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Is Belgium's Dexia About To Be The First Greek Casualty?

Tyler Durden's picture




 

About a month ago Belgium's biggest bank, and as is now well known one of the most active borrowers at the Fed's discount window in the days following the Lehman crisis, issued €3.2 billion in FRNs with a two year maturity that had an odd feature: an ultra short term put feature (as the Bloomberg screen shows below, puttable June 26, 2011 at par) which can be exercised up to 33 days ahead of the put day (underwritten by Barclays, Citi and MS) or in other words, today. Well, as our source has told us, following recent downgrades of virtually all banks with Greek exposure (a topic further pursed by the below IFR article), the two largest investors in the bond: Blackrock, which owns the bulk or about €2.6 billion, and Barclays (among others) have exercised their put option. The speculation is that "either someone knows something or had a very rapid change of heart" and concludes that "this should make the whole funding thing relevant again" especially since banks continue to rely on the ECB exclusively for short-term liquidity needs. Also possible a jump in Fed Discount Window borrowings if the ECB is unable or unwilling to cross-collateralize even more Greek debt exposure. The advice: "start watching Libor/Euribor and the Forwards basis" for some near-term volatility. If this is confirmed, look for any/all other comparable short-term put deals to suddenly spring the investor option to pull their capital, and the domino avalanche to set off in earnest.

Issue DES page:

Dexia CDS:

And some more color (mostly red) from IFR:

Greece casts €100bn shadow over European banks

European banks remain saddled with almost €100bn of Greek government debt they can’t sell, hedge or ignore, after a number of recent deals to offload the exposure to reduce the impact of a possible default ended in failure, according to bankers involved.

The deals have been thwarted by a lack of willing buyers for the debt – even at record low prices – and that exposed lenders have been unable to buy protection because of the high costs, with top bankers advising their clients all they can now do is cross their fingers and hope for the best.

“The vast majority of these banks have just been unable to do anything,” said one European banker who has advised dozens of such banks. “Protection is too expensive, and markets for these bonds are illiquid, so many are riding out the problem. Right now, all they can do is shut their eyes and hope.”

Greek domestic banks are by far the biggest holders of the country’s bonds with some €50bn of exposure, according to a handful of estimates. But another €50bn is held at banks outside the country, with German banks alone exposed to around €19bn of the paper, while French banks hold another €15bn.

“For a lot of banks, their worst nightmare seems to be coming true,” said another investment banker who advises financial institutions on the continent. “We now know that the Greek smoke was indeed fire and a lot of people have now found themselves heavily exposed.”

“The big question is the exposure of some of our clients,” added the chief financial officer of one of Europe’s largest investment banks. “At some point something has to happen.”

As prices tumbled – the 10-year bond now trades at 51 cents on the euro – and fear grew that a default was inevitable, the window for selling was gone. “The state of liquidity in the Greek market would be too limited to support major asset reallocations involving Greek bonds at present,” said Philip Brown, head of public sector capital markets origination at Citigroup.

Perhaps remarkably, some banks even saw the drop in prices as a chance to increase their exposure to Greek bonds, so as to repo the instruments at full face value at the European Central Bank’s open market operations. “One chief financial officer told me I was a complete idiot not to be buying bonds and that was only back in April,” said one adviser, who asked not to be identified.

As for why CDS "protection" is now moot:

Even the credit default swap market doesn’t offer a way out. Indeed, net notional outstanding Greek hedges have decreased over recent months, falling to less than US$5.3bn now from more than US$9.4bn in late 2009, according to Depository Trust and Clearing Corporation data.

“CDS are beyond the level where you even bother to hedge,” said one analyst. “It’s easier in a way just to take the hit.” The cost of protecting €10m of five-year Greek bonds against default recently rose to €1.48m amid increased speculation that Athens would default.

The inability of banks to sell or hedge such exposure partly explains why the European Central Bank has been so keen to silence any talk of a restructuring or default. Central bankers will be keenly aware of the potential repercussions on the region’s banking system if such an event were to happen.

