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Europe's Horrendous Liquidity Just Got Even Worse (And Nonexistent In Spain)

Tyler Durden's picture


Even as the regularly scheduled take down of gold sends the risky FX pairs (but not the EURCHF), and their immediate computerized proxy, the S&P, higher, the truth about Europe's bad and deteriorating liquidity is out there in plain view. The most recent ECB Discount Facility usage just hit a fresh new all time high at €365 billion, 15 billion higher compared to two days ago, and €80 billion higher compared to a month ago. Banks are now openly warehousing every euro bill they can find with the ECB. Compounding the issue, is the continuing grind higher in the EUR Libor, hitting a fresh 2010 high of 0.65%. The primary driver for these adverse development was the earlier news in Spanish newspaper Cinco Dias that Spanish interbank liquidity no longer exists. And while reality is uglier by the day as the double dip reality seeps in, in the realm of rosy mythology, we have Ben Bernanke seeing US economic growth, and the World Bank rising global GDP growth forecasts. Picks your side.

ECB deposit window usage:

EUR Libor:


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Wed, 06/09/2010 - 12:05 | 403403 homersimpson
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When Ben announces that he pooped before his meeting, does the market go up 100 points, too?

Wed, 06/09/2010 - 12:27 | 403473 firstdivision
firstdivision's picture

Of course it does.  If he poops, then he is able to run from the congressional meeting back to his comp that is currently idle with FXPro asking for Y Ben, there is no Yes button.

Wed, 06/09/2010 - 12:44 | 403527 Sudden Debt
Sudden Debt's picture

It depends on the kind of paper that he uses to whipe his ass after it.

Wed, 06/09/2010 - 13:43 | 403696 debauch
debauch's picture

No.  Pooing is deflationary because it consumes toilet paper currency.

Wed, 06/09/2010 - 14:40 | 403899 Missing_Link
Missing_Link's picture

Yes, because when he poops, he poops MONEY, BITCHEZ!

Wed, 06/09/2010 - 15:26 | 404068 Rusty_Shackleford
Rusty_Shackleford's picture


Wed, 06/09/2010 - 12:15 | 403407 homersimpson
homersimpson's picture

[comment deleted by poster]

Wed, 06/09/2010 - 12:06 | 403408 mule65
mule65's picture

DOW 10,000!  Wow!

Oh wait, we did this 11 years ago.  Nevermind.


Wed, 06/09/2010 - 12:25 | 403461 DoChenRollingBearing
DoChenRollingBearing's picture

+ 10,000    Hahaha!

Very good!

Wed, 06/09/2010 - 12:45 | 403528 Sudden Debt
Sudden Debt's picture

That's what they mean with: PARTY LIKE IT'S 1999!

Wed, 06/09/2010 - 12:10 | 403414 Attitude_Check
Attitude_Check's picture

This is the result of the "flight-safety" trade into the $.  Although why anyone would consider the $ safe-haven anymore baffles me.  I guess it is the human instinct to fall-back on what worked the last-time when in severe stress.


I'm waiting for a big slug of US bonds to be sold during this period, THEN a massive QE 2.0 initiated without warning!

Wed, 06/09/2010 - 12:22 | 403450 JLee2027
JLee2027's picture

How can QE 2.0 just happen? It requires Congress to vote on a bill, remember?   

It won't happen, they're all running scared of the Tea Party.

Wed, 06/09/2010 - 12:27 | 403470 DoChenRollingBearing
DoChenRollingBearing's picture

I dunno Jlee. 

I think that the Dems are either clueless or want our economy to go down bad (to rebuild it in their Socialist vision) or BOTH.

Wed, 06/09/2010 - 13:27 | 403648 Heavy
Heavy's picture

I would agree with the sometimes stated idea that a change, if you will, in the nature of the global monetary system is likely within the next decade.  I would not worry that such a change would be from neo-Keynesian to socialism (some say communism), nor would I worry that it would be sparked by an economic failure engineered by the Dems.  I would worry that we go from neo-Keynesian to something more corporate, less transparent, more disparate, more global (or simi-global (East v West 1984 style anyone?)).  The end of the dollar as world reserve currency (which was initially achieved by militaryactions), would seem to be more likely every day.   The forces of physics would seem to be a more likely culprit for the ultimate social actions that end the current paradigm.

Wed, 06/09/2010 - 17:56 | 404521 DoChenRollingBearing
DoChenRollingBearing's picture

duplicate post, sorry.

