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Intervention Alert - Here Comes The Bailout Bailout: European Cental Banks Gobbling Up Portuguese, Irish And Greek Government Bonds

Tyler Durden's picture





 

And so the European private banks win the overnight battle with the Central Banks again: after shorting the EURUSD all the way to almost 1.25, they have forced the European Central Banks to buy ever more of their worthless Government bond holdings. Reuters reports that overnight CBs have been aggressive buyers of Greek, Portuguese and Irish Sovereign (if there is such a laughable concept as sovereign any more) bonds, which in turn has forced a quick short covering spree in the EURUSD and the EURJPY, which in turn has forced futures to go from 10 handles down to up 4. In other words, Central Banks now are fighting tooth and nail to prevent the market from going down ever again. To all the shorts out there- you are no longer taking on merely the Fed, now you have every money printer against you as they scramble to load up with every worthless asset imaginable. At this rate Dow, Dax and Dung Manure 36,000 is easily reachable. The only way to play this is through gold, which is now the only flight from Central Bank lunacy.

 


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Wed, 05/12/2010 - 05:24 | Link to Comment AnAnonymous
AnAnonymous's picture

I wonder if european eurozone central banks have the power to "print money"

Looks to me they have not. That the ECB power to "print money" is limited as they have to get recourse of others'facilities (the FED) when willing to pursue "money printing" activiting.

Wed, 05/12/2010 - 05:41 | Link to Comment Popo
Popo's picture

Well... correct me if I'm wrong, but I believe you're confusing 'responsible monetary expansion' with 'raw printing'.

In the former, yes the ECB would need to sell debt to counterparties.

In the latter I don't believe they need anyone but themselves.

Wed, 05/12/2010 - 06:47 | Link to Comment AnAnonymous
AnAnonymous's picture

I just wondered who has the power to "print money" in Eurozone.

It seemed to me that the Eurozone central banks surrendered that power to the ECB and that the ECB power in this area is limited.

Wed, 05/12/2010 - 04:59 | Link to Comment plocequ1
plocequ1's picture

And we all thought this couldnt happen. Shit, What were we smoking. Im going long. Even Longer than Long Dong Silver and Johnny Wadd. Google / 17,000 a share, Here we come!! I should of known anything is possible with a printer , a Dell and Uncle Benny Bernanke.  Tyler, Im suprised you didnt see this coming. Dont worry, I still love ya.

Wed, 05/12/2010 - 09:13 | Link to Comment whatsinaname
whatsinaname's picture

We can do better than the Europeans - States now wanting to use taxpayer money to pay down mortgages. Sad..

http://money.cnn.com/2010/05/12/news/economy/taxpayer_mortgages/

Wed, 05/12/2010 - 04:50 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

This is it. Germany is out in the next 18 months from both EMU and EU. The ban on ECB monetization was put there only because Germany insisted heavily on it due to historic experience with the repercussions or inflation/hyperinflation. That is IF the swap facility is not fully operational and running 100%. This is a certain path to hyperinflation or at best; massive inflation.

Wed, 05/12/2010 - 04:55 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

Looking at the movement on these four charts during the night, my guess is the line is fully operational.

Wed, 05/12/2010 - 06:14 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Cheeky, how were you able to embed these charts into your comment (and also into your contributor posts) in a way that allows them to update every time I revisit the page?

Are you using black magic? Is that why you were gone so long, getting training from Satan herself:>)

Wed, 05/12/2010 - 06:27 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

its the magic of the marketplace.

just kidding. actually finviz.com is the most awesome market data site ever. and their chart technology is awesome. once you copy the .jpg of the chart the .jpg becomes as screener. i just need to find a good derivatives site and bond site. everyone i have seen till now are POS. 

Wed, 05/12/2010 - 07:17 | Link to Comment Mako
Mako's picture

When the central banks are the market there is no market.  If you can fund your own "credit", the "credit" would never exist. 

Not only is "credit" not hyperinflating, it's deflating.  Central banks have no power to create "credit" exponentially to infinitiy. 

