International Monetary Fund
It appears that the market refuses to be baffled with bullshit any longer. The EURUSD just took a big tumble following a report that Christine Lagarde, the IMF's new boss, announced that her new agency has not yet discussed Greek aid details, and made it clear that "nothing should be taken for granted on Greece." Since the only thing that is being taken for granted is that Greece will be bailed out, it is easy to see why the EURUSD just lopped off 60 pips in seconds. Not very surprisingly, this fits with what the Chairman of Commerzbank Martin Blessing told the Frankfurter Allgemeine Zeitung earlier. It appears that the dining room table is being set for what the EUR's chef believe will be a brief feast on the Greek carcass, following the country's plunge into SD, or temporary default status. What will happen next, however, is the same thing that happened when Lehman filed: sheer panic, as a global bank runs ensues, and the USD, not to mention gold, all go parabolic. The only possible brief saving grace is once again China, which just reported that its FX reserves rose from $3,197 billion to $3.233 billion. The bulk of that money is now going to purchase EURs and keep Europe afloat one more day.
Unable to keep with the events in Europe which are now literally changing on an hourly basis? Fear not: SocGen's James Nixon has compiled the most succinct explanation for why we are where we are, and why things will get much worse, before they get even remotely better. In a nutshell, everything you know about the existing proposals is finished: what is currently on the table is "a wider strategy which includes lowering the interest rate on lending to Greece and returning to the idea of bond buybacks." Ah, yes, the Goldman proposal. However did we know we may end up precisely here. The problem with this proposal is that all bond buybacks at prices below par are, and always have been, considered by the rating agencies as immediate events of technical default. How this eliminates the ECB liquidity scramble bogeyman we have no idea. At this point we are absolutely certain that the only thing on the Eurozone and ECB's plate is to baffle everyone with steaming pile after pile of bullshit so unbelievable, that people are stunned for days, buying bankers valuable time to convert even more freshly printed paper into hard assets. In the meantime, there is no actual plan to deal with the problems of untenable debt, or at least not one that does not involve the outright monetization of debt and thus, the spurring of hyperinflation, which unfortunately is the last recourse to wipe out the tens of trillions in bad debts dispersed proratedly across Europe's insolvent banking system.
It is only fitting that a few days after South Sudan became the newest independent country to join the roster of IMF and World Bank "modernization and industrialization" targets, another Southern version of something should break apart, although some may be surprised that this latest secession is not somewhere in the middle of Africa, but in America's own insolvent back yard. Meet Southern California. "Accusing Sacramento of pillaging local governments to feed its runaway spending and left-wing policies, a Riverside County politician is proposing a solution: He wants 13 mostly inland, conservative counties to break away to form a separate state of "South California.'' Supervisor Jeff Stone, a Republican pharmacist from Temecula, called California an "ungovernable'' financial catastrophe from which businesses are fleeing and where taxpayers are being crushed by the burden of caring for welfare recipients and illegal immigrants." Ah yes, the heart of prosperity that is the Inland Empire, known for such great achievements as Hell's Angels, the most ridiculous excesses of the housing bubble, Del Taco, and... that's pretty much it. This sounds like yet another Swiss Watch plan.
I have to tell you some terrible things.
Risk-aversion remained the dominant theme during the European session, as lack-lustre economic data from the US last week, and China, during the weekend, weighed on market sentiment. Allied to that, the ongoing contagion fears in the Eurozone dented the appetite for risk-among investors. European equities traded lower throughout the session, with particular weakness seen in financials, which was also reflected in the Italian FTSE MIB and Spanish IBEX 35 indices underperforming their European peers. Weak equities provided support to Bunds, whereas general widening was observed in the Eurozone peripheral 10-year government bond yield spreads. European sovereign concerns together with strength in the USD-Index weighed upon EUR/USD and GBP/USD, whereas safe-haven currencies including JPY and CHF received a boost. Elsewhere, WTI and Brent crude futures traded under pressure weighed upon by a strong USD as well as diminishing hopes of a sustainable economic recovery.
