Stop Fooling Yourself... NO Entity On Earth Can Stop This

Phoenix Capital Research's picture


The markets are going bananas over the same tired assumption that Central Bankers have some magic solution up their sleeve.

Over the last five years, market participants have largely operated based on the “Bernanke Put” (the belief that no matter what happens Bernanke will somehow save us). I explained how this was a bluff in last issue of Private Wealth Advisory.

However, the ECB’s Mario Draghi may have surpassed the Bernanke Put as the biggest bluff in financial history with his claim that the ECB will take action and that the action will “be enough” to solve the EU Crisis.

Let’s consider what the ECB has done so far and whether or not it has worked.

To date, the ECB has:

  1. Intervened in the sovereign bond markets throughout 2011.
  2. Launched its LTRO 1 and LTRO 2 schemes which provided over €1 trillion in funds to EU banks.
  3. Opened up various liquidity windows to EU banks.
  4. Facilitated bailouts of Greece (2) Portugal (1) Spain (1) Ireland (1) and soon to be Cyprus and Slovenia. REAL w
  5. Ballooned its balance sheet to over €3 trillion?Euros (roughly 30% bigger than the German?economy, which is the largest single economy in Europe).


Has the EU Crisis been solved by any of these measures? The obvious answer is no. The EU Crisis began in earnest in January 2010 with Greece. Today, August 2012, Greece is still an issue and is in fact about to default or leave the EU.

So, one has to ask one’s self... if the ECB (along with the IMF and Germany) has thus far failed to manage, let alone solve, Greece’s problems (a country which comprises only 2% of EU GDP and whose bond market was just €350 billion), how is it now going to solve those of Greece, Spain, Ireland, Portugal, Cyprus, and Slovenia all at once?

The answer is obvious: it cannot. Draghi is bluffing

However, for the sake of argument and since I’ve received so many emails claiming that the ECB has everything under control, let’s consider the ECB’s options. I can think of just two potential “Hail Mary” moves the ECB could stage to attempt to stop the Crisis. They are:

Massive money printing and buying of sovereign debt

The issuance of Euro-­?bonds along with across the board banking backstops

Let’s say the ECB opts for #1. First of all, rampant monetization would weaken the Euro dramatically: something I’m not sure the ECB wants to do given that the currency is already on the edge of a cliff:

Secondly, this policy would almost certainly result in Germany threatening to, if not outright leaving the Euro. We’ve already seen multiple German officials leave the ECB based on its monetary profligacy. Moreover, Germany knows all too well how monetization of debts pans out: Weimar. According to a recent poll, 69% of Germans are worried about inflation. Do you think they’d let Merkel permit the ECB to go on a money-­?printing rampage?

Finally, we need to consider that the ECB was intervening in both the Italian and the Spanish sovereign bond markets on a weekly if not daily basis in the fall of 2011.

In the case of Spain, the ECB was never able keep the 10-­?year’s yields at 5% for long. In fact, despite aggressive intervention, the ECB lost control of the Spanish 10-­?year several times last year.

The situation was even worse in Italy where the ECB couldn’t even get the 10 year’s yield to flatline (the general trend remained upwards). In this case the ECB also lost control of the bond market several times.

So... the idea that the ECB can suddenly just hit print and monetize everything to stop the EU crisis is extremely problematic. Aside from the fact that it would kick the Euro off a cliff, it would have dire ramifications for EU/ German relations (a situation that is already troublesome as now both Greek and Italian newspapers are referring to Merkel and Germany as Nazis). Finally, it’s not even clear that this policy would work.

Now let’s consider the ECB’s second “Hail Mary” option: the issuance of Euro-­?bonds and across the board backstopping of EU banking deposits.

For starters, Angela Merkel has said that there will not be Euro-­?bonds for “as long as [she] live[s].” This is not a bluff. The issuance of Euro-­?bonds goes against the German constitution. If Merkel were to even consider this option she would likely be kicked out of office (remember she’s up for re-­?election next year).