Hyperdeflation of the non-performing liabilities.  Expect huge swings in so call all asset classes.

Wed, 05/12/2010 - 07:26 | Link to Comment Renfield
Renfield's picture

Mako, don't always understand everything you say, but always fascinated.

Isn't there a point where hyperinflation and deflation pretty much have the same result?

For example, gold: when the (physical) gold price goes too high (hyperinflation), then the paper price will collapse to zero (deflation), and either way you wouldn't be able to use fiat to buy it? So you'd have very high inflation in some things, deflation in others, and in neither case would one's paper money be any good...you could use the paper to buy crap with, but not to buy anything very important. This is what looks to me to be happening with a lot of 'asset classes' (?) today, so I don't understand why 'inflationists' and 'deflationists' are always at odds.

Or am I completely misunderstanding one or both of these things?

Wed, 05/12/2010 - 08:01 | Link to Comment Mako
Mako's picture

I think most of the time people confuse definitions.

Inflation or hyperinflation to me is the increase or rapid increase of money, well, humans use "credit" as money.  "Credit" is not inflating or hyperinflating, I would say this is a fact.  See Federal Reserve Z1 report.  It's actually been deflating for over 2 years and has been negative for a year. 

What we are about to witness and experience will not be an expansion of "credit", central banks have no ability to infinitely expand "credit", if they do... well tell them to send me over 99 virgins, some pizza and a 6 pack of beer. 

Most people believe their is a spoon, which is why the system is still some what working.  I expect huge swings to continue and to get more violent.

Spoon boy: Do not try and bend the spoon. That's impossible. Instead... only try to realize the truth.
Neo: What truth?
Spoon boy: There is no spoon.
Neo: There is no spoon?
Spoon boy: Then you'll see, that it is not the spoon that bends, it is only yourself.

"when the (physical) gold price goes too high (hyperinflation), then the paper price will collapse to zero (deflation), and either way you wouldn't be able to use fiat to buy it?"

I expect huge swings like we have already experience to continue in both directions.   Gold is not going up because of rise in the money supply though.  This is just a fact.  The reason gold is going up is because the underlying credit system is unable to expand and it's over.  Still plenty of "credit" out there to buy gold.   Even if a 1% of money moves into gold you see 100s of not 1000s of dollar moves in gold.   Either way you probably will not get rich with gold, the world runs on "credit", once you remove that "credit"... the chaos begins.

"credit" is nothing more than a human emotion, a fiction of law, which humans give substance to by offer a contract or obligation.  Humans are unable to produce "credit" exponentially infinitely any more than we are able to produce happiness or sad tears exponentially infinitely.  

Humans continue to believe the lie, how do I know?  The system would crease to exist this second if humans didn't believe they could get out of the inescapable.  Humans continue to believe there is a spoon, eventually the Truth always comes out.

Wed, 05/12/2010 - 08:11 | Link to Comment Renfield
Renfield's picture

One of my favourite scenes in one of my favourite films!

OK, focusing on money supply not prices - something I often forget to do.

'Money' supply, of dollars, is going way up, hyperinflation. (Bailouts in the trillions, unlike the billions of last year, unlike the millions of the year before that.)

But credit 'money' is deflating for sure. Even governments in trouble now b/c they can't get enough credit, same with individual citizens, deflation. Got it, I think.

So I'd still say they're both going on at the same time, and from what you're saying, I'm seeing hyperinflation (supply of dollars) as a RESULT of deflation (shrinking credit). If money *represents* credit, that's why it's hyperinflation - a larger number of dollars to represent a smaller amount of credit. If money *is* credit rather than dollars, then this is deflation and the flood of dollars is just to hide that fact. It still looks to me like 'inflationists' and 'deflationists' should be in agreement. But maybe it just depends on whether we're talking about 'money' as dollars or 'money' as credit.

OK, I think I got it. Not to waste your time, I will ponder this over more. Will also have a look at the Z1 report. Thank you for your detail!

