International Monetary Fund
Payback sure is a bitch. After being demonized for everything from the tiniest tick down in the EURUSD, to blowing out spreads in CDS, to plunging stocks across the insolvent continent, hedge funds, long falsely prosecuted for everything, even stuff they patently did not do, are about to have their day in the sun, precisely in the manner we predicted back in June of last year when we posted: "Greek Bailout #2 Is Dead On Arrival: A Few Good Hedge Funds May Have Called The ECB's Bluff, And Hold The Future Of The EUR Hostage." Back then we wrote: "we may suddenly find ourselves in the biggest "activist" investor drama, in which voluntary restructuring "hold out" hedge funds will settle for Cheapest to Delivery or else demand a trillion pounds of flesh from the ECB in order to keep the eurozone afloat. In other words, the drama is about to get very, very real. And, most ironically, a tiny David is about to flip the scales on the mammoth Goliath of the ECB and hold the entire European experiment hostage..." Sure enough, we were right yet again. Ekathimerini writes: "Hedge funds are taking on the powerful International Monetary Fund over its plan to slash Greece's towering debt burden as time runs out on the talks that could sway the future of Europe's single currency. The funds have built up such a powerful positions in Greek bonds that they could derail Europe's tactic of getting banks and other bondholders to share the burden of reducing the country's debt on a voluntary basis." Oh no, they will let it happen, but first Europe will pay, with real interest, for every single incident of hedge fund bashing and abuse over the past 2 years. We estimate the final tally, to US taxpayer mind you, will be about $20 billion, to remove the "nuisance factor" of hold out hedge funds. Congratulations Europe - you have proven to be a continent full of idiot "leaders" once again.
If there is any one more vivid confirmation of Mayer Rothschild words "Let me issue and control a nation's money and I care not who writes the laws" then we have yet to find it. Today Hungary, which had "valiantly" defied Europe and the IMF in ignoring pressure to make its central bank more "malleable" finally folded, following a recent explosion in its bond yields, a surge in CDS to records, and a collapse in its currency. And to think how easy it is to subjugate a state to slave status in our "globalized" days without shedding one drop of blood. Reuters reports: "Hungary's government is ready to consider modifying disputed legislation if the European Commission deems it necessary, Foreign Minister Janos Martonyi told the bloc's executive and European Union partners. "We fully respect the authority of the European Commission, the guardian of the EU treaties," Martonyi wrote in a letter dated January 6 and published by his ministry on Tuesday. "We stand ready to consider changing legislation, if necessary."" As Rothschild foresaw so effectively over 200 years ago, selling out your sovereignty only takes a few pieces of (paper) silver.
One of the reports making the rounds today is a previously little-known academic presentation by Princeton University economist Hyun Song Shin, given in November, titled "Global Banking Glut and Loan Risk Premium" whose conclusion as recently reported by the Washington Post is that "European banks have played a much bigger role in the U.S. economy than has been generally thought — and could do a lot more damage than expected as they pull back." Apparently the fact that in an age of peak globalization where every bank's assets are every other banks liabilities and so forth in what is an infinite daisy chain of counterparty exposure, something we have been warning about for years, it is news that the US is not immune to Europe's banks crashing and burning. The same Europe which as Bridgewater described yesterday as follows: "You've got insolvent banks supporting insolvent sovereigns and insolvent sovereigns supporting insolvent banks." In other words, trillions (about $3 trillion to be exact) in exposure to Europe hangs in the balance on the insolvency continent's perpetuation of a ponzi by a set of insolvent nations, backstopping their insolvent banks. If this is not enough reason to buy XLF nothing is. Yet while CNBC's surprise at this finding is to be expected, one person whom we did not expect to be caught offguard by this was one of the only economists out there worth listening to: Ken Rogoff. Here is what he said: "Shin’s paper has orders of magnitude that I didn’t know"...Rogoff said it’s hard to calculate the impact that the unfolding European banking crisis could have on the United States. “If we saw a meltdown, it’s hard to be too hyperbolic about how grave the effects would be” he said. Actually not that hard - complete collapse sounds about right. Which is why the central banks will never let Europe fail - first they will print, then they will print, and lastly they will print some more. But we all knew that. Although the take home is the finally the talking heads who claim that financial decoupling is here will shut up once and for all.
First Morgan Stanley issued the first market forecast of 2012 before the market has even opened, and now it is Greece's turn to threaten fire and brimstone (aka to leave the Eurozone, but according to UBS and everyone else in the status quo the two are synonymous) within hours of the New Year, if the second bailout, which as far as we recall was arranged back in July 2011, is not secured. Quote the BBC: ""The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro," spokesman Pantelis Kapsis told Skai TV." And cue several million furious Germans and tomorrow's German newspaper headlines telling Greece bon voyage on its own as it commences braving the treacherous waters of hyperinflation. In other news, the sequel to Catch 22 is in the works, and explains how Greek tax collectors (i.e., people who collect those all important taxes so very needed for government revenues) continues to strike. In it we also learn that the first strike of the year in Athens is already in place, with Greek doctors saying they will treat only emergency cases until Thursday, in protest at changes to healthcare provision. All in all, the complete collapse of the Greek debt slave society is proceeding just as planned.
When losing is "winning".