systemic crisis and everything will collapse. But the question is really between here and then. Will everything collapse with Dow Jones 20,000 or 50,000 or 10 million? Mr. Bernanke is a money printer and, believe me, if Mr. Romney wins the election the next Fed chairman will also be a money printer. And so it will go on. The Europeans will print money. The Chinese will print money. Everybody will print money and the purchasing power of paper money will go down. And I don’t like bonds. I don’t particularly like equities, but I think equities are a better space to be in than bonds.” Continue reading »
Tags: Barack Obama, Ben Bernanke, Bonds, Debt, Economy, EU, Europe, Fed, Federal Reserve, Gold, Government, Great Depression, Kazakhstan, Marc Faber, Nasdaq, Obama administration, Politics, Portugal, Quantitative Easing, Real Estate, Society, Spain, U.S.
The proposed rescue fund for Europe not only breaches German law and EU treaties but could condemn a generation
- Germans could be consigned to serfdom to save the euro (Guardian, Sep 9, 2012):
Some commentators have taken to referring to this Wednesday as “the day that could make or break the common currency”, and they’re not far off the mark. On that day, Germany’s constitutional court will announce its verdict on the legality of the European Stability Mechanism, the permanent rescue fund for struggling eurozone countries. If implemented, the ESM’s share capital of €700bn would be provided by all 17 eurozone members in proportion to their economic size. Fourteen have so far ratified the treaty – Estonia, Italy and Germany are the only ones remaining.The German government has defended the ESM treaty, claiming it would fix Germany’s maximum liability at €190bn, and that the Bundestag would retain control over the grant of further assistance. Either German politicians have not read the treaty they have signed, or they do not understand its small print, for there is little in the document that supports their interpretation. Because the ESM is plainly unlawful.
For example, article 25(2) of the treaty states that members are jointly liable for any losses arising from loans made by the ESM. That means if one or more of the ESM members fail to meet their agreed financial contributions, the other members are liable for the shortfall. That situation is already a reality, because Greece and Portugal are unable to make any contribution.
- Carpe Diem, Quam Minimum Credula Postero (ZeroHedge, Sep 3, 2012):
Via Mark J. Grant, author of Out of the Box,(Latin)
“Seize the day, put no trust in tomorrow.”
Tomorrow, September 4, 2012 will be a defining moment. Mr. Draghi will release to the European Central Banks his plan to save the Continent. The plan will get leaked, no doubt, and the consternation will begin throughout Europe. Today the German Economy Minister went public and announced that he supports Weidmann, the head of the German Central Bank, in his opposition to the European Central Bank’s plans to buy debt of Eurozone countries with high borrowing costs, saying that they could not replace economic reforms. I think we may all read this as Frau Merkel’s position as well as Herr Roesler does not speak without approval. The stage is now set for battle.
“A good soldier in an enemy’s country should everywhere and at all times be on the alert. It has been one of the rules of my life, and if I have lived to wear grey hairs it is because I have observed it.”
-Sir Arthur Conan Doyle, The Adventures of Gerard
Spain wants the ECB to buy their debt without limit. France, Greece, Portugal, Italy and Cypress are lined up with Spain. The “have nots” are demanding divine intervention; the “haves” are not willing to tithe or to provide the necessary “indulgence” to send Madrid into Heaven. It is not the Barbarians but Martin Luther at the gate and I expect rancor and the spitting of Hell-fire. The Draghi plan, whatever it is going to be, will cause a very serious division of the faithful in Europe and I expect quite a fight. Spain and perhaps Italy are waiting on the plan before lining up for hand-outs and the trouble in Europe keeps escalating. Over the weekend the largest mortgage lender in France had to be bailed out and I expect the cost to be between $40-50 billion. In Spain Bankia had to be rescued and besides the initial payment of $5-6 billion you may expect a $30-40 billion injection required. In Italy the oldest bank in the world, Monte Paschi, turned to the nation to get bailed out in the last few days. The events may be isolated but a pattern is beginning to develop and the amount of money required will send shell-shocks through the national budgets of a number of countries in Europe.