Wed, 06/09/2010 - 17:55 | 404523 DoChenRollingBearing
DoChenRollingBearing's picture

I have proven many times that I am a lousy predictor of the future.

So many variables at play...

Maybe probability can give us some clues.

Still, I see no logic among the Keynesians since it seems an open and shut case that it has not worked, making things worse in fact.

Fri, 06/11/2010 - 14:43 | 408622 Heavy
Heavy's picture

Agreed...with all but the first one, just being human makes you one of the greatest known future predictors out there.

Wed, 06/09/2010 - 12:29 | 403481 Attitude_Check
Attitude_Check's picture

There are many way's to initiate QE 2.0 defacto without Congressional approval.  Not that it is actually Constitutional -- but that hasn't stopped them so far.  The majority of QE 1.0 was done without Congressional approval.  The TARP was a $700B misdirection.


The FED just needs to open up the $ swap lines with other central banks and flood the international market with loaned $'s to the other CB's and POOF instant QE 2.0 without a word to CONgress,

Wed, 06/09/2010 - 12:42 | 403520 JLee2027
JLee2027's picture

I don't believe that sorry. The money would have be created (printed) to do that, otherwise you're moving money

from one bucket to another. He can't print w/o approval.

Wed, 06/09/2010 - 12:46 | 403532 Teaser
Teaser's picture

might want to check the facts on this...


He can't print w/o approval.



Wed, 06/09/2010 - 12:48 | 403540 taraxias
taraxias's picture

He has, and he will again.

Wed, 06/09/2010 - 12:49 | 403542 Attitude_Check
Attitude_Check's picture

It was done already.  It is done all the time. It is being done now (at a low level).  Check out at the Fed website what $ swaps are.

Wed, 06/09/2010 - 13:10 | 403595 aaronvelasquez
aaronvelasquez's picture

QE2 is being carried out through unlimited backstopping of Fannie and Freddie, dollar swaps, and let us not forget that TARP is a rolling total.  $700 billion was not a total, it was the cap on the amount outstanding at any one time.  



Wed, 06/09/2010 - 13:46 | 403706 tmosley
tmosley's picture

Yeah, and we all know that Bernanke is above repute.

I mean, they've never been audited, but that is because they are SOOOOOOO trustworthy.  Surely they would never use their power to profit themselves and their friends.  Surely...

Wed, 06/09/2010 - 15:14 | 404024 Busy-Body
Busy-Body's picture

The uninformed (and potentially even the ignorant) are welcomed at ZH.  This is, after all, a forum for learning.  That said, naivete' would be greatly discouraged and could best be remedied by a bit more research on your part.

Wed, 06/09/2010 - 12:36 | 403501 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

How can QE 2.0 just happen?

By proxy...Just like it does everyday...

Wed, 06/09/2010 - 12:46 | 403533 Sudden Debt
Sudden Debt's picture

They made a macro in excel so it's going to go a lot faster now.

Wed, 06/09/2010 - 13:01 | 403577 Solarman
Solarman's picture

They are not running to the dollar, they must buy back dollars as the carry is being unwound.  The same thing happens to the Yen.

Wed, 06/09/2010 - 12:11 | 403418 The Franchise
The Franchise's picture

Banco Santander, why do you vex me so? Why will you not drop under $8? Why, oh why.

Wed, 06/09/2010 - 13:23 | 403635 Screwloose
Screwloose's picture


It's a Columbian laundry.  Never short of cash.

Wed, 06/09/2010 - 12:13 | 403423 firstdivision
firstdivision's picture

Tyler, did the EURJPY & ES recouple before or after yesterdays ramp job?

Wed, 06/09/2010 - 12:14 | 403424 ZeroPower
ZeroPower's picture

Is anyone else seeing pretty much nonexistent volume from around 1130 to present (1215). ES and SPY are trapped..

Wed, 06/09/2010 - 12:19 | 403439 Cheeky Bastard
Cheeky Bastard's picture

Tyler; only the regionals and the Cajas have the problem. 

Big banks are doing fine [probably overcollateralizing the REPOs, but have their borrowing operations run smoothly. Check the Cinco text again; its mentioned there]. Cajas and regional are locked out since no one is sure of the value of the collateral they hold on their balance sheets [since any effect of credit enhancement in form of governmental backing is effectively over with the downgrade].

Wed, 06/09/2010 - 12:29 | 403483 DoChenRollingBearing
DoChenRollingBearing's picture

I had not heard that Cheeky re Spain's big banks being OK.

Thanks for that tidbit of news.  Going straight into my mental hopper (along with everything else) for more cogitation.

