"We're on the way to a worldwide financial dictatorship governed by bankers," said Peter Gauweiler, Member of Parliament in Germany. "We don't support Greece. We support 25 or 30 worldwide investment banks and their insane activities."
When it comes to European bureaucrats, the easiest way to determine if they are lying is whether or not their mouths are open. Yet there are those rare occasions in which even the most hardened of liars let one slip. The Economic Collapse, always the master of compiling impactful bulletins, has prepared a list of just such "slip" quotes that "are absolutely shocking. In Europe they openly admit that the financial system is dying, that the euro is in danger of not surviving and that the EU does not work in its present form." In other words, ignore the ceaseless headlines of promises that all shall be well. Because it won't. Here is all you need to know about the imminent end of the Eurozone, straight from the horses' mouths.
When all else fails, change the rules, and shove your head even deeper in the sand:
- IMF has agreed to substantially lower initially estimate for European bank sector capital needs according to Eurozone sources
- Private sector expected to meet bank recapitalisation needs, according to Eurozone sources
- Eurozone has no plans for public support for banks over and above money in bailouts for Greece, Ireland and Portugal according to Eurozone sources
- "We have discussed this with the IMF in detail and the IMF has agreed that this initial figure will be revised downwards and the revision will be quite substantial," a euro zone official participating in the talks said.
Of course, this won't change anything about the fact that Eurobanks are insolvent, that the ECB is undercapitalized, that the Greek bailout is falling apart. But what matters is that the IMF, or the world's former bailout, and now completely irrelevant, organization courtesy of China, will allow banks to proceed far further undercapitalized than prudent, until it has to bail out not one, but all, and at the same time. As a reminder, the IMF expected a need of $200 billion, which the eurocrats say is goign to be far lower... Even as Goldman's report, first released on Zero Hedge, said that the full amount will be 5 times bigger, or $1 trillion. As much as Goldman is blasted left and right, they at least know how to use that HP12C. Which is far more than we can say about the idiots from Luxembourg.
Yes, equity markets in Europa and the US are getting the Axe treatment, but the event that is most forboding is still being overlooked by the media. At the end of the day, this will be the cause of continuation of the 2009 global market collapse... CONTAGION!!!
Holy Red Screen, Batman! If you haven’t seen the news, the Swiss National Bank has just announced that it is putting a ceiling on the franc’s appreciation against the euro… effectively abandoning its economic sovereignty and putting its future in the hands of woefully corrupt and incompetent bureaucrats. On the news, the franc fell off a cliff, dropping almost 10% INSTANTLY. Gold priced in Swiss francs jumped from 1497 to 1620 per troy ounce, all in about 45 seconds. Precious metals are now all alone as the only forms of sound money that are truly safe havens. Since then gold has soared roughly 20%, and as of this morning, the SNB has imposed capital controls to thwart the rise of its currency. This is just the beginning. The Swiss government has basically told the world that they will print as much money as it takes, and buy up as much crap sovereign debt as they can, to competitively devalue the currency. This essentially puts Switzerland in the same sinking boat as Italy, Greece, and Portugal… with one key difference: Switzerland has 0% interest rates. In other words, you can now borrow in francs at 0% and buy government-backed euro garbage yielding 5%, 10%, 30%…. with absolutely no downside currency risk.
Bring Out Your Dead - UBS Quantifies Costs Of Euro Break Up, Warns Of Collapse Of Banking System And Civil WarSubmitted by Tyler Durden on 09/05/2011 20:15 -0400
Any time a major bank releases a report saying a given course of action is too costly, too prohibitive, too blonde, or simply too impossible, it is nearly guaranteed that that is precisely the course of action about to be undertaken. Which is why all non-euro skeptics are advised to shield their eyes and look away from the just released report by UBS (of surging 3 Month USD Libor rate fame) titled "Euro Break Up - The Consequences." UBS conveniently sets up the straw man as follows: "Under the current structure and with the current membership, the Euro does not work. Either the current structure will have to change, or the current membership will have to change." So far so good. Yet where it gets scary is when UBS quantifies the actual opportunity cost to one or more countries leaving the Euro. Notably Germany. "Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around EUR6,000 to EUR8,000 for every German adult and child in the first year, and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. " It also would mean the end of UBS, but we digress. Where it gets even more scary is when UBS, like many other banks to come, succumbs to the Mutual Assured Destruction trope made so popular by ole' Hank Paulson : "The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless). It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war." So you see: save the euro for the children, so we can avoid all out war (and UBS can continue to exist). The scariest thing, however, by far, is that for this report to have been issued, it means that Germany is now actively considering dumping the euro.
