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ECB Deposit Facility Usage Hits Record As European Bank Liquidity Conditions Continue Deteriorating
According to the ECB, the June 1 usage of the Central Bank's Deposit Facility Usage has hit an all time high of €316.4 billion, an amount greater than seen any time before, including the days after the Lehman bankruptcy, and the March 2009 lows. This surge is an indication that European banks continue to perceive the continental liquidity situation as dire, as banks receive a submarket 0.25% on funds held with the ECB, as opposed to the 0.33% paid out by money markets. Is the European liquidity crisis now shifting aggressively into the shadow economy, with money market getting impaired under the radar? Should that be the case, it is likely that the European repo market is also in jeopardy, although don't expect to hear about this until it is too late, when there is no liquidity to be found at all. As we pointed out yesterday when comparing Euribor and EUR Libor, the sense of counterparty risk is now greater than it was in late 2008: this is likely another factor forcing banks to bypass any potentially insolvent counterparty altogether and store funds overnight with the safest entity of all, even if it means a haircut on returns.
The WSJ is also worried about the implication of a surging Euribor:
Fears about the health of the region's banks also pushed up euro interbank offered rates--or Euribor rates, at which banks lend funds to each other. The three-month benchmark rate hit 0.704% Wednesday--the highest level since late December 2009. By comparison, the rate stood at 0.634% at the end of March.
Higher Euribor rates imply increased funding costs for banks, which they may pass on to their corporate customers. Economists warn it could put a brake on the euro zone's economic recovery.
In short, nothing continues to be fixed in Europe, with Jean Claude Trichet just hoping that with greater distractions like the BP cam out there, skeptics will soon tire of worrying about a European financial system that is once again insolvent, and instead throw all of the Other People's Money under management into banks such as BBVA and Santander, which as is well-known continue to exist on liquidity vapors.
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It looks like the market has forgiven the euro for this. The vix is down 6% already...
How does one square these rates with the LIBOR rate falling (at least according to CNBC.com)? After LIBOR rose for 12 straight days, looks like it has fallen a bit in the last 2-3.
The end game? DOW apocalypse coming to an Economist cover near you circa early 2011.
What a joke these markets are. A rally based on non existent earnings due to mark to myth accounting, shameful BLS job reports and bubble blowing desperation from Chinese central planners. The whole damn thing is a scam and a sham. Nothing has been done for 3 years to even reform the system, not one person has been put in jail. Everyday we hurtle toward the inevitable, total collapse of confidence and thus the global economy.
Yeah but VK there really is nobody in the markets aside from the Fed & the big banks. The flash crash told us there are no buyers without the machines constantly churning. Their desperate move to influence the political process of our nation, aside from being treason, may have been the worst strategic move in their desperate fight for survival. Their business models are contingent upon fraud, theft, deception, fear and complicity of our government.
But But But - existing home sales was an upside "surprise" today!!
That alone should be good for about 10-handles on the SPX!!
(/ Fed.Co Plunge Protector 10K )
And now back to our regularly scheduled march towards armegeddon.
I am Chumbawamba.
T-shirt quote.
"My friend went to armageddon and all I got was this lousy t-shirt."
Where can anyone place their money?
I see record negative rates on the T-Bill surpassing Lehman shortly. The Euro is a no go. Commodities are a no go with China entering a collapse imo shortly. Certainly not equities after the flash crash ripped away all the clothers on PPS. Cannot go into oil since ships will have to start pulling into port and unloading their inventory to assist with skimming and the Oil scammers can no longer falsify the price of oil.
King dollar which is as good as gold..for now. And that commodity gold that people are slowly realizing is the ONLY currency that can always be relied upon for storage of wealth. Sure gold may face deflationary pressures if prices are finally permitted to fall but by that time it could be well over $2,000
Waiting for the daily market intervention driving the USDEUR to 1.235 or so... Should be coming any time...
"...throw all of the Other People's Money under management into banks such as BBVA and Santander, which as is well-known continue to exist on liquidity vapors. "
You are misinterpreting Europe and the significance of last May 9th events.
Euro is seeking a gold standard ... sort of.
G20 financial PR team meeting this weekend. I'd love to be a fly on the wall!
The Bilderberg Group also having their annual meeting in Spain in less than week.
The system is collapsing, Europe is suffocating from the lack of oxygen ie US Dollars. US Consumer production of credit peaked in 2007 and has been in a collapse mode since that time. Exactly the same thing that happened in the 30s when the UK and the Sterling were the center of the financial system.
People are shocked to find out that Europeans were going hungry while at the same time they were dumping grain out at sea in a failed attempt to get a bid on the grain price. Yet, Europeans were the biggest gold holders in the world.
People better wake up fast, thinking you have the holy grail to avoid chaos is a fantasy.
If everything is going to go "tits up" anyway, why not hold gold? It seemingly has the best upside potential (assuming one is fortuitous enough to be a survivor) as compared to the world of fiat. When a bear attacks your camp, you don't have to be faster than the bear, you just have to be faster than the slowest camper......
this is bigger hole than the hole in guatemala
http://www.reuters.com/article/idUSTRE65124B20100602?feedType=RSS&feedNa...
Sounds to me like the leak in the damn is getting worse and nobody is reporting this other than, of course, ZH. I would anticipate that we are literally days, maybe 2 weeks at the most, from the damn collapsing.
damn dam! - Ned
Is something looking bullish ?
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
The Central Bank's Deposit Facility Usage having hit an all time high of €316.4 billion establishes the ECB as the nexus of banking activity, and the documents the end of traditional intrabank lending and suggests a winding down of commercial credit extended by banks.
A liquidity evaporation, is currently occurring in the banks; a greater liquidity evaporation will come to more and more markets such as money market accounts and investment brokerages; investment security can only be found in personal ownership of gold.
The dramatic of the ECBs' Deposit Facility and the "haircut on returns" is a type of Seigniorage that comes to the ECB, under the direction of its director Mr. Trichet. Could it be, might it be, that he will rise to be Europe’s Seignior and Treasurer?
We are moving at light speed away from neoliberalism into the neo-centralism of global governance, specifically European Economic Governance, that is a federal economic, fiscal, banking, and seigniorage authority for the stability of the Euro.
The north south divide, that is the central periphery divide, in Europe was dissolved by the leaders announcement in early May 2010 of a common treasury to sell debt, buy distressed state debt and issue seigniorage aid to Greece. National sovereignty is a principle of a bygone era; those living in Europe are no longer residents of sovereign nation states, they are residents in a region of global governance. And the dramatic rise and ongoing use of the ECB's Deposit Facility melds all into European Economic Governance.