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ECB's Press Release On Portuguese Rating Threshold Suspension Until Further Notice

Tyler Durden's picture


7 July 2011 - ECB announces change in eligibility of debt instruments issued or guaranteed by the Portuguese government

The Governing Council of the European Central Bank (ECB) has decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purposes of the Eurosystem’s credit operations in the case of marketable debt instruments issued or guaranteed by the Portuguese government. This suspension will be maintained until further notice.

The Portuguese government has approved an economic and financial adjustment programme, which has been negotiated with the European Commission, in liaison with the ECB, and the International Monetary Fund. The Governing Council has assessed the programme and considers it to be appropriate. This positive assessment and the strong commitment of the Portuguese government to fully implement the programme are the basis, also from a risk management perspective, for the suspension announced herewith.

The suspension applies to all outstanding and new marketable debt instruments issued or guaranteed by the Portuguese government.


The farce continues...

In other news, rumors of euro's death have not been exaggerated one bit.


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Thu, 07/07/2011 - 09:38 | 1432195 Thorlyx
Thorlyx's picture

We don't need no stinking ratings, bitchez...

Thu, 07/07/2011 - 09:49 | 1432214 Popo
Popo's picture

"In light of the fact that all of this Portuguese paper is apparently dogshit,  we have decided to solve the problem by lowering the requirements for Portuguese paper to dogshit.    There.  I fixed it."

Isn't central banking easy?

Thu, 07/07/2011 - 09:57 | 1432246 TheTmfreak
TheTmfreak's picture

Apparently anything they do (or don't do) is correct. Its easy when one defines success on makebelieve.

Thu, 07/07/2011 - 10:27 | 1432334 MarketTruth
MarketTruth's picture

NINJA loans, once the domain of people, has now gone to countries as they can sell NINJA junk to the ECB.

Fri, 07/08/2011 - 07:41 | 1435462 midnight
midnight's picture

U.S. paper is the dogshit here. Very well polished by rating agencies, but still shit

Thu, 07/07/2011 - 09:41 | 1432199 RetiredSilverBug
RetiredSilverBug's picture

EU should protect itself in this financial war. Ignoring US rating agencies is a good start.

Thu, 07/07/2011 - 09:44 | 1432207 cossack55
cossack55's picture

The US has rating agencies? Huh? Who woulda thunk.

Thu, 07/07/2011 - 09:46 | 1432210 eigenvalue
eigenvalue's picture

Ignoring US rating agencies is not equal to ignoring the truth. The truth is that Portuguese bonds are junk no matter what ratings they have.

Thu, 07/07/2011 - 10:55 | 1432457 Urban Redneck
Urban Redneck's picture

But Portuguese debt was just as junk 72 hours ago as it is now.  There has been no material change in circumstances recently.  The relatively small spread in the sovereign repayment ability on the outstanding debt load (absent outright monetization/stealth default) between Portugal and the US also doesn't mirror the spread between AAA and junk.  So Moody's is playing politics WITH THE ECB??? They deserved to get bitch slapped, too bad the human rights ass clowns in Brussels and the Hague are too busy to look into their economic crimes against humanity.

Sat, 07/09/2011 - 00:35 | 1439166 InvalidID
InvalidID's picture

The problem with your thesis is that the US has options that Portugal doesn't. Like monetizing the debt.

 There is also the fact that the dollar is the WRC, meaning that people will flock to it in times of uncertainty. It's like name recognition. If Coke and Hanson's Natural had similar balance sheets you'd still place your bets on Coke's debt. Bigger, better recognized, more resources... I could go on and on, but I think you get the point.

Sat, 07/09/2011 - 03:33 | 1439266 Urban Redneck
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WRC is a quantifiable reality based on transaction settlements, but flight to safety is a relative perception based on a portfolio allocation.  Given USD weakness through MENA uprisings, Fukushima, et. al, the perception is shifting. 

The ability to directly monetize debt is a distinction between the ECB and FED, over the short term.  Central bankers, however, have a deep a bag of tricks on both sides of the pond and the statists behind the Euro want greater fiscal union within the Eurozone, which would inherently give the ECB monetization authority and balance sheet flexibility.

Right now Moody's is pushing a strong dollar/ weak euro agenda.  There was no material catalystfor the huge overnight reduction in ratings, when they get slapped down, they moved on to Belgium and skipped the sovereign and moved straight to the corporate, which they did start evaluating in March.  Technically, the downgrade could be justified within (barely) the criterion changes announced June 14, but it is somewhat of a stretch given the lending lifeline in Greece was extended, and Dexia's market access had not changed relative to similar market participants (before the downgrade - which becomes a self-fulfilling prophecy).  They would have had a much better case a week or two ago, but the strong dollar/ weak euro mantra was being chanted by the lemmings in light of the SPR manipulation and Greek uncertainty.

