Euro Surges On News Chinese White Knight To Make Repeat Appearance, Attempt To Bail Out Europe For Second Time (Just As Unsuccessfully)

Tyler Durden's picture

Back in January we wrote with some amusement that China would be Portugal's knight in shining armor following a "Reuters report that Portugal is in the process of making a private placement of bonds, without announcing details on size or the buyer... The WSJ has just confirmed that China was indeed the buyer, and the amount purchased was €1.1 billion." Since then Portugese bonds have tumbled and China has taken at least a good 10% loss. Five months later, it is time to kick the can once more down the road, courtesy of the Chinese yet again, who not surprisingly don't want to experience a partial wipe out on their foolish investments across their soon to be European protectorate should Greece file tomorrow. The FT reports: "Asian investors including the Chinese government are expected to represent a “strong proportion” of the buyers of Portuguese bail-out bonds when the eurozone’s €440bn rescue fund begins auctioning them next month, according to senior fund officials.  Klaus Regling, chief executive of the European Financial Stability Facility, told reporters on Wednesday that Beijing was “clearly interested” in the Portuguese auctions and that he expected China to participate." And whoever said that stupidity follows an arithmetic progression was wrong. It's exponential: "He argued the intense interest from Asia and other international investors showed renewed confidence in the future of the euro as a currency." Uh, no. That was the bullshit excuse in January. Now it is merely an attempt to not get destroyed in the upcoming massive pan-continental "rights offering" which will see existing "investors" take haircuts of up to 50%. But since when does Europe even pretend to tell the truth.

From the FT:

“[Asia] is a region that has money to invest in the rest of the world,” Mr Regling said. “They don’t want to go only into one currency. They don’t want to go only into one asset class . . . They look at us and come to the conclusion it’s a good way to diversify.”

Chinese officials have expressed interest in investing in European assets as a way to diversify holdings in their sovereign wealth and other investment funds, which have historically concentrated on dollar-based assets. While Beijing has acknowledged it remains a significant holder in Portuguese and Greek sovereign bonds, Chinese officials have been reluctant to disclose where in Europe it will make investments.

Christophe Frankel, EFSF chief financial officer, confirmed that China had participated in its January auction, which raised cash for Ireland’s bail-out, but declined to disclose how much Beijing had invested.

China’s involvement in the triple A rated bonds issued by the bail-out fund could be an indication Beijing is focusing on ultra-safe assets rather than more risky sovereign bonds for countries such as Ireland, Portugal and Greece

In the meantime, absent this latest cash infusion, Lisbon would be broke within a month:

The move, coming soon after the bail-out was approved by EU finance ministers last week, reflects Lisbon’s urgent need for cash, with nearly €10bn in debts coming due by the middle of next month.

Naturally, the euro which can no longer discount a future further than 1 day or at most a week ahead, is surging. If history is any indication, the move is to be faded, as now it is China's turn to experience the half life effect of repeated and flawed "interventions" which have already forced the SNB and the BOJ to cease and desist from pretending they have more money than the capital markets (or, in China's case, prevent the inevitable). If anything, this last ditch pre-rights offering smacks of nothing short of desperation on the side of Europe's bloated, privileged and endlessly lying kleptocrats. That said, all the shorts which recently flipped out of the USD into the EUR will likely keep the covering momentum going for a while before the same weak marginal hands that got evaporated on the recent move up in the USD experience the same fate on the other side of the Atlantic.

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Ray1968's picture

Short the spike. TD is right... this will soon fade.

Ahmeexnal's picture

Gives anyone wishing to dump their euros a little more bang for the euro so they can then exchange it for PMs, cocoa beans, parrot feathers, bags of salt, dung beetles, or any other tradeable items worth something,  before the euro -and the rest of all paper money- collapses to recycled toilet paper status.


In other news, China is building a new "wall of China" in order to prevent the hungry smelly dirty uncultured paupers of europe from entering the middle kingdom when TSHTF.

Concentrated power has always been the enemy of liberty.'s picture

What's the bid/ask on dung beetles.  I WTB.

Cdad's picture

Seriously, is this the reason the Euro just went apeshit?

The market saw sizable stop-loss euro purchases at $1.4120 and $1.4150, encouraged by a Financial Times article quoting the chief executive of the European Financial Stability Facility as saying China was "clearly interested" in buying bonds for the Portugal bailout to be issued in mid-June.  Reuters


You mean that a desperate bailout king in Euroland says this...with no actual bailout bond buying, and the Euro moves 2 cents?  So this non story is placed to suggest we are good through June?   You have got to be kidding me.  So I guess the criminal syndicate known as Wall Street was very nervous about that S&P 100 day sma issue today. 

Zero market integrity.  None.  In fact, more evidence that there is no market anymore.  

Good grief [and by that I mean just commence with the zombie apocalypse already because this bullshit is getting so tiring that I rather think I would prefer a world with the flesh eaters to one with these jack ass bankers]

Orly's picture

I'm about yay tired of getting monkey-hammered by this crap myself.

