Yep, yhe headline barrage continues - from Reuters:
- Moody's sovereign head says more likely than not that Greek debt roll-over would be a credit event
- Moody's sovereign head says hard to see how any Greek roll-over would be truly voluntary, would therefore be a default
- Moody's sovereign head says any Greek restructuring would to big to be effective therefore disruptive for ECB, Banks
- Moody's sovereign head says impossible to have orderly and effective Greek debt restructuring
- Moody's head of sovereign risk says Euorzone, ECB has resources to contain short term financial pressures
- Moody's says current Greek rating sees 50% default risk in 3-5 years
Naturally, unless this changes and Moody's is bribed with enough worthless paper to keep its mouth shut, this means game over for the "voluntary" bailout track as we predicted, as it implies an event not so much of default (which certainly will occur), which is largely irrelevant, but of remarking of ECB Greek bond collateral, which will certainly be greater than the 4.25% haircut needed to push the ECB into insolvency.
The soap opera begins early today (at least in the US), after the Irish Times reports that the IMF is open to delaying Greece's repayment of its international loans but believes a major restructuring of its debt would create untold problems in the euro zone, a senior IMF official said today. "Athens has made progress in tackling its debt crisis but cannot afford to relax the pace of reforms, Bob Traa, the International Monetary Fund's senior representative in Greece, told a banking conference. "If you want a debt restructuring that will really make a difference, it will need to be very large. Such a large debt restructuring would create untold problems not just in Greece, but also in the euro zone," Mr Traa said. But he did hint that the IMF was open to other solutions. "Stretching out payment terms, for instance in loans from euro area partners and the IMF, is a reasonable thing to think about because we have amortisation right at the end of the programme. This is a technical issue we can think about," he said." Unfortunately, as the rating agencies have made clear by now, such a move would be considered a technical default, and thus is unworkable as the very simple matter at the heart of the whole eurozone crisis is the forced marking of debt from mythical par levels (where the ECB has it) to market values (around half): a development which would lead to the insolvency of the ECB, something discussed minutes ago. All Europe wants is a phase transition that allows it to keep marking Greek bonds at par, and how this is achieved is irrelevant.
- Rogoff - The global fallout of a eurozone collapse (FT)
- Europe’s Banks Too Fragile to Afford Greek Default (Bloomberg)
- Geithner Wants Global Rules on Derivatives (WSJ)
- Low Yields on Treasury Debt No Guarantee Financial Crisis Won’t Hit U.S. (Bloomberg)
- Debt crisis and IMF to dominate Obama, Merkel talks (Reuters)
- Lehman Brokerage Gets $2 Billion From Barclays (Bloomberg)
- Obama’s Chief Economist Goolsbee Is Said to Consider Return to Teaching (Bloomberg)
- Hong Kong Banks’ Mortgage Rate Increases Taking Steam Out of Housing Boom (Bloomberg)
ECB Has €444 Billion PIIGS Exposure, A 4.25% Drop In Asset Values Would Bankrupt European Central BankSubmitted by Tyler Durden on 06/07/2011 - 07:23
As if insolvent European private banks were not enough to worry about (and with banking assets of 461 percent of GDP in the UK, 178 percent in Germany, and 820 percent in Switzerland, there is more than enough to worry about), a new study by Open Europe has found that at the heart of the insolvency argument is none other than the only hedge fund that is even worse capitalized than the US Federal Reserve: the European Central Bank. "With Greece forced to seek a second bail-out to avoid bankruptcy, Open Europe has today published a briefing cataloguing how the eurozone crisis could drive the European Central Bank itself into insolvency, with taxpayers likely to pick up a big chunk of the bill. The role of the ECB in the ongoing eurozone and banking crisis has been significantly understated. By propping up struggling eurozone governments and providing cheap credit to ailing banks, the ECB has put billions worth of risky assets on its books. We estimate that the ECB has exposure to struggling eurozone economies (the so-called PIIGS) of around €444bn – an amount roughly equivalent to the GDP of Finland and Austria combined. Of this, around €190bn is exposure to the Greek state and Greek banks. Should the ECB see the value of its assets fall by just 4.25%, which is no longer a remote risk, its entire capital base would be wiped out." It seems that in crafting "prudent" capitalization ratios courtesy of Basel 1 through infinity, the global NWO regulators totally let the ECB slip through the cracks. The finding also confirms what we have been saying all along: there is no way that any form of voluntary or involuntary phase transition that will require the ECB to mark down assets that it has on its books at par (yet are worth 50 cents on the dollar) can ever occur: such an event would result in the immediate insolvency of the European lender of first and last resort, and, in turn, the unravelling of the Eurozone.