Getting back to the flight to safety.  Strong dollar/weak euro helps to diametrically opposed trades.  The traditional risk off/fear trade of dollars over other currencies, debt over equity, and short over long duration benefits US Treasury sales and refinancing.  However, a weak euro also benefits the exit and entry positions of a flight to safety (or diversification) out of the dollar and into the euro.  In short I think the big problem rig now is actually identifying big money's idea of the flight to safety.


Thu, 07/07/2011 - 09:47 | 1432212 AccreditedEYE
AccreditedEYE's picture

Dude, are you smoking crack or am I not picking up on your sarcasm?

Thu, 07/07/2011 - 11:31 | 1432639 scratch_and_sniff
scratch_and_sniff's picture

Moody's came out a day before Portugal went to market and killed their rating, down 4 NOTCHES!, to JUNK, OVERNIGHT. What, they only realised on tuesday that Portugal was insolvent? They are incompetent, they have proved it time and again(other than the time they downgraded S&P), the ECB is right to take no notice... way too fishy to take seriously, lets hope the world pays attention and breaks the monopoly on credibility. How the fuck can any American agency downgrade anyone when they grade the US as AAA - when they are openly debating default?? (You got Rand Paul going for a filibuster, just because he owns a few million in gold and mining stocks...fuck that, Moodys is toast, I would short the shit out of it after today)

Thu, 07/07/2011 - 12:11 | 1432841 Rossalgondamer
Rossalgondamer's picture

"...just because he owns a few million in gold and mining stocks..."

And there it is.

Setting aside our faceless crew of politicians. Some things are perceived to float in moments of pure panic - like just before drowning. Should we scold the prudent who jumped out early onto their steamer trunk? Should we blame the folks in steerage for charging the bridge and forcing a FSA run-aground?

Either way, Bon Voyage!

Thu, 07/07/2011 - 12:14 | 1432855 scratch_and_sniff
scratch_and_sniff's picture

No, just scold the fuckers who get caught kicking holes in the boat.

Thu, 07/07/2011 - 12:22 | 1432895 Rossalgondamer
Rossalgondamer's picture

I believe I agree with you - but the problem to me rests with systems which reinforce the single large boat theory.

More numerous sloops - better distribute both the freight and potential for mass carnage.

Thu, 07/07/2011 - 14:04 | 1433278 AccreditedEYE
AccreditedEYE's picture

Easy killer. When you look at what happened in Greece and extrapolate that to what will happen with the rest of the periphery, you need to let people know. Most investors in the know were expecting that downgrade anyway. (and more to come)

And your trying to tell me European politicians and bureaucrats DON'T act in their own interests? LOL Please bro.... have a scotch and take a few minutes to ponder that, then get back to me.

Thu, 07/07/2011 - 09:52 | 1432230 SheepDog-One
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Well, yes it IS a financial world war. Next always comes the actual shooting wars as the people starve to death and pillage and loot.

Thu, 07/07/2011 - 09:59 | 1432251 TheTmfreak
TheTmfreak's picture

If they made an alternate attempt to understand/evaluate risk and minimize it, than you're argument would make sense. Instead they are doing the plug the ears method and ignoring the obvious.

Thu, 07/07/2011 - 11:53 | 1432749 Highrev
Highrev's picture

Absolutely correct.

It is a financial war, not doubt about it.

And would anyone suggest that Europe not defend itself?

And is there any doubt about who's attacking whom?

Or does anyone think that these are European agencies rating Europe? Have we cleared that up? Uh, where are the downgrades on the U.S. state and municipal levels? On the federal level? Are you rolling on the floor laughing yet?

What ZH readers are correct about is that this ends badly. Now it remains for those same readers to figure out who goes down first and who takes the biggest beating. I've said before that the odd-man-out will take the biggest beating. I've also asked if you know who the odd-man-out is?

Sat, 07/09/2011 - 00:47 | 1439173 InvalidID
InvalidID's picture

 Let's ponder the question of whom is attacking whom. Let's ask where this started.... Which bank was the first one under from the Debt Bubble? Anyone? Northern Rock was the first. Who had the largest share of bad debt per GDP and per capita? The UK. Who has attempted to stay really really quite during this whole mess? The UK?

 From my house it looks like the UK had no industry to speak of, no resources to speak of and decided it needed to make a buck somehow. Look into Gordon Brown and see what kinda bullshit he was peddling. Look at how Germany was all about it, until Northern Rock went under. Then German banks couldn't unload that dog shit paper fast enough.

 Now its a game of Limbo, who can get the lowest without falling. The Euro zone doesn't look like she's ready for that game, as you all can see several of her peripheral states are failing. Its a game the US is in a good position to win, and why shouldn't she? After the financial terrorism coming out of the Euro Zone it's lucky the US didn't declare WWIII and start whooping ass again.

Thu, 07/07/2011 - 09:42 | 1432201 Everybodys All ...
Everybodys All American's picture

They had no choice ... otherwise the entirety of the ECB would be suddenly unemployed.

