A "Who Is Who" Of Countries About To Fund The IMF's Bail Out Of Europe

Tyler Durden's picture

When back in April we wrote about the huge expansion in the IMF's New Arrangement to Borrow (NAB) multilateral facility (which was expanded from $50 billion to over $550 billion), one of our observations was that "Funny money will galore. At this point nobody will allow anyone or anything to fail." And since all of Europe is about to be bailed out by the now insolvent ECB and the still somewhat solvent IMF, it strikes us as an opportune time to recall just who will bear the cost of this pan-European rescue. Surely, by now even idiots realize since the ECB is bailing out Europe, it is really bailing out itself, in a process described beautifully by Sean Corrigan recently, and any incremental money coming from ECB member countries will really go to themselves, and therefore its "new capital" contribution can be completely ignored. The same thing goes for European member countries of the IMF: that Ireland has pledged $2.9 billion to the IMF's NAB (not to mention Spain's $10.3 billion and Portugal's $3.4 billion) is late night comedy circuit fodder. Which is why it is not at all surprising that new capital will come from the US, Japan and China, in that order: the trio is about to spend over $250 billion (and soon much more) to rescue Club Med, as the Ponzi unwind shifts into a higher gear.

New, incremental sources of capital have been conveniently highlighted in the table below which lists the NAB participants and amounts pledged.

And just so there is no confusion, here is Nomura explaining why the existing EFSF framework is insufficient to fund even the rescue of Spain:

...Our estimate of total rescue funds available comes close to but does not fully cover complete three-year bailouts of Portugal and Spain (Figure 4). At the outset this seems to justify recent market moves given the likelihood also that if Spain was to roll over contagion would have room to extend further.

However, there are options open on this front that could make the numbers seem more palatable. First, it is not necessarily the case that potential rescue packages will look to cover the entire three years. In the Greek case for instance we project that the provided package effectively covered the funding gap into the latter part of 2012, the implicit assumption being that market access would improve by that time and that the sovereign would be at least partly be able to resume independent financing. Whether Greece is actually able to do this is another question. However, in the interim we see no reason why this approach would not be adopted for other countries. If nothing else it provides a signal to the markets of confidence in the underlying apparatus.

An expansion in the EFSF framework is another possibility and we note the amount of traffic around this subject over the last couple of sessions, most notable ECB?s Weber in, saying that he was convinced that interested parties would “do what is necessary to protect the euro”. Greater reliance on bilateral credit sources could be an outlet as well, with Ireland?s case showing that even non-euro denominated countries are willing to become involved where their own banking sectors are exposed. Overall. we think that Europe does have the underlying resources to accommodate the rescue of Portugal and Spain. Were the need to spread further though, Italy perhaps being the most telling example, worries over the ability of the region to cope could gain some credence.

Ergo: once Spain is under (+/- one month), then the full cost of the Italian and subsequent rescues will be increasingly borne by America.

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Mr Lennon Hendrix's picture

Quite the new invite list.  The newly bankrupted Grease, Ire'land, Port de Gaul join the BRICs.  Globalist Voltron uniting into a one world banking order.

Commander Cody's picture

I can spare a few bucks.  Sign me up.

Mr Lennon Hendrix's picture

Your IMF standards and liabilities include the operational ability to:

-Lease gold from the IMF

-Bailout the IMF

-All decisions and designs concerning the operations will be designated by IMF

Any questions?

cossack55's picture

Hip, Hip, Hooray.  The US is still #1.  Screw those third worlders.

Spitzer's picture

Not so fast..

Can you explain to me why the US sponsored IMF is bailing out Europe when Europe has the ability to print Euros and bail out itself ?

