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The Fatal Flaw In Europe's Second "Bazooka" Bailout: 82 Million Soon To Be Very Angry Germans, Or How Euro Bailout #2 Could Cost Up To 56% Of German GDP
A funny thing happened in Euro spreads today. While the bonds of all PIIGS countries surged higher in price (and plunged in yield) upon the announcement of the second Big Bang bailout, the reaction in core Eurozone credit was hardly as exuberant, and in fact spreads of the two core European countries pushed wider by the end of the day, and over the last week. Why? After all the elimination of peripheral risk should have been seen as favorable for everyone involved, most certainly for those who had been seen as supporting the ever more rickety house of European cards. Well, no. Basically what happened today was a two part deal: the i) funding of future debt for countries that are currently locked out of the market (all the PIIGS and possibly core countries soon) or in other words the "liquidity mechanism" which is being satisfied by the EFSF "TARP-like" expansion, and ii) the roll-over mechanism for existing holders of debt which "allows" them to "voluntarily" transfer existing obligations into a "fresh start" Greece which can then emerge promptly from the Selective Default state that is coming from Moody's and S&P any second, and supposedly allow the country to access markets as a non-bankrupt country.
For all intents and purposes the second can be ignored, because as has been made clear over the past few days, and as will be demonstrated below, the actual rollover from non-Peripheral banks will be de minimis, the bulk of impaired debt being held by banks in the host countries as is, and used as collateral with the ECB in the form of par instruments for cash.
Now the second part of the mechanism was never an issue further demonstrated by the plunge in net notional in Greek CDS as core banks no longer needed to hedge exposure and instead opted to divest their holdings. This is merely a red herring that attempts to confuse the issues associated with the first, and far more important concept: the nuances of the EFSF and its imminent expansion. And expand it will have to, because in reality what is happening is that the net debt of the countries will end up growing even more over time for one simple reason: this is not a restructuring of existing debt from the perspective of the host country! Simply said Greek debt will continue growing as a percentage of its GDP, meaning it, and Ireland, and Portugal, and soon thereafter Italy and Spain will be forced to borrow exclusively from the EFSF. Therein lies the rub. In a just released report by Bernstein, which has actually done the math on the required contributions to the EFSF by the core countries, the bottom line is that for an enlarged EFSF (which is what its blank check expansion today provided) to be effective, it will need to cover Italy and Belgium. As AB says, "its firepower would have to rise to €1.45trn backed by a total of €1.7trn guarantees." And here is where the whole premise breaks down, if not from a financial standpoint, then certainly from a political one: "As the guarantees of the periphery including Italy are worthless, the Guarantee Germany would have to provide rises to €790bn or 32% of GDP." That's right: by not monetizing European debt on its books, the ECB has effectively left Germany holding the bag to the entire European bailout via the blank check SPV. The cost if things go wrong: a third of the country economic output, and the worst case scenario: a depression the likes of which Germany has not seen since the 1920-30s. Oh, and if France gets downgraded, Germany's pro rata share of funding the EFSF jumps to a mindboggling €1.385 trillion, or 56% of German GDP!
The Europarliament, ECB and IMF may have won their Pyrrhic victory today... But what happens tomorrow when every German (in a population of 82 very efficient million) wakes up to newspaper headlines screaming that their country is now on the hook to 32% of its GDP in order to keep insolvent Greece, with its 50-some year old retirement age, not to mention Ireland, Portugal, and soon Italy and Spain, as part of the Eurozone? What happens when these same 82 million realize that they are on the hook to sacrificing hundreds of years of welfare state entitlements (recall that Otto von Bismark was the original welfare state progentior) just so a few peripheral national can continue to lie about their deficits (the 6 month Greek deficit already is missing Its full year benchmark target by about 20%) and enjoy generous socialist benefits up to an including guaranteed pensions? What happens when an already mortally wounded in the polls Angela Merkel finds herself in the next general election and experiences an epic electoral loss? We will find out very, very shortly.
Here is Bernstein with the full breakdown:
Continuation of the current strategy with a materially enlarged EFSF and private sector participation in liquidity support
Despite the failure of the current strategy, there is still a theoretical option of an extension of the current liquidity support with a materially enlarged EFSF that would also be buying government bonds in the secondary market. We believe this is the least likely option given the size of the fund required to achieve the objective.
An extension of the EFSF to cover Italy and Spain would require a €790bn (32% of GDP) guarantee from Germany
This strategy is not only unlikely to succeed but would also run into some serious structural difficulties. To cover 100% of the roll-over for Greece, Portugal, Ireland, Spain, Italy and Belgium as well as an allowance for bank support at 7% of the banks' balance sheets until the end of 2013, the support mechanism(s), would need to be able to deploy a total of €2.4trn in available funds.
Assuming the Greek Loan facility and the EFSM remain in place, the EFSF would have to increase its deployable funds from currently about ~€270bn to €1,450bn.
Given the 20% overcollateralization requirement on the current EFSF structure and the fact that countries that receive EFSF support are not able to provide valid guarantees mean that in order to create a €1.45trn funding capacity, the total fund would have to be €1.7trn. The guarantees to be provided by Germany would have to be €791bn or 32% of GDP.
There is a legitimate question whether in particular Germany would see the point of committing that kind of support to a concept that has so far been extremely unsuccessful. It also would expose Germany to a worst case scenario of a French downgrade. Without France, the guarantee need would rapidly move towards the whole of the €1.7trn. As the market is getting increasingly concerned about France, the odds are heavily stacked against an extension of the EFSF as a pure liquidity support mechanism.
If Banks were to participate in a liquidity expansion their contribution would be minimal
Within the current strategy one of the open questions is whether or not the private sector can participate by providing liquidity to the periphery countries. We believe this to be a fundamentally marginal discussion despite its enormous political importance.
Based on the stress test data released on Friday, we find that whilst the banks account for the majority of the very short term paper, their total share of the funding requirement into 2013 is just 23% and 16% of the total EFSF.