One potential tactic might be to delay any default or restructuring as long as possible. With every year that passes, exposure to such an event is decreased as bonds mature and are paid off in full. Of the estimated €270bn of Greek bonds currently in existence, about a third will mature by the end of 2013.

But while that might lessen the blow for the banks, politicians are likely to find such a solution less palatable than a full-blown restructuring. That’s because EU and IMF loans will have to fund those redemptions – essentially a government-sponsored bailing out of private bond holders. Insurance companies, pension funds and central banks hold a further €170bn of Greek paper.

Indeed, an added complication is the exposure of the ECB, which stepped into the market to buy Greek bonds last year. Under a default or restructuring situation, it would have to be recapitalised. Indeed, advisors say some clients see the ECB’s exposure as a reason such an event will be delayed.

“These banks know they are in good company – the ECB is in the same position and they too are unhedged,” said the first banker. “There is the presumption that it doesn’t really matter for the Landesbanken, they know they will get rescued. For them, this isn’t an immediately pressing issue.”

In other words, it just may be that the can kicking exercise is about to come to a very violent end.

 

 

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Wed, 05/25/2011 - 11:00 | 1308965 TruthInSunshine
TruthInSunshine's picture

Off Topic, but Frontline always is one of my tells, and it was a dead ringer back in 2007/2008.

Bang Dae-Ho, bitchez.

Norway's Frontline, which operates the world's largest oil tanker fleet, announced an 81-percent decline in net income for the first quarter compared to last year. The company issued a grim outlook...

Link: The operator of the world's largest tanker fleet gives up on the global recovery

Also, the UK is looking FUGLY. No amount of lipstick can dress up this British Pig, and she can't afford her meat, so how is she ever going to get any pudding? -

Via DailyFX Team: "UK TOTAL BUSINESS INVESTMENT (Q1) Q/Q COMES IN AT -7.1% WORSENING SIGNIFICANTLY FROM A FLAT READING IN Q4 2010"

And even more FUGLINESS.

https://twitter.com/#!/ftalpha/statuses/73306242344423424

FT Alphaville team UK GDP in Q1 2011 left unrevised at 0.5%. Also however - Q1 2011 household spending saw its biggest quarterly drop since Q2 2009...

 

FUGLY!

 

Back ON Topic:

Whether Dexia is or isn't the 1st (of what will soon be a very long line) of casualties, the biggest casualty of Greece's debt problems will be the death of the Eurozone.

Just think; if Greece, pretty much by its lonesome, has so far doomed formerly solid incumbent senior politicians (and even long-standing ruling political parties) in Germany, France and in the other allegedly solvent member states of the EU, what will the casualties look like from having to deal with the larger, flaming wreckages that are Spain, Italy and Portugal (and then some, count on it)?

Wed, 05/25/2011 - 11:41 | 1309209 MarketTruth
MarketTruth's picture

Greek BANK RUN bitches!!! (someone had to say it)

Wed, 05/25/2011 - 11:54 | 1309252 TruthInSunshine
TruthInSunshine's picture

Based on the video of the riots induced by EU imposed austerity talk about a month ago, I would not want to be a Greek ATM Machine during an angry Greek bank run.

Or a teller.

And especially not a banker or politician.

Wed, 05/25/2011 - 12:42 | 1309445 3.7.77
3.7.77's picture

 The banker and politicians get what they deserve, poor tellers and atm's.

Wed, 05/25/2011 - 13:04 | 1309531 silberblick
silberblick's picture

Sure enough. For some hilarity, click below to see a graphic illustration of bankster's dirty hierarchy of needs:

http://thesilvergoldhedge.blogspot.com/2011/05/banksters-dirty-hierarchy...