RoRoTrader's picture

what are you like a fucking saint or something, orly?'s the way i see it; China bails out the US for Years and that no longer works so its on to the next lowest common denominator which is nation states within a single currency union with a negotiated backstop by the ECB which itself is technically bankrupt.

and, to top that off the mayor of Dublin, Ireland is selling the notion that the Chinese will be coming to the Party....with plastic santas for all dummies to go around.

where is the ira when it is needed

get real........not you, Orly.... you are more than real.

can we spell/smell desperation...........the mayor of is obviously King

can you just imagine the historic implications of the Chinese in Paris?!?!.......NO!!!!!!

short the GBP, equity indexes, NZD tonight........looking to short OIL

Harlequin001's picture

China prints a shit load of new Renminbi which it uses to buy a US T Bill, pledges that as collateral to a European bank for a credit line which it uses to buy Irish or any other kind of imploding debt.

If the US dollar tanks, China simply prints more money and buys another US T with which it makes good on its collateral to the European banks. If Ireland fails it demands hard assets in repayment.

This shit has got to stop. Our politicians are committing TREASON, for which we will need to slaughter our children on the mantle of nationalism when the Chinese come demanding payment on their debt.

The Chinese conjured this stuff up from thin air and will demand hard assets in repayment. What does it take to get people to understand this? These politicos are selling our countries out for nothing.

People have been shot for less...

It will take complete repudiation of all these debts and a gold standard to stop this, nothing less.

Orly's picture

But couldn't it work in the opposite direction for the Chinese?  I mean a blowback or backfire?

Suppose the Chinese conjure up renminbi and then turn around and buy all of this European paper.  Maybe they have to sell US dollars to do it and hedge their bets with physical metal, precious and base.  The USD continues to go into the tank and it turns out Gross was right and that Treasuries are a bad move.

The world panics as the US has to raise rates to raise capital and the flight is again to precious metals but not necessarily the USD.  The Chinese print more money to buy gold and European sovereign debt because they are now in the pickle they were before with the US, in that they have to keep buying or the whole thing comes down around their ears.

Inflation in China soars.  The price of gold and silver and copper and zinc soar along with it.  There comes a massive slowdown in the US economy- another round of stagflation- and we muddle through.

Meanwhile, commodity prices come off hard, maybe even crash.  The Chinese are forced to sell their commodities at a massive loss in order to keep their European investment hopes alive.  The economy is basically insolvent.

There are riots in the streets of Beijing.  US manufacturing comes back strong with new investment.  The Chinese economy becomes a net importer and inflation soars again in basic goods.

Two billion people say no mas (or whatever it is they say in China...) and there is a massive regime change, making the Middle Kingdom safe for Western "democratic" capitalism.

It seems they are going from the frying pan to the fire on this one.  I think it's all in the plan. The old bait-n-switch.

Harlequin001's picture

Orly, I think the problem here is that you're still thinking pre crash. China has a problem ostensibly with a rising currency from a budget surplus, the US has the oposite. China needs a good reason to slam the Yuan whereas for the USD it is inevitable.

I can see no good reasson why the Chinese would want to hedge their bets with pm's; they want a weaker currency and magicing it up from fresh air is their only way to weaken it; buying USD's first slows the dollars decline in the short term.

My problem is that they are using this money created from nothing to compete with me and everyone else's hard earned cash. When they call it having been given hard collateral in exchange we will be at war.

Zeilschip's picture

People on ZH are forgetting that the average income in some parts in (western) China is around $2. I mean China is waaay from becoming a global player, all the stories about China's $3 trillion reserves, well US firms have $3 trillion parked just outside the US, never mind what they have inside the US.

Harlequin001's picture

I think this is getting off topic a bit, China is better known for its human wave tactics as opposed to sophisticated military technology, my point being that the US cannot afford its carriers and missiles; it is not the ascent of China but the decent of the West that is the problem.

My point in all of this is that there is no limit to how much of your stuff I can buy if I can create unlimited free money in my own currency, and there is no limit to how much pain you can suffer trying to repay it if you can't print it.

We need a gold standard, pure and simple...

Sovereign wealth funds should be banned.

Harlequin001's picture

'People on ZH are forgetting that the average income in some parts in (western) China is around $2.'

absolutely, just think what happens next when a $5 bag of rice goes up by $5.

China calls in its debt to buy rice...

Mountainview's picture

The Chinese will buy the Greek Crown-Jewels,i.e. the last cash flow positive assets the Greek State owns. Afterwards it's darkness and default + exit EURO.

tiger7905's picture

Great Rob McEwen interview. His perspectives on Europe and bailouts, as well as gold and silver of course.

Pegasus Muse's picture

Good stuff.  McEwen is one of the best CEOs in PM the mining industry.  His interests are properly aligned with stockholders.  Own stock in his companies.

Popo's picture

Easiest short ever.   Why do monetarists think they're in the driver's seat?   The arrogance would be funny if it weren't so sad.

chump666's picture

I know what a joke.  China is a economic and financial joke.  Check the NZD spike, claims are coming out china that they will buy New Zealand too!  So looking forward to China's meltdown in 2011.


