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Ireland the Dollar and Ben
Ireland is high on the list of, “Things that Could Go Wrong Big Time”.
The numbers are so scary that they are encouraging. Ireland is a TBTF.
If there were to be a problem it would cripple the rest of Europe’s
banks. Therefore they can’t let if go.
Robert Peston (BBC)
wrote a blog about his conversation with Irish finance minister Brian
Lenihan. He spells out the death grip of debt that Ireland is in. A
good read. Some cut and pastes:
Total foreign bank exposure to Ireland's economy is $844bn, or five times the value of Ireland's GDP or economic output.
BK: By way of comparison the CIA puts total external debt of
Germany at 1.5X’s GDP. The US is 1:1 Canada has a ratio of 0.7. And
Ireland is 5X’s? How did they get so deep into hock? (That same ratio
for Russia, India and Brazil: 0.4X, 0.2X and 0.2X respectively.
Ahem....)
German and UK banks are Ireland's biggest creditors, with €206bn and €224bn of exposure respectively.
BK: About $600b. Just the UK and Germany. What’s a good “haircut” estimate on this? My answer is it starts with 20% and could be as high as 30%. That would come to $150b. This would be a lights out event for the banks.
The Irish economy is hideously and perilously balanced between recovery and Armageddon.
Mr.
Lenihan didn't rule out in his interview with me that the Irish
government might eventually be obliged to ask for financial support from
the European Financial Stability Facility.
BK: When any Finance Minister says, “I wouldn’t rule that out”, he is really saying, “We are trying to kick the can down the road a bit longer, but really the lines have crossed and we are going to need help.”
The Ireland story has been popping up in the press and with folks who
trade CDS and Bund swaps of late. It has not hit the EURDLR. A few short
months ago if Ireland was in the spotlight as it is today the dollar
would have been soaring. Today it is ho hum. The reason for the change
in sentiment is Ben Bernanke and his obsession to devalue the currency.
The idea out tonight (From Ben to the WSJ) is that the Fed is planning
to buy $100b a month of Treasuries. For as long as Ben likes. We are
now completely without limits. What central bank or foreign investor
will willingly accept that policy? Why should they? They will vote with
their feet.
Europe is in deep trouble. America wants to destroy itself. America will
prevail in the race to the bottom thanks to the mindless persistence of
Bernanke. And in the process we will all lose. Things are getting
downright silly. The price of gold could too.
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The five-times-GDP figure is somewhat misleading, as a good chunk of that debt is owed by tax vehicles parked in the Irish Financial Services Centre (did someone mention HRE?) Obviously these are somewhat detatched from the actual Irish economy and there's scant likelihood of the Irish government bailing any of them out. Even after you strip out the IFSC's contribution the debt-to-GDP is quite astonishing though. (And the denominator may be misleadingly high too, as a good proportion of Irish GDP is profits being booked here by tax-sensitive multinationals.)
Foreigners will "vote" as they must. They will buy our paper. And then buy some more. Our troops on their ground guarantee that. It's power politics. We won. They lost.
Just don't run out of dumb animals.
Hahahahaha you chump.
Its this sort of dumb arrogance that will ensure the end of the american era.
while 40000 limbs have been blown off our troops for nothing much...oh yeah - so we can threaten people and they buy dollars?
'we won' - we won what exactly?
Insane.
The USD is as grains of sand on the beach. Most may not be able to go onto the beach, but from where we stand we know one grain shouldn't be worth too much.
S&P 500 FINANCIALS INDEX - an important chart:
http://stockmarket618.wordpress.com
"There is more to this plot than a storyline - it's looking more and more like a real and true plot. "
Plume: If there is a plot/script, then a lot of what looks like inept bungling is in fact calculated, purposeful steps toward an unacknowledged goal.
Then please expand on that theory a bit - review the major economic/financial/political events of the past decade in this light and tell us which were not part of the script:
1. Tech bubble
2. Real estate bubble
3. 9/11
4. Patriot Act
5. G'span-to-Bernanke transition
6. Free drugs for seniors
7. Credit bubble: personal, corp, gov't
8. choking off money supply in 2007
9. Moving bank debts to sovereign gov'ts
10. Keeping border open to cartels
11. Nationalizing F&F
12. Healthcare
13. FED buying up assets with fiat
If bungling is a cover for shrewdness, where does this point?