Wed, 05/25/2011 - 13:32 | 1309622 dogbreath
dogbreath's picture

fuckoff troll

Wed, 05/25/2011 - 21:15 | 1311273 StychoKiller
StychoKiller's picture

Spammer != Troll

Wed, 05/25/2011 - 10:49 | 1308966 A Man without Q...
A Man without Qualities's picture

Dexia is such a big player in the derivatives market that the Fed and ECB will do everything in their power to defend it.  

Of course, I am sure the likes of JPM and Deutsche are happy to sell very expensive CDS on the name, but they will be fully aware of this fact...

Wed, 05/25/2011 - 11:11 | 1309048 Sudden Debt
Sudden Debt's picture

ALL Belgium cities have stakes in Dexia and are forbidden by the state to sell their stake.

So if Dexia goes down, and indeed it is a massive deri. player, it will take the cities with them. ALL of them.

Dexia is in suck a big mess, and still they want to give a 7% div. this year no strings attached. Just after the capital raise demande from the shareholders.

The bid on dexia shares is GONE. Once the panick kicks in, it will be at 0 very fast.

The government is planning to SAVE Dexia. BUT to do so, it will need 30% extra revenue (hello dear taxpayer who pays +50% already) to do so. And yet the government promises to get to that 30% WITHOUT tax increases. I wonder how many magicians they will get involved to do so...

DEXIA has hughe connections to BAC and CITI. SO HELLO AMERICA! WELCOME ON STAGE!

If Greece falls, Belgium falls. It's that simple.

If Belgium falls... Europe and America because indeed the derivative market will fall of the cliff. And it will either way when the US will do a QE3 and also when it doesn't do a QE3.

PICK YOU OPTIONS!

 

 

 

 

Wed, 05/25/2011 - 11:14 | 1309084 achmachat
achmachat's picture

whoa! you just made this article even more sinister and catastrophic!

I am just happy that I got rid of ALL my Dexia shares when it was still at 4,6 €.

Wed, 05/25/2011 - 11:23 | 1309118 Sudden Debt
Sudden Debt's picture

It get's worse!!

 

ALL those Dexia shares ARE STILL IN THE CITIES BOOKS AT PURCHASE VALUE!! €22!!

 

And

1. if Dexia goes down = The cities have to BOOK the loss! = cities default.

2. The government itself has a big stake in Dexia to = Belgium DEBT will go to 175% in a matter of weeks!

3. ALL the big pension funds are Dexia related

4. Dexia is very interconnected in the French Banking world => Ouch!

 

This shit is just so BIG, nobody can even graps it!

Dexia is in a way bigger mess thant CITI and BAC combined!

Who will pay for it while nobody can really calculate how big the mess even is?!

 

 PS: Belgium is Uber BROKE!! No dineros! No more Euro's!

Wed, 05/25/2011 - 11:41 | 1309194 Sudden Debt
Sudden Debt's picture

AND IT GET'S EVEN WORSE THAN MORE WORSE!!

 

The Belgium government has 600 billion in covered risks from Dexia.

That's just a number because Dexia would never be put at real risk... they said 2 years ago...

NATIONAL DEPT => X2  => DEPT=285% OF GDP!!

 

I'd better start looking to relocate...

 

Wed, 05/25/2011 - 11:51 | 1309226 camaro68ss
camaro68ss's picture

Thanks Sudden Debt. your a great Contributor to the web site and I always look forward to what you have to say.

Thanks, - Camaro

PS  BTFD BITCHEZ!

 

Wed, 05/25/2011 - 11:51 | 1309250 achmachat
achmachat's picture

relocate? you can always come here to little green Luxembourg ;-)

Wed, 05/25/2011 - 12:40 | 1309448 Motorhead
Motorhead's picture

I'll have a Diekirch, please!

Wed, 05/25/2011 - 13:11 | 1309562 achmachat
achmachat's picture

i am right across the river from the brewery! ha!

Wed, 05/25/2011 - 12:09 | 1309323 Zero Debt
Zero Debt's picture

They were rolling up to $37 billion in discount window debt year end 2008-12-31. Now you say they may need 600 billion?? Even Ben would not do that.

