Sovereigns

Presenting The ECB's "Tools" To Stem Contagion

On the heels of Sunday's landmark referendum in Greece, all eyes are now on global financial markets and how the European Central Bank intends to prevent contagion in the event Greece exits the currency bloc. 

Beware Of Greeks Bearing Referenda

It appears the sovereign peoples of Europe would not go gently into a Federal States of Europe night. Investors need to prepare for the inevitable political solution: referendums across Europe on the constitution of the Federal States of Europe needed to sustain the Euro. Events this weekend will trigger the search for the democratic legitimacy for the single currency and the centralised constitution it requires... or the demise of the unelected 'king Juncker' and 'queen Lagarde' of the Federal States of Europe.

GoldCore's picture

With each passing year the currency fell in value to ever more absurd depths until by November 1923 an ounce of gold - which had cost 170 Marks only five years previously - was trading at 87,000,000,000,000 Marks per ounce. Silver saw similar price gains (see chart) - or rather to put it more accurately silver too remained a store of value and maintained purchasing power as the currency collapsed.

The First Rule Of Holes

“Promoted by the intellectual glitterati of the central banks, our economic system has become addicted to all forms of debt, much of which has been unproductive." The seemingly universal agreement that the prerequisite for a healthy economy is the growth of debt at all costs highlights both a lack of discipline and an aversion to consider different ideas on the part of economic policy-makers.

Greek Bank Will Write Off Up To €20,000 In Debt For "Poverty-Stricken" Borrowers

Instead of merely plugging the hole left from declining liabilities (deposits), what the ECB's ELA funding appears to also be doing is compensating for a rapid write down in bank assets (loans) as well, in the form of charged off Non-Performing Loans. According to Reuters, one of the leading Greek financial institutions, Piraeus Bank will write off credit cards and retail loans up to 20,000 euros ($21,484) for Greeks who qualify for help under a law the leftist government passed to provide relief to poverty-stricken borrowers, it said on Thursday.

Assessing The Bund Shortage And Weighing Mario Draghi's Q€ Expansion Options

30% of German debt trades at or below the depo rate and some 60% carries a negative yield. The way things are going now, central bank Bund purchases will have to be in maturities of 7 years or more within just 6 weeks, and of course that timeframe could accelerate meaningfully should things take a turn for the worst in Athens. Ultimately, the math doesn't add up and it appears as though modifications to PSPP's structure will be necessary (perhaps at the ECB's September meeting) in order to prevent a forced taper.

Reggie Middleton's picture

This may take you the entire weekend to digest, but if you are an unsecured creditor/lender (have a checking, savings or demand deposit account) to a euro zone bank, I would consider it your fiduciary responsibility to yourself to sit down and parse this piece with care and aplomb!

European Sovereigns Have Worst Week In 5 Years, Stocks Slump

As Grexit contagion spreads so European peripheral bond risk has surged. Portuguese, Italian, and Spanish risk has increased by the most since May 2010. It appears that the hope of "containment" in Europe via Q€ purchases is overwhelmed by the outflows - this was extremely evident in German markets today that saw 'someone' selling both bonds & stocks as Grexit fears rose. European stocks were all battered - the worst week of the year - with Germany worst as European VIX soared 5 to 25.05 - its biggest jump in 4 months.

Contagion Arrives: European Peripheral Bond Risk Soars

Just yesterday, German FinMin Schaeuble bent the truth, proclaiming that there was no sign of contagion from Grexit concerns. Today, it appears, he will be eating his words, as Italian, Spanish, and Portuguese bond spreads have exploded higher (up 15-30bps this week) amid the collapse of Greek sovereign and bank bonds. All we need now is for some EU leader to claim "Grexit risk is contained," and we know trouble is ahead.

Spelling Out The Big Reset

Wiping out creditors by inflation is the easy part. Re-establishing money to restart the world economy is the harder one.