Open Europe Briefing On What The German Constitutional Court Ruling Will Mean For The Eurozone CrisisSubmitted by Tyler Durden on 09/05/2011 14:14 -0400
While today's market action is merely a reaction to pent up negative news over the weekend, all attention now moves to this week's most critical binary event: the much anticipated German Constitutional Court's vertdict on Eurozone bailouts. While a ruling that destroys the eurozone is unlikely, there are quite a few interesting nuances that may come out of the main event on Wednesday. For those who are unfamiliar with the story here is a critical briefing from Open Europe. "On 7 September, the German Constitutional Court will deliver its keenly anticipated verdict on the eurozone bailouts, following several challenges against the rescue packages of Greece, Ireland and Portugal in addition to complaints against the ECB’s bond buying programme. The Court will almost certainly approve the bailouts, fearing that any other decision would spell disaster for the euro. In order to protect its reputation, however, the Court could well demand more influence for the German parliament and lay down additional constitutional red lines – possibly including restrictions on joint debt liabilities in the eurozone – in return for approving the bailouts. Any such limits would hugely complicate any move towards a fiscal union in the eurozone. Injecting more parliamentary democracy into the eurozone crisis is clearly a good thing, but it will also further limit EU leaders’ room for manoeuvre when dealing with the crisis, which in turn could increase market uncertainty. Unfortunately for the ECB, under such a scenario it would once again be forced to pick up the responsibility of lender of last resort, as the EFSF will be too inflexible and unresponsive to play that role."
According to the Handelsblatt, while the majority of the members of the ECB's shadow council - an unofficial panel, independent of the ECB/Eurosystem, and comprising fifteen prominent European economists drawn from academia, financial institutions, consultancies, companies and research institute - supported an unchanged policy the bias is increasingly shifting to one of easing. This comes on the heels of Trichet's idiotic decision, just like in 2008, to start hiking rates in several months ago (ridiculed extensively on these pages and elsewhere) which not only ended up costing Europe its common currency much faster than had it merely kicked the can down the road, but could very well be the last bad decision by the ECB: should Greece be kicked out of the Eurozone as a result of this decision, the ECB is over. It is therefore not surprising that not only is the shadow council scrambling to undo 5 months of bad decision making by the ECB, but the bankers on the council, particularly RBS, PIMCO, RBS (RIP by the way), Barclays and Tudor and HSBC are either expressing an easing bias or outright pushing for a 50 bps cut. Alas, this is too little too late. And the irony is that once the Fed proceeds with QE3, and commodities surge again, the ECB will really be helpless as the continent's core redlines even as the Periphery remains terminally insolvent (ignoring for a minute the inflationary elephant in the room that is China). So will Trichet disgrace his already discredited central banker career by pushing a rate cut before he is swept out of the corner office by Mario Draghi, or will the former Goldmanite Italian become the most hated man in Germany soon, after he proceeds to ease, even as Germany still experiences Chinese inflationary re-exports. The answer will be all too clear in just a few months.
Gold Reaches $1,900 Again - Supported by Risk of U.S. Recession, German Euro Risk and Wikileaks China Gold CablesSubmitted by Tyler Durden on 09/05/2011 09:02 -0400
Gold’s London AM fix this morning was USD 1,896.50, EUR 1,341.13, and GBP 1,174.67 per ounce. The gold fix was higher than Friday’s in all currencies (USD 1,854.00, EUR 1,301.23, and GBP 1,143.81 per ounce). Despite continuing denial, a recession in the U.S. is inevitable; the question is only with regard to how deep the recession is and to the nature of the recession – inflationary, stagflationary, hyperinflationary or deflationary. The consensus, especially amongst Keynesians, is that deflation is most likely. However, given the degree of currency debasement being seen internationally stagflation is also a risk. Hyperinflation, as being experienced in Belarus today, is the macroeconomic and monetary ‘black swan’. There are growing concerns that the Eurozone crisis might degenerate again soon due to the Greek debt crisis and risk of default. Over the weekend talks between Greece, the IMF and ECB representatives over new bailout funds broke down. The euro has fallen and the German local elections have added to concerns over Greece.