Spalding_Smailes's picture

The US dollar shortage in global banking ~ Bank For International Settlements

Banks’ global expansion

European banks’ combined long US dollar positions
grew to more than $800 billion by mid-2007

Banks’ foreign positions have surged since 2000. The outstanding stock of BIS
reporting banks’ foreign claims grew from $11 trillion at end-2000 to $31 trillion
by mid-2007, a major expansion even when scaled by global economic activity
(Graph 1, left-hand panel). The year-on-year growth in foreign claims
approached 30% by mid-2007, up from around 10% in 2001. This acceleration
coincided with significant growth in the hedge fund industry, the emergence of
the structured finance industry and the spread of “universal banking”, which
combines commercial and investment banking and proprietary trading
At the level of individual banking systems, the growth in European banks’
global positions is particularly noteworthy (Graph 1, centre panel). For
example, Swiss banks’ foreign claims jumped from roughly five times Swiss
nominal GDP in 2000 to as much as eight times in mid-2007. Dutch, French,
German and UK banks’ foreign claims expanded considerably as well. In
contrast, Canadian, Japanese and US banks’ foreign claims grew in absolute
terms over the same period, but did not significantly outpace the growth in
domestic or world GDP (Graph 1, right-hand panel).

Concluding remarks

The crisis has shown how unstable banks’ sources of funding can become. Yet
the globalisation of banks over the past decade and the increasing complexity
of their balance sheets have made it harder to construct measures of funding
vulnerabilities that take into account currency and maturity mismatches. This
special feature has shown how the BIS banking statistics can be combined to
provide measures of banks’ funding positions on a consolidated balance sheet
basis. The analysis suggests that many European banking systems built up
long US dollar positions vis-à-vis non-banks and funded them by interbank
borrowing and via FX swaps, exposing them to funding risk. When heightened
credit risk concerns crippled these sources of short-term funding, the chronic
US dollar funding needs became acute.
The resulting stresses on banks’
balance sheets have persisted, resulting in tighter credit standards and
reduced lending as banks struggle to repair their balance sheets.



The US dollar shortage in global banking - BIS Quarterly Review ...

Spitzer's picture

This is not dollar positive.

Does the article not basically say that the Euro banks did all their shitty deals with dollars and not Euro's ?


Spalding_Smailes's picture

This is dollar positive a thurst for dollars/new debt/securitization. Businesses continue to fund debt through dollars on a global scale every day. Look at a 5 year chart of the dollar all this new debt issued and what move/crash. The trillion dollar securitization market was built using dollars. The deflation from the breakdown will last a very long time.

The dollar is the king our inflation gets exported. The rest caught in our dollar denominated web drink inflation 24/7. Global trade is based on the dollar/letters of credit this churn will always keep a floor under the dollar.


Country Garden Holdings Co Ltd, a leading Chinese real estate developer with a focus on Guangzhou and Foshan in Guangdong Province, today said that it plans to float US$400 million in five-year dollar-denominated bonds with a coupon rate of 10.5%, sources reported.

Emerging market governments and companies have raised $151bn in dollar-denominated bonds this year, a record since 1995.


Spitzer's picture

The Fed does not hand out dollars out of the kindness of its heart. The Fed is dealing with it because its the dollars problem.

Spitzer's picture

The Fed does not hand out dollars out of the kindness of its heart. The Fed is dealing with it because its the dollars problem.

Spalding_Smailes's picture

European banks’ combined long US dollar positions
grew to more than $800 billion by mid-2007


Swap lines = ?Who needs who ? Banks in europe need dollars to stay solvent and if they cant get dollars on the debt market they go boom. Game over for the euro.

The banks that played in the forex/dollar/bond gang bang are getting blowtorched on the meltdown in the shadow banking industry. They are all on the hook and must continue to make that debt payment every month in dollars the central banks hold tons of dollars because of this and will always need more.

Gold can not back global trade/global banking/ thats the reason they dumped it in the 70's they need cdo's,siv's trillions so gold cant back the shadow banking needs/wants. Only the dollar can.

The securitization market is nothing like it was thus the credit is being pulled in across business/credit card/ninja loans ect .... But they must continue to service this debt or whats left all the non performing loans. New dollar debt needed to keep the hamster wheel spinning.