Wed, 06/09/2010 - 12:38 | 403500 Cheeky Bastard
Cheeky Bastard's picture

Cinco Dias article [the one linked here; the overcollateralization of REPOs by the big boys and the reason for inaccessibility by the regionals and Cajas are my thoughts]:

Elsewhere in the Spanish financial sector, newspaper Cinco Dias is reporting that second tier Spanish banks are being frozen out of the European interbank market and that only the largest institutions are managing to finance their operations smoothly, adding that the situation has worsened since the start of the week.  


Also Santander just did this:

Banco Santander announced this morning that it has agreed to acquire Bank of America's 24.9% stake in its Mexican unit, Grupo Financiero Santander ("Santander Mexico"), for $2.5 billion. Following the deal Santander's holding in Santander Mexico will amount to 99.9%. It is estimated that the transaction will have a positive impact of 1.3% on Santander's EPS from year one and a ROI of 15% from year three, based on market consensus estimates of Santander Mexico's earnings.


And you dont go into a buying spree if you have short term funding problems.

Wed, 06/09/2010 - 12:40 | 403515 ZeroPower
ZeroPower's picture

Thanks for the info, haven't researched too much about Spain myself and now i know a bit more.  

Wed, 06/09/2010 - 13:18 | 403618 DoChenRollingBearing
DoChenRollingBearing's picture

Santander buying B of A's stake there in Mexico is (I guess?) good news in that B of A is the bank which our family uses.

B of A no doubt needs that $2.5 bn...

I never got around to welcoming you back Cheeky, and I am indeed happy that you are better and back here posting most excellent pieces of overseas news.

Wed, 06/09/2010 - 13:49 | 403716 SwapThis
SwapThis's picture

You can go on a buying spree with short term funding problems if your backstopped and 'TBTF'

Wed, 06/09/2010 - 13:54 | 403739 Cheeky Bastard
Cheeky Bastard's picture

Yes; because the World is just that simple.

Do you actually grasp the utter stupidity you just displayed in your comment.



Wed, 06/09/2010 - 14:25 | 403847 Bonesetter Brown
Bonesetter Brown's picture

Cheeky, I had the same take on STD with the announcement of the BofA deal.

Then I remembered BofA did after all buy Countrywide and ML in 2008.  OK, so maybe one of them was a shotgun wedding, but still...

Wed, 06/09/2010 - 15:07 | 404011 Jonathan E
Jonathan E's picture

To be fair, Santander is a world apart amongst Spanish banks. Certainly in terms of size and reach anyway.  It's the same old same old: the tiddlers get squeezed and frozen out and then gobbled up by the TBTFers.

Wed, 06/09/2010 - 14:55 | 403957 Tyler Durden
Tyler Durden's picture

Dont forget the news from Friday about BBVA and Santander not having access to CP. Nothing has changed there.

Wed, 06/09/2010 - 15:07 | 403983 Cheeky Bastard
Cheeky Bastard's picture

Jesus fucking Christ; I cant believe I forgot about that.

Yes; ditto. And I even left a lengthy comment underneath the article.

Well, then this Santander move is total idiocy [the original article is about BBVA, but yes it is indicatory of problems with CP.]

Then, could Santander use SM to gain access to CP market in SA and thus offset any potential deterioration in Europe. I would call this purchase of 2.5 billion of SM more of a hedge than investment.

Wed, 06/09/2010 - 12:19 | 403440 Spitzer
Spitzer's picture

Bernanke just said he doesn't understand the flight to gold. That's one for the archives...

Wed, 06/09/2010 - 12:20 | 403445 schoolsout
schoolsout's picture

He really said that?

Wed, 06/09/2010 - 12:26 | 403457 LeBalance
LeBalance's picture

That quote needs to be playing 24/7 next to the spill cams.

Side by side: WWE, CNBC, Spillcams, man dumping, BB gold WTF?.

The comment loop of our time. Pardon the man dumping does not belong, that's not tragic.

Wed, 06/09/2010 - 12:42 | 403522 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

 Side by side: WWE, CNBC, Spillcams, man dumping, BB gold WTF?.

OMG.  I'm dyin' here.

+Nat'l Debt

Wed, 06/09/2010 - 12:56 | 403562 Ripped Chunk
Ripped Chunk's picture

We have entered the realm of complete fantasy/fiction

Wed, 06/09/2010 - 14:49 | 403939 Muir
Muir's picture

"Bernanke just said he doesn't understand the flight to gold. That's one for the archives..."