“Once more unto the breach, dear friends, once more…”
-William Shakespeare, Henry V
The Battle Of Frankfurt
- The Portuguese Run Out Of Gold To Sell (ZeroHedge, Aug 16, 2012):
“Business has gone from great to terrible in a matter of months. The sad truth is that most of my clients have already sold all of their gold rings,” is anecdotal evidence of a growing trend that Bloomberg reports in Portugal. Historically the home of Europe’s biggest relative gold reserves, cash-for-gold shops rose 29% in 2011 (average 2 store openings per day) – but now some are closing. Portugal’s gold exports increased by more than five times to 519.4 million euros last year from 102.1 million euros in 2009, according to data published on the Lisbon-based National Statistics Institute’s website.
- The Financial Decline In Europe Continues (ZeroHedge, Aug 14, 2012):
Via Mark E. Grant, author of Out of the Box,
As Industrial Production falls -0.6% in Europe and as the economy shrinks -0.2% there is once again a good reason to pause to consider the ramifications for this going forward. As part of the data release this morning Germany and France did somewhat better than expectations but it was fairly marginal while the rest of the EU-17 continues to be mired in difficulties. Overnight LCH increased the margin requirements for both Spain and Italy as the banks of Spain keep increasing their borrowings at the ECB which is now at an all-time record. More troubling perhaps is the recent release of data from Italy which showed that their sovereign debt had ballooned to $2.437 trillion and the trajectory is more than troublesome. In 2010 and 2011 Italy’s debt was expanding by $7.90 billion per month but in 2012 Italian debt has increased by $11.73 billion per month for a projected $141 billion by the end of this year. In fact the Italian economy is shrinking by about -2.5% while their debt is growing by 5.8% which is the baseline for an unsustainable situation if these trends continue.
To make matters worse Italy’s Industrial Production is down -8.2% from a year ago and down -1.4% in the last month. I think Italy must be reassessed in light of the recent data and I would project further downgrades for the country and an increase in their bond yields as people recognize the severity of their problems. To me it looks increasingly likely that both Spain and Italy will soon line up at the feeding trough which is going to strain Europe, in my opinion, past the limits of what France and Germany can bear and then all of the superlatives and all of the great hype are going to come face-to-face with a very tough reality I am afraid. Continue reading »
So get your popcorn ready!
- September: Crunchtime For Europe And Germany (ZeroHedge, July 30, 2012):
“September will undoubtedly be the crunch time,” one senior euro zone policymaker said. “In nearly 20 years of dealing with EU issues, I’ve never known a state of affairs like we are in now,” one euro zone diplomat said this week. “It really is a very, very difficult fix and it’s far from certain that we’ll be able to find the right way out of it.”
As Europe’s fight with the twin demons of logic and math continues, time is running out. And as eurocrats take their mandatory vacations for a job well done and spend the next two weeks lounging on some Mediterranean island or listening to opera, Europe will enter hibernation mode, courtesy of a slow down in sovereign bond issuance, all of which however will change very quickly once September rolls in which as Reuters describes, “is shaping up as a “make-or-break” month as policymakers run desperately short of options to save the common currency.” It is then that we will find if all that money spent on newsletter promoting active prayer to push the hands of central planners in that direction or the other, was well spent, or just thrown in the same cash black hole which is the final restring place for hundreds of billions in “bailout money” which has achieved nothing but perpetuating the same destructive behavior that it was meant to change.
- Scenes Of Despair (The Economic Collapse, July 10, 2012):
Sometimes it can be easy to forget that behind all of the horrible economic numbers that we hear about are millions of real people that have had their lives absolutely devastated by this economy. Elderly couples are being brutally evicted from their homes, young families are living in their cars, terminally ill people are dying because they cannot afford medication that they need and millions of parents can’t sleep at night as they wrestle with anxiety over not being able to provide for their children. Often those that lose their jobs or their homes discover that people start looking at them very differently and that there is very little compassion out there these days. As you will read about below, one major U.S. bank is even kicking an elderly woman with stage 4 breast cancer out of her home because she cannot make her full mortgage payment each month. When the next major global financial catastrophe happens, we are going to see a whole lot more economic despair. Will society respond to that crisis by becoming warmer and more compassionate, or will the world around us become even more cold and even more cruel? As bad as things are right now, it truly is frightening to think about what the world is going to look like after the next major economic downturn.
Many of the stories that you are about to read are truly heartbreaking. Unfortunately, they represent thousands upon thousands of other stories that never make it into the news…. Continue reading »
- Spain Crisis: Bond Yield Hits Bailout Danger Zone (NPR/AP, June 18, 2012):
MADRID (AP) — Spain’s ability to manage its debt without an international bailout was thrown into doubt Monday after investors pushed its borrowing rates up to the level at which Greece, Portugal and Ireland had sought help.