Thu, 07/07/2011 - 11:21 | 1432589 Thorlyx
Thorlyx's picture

Now the guys at Moody's and co. will be unemployed.  You've got to make tough choices.

Thu, 07/07/2011 - 09:43 | 1432203 francis_sawyer
francis_sawyer's picture

So... does "Until Further Notice" mean its TRANSITORY?

Thu, 07/07/2011 - 09:52 | 1432231 Transitory Disi...
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If we were living in the real world, the headline, which best describes the current financial situation would read: The end is near. We are in the middle of an economic financial meltdown. For Bilderberg high-financial managers the problem is how to postpone defaults for as long as possible“ and then to bail out, leaving governments (taxpayers) holding the bag, taking over the obligations of insolvent debtors. With overwhelming cross section of the worlds population against it, the trick is to override democratic politics.

As Bilderberg agrees, for this to happen, economic policy must be transferred from elected government bodies to those of financial planners,making the economy entirely dependent on them, with public borrowing creating an enormous risk-free market for interest-bearing loans. This explains what George Ball, the then Under-secretary for Economic Affairs with JFK and Johnson said back in 1968, at a Bilderberg meeting in Canada: Where does one find a legitimate base for the power of corporate management to make decisions that can profoundly affect the economic life of nations to whose governments they have only limited responsibility?

This is how financial oligarchy replaces democracy. The role of the European Central Bank, IMF, the World Bank, Bank of International Settlement, the Federal Reserve and other financial oversight agencies has been to make sure that bankers got paid.

The problem with today´s system is that the world is run by monetary systems, not by national credit systems. If you are smart, you don´t want a monetary system to run the world. You want sovereign nation-states to have their own credit systems, which is the system of their currency. Above all, the possibility of productive, non-inflationary credit creation by the state, which is firmly stated in the US Constitution, was excluded by Maastrich as a method of determining of economic and financial policy.

Now, in Europe, that can´t be done because in Europe, the governments are subject to control by private banking interests, called independent banking systems, which is blocked constitutionally from creating credit for governments. These institutions have the power to regulate government, and to dictate terms to government. Think about this institution within this European edifice called ECB. It tries to function like a European independent central bank, which has no government.

There is no government. There is no nation. It´s a group of nations run by a private bank.

The supposed independence of the Central Bank is the decisive control mechanism for private financial interests, which historically in Europe has been installed as an authoritative instrument against an economic policy of sovereign governments oriented towards the General Welfare. European banking is a remnant of a feudal society, in which private interests“ as typified by ancient venetian cartels or by the Lombard league which went down in the Dark Age in the 14th century.



By Daniel Estulin of

Thu, 07/07/2011 - 12:18 | 1432879 Rossalgondamer
Rossalgondamer's picture

And the democratic trick of politics is - Fear, Fiat money and Taxation.


Strip these - and we may honestly speak on sovereign dignity, peace, and prosperity.

Thu, 07/07/2011 - 17:55 | 1434295 Ghordius
Ghordius's picture

So if we prefer default risk to money printing inflation we are ancient feudalist?

Enjoy your way

Thu, 07/07/2011 - 10:00 | 1432256 TheTmfreak
TheTmfreak's picture

They should have just said the Euro is transitory.

Thu, 07/07/2011 - 09:43 | 1432205 eigenvalue
eigenvalue's picture

But the Euro and equities are higher on this news so mission accomplished.

Thu, 07/07/2011 - 09:43 | 1432206 Coke and Hookers
Coke and Hookers's picture

The ECB would gladly use human excrement as collateral for credit to save the euro. Just anything to save the dream. There should be plenty of collateral available since the entire EU elite is shitting their pants now.

Thu, 07/07/2011 - 09:52 | 1432232 LetThemEatRand
LetThemEatRand's picture

I also hear that human pubis is in demand in some European markets.

Thu, 07/07/2011 - 09:45 | 1432209 cossack55
cossack55's picture

Hell, my house should be worth at least 110 billion euros. Can I buy Austria?

Thu, 07/07/2011 - 09:51 | 1432222 SilverRhino
SilverRhino's picture

No Flounder, but you can have these 10,000 marbles.

Thu, 07/07/2011 - 10:04 | 1432268 francis_sawyer
francis_sawyer's picture

Thank you God!

Thu, 07/07/2011 - 09:46 | 1432211 molecool
molecool's picture

Funny how the inconvenient truth simply gets ignored. What a freak show...

Thu, 07/07/2011 - 09:59 | 1432253 Curtis LeMay
Curtis LeMay's picture

Well said.

Shit's surreal, ain't it?

It's like we are living in some parallel universe where the laws of physics and economics simply do not apply.

We can no longer overlook the fact that the puppetmasters taking us to this "new world" are along the way destroying the real one we all live in...

Thu, 07/07/2011 - 10:06 | 1432270 francis_sawyer
francis_sawyer's picture

"Convenient Lies" is the new documentary we're working on...