This would also result in Germany losing its AAA credit status. Germany is already approaching the dreaded Debt to GDP level of 90%. And thanks to nearly €1 trillion in back-­?door bailouts to Europe, the country is already on the hook for potentially tens if not hundreds of billions of Euros worth of losses: money Germany doesn’t have.

As for backstopping EU deposits... no entity on earth has the capital to do this. Total Eurozone deposits stand at €15 trillion. Even deposits at the current EU “problem” countries (Spain, Italy, Portugal and Ireland) are €5.5 trillion. That’s nearly TWO TIMES the size of the ECB’s balance sheet and over FOUR TIMES the size of the various EU bailout funds (the EFSF and ESM, the former of which only has €65 billion in capital left by the way).

Again, in very plain terms, NO ENTITY on planet earth has the money needed to backstop banking deposits for the PIIGS, let alone the entire EU. So scratch that idea off the list.

With that in mind,  if you’re not already taking steps to prepare for the coming collapse, you need to do so now. I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.


This report is 100% FREE. You can pick up a copy today at:


Good Investing!


Graham Summers


PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.









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Aquaman's picture

Its not that we're kidding ourselves, Graham. Its that we are sick of you blathering week in and week out about how this is going to happen so you can hawk your crap newsletter.  Like a broken clock you will eventually be right.  We get it already...shits bad. Got it... now shut fxck up until something actually happens if and when that happens in this sham market.  ANyone who has invested in your crap has lost a ton of money up to this point based on your ability to time anything.  I doubt your constitutions are even regular.

PatientZero's picture

Relax, people. The government will figure it out. Surely they can tap the knowledge of the aliens at Area 51 or cast magic spells from the Dungeons & Dragons Player's Handbook.

Squids_In's picture

Graham - I have to respect the conviction that you have on this trade. Ultimatley you may be right - who knows? Many market twists and turns lie ahead on this story. There is HUGE money on this - Merkel, the ECB, the German consitition are all ultimatly expendible. There are much more powerful forces at work. I have no idea what is going on behind the scenes - and neither do you!  All I know is if I had followed your advice, I'd be loosing money in August. I may be considered kind of shallow - but that is really all I care about. So give us a trade that works for a day or a week or a month and stop the broken record.

Chump's picture

As far as I know, you have to be a paid subscriber to get access to his trades, so could you tell us specifically what trades Phoenix Capital recommended that would have lost you money?

Don't mistake economic analysis for trading advice.

orangegeek's picture

About 60% of the USD weighting is the Euro.  If the Euro slides, the USD rises.


Primary elliott wave count on the USD remains bullish.

ebworthen's picture

The Riddler and some Kryptonite ought to put a lid on it...oh wait...

NuYawkFrankie's picture

Re NO entity on earth can stop this....



Don't mean to brag, but it's the kinda thing my "lady-friends" usually say as they go about ripping the shirt off my back..     ;)

Joe A's picture

"However, for the sake of argument and since I’ve received so many emails claiming that the ECB has everything under control, let’s consider the ECB’s options."

I am sure he received more emails asking him to bugger off with his postings. He claims he was the one that predicted it all (according to him the Euro would have collapsed already some time ago). He states the obvious and brings yesterday's news.

Btw, no entity can solve America's debt problem either. The only thing that can solve the world's debt crisis is a global default but that would mean the end of life as we know it.

lakecity55's picture

" now both Greek and Italian newspapers are referring to Merkel and Germany as Nazis."


hoho, best line of the article. it's down to the Dirty now....

XtraBullish's picture

If all of you fine gentlemen and ladies want to remain solvent, you MUST IMMEDIATELY sign up for my new service: where, for $299/year, I'll promise to scare the shit out of you every week for the rest of your lives while you park your money with me in a money-market fund that I personally manage for an annual fee of 50% of your total return. Hurry and sign up NOW because financial Armageddon is coming soon to a bankster near you!