Dollar At One Month Lows On PBOC Advisor Comments That Chinese FX Formation Mechanism Needs "Drastic" ReformSubmitted by Tyler Durden on 06/07/2011 - 07:12
Appeals for changing the fixed CNY exchange mechanism are now coming not only from the office of Chuck Schmuer. In a column in China's Caixin website, Zhou Qiren, a central bank advisor, said that China's yuan exchange rate formation mechanism needs drastic reform. "The central bank has used too much money to intervene in the foreign
exchange market, so modest reform is not going to help," said Zhou, a
member of the Monetary Policy Committee under the People's Bank of
China, in his special column on the Caixin website. "We need drastic measures," he said. Zhou said the growth of China's monetary base is largely decided by the
central bank's purchase of foreign exchanges, which in turn is fueling
inflation. The comments resulted in dollar weakness overnight as soon as they hit the wires, sending the DXY to one month lows of about 73.616, a level last seen on May 5. The statement offset some carry currency weakness overnight after the RBA decided to keep rates unchanged at 4.75% in a widely expected decision, though a hike is still thought likely in coming months to combat inflation amid a massive trade and mining boom. Additionally, courtesy of further rumormongering out of Europe, which today has been with a EUR-bullish bias, the EURUSD has continued its uptrend, and is now also trading at one month highs, appreciating by 700 pips since recent lows of under 1.40 on May 23, last printing at 1.4666. As usual, Greek newsflow will dominate the EURUSD, and thus, the general market.
Watching international financial policy persisting on a concept to fight debt with more debt in an environment where official GDP growth rates only remain positive because of ridiculously low deflators, while interest rates apart from those central bank help for banks via laughingly low interest rates begin to surge everywhere else, this observer begins to wonder if one can expect anything else than a fast-rolling, simultaneous European banking collapse. Engulfed in more exponentially rising debt on public and private levels than ever before there simply cannot be another end of the longest growth cycle in history than a simultaneous collapse of international banking when lending freezes up due to fears about the real creditworthiness of the respective counter party. Globalization will have made it possible.
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In a double whammy of bad news from the mainstream media blackouted Fukushima (or perhaps the general population just doesn't care any more) today we learn that not only did The Nuclear and Industrial Safety Agency (NISA) double its estimate of the radiation leak in the early days of the Fukushima catastrophe, something we had predicted would happen eventually courtesy of the secretive Japanese government, but that Plutonium from Fukushima has now been found in the town of Okuma, over 1 mile away from the stricken Nuclear Power Plant.
The media has been replete lately with a variety of different government officials saying that there will not be a third round of Quantitative Easing. Even the great Ben Bernanke himself on April 27th spoke against the possibility of QE 3. This isn't surprising, of course, because in order for something like QE to have the most effect it needs to be, well, a surprise. However, I am throwing down the gauntlet and making the call - there will be Quantitative Easing, and a big one most likely, by the end of summer. There I said it; of course, I have actually been saying this for the last couple of months and it doesn't take much of a real genius to figure it out considering that we are heading into a presidential election year. However, it most likely won't be called QE 3 since the term QE is now politically and socially almost taboo.