Thu, 07/07/2011 - 09:47 | 1432213 SheepDog-One
SheepDog-One's picture

Same phrases coming next to a Bernank speech soon no doubt!

Thu, 07/07/2011 - 09:48 | 1432215 inkarri9
inkarri9's picture

So by that logic, why not throw out credit scores for the little guys as well so that everyone can buy a house again and the party can continue.

Thu, 07/07/2011 - 09:49 | 1432217 alien-IQ
alien-IQ's picture

wouldn't it be nice if those rules applied to all of us?

just imagine:

YOU: I'd like to take a 250K personal loan please.

BANKER: Do you have any collateral?

YOU: Yes. I have this hamster.

BANKER: Excellent. You are approved.

Thu, 07/07/2011 - 09:53 | 1432233 wandstrasse
wandstrasse's picture

may I say that, within this context, you do insult hamsters.

Thu, 07/07/2011 - 09:56 | 1432244 alien-IQ
alien-IQ's picture

No hamsters were harmed in the scripting of that post. Any resemblance to actual hamsters, living or dead, is purely coincidental.

Thu, 07/07/2011 - 10:05 | 1432271 wandstrasse
wandstrasse's picture

ok ok but don't you think that your post could encourage people to offer their hamsters to ruthless bankers?

Thu, 07/07/2011 - 10:43 | 1432397 disabledvet
disabledvet's picture

it is a talking hamster.

Thu, 07/07/2011 - 09:58 | 1432248 equity_momo
equity_momo's picture

The freakoids who run the banking system enjoy sticking hamsters and other rodent like creatures into tubes that are inserted into their anus.  You'll have to lower your collateral quality if you want to draw a parallel with this. Something they would never ever find use for , like a fucking CLUE.

Offer to give them a clue in exchange for 250k.

Thu, 07/07/2011 - 10:11 | 1432284 francis_sawyer
francis_sawyer's picture

YOU: I'd like to take a 250K personal loan please.

BANKER: Do you have any collateral?

YOU: Yes. I have this hamster.

BANKER: Excellent. You are approved... Now kindly take the hamsters place on the wheel, and don't get off until I tell you...


There... fixed it...


Thu, 07/07/2011 - 09:49 | 1432218 hugovanderbubble
hugovanderbubble's picture

IF hedge funds doesnt appear, to short this farce, i will never ever more will buy any hedge fund in my f.g life.

Thu, 07/07/2011 - 10:22 | 1432319 MachoMan
MachoMan's picture

Weren't there numerous previous articles essentially explaining that the reason vigilantes haven't shown up is because they're up against a printing press?  Essentially, they can come in and donate for a short covering rally some more...  or sit back and front run/take scraps from the machine...  which do you think is more likely?

Thu, 07/07/2011 - 09:50 | 1432221 earnulf
earnulf's picture

So the newest rating agency is the GCECB (which doesn't make for a good acronym in any language).   Guess Europe found thier "rating" agency that they were looking for.

Next up, Greece Debt is AAA as is Ireland, Italy..etc

Thu, 07/07/2011 - 09:50 | 1432223 Everybodys All ...
Everybodys All American's picture

So if the US ever loses their AAA rating all we have to do is ignore it? Problem solved.

Thu, 07/07/2011 - 10:19 | 1432307 pat_mas
pat_mas's picture

The USA being AAA is already a bigger joke than everything happening these days .... If the US debt is the reference (aka AAA) then ECB accepting shite as collateral for portugese debt does make a lot of sense indeed. As said before, this is monetary war and the winner is whoever stands last.


Funny how UK seems protected from market turmoils atm ... won't probably last ;)

Thu, 07/07/2011 - 09:52 | 1432228 ziggy59
ziggy59's picture

nothing like neutering the ratings..hmmm interesting change of rule..ignore problem. theres always Hopium

Thu, 07/07/2011 - 12:17 | 1432873 luigi
luigi's picture

It seems rating agencies are first in ingnoring realities too inconvenient to take in account for...

Thu, 07/07/2011 - 09:53 | 1432234 qussl3
qussl3's picture

How soon before the agencies downgrade Germany?

They are on the hook for all of this BS eventually.

Thu, 07/07/2011 - 10:01 | 1432261 wandstrasse
wandstrasse's picture

hey hey hey - shut up or I downgrade YOU :-)

BTW Germany is in the worst position anyway. As we are the last citadel of industrial production in the western world which is worth mentioning, the most debt will be loaded upon us = the farthest and longest way we have to walk downwards and/or the deepest we will fall.

Thu, 07/07/2011 - 10:05 | 1432269 qussl3
qussl3's picture

Not a good idea to piss off the Germans........

How soon before its better to swallow a strong DM, and flip the EZ the bird?

German quality is usually worth it.

You guys are going to get a strong EUR anyways, why not get out from under the bloodsuckers?