Euro negative ~

The analysis suggests that many European banking systems built up
long US dollar positions vis-à-vis non-banks and funded them by interbank
borrowing and via FX swaps, exposing them to funding risk. When heightened
credit risk concerns crippled these sources of short-term funding, the chronic
US dollar funding needs became acute.
The resulting stresses on banks’
balance sheets have persisted, resulting in tighter credit standards and
reduced lending as banks struggle to repair their balance sheets.

Spalding_Smailes's picture

China negative ~

Take the most obvious example, the PBoC itself.  The central bank officially has about $2.5 trillion in reserves.  This by the way almost certainly understates its true position but let’s ignore that for a moment.  The PBoC has funded this position with an equivalent amount of RMB liabilities, which makes it very vulnerable to changes in the value of the currency.

Rate addiction

In fact there were strong rumors last year that the PBoC was technically insolvent as a consequence of the 20% increase in the value of the RMB against the dollar during the 2005-08 period of currency appreciation.  Weirdly enough, although the numbers are huge, it has proven difficult to convince anyone that the PBoC is not the richest institution in the world, and that it is actually very vulnerable to big losses (although I notice that Sovereign Trends’ Terrence Keeley, in an OpEd in the Financial Times Tuesday, seems also to have done the numbers).

The problem for the PBoC occurs not just because of the currency mismatch but also because it needs repressed funding costs to keep it profitable.  How much do the PBoC foreign currency assets earn?  I would guess probably between 3% and 4%, maybe less.  The RMB funding cost, on the other hand, is roughly between 1.5% and 2.5%.  This leaves the PBoC with a net positive carry of between 1% and 2%.

If the RMB appreciates by as little as 2% a year, in other words, the PBoC runs a negative carry on its assets.  Every further 1% increase in interest rates, or additional 1% rise in the value of the RMB, then, erodes its capital by at least $25 billion (annually, if it happens through an increase in interest rates).

Let’s assume, for example, that over the next two years we see a combined appreciation and interest rate increase of 10% (let’s say a 2% increase in interest rates and a 4% annual appreciation), which is, in my opinion, the absolute minimum that China must do to slow down the worsening domestic imbalances.  Assuming no change in the rate earned on reserve assets, which in fact may decline, this means that the PBoC’s net indebtedness would rise by over $250 billion, or roughly 5% of the country’s GDP.

These kinds of number quickly add up.  And of course it is not just the PBoC that has this addiction to repressed interest rates.  Many years of very low cost borrowing has created a huge dependency on low interest rates among SOEs, local governments, and other creditors of the bond markets and the banks (not to mention the banks themselves), all of whom are directly or indirectly funded by long-suffering households.




Spitzer's picture

PBoC was technically insolvent as a consequence of the 20% increase in the value of the RMB

im not going to waste my time with a keynesian.


Spalding_Smailes's picture

Dont hate the playa/uncle ben hate the game.

Dollar crash = wrong call.


Spitzer's picture

You are the keynesian I am talking about.

Nasdaq crash=right call

real estate crash=right call

Treasury/dollar crash=right call

Spalding_Smailes's picture

Check out a five year chart of the dollar ... After all the backstops, bailouts, trillions in new credit/debt.

What crash ? 2005 (85) 2010 (80.43)

The bubbles you speak of Dot.com/Homes/Now Gold. Lots of golden paper floating about, enjoy the crash.


China Medical Technologies Inc., which makes devices for tumor treatments, plans to sell bonds denominated in U.S. dollars, according to a person familiar with the matter.

Deutsche Bank AG and Standard Chartered Plc are managing the sale, said the person, who asked not to be identified because the details are private. The company is planning a series of investor meetings from tomorrow, the person said.


Venezuela announced a dollar-denominated government-bond sale for at least $3 billion, a move that gave the bolivar currency a boost against the dollar in the black market.

Venezuela's Finance Ministry said that the bond sale, which is being managed by Deutsche Bank AG and Citigroup Inc., would come in two issues, one for $1.5 billion with a 2019 maturity and another for the same amount, with a 2024 maturity.