Comex Physical Silver Drops To Fresh All Time Low Of 28.8 Million Ounces, 3% Drop Overnight, 30% Drop In Six WeeksSubmitted by Tyler Durden on 06/06/2011 - 18:40
When we first started paying attention to the physical ("Registered") silver held in COMEX warehouses on April 20 following the explosion in the silver price, the total amounted to just over 41 million ounces. As of today, a short 6 weeks later, the total physical silver held throughout the entire Comex complex, has dropped by 30% over that period. As of close today, the total amount of Registered silver is now 28,773,375 ounces, a decline of 2.9% overnight from 29,636,513. This is due to a withdrawal of physical from both Brinks and Scotia Mocatta, as well as the ongoing reclassification of 438,708 ounces of Registered into Eligible silver over at HSBC (but wait, it will revert back to Registered any moment... we promise). At this rate of withdrawal and "adjustment", there will be no physical silver left in the entire Comex in about 5 months. At that point, even one delivery intention will send the price of silver to previously unseen levels.
First we had the bread (or some other Oscar Meyer product)...Now comes the circus. Politico reports that Pelosi has just called for a "Weiner Ethics Inquiry." Um... What is there to inquire: the guy sent out pictures of his wiener in clear abuse of his political position (leaving his family drama aside) from a Twitter account that was obviously that of an elected official. It's unethical - period (to spare various other adjectives that come to mind). He should resign immediately. Then again, New Yorkers once again get precisely the representatives that they deserve. A far better inquiry (and thus use of taxpayer capital) would be to discover who else among the political elite does just the same on a daily basis (Weiner is certainly not alone), and has merely not been caught yet.
Quantifying The Treasury's Plunder Of Retirement Accounts: $80 Billion Between The G- And CSRD Funds Since Debt Ceiling BreachSubmitted by Tyler Durden on 06/06/2011 - 17:48
Last Thursday we attempted a rough estimation of how much the Treasury has been dipping, or as it is also known "disinvesting", into the G-fund and the Civil Service Retirement and Disability Fund (CSRDF). Courtesy of Stone Mountain, we now have a definitive number. Even we did not realize how bad it is: in a nutshell, since the debt ceiling breach in mid May, Tim Geithner has replaced one IOU (that of the Fed) with another (that of the Treasury) in the G Fund to the tune of $57 billion, and in the CSRDF of about $22 billion. In other words, retirement funds have seen a "disinvestment" of nearly $80 billion in the past 3 weeks just to make space for further funding of bloated government, defense spending, and healthcare benefits. But don't worry: Tim promises it shall all be well.
Panama is an example of how I see governments moving in the future– like Singapore, Chile, Hong Kong, and may others, Panama is the kind of place that seeks to attract foreigners, to compete for them by providing a number of incentives. Panama does this most pointedly with its retirement ‘pensionado’ program, but there are a number of other such programs. In fact, the country’s immigration law has so many different categories, it’s possible for just about everyone to find a way to move here. In other places, immigration is unfortunately a four letter word. The borderless Schengen area in Europe is on the verge of disintegration as a number of countries in the region begin to put up border checkpoints to restrict the free movement of people (and capital). In the United States, the government has been eager to show that it’s not slacking on the illegal immigration issue. The result has been an increase in the size and scope of its persecution against “undocumented workers” as well as the businesses which hire them. I can just imagine the conversations within the hallowed halls of government: “those who break the law must be punished accordingly…”
Watch the pathetic confession from the congressman live here. Nonetheless, a very "regretful" Wiener refuses to step down.
It seems that Europe once again shot its last bullet a few days too early (to use a more polite phrasing than the alternative) with the announcement from last week that the Greek bailout was a done deal. As we speculated, various complications will soon emerge for anyone who cares to read the fine print in the bond indentures which preclude the imposition of Collective Action Clauses, thereby making an enforcement of a "voluntary" maturity extension problematic if anything. Below we present an article that appeared in Handelsblatt in the last hour, which indicates that opposition to the rescue has emerged not only from Slovakia, but from the UK as well. The English is about as garbled as possible thanks to Google translate, but oddly enough far more understandable than the periodic soundbites of outright lies from the pathological troica of Rehn-Junker-Trichet.