This page has been archived and commenting is disabled.
Confirmed - Eurozone "Stress Tests" Will Not Include Any Default Scenario
And now the latest joke - the increasingly more incorrectly named "stress" tests being conducted in Europe are now officially confirmed to be anything but. As Market News reports: "Planned stress tests for European banks will cover their resistance to a crisis in the market for European sovereign debt, but not the scenario of a default of a Eurozone state since the EU would not allow such an occurrence, a German newspaper reported Wednesday." Now that is some serious downside stress testing. Of course, by the time the stress tests are found to have been a joke, and the country hosting the bank blows up just becase the bank's assets are 3x the host nation's GDP, and the country is forced to bankrupt, it will be far too late. So let's get this straight - the very issue that is at the heart of the liquidity crisis in Europe, namely the fact that a bankrupt Greece has managed to destroy the interbank funding market in Portugal and Spain, and the other PIIGS, and has pushed EURIBOR and other money market metrics to one year stress highs, and forced the ECB to lend over $1 trillion to various central and commercial banks, will not be tested for? Fair enough - if the ECB wants to treat the CDS vigilantes as a bunch of idiots, only to be hounded in the press with derogatory words as "Wolfpack" and much worse, so be it. But it certainly should not be surprised if this is latest show of idiocy by Trichet's henchmen serves as the springboard for the latest round of spreads blowing up across Europe.
And for those who can not believe their eyes, here it is again:
“In the planned stress tests, European banks will also be tested for their resilience toward a crisis on the market for European government bonds,” German weekly Die Zeit wrote without identifying its sources.
“It is not envisioned, however, to test the consequences of an insolvency of a Eurozone state,” the paper said. “The reason is that the EU does not want to allow a sovereign default and has therefore specifically set up a rescue fund,” the paper added.
The consequences of a downturn of economic activity on banks and their lending will, however, be tested, the article said. Were a bank’s percentage of own capital to fall below 6% in the tests, it would then need to show how it would obtain fresh capital, the article said.
»
- 3802 reads
- Printer-friendly version
- Send to friend
- advertisements -
Yawn...can't they all just give them a gold star or smiley face sticker and declare victory already? Who believes this BS anyway?
Nobody believes it. However, isn't the point that they can 'use' it as a plausible explanation for ramping up their stock?
There you go! We've got enough gold star smiley faces for everybody!
If a country's/union's currency is backed by nothing but thin air, then simply 'print' all the debt away. Then start over again with the New And Improved IMF FIAT currency. See how easy that is folks.
Of course it crushes the citizens' savings and all that, yet fools who play with FIAT currency with 100% faith and zero diversification into gold/silver/etc will get the horns. Perhaps this is why Germans, British bankers and many others are buying physical gold.
Everyone with an IQ over 75 knows the stress tests are a joke. Look folks, it is the stupid sheeple they are looking to trap in Europe and of course normally low education level Americans.
Then again the CBs can use the results of the stress test to once again manipulate the market in the direction they want. Think of it as the EU's very own PPT.
David Copperfield should get in on this "illusion".
The market has a very fickle memory. The first cracks in the credit market in the US were shrugged off and S&P rallied to an all time high several months later. It took 9 months for Bear to become insolvent, and 15 months for Lehman. Come back to me in a year and tell me what the outlook for European banks is.
The market has a very fickle memory. The first cracks in the credit market in the US were shrugged off and S&P rallied to an all time high several months later. It took 9 months for Bear to become insolvent, and 15 months for Lehman. Come back to me in a year and tell me what the outlook for European banks is.
Somebody should conduct a stress test on JC Trichet
I now know how it feels to be violated......
EURO STRESS TEST:
http://www.youtube.com/watch?v=CSe38dzJYkY
SINNERS CONFESS!:
http://williambanzai7.blogspot.com/2010/07/european-stress-tests.html
Can King Canute Trichet commanding the waves of credit default to stop...? It is to laugh. Fiat money is a confidence game, and many europeans are wise to this game. The debts cannot be deflated short of a default or hyperinflation. Either way, the Euro will realise its best and highest use as toilet paper.
the EU would not allow such an occurrence............
"The best laid plans of mice and men gang aft agley." - Robert Brown
"European Bond vigilantes a bunch of idiots" ? Can´t confirm. I would rather say that bond vigilantes are necessary casualties of an effiecient market. At least, we can conclude that now we have sound risk premiums on European sovereign bonds and not artificial flattening bond yield curves across Europe. In so far, thank you vigilantes to get this straight.
In other news JPM, GS, BAC, C, MS and WFC have decided to move on with their short covering rally.
I hate the stupid word "Bond vigilantes". The so called "bond vigilantes" are just another word for Mr. Market. The market will *always* call bullshit when a big player lies blatantly and frequently. And Mr. Market *always* wins.
Just because Mr. Market doesn't behave the way Mr. Trichet and pals would like, does not make the market wrong (or a "vigilante"). The central bankers are the ones that are wrong, and the free agents of the bond market are preparing to teach the bureaucrats a lesson.
The phrase du jour on CNBC is "Credible Stress Tests". Two people on CNBC including El-erian have uttered that today. It's obvious that the so called "stress tests" were nothing more than a way to inflate the stock price of the banks before their capital raises and the Eurozone should expect nothing more. The jig is up if you think the market is going to rally in response to that news.
The European Union is trying this out because it worked in the US. Here we changed the accounting rules to inflate the bank's assets and then performed a stress test. PASS! It is like giving an athlete on drugs a masking agent before drug testing. Oh boy, you passed.
It fooled the market here. Maybe it will work in Europe too.
You are a bit wrong with your assessment. What the US of A government did was legalizing your athlete on drugs. That´s the point ! If a government legalizes drug addicts, who cares ?
Really this is a great post from an expert and thank you very much for sharing this valuable information with us..................... windows vps | cheap vps | cheap hosting | forex vps