"...believe they could get out of the inescapable."

heh...I wish I could say I was above that.

Wed, 05/12/2010 - 08:43 | Link to Comment Mako
Mako's picture

"Money' supply, of dollars, is going way up, hyperinflation. (Bailouts in the trillions, unlike the billions of last year, unlike the millions of the year before that.)"

Money supplly is going down not up, see that is the lie.  That is the lie everyone is running from.  See Federal Reserve Z1 report under "total credit market debt"... figures peaked in 2007 and have been declining ever since, in 2009 it is now negative every quarter.  The central banks can't create "credit" no more than they can create happiness infinitely.

Credit creation is negative which is the money supply.   Without the federal government the system would have been toast 2 years ago.   All the little lemmings think they can get out of this, they can't. 

The cycle

System start>System expands>System unable to expand>System peaks>System collapses>System liquidates>(up to this point rinse and repeat)

Wed, 05/12/2010 - 14:20 | Link to Comment Boop
Boop's picture

What money is being created is being handed to the banks. The banks are speculating with it in the markets. (Dow 36,000, anyone?) But getting that money into the hands of the public, via credit cards or traditional lending, is not happening, because the banks are nervous about being paid back, and the consumer doesn't want the money in the first place because they are tapped out (already in too much debt). 

On balance, due to the destruction of money by defaults and crashing real-estate values, the net amount of money (credit and cash) is dropping.

 

Wed, 05/12/2010 - 08:55 | Link to Comment Hughe Crapper
Hughe Crapper's picture

Mako is correct.

What he said was: There are two opposing forces in the capitalistic system. We have a contracting private sector, behaving rationally. And we have a bloating public sector, throwing fiat money at the system, behaving unrationally.

Hence, the two forces result in a dynamic situation called volatility.

 

There you go. Elmo language.

Wed, 05/12/2010 - 10:35 | Link to Comment mikla
mikla's picture

+1  ... Very nicely succinct.

Wed, 05/12/2010 - 14:49 | Link to Comment RockyRacoon
RockyRacoon's picture

CD, it looks like the key is in the link to the image:

http://finviz.com/fut_chart.ashx?t=DX&p=m5&s=m

http://finviz.com/fut_chart.ashx?t=ZB&p=m5&s=m

etc...

It's not a static .jpg.   Post the .jpg image as a link.  I do this with images in my emails.  Just use the image itself (.jpg) and insert a link as you would do for any text.

 

 

Wed, 05/12/2010 - 18:19 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

RR,

Thank you.

Wed, 05/12/2010 - 04:52 | Link to Comment AUD
AUD's picture

Don't these private banker fools realise the government is just handing their worthless bonds back to them in the form of worthless non-interest bearing paper?

The ECB creates Euros by monetising bonds, it's the same damn thing...the Euro & the bond, they are the same thing!

Wed, 05/12/2010 - 04:58 | Link to Comment plocequ1
plocequ1's picture

Does it really matter?? Look at the bright side.. Dow/ 56,000, Google/ 18,000 a share..

Wed, 05/12/2010 - 05:02 | Link to Comment AUD
AUD's picture

But you're just pricing the Dow in worthless bonds, what are you going to buy with your sovereign debt?

 

Wed, 05/12/2010 - 05:04 | Link to Comment plocequ1
plocequ1's picture

Im being sarcastic. I hope this Ponzi operation fails with a passion.

Wed, 05/12/2010 - 07:38 | Link to Comment nuinut
nuinut's picture

It is the same thing unless one extracts some from the loop and buys gold with it, isn't it?

Wed, 05/12/2010 - 06:21 | Link to Comment chindit13
chindit13's picture

"what are you going to buy with your sovereign debt?"

Are you crazy? Why I can sell my Google for $18,000 per share and either buy two shares of Apple for $9,000 a piece, or better yet 30 shares of Citibank for $600 a piece. Heck, if I play my cards right, I might even be able to afford my own Congressman.