And we remember the Dexia rate-swap debacle with the US Municipalities..

Dexia is both too big to fail and too big to save.

Wed, 05/25/2011 - 12:47 | 1309465 Nnthnt1
Nnthnt1's picture

Dexia is both too big to fail and too big to save.

You forgot the magic printing presses.

2008 was just the beginning of the end. Give it a small decade and this money system is gone.

=> Physical gold in your vault, like a bowwss

(irony: I bought physical gold from Dexia 2 months ago)

Wed, 05/25/2011 - 12:45 | 1309453 Nnthnt1
Nnthnt1's picture

You see what happens, Larry, when you pay wannabe-bankers uberbonuses from the black hole of fractional reserve promises

Wed, 05/25/2011 - 12:36 | 1309430 Nnthnt1
Nnthnt1's picture

I advice you to stay away from financials as an 'investment', especially KBC and Dexia.

My father thinks he has the longest (still) running short on Dexia of the whole market. Since the beginning of 2007!

 

Wed, 05/25/2011 - 15:43 | 1310116 Sudden Debt
Sudden Debt's picture

Since the beginning of 2007? :)

I remember those day VERY well.

In 2007, you couldn't buy the 2011 puts. :)

Dexia only had the 2009 puts by than.

Your father is bullshitting you.

 

Wed, 05/25/2011 - 18:42 | 1310719 Nnthnt1
Nnthnt1's picture

I'll ask him again.

I'm not sure how puts are related but I thought the short-selling regulation came in in the panic of 2008?

Pretty sure.

It started out as a pair trade with fortis.

 

Wed, 05/25/2011 - 10:50 | 1308970 Tense INDIAN
Tense INDIAN's picture

u have to admit ...these ELITE are so precise....it boggles the mind

Wed, 05/25/2011 - 10:52 | 1308977 SDRII
SDRII's picture

While the eulogy continues water street leaning on the buy buy buy

Wed, 05/25/2011 - 10:54 | 1308989 achmachat
achmachat's picture

so what would happen when one of these big banks fail?

I mean... let's say that I owe Dexia 1.000.000 EUR, I'd still owe those 1.000.000 EUR to whoever takes over, no?

Wed, 05/25/2011 - 11:02 | 1309031 Translational Lift
Translational Lift's picture

Yes!

Wed, 05/25/2011 - 11:09 | 1309044 achmachat
achmachat's picture

how sad ;-)

Wed, 05/25/2011 - 11:12 | 1309078 Sudden Debt
Sudden Debt's picture

Easy there. You own 1000.000 euro in stocks, you'll pay all the required capital raises. Unless you sell but there is no Bid... even near zero... so guess what happens if no sucker buys your crap? = you are fucked.

That million, is a millstone around your neck.

And the big shareholders know this, and it's just these that aren't allowed to sell without concent of the government.

 

Wed, 05/25/2011 - 11:15 | 1309090 Sudden Debt
Sudden Debt's picture

Debt to Dexia = can be confiscated by the government.

at new terms....

and they are in short supply of money...

 

 

Wed, 05/25/2011 - 11:22 | 1309102 achmachat
achmachat's picture

if this happens, let's hope that the government has bigger problems to look after than coming for my measly million euros.

Besides.. there IS NO government!

Wed, 05/25/2011 - 11:27 | 1309126 Sudden Debt
Sudden Debt's picture

Yes there is. There are 6 governments in Belgium.

Unless the new one get's the BHV problem solved, the financial reform, they can't form a new one AND THE OLD ONE STAYS IN POWER!

Did you really think they stopped messing things up? :)

And whatever they do, they're not responsible for it.

Is there anything better to fuck things up? Whatever you do, it's the other guys fault.

 

 

 

 

Wed, 05/25/2011 - 12:24 | 1309383 Overflow-admin
Overflow-admin's picture

So as you have already said fuck to your government for more than a year, wouldn't that be the moment to extend the word to the banks?