Thu, 07/07/2011 - 10:10 | 1432282 wandstrasse
wandstrasse's picture

Germany is one of Ackermann's puppets. Period. Recently I heard him threatening with the end of the world if Greece's debt will not be increased. Suicide bankers run the world.

Thu, 07/07/2011 - 10:18 | 1432304 qussl3
qussl3's picture

Call his bluff.

Its always the fucking end of the world with these banker types.

Need more Icelanders.

Thu, 07/07/2011 - 10:14 | 1432295 Watson
Watson's picture

Actually, not so bad.
True that Germany will get more rubbish EUR debt, but eventually Merkel will be removed and DEM will return.
Since Germany will run surpluses in DEM, EUR debt will cheapen in DEM terms.
In fact, without German economy behind it, EUR could completely collapse...

Thu, 07/07/2011 - 10:19 | 1432308 qussl3
qussl3's picture


No Germany = China drops the EUR.

Thu, 07/07/2011 - 16:22 | 1433911 CassandraDoomsday
CassandraDoomsday's picture

And Angie knows it only too well. Germans are better off with a stronger currency (may even increase internal demand if workers are paid properly).

That was the deal to unite the two parts in 1989 - at the price of giving up the strong currency, and to pertain French (economic) control for a while.

Without the German backing the EURO will survive - about a second?

Thu, 07/07/2011 - 09:53 | 1432235 nobusiness
nobusiness's picture

Trichet - There must be no credit event, there must be no credit event!  are we idiots.  there already was a credit event in Greece, Spain, Port, Ireland, Iceland, US, UK, jackass.

Thu, 07/07/2011 - 09:54 | 1432237 equity_momo
equity_momo's picture

Sorry , what is JCTs reason for doing this? Whats the excuse?

I know its because Portugal and the Euro is fucked but id just like to know how they are spinning it.

This positive assessment and the strong commitment of the Portuguese government to fully implement the programme are the basis, also from a risk management perspective, for the suspension announced herewith.


Thats it? Markets should be in meltdown. This is full on panic mode at the top.


Thu, 07/07/2011 - 10:49 | 1432430 MadeOfQuarks
MadeOfQuarks's picture

Yep, it's funny hour. If anyone believed in the positive assessent and the strong commitment they wouldn't have to do this, it is precisely because no one else is buying it (the debt or the lies) that the ECB has to step in.

Thu, 07/07/2011 - 09:55 | 1432238 wandstrasse
wandstrasse's picture

the saying 'cash is trash' can eventually also be used reverse.

Thu, 07/07/2011 - 09:55 | 1432240 entendance
entendance's picture

Trichet says "ECB will follow stress tests" but won't observe credit ratings for Portugal. This doesn't make sense. € rallies, for now...

Thu, 07/07/2011 - 09:55 | 1432241 Archimedes
Archimedes's picture

All kidding aside..what are ther implications of this? So the ECB buys worthless paper with more worthless printed paper? What do the banks with these crap bonds then do with more worthless Euros?

Does not seem to benefit anyone.

Thu, 07/07/2011 - 10:00 | 1432259 Misean
Misean's picture

The ECB is attempting to put in place a price floor, ostensibly to boost confidence in Portuguese used TP. The likely result will be that the ECB will be the only purchaser.

It's a ploy. It will likely fail.

Thu, 07/07/2011 - 10:01 | 1432262 equity_momo
equity_momo's picture

Buy Eurostox futures probably.  Which is still just worthless bits of paper but it keeps the farcade up a while longer.

Im wondering when its time to blink and get out of this game completely. Problem is , i dont want to buy real estate yet and i dont really want to be 100% PMs. And sticking cash in the vault is risky as i fully expect cash transaction to be blackballed when the collapse comes. Or old notes to be discontinued etc.

Thu, 07/07/2011 - 10:22 | 1432318 francis_sawyer
francis_sawyer's picture

This whole charade is an exercise in keeping the "monthly nut" going long enough to give the banksters enough time to print enough fiat whereby they buy & warehouse physical commodities...

When the paper is finally destroyed, they'll still have all the goods... Might as well sock away your share while you still can...

Thu, 07/07/2011 - 11:07 | 1432508 Urban Redneck
Urban Redneck's picture

The ECB already has the worthless paper, so what isn't  happening is the margin clerk at the ECB isn't calling making margin calls today (and the banks don't have don't have to start dumping stuff in Europe to meet a margin call due this evening or tomorrow, whatever the fine print on that side of the pond says).

Thu, 07/07/2011 - 09:55 | 1432242 Marge N. Callz
Marge N. Callz's picture

Default is the new AAA.