Freelectron...
14. Over 50% of American households now receive some form of gov assistance each month
15. The rapid expansion of 'paper gold' products that are traded on the spot markets
16. Regulators looking the other way while HFT trading bots destroy the asset markets
...feel free to add more.
gulf coast people are dying from bleeding internally. its kept quiet.
Gulf WAS 1/5 economy. All kinds of coverups to protect BP.
Chemtrails still going on.
Gulf stream impaired/stopped.
All the while government stands in the way of peoples health and safety.
Please excuse the ignorant who junked you. They need to Google the facts to get to the .gov site where this originates, from the W$J:
In his analysis accompanying the recently released Annual Report of the Medicare Board of Trustees, Richard Foster, Medicare's chief actuary, noted that Medicare payment rates for doctors and hospitals serving seniors will be cut by 30% over the next three years.
So in adddition to seizing the elderly's interest from savings and CDs, the out-of-control Federal government is stripping away the most needy's medical resources. This is evil.
America will prevail in the race to the bottom thanks to the mindless persistence of Bernanke. And in the process we will all lose.
Hell yeah!
http://www.youtube.com/watch?v=Vlg-VRc6TbY
I'm just trying to get a grip on this. Ben is monetizing. Big time. He is printing 100b a month so the government can spend money. But is government spending enough to cause hyperinflation? Because as far as I know, I'm not getting a cheque in the mail.
As far as hyperinflation goes, isn't there two aspects to it? The first aspect is straightforward enough - things become more expensive. In all the Zimbabwe examples, we are supposed to show up at the grocery store with a wheelbarrow of money. The problem isn't a thousand dollars for a loaf of bread. Rising prices the Fed can do - supply money to the banks to prop up commodity prices. But the part I'm having trouble with is the wheelbarrow full of money. With greater than 16% real unemployment, how am I supposed to go to my boss to ask for a wheel barrow of "useless" dollars for my groceries?
What Bernanke is doing is killing the economy. He's trying to create inflation at all costs but in a climate of declining credit he is forcing people with less and less money to pay higher and higher prices.
Unless he can find a way to put dollars in the hands of people, he'll have better luck getting water from a rock.
It reminds me of the asinine comment from the Bank of England telling people to spend more money. New Flash: people like spending money. The problem is not that people suddenly stopped spending. The problem is that people have no money and have maximized their borrowing capacity.
The government keeps giving billions of taxpayer dollars to the big banks, yet the taxpayers remain poor.
So if it didn't work last year, next year do it again harder.
"Unless he can find a way to put dollars in the hands of people, he'll have better luck getting water from a rock."
He's not interested in putting money in the hands of the people.
This is the next phase of robbing all the wealth from the middle class and transferring it to the elite banking class.
And it's so easy to do. Simply run the printing presses and give all that new money to the banking class, exactly what they're doing.
It dilutes the value of every dollar in existence. Banking class gets more dollars to make up for collapsing dollar value, exactly what's happening, but middle class doesn't.
Eventually everyone's dollars are near-worthless, but banking class has quadrillions of dollars to make up for it. Middle class doesn't.
It's the same rob-the-middle-class game central bankers have always played. And it's so easy to do.
Then the banks can put the money into the hands of the people for "hyper-gedden" and sell at inflated prices...?
It reminds me of the asinine comment from the Bank of England telling people to spend more money.
Out of one side of its mouth, the BoE is telling the English to shut up and spend, because only the Banks are entitled to live on interest. Out of the other side of its mouth, the BoE is telling the Irish government that BoE bond holdings had better remain haircut-free, or else the Irish economy will turn into a smoking ruin by a sudden flight of capital.
What if BB is following the script? Americans keep asking, why would a man who has studied the great depression follow the same failed recovery policies?
Why would pols pass TARP bills that were roundly rejected by constituents?