Wed, 05/25/2011 - 11:19 | 1309101 legal eagle
legal eagle's picture

The way I see it, the banks take money from other banks and invest it for their shareholders.  They are not really banks, servicing clients, they are investment funds for the bank shareholders.  The concept that our economy will be wiped out, or that real depositors will be wiped out, is farcical when you see the low lending, the government insurance for depositors (and believe me, folks with money have spread it around to take advantage of the insurance).  These are not really banks anymore!

Wed, 05/25/2011 - 10:57 | 1308990 Urban Redneck
Urban Redneck's picture

Bankers issuing paper with "do over" clauses.  Instead of maturing and learning from 2008, they are regressing to utter childishness.

Wed, 05/25/2011 - 11:29 | 1309133 LawsofPhysics
LawsofPhysics's picture

Yes, banks need to become just banks again.

Wed, 05/25/2011 - 11:29 | 1309154 Sudden Debt
Sudden Debt's picture

Can't. To many digital money flooting arround that "generates income".

Without it, our economy can't survive.

Banks are evil yes. But they are our opium.

 

 

Wed, 05/25/2011 - 12:48 | 1309467 3.7.77
3.7.77's picture

They will learn again soon..

Wed, 05/25/2011 - 12:52 | 1309483 Nnthnt1
Nnthnt1's picture

 "Without it, our economy can't survive."

Thats at least what the billions of dollars financial lobbying industry says when there's 're'-regulations e.g. Basel I, Basel II, Basel III.

standard lobbying reasoning: "for every additional % of capital requirements there is a% less growth",

Why?

Because our uber-knowledgeable-ministry-of-truth-economists said so.

I bet they will eat themselves by being too greedy the next coming years.

 

Wed, 05/25/2011 - 10:54 | 1308991 hugovanderbubble
hugovanderbubble's picture

Credit Agricole = DEFAULT

Wed, 05/25/2011 - 10:57 | 1308999 hugovanderbubble
hugovanderbubble's picture

Short French Banks ALL

Wed, 05/25/2011 - 10:58 | 1309004 richard in norway
richard in norway's picture

should i be buying the fucking dip

Wed, 05/25/2011 - 11:01 | 1309007 hugovanderbubble
hugovanderbubble's picture

Morgan Stanley; JpMorgan and BAC ,

US FInancial ENtities with biggest exposure to European Sovereign Debt.

 

SELL and short them till 40% down.

Wed, 05/25/2011 - 11:34 | 1309163 Sudden Debt
Sudden Debt's picture

Shorting the banks will be forbidden again in the next 6 weeks!

DON'T DO IT!

 

Wed, 05/25/2011 - 12:54 | 1309490 Nnthnt1
Nnthnt1's picture

It's not when you are already short..

Like I said: My father is short Dexia since early 2007. Beat that, captain hindsight!

Wed, 05/25/2011 - 15:48 | 1310124 Sudden Debt
Sudden Debt's picture

Since the beginning of 2007? :)

I remember those day VERY well.

In 2007, you couldn't buy the 2011 puts. :)

Dexia only had the 2009 puts by than.

Your father is bullshitting you.

Fri, 06/03/2011 - 02:39 | 1334971 jeff montanye
jeff montanye's picture

buying a put option and selling a stock short are not the same thing.

Wed, 05/25/2011 - 10:58 | 1309008 Dick Darlington
Dick Darlington's picture

Dexia will have to ask the gubbermint for help. Again. Oh wait, there is no gubbermint in Belgium, hasn't been for over a year now. Funny how practically all the european TBTF's have lately been pushing, among other similar crap, spread compression trades between Belgium and Germany. Traders want to clean their books and switch into german paper while "real money" ends up with the crap.

Wed, 05/25/2011 - 11:02 | 1309010 RobotTrader
RobotTrader's picture

I'd be wary about shorting.

All the PIIGS banks and the XLF are off their lows.

HBC is my bellweather, I'm watching that one carefully.

