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Same Liquidity Contraction, Different Day: Euribor Higher, European Bank Liquidity Lower, Spin Endless
Euribor is again spiking by 0.4 bps overnight, from 0.889% yesterday to 0.893% today. In the context of the massive (and insolvent) European banking system, this is yet another indication that all is unwell with Europe's banks, even as the Goebbels brigade goes into overdrive. The interbank lending market does not lie, unlike every single European and American politician. And just to make things worse, the ECB withdrew another E11 billion in liquidity via a reduced 7 Day MRO. From Market News: "The European Central Bank on Tuesday allotted E189.9864 billion in its main seven-day refinancing operation at a fixed rate of 1.0%. The ECB satisfied all of the 151 bids received. Today's operation resulted in a net drain of E11.2996 billion after the ECB allotted E201.286 billion in its 7-day MRO last week."
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Hey,
you say Goebbels, I'm there. ;p
ps...how's the FED's balance sheet today? ;)
Euribor!,Euribor!Andale!Andale!
These central bankers can play all the games they want - but oil getting north of 80 during an economic slowdown - implying a price well north of 100/bbl if some growth returns - is my personal measure of how well they are doing.
My bet is that these bozos will be an abject failure - and to me Oil over 80 is the indicator that spells FAILURE.
Oil shot back up to the $75 level very soon after our friends in the middle east announced that number as their preferred target. And counter to the fundamentals of supply and demand, it has remained there. Does anyone really wonder who the "mysterious London bidders" are for all of the US debt?
Yeah the central bank of oil ( SA) probably has some sayy in the price of oil? Much like folks understand the the central bank of fiat( Bennie) has some say on the price of overnight borrowings?
So - if the central planners of the west think they can do whatever they want - in other words provide purchasing power tto people who in most other places would be sleeping in a coener of a warehouse. Purchasing power that enables uneducated, unskilled people who have no desire to do any manual labor either. Why - there are plenty of people like that - billions - in asia that would love to just have a dry bed and 3 meals - a day .
So if that is what the central planners of the west think they can pull off by printing money - why then - the price of oil will go up to reflect that.
Off topic, but I remember around the 5th July the DOW futures being down to about 9550. Well the DOW futures are currently at over 10550.
So a 1000 point+ rally in a few weeks mainly on corporate earnings for a quarter that has passed. All future indicators look bad.
We are are now only off approx. 650 points from the April 11200 highs.
And the Nikkei seems to be ignoring the US Markets pump-up bull.
Looks overbought to me.
The worlds capital is now in a negative trajectory - and the issuing of more credit will simply accelerate the decline until they convert all debt money to money
The greatest scam of all time is coming to a end but the bankers will not want or possibly be able to raise capital as that will destroy their profits.
Will Trichet and BB finally do the decent thing and convert all their debt money to money - I doubt it - they will ride this sinking ship down with the rest of us.
Tyler, I am sure you have a good understanding of who you are referring to when you calling the ranks of those who propagate a return to normal his brigade?
This situation makes the Titanic look like a dingy...ahhoooy!
Creditberg sinking the global ship captain. Peasants, plebes to be cast off first with no lifeboats. Timbeeeeer!
Is this the week - the treasury auctions "fail"?
I mean - bennie - is on the back foot - what with the elctions and whatnot. And the congress critters are more keen on pressing bennie for more easing - not less. Mo mo mo - howdya like it - howdya like it? need mo money - hey we are suffering here - barely able to pay the cable bills.
But unfortunately - the rest of the world is doing fine thank you .
So - Zero interst rate - seems like asking for trouble.
Next move by Fed - panic increase in Fed Funds rate - and not in baby steps either. As the dollar - heads towards fair value ( zero).
If eurobor were to keep spiking at this frenetic pace for some 28 more days it would hit the showstopping rate of 1% at about the same time the s&p (were it to continue it's current rate if change) would print about 1400.
How long can the euro inter bank liquidity crisis continue unabated? What could be some of the possible causes to turn this into a disaster? They managed to keep it glued together this long, whats to say they can't keep it up indefinitely?