Yes, he did.

and I turned off the tv right after that.

Wed, 06/09/2010 - 12:23 | 403455 JLee2027
JLee2027's picture

Bernanke said that?  OMG!

Wed, 06/09/2010 - 12:28 | 403478 DosZap
DosZap's picture


It just shows how much esteem he holds the American  public .(i.e.), we're DA's in his opinion.

Wed, 06/09/2010 - 12:29 | 403482 carbonmutant
carbonmutant's picture

The Marie Antoinette of our time...

Wed, 06/09/2010 - 12:35 | 403497 Cpl Hicks
Cpl Hicks's picture

Does a guillotine go "snick" or "shwinggg!"?

Wed, 06/09/2010 - 12:41 | 403517 carbonmutant
carbonmutant's picture

"Politics should be limited in scope to war, protection of property, and the occasional precautionary beheading of a member of the ruling class." -- P. J. O'Rourke

Wed, 06/09/2010 - 13:07 | 403587 aheady
aheady's picture


Wed, 06/09/2010 - 12:49 | 403544 Sudden Debt
Sudden Debt's picture

we have WD40 now, you'll hardly hear it ;)

Wed, 06/09/2010 - 12:55 | 403555 cbaba
cbaba's picture

OMG, unbelievable. Yes, it must be in the Archives .

This may also be a sign for Gold Protection Team to try their best to stop the gold prices from rising.

Wed, 06/09/2010 - 13:59 | 403754 faustian bargain
faustian bargain's picture there a youtube clip? Or was it a written comment? This one's going viral.

Wed, 06/09/2010 - 14:53 | 403949 Muir
Muir's picture

" there a youtube clip? Or was it a written comment? This one's going viral."

no, he said it nonchalantly, sort of like, "I don't know why they put so much mustard on these hotdogs."

The panel took no notice.

He seemed calm.

I turned off the tv

Wed, 06/09/2010 - 12:27 | 403472 jkruffin
jkruffin's picture

Does the silly S&P, Fitch, or Moody's have the balls to downgrade the US Debt?  That tis the question.  I don't think they do.  We shall see.  They keep talking smack, but nothing official released yet.  Based on downgrades of other nations, the US should have been downgraded long ago.

Wed, 06/09/2010 - 12:33 | 403491 chunkylover42
chunkylover42's picture

They don't have the stones to downgrade , and if they started to think about it, this administration would raise holy hell and bully them into just issuing another "warning".  Why do you think Geithner talks so confidently about how the US will NEVER lose it's triple-A rating?

Wed, 06/09/2010 - 15:18 | 404048 Busy-Body
Busy-Body's picture

If you were so deeply in debt, would you advise your current creditors (as well as future creditors) that you were, in fact, insolvent?  Asked and answered.

Wed, 06/09/2010 - 12:38 | 403508 Popo
Popo's picture

In other news... (and with historically bad timing) Estonia joins the Euro.   


Seriously?  Now?   WTF?



Wed, 06/09/2010 - 12:40 | 403514 docj
docj's picture

Liquidity. Squidquidity.

Benron told the hacks on Cap Hill this morning that all was well, so RALLY ON, DUDES!!

Wed, 06/09/2010 - 12:42 | 403521 johngaltfla
johngaltfla's picture

Is it just me or has anyone noticed the deathly silence from ye old Fed since the Discount Rate meeting on Monday?

Wed, 06/09/2010 - 12:54 | 403557 taraxias
taraxias's picture


I think not.

Equities goosed, Gold trashed, no sir, not silent, very "vocal" me thinks. 

Wed, 06/09/2010 - 12:45 | 403529 peripatetic86
peripatetic86's picture

Any predictions on the Beige Book?

Wed, 06/09/2010 - 12:58 | 403570 Ripped Chunk
Ripped Chunk's picture

They are changing to color of the cover to green.

Otherwise it's business as usual with the statistical "presentations"

Wed, 06/09/2010 - 12:49 | 403543 jbc77
jbc77's picture

You have to wonder at this point how they are keeping the Euro situation glued together. Helicopter comes out today with more populist bullshit and I love the part where he says the Euro meltdown won't effect us as long as Wall Street recovers. What is this guy smoking?

Wed, 06/09/2010 - 20:00 | 404828 Rider
Rider's picture

Nice, higher than March '09 levels.

I see a lot of econ indicators and variables aproaching those sweet march levels, the ones that are actually lagging are the always "Loco" US equities.

When those loco things are gonna head to fair value??


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