After a stunning 2009 recovery with massive monetization/nationalization/POMOzation, I doubt TPTB are going to let anybody "big" fail again.

Wed, 05/25/2011 - 11:23 | 1309107 Cursive
Cursive's picture

@Robot

Dick Fold on line 1.

Wed, 05/25/2011 - 11:37 | 1309191 Quintus
Quintus's picture

That sounds painful.  Unless one is some kind of penile contortionist.  :-)

Wed, 05/25/2011 - 11:47 | 1309236 SheepDog-One
SheepDog-One's picture

Oh I thought TZOO was your bellweather....guess that was last week. You change bellweathers more often than the queen changes hats.

Fri, 06/03/2011 - 02:41 | 1334973 jeff montanye
jeff montanye's picture

in time the shareholders and bondholders will take a hit.  in time.

Wed, 05/25/2011 - 11:02 | 1309011 hugovanderbubble
hugovanderbubble's picture

Nobody looking at EUR/CHF

 

Whole European Families switching Euros intro Swiss Francs....(Big ones)

Wed, 05/25/2011 - 11:07 | 1309041 achmachat
achmachat's picture

... the ones I know, switched their liquid assets and money to real estate and precious metals; but that was two years ago.

Wed, 05/25/2011 - 11:16 | 1309082 Dick Darlington
Dick Darlington's picture

Everybody's so busy watching the stock markets in Europe to levitate that the pain in EUR/CHF goes unnoticed. Seems that we have once again entered into the "full retard" zone in which everything is just ignored and equities spike higher no matter what.  Only there's one slight difference compared to year or two earlier. The real boogie man which will bring the markets down hard eventually has grown bigger and bigger, thanks to the central planners.

Wed, 05/25/2011 - 11:22 | 1309106 Urban Redneck
Urban Redneck's picture

Damn fucktart fiat faggots- running around trying to create Triffin dilemmas.

Wed, 05/25/2011 - 11:34 | 1309174 THE DORK OF CORK
THE DORK OF CORK's picture

The Swiss franc is not what it was - the private SNB sold half of its Gold to faciltate Euro Buggery so the Franc needs every serf to pay its debts and every banker to buy its watches.

Its Fiat Baby.

Besides they devalued during the last depression - why not now ?...... I suspect massively against Gold.

This entire Euro thingy was a set up from the start - when they are good and ready the BIS will become the dealer for a massive physical cash only auction.

Wed, 05/25/2011 - 13:56 | 1309720 Thisson
Thisson's picture

Goodbye, Euro.  Hello, Bancor!

Wed, 05/25/2011 - 17:38 | 1310504 Sudden Debt
Sudden Debt's picture

About 7 weeks ago, I spoke to a banker who manages large accounts and he also told me that massive gold and silver purchases where being made by his clients.

It was like they all got the heads up for what's comming and is happening now.

He said he was scared shitless for what was comming and that pannic was all arround.

So funny you never read anything about this in this so called "negative" media of ours...

 

Wed, 05/25/2011 - 11:08 | 1309058 terryfuckwit
terryfuckwit's picture

wish i understood the dexia stuff?? sounds sinister anyway!

Wed, 05/25/2011 - 11:10 | 1309067 f16hoser
f16hoser's picture

Another exciting episode in the continuing saga of Rich Bank / Poor Bank.

I love it when Banks suck-on each other. Too Funny!

Wed, 05/25/2011 - 11:16 | 1309080 ReallySparky
ReallySparky's picture

So this will hit American shores just about the time that everyone discovers that farmers have been unable to plant crops and grow food, and we can't borrow any more either.  What a cluster f*ck.

Wed, 05/25/2011 - 11:43 | 1309206 Sudden Debt
Sudden Debt's picture

I have like a 1000 flashes in my head right now about what will go wrong when Dexia gets the hit...

When they saved the banks, they all made us believe that none of these could happen... and now they could happen all at once.