In a long-anticipated move, France's Compagnie de Financement Foncier (CFF) priced its first-ever U.S. dollar-denominated (USD) covered bond Thursday (April 15).

The Debts of the World: Colombia Offers Dollar Denominated Bonds

All aboard the dollar carry trade train! Weeks after the German government decided to issue dollar denominated bonds, a slew of European nations also decided to follow on board. Even countries like Venezuela have followed.

Now, Colombia is the latest country to join this global arbitrage game of selling dollars. As I said before, the issuance of dollar denominated bonds is a very attractive factor for US fund managers seeking to gain foreign exposure whil e retaining currency risk at a minimum.

Brazil plans to sell dollar-denominated bonds in the international capital markets , the national treasury said on Tuesday.

The government hired Goldman Sachs and Merrill Lynch to manage the bond sale, according to a source with knowledge of the deal.

rsi1's picture

Where do you get the funding cost for RMB for PBoC? they are the central bank, they issued RMB as a liability to keep the PEG, but that is just cash, has no interest cost, while the assets they received do, even if small.

In any case, talking about insolvency of  a central bank in a fiat currency system doesnt sound possible.

unky's picture

How I love this giant ponzi scheme, I think even a kindergarten child understands that this is a ponzi scheme. Maturing loans payed with new loans and so on.

Its just money out of thin air.

mikla's picture


HAHAHAHAHAAAAAA!  Did you get that?!  Ireland will pledge billions to help bail out Ireland.

Oh, Late Night Comedy was never so good!

Eternal Student's picture

I'm guessing that it's a requirement now, in order to get bailout funds.

It's also the classic hallmark of a Ponzi scheme. I think it was Bruce K. who had a recent article about the CDO bubble; in order to sell, you absolutely had to buy some. And around, and around it went, creating more "profits", until it didn't.

The only question is how much longer can they keep this Ponzi going?

Now the only thing missing is some Prime Minister, President or Central Banker telling the Bond Market Vigilantes to piss off, because they have restored the system.

Trifecta Man's picture

What they need is a real ponzi bailout pro.  Release Bernie Madoff, put him in charge, and he will likely keep these ECU bailouts going for another umpteen years.

shortus cynicus's picture

Yes, exactly, let real experts to their goods work.

SwingForce's picture

Yes! But the diff is THEY CHARGE INTEREST!

Asset Reallocation: From one pocket to the other.

MeTarzanUjane's picture

Yea, so.

Who ya gunna call? Ponzibusters?

Get with it, sell your gold now. Reallocate. Become profitable and then buy metals when their price is depressed.

Otherwise you're doomed for a quick elevator ride into the basement.

delacroix's picture

check out the current availability, of physical silver. it's starting to dry up.

tallystick's picture

Stop trying to hurt people!

MasterB's picture

If you look up "piker" in the dictionary now, there's a picture of Bernie Madoff.

QQQBall's picture

Its history's biggest "Collective Reach-around"

snowball777's picture

This crap is lame; can't we use all those SDRs to play a televised, winner-takes-all No Hold Em tourney instead?

Or would the EEEWW insist on baccarat?


A Man without Qualities's picture

Ok, if we think of the US government spending, currently they are drawing down about $1 trillion per year to keep the nation in fried chicken and sweat pants and buy cool shit to blow up people in far flung places, yet this "burden" on the taxpayers is just about the only actual investment the government makes.  Why, because it is a loan and the borrowers must pay back principal and interest.  You know, when you have $1.3 trillion in delinquent consumer credit in New York State alone, the Fed is sitting on around $1 trillion of toxic MBS and the GSEs with several more trillion of terrible quality assets, making a loan to another sovereign nation, in order to pay pack the international banking cartel is nothing more than a commitment to keep the Ponzi going a little while longer.  People should stop worrying, it's only Dollars, not something of intrinsic value.

SwingForce's picture


"Ben, you're surrounded. Take you finger off the trigger".

Sudden Debt's picture



shortus cynicus's picture

Correct remark. I never understood all this claims about limiting borrowing and spending. All is done with just imaginary symbols, so lets do it until somebody else hit a wall.