Wed, 05/12/2010 - 07:40 | Link to Comment Renfield
Renfield's picture

I asked for a congressman for Xmas, but all I got was this stupid sock puppet.

Wed, 05/12/2010 - 07:54 | Link to Comment LongGold
LongGold's picture

Same thing ;-)

Wed, 05/12/2010 - 08:13 | Link to Comment Renfield
Renfield's picture

Dammit. Now you tell me - after I sent off a NASTY letter to jolly old Saint Nick about it, too!

sigh...Back on the naughty list again...

Wed, 05/12/2010 - 08:50 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

LOL

Who said you were ever off the naughty list? :>)

Wed, 05/12/2010 - 09:03 | Link to Comment Renfield
Renfield's picture

Hmph!!! No Christmas cake for YOU this year...

awww...you have to be good for a whole 364 days just to have fun for one day at Xmas. What kind of ROI is that? Sucks.

Better plan is be really, really, REALLY sorry at Xmas and see what cajoling + bargaining can get you. Lucky for me my Santa is very forgiving! ;-)

Wed, 05/12/2010 - 09:42 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Sounds like you're taking lessons from some Wall Street banksters. They most certainly understand how to game the system, only their Santa Claus is in Washington, DC. And they just need to threaten Santa with a nuclear winter and Santa drops presents from a helicopter. None of this "nice" crap for them.

Wed, 05/12/2010 - 14:29 | Link to Comment i.knoknot
i.knoknot's picture

364 for 1...

but the MSM spends 200+ days pumping that 1 day... so it must be worth it.

jeez. we've been had.

but this year will be different. you wait and see.

Wed, 05/12/2010 - 05:19 | Link to Comment Renfield
Renfield's picture

Not to worry. What goes up will come down.

As long as our loser governments collect taxes, price goods & services in fiat, and reward banksters who short the world or sell shit they don't own and which doesn't exist - markets will go down. They have to, b/c if the government quits pretending then the people can quit pretending. Then the government morons would have to find real work, and the rest of us could keep (or dispense ourselves) the fruit of our labour.

So. This short squeeze will come down too. Perhaps as soon as when New York opens and the banksters who shorted the eurine and pound get tired of being squeezed. If not then, within a day or two, with the first sign of:

a) citizen unrest

b) government inability to make debt payments/disguise inflation/impose austerity

c) bankster losses on the short side

d) price of oil rises over $85

In the meantime, may all of us citizens enjoy the inflation.

I reckon this rise was nothing but London/Frankfurt using the excuse of Britain's new government 'coalition' to employ a squeeze they've been desperate to make for some time now. They needed any excuse...but the whole world would need to sign on to it (you know, even those unimportant non-Western countries) and stay signed on, to make it last.

ETA: EUR and GPB already selling briskly. My theory: They took it too high too fast...bet they're trying to allow room for New York to take it higher. I doubt they will, but if they do, I very much doubt Asia will keep it going...

Wed, 05/12/2010 - 05:12 | Link to Comment mee-mee-mee
mee-mee-mee's picture

Isn't the Central bank able to manipulate GLD / SLV also? Or will the price run beyond their control....Lets hope so.

Wed, 05/12/2010 - 05:23 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

unfuckingbelievable ... EUR/DXY turning into mimic not percentage moves but fucking 1 minute ticks .... mind boggling ... invert the DXY chart and place it over the EUR. Almost perfect matching.

Wed, 05/12/2010 - 05:46 | Link to Comment Boston Wealth
Boston Wealth's picture

Do you ever sleep!

Wed, 05/12/2010 - 05:59 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

not while im in my ZH mode. then im mike tyson with a roid rage and 46 cans of redbulls in him sans the raping urger.

Wed, 05/12/2010 - 06:07 | Link to Comment Boston Wealth
Boston Wealth's picture

lol!!!!

Wed, 05/12/2010 - 05:41 | Link to Comment silvertrain
silvertrain's picture

gold $1242 and silver $1950 though lol

Wed, 05/12/2010 - 05:56 | Link to Comment AUD
AUD's picture

Holy Smoke!