Thu, 07/07/2011 - 09:57 | 1432245 Jim in MN
Jim in MN's picture

Secret plans to use Fed as 'broker' in last-ditch effort to avoid default and "armageddon": Reuters exclusive

Exclusive: Treasury secretly weighs options to avert default

WASHINGTON | Thu Jul 7, 2011 7:26am EDT

WASHINGTON (Reuters) - A small team of Treasury officials is discussing options to stave off default if Congress fails to raise the country's borrowing limit by an August 2 deadline, sources familiar with the matter said on Wednesday.

Senior officials, including Treasury Secretary Timothy Geithner, have repeatedly said there are no contingency plans if lawmakers do not give the U.S. government the authority to borrow more money.

But behind the scenes, top Treasury officials have been exploring ways to prevent a financial meltdown that would be triggered if the government were unable to pay its bills on time, sources told Reuters.

Treasury has studied the following issues:

- Whether the administration can delay payments to try to manage cash flows after August 2

- If the U.S. Constitution allows President Barack Obama to ignore Congress and the government to continue to issue debt

- Whether a 1985 finding by a government watchdog gives the government legal authority to prioritize payments.

The Treasury team has also spoken to the Federal Reserve about how the central bank -- specifically the New York Federal Reserve Bank -- would operate as Treasury's broker in the markets if a deal to raise the United States' $14.3 trillion borrowing cap is not reached on time.

Thu, 07/07/2011 - 10:38 | 1432377 Joe Sixpack
Joe Sixpack's picture

I hope Obama does use the Fed to bypass Congress. This will be the event that gets the Audit the Fed movement back into the drivers seat, and hopefully the "abolish the fed" crowd, too.

Thu, 07/07/2011 - 09:57 | 1432247 Misean
Misean's picture

I see, that the ECB wants to own every Portuguese bond issue going forward then...

Thu, 07/07/2011 - 09:59 | 1432252 TraderMark
TraderMark's picture

(video) ECRI's Achuthan says slowdown is not transitory, long term indicators point to continued slowdown

Thu, 07/07/2011 - 09:59 | 1432255 crash_davis
crash_davis's picture

i was wondering here recently if a bag full of dog crap with a portuguese bond taped to the front of it, left on the front step of the ECB, if that would be as good of colateral as the aforementioned hamster.

my question has been answered today.

Thu, 07/07/2011 - 10:00 | 1432258 swissinv
swissinv's picture

First the rating agencies lost their creditbility on Lehmann and Co... Now, they will lose it because they're playing political games. You simply can't downgrade Portugal directly to junk without any new real information and the timing stinks to high heaven. Of course, US remains AAA rated eventhough there is a good chance of default within a month. The US tries everything to crush Europe that investments are flowing back to US. Media only focus to Greece and Europe, DSK sex charges and US rating actions. Well, I'm not a friend of the EU construct and don't like how the can is kicked down the road again but I fully understand that the EU starting to get pissed.

Thu, 07/07/2011 - 10:11 | 1432285 qussl3
qussl3's picture

The US can print.

Portugal cant, for now at least lol.

Thu, 07/07/2011 - 10:23 | 1432322 swissinv
swissinv's picture

not so sure about this - QE3 could be well the last printing action

Thu, 07/07/2011 - 10:25 | 1432328 qussl3
qussl3's picture

Perhaps, but between default and printing, im pretty sure I know which path they will choose.

And the world would rather they print, the last thing you want is not paying the US army.

Thu, 07/07/2011 - 10:36 | 1432350 swissinv
swissinv's picture

agree - also see a FED printing action but this will push the USD down to hell.. You can have negative interest rates, but unfortunately there is no concept of having negative FX rates...

Thu, 07/07/2011 - 10:51 | 1432438 qussl3
qussl3's picture

Depends on how full retard the ECB is willing to go.

Will be interesting to see the Greek response to the ECB essentially underwriting Portugese debt.

How long till Spain comes hat in hand?

The Germans are so screwed.......

Thu, 07/07/2011 - 11:08 | 1432512 anyways
anyways's picture


You nailed it.

Thu, 07/07/2011 - 11:29 | 1432618 Ghordius
Ghordius's picture

BUUUHUUU! How you dare to write that US rating agencies are not allowed to play political games! Spoilsport!

Thu, 07/07/2011 - 10:03 | 1432264 youngman
youngman's picture

so if they are going to accept everything...I would think interest rates should go to 100-1000% on a three year....why not...they will take anything...

Thu, 07/07/2011 - 10:09 | 1432279 RobotTrader
RobotTrader's picture

Wow, the run in stocks the last 2 years in spite of all the horrid news out of Europe is simply eye-popping.

Thu, 07/07/2011 - 10:13 | 1432293 qussl3
qussl3's picture

Prelude to currency crisis.

Hyperinflation not possible when the middle class has no cash to spend.

Rich hide from inflation in assets.

Will work up to the point where printing driving true supply push inflation and destroys real economy.

Then realization and panic scramble for PMs.

Smart ones loading up now.

Risk that govts fuck people over.

Swiss strength cos govt not fuckers, Singapore too.