Investor sentiment improved briefly in the morning as electoral results in Greece suggested the country would not drop out of the euro currency union, a scenario that would have put severe stress on Spain’s markets.
But that market relief quickly transformed into concern in Madrid as it became clear that Spain’s fundamental economic and fiscal problems remain huge.
The interest rate on Spain’s 10-year bonds — an indicator of market confidence in how well a country can pay down its debt —hit a fresh eurozone era high of 7.18 percent before easing in the afternoon and closing at 7.12 percent. It is the first time since Spain joined the eurozone that it ended above 7 percent. Stocks plunged 3 percent on Madrid’s main index.
The bond yield’s alarming quarter percentage-point rise put it firmly in the range that prompted the other three eurozone countries to ask for a bailout.
YouTube Added: 13.06.2012
In an epic rant, trumping Biderman, UKIP’s Nigel Farage appears to have reached the limit of his frustration with his ‘peers’ in the European Parliament after the Spanish bailout. Rajoy’s proclamation that this bailout shows what a success the euro-zone has been, sends Farage over the edge as he sees the Spaniard as just about the most incompetent leader in the whole of Europe (up there with favorites like Van Rompuy and Barroso). The erudite Englishman notes that by any objective criteria “The Euro Has Failed” expanding on the insane farce of Italy funding Spain’s banking bailout at a loss (borrowing at 6% to fund a loan at 3% as we discussed here). “This ‘genius’ deal makes things worse not better” as it merely drives other nations towards needing bailouts themselves and while his socialist colleagues in the room are mumbling and checking their blackberries, he reminds them that Spanish national debt will surge and that 100 billion does not solve the problem, and that if Greece leaves, the ECB is failed, is gone, and to rectify this there will be a cash call from the very same PIIS (Ex-G) that are tumbling towards the abyss. Blood pressure surges as he screams “you couldn’t make this up” concluding that “the Euro Titanic has now hit the Iceberg and sadly there simply aren’t enough lifeboats.”
- Credit Suisse Explains “The Real Issue”, And Why There Is Two Months Tops Until France Is In The Bulls Eye (CBS News, June 10, 2012):
Credit Suisse’s William Porter is strangely laconic and oddly brief in his latest issue of the European Credit Flash titled “The Real Issue”:
“It’s all about Spain”, so now we are cutting to the chase. Recapitalization of the banks versus funding the sovereign is of course a semantic issue given the nature of the interplay. But it enables the attempted finesse we describe below.
“Portugal cannot rescue Greece, Spain cannot rescue Portugal, Italy cannot rescue Spain (as is surely about to become all too abundantly clear), France cannot rescue Italy, but Germany can rescue France.” Or, the credit of the EFSF/ESM, if called upon to provide funds in large size, either calls upon the credit of Germany, or fails; i.e, it seems to us that it probably cannot fund to the extent needed to save the credit of one (and probably imminently two) countries that had hitherto been considered “too big so save” without joint and several guarantees.
The issue can be finessed for a while by addressing the issues as bank issues and recapitalizing the banks by bond transfer. This hides from the (primary) market and is simply another manifestation of the “Sarko trade” given by the LTRO. That rally lasted four months. Given the market’s adaptive learning behaviour, we suspect that this finesse might last two. The eventual denouement should be flagged by symptoms of the failure of the credit of EFSF/ESM and/or France.
And there you have it. As evidenced by today’s reaction to the bailout, which had a half life of 2 hours, and was a complete failure in 6, the market is learning much, much faster than expected. Which also means that Porter’s estimate for the length of time before the next wave of the contagion tsunami strikes somewhere in the middle of the 8th arrondissement is furiously optimistic, but we agree: 2 months tops.
As a side note: Gerald Celente officially supported Ron Paul … before.
