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Acute Liquidity Crisis In Europe Confirmed As Borrowing Surge On Marginal Lending Facility Continues For Second Day

Submitted by Tyler Durden on 02/18/2011 08:26 -0400

European Central Bank

The one thing that nobody is conveniently talking about that has suddenly become a big flash red light, the surge in borrowing on the ECB's Marginal Lending Facility which we noted yesterday, continues for the second day in a row, removing all speculation of this being a technical or calendar glitch, and confirming that some financial entity in Europe has entered its death rattle. Today, the ECB announced that after borrowing €15.8 billion in overnight liquidity, the highest since the program's inception in 2009, we got another increase in borrowing, this time at €16 billion in overnight liquidity needs. With expectations that this borrowing surge at a last resort rate of 1.25% would normalize disappearing, we are surprised the reaction in the EUR is not far greater: the EURUSD did contract modestly overnight, but if this is indeed the proverbial first domino we would be very concerned about the long term prospects of the European currency. What is most concerning is that after revelations of check kiting at Irish banks yesterday, which confirms that banks are using a legalized ponzi scheme to literally print each other money, that some bank - any bank - will need to resort to such a high rate source of overnight capital. As European collateral has no quality thresholds, and as the ECB will accept anything, it makes no sense for any bank to pay incremental interest just to transfer borrowing to an overnight facility with a punitive rate - simple as that. If this continues for a third day on Monday, it may well be time to follow Hugh Hendry's advice, and panic.

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Fri, 02/18/2011 - 08:29 | 973539 HelluvaEngineer

Tyler, I think the headlines that show up in your rss feed are probably too complicated for the trader bots to parse.

Fri, 02/18/2011 - 08:30 | 973540 ZeroPower

This is not the liquidity crisis you're looking for.

Fri, 02/18/2011 - 18:54 | 975893 StychoKiller

Wow! I found $5 FRNs in my left pocket, I stuck them in my right pocket and now I have $10! Bankin' is eezy!

Fri, 02/18/2011 - 08:34 | 973545 The Axe

This is the FDX market!!!! warn stock goes fucking up... The central banks have a fucking loins death grip on the world's markets....Ain't going no WHERE!!!

Fri, 02/18/2011 - 08:34 | 973546 htfan123

Still to early to know what the underlying cause is

http://ftalphaville.ft.com/blog/2011/02/18/492341/clues-to-the-eurozones-e15-8bn-fat-finger/

Fri, 02/18/2011 - 09:04 | 973588 Modus

thanks for putting that up that soon after the post was made by tyler.

read that yesterday on ftalpha as well...

Fri, 02/18/2011 - 08:38 | 973549 The Axe

very helpful link HTFAN123 thx

Fri, 02/18/2011 - 08:38 | 973552 alnitak

this problem in spain is more dangerous, wait out with spanish "cajas"

http://www.elconfidencial.com/en-exclusiva/2011/gobierno-preferentes-provisiones-capital-cajas-20110218-75020.html

Fri, 02/18/2011 - 08:43 | 973555 SloaneSquare

From an Irish source - "This will also be here on monday and is not a fat finger"...Let the good times roll.

Fri, 02/18/2011 - 08:41 | 973556 johnQpublic

time to follow Hugh Hendry's advice, and panic.

sounds like a simpsons quote

Kent: Hordes of panicky people seem to be evacuating the town for
some unknown reason. Professor, without knowing precisely what
the danger is, would you say it's time for our viewers to crack
each other's heads open and feast on the goo inside?
Prof.: Mmm, yes I would, Kent

Fri, 02/18/2011 - 09:02 | 973585 Husk-Erzulie

LMFAO :-)

Fri, 02/18/2011 - 08:44 | 973559 Henry Chinaski

dominoes bitchez

                   m e
                e               e
             r                   u                u
           g                    r                 n
          i                      o                i
        n                       p                t
        g                       e                e
      m                        a                d
     a                          n                s
     r                           u                t
    k                           n                a
   e                            i                 t
t                             o                e
s                               n                s

Fri, 02/18/2011 - 08:43 | 973560 smlbizman

i know this is off topic, but if it appears that our ship is sailing ....i will admit i know the least of every person on zero hedge, but apmex is buying back over spot.....this is really good , correct?

Fri, 02/18/2011 - 08:44 | 973562 saulysw

That is a zero based graph, for once. It doesn't look good....

Fri, 02/18/2011 - 08:45 | 973563 Dick Darlington

And ECB buying Portugal now. Just this morning Portugal made a statement for the 100th time that they don't need external assistance. What a joke.

Fri, 02/18/2011 - 08:50 | 973566 MarketTruth

<s> Can't they just fraudulently lend each other billions of Euros in a Round Robin facility like in other EU countries? Thus, problem solved. </s>

Or perhaps it is those paper silver shorts being fried by the physical market?

Fri, 02/18/2011 - 08:49 | 973567 jesse livermoore

is this a prelude to a bank run in europe?

Fri, 02/18/2011 - 08:51 | 973570 qussl3

EUR going nuts, WTF

Fri, 02/18/2011 - 09:00 | 973580 bingaling

RAN Squawk:EUR/USD spikes up 15pips after ECB's Bini Smaghi said that ECB may raise rates as price pressures mount

Fri, 02/18/2011 - 09:24 | 973635 qussl3

This BS spike for however long it lasts is going to be a nice fade.

Raising rates while, they lend the left pocket money from the right pocket, riighttt.

Fri, 02/18/2011 - 08:54 | 973573 Josh Randall

What happened to the Europe/Delta I used to know ?

Fri, 02/18/2011 - 08:57 | 973577 gaoptimize

"(Irish) banks are using a legalized ponzi scheme to literally print each other money"

Why wouldn't there be a bank run on such information becoming public?

Fri, 02/18/2011 - 09:04 | 973587 EscapeKey

You seem to be under the mistaken belief that the majority of the sheeple a) understand this information, b) prioritise it above Beyonce's new hair style, c) remember it 5 minutes after being told.

Anyway, it's been my impression that the majority of people don't want to hear bad news, and if told, will do everything to trivially discredit it.

Fri, 02/18/2011 - 09:59 | 973753 Founders Keeper

[Anyway, it's been my impression that the majority of people don't want to hear bad news, and if told, will do everything to trivially discredit it.]---EscapeKey

Isn't that the truth. It's amazing, from a psychological/human-nature point of view, the lengths people will go to avoid learning of imminent uncontrollable danger.

I will be disappointed in myself if I ever utter "I told you so."

I hope instead, when the time comes, I will simply offer help to those in need. Share what you can spare. And thank God for lending me the foresight and means to prepare.

Fri, 02/18/2011 - 17:46 | 975664 uranian

normalcy bias seeming to be a bit of ZH buzzword, a good example i read of the phenomenon; a group of people are living downstream of a dam that is known to be structurally unsound. logic would suggest that the closer you live to the dam, the greater anxiety you would feel. the reality for these people was that the closer they lived to the dam, the less anxiety they felt, because to do anything other while living next to a dam that might collapse any moment than deny that would cause panic. you could of course just move freakin' house, but you might miss beyonce's latest haircut at that point, so that's a no brainer, too.

Fri, 02/18/2011 - 09:08 | 973598 Dollar Bill Hiccup