Zeilschip's picture

Let me guess. You looking forward to making cheap shoes and toys in the US doing 14 hour shifts right? Question is though do you have the necessary skills?

lolmao500's picture

China has got to do something useful with their useless dollars. Like buying bankrupt countries so they can be their slaves in the future.

In other news :

New FBI Files Alleging AIPAC Theft of Government Property and Israeli Espionage Released

So... how long before those AIPAC traitors are arrested?

Bay of Pigs's picture

This part caught my eye,

"These files, available on the Internet for the first time, reveal activities that undermined rule of law and governance.  They have wrought massive economic harm to American businesses and workers.  We urge all concerned Americans to carefully review and ponder the implications of these FBI files and other documents now available from the Israel Lobby Archive."

War on Terror indeed. Who are we fighting again?

Fedophile's picture

In 1985 Israel had a GDP a full 2/3s of one percent of US GDP; how much damage could have been done?

That part caught your eye because it's sensationalized. If the headline read, "a little political espionage and back and forth over tariffs that would effect only 7 companies", like the reports did (but who follows up on sources?) no one would have taken a second look.

It's a non issue; nothing to see here.

Cthonic's picture

I used to wear a blue suit to a certain system program office every day and learned rather quickly which foreign military sales attachés required the utmost vigilance.  It would be an error to downplay the scope or opportunistic nature of their intelligence gathering operations.

Bay of Pigs's picture


Thanks for catching the date on that. 

Why the hell is this old news being posted right now lolmao500? I don't like AIPAC, but a 26 year old story?

Cthonic's picture

Because the FBI just declassified and posted it recently.

luckylogger's picture

double down always worked really well for me.

Didn't one of those Arab countries double down on Citi stock at 35 or so?


Concentrated power has always been the enemy of liberty.'s picture

The doubling down has been watching POTUS grab ankles and "double down" for his arab brethren.  Shameful.

Kevin... Who suffers from Cassandras curse's picture

When you bet small..... You lose when you win?

MountainLotus's picture

China want to buy a lot of EURO bonds so that it can get rid of some of US dollar and some europeans might have feel more good toward China.

Spitzer's picture

Eurozone: Fuck it, we are going to kick in freegold

China: Wait...We want to get more gold first

Eurozone: Ok then, buy some bonds

Ahmeexnal's picture

More likely:

eurozone: Please help me, I'm european!

China: Confucius say we buy some eurotrash bonds, but with collateral.

eurozone: anything you ask, but please help me, I'm european!

China: Confucius say we take all gold and your women under 25 as collateral.


mynhair's picture

Surges?  WTF?

1 hr for USDHUF to break below 190, or I'm going to bed.

(With a set 189 buy in)

gwar5's picture

China is smart.

They get to play the good guy and prospect for future European naval bases. The ECB  will be still left to face the pitchforks.

ForexFilms's picture

Yeah, maybe China will be the new ECB when it's all over.

chump666's picture

It's a distraction for their (China's) illiquid time bombs - banks.  China should just stick to what they do best building more zombie apartment loans and malls and excepting imported inflation from the US.

Some say we got 2-5yrs before the whole financial systems just collapses.  I am looking at 2011 when i hear this vomit from China

Ecoman11's picture

Christine Lagarde who? Don't worry baby, Daddy is in town now.

mynhair's picture

She be ugly.  Best they can do?

knukles's picture

Full tilt hegemony gets a little great, a lot mediocre and a whole bunch just plain nasty.

Ahmeexnal's picture

she so feckin ugly, she could be a modern masterpiece

disabledvet's picture

well--she was named after a car with an attitude problem.  and we all know about women who are compared to cars...

wretch's picture

Never go full retard, man.

AccreditedEYE's picture

What fools.. They keep trying to buy power in an Anglo-dominated world. They better keep building aircraft carriers because they are going to need them to collect.

frippy's picture

How stupid is China? Prediction: when America cedes the crown of alpha dog, China will not be there to claim it. I bet Germany comes in and scoops it up while China fumbles with its ridiculous 1000000 year plan.'s picture

Tyler....what are your thoughts on Schiff vs. NIA....

Tyler Durden's picture

Haven't followed it, but here a counter question: in exposing fraud and corruption, which the NIA has done in recent months, some of which work has ended up on Zero Hedge, has it backed its findings and observations with facts, and if so, is it providing incremental information over and above what is available in the Borg?

If so, who cares if Vision Victory, or whoever is the purported head of the organization, is the 3rd coming of Tim Sykes?'s picture

Ronald Regan had it right..."Trust but verify.." holds true with any of our sources.... I don't mess around with Penny stocks anyways because I prefer my gambling to be conducted in Casinos....I still hope they are above board so as not to taint their message...

Cult_of_Reason's picture

Buffet said, "You only find out who is swimming naked when the tide goes out."

China is trying to prevent the tide going out because China is swimming naked too.

If there is another global financial crisis that start in Europe, Chinese Ponzi scheme economy will be exposed.

mynhair's picture

This is looking way too wonky.  Taking 2 USDHUF at 190.7, if it gets there.

Ok, got 1.  Back to 189.