The question is how big the private sector participation could be. Taking the "French proposal" as a guide, the private sector participation would reduce the size of the EFSF by €137bn or 9% of the €1.45bn EFSF funding, assuming 70% of the debt is rolled over, 30% collateralization and 75% of banks participate.
The problem with this private sector participation so far has been the risk that this may be regarded as a default by the rating agencies. As a consequence the banks would have to write down these exposures to market prices. This exercise would lead to reported write-downs for the European banking sector of €75bn, 0.55 times more than the liquidity support that the EU is seeking. And in particular in Portugal and Greece the fallout of the MTM losses far outstrips the increase in liquidity.
Even more importantly, more than half of these losses would occur in the banks of the periphery countries themselves. In the absence of an open market for these banks, the losses would have to be made up by the governments themselves and subsequently added back to the EFSF utilization.
And there you have it: the cost of the euro not plunging today as a result of the ECB not proceeding with outright monetization, is that Germany is now the ultimate backstopper of all of Europe's risk. And while before, when the EFSF was just over €400 billion or so, the market could largely ignore the risk, a €1.5 trillion "upgrade" certainly changes the equilibria dynamics. In an attempt to avoid the appearance of inviting inflationary pressures on Trichet's central bank, Germany has directly onboarded the risk associated with terminal failure of this latest and riskiest "bailout" plan and in doing so may have jeopardized anywhere between 32% and 56% of its entire annual economic output. One wonders if the risk of runaway inflation is worth offsetting the risk of a plunge into the worst depression in the nation's history? It sure isn't for the Fed.
The most ironic outcome would be if the eurozone, in an attempt to prevent further contagion at the periphery, simply invited the vigilantes to bypass Italy (recall how everyone was shocked that instead of attacking Spain, it was Italian spreads that got destroyed in a manner of days), and head straight for the country on whose shoulders lies the fate of the entire EUR experiment?
Is Atlas about to shrug and topple the entire oh so heavy house of cards?
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Either it is a game of who blows up first between the US and EU... or... it is a hot potato game between the US and EU to buy time together to see China blow up. I am not so sold right now on who is trying to choke who.
would you please sponsor my children?
What about the Transitory Euro Dollar backed by the treasury, or the "TEURD" for short?
Won't that have their back?
TEURD
So Francais monsieur!
best of today to you.
Bon Chance!
Duplicate via GSM. The Seqouia had better under under Nixon. Currently drinking and thowing ice for the gulls. Fun to watch them dive after nothing!
Germans have become sheeple like the USA. Nothing will happen.
Just the biggest pot party ever in Amsterdam!
Pot Party will soon be over
http://www.dailymail.co.uk/news/article-1392205/Dutch-ban-foreigners-cannabis-coffee-shops.html
Idiot politicians again. Forcing a prosperous market to go underground as a whole and push the revenues in the hands of organised crime.
Really, deplorable unfounded and irretrievable descisions like this make you want to go into politics and destroy these assclowns that are wrecking our free world.
reptil whose hands do you think the revenues are already going? where do you think the coffee shops get the weed from? it's technically illegal to grow cannabis in holland, yes?
Of course, the whole "war on drugs" is keeping a criminal circuit very liquid. Just recently psylocybin (magic mushrooms) was made illegal, guess where that trade moved to. Exactly the same as happened in the case of MDMA production (XTC) in the early nineties. Pushing it into obscurity only creates higher profit, and with that, involvement of professional organised crime groups. Oversight over a market and protecting potential victims then becomes impossible.
And now, the next step: Criminalising users will make it worse though: The issue is about individual rights, and control of the State (and now Europe) over what individuals are supposed to do, regardless of any scientific findings (that show criminalising is only creating more problems). And much more important than some tourist revenues, or the "image" of Amsterdam.
It's another example how, in the push for control, the politicians are willing to wreck society. The purpose is conditioning the civillians they're criminals if they engage in these things, and that they accept they'll lose their citizen's rights, for something that can not be regarded as a crime, under principles of dutch law. All of this, regardless of public opinion (polls clearly show a strong majority think the coffeeshops should remain). So they're now nibbling at the edges. The whole thing is a travesty. The "role model" is a failed policy in the USA, and increasingly France, who dictate policy here more and more.
http://abcnews.go.com/Health/Wellness/flesh-eating-cocaine-laced-veterin...
it's a shame really, last time i was there, the town of Eindhoven was considering growing their own to supply the coffee shops. seemed like a sensible move in the right direction, considering the mad greenthumbs the Dutch are.
Holland is a strange country to me. seemed like an schizophrenic clash between tolerance and fascism. doesn't make for a good mix.
then again, new amsterdam's no better.
That's gonna be one pinner spleef right there. Even just looks like Mexican brown weed, not that good green hydro sold in the shops.
...books flight to Amsterdam........
Why travel to another country or a pot party.. ? Just curious...
Like those who used to travel to Thailand to play with boys and girls without regard to the Lqws at home.
Much american dollar, all night boom boom. two dollar buys two girls... yes?
Now they probably say No dollar, gold only. If you survived the trip there. And once you go, you are in the records somewhere deep in the USA as a possible sex offender.
Two US dollars is not enough.
Yeah... a bunch of "LOVE paradists"...
http://en.wikipedia.org/wiki/Love_Parade
Oh wait... they cancelled that after last year... HATS ON!!! They might be pissed this time!
Will the Germans complain or protest? I don't know if that is their M.O. I haven't been to Germany but I've been to Austria. I remember there was a red light with no car, motorcycle or donkey cart within miles. My wife and I crossed the street and didn't give it a second thought. The Austrian girl (about 19) didn't step a foot off of that curb. I was probably on my second Duvel when she was still waiting at that light. Poor kid.
The word you are looking for is organised. Match it!
Absolute submission could also apply.
The ones the south, e.g. Bavaria and Austria, have a well earned reputation of being stubborn and hard headed. The Berliners wouldn't wait so long.
If you're caught in the intersection jaywalking the Austrians just might run over you. It isn't California.