Thu, 07/07/2011 - 10:21 | 1432317 SheepDog-One
SheepDog-One's picture

Stocks are worth nothing when the currency collapses.

Thu, 07/07/2011 - 11:53 | 1432756 Ghordius
Ghordius's picture

Eh? Did someone steal your account?

Historically stocks are one of the better assets in any hyperinflation.

Thu, 07/07/2011 - 11:54 | 1432760 swissinv
swissinv's picture

stocks were incredible good investment during Weimarer Republic - especially gold/mining shares...

Thu, 07/07/2011 - 10:10 | 1432280 oogs66
oogs66's picture

the bailout of the ECB will be a trillion dollar experiment

Thu, 07/07/2011 - 10:13 | 1432290 jm
jm's picture

Much more than that.

Thu, 07/07/2011 - 10:16 | 1432288 Durchbruch
Durchbruch's picture

All the issue here is political only. Europe could print his way out of any debt, and that is the only solution for those wanting one Europe and one currency. Economics don't matter. We have to forecast and bet on the will power of the political elite supporting the euro. A lack of it could cause Germany to exit or a peripheral country to leave the euro. By now media and politics are dominated by the pro-european politicians. The more they wait in solving this situation the more probable we can see new anti-european political forces.  

Thu, 07/07/2011 - 10:14 | 1432297 Franken_Stein
Franken_Stein's picture


The minimum credit rating treshold is currently under survey.

We apologize for any inconvenience suffered.


Thu, 07/07/2011 - 10:17 | 1432302 lookma
lookma's picture


Its not hard to figure out, of course the EURO won't be held hostage by reatardo ratings agencies trying to evaluate the EURO through the failed lens of the dollar system. Just yesterday RAN headlines included:

EU's Barnier says rating agencies must be extremely careful to respect EU rules

German finance minister says does not believe there was a justification for Portugal rating downgrade


I wonder why the ECB thinks its EURO system is different than the FED's dollar system? Hmmm... Oh, I know, its probably all the gold ( they list as the first asset on the balance sheet and keep revaluing every quarter.

Who knew - if you keep telling people about all your gold, and keep issuing press releases designed to higlight your quarterly marked-to-market revalaution of this gold, maybe lenders will take notice and perhaps favor lending aginst your collateral instead of the less appealing alternatives - paper collateral.

The big press release from yesterday starts off with:

PRESS RELEASE 6 July 2011 - Consolidated financial statement of the Eurosystem as at 1 July 2011 Items not related to monetary policy operations

In the week ending 1 July 2011 the increase of EUR 12.6 billion in gold and gold receivables (asset item 1) reflected quarterly revaluation adjustments.


....maybe that's why China is buying all that euro debt ;)


Thu, 07/07/2011 - 10:23 | 1432323 qussl3
qussl3's picture

How soon before China demands to hold that collateral before extending any more abeyance?

Where is the ECB's gold anyways?

With the Germans or Americans?

This will end well lol.

Thu, 07/07/2011 - 11:00 | 1432482 MadeOfQuarks
MadeOfQuarks's picture

The gold is probably leased out to someone who's sold it, that's what it usually means when they put gold and gold receivables on the same line.

Thu, 07/07/2011 - 12:11 | 1432840 swissinv
swissinv's picture

I expect that Italian and France should still have a lot of it. Germans have the problem that most of its gold is custodied in the US

Thu, 07/07/2011 - 15:50 | 1433769 Urban Redneck
Urban Redneck's picture

Germany could play that to its advantage if they want Bernanke to bailout DB, CB, and Hypo (or the whole damn Eurozone for that matter).  It's a WMD but if central bankers won't play nice then the gloves should come off.  If they threaten to announce a repatriation, the Fed would probably turn the printers on.  If they actually announce a repatriation it could start a run on the the NY FED's gold supply.  Heaven forbid the US can't deliver 3,400 tons of physical gold on short notice- the USD wins the worthless fiat race by a mile.  Brinkmanship sucks when you go over the edge, but in this case it would just be accelerating the inevitable. 

Thu, 07/07/2011 - 10:53 | 1432445 InvalidID
InvalidID's picture

 The Euro is backed partially by gold. The problem? There isn't enough gold to cover the debt issued to Greece alone. If you don't have enough gold to cover your debt, is it really collateral anymore? Of course, we have to wonder if the ECB would ever allow anyone to take that gold in the first place. If the Euro were to fold up, do you think we'd be allowed to collect on that collateral? No? Then it isn't really collateral is it?

Thu, 07/07/2011 - 11:13 | 1432532 Non Passaran
Non Passaran's picture


That grandparent comment above is utter nonsense.

By the way I think you are right - IIRC an NCB's gold cannot be taken as it is transferred to ECB and stays there as long as the country remains in euro-zone.

Thu, 07/07/2011 - 11:02 | 1432489 Non Passaran
Non Passaran's picture

The 12.6bn increase is peanuts compared to the amount of bad debt the ESCB has on its books.
As for China "favoring" euro vs. US debt, you probably didn't get the memo that since last year China actually increased their purchases of US debt.