Treeplanter's picture

Obama shares your contempt for the successful.  How's that hopey changey stuff working out for ya?

silverserfer's picture

what Ghraham doesnt realize that it is a race to the bottom. weaker currencies is what each country is competeing for. thats why we are in a currency war that was started by china. exporting nations all want this. Germany included to Graham. inflation is coming and you are Wong. that wil be $69.95 for that financial advice. Thx!  

vinu02's picture

Printing press also has expiry date.

old naughty's picture

It is Best Before.

Usually good for another 30-60 days, dependent on the mood of the "Manufacturer", eh, I mean "User".

MGA_1's picture

Nothing's gonna happen for a year, so maybe start the tirade again then ?

stocktivity's picture

Graham - your logic is correct. But as long as they can keep printing money out of thin air, it's all Bullshit!

mind_imminst's picture

Correct. 15,000,000,000,000. There. I just created 15 trillion to backstop European banking deposits. It took about 5 seconds - the same amount of time it will take the FED or ECB.

Dareconomics's picture

Are you sure the Bundesbank will not allow money printing to bail out Europe? It is already looking the other way while the Bank of Greece prints more euros to pay back a €3.2bn loan to the ECB. Check out the Journal:

I also wrote a post on this topic a couple of days ago:

As long as the ECB has the magic money machine, then the can kicking can continue. 

ddtuttle's picture

First, the Germans aren't worried about a repeat of Wiemar.  That situation was totally different; only one currency went into hyperinflation.  Even though Germans lost confidence in their own currency, they had many healthy ones to flee to: gold, swiss francs, stirling etc.  That's what drove the hyperinflation: people abandoning the DM for other currencies.  That won't happen today, because we're all joined at the hip, so if the dollar goes, everybody goes.  There won't be anywhere to go (except gold).

Living Gremans can't even remember Weimar, but they do remember reunification.  That was the restoration of a failed state about the same size as Greece.  It nearly broke Germany with billions upon billions of investment.  Even 20 years into it, it's still not working, they have to wait for all the economically worthless commies to die off.  That was hard enough, and they even spoke the same language and were culturally only one generation removed.  Fix Greece? Foregt it.  Germans understand this first hand.

The main problem with the Euro is that is based on emotions, not economics  Everyone is comitted to the "European Dream", whatever the hell that means.  It's not a dream its a memory: the Roman Empire WAS the United States of Europe, and it ain't comin back.

The game will only change course when the average German realizes that staying in the Euro means default for them too, whereas if they leave they can avoid it.  But if they wait too long, it will be default either way.

fockewulf190's picture

Not to mention that Germans are still paying for unification to this day with a 6.25% "Solidarity Tax" on their MONTHLY income.  Now, the opposition SPD and Greens want Germany to "your casa my casa" the entire debt load of the whole EU, turn over to Brussels the political keys it needs to found the US of E, and re-ground an EU wide, unified, tax and fiscal policy.  It´s way too fucking late for that.  The ordinary German is going to be sold out, sacked with debt, and taxed to the eyeballs for decades to come.

nathan1234's picture


I am with you.

The useless paper money printed by the Fed has been buying real assets and gold while the sheeple sleep.

It's but certain that the protocols take over soon.

It's easier to destroy wealth and than make it.



SheepDog-One's picture

Germany fast approaching 'the dreaded' 90% Debt/GDP ratio? Gee it doesnt seem to be too 'dreaded' in the USA since we passed that long ago and now sit at around 105% Debt/GDP. So why is it 'dreaded', and by whom? Seems to make no difference at all here in USAland.

SheepDog-One's picture

I'm placing my bets right now, contrary to what all the 'geniuses' have concluded that we'll just glide along calmly for months....'get QE for Christmas', and all that rubbish. Nah I'm betting they dont do what theyve trained everyone to think they'll do at all, and in early fall we'll have scandals at the top levels and big market troubles, in order to ensure 'Much-Hated WhiteyRepub' is the banksters next whipping puppet for the media and banksters to attack as 'ruining everything'....of course the american people will be shamed as well for 'getting rid of The Messiah who had everything fixed' and the banksters can just shrug their shoulders and say 'HEY its not our fault at all! LOOK before this Mittens much-hated 'whitey repub' came along, WE had it all FIXED see!'