YouTube Added: 09.06.2012
Tags: Bilderberg, Bilderberg 2012, Bonds, Christine Lagarde, collap, Collapse, Debt, Dictatorship, Economy, EU, Europe, Fascism, Gerald Celente, Global News, Government, Greece, IMF, Indefinite Detention, Italy, Military, Mitt Romney, NDAA, New World Order, Obama administration, Police State, Politics, Portugal, Rand Paul, Ron Paul, Society, Spain, U.S., WWW III
- Friday Dump Complete: Moody’s Warns Of Spanish Downgrade, Threatens AAA-Countries In Case Of Grexit (ZeroHedge, June 8, 2012):
First we got Spain miraculously announcing late at night local time, but certainly after close of market US time, that the bailout so many algorithms had taken for granted in ramping stocks into the close may not be coming, because, picture this, Germany may have conditions when bailing the broke country’s banks out, and Spain is just not cool with that, and now, after the close of FX and futures trading, we get Moody’s giving us the warning the after Egan-Jones, S&P, and Fitch, it is now its turn to cut the Spanish A3 rating.”As Spain moves closer to the need for direct external support from its European partners, the increased risk to the country’s creditors may prompt further rating actions. The official estimates of recapitalising Spain’s banking system have risen significantly and the country’s indirect reliance on European Central Bank (ECB) funding via its banks has been growing. Moody’s is assessing the implications of these increased pressures and will take any rating actions necessary to reflect the risk to Spanish government creditors. Moody’s rating on Spain is currently A3 with a negative outlook.” Moody’s also warns, what everyone has known for about 2 years now, that Italy could be next: “However, Spain’s banking problem is largely specific to the country and is not likely to be a major source of contagion to other euro area countries, except for Italy, which likewise has a growing funding reliance on the ECB through its banks.” Of course none of this is unexpected. What will be, however, to the market, is when all 3 rating agencies have Spain at BBB+ or below, which as ZH first pointed out at the end of April will result in a 5% increase in repo haircuts on Spanish Government Bonds, resulting in yet another epic collateral squeeze for the country which already is forced to pledge Spiderman towels to the central bank.
Moody’s: Developments in Spain, Greece may prompt euro area sovereign rating downgrades
- Are The Europeans About To Start The Second Half Of Our Great Depression? (ZeroHedge, May 27, 2012):
“Just when we think the worst is over – and let’s face it we have been in this crisis for five years – we get the second half; are the Europeans about to start the second half our Great Depression with massive bank runs” are the Jaws-music-inspired words that recent media-favorite (yes, us too) Niall Ferguson uses in an interview with CBC. His main concern is that this kind of (bank-run) event can quickly spiral out of the control of even the ECB as he uncomfortably conjures the image of the initial US stabilization that occurred in 1930 to May 1931 only to be knocked back into a greater depression by the failure of Credit-Anstalt, which set off bank failures and eventually defaults in 1932 on many government debts. The deposit run potential is the single-biggest reason to care about Greek-exit – in itself it is not large enough economically to interfere with global growth but it is the message and contagion that it sends that is critical in bringing forth a pan-European banking crisis and implicitly spilling over to the US and Asia via global trade and banking transmission channels. An excellent brief interview that summarizes the exact fears that face Europe and implicitly the US, explains the rather simple solution of fiscal federalism and the fact that today’s German politik is very different from 1989′s Helmut Kohl-era with regard to their commitment to the Federal outcome. His conclusions are worrisome. Germany is the key – and there is not a good understanding of financial markets in Berlin.
Six minutes well-spent on a Saturday evening…
Europe is a part of North America’s destiny because the financial systems are so intertwined – and remember even the all-knowing Fed massively under-estimated the second-order effects of Lehman.
“It’s a total fantasy to think that the meltdown that I am discussing that could happen in a matter of weeks would not have a major impact on North America’s prospects of sustained recovery.”
- Germany Folding? Europe’s Insolvent Banks To Get Direct Funding From ESM (ZeroHedge, April 26, 2012):
We start today’s story of the day by pointing out that Deutsche Bank – easily Europe’s most critical financial institution – reported results that were far worse than expected, following a decline in equity and debt trading revenues of 23% and 8%, but primarily due to Europe simply “not being fixed yet” despite what its various politicians tell us. And if DB is still impaired, then something else will have to give. Next, we go to none other than Deutsche Bank strategist Jim Reid, who in his daily Morning Reid piece, reminds the world that with austerity still the primary driver in a double dipping Europe (luckily… at least for now, because no matter how many economists repeat the dogmatic mantra, more debt will never fix an excess debt problem, and in reality austerity is the wrong word – the right one is deleveraging) to wit: “an unconditional ECB is probably what Europe needs now given the austerity drive.” However, as German taxpayers who will never fall for unconditional money printing by the ECB (at least someone remembers the Weimar case), the ECB will likely have to keep coming up with creative solutions. Which bring us to the story du jour brought by Suddeutsche Zeitung, according to which the ECB and countries that use the euro are working on an initiative to allow cash-strapped banks direct access to funding from the European Stability Mechanism. As a reminder, both Germany and the ECB have been against this kind of direct uncollateralized, unsterilized injections, so this move is likely a precursor to even more pervasive easing by the European central bank, with the only question being how many headlines of denials by Schauble will hit the tape before this plan is approved. And if all eyes are again back on the ECB, does it mean that the recent distraction face by the IMF can now be forgotten, and more importantly, if the ECB is once again prepping to reliquify, just how bad are things again in Europe? And what happens if this time around the plan to fix a solvency problem with more electronic 1s and 0s does not work?