 

Wed, 05/25/2011 - 11:59 | 1309274 oogs66
oogs66's picture

they saved the banks and then talked about ways to increase capital by 2013.  The banks even resisted that.  They should have raised massive amounts of capital last year.  The next leg down will wipe them out because everyone pretended the problem was over and we had decades to prepare for the next one.  We are still in the same problem, we never got out, and no one forced the banks to do enough while it was in remission.

Wed, 05/25/2011 - 13:57 | 1309723 Thisson
Thisson's picture

There is still plenty of time.  The Great Depression lasted 30 years.  This one is only in year 4 or so...

Fri, 06/03/2011 - 02:45 | 1334978 jeff montanye
jeff montanye's picture

1929 to 1949, at most.

Wed, 05/25/2011 - 12:01 | 1309280 Roger Knights
Roger Knights's picture

"When they saved the banks, they all made us believe that none of these could happen... and now they could happen all at once."

They couldn't see the big picture, just the view within their (socially constructed) box.

Wed, 05/25/2011 - 11:51 | 1309238 SheepDog-One
SheepDog-One's picture

Why Bernank will be forced to cut his own throat. Fine go ahead!

Wed, 05/25/2011 - 12:00 | 1309278 Dick Darlington
Dick Darlington's picture

Dexia Municipal Agency which issues public sector covered bonds backed by a pool of assets consisting of loans to States, local governments and public sector entities (regions, departments, municipalities, public hospitals, ...) and loans wholly guaranteed by States or local governments has some nice exposure to european periphery. Here's a link to the bag of goods they have:

http://www.dexia-ma.com/docs/en/actifs_31-12-2010.pdf

Wed, 05/25/2011 - 12:02 | 1309295 youngman
youngman's picture

And Biden just came out and said they have come to an agreement to "save" 1 trillion from the future deficits......they will spend 2 trillion more this year..but they will save 1 trillion 10 years from now is my bet....or it will come from estimated savings on some future increases..for sure post elections...or whatever...its the old game..still smoke and lies at this stage....we are doomed too...if the politicians in charge can´t see what is coming...then its all over....

Wed, 05/25/2011 - 12:04 | 1309300 nowhereman
nowhereman's picture

It really is all of a piece isn't it?  The interconnectedness is staggering.  And yet each piece is looked at in isolation, not taking this interlinking into consideration.  The US sees the problem as different from the Eurozone and Asia and the emerging markets, and yet each is so wrapped up in the other as to almost appear unfathomable.

Each move made has unforseen implications simply because each actor sees the problem from a different perspective and acts accordingly without an understanding of the global consequences.

Until TPTB realize just how complicated the structure is, there is no one size fits all solution.  It's akin to the Three Body Problem in Physics.  You can fairly accurately determine the influence on one body on another, but add in a third body and all bets are off.  Now just imagine what happens when there are several more spheres to take into consideration.

What this tells me is that the system is far too complicated for TPTB to figure out, and they know it, so it's every man for himself.  All I know, is that in the end, the current market relationships will never be the same, and who comes out on top will not be who you would predict.

Wed, 05/25/2011 - 12:59 | 1309523 oogs66
oogs66's picture

I will have to look up this 3rd body problem. In meantime I still think 'what a tangled web we weave when we first try to deceive' sums it up

Wed, 05/25/2011 - 21:24 | 1311307 StychoKiller
StychoKiller's picture

Off the top of my head, I'd guess its a non-linear 2nd-order differential equation, unlike the Real Economy:  non-linear Nth-order system of partial differential equations...

Wed, 05/25/2011 - 13:21 | 1309593 Crack-up Boom
Crack-up Boom's picture

It's like having 10 people drowning in deep water and trying to swim away from each other not realizing that they're all tethered together -- or realizing it, but each thinking he's strong enough to pull the others his way.  They're getting nowehere, but using up their reserves at a rapid rate.  Doesn't end well.

Wed, 05/25/2011 - 12:07 | 1309318 PulauHantu29
PulauHantu29's picture

But...but...they said,"it's only a tiny leak."