ABN Amro Complains About Interbank Liquidity Crunch, As CEO Says End Of Euro Would Make 1930s Seem Like "A Trifle"Submitted by Tyler Durden on 09/04/2011 16:58 -0400
As we have been writing for a while now, it is not in the arcania of shadow banking that one needs to look to find increasing signs of the collapse in interbank lending. No: something as simple as Libor, especially its USD variant, which is so crucial to USD-crunched European banks, is more than sufficient to determine that not just Greece, or the PIIGS, but now the entire Eurozone is becoming completely dependent on the dollar generosity of the ECB, and the various other regional central banks. This by implication means that the Fed will once again be forced to step in, "in size" and bail out the world, only this time it is far more debatable if the world believes that even the Fed alone is sufficient to prevent a rising global insolvency tsunami. And confirming how bad it is, we now have none other than ABN AMRO's CEO on the tape, complaining loudly about liquidity: this is and always has been a move of total desperation as the last thing a bank wants to do is give any indication of funding weakness. Furthermore, since ABN Amro is not a USD LIBOR reporting bank, we can safely say that the dollar liquidity crunch has spread far and wide from the 18 BBA member banks, where it is hardly any easier to procure the former reserve currency.
One of the recurring themes on Zero Hedge ever since the announcement of the EFSF is that in addition to onboarding contagion fears by transferring financial risk from the PIIGS to itself, Germany's ruling party, and particularly Frau Chancellor Merkel, has been on the receiving end of ever increasing popular anger at putting German wealth at risk in order to rescue lying, thieving countries like Greece and Italy, which have proven beyond a reasonable doubt, they will do none of the fiscal reforms demanded of them, yet promise the world in exchange for yet another bailout tranche, or more ECB-backstopped purchases of their debt (even Sean Corrigan would be proud of that sentence). Sure enough, today we get the latest confirmation that as national elections loom ever closer, as does the specter of a government crisis following the EFSF expansion vote some time in late September (it is fluid), the ruling CDU continues to take on water. Per Reuters: "Chancellor Angela Merkel's centre-right bloc suffered another defeat on Sunday in a regional election in Germany's poorest state, Mecklenburg-Vorpommern, with both her conservatives and their Free Democrat allies losing support. A first projection by the ARD network at 1615 GMT showed Merkel's Christian Democrats (CDU) falling to 24 percent from the 28.8 percent won in the sparsely populated state on the Baltic shore in 2006. It was the CDU's worst result ever there."
Presenting Goldman's Six Bullet Point Forecast Of Global Policy Intervention To Prevent The Re-DepressionSubmitted by Tyler Durden on 09/04/2011 12:48 -0400
While the bulk of his weekly parable is primarily about the Swiss Franc (certainly worth the read coming from an old FX trader), the subtext is far more nuanced, and as usual, presents what "next steps" will be in terms of policy response from the G-20 to prevent the end of the Status QuoTM. For all those who ridiculed us about consistently presenting what Goldman believes is in the economy's "best interest", we have only one thing to say: QE3 is coming. Just as Hatzius demanded it several months ago (as predicted by us back in January). Indeed, the instruction flow never errs: from Goldman to the Fed; from the Fed to the SecTres and teleprompter; from theteleprompter and out of taxpayers' pockets. So speaking of flow charts, here is what the world should expect, tongue in cheek, in terms of G-20 intervention over the next several months, to prevent a swift plunge into the mother of all depressions. 1. Clear, credible, targeted action from President Obama and Congress to create US jobs and stimulate domestic investment; 2. If not more QE from the Fed, an ongoing clarity about their bias; 3. A quick resurrection of a credible budget in Italy; 4. A move towards an interest rate cut from the ECB. There is no inflation problem and the Euro Area economy has weakened a lot; 5. Some indication by German Chancellor Merkel that as part of a more fiscally coherent EMU, Germany would accept the principle of Euro Bonds; 6. A clear signal from Beijing that once inflation has peaked, monetary tightening is finished. In other words: not just more of the same, but much, much more of the same. In yet more other words: insanity defined.