.
I can't even junk dumb assed americans. You da man. you da most impotent in da wurld U Suck Ass! U Suck Ass. U Suck Ass!!!!
Yeah, yeah. I think 99% of the peoples of the world should be angry at what has transpired over the past 3 years... but they will not... the past 3 years have PROVEN that people will take anything... otherwise we wouldn't be in this situation now.
Obumma could come around your house and stand on your kid's face and all he would have to say is "its for national security" and you'd reply "thank'ems sir, mr obumma sir, much appreciated, kindly, god bless you sir".
Humans are pathetic.
Only Libs burn and break stuff.
Then again, they are uncivilized. Keep dropping EUR! You hoor!
Some humans are pathetic.
Sometimes I really wish I'd chosen the blue pill...
Having trouble getting up? You can tell us, monkey. You're among friends.
You live in a dead gay mans' apartment! Happy? How long?
Go spank yourself, MonkeyBoy.
Well yeah if it was Obama that makes sense. If it was that Bush guy or those other evil war for oil criminals then it would be wrong.
If I can borrow at below market prices no matter what I do, I promise to spend the money and stimbubbulate the ebubblemy to my heart's content, and then borrow more. It will be tough, but I shall perservere.
+1
no moral hazard here, nothing to see move along.
Schnitzel, Schnitzel, who gets the Schnitzel?
Schnitzel is Austrian.
I thought it was from Chelsea. A lot of those guys tak about how much they love the wiener schnitzel. Are we talking about food?
Weiner's schnitzel?
They probably did get everything 'fixed' long enough to let all the European officials finish their July - August holidays.
Quality of life is always a primary European objective.
Tell me about it. That was my theory last summer, with the obvious play of shorting the euro in late august, but that was busted by the Bernank's Jackson Hole talk. This has been a civilised race to the bottom so far, neck and neck at a leisurely but sure pace.
check out www.pissedkrauts.de for the latest in attacks and revolts against the European Monetary Rip-Off /sarc the site will never exist
Amazing how much power these people (pigmen/IMFsters/Eurosoviets/etc) wield to be able to make Merkel their bitch. It's clear that Merkel doesn't want to do this, her people don't want it, the German constitution says she can't etc ... but still she does it. The notion that the rule of law or voters control any aspect of the world anymore is simply laughable.
+1
"The notion that the rule of law or voters control any aspect of the world anymore is simply laughable."
Indeed.
Can you tell me a time when we ever did? Oh, hold on. Don't tell me yet. I need a few minutes to go and polish my picture of J Edgar Hoover in a wedding gown. Then I will be free to learn about how free "we the people" have been in the past. But your time will be limited because I have to go polish my McCarthy picture before bedtime.
Blitzkreig, BITCHEZ!!
Yes they are sheeple, but they don't call it that over there..
Schweinehund
So a plunging euro is 'fatal' to europe? Not likely.
FOFOA: If the euro weakens on the global currency stage Europe will start running an overall trade surplus again, like China, which will soften the blow of a contracting internal economy. If the euro strengthens, things like cheaper oil will help soften the contraction. Internally the politicians have their hands full. No doubt! Externally, the euro is just fine. To the euro, just like FOA said, the politics of the PIIGS and Germany are little more than a sideshow.
And notice I didn't even mention gold yet. Anything that would appear to seriously threatens the euro, like an outright sov. debt default, would explode the price of gold which would simultaneously rescue the euro balance sheet and kill the dollar.
This is called charlatanism. Their currency depreciates and suddenly their raw material import costs rise. Where is your savings then?
EUR won't plunge. China is in their buying everyday. As for oil plunging $118 brent, could contract 20% and bring it back to levels not seen for 6 months.
What is fatal to the EUR is the citizens of Europe waking up and realizing that they are all being enslaved so the French and German banks get to avoid the consequences of their bad behavior.
Ten years from now we will look back at this period as the last time we could have our changed course. Today the elites decided to put us on a collision course with fate. That fate will be sealed when we get some non material deficit deal out of the US at some point in the next week.
We had a choice. We had a choice...............
When? Can you point to an election where either candidate would have changed course? We have been on this course a good damn long time and pat the point of no return in the US in the 60s. Funny how the Europeans also got blindsided into this system. Celebrated 50 years of the EU a couple years back, odd how little known treaties signed by politicians on the take will bite one's children and grand children in the ass. Or maybe the Chinese have a chance in their open and free society.
None of have a choice, some of us have the illusion of choice. If that choice is different then what the big boys want then that choice is ignored. Try to press your choice over theirs and one soon realizes why they own the police and military.
China is buying euros because it is the fiat that will survive. A vote of confidence, yes?
Your other statement is too vague for a response.
They have no choice. They have been bluffing on the USD, they have to support the EUR. And, they need Europe as a healthy market since it helps enlarge their cost basis of production/export.
PS Who says their finance people aren't basically as dumb as Caucasians?
A healthy market indeed! If I had a surplus (like China) I would want to invest in a healthy market too. A healthy trading partner. Smart.
healthy market? that's a joke. eurodemographics is second worst in the universe, behind Japan.
The only healthy market left in europe is healthcare, miracle medicines, adult diapers, hearing aids, retirement homes....
And who has the best demographics? Saudi Arabia? South Sudan?
Iran ... and china is already doing a lot of business there.
vietnam's gotta be up there as well
I'll take the other side of Lizzy's "the EUR won't plunge" trade.
As of today, the EU has embarked on a grand mission to intentionally devalue the Euro, and although I can't be certain, I'd be willing to bet that they were given non-interference pledges by certain other central banks (in what's turning out to be a new, Plaza Accord type arrangement - instead on USD devaluation vs the Yen and Deutsch Mark, it will be a EUR devaluation against the USD and YEN -, although not spoken of expressly) in their aspiration to do so.
On condition the Germans allow themselves to be taxed for the excesses of the rest of euroland.
Im sure that will end well.
Vietnam? Gaza is where it's at. The average age is around 15. Have a look at Bangladesh too.