Wed, 05/25/2011 - 12:50 | 1309487 DNB-sore
DNB-sore's picture

SD, please don't get a stroke, I'll mis your comments

Wed, 05/25/2011 - 13:25 | 1309610 Crack-up Boom
Crack-up Boom's picture

+1.  Breathe.  Everything's better when oxygen gets to the brain. 

Wed, 05/25/2011 - 13:20 | 1309579 slewie the pi-rat
slewie the pi-rat's picture

pi-ratical auction rules:

1) if the banks & financials go tits up and you are holding their iou's you can trade the iou's + green stamps for their shit, at the auction.

2) if you are so moronically styoopid as to deem corporations, designed for possible bankruptcy, too big and important to bankrupt, you can bail them out with the Treasury and iou's from the goobermints and Treasuries.  then, they will use the iou's + green stamps for your shit @ the auction.

Wed, 05/25/2011 - 13:53 | 1309709 koeleköpke
koeleköpke's picture

A couple weeks ago the results were good, so the management got his bonus.

By the way fat Dehaene, chairman of Dexia (former prime minister) will solve the problems as soon as there are problems. Till now he is not in a hurry, so no problem to solve.

 

Wed, 05/25/2011 - 13:58 | 1309730 MrTrader
MrTrader's picture

May 25, 2011, 11:38 a.m. EDT

German bank exposure to Greece ‘manageable’: Fitch

 

 

 

 

 

The worst consequence of any Greek sovereign default for German and other European banks would be in a sharp increase in general capital market and creditor risk aversion at a time when many banks are still in rehabilitation mode.


Wed, 05/25/2011 - 14:17 | 1309788 lj_nissen
lj_nissen's picture
  • So what would you do Sudden Debt?
  • I have a broker account in Crédit Agricole. Would you get the hell out of Dodge?
Wed, 05/25/2011 - 15:06 | 1309931 slewie the pi-rat
slewie the pi-rat's picture

i am not sodden debt, and poeple have made fortunes fading my calls;  read the prospectus/account.  what are your choices?  do the right thing. 

often, the feeling that we have an uncertainty leadz to a good decision.  other times, it's just neurotic.

generally, with banks & banksters, trust yer gut. you/your clients need to avoid the counterparty blues, whatever it takes.

even on my tiny scale, i opened a free checking acct w/ jpmorgue-chase.  they paid me!  then, several months later, got a letter explaining the fees they would charge if i there were not a certain amount of account activity.  they changed the rules.  i took the letter in to see the bankster with whom i had opened the account, and instructed him to close it.

he said:  slewie, just take the freaking dollar out and it will close itself!

and, i just received a new offer from the morgue! 

Wed, 05/25/2011 - 21:34 | 1311341 StychoKiller
StychoKiller's picture

Reminds me of a joke:

Teacher:  "Children, each of you have a hard candy of different flavors, please stand up and tell us what flavor you have..."

Suzy:  "My flavor is cherry."

Johnny: "My flavor is grape."

Teacher: "Thaddeus, what flavor do you have?"

Thaddeus:  "I can't figure it out!"

Teacher: "I'll give you a hint, your Mom sometimes calls your Father this flavor (Honey)..."

Suzy:  "Spit it out Thaddeus, it's an asshole!"

Watch yourself, Slewie!

 

Thu, 05/26/2011 - 03:02 | 1312222 Suricate
Suricate's picture

Well ,

 

About Dexia , I'm quite sure if the worst is coming , this bank will be nationalised . And about Belgium , this is already a broken country , financially speaking . Just like all mature economy , including America .

So everything will break apart . Thedre is just one thing we don't know . Timing....

Thu, 05/26/2011 - 03:38 | 1312244 Suricate
Suricate's picture

Well ,

 

About Dexia , I'm quite sure if the worst is coming , this bank will be nationalised . And about Belgium , this is already a broken country , financially speaking . Just like all mature economy , including America .

So everything will break apart . Thedre is just one thing we don't know . Timing....

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