Paul451's picture

Heh. We HAVE been gliding along calmly for months. When the Kabuki Dance in Europe ends - and it will end, we just dont know WHEN - so will the gliding.

DeadFred's picture


Don't you just love a good conspiracy scenario in the morning?

SheepDog-One's picture

Sure the ECB is bluffing, the FED is bluffing, everyone KNOWS theyre bluffing....but the music keeps playing so no ones diving into a life raft yet....when the shit really hits the fan it will bee too late to react for most of them.

TrulyStupid's picture

Printing Euros will work if there is a well timed concurrent printing of USD by the Fed. This concurrent QE will preserve the USD/Euro price, Stiff the Chinese, punish the poor, enrich the 1% and extend the party. The required pre-election stock market rally will also ensue.

Wasn't Geithner just in Europe setting this up?

andrewp111's picture

The Fed, ECB, BOJ, PBOC, BOE, Bank of India, etc... will all print at the same time. They will buy each-other's currencies to maintain an acceptible exchange rate. They might also all buy gold.

SmallerGovNow2's picture

If this happens as you suggest, there will be massive inflation and subsequent world wide riots as food prices skyrocket...  The increases this would bring in energy prices will also lead to world wide depression...

lakecity55's picture

Well, is that not what TPTB want?

They gotta use up them (now) 750 million hollow points.

Hell, even the Weather service is getting in on it.

Good thing I save my brass. It might compete with Au.

TrulyStupid's picture

If they don't print, the consequences are the same, only sooner.

wdmitch666's picture

the change comes when a critical mass of people wake up one morning and decide to panic. hard to predict what that number, or percentage, will be.

Mr Lennon Hendrix's picture

Mr Summers,

Economics 101 is that when deflation approaches, the currencie must be devalued to raise all asset prices.  This continues, and will contimue at all costs.

bank guy in Brussels's picture

Your greeting to him made me wonder if Graham Summers is related to Obama's advisor Larry Summers ... or is maybe his kid brother ... but there's no picture of Graham on his website ... So maybe - oh no - maybe he IS Larry Summers, trolling on ZeroHedge! ... LOL

Intersting to look at Graham's websites. His main website comes off much better than his postings on ZeroHedge, more restrained in the style, where he makes some strong claims for his returns:

« Since inception in June 2010, The Perfect Trade model portfolio has returned over 215% vs. 28% for the S&P 500. »

But then Graham has another website with his Zero Hedge postings, 'Gains Pains & Capital' - at the link above at the end of his article - the title perhaps an echo of Mark Faber's ... Gloom Boom & Doom' report

If Graham Summers really is doing so well as a money manager, it seems his articles would have a different tone ... his articles don't quite have the sound of a confident 'playah' ... a little too pushy ... as is Reggie Middleton ... That kind of pushiness is a particularly 'American' style, but it is surprising from people who present themselves as independent and wealthy investment advisors ...

Jack Sheet's picture

Summers is a complete prick who is lying about his record and has to peddle penny ante bullshit.

Metalredneck's picture

I clicked on this before I read the author.  This guy is monotonous.

Seize Mars's picture

My two cents:

Draghi isn't bluffing, he's lying.

I don't think there will be any "collapse" as a sudden event. I think things will go on and on as they are until every person in Europe is in poverty, hungry, and crying for Red solutions.

The Germans aren't going to pull out, refuse, or anything. The German high court is going to rule that it's ok to carry on. These guys are all GS employees, including Merkel. She wants to appear as such and such, but in the end, the currency will continue.

They will destroy Germany, they will destroy everything and every body. One slow, grinding day at a time.