Why would pols - who follow polls religiously and fret over a couple of pct points - pass a healthcare reform act that polled terribly nationwide, and that they know is unaffordable? Why would insurance companies back it unless it increased their revenues?
Why would those same pols propose amnesty bills that are wildly unpopular, especially when millions are out of work?
There is more to this plot than a storyline - it's looking more and more like a real and true plot. The more I understand history, the more I understand the present. We've turned this ground over before. So have other countries.
TPTB are sticking to the script. It's all about power and control over citizens.
The pols are bought. Voters no longer count. What counts is having millions in campaign contributions to buy the best advertising campaign, and having the guy who works the voting machines in your pocket. Who cares what the voters want. Your government answers to the big boys. Everyone else is livestock.
All you have to ask yourself about the likelihood of any policy in America is: "What would most benefit the banks?"
It's an old war: Capital vs Labor. Corporations vs Individuals.
General Ben Westmoreland Bernanke wants to fight the rebels with massive QE firepower. Meanwhile, the rebels are fighting back via a PM guerilla war.
Who will win? What does history tell us?
Ben Bernanke, the General Westmoreland of finance:
http://en.wikipedia.org/wiki/William_Westmoreland
Nice...
BTW: Isn't Ben winning the war of attrition?
on Mon, 09/27/2010 - 21:13
#608718
In 1969,70,71 and 72 I marched on Washington. I was a frustrated young man who hated the Viet Nam War. It does not make me feel any better that history proved me right.
Now I am an old man but I still would march on Washington to stop the Bernanke madness. It will not make me (us) feel anybetter when in five or so years the catstrophe that Bernanke will trigger happens and we can say, "I told you so".
These measures are not needed. America stands alone in the money printing insanity. Bernanke's QE will destroy everthing we thought was important. And we won't get it back for a long time.
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by RoRoTraderon Mon, 09/27/2010 - 23:40
#609016
The shit you are talking about Bruce is pretty fucking deep........it's trancendance of arching power which I admit to not understanding, although believe what I see.
How and where it comes to rest is another story, but my gut feeling is it is at the point of doubt; 'cannot beat them then join them', indecision time.
Maybe there is some real leadership out there beyond the rag tag that can step up, but it has yet to resolve itself.
Only lonely thoughts from the roro.
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by RoRoTraderon Mon, 09/27/2010 - 23:54
#609046
Bruce, you are a sophisticated, experienced mind. What is it Bernanke et al is/are out to destroy and why?
Not to be smart about it, but how much longer do you think it will take?.......to destroy.
Get in line and take a number...
I'll take a hundred, as in 100 : 1 for reserve ratios at these German banks. Even a tiny hit would zero these banks out in a New York minute. At the same time, Europe's major central banks have stopped all gold sales now. Might be handy to have some in case a new currency needs backing?
Irish Car Bomb'
Tick,tick,tick ...
EU worried about viability of three German banks: reportBERLIN — European Commission officials are worried about the fragility of three regional banks in Germany, the weekly Der Spiegel reported Saturday.
A letter from the commission to junior finance minister Joerg Asmussen expresses concerns about the threat that WestLB, BayernLB and HSH Nordbank might pose to market stability.
"For the commission, it is indispensable to have the certainty that rescued institutions are viable in the long term and that they do not represent a permanent threat to the stability of the financial markets," says the letter, quoted by Der Spiegel.
Describing the three banks' latest results as "disappointing", the letter adds: "Given the good current conditions, these figures, in the three cases, are not convincing."
HRE, which last year narrowly avoided bankruptcy before being nationalised, was the only German bank to fail Europe-wide stress tests in July.
http://www.google.com/hostednews/afp/article/ALeqM5iHHo0HwRCqqAae_2XdgSP...
The sense that change could be on the way will be reinforced on Tuesday in Berlin. Politicians and other regional barons who control the Landesbanken have been ordered to the finance ministry to discuss the banks’ future. Behind the curt summons from Wolfgang Schäuble, Germany’s finance minister, is a clear message: sort out your banks or we will sort them out for you.
Sceptics know Landesbanken owners usually ignore such threats. Reform has been discussed for years but it has always seemed to come behind the interests of the banks’ regional political paymasters in terms of local jobs, power and prestige.