EUR is deep in trouble, let start new Korean war and JPY goes down, so USD is a clear winner, so Ponzi scheme may go some years further. In 1971 US defaulted changing definition of RFN from 'covered by gold' to 'covered by debt promise'. US may default second time changing definition to 'just uncovered, suck it up or be bombed'.

Austrian economic theory do not apply if whole economy is running with imaginary symbols without constant definition, instead of real money.

So spend and go in debt, there is no rational limit to it now.

But never, ever go in debt with real money.

Careless Whisper's picture

Argentina. Not on the list!

Because they are dedicated to "helping our children have no idea what the imf is":



lizzy36's picture

Excellent article on IMF in Globe&Mail.


Ireland's government was not in trouble. It did not have the overspending and long-term-debt problems that Greece did. Ireland's fiscal balance was fine except for the need to take control of the failed private banks. So the IMF has taken on a new role, as a guarantor of private banking and private-sector stability, that is far removed from the visions of 1944.

Our best hope is that the Irish debacle shows, vividly, what is wrong with the whole ritual: Even a sensitive and caring bailout is not designed to help a country. It is designed to help lenders get their money back.

Second, it creates moral hazard. Because a bailout is expected to spare bondholders pain in case of trouble, institutions lend recklessly to countries without sound fundamentals. Bailouts are now anticipated and demanded: Ireland watched this month as interest rates on its 10-year bonds soared to an unaffordable 9 per cent – not because there were any signs that its economy was insolvent, but because investors were not going to put their trust in a country with failing banks without promise of a bailout.

“The IMF doesn't put out fires,” Harvard economist Robert Barro famously argued. “It starts them.”

DaveyJones's picture

It's almost as if... the system is corrupt

Sudden Debt's picture

don't make me wash your mouth with soap boy!


Kobe Beef's picture

Yes. And semantic confusion spread by the MSM is one of the scheme's prime enablers. The informed among the Zedge community should be doing our best to combat this.

Notice that it is called the "Irish bailout", not the "European money center banks who overlent into a real estate bubble bailout". Likewise, the "Greek Bailout", and the "Portugese Bailout", never identify the actual recipients of IMF, ECB, & FED bailout funds. Confusing the public about whom is the actual recipient of bailout funds allows the banksters to pillage in broad daylight.

I believe this intentional confusion of bailout recipients goes back to the "Mexican Bailout" of 1995, which conspicuously was not called the Citibank bailout.

Accuracy is important. Insist on it.

Thanks Davey,

Sofa King's picture

Barrons also talked about how Ireland buried itself to protect the Bankster's.  Ireland should just default on the liabilities associated with the gurantees on the bank's toilet paper.  How can you punish some pensioner so some snake oil selling banker prick can expand his wine cellar?  It's about time these cocksuckers start jumping...

frenchie's picture

so the zombie US will rule the world as it will definitely own the planet through debt and/or military and it will become the center of the NWO ?

The PolyCapitalist's picture

Ahh, but remember the IMF always gets repaid in full (at least according to their former chief economist, Simon Johnson).



swissinv's picture

and eastland is now gone adapot the Euro, unbelievable how stupid people are!!!!

swissinv's picture

well hopefully the Yines grow their own food they can exchange

cossack55's picture

Not for long. Monsanto has a crack team enroute even as I hunt-n-peck.

shortus cynicus's picture

"own food" - what? do they hold  patents on all gens used for it ?

if not, they are intellectual property terrorists.

If they have little shame at all, they should starve. Mother earth don't like to feed weak and stupid (without labs and patent layers). No patents, no food, it's just simply as that.

Sudden Debt's picture

I wonder what kind of economic problem there will be in 2 weeks...

first we had the QE2 which became boring after 1 week

now we have the Euro trash can glitches which are also becoming boring

I'm still a bit fascinated by the korean bully fight but unless we see some ground troop fights, that will also be boring by next friday




what will it be...

anony's picture

I saved 15% on my car insurance...