I find it interestin that the price of oil is the one real consequence of the Feds policies - yet the price of oil is the one thing the Fed considers outside its mandate . I bet if congress questioned bennie in a couple of months why the price of oil is at 120( say)- he would say - oh that has to do with the supply/demand dynamics in the energy market and he has nothing more to say on that.
This is the achilles heel of so called monetary policy.
Love the AUD pump starting at midnight. If it continues going up a dollar a day the market should be back to its all-time highs.
Yes Primefool you are right.
Imagine a world in which the dollar remained on the gold standard however flawed it was - they would have been forced to put in energy austerity to build capital .To create capital that would both reduce and / or replace oil within its economy as a continued drain on its gold reserves would have been unsustainable - instead we replaced this with a unsustainable draw down of the worlds premier physical capital and now that this capital extraction has reached its peak we are now in a energy/debt spiral.
Why the European Stress Test is Meaningless
The Main Flaws of the Test
1. Under the most severe scenario, banks were tested on how they would cope with a moderate recession,
not a severe depression. Notice the fact that in Greece, Spain and Ireland we already defiantly in
Depression conditions (Deflation, Unemployment north of 15%, Contracting credit, etc.)
2. Some of the banks dodged full disclosure full disclosure of their foreign debt holdings.
3. The test demanded a Tier 1 capital ratio of 6 percent or above by the end of 2011, an extremely low and
inefficient amount.
4. Government bond losses were only applied to trading books, and not hold-to-maturity bonds, as the test
did not consider there was a risk of any sovereign default.
Why the European Stress Test is Meaningless
So are you inferring that the Europeans are a bad day away from a banking crisis? Triggering another stock market melt down? Triggering another recession? Is that what your sayin'?
EURO buying support mentioned since June continues and further upside is expected.
http://stockmarket618.wordpress.com
"Good" earnings create short squeezes and negate the need for higher liquidity.
More like "good" lies. These corporations are running bare on employees and are carrying significant amounts of debt. Better to lie now and get caught later after vanishing with the money.
At the end of the day, I don't see how the ECB can continue to suck out liquidity.
Gold just shot down US$ 8.00 another hedge fund needing liquidity or getting ready for the Wednesday Gold + Silver options ?
Gold up 7% for the year.... S&P flat. Go figger.
NYT headlines:
Trader’s Cocoa Binge Wraps Up Chocolate Markethttp://www.nytimes.com/2010/07/25/business/global/25chocolate.html?_r=4&hpw
From Ted Butler:
Look for the euro to reflate to $1.40-$1.45 range, that seems to make the CBs happy. Of course, it encourages the 'export' driven recovery as well.
These guys are lookin' skyward while the ground falls into a huge sinkhole that is perpetual debt.
I suppose they'll say, 'hey, we saved the banks! That's job 1.'
Why am I getting "Profit with Cramer" ads on the ZH site?
Because your the chosen one. You got a bad case of coyote ugly.
It is the devil speaking to you, "Come do my bidding! ha ha ha ha"
The Euribor spike is noteworthy, but there are some interesting divergences that call into question whether it really emanates from liquidity/solvency concerns re European banks. Specifically, we are not witnessing a spike in 3-month eurodollar rates, as we have seen in past euro crisis, and the euro libor/ois spread has actually tightened a bit recently, as has the spread between the premiums on euro and sterling ois. http://imarketnews.com/node/17084
As Nic Lenoir has pointed out here recently, perhaps the spike is due to an immediate need for euros, which would correlate with the 30% rise in eur/usd witnessed in the last 6 weeks. Is this squeeze caused by depositors cashing out euro bank deposits? The above divergences (and the correction in gold) would suggest the contrary and what we are seeing is a ratcheting of euro velocity (euro bullish), but I would love to hear others thoughts on the subject, because these are pretty interesting divergences. In any case, the results of the upcoming euro bank funding operations will be much more interesting than the more easily manipulated stress tests. Thanks!