Zero Govt's picture

that sounds about right... the distinct sound of politicians and banksters sucking nations dry of their wealth ...Greece done, onto the next host nation

mrktwtch2's picture

hey chicken little showed up still short from march of 09?

Frastric's picture

Ever of heard of the Fed? Benny will always pay for your crashed car!

Fed has inflation under control with the deleveraging shadow banking sector, can jawbone the market higher and has kept bond yields really low. Hell it could monetise the entire government debt and get away with it...

Until debt levels become exponentially to high and the dollar becomes toilet paper, until that happens the market will stumble and bumble its way higher.

SDS Trader's picture

"Today, August 2012, Greece is still an issue and is in fact about to default or leave the EU."

When?  I keep reading articles on this website that drone on endlessly about default or leaving the EU.  They tirelessly parade grim statistics to shore up their case. 

As an Econ professor used to say to me, all forecsasts are be definition incorrect.  The only quesiton is the degree of incorrectness.  So, let's see something useful like a timeline showing when the last straw will finally break the camel's back.  That will in turn nicely dovetail on what actions to take WHEN to protect our portfolios and our loved ones.

Don't get me wrong.  I don't think the endgame will be pretty.  Some day Greece will leave the EU.  And someday there will be civil unrest in our country.  And someday we will experience a debt crisis that sends horrific shockwaves through our financial system that we may not be able to stop.  But I don't know when.  I had conversations with people in 2001 and 2002 about the real estate bubble.  It took about 7 years for those predictions to come true.  I could easily see that home prices could not rise forever and that defaults would occur.  But I could not produce a timeline of when it would happen, so it yielded very little in actionable value.

Give us a prognostication we can use - tell us when it will be "go time."  Don't just keep saying some day it will be "go time."  That's pointless except to keep promoting your other products.  I stopped believing any entity could could stop "this" a long time ago.  The problem is that the "this" could keep going on for quite some time.

Simon Endean's picture

@SDS Trader: "The problem is that the "this" could keep going on for quite some time."

Yup.  The vultures that were circling the economy in 2007 starved to death, as did the vultures that were circling them, and the vultures that were circling them.  The newest crop may yet get to feast, but they may well starve to death, too.

CapitalistRock's picture

Greece already defaulted on debt. More defaults will follow. It sounds like you are seeking an event that encapsulates the entire future into a moment. You won't get that. It will take at least a decade to correct this problem of more claims on wealth than actual wealth. Your goal should be to position yourself for what is clearly happening and will continue to happen.

SDS Trader's picture

I might not.  I might also get a Lehman moment.  And I don't mean "moment" in the literal sense of 60 seconds.  But repeating the same things over and over in articles is at the other end of the predictive spectrum.

That's my whole point - we will be lucky if it only takes another decade of this confiscation of wealth/monetization of debt/asset inflation to make it reasonably stable.  I happen to agree with you that we will be fortunate if this only takes a decade to correct. 

But that's still a far cry from saying WHEN Greece will leave the EU/Euro.  And THAT was my criticism of the article.  If it were just saying we are in deep doo-doo, that would be one thing.  But, again, it's this constant, nebulous prognostication that things will fail someday.  Well, you know, we're all dead in the long run. 

My mom used to get a newsletter in the late 1970's from a guy named Howard Ruff.  It was called The Ruff Times.  It was telling people back then to dig bunkers in their basement and buy HIS BRAND of freeze-dried food, buy precious metals from HIS sponsored dealers, you get the idea.  Glad I did not dig a bunker, eat powdered eggs and buy silver at $40+ per ounce, etc.

g speed's picture

You will only get the "point in time" by reading high school history books written years after the fact. If its indicators you're looking for then you must look outside the box (in the box is false info)-- I'll give you an example-- If your looking for a devalue or destruction of a currency then you should look for the "on the street" trade info like when did your coke/pot dealer stop taking $100 bills. If he hasn't then the dollar is good for today.  


















Peter Pan's picture

SDS, you are fixated on a time line and profit. I on the other hand have no such fixation. I am ready and that is all that matters.