Nonsense. China , Debt deals , euros ..... waaaaay too late.
Our time for changing course ran out along time ago. Letting it all collapse in 2008 would have been better but it would have still been a collapse. The collapse happens regardless what we did last week or next. China are just along for the ride.
This what happens when you don't allow the bad debt to clear out of the system. Now they are just shuffling the debt around and allowing the disease to infect the healthy countries.
I would say there are no 'healthy' countries. There are just the sick, the sicker and the sickest.
Everyone holds some piece of everyone else. At this point since this sovereign debt can be considered a communicable disease, if you are holding a piece of the disease you are sick as well. Then the only question left to be answered is, how sick are you?
not sick enough... apparently...
Now ask me tommorrow... then next week... yeah, that's right... keep going...
In the land of the blind, the one-eyed man is king.
& unfortunately... In the land of the "one eyed monster", the dude with the largest JOHNSON is king... (I won't get in to whether or not it's circumcised)...
The King here: You request an audience?
yes the one-eyed man ma be 'King' in the land of the blind but he also needs a vote. If you're familiar with European politics you'll find your vote has been cartelled away from you.. In Britain you have a 'choice' of 3 Parties all Pro-EU/EC/ECB.
In Germany you have a 'choice' of 5 Parties and guess what, all 5 are Pro-EU and get this, Pro Bailout
The one-eyed man has been gagged, bound and stabbed in the back by the political process (corruption) ..."Democracy" is merely a word lying in the sewer in every Western country
Sing along..."Things are healthy this I know, 'cause the Market tells me so".
Sounds like a circular firing squad to me. Only Germany could step out of the way if they would just wake the fuck up.
Europe has decided, if their leaders are to proceed as they announced they would, to follow in The Bernank's tragic footsteps.
They're basically going to bail out all bad actors, whether nations in the EU or megabanks and bondholders, and they're going to print and inject trillions in euros over the next several years. It's baked in the cake; The EU officially announced TARP/TALF/QE1/QE2/QE2.5/QE3 all in one fell swoop tonight.
And it's tragic, for the same reason that what Bernankincide has done has turned out tragically.
Here's why, based on what I wrote of the U.S. crisis in another ZH thread:
by TruthInSunshine
on Wed, 06/08/2011 - 10:17
#1350577
There was no real intention of helping Americans, when Bernanke & Paulson (and others) implemented the insane monetary and fiscal policy of the last three years.
I just wanted to address those who somehow believe that such an intent actually did exist, and I will add this to my prior statement:
The 1st option (do nothing more)...well, it speaks for itself.
The 2nd option (add more liquidity via multiple methods) merely hastens the debt crisis and draws the default/implosion/end nearer.
The 3rd option (withdraw liquidity) merely hastens the reality of our true economic situation and draws the medicine and inevitable treatment nearer, which would mean a financial reckoning and realization that the TBTF banks need to be cut off, that many banks need to be let fall, that government spending needs to decline by a minimum of 25%, that the military be cut down to size and restored to a primarily defensive force, and that the 60 year pattern of episodic periods of economic expansion via chasing Federal Reserve influenced (heavily) or created (in entirety) process of chasing larger and larger bubbles needs to end, and a real economic cycle of production and consumption of goods and services at a level consistent with the natural demand-supply curve be returned to (this would involve an initial large contraction in the economy, and then lower growth going forward than what Keynesians deem optimal).
Choosing the 3rd route is really the only true way out, that avoids a total collapse, but it would at least allow Americans to preserve their sovereignty, and could even involve strengthening the USD (over time) which would offset some of the effects that a slower growing economy - it even could potentially allow the U.S. to return to a way of life whereby one income households can afford a quality home, health insurance, food, transportation and education, as once was the case, while actually being able to save 3% to 5% of their income each year! What a concept!
(But the interest-feeding & tax-gorging beasts would have to be slayed for good in order for this to be possible)
Wow they managed to enslave the Germans and the Greeks in one fell swoop. maybe Germany was the target all along.....bankers enslaving Germans...now why would they want to do that? Couldn't be some long held revenge thing.....naw
.
You're right -- it's not revenge. It's tradition.
The Germans are a gullible bunch -- even worse than the Yanks. Hopefully, for their sake, they're getting smarter. But I doubt it.
Mmm hmm. They worshipped Freddie Mercury. Must explain all those Freddie Mac securities the Fed bailed em out for.
And the Germans love David Hasselhoff.
And the French found Jerry Lewis insanely funny.
Weird, wild stuff.
WW3 is what happens. The rise of a new Hitler.
I love how the PTB are so easy to predict.
In order to think like them, all you have to do is assume everyone else is clueless and then think of a way to rob them.
Next think of a way to cover the robbery while blaming someone or something else. (preferably foreign)
This is why politicians love bankers so much, the pollies realise they are dealing with professional thieves, who are masters at obfuscation.
After all if you want to rob your own constituents you need help from the best....
It's pretty much as simple as that...
Just consider this WWII REPERATIONS...and the Germans are still so disgusted and guilty by what they did in WWII they'll do anything to maintain the Euro and avoid the potential or another European war.
Book it - Germans will not resist.
It's like my Aunt Bettie that blew her prom date back in 1956 and is still guilty about it. The prom date remembers those days fondly without guilt.
probably also has to do a little with all that German gold sitting in the bedrock under 33 Liberty...for safekeeping of course.
Its time for Germany to be a "normal" country. And by normal I mean looking out for your own country's interests. They were guilted into giving up their D-Mark. They shouldn't have to give up their prosperity to the Euro-slackers.
Transcript of a Teleconference Call on the International Monetary Fund’s 2011 Article IV Consultation with Japan
Example..
Statement by IMF Managing Director Christine Lagarde on the Eurozone Leaders' Summit
Ms. LaGarde, this matter is no concern of mine but I'll tell you this. When they find out your about your latest scam.. God help you. Pssst.. the general European populous is at 80% awareness level.