This time, the plight of WestLB – likened by one senior German banker to a “jumbo with the engines on fire and nowhere to land” – is the most obvious reason for urgency. A formal process will begin this week for the sale of the Düsseldorf-based bank, demanded by the European Commission by the end of next year as the price of a bail-out during the financial crisis. The Commission is likely to want WestLB wound down if a buyer does not emerge.
Furthermore, the Commission, which has wide powers over European banks that need state aid, has other concerns. It has still not approved the way WestLB has spun off €77bn of unwanted assets into a bad bank. It has deep reservations about the aid given to other Landesbanken, including BayernLB. Without approval, the banks’ survival is at stake. “We have new pressures. Doing nothing isn’t an option,” says Steffen Kampeter, deputy finance minister.
At the heart of demands for Landesbanken reform is the criticism of their business model. Having evolved to provide services for smaller local savings banks and help regional development, Landesbanken have struggled to adapt as this role has waned. They have tried to compete head-on with Europe’s larger commercial banks but most have virtually no retail deposits and rely heavily on funding direct from capital markets. To many private-sector rivals – as well as thinktanks such as the Organisation for Economic Co-operation and Development – they are unstable, market-distorting competitors, which should be privatised or wound down.
The last big potential trigger for change in the sector was ignored – and contributed to the banks’ current plight. The Landesbanken used to rely on funding themselves cheaply with the help of guarantees from their state owners. When the EU ordered an end to such practices by 2005, many Landesbanken used a last flurry of cheap debt to invest heavily in foreign commercial property, subprime debt and other structured securities – with disastrous consequences.
This time a net may be closing on the Landesbanken from several directions.
http://www.ft.com/cms/s/0/482e3c24-ca6e-11df-a860-00144feab49a.html
I slightly disagree with the FT article. As I recall, the problem for the Landesbanks was when they were stripped of the state guarantees, it caused a jump in funding costs, but the investment criteria (i.e. the ratings quality of investments) remained unchanged. Therefore, they needed high rated, but high yielding investments to maintain margins. Enter stage left a bunch of smooth talking investment bankers from London offering AAA rated MBS and other wonders of financial engineering that appeared to offer the magic combination of high yield and high rating. Most of the guys and the Landesbanks couldn't price up a ham sandwich, so they took all of their comfort from the US ratings agencies and went with the flow.
The sad truth about German Landesbanks is they were staffed with people with good academic qualifications but lack "street smarts". My personal experience of these guys was if you sent them an investment idea, they would be more concerned that their names had been spelled correctly and all their academic qualifications had been included .
They used to have lots of smart traders, but they either took a boat to the United States in the 1930s or died in Auschwitz, Dachau or Buchenwald.
You got it completely backwards.
Things started when it was announced that state guarantees would run out in a few years. Then the haphazard Landesbanken had no better idea than use their last chance to load up on cheap debt (while the state guarantees where still in place) and invest it in high yielding stuff. Problem was there was no high yielding stuff... except CDOs.
And the cherry on top is that happened on the watch of famous Steinbrück, as state finance minister responsible for oversight of West LB at the time, who then later as German finance minister flip-flopped between denying there was any problem and posing as the hero who saved us.
There was a fantastic interview on Institutional Risk Analysis on that topic, long time ago.
mmm mmm gold
Falling into the abyss. Hmmm. That means different things for Japan and the several nation States within Europe.
Food sufficiency should be right up there.
Fuel sufficiency as well.
All kinds of sufficiencies.
A good chart expert might create a sufficiency chart.
is "the first not to default" actually a first? and if so, how? now i know crazy so, yeah....this bond thing is CLOUD CUCKOO. Shhhh. Don't tell anyone. But I LOVE IT. MAD MONEY BABY!
Not only is it a race to the bottom. It is the first NOT to default. As messed up as the Fed is, they know others are much closer to the cliff. Europe and Japan will fall into the abyss before the US.
The old "You can't outrun a lion" bit?
Or- When encountering a lion, make sure you can run faster than your partner.