Thu, 07/07/2011 - 11:57 | 1432773 Urban Redneck
Urban Redneck's picture

How much have the Chinese reserves increased was is the change in the percentage of reserves invested in US debt?  Nominal and relative changes aren't the same.

Thu, 07/07/2011 - 10:19 | 1432306 Steak
Steak's picture

During 2008 the Fed accepted all kinds of collateral that was defaulted in all but name from the likes of Lehman.  While this is a seminal event for the ECB, as they indicate they will take all paper without regard, we knew they would take any paper without regard.  The market impact from this move *should* be dramatic, but then again the ponzi *should* have ended in 2008.

Thu, 07/07/2011 - 10:23 | 1432321 Dr. Grover Visicool
Dr. Grover Visicool's picture

Could this action be less about what the ECB will accept as collateral and more about telling the credit rating agencies where to stuff their ratings? Not sure what impact a match of urinary olympics will have on this going forward, but it will be interesting to watch.

Thu, 07/07/2011 - 10:26 | 1432329 curbyourrisk
curbyourrisk's picture

And what about the CDS' do they react to this?

Thu, 07/07/2011 - 10:27 | 1432333 RobotTrader
Thu, 07/07/2011 - 10:36 | 1432360 Major Priapus
Major Priapus's picture

Here is the German perspective:,1518,772965,00.html

I find it most telling that when Germans confront crisis of historic import - they resort to metaphor of history; i.e.  "... stab in the back!"

sigh - history may not repeat itself - but it sure does rhyme!

Thu, 07/07/2011 - 10:52 | 1432439 Zombies On Toast
Zombies On Toast's picture

I recently watched the movie "1984" on Netflix.

The world of Big Brother is here. Evil is good and good is evil.

Thu, 07/07/2011 - 11:11 | 1432530 geminiRX
geminiRX's picture

I am super confused?


How can a country have it's debt instruments halted from ratings? You would think that would send ratings agencies and bond vigilantes into a frenzy. I am scratching my head and wondering why there is no immediate retaliation for this?

Thu, 07/07/2011 - 11:50 | 1432736 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

I feel you man...


I guess its similar to how money is expierienced by citizens in a way that bears little resemblence to its actual nature (I have to work for it and so it seems like wealth, but they just print it)...

I guess all this rating and "creditworthiness" stuff is yet another puppet show put on to impress those who work for a living, but if little relevance for the elites. 

Thu, 07/07/2011 - 11:14 | 1432547 disabledvet
disabledvet's picture

What's the tally since 2010?  Trillion or there abouts?  In the USA the government got ownership of GM and AIG and to some extent Chrysler.  It got basic control of the banks since they couldn't raise their dividends without permission of the Fed--"start lending to someone other than the government or else!" comes to mind.  What has the ECB "gotten for all it's pain"?

Thu, 07/07/2011 - 12:10 | 1432834 luigi
luigi's picture

Frankly speaking, it sounds like a slap in the face of Moody's... at least it does so to some of us on this side of the pond.

There are also other interesting quotes of Trichet about rating agencies today.

Thu, 07/07/2011 - 12:27 | 1432920 PulauHantu29
PulauHantu29's picture

Who needs an "offical" rating. Everyone knows they are J-U-N-K.

Thu, 07/07/2011 - 12:31 | 1432939 Major Priapus
Major Priapus's picture

Its quite simple really:

The Eurocrats are not buying time for lipstick-bedecked-PIIGS  to be rescued - they are instead buying time to rescue the Banksters by continuing the transfer of debt from private banks to the taxpayer.

Major private-sector European investment banks accommodated EU policy of unity at any cost by purchasing gob-stopping quantities of these PIIGS’ debt.  Euro-banks mortgaged their free-enterprise souls in a diabolical contract no different than their American predecessors’ by relying on public credulity that they too, are too big to fail and are entitled to a taxpayer bailout when (not if) necessary. 


That was supposed to be the ECB’s job, but the ECB is itself already bankrupt, given its own balance sheets are already crammed with worthless PIIGS government bonds accepted as collateral for loans to fund further private sector purchase of PIIGS debt.

Europe has funded debt by buying debt in order to fund yet more debt no different than consumers employing a series of maxed out credit cards to pay off other maxed out credit cards.

This will all end in tears.  Little wonder Germany is about to restrict the purchase of precious metals by concerned citizens.

We are rapidly approaching what Germans are loathe to deem "a von Havenstein inflection point"!

Thu, 07/07/2011 - 12:35 | 1432954 Major Priapus
Major Priapus's picture

I just realized...  it is even simpler than I thought.  The ECB is merely attempting to remain solvent by rejigging the definition of "solvency".

The buck-naked Ponzi-(Im)Potentate is grasping at fig leaves.


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