- Merkel's Migraine: The Man Who Wants Greece to Give Up the Euro (Spiegel)
- Up to 15 years needed to fix Greece: German president (Reuters)
- Taxes still a stumbling block in debt talks (Reuters)
- EU stance shifts on Greece default (FT, first in the WSJ)
- EU calls emergency meeting as crisis stalks Italy (Reuters)
- China Boosts Lead in Global Exports (WSJ)
- Italy's Market Regulator Imposes Measures To Curb Speculation (WSJ)
- NOTW reporters tried to access 9/11 phone data (Reuters)
- Trichet says debt is global, not European problem (Reuters)
China activity data: Following the June CPI print, which saw inflation rise to 6.4% yoy, in line with our above-consensus forecast, we will be looking for above-consensus activity readings for Q2 GDP and June industrial production. Eurogroup meeting and bank stress tests: This will be an important policy week for Europe. On Friday, the IMF approved its disbursement to Greece under the old EU/IMF program of EUR110 bn agreed in 2010. Discussions at the Eurogroup meeting will center on the financing of a new program, which is supposed to close the financing gap for Greece for 2012 and 2013. The role of private sector involvement remains a key issue. The week also brings a bond auction for Italy on Thursday, for an estimated EUR7 bn. The week ends with the publication of the EU-wide bank stress tests on Friday. Summary results will be published at 6 pm CEST, with bank-by-bank results following thereafter. Bernanke testimony: In his semiannual monetary policy testimony, Fed Chairman Bernanke is likely to repeat the basic message from his recent press conference—namely that labor market performance has been disappointing but that inflation remains too high to combat the weakness with additional monetary easing.
No matter what happens with Rupert Murdoch's media empire, the rottenness of the world always prevails...
The IMF is delighted to announce that it just approved a €3.2 billion disbursement of cash for Greece, its fifth, as part of the €12 billion in money that Greece needs in order to continue operating in the months f July and August. And just for what purpose will this money be used, one may ask? Well, as explained a few weeks ago, in Greek Math: €12 Billion In, €18.2 Billion Out the entire amount will be promptly recycled by global financial institutions in the form of debt maturities and interest payments, which amount to €18.2 billion in the months of July and August. Simply said ECB, EU and IMF money in, money owed to bankers out. The kicker: 17.09% of the money coming from the IMF, comes from, that's right dear US taxpayer, you (and since 21% of the quota contributions allocated to the IMF are deemed "non-usable", the actual number funded by the US is likely much higher). But this plot has a bonus kicker: as we reported on Wednesday, the actual Greek debt is no longer owed by European banks to the extent it had been previously expected: a development that threatens to scuttle the entire second Greek bailout plan as currently proposed. So as the banks have been selling Greek debt, who has been buying? Mostly hedge funds, such as everyone's favorite John Paulson. So to recap: US taxpayers have just paid out about $780 million of the $4.6 billion in order to fund interest owed to... hedge funds.
- IMF Greek Loan Decision May Counter Its Policy Guidelines (WSJ) good thing the IMF's policies are made to be broken
- Murdoch Closing Tabloid Linked to British Hacking (NYT)
- News Corp.’s BSkyB Bid Facing Delay on Review (BBerg)
- High-frequency trading adding risk, Haldane says (FT)
- Countrywide Wages Victorious Tranche Warfare Against Investors (Bloomberg)
- Obama expects "bottom lines" on debt limit on Sunday (RTRS)
- European regulators under fire over stress tests (FT)
- No plans to drop Strauss-Kahn charges, no plea deal (RTRS)
- Eurozone governments warned on bail-outs (FT)
As DSK's Star Is Rising, Is Lagarde's About To Set? French Court To Decide Whether To Open Against Brand New IMF HeadSubmitted by Tyler Durden on 07/07/2011 18:55 -0500
The IMF soap opera just entered the twilight zone. Following the release of facts about DSK's accuser just two days after the swearing in of his replacement, Christine Lagarde, that could discredit her story and absolve the former IMF head of all wrongdoing, the current one may be about to experience amajor legal humiliation of her own. According to Reuters, a French court will decide on Friday whether to launch a legal inquiry into the role of IMF chief Christine Lagarde in a 2008 arbitration payout, a move that could cloud her debut at the international lender. To be sure this is the second time in the past two months that Lagarde's legal troubles have followed her: back in May we noted that the very same legal troubles could potentially delay her ascent to the head of the IMF. However, the French tribunal did not move fast enough, and thus Lagarde was elected without that major legal blemish being removed from her record. Thus it would be supremely ironic if tomorrow the Court Justice of the Republic were to pronounce that there just may be a case against Lagarde for abuse of authority. Coupled with DSK's probable imminent absolution of wrongdoing, in keeping with the Onionesque nature of reality, it would not surprise us if a year from now the IMF will have done a big switcheroo, and undone the whole thing, whereby DSK is back as head of the IMF.
No matter what financial engineering scheme you attempt to wrap around it, no matter what socio-political financial nomenclature you attempt to drape it in, and no matter how far you attempt to kick said can down the road in a "delay and pray" tactic of pushing the inevitable collapse past your particular tenure at the helm, the only way out of this is the recognition of capital destruction, AKA Default!