This reminds me of the time we tried putting the cat in a box to drive it to the vet.

The box didn't last long.

Wed, 05/12/2010 - 06:45 | Link to Comment Mesquite
Mesquite's picture

Hehehe.. Perfect analogy, I believe.. 

Wed, 05/12/2010 - 07:05 | Link to Comment Renfield
Renfield's picture

HAW!!

As a cat-owner, I loved that comparison!

Wed, 05/12/2010 - 09:22 | Link to Comment Hephasteus
Hephasteus's picture

Austerity. Sometimes it's just like failing to take a cat to the vet.

Wed, 05/12/2010 - 05:41 | Link to Comment LongGold
LongGold's picture

DOW 36k ? That's so yesterday. DOW 3.6E36 is more like it :-)  To infinity and beyond

Wed, 05/12/2010 - 05:46 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

Gold is giving the lie to all the bailout shenanigans and propaganda. EUR goes down, Gold goes up. EUR goes up, Gold goes up. It doesn't matter anymore which fiat currency is imploding against which other fiat toilet paper. They are ALL CRASHING against G.O.L.D.

Got GOLD, Bitches?

Wed, 05/12/2010 - 09:24 | Link to Comment Hephasteus
Hephasteus's picture

Ah man just when I was going to try putting 50 yen inbetween two dollars and mail it to the power company. Just when I learn a trick they take the trick away.

Wed, 05/12/2010 - 05:49 | Link to Comment JonTurk
JonTurk's picture

don't fight the fed (until its broken).. 1 trn bucks is a hefty sum to manipulate fiat currencies and virtual equity indices..

the path seems clear.. currency debasement - stagflation - CBs gone broke - deflation

Wed, 05/12/2010 - 05:50 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

Ultimately, it will be revealed that the simplest strategy is also the best and most profitable one - holding 100% physical Gold ONLY. Many people will blow themselves up trading paper tickets instead of just sitting back, chilling and watching the fiat world around them implode.

Wed, 05/12/2010 - 06:08 | Link to Comment Renfield
Renfield's picture

GG

I trade paper tickets, but only to buy gold with! (I get more paper tickets doing this than when I worked at a real job, with real labour - sooooo, when in Rome you know)

We have a tiny trading account, which has paid for itself a couple times now in terms of gold, but our balance left in it stays tiny. (Of course we never put more than that little balance at risk...) We withdraw a lot and trade the paper for beautiful, real, lustrous & seductive metal.

What haunts me is the day the metal runs out. I get fearful about that b/c we don't have anywhere near enough yet, with my husband's small wage and my little trading work...

Wed, 05/12/2010 - 15:21 | Link to Comment Tipo anónimo
Tipo anónimo's picture

Ren - The thing is that there is never enough. Think on the other hand that if you divide all the gold by the number of people in the world and then subtract the number who don't buy, 30 grams is oh let's see, 30 grams more than about 5 billion people have. So don't worry about it so much!

Wed, 05/12/2010 - 05:53 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

A public service announcement (for those who haven't already - it's still not too late):

BUY. GOLD. NOW.

Wed, 05/12/2010 - 05:57 | Link to Comment LongGold
LongGold's picture

And silver. At the moment silver has more upside than gold in my opinion. Both will eventually blow sky high as the fiats of the world go towards their intrinsic value of 0  :-)

Wed, 05/12/2010 - 05:58 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

click on contrib section and follow the chart in the first article. my take is. we see gold closing a tad below 1250 before NYC closes.

Wed, 05/12/2010 - 05:59 | Link to Comment silvertrain
silvertrain's picture

.

Wed, 05/12/2010 - 05:59 | Link to Comment silvertrain
silvertrain's picture

get to silver, just moved another dime!!!!!!!!

Wed, 05/12/2010 - 06:15 | Link to Comment JonTurk
JonTurk's picture

gold seems like putting in a short term top at around 1250.. dont chase here, wud be buyer after the dip..