Yes the Germans are now essentially going to be holding the toxic waste of Europe via guarantees and China is slowing down - Germanys export earner.
Plus this just in: "Westpac strategist Russell Jones. "The changes proposed to the EFSF [European Financial Stability Facility], in particular the financing of banks for countries not in the full program, would be a breach of the existing treaty criteria and would appear to need parliamentary ratification by each individual nation."
German lawmaker and taxpayer revolt, you are right ZH...
Whole thing will flop again for the nth time.
Westpac has been spewing way too much of the truth lately.
Look for them to be the Oz bad bank when their property BS finally goes POP.
they are already right out of their minds angry. They are Germans, but there is nothing they can do. Their leaders buckled at the first flame to touch them.
Ultimately, the ponzi depends entirely upon greater artificial demand from America, and housing will not recover, without an immediate about face. They would rather torch their own wealth than lose face. All the exits are closed, and they are throwing the only things left on the fire, themselves, hoping it will burn itself out before the American log really catches hold, so they will lose big, but not everything.
Too late. The only question now is what to do with all that heat.
build a giant hoop house & grow some winter kale.
i think i've counted 4 bailouts so far of Greece. Let's look closer:
http://www.youtube.com/watch?v=kRW7pITY5Cg&feature=player_detailpage
When all else fails, I return to my early training in nursery school economics to figure out what's going on.
Here's a nice nursery rhyme for the "bailout" record books...
http://www.youtube.com/watch?v=e9BqUBYaHlM&feature=related
"Not one... not 2... not 3... not 4... not 5... not 6..."
"YES WE DID"... Until we didn't...
apparently the Greek sales pitch was pretty straightfoward:
http://www.youtube.com/watch?v=IW-gerAdxpY&feature=player_detailpage
Let me explain one time. Much of the market is set up to deceive, by nature, just like a cheetah's camouflage. Sure, there are illegal, blatant, collusion type manipulations of the market, but that is not what I am talking about.
Certain patterns recur. The "smart guys" see a support or resistance and they place a leveraged bet. Then after 3 to 6 ---5 minute bars of "waffling around, confirming trend”, whatever, then the ticker bounces back to hit the same line again, maybe even pop that line a little harder/deeper. By then the "smart" money has moved their stops to breakeven, proud that they "predicted the market". Then they get stopped out. And then they don't go back in until the trend is “confirmed”....in this case maybe around 67.63, at that point expect a sharp snap back to the upside, send the retail running for the buy back button, as in “Sheesh, I knew this short position was going to be trouble”. Then maybe a Bearish Engulfing or a Dark Cloud cover and THEN when retail been whipsawed and had their lunch money taken, THEN the real move may commence.
Example here in my favorite risk on risk on indicator NZD/JPY
http://oahutrading.blogspot.com/2011/07/drtv-pattern-commit-this-to-visu...
Seems that is happening in EURUSD right now.
'cause that French moron knows jack about his own economy (which is looking crappy by the day), the French and Germans hate a higher oil price. So yes strikes, turmoil lock it in as China goes into a hardlanding and takes out EZ 'stronger' economies export markets.
Bets on start on August 2011.
Nicely put, Tyler. What a bunch of hopium, bullshit, responsibility shifting, loss dodging pile of steaming crap.
This will never work...but of course, it does not have to hold for more than 24 hours as the criminal syndicate goes to cash at sweet price levels whose catalyst was pure nonsense.
Again and again, this nation will not recover until the kleptocracy is removed from power. Real capital will not form in such a nonsense environment, which is why giant corporations continue to hoard cash and fire employees to make their earnings beats.
What a joke. Pink slips, please. Tens of thousands of them from the financial services group.
Double 00 shot is far more sure and permanent. Milestones
Rothschild mantra: If we can only hold it together for one more day.
oh...
o__0
Can someone help explain who are the "bond vigilantes" and who do they consist of? I see this mentioned all the time. Thanks
That's investors who are through with the BS and are pushing interest on the debt of the country in question up and up. I bet a lot on zerohedge are bond vigilantes... but to really be a bond vigilante, you need a lot of $$$ backing you up... so probably big investing firms/national banks doing this kind of stuff... national banks of Africa, Asia... or even the big western banks themselves using offshore accounts playing both sides.
A fictional/mythical group of investors used to explain the inverse relationship of price and yield for debt instruments traded before maturity. The term is usually used in an increasing risk environment.
it's a term...essentially bond vigilantes push bond yields up if a country is an economic pile of shit, like Argentina was back in the 90's and now the PIIGS.
CDS traders (shorting) flipped when they got burnt by Merkel and Sarkozy last year when those two crazies did the first Greek bailout. Governments are paranoid about self correcting markets.
In capitalism markets should be punished for greed and complacency - just like in nature. Shorting the market and bond vigilantes actually help the market/debt restructure.
But, we have old Europe acting commie and bizarro again. Extreme Keynesian economic lunacy has infected US economic policy.
At the end once a asset supporting cartel implodes - huge short position will occur mixed with flash crashes, yield blowouts and defaults across the board.
Hard to time. But the major event for the markets could be in a 6mth to a year time-frame. Remember markets always implode internally, so a new chaos event could be forming.
just want to add that a default via yields potentially touching e.g 7% on the Spanish 10y, will shocked the country into getting their shit together. When Argentina defaulted (full), they came back so much stronger. With Greece, the EZ is trying to mitigate a default. If they choose selective defaults, the EU/IMF/ECB may loose control as the rest of the PIIGS start to selective default.
I think a default via yield blowouts for the PIIGS is gonna happen, but as ZH points out the bailout will waste taxpayer money whilst the greedy French and German banks re-capitlize. So I hope the Germans get very angry over this and riot and whatnot
LOL, are you even trying to bring morality into this discussion?
i dunno man, but i don't live in Cuba...
I think i caught a brief glimpse of th European variant:
http://www.youtube.com/watch?feature=player_detailpage&v=KI-2yud7id8
Here's the American one:
http://www.youtube.com/watch?v=1NV2w-vqd7c&feature=player_detailpage
apparently he's fluent in German.