Here is Deutsche Bank’s Jim Reid redirecting attention back to where it was all throughout the summer and fall of 2011, until the new Goldman-based head of the ECB relented days after his appointment: Continue reading »
Tags: Banking, Belgium, Ben Bernanke, Bonds, Czech Republic, Debt, Deutsche Bank, ECB, Economy, ESM, EU, Euro, Europe, Fed, Federal Reserve, Finland, France, GDP, Germany, Global News, Greece, IMF, Ireland, Italy, Politics, Portugal, Society, Spain
- EU – EFSF & ESM – A Whole Lot Of Nothing (ZeroHedge, Mar 28, 2012):
A quick look at the headlines:
€200 billion already committed. So the EFSF has already committed €200 billion. So far I only see €63 billion of debt issued by the EFSF, so they have at least another €137 billion to fund. The bulk of their issuance so far is back to back with a they made to Greece, hardly the best collateral. For now I’m going to assume that there is no overcollateralization requirement and just €200 billion has been committed, but if the 165% overcollateralization is in place, then that would really be €300 billion of “guarantees” used up. Continue reading »
- European Solidarity – “Everybody Knows The Spanish Are Lying About The Figures” (ZeroHedge, Mar 2, 2012):
Back in October, when Greece was rewarded with further bond haircuts for progressively missing its economic targets, even after having gotten caught on at least one occasion making its economy appear worse than it was, we said that it is only a matter of time before “Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece.” In the aftermath of this statement, we got the Irish and the Portuguese proceeding to slowly but surely do just that. Today, it was Spain’s turn to make it 3 out of 4 after as Reuters noted so appropriately, “Spain defies Brussels on deficit target” clarifying that “Spain set itself a softer budget target for 2012 on Friday than originally agreed under the euro zone’s austerity drive, putting a question mark over the credibility of the European Union’s new fiscal pact. Prime Minister Mariano Rajoy insisted he was acting within EU guidelines because the plan was still to hit the European Union public deficit goal of 3 percent of gross domestic product (GDP) in 2013.” That Italy is sure to follow is absolutely guaranteed, however just because the ECB is now indirectly monetizing BTPs the true impact will be delayed far more, and instead of taking prompt steps to remedy the situation, the European complacency will be accentuated by the fact that bond yields are very low, and supposedly indicates the true state of the economy. No. All it indicates is the conversion of future inflation (courtesy of €1 trillion in new money in the past 3 months) for a very temporary respite before all hell ultimately breaks loose as countries pretend everything is ok as bond yields are pushed artificially low. And in doing nothing, the fundamentals in the economy only get worse and worse. Germany knows this very well, and the Economist explains the reaction to Spain’s surprising statement today perfectly…
A novice in European summits, Mr Rajoy has been playing a strange game. He was careful not to discuss specific figures with fellow leaders. But as soon as he emerged from the summit he declared that Spain’s deficit this year would be 5.8%, rather than the agreed target ratio of 4.4%. He insisted, though, that Spain would still fall below the 3% deficit limit in 2013, as planned.
Germany, moreover, seems to be in an intolerant mood. There is irritation that the Spanish government is delaying its budget pending regional elections in Andalusia that Mr Rajoy’s party hopes to win, and suspicion that it is inflating last year’s deficit figures to blame its Socialist predecessor. The commission says it wants to double-check the numbers. But a senior source in Berlin puts it more bluntly: “Everybody knows the Spanish are lying about the figures.”
Funny. And yet the people are supposed to believe in the mumbo jumbo that is Europe’s fiscal pact, or frankly anything else? Perhaps the senior source in Berlin should have just stepped up and told the outright truth: “Everybody knows that everyone in Europe is lying about everything.”