Wed, 05/12/2010 - 10:44 | Link to Comment Hephasteus
Hephasteus's picture

Dip isn't anywhere in the 1250 neighborhood. The dip will likely occur in the 1340 to 1360 neighborhood and take you back to the 1300 neighborhood. It will top before the PM fix then go higher.

Wed, 05/12/2010 - 11:09 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Was this the idea you had yesterday after my comment about Euros over nipples? :>)

Wed, 05/12/2010 - 06:56 | Link to Comment asteroids
asteroids's picture

I'm wondering what the decay effect will be this time. 14months after the American bailout we were seeing the start of a pullback. I wonder if this ECB jump will last even a month.

Wed, 05/12/2010 - 07:43 | Link to Comment nuinut
nuinut's picture

Bailouts going parabolic! Love to see that chart.

Wed, 05/12/2010 - 06:57 | Link to Comment jkruffin
jkruffin's picture

GOLD 5k and Silver 500 coming to a country near you.

 

Silver will close the ratio IMO to 10:1 or close to it ,  as gold gets really out of reach for the late crowd,  I believe they will flock to the next best thing. 

Wed, 05/12/2010 - 07:03 | Link to Comment Renfield
Renfield's picture

I reckon that silver has a lot higher to rise in terms of price, than gold even (proportionately).

I think traditionally silver was meant to be 1/15th the price of gold.

In today's terms (the gold price still being suppressed of course) the silver price ought to be about $83/oz.

Not sure if gold being more available for currency, while the supply of silver is being reduced by industrial use, also should be counted in this. Which would put the ratio closer to your 1:10 than the old one.

Wed, 05/12/2010 - 08:58 | Link to Comment MyFriendMises
MyFriendMises's picture

Lets hope so...

Wed, 05/12/2010 - 07:04 | Link to Comment Instant Karma
Instant Karma's picture

Is anyone surprised? Someone had to buy the PIIGS bonds.

I just bet the IMF or even the US "announces an intention" to sell some gold just to attempt to dampen the price.

I'd buy that dip.

Wed, 05/12/2010 - 07:07 | Link to Comment Renfield
Renfield's picture

That's been backfiring on them lately.

Turns out when they announce selling it, that countries and hedge funds start announcing their intentions to buy, and at some damn fine prices.

Then they look like chumps for letting it go. And some hedge funds get publicly irritated at being turned away even when they want to pay more...

Wed, 05/12/2010 - 07:44 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

we are printing money for the EU, swaps, and IMF bailouts..ben was up all night running those presses,,,or was it hitting those computer keys - 1 and 0's..

what's the price of gold in computer code??

 

Wed, 05/12/2010 - 07:55 | Link to Comment Arm
Arm's picture

Old news.  We've been buying Portuguese debt since January.

Wed, 05/12/2010 - 08:00 | Link to Comment spanish inquisition
spanish inquisition's picture

It makes sense that French (& other Eurpoean banks) would short the Euro. So they could drive down the Euro and accelerate the buying of all their crap bonds (that they are getting a premium on). Dump it into Gold to short term to hold value (in Euros)and switch back to euro before the swaps kick in. Then they start changing back Gold to Euro's. I am sure the Fed will kick in and help selling Gold. It's a theory...

Wed, 05/12/2010 - 14:54 | Link to Comment RockyRacoon
RockyRacoon's picture

Just heard a good one:  "Isn't the gold trade crowded?"

"Sure, but so were the lifeboats on the Titanic.  That wasn't a reason not to get on board."

Ha!

Fri, 02/25/2011 - 08:11 | Link to Comment george22
george22's picture

This is it. Germany is out in the next 18 months from both EMU and EU. The ban on ECB monetization was put there only because Germany insisted heavily on it due to historic experience with the repercussions or inflation/hyperinflation. That is IF the swap facility is not fully operational and running 100%. This is a certain path to hyperinflation or at best; massive inflation.

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