For the life of me, I still do no understand how this crap just keeps continuing week after week, somewhere along the lines you would think the people who are citizens of these countries would say it is over, as of right now, no more....or else...
Bernanke has absolutely created the most dangerous time in history that is waiting to implode on people, and then I bet he goes into hiding and is protected.
nope, it was three bailouts. absolutely.
http://www.youtube.com/watch?v=kEpLncBG_Nw&feature=player_detailpage
www.youtube.com/watch?v=iwZk33fwSFo
In the grand scheme of things those that work their ass off to earn money so that someone else can sit on their ass is called a slave or in ZH venacular 'their bitch' bitchez.
My brother is working in Germany right now...I sent him a box of KY Lube to hand out to his German co-workers. Did Angela sell her people out?
Sarkozy pushed for the next Nobel peace Prize (a la Libyan invasion) but Merkel can beat the Frog to that precious award by invading France now that all of the French NATO forces are either assisting the "rebels" in Libya or fighting the other rebels in Afghan areas.
Stranger things have happened.
What is interesting and sad is that no one ever would vote for this if it were put up for a vote. Fascism is alive and well in Euroland.
Heyy, Their Aim Are to satisfying Investors and make them confident about EU. But Speculator ( Like You) Will never feel satisfy . Maybe they forget about speculator . But Unfortunately, by the time being, speculator always on side right side
Nobody will rock the boat. Nobody dares because doing so risks obtaining fuel ... which is why the euro was 'created' (Spawned? Found under a rock?) in the first place.
A 'hard' euro based upon good, solid German productivity would allow Europeans to buy Midle Eastern fuel without having to buy pathetic dollars at a discount. The euro is an energy hedge, like Tokyo's real estate- and stock bubbles, like the USA tech stock and morgage lending bubbles, like selling high-paying jobs to China (for Chinese energy in the form of poisoned dog food), like massive government debt ... all of these are failed energy hedges, crushed by the relentless rise in fuel costs in both real (and so far) nominal terms since 1998.
The rise because production cannot keep up with accelerating demand ...
No matter what the Europeans do they will fail. There is no 'cure' only conservation and a n economy with a different design. The cost of keeping the euro is approaching the cost of switching to a depreciated currency. If the Greeks (or Italians or Belgians or Spanish) they will find fuel in their currencies monstrously expensive. It won't matter because buying the euros to buy the fuel will ALSO be monstrously expensive. At that time there will be a lot less fuel sold in Europe. Goodbye industrialization: at that point Germany and France would also be facing bankruptcy b/c of declining sales (to the PIIGS and others) and all the euro costs hanging on them.
Keep in mind, the producers can sell every barrel at a high price to China with loads of euros that the EU has obligingly given them. At that point the EU is bidding against itself for fuel and the euro itself vanishes.
There is no way out. Only buying time and pretending that thermodynamics don't work. That is the fatal flaw ...
Nice shooting Steve.
Interesting, plausable and utterly frightening thesis there Steve. Food, water and fuel being the basis of any enterprise reliant on labor (on any scale).
i heard a talk from a gentleman tonite who was recently at the white house and had a talk with Hillary. she told him that upcoming wars, although not labelled as such, will be over food & water.
The US is in a much worse bind than the EU in regards to energy efficiency and per capita demand to maintain even a minimal standard of living. The US already passed NAFTA to get cheap oil from Canada and Mexico and cut down on MENA reliance, and the US jobs and the productive capacity have already been exported, meanwhile, the commuting distances and available mass transportation hasn't improved. Unfortunately, both money and oil are rather fungible and it probably didn't work out well as the statist central planners in the US had hoped. Within the Eurozone, the designs of statist central planners are progressing according to the long-admitted-to plan of achieving fiscal integration through a crisis resulting from a unified monetary policy. The Eurozone less about oil than it is about the USD, and providing Brussels with leverage against Washington. Oil might become cheaper with a stronger Euro (vs. USD), but those savings must be counterbalanced against decreased exports, increased non-petroleum imports, and decreased tourism revenues- so the value of the Euro is a balancing act, and that balance is far easier to maintain with an ECB that can operate in the same league as the FED. Separately, the Deutsche Bundesbank and Banque de France would have a much more difficult time defending Banca d Italia and the Bank of Greece without an the common framework of the ECB and Euro.
I would also bet my last dollar that the Fed and IMF are somehow going to be involved in parts of the funding of this SIV once the debt ceiling is raised. Anyone?
+1000000000000000000
I think...no I know we already are.....this is so transparant in its obscure way.....its "save the banks" period....they are going to flood and I mean flood...New Orleans Levy style..the world with paper to pay off and down all the expenses that are piled up.....they think that will get them out of the problem..they are right..but that is only half of the equasion...the other side of that deal they have not studied nor seem to care about it....the average people side...higher interest...inflation...costs going up...but with the economies in stagnant or dying modes...their wages salaries stay the same...so here we go...I do not see any and I mean anyone who is standing up and doing the right thing...we are going to hear the word "CRISIS" over and over and over again....the CCB will not pass today...and that was a start...
Could we stop saying it's only the Naughty Baddy Lazy Greek's fault?!
And the biggest myth of them all: Greeks are protesting because they want the bail-out but not the austerity that goes with it. This is a fundamental untruth. Greeks are protesting because they do not want the bail-out at all. They have already accepted cuts which would be unfathomable in the UK – think of what Cameron is doing and multiply it by ten. Benefits have not been paid in over six months. Basic salaries have been cut to 550 Euros (£440) a month.
http://sturdyblog.wordpress.com/2011/06/18/democracy-vs-mythology-the-ba...
Some perspective is required, let's be wary of Country Vs Country interests and badmouthing, those are definately not the times for this dangerous bullshit. The greeks are suffering much more than the fucking JPM & politicians fucks who put them in the first place...
IT ALL BEGAN WITH THE BANKSTERS, REAGAN & FUCKING THATCHER, LET'S NOT FORGET IT!
"Vangelis Vasilopoulos is the chief engineer for a company which builds swimming pools in the wealthy northern suburbs of Athens, home to ship-owners and tycoons like Spyros Latsis, one of the richest men in the world, who hosts Prince Charles on his travels to Greece. Industrialist Theodore Angelopoulos and his wife Gianna, who led the organising committee for the Athens Olympic Games (only six years ago, when Greece was heralded a "little nation miracle") are installed there too, as is Mr Papandreou himself.
Mr Vasilopoulos says his company has been "inundated with calls" from residents of such elite residential neighbourhoods as to how to camouflage their swimming pools. At first blush, the requests seem bizarre.
In fact, they stem from the revelation that the Greek finance ministry is using Google Earth software to track down the owners of the pools, which tax inspectors consider an indicator of wealth, and which have often been built illegally.
"There are therefore two reasons to hide one's swimming pool," said a pool-owner who confessed guilt on both counts and, not surprisingly, asked not to be named.
Fortunately for him, however, there is a ingenious solution.
"The formula is simple," said Mr Vasilopoulos. "All you need is a green-coloured cover and then the pool cannot be spotted from above. But if the water is visible, or the netting or cover is blue, then you've had it".
Anecdotes don't defeat statistics. No matter how many Mr. Blahblahblahopouloses you find to say something, it is inconceivable that an entire nation of people can be characterized a certain way. The US likely has a high murder rate. Are we all murderers?
Greek Wealth Is Everywhere but Tax Forms
In the wealthy, northern suburbs of this city, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned pools.
So tax investigators studied satellite photos of the area — a sprawling collection of expensive villas tucked behind tall gates — and came back with a decidedly different number: 16,974 pools.That kind of wholesale lying about assets, and other eye-popping cases that are surfacing in the news media here, points to the staggering breadth of tax dodging that has long been a way of life here.
The cheating is often quite bold. When tax authorities recently surveyed the returns of 150 doctors with offices in the trendy Athens neighborhood of Kolonaki, where Prada and Chanel stores can be found, more than half had claimed an income of less than $40,000. Thirty-four of them claimed less than $13,300, a figure that exempted them from paying any taxes at all.
Such incomes defy belief, said Ilias Plaskovitis, the general secretary of the Finance Ministry, who has been in charge of revamping the country’s tax laws. “You need more than that to pay your rent in that neighborhood,” he said.
He said there were only a few thousand citizens in this country of 11 million who last year declared an income of more than $132,000. Yet signs of wealth abound.
“There are many people with a house, with a cottage in the country, with two cars and maybe a small boat who claim they are earning 12,000 euros a year,” Mr. Plaskovitis said, which is about $15,900. “You cannot heat this house or buy the gas for the car with that kind of income.”
http://www.nytimes.com/2010/05/02/world/europe/02evasion.html
You like paying exorbitant taxes? Neither do the Greeks! They do what they have to.
If what you claim is true, then the Greeks should be in full car\govt building burning mode. I mean overthrow of govt riots....I see nothing. They were just supposedly made slaves....anything? Nope. They just got their party keg refilled...for the second time. They had better tear the place down in the next week or I call BS on your rant. Actions speak louder than words.
Police response after last massive protest can make things a tad difficult:
http://roarmag.org/2011/07/greek-police-wage-war-on-their-own-people-in-videos/
Party keg? Do you think everyone in Greece is 20 years old? The 20 year olds are likely just the tourists from the hard-working virtuous countries.
"Antonios Avgerinos, 59, a retired army pharmacist, always wanted his own pharmacy here. And why not? Greek law ensures that pharmacists get a 35 percent profit on all drugs sold, even over-the-counter medications.
But Greek law also limits just about everything else about pharmacies. They must be at least 820 feet apart and have a likely market of no fewer than 1,500 residents. To break into the business, an aspiring pharmacist generally has to buy a license from a retiring one. That often costs upward of $400,000.
“It is an absurd system,” Mr. Avgerinos said recently. “But it has been that way my whole life.”
“Greece is the last Soviet-style economy in Europe,” said Yannis Stournaras, an economist and the director of the Foundation for Economic and Industrial Research, known as IOBE Athens, who has studied the issue. “Other countries have some closed professions. But nothing like Greece. Every stone you turn here, there are regulations.”
For selling a cancer drug for $4,200, Mr. Stournaras said, a pharmacist makes a profit of around $1,400. “That’s a movement of the elbow that is more expensive than one of Roger Federer’s.”
"Experts say there are about 70 closed professions here, including those of lawyers, engineers, taxi drivers, speech therapists, welders, notaries, street market vendors, newsstand operators and architects. Each is protected from competition by a byzantine tangle of regulations and licensing requirements that result in high prices for consumers and a reliable living for insiders.
No use shopping around for a less expensive lawyer or notary, for instance. They all charge fixed fees, as do many other professions. There are numerous restrictions on licenses, too. Some are not even available to some classes of citizens. For instance, newsstand licenses are reserved for war veterans, the disabled and those with large families to support. Others are limited, like the number of long-haul trucking licenses, which has been frozen for 25 years."
http://www.nytimes.com/2010/10/15/world/europe/15greece.html
Find the Water supply pipe into pharmacy, inject a bit of Demerol and Versed. Wait until about lunch time then enter and make the deal while the old one babbles nursery songs in his narcotic dreams.
Seal the deal and wait until old one sobers up.
They don't drink tap water.
Sounds a lot like liquor licenses in America.
LOL.
Seriously, this is such bollox that it's difficult where to start to debunk it. With regard to your data sourced from the OECD, that organisation relies on member countries to provide statistics and does not audit them. Given Greece has perpetually lied about its national statistics, I think we can safely give them a wide berth. With regard to "associate membership" of the EEC, this is again is inconsequential. Associate membership is not full membership and Greece only obtained this in 1981, whereas the UK joined in 1973. The UK has never really been an enthusiastic member of the club and it was the Euros (De Gaulle excepted) who desperately wanted London on board. Greece on the other hand was desperate for the handouts but still had to wait till it sorted out its democracy out given its predilection for military rule. The EU has helped Greece to the tunes of billions in hand outs (Athens metro anyone?) and any amount of self-serving statistics won't hide the fact that this country is a basket case.
Why should we believe the OECD when we have you to tell us the truth?
Who needs prosperity when you can have EUtopia ?
You mean even Germany doesn't have enough Other People's Money?
Money?
Nien.
You work, 7 years here. Learn labor skills then you are free ja?
I'm utterly amazed how anyone can short the euro against the dollar based upon so many un-qualified opinions including the opinion of their very own ego's.
I read this fear-mongering and simple hysteria for nearly four months now and have asked several times on this forum for anyone to tell me why the euro was any worse than the dollar, but not a one of you responded. I was disappointed because I have been long the euro since 2003 to varying degrees and, I feared that there was some great misunderstanding on my part-----that I was just too dumb to fathom by myself.
I knew as everyone kept saying that the MSM was using this as a cover to wean our collective attention away from the dollar, but I gave that no attention because no one here could be taken in by THIS government-----we are too hip for that.
So what is it, dudes, that keeps the cover over the fact that the european leaders are committed to holding their imperfect union that is not completely supported by the populace? They have shown consistantly through their rhetoric and actions that the euro is more than just a currency; it is the only way that europe can be held together in peace and practice. Today's action only re-enforced their dedication.
I welcome everyone to give me fundamental economic or political reasons for the euro being a weaker fiat than the dollar because I have not found any. The technical stuff anyone can read and it is obvious to play the limits of the trading channel--long/short, trailing stops, blah, blah----the algorythmic i am befuddled by it, so it is the reason I no longer trade------ya, ya, ya
By the way, if you want to short the euro successfully and wsithout risk----turn your euros into gold by buying physical.
thanks all om
"I welcome everyone to give me fundamental economic or political reasons for the euro being a weaker fiat than the dollar because I have not found any."
Let me put it clear for you: when dealing with Europe, ZH is tabloid grade garbage. If you want tips on how to trade EUR pairs, you're wasting your time here.
Can you please point out to me where on ZH did Tyler ever say he was providing "tips" on how to trade EUR pairs?
Does this seem like a forex site to you?
If you don't like this "tabloid grade garbage", feel free to take your idiotic comments and waste your time elsewhere.
Midnight - if anyone's thinking of using ZH as an info channel for trading Euro pairs then quite right, it's "tabloid" stuff... but is that what ZH or any bloggers here thinks they're about? ...nope.
i'd define ZH as 'sharp cookie News' as apposed to dull crony journalist garbage (see the rest of our woefully inadequate and propagandised zombie media)... the place is refreshingly old fart establishment free and the trolls that try to imbed themselves in blogs usually get weeded out in short order because of the sharpness of the no-BS ZH bloggers about which is another characteristic of what sets the place apart ..is that clearer?
There's so much trans-Atlantic backscratching going on by CBs the EURUSD prices are coordinated like a Fred Astaire-Ginger Rogers downward spiral dance routine.
All things being equal the currency of the monetary entity that is most insolvent loses.
But while the Euro can/will go extinct with an EU breakup, the US can theoretically print forever.
So, how come Europe calls the USA a war mongering country when you're the ones who had to get married to keep from killing each other? You can manage without the EU.
OK let me give it a shot. We know the foundations of both the US and Eurozone are shit. The US is in the process of being deindustrialized and Europe is as well to some extent. Both economies are shrinking but are falsified by pumping in money, both by the fed and foreign borrowing, creating the illusion of growth.
Investors and the financial system as a whole don't react anymore to anything "real" - like actual wealth creation. All they react to is more debt. That's the reason stocks went up in Europe when the latest bailot was announced. The same will happen in the US when the debt ceiling will be raised.
So, the market rises when nations go deeper in debt. Debt is the only game in town - debt that's used to fake the economy.
The US is in a much better position to fake its economy than the EU. The fed can basically print as much as they want. In the EU the ECB doesn't (yet) have the same power. National sovereignty is in the way. That means the EU are having problems faking their economy and have needed help from the fed in the past (remember all the freshly printed electronic money the fed has given to euro banks since the 2008 crash? And all the insurance of Euro debt by US banks?)
This all means that the US (through unlimited printing by the fed) is better at faking their economy than the Europeans. This is a clear advantage since all that matters to the market is debt based fakery. This is the reason the Euro is more likely to fail before the dollar.
The reason the Brussels elite wants to abolish all central banks and give unlimited powers to the ECB is so they can fake their economy equally well as the Americans can. Unless that happens, the Euro will fall victim to lack of fakery.
Thanks, C&H,
Your comments have helped a lot. They have enabled me to understand that I see things the opposite of you, inasmuch as I believe it is a positive to not be able to 'print' 'money' (aka debt). I like the fact that if europe is going to stand it has to stand in agreement and this requires collaboration between all parties. In fact, to this oldman the era of dominant egos and individualism is an illness that, hopefully, we are mutating away from
blah, blah, blah------------------
I see this process as aone to be preferred over an 'allpowerful federal union'; sorry it did not hold here-----the 'Union' won and saddled us with what has turned into a nightmare of to manage and wide open for rampant corruption which has always been a problem for us.
Anyway, your position so well-stated has given me a different perspective, though I will continue to use the euros as the last source of funds. I've done quite well, so far, burning up my few dollars first.
Thanks again, C&H om
"inasmuch as I believe it is a positive to not be able to 'print' 'money' (aka debt)."
I see it that way too of course. The whole thing is going straight to hell. I was only trying to see things from the perspective of the 'market', not stating my position on the issue.
Coke and hookers must be good for you, cuz that was the best explanation yet comparing USD to EU...thanks for the post.
"Investors and the financial system as a whole don't react anymore to anything "real" - like actual wealth creation. All they react to is more debt. "
You are exactly right here....