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The Black Swan NO ONE is Talking About: Germany’s “Plan B”
While the Second Greek Bailout may or may not be complete (depending on whether we get a credit event as a result of it), Germany can and will walk from the Euro if it needs to. This is the unforeseen black swan everyone is ignoring.
Obviously, Germany wouldn’t want to do this as it would result in Germany being blamed for the Euro failing. So thus far, “Plan A” for Germany has been to offer bailout funds that are contingent on requirements so unpalatable that Greece or any other PIIG would likely end up preferring to walk rather than submit to them.
Case in point, before the second Greek Bailout German Finance Minister Wolfgang Schäuble proposed that Greece should postpone its April elections as part of the bailout package.
In simple terms, Schäuble is concerned that the unpopularity of the austerity measures being imposed on Greece as part of the second bailout package would lead to a “wrong” democratic choice.
Let that last paragraph sink in for a moment; it’s so outlandish it’s hard to even comprehend. Imagine if a Chinese official suggested the US put off its elections otherwise China would dump US Treasuries en masse and you’ll see what I mean.
Understand, Schäuble is no idiot. He knows that there is no way Greece would go for this. So his comment can only be seen as an attempt to incite a Greek backlash while also winning political points in Germany.
Indeed, those who show themselves willing to play hardball with Greece have seen a huge boost in the polls (Merkel recently saw her approval ratings hit their highest levels since her re-election by doing this). Schäuble is obviously taking a page from her playbook here.
We should also take Schäuble’s statements in the context of Angela Merkel’s recent backing of Nicolas Sarkozy’s re-election campaign in France against hardened socialist François Hollande, who wants to engage in a rampant socialist mission to lower France’s retirement age, cut tax breaks to the wealthy, and break the recent new EU fiscal requirements Germany convinced 17 members of the EU to agree to.
Current polls show Hollande winning the election if it goes to a second round. The fact that Sarkozy’s re-election campaign just kicked off with an MP from his party announcing that the Nazis never deported homosexuals from France to Germany during the Holocaust (hardly a statement that boosts Sarkozy’s chances of re-election) isn’t helping.
Put another way, German leaders, particularly Merkel and Schäuble see the writing on the political wall: that both Greece and France are likely going to find themselves with new leadership that is pro-socialism, anti-austerity measures, and most certainly anti-taking orders from Germany.
Thus, Germany must be aware (as the EU, IMF, and ECB are to some degree) that it is ultimately fighting a losing battle by participating in the bailouts. Indeed, Schäuble has even gone so far as to recently call Greece a “bottomless pit” where money is wasted (having just participated in Greek bailouts that exceed the entirety of Greece’s GDP, he does have a point here).
Schäuble’s statements have not passed unnoticed by the Greeks. Greek politicians have regularly brought up Germany’s lack of war reparations to Greece post-WWII while the Greek media has begun regularly portraying Schäuble and Angela Merkel as Nazis.
So while a “deal” may have officially been struck for Greece, there are deep underlying tensions that could bring the EU to a crashing halt at any point.
Big picture, we must remember that Greece is just the opening act for what’s to come in Europe: Italy and Spain are waiting in the wings to take center stage as soon as the Greece bailout deal is finalized (if this happens… which remains to be seen).
Having seen how ineffective the whole “hand over fiscal sovereignty in exchange for more, cheaper debt/ bailouts” deals have been for Greece, Spain’s already told the EU to “shove” its budgetary requirements. This kind of political tension will be growing between EU members in the coming months as Ireland, Portugal, Spain and Italy all start showing their hands at the EU poker table.
Germany is aware of this, as well as the fact that there is no way German voters will go for bailouts of any more of the PIIGS (even if Germany, the IMF, and ECB had the funds to bail out Spain or Italy… which they don’t). This is why Germany has decided to play hardball with Greece. It’s also why Germany has put into place a contingency plan that would permit it to leave the Euro if it had to.
What is Germany’s “Plan B”? Leave the Euro but remain in the EU (maybe).
If you don’t believe me, consider that in the last six months Germany has:
- Passed legislation that would permit Germany to leave the Euro but remain a part of the EU
- Reinstated its Special Financial Market Stabilization Funds, (or SoFFin for short)
It is the second of these items (the reinstatement of the SoFFIN) that the western media and 99% of investors have missed entirely. In short, Germany has given the SoFFIN:
- €400 billion to be used as guarantees for German banks.
- €80 billion to be used for the recapitalization of German banks
- Legislation that would permit German banks to dump their euro-zone government bonds if needed.
That is correct. Any German bank, if it so chooses, will have the option to dump its EU sovereign bonds into the SoFFIN during a Crisis.
In simple terms, Germany has put a €480 billion firewall around its banks. It can literally pull out of the Euro any time it wants to. The question is whether its current EU power grab is successful. If it isn’t… and other EU nations refuse to play ball (like Spain has started to) then Germany could very easily leave the Euro.
This is the black swan no one is talking about. If Germany bails on the Euro, the EU will collapse. It will be Lehman Brothers times 10 if not worse.
I recently published a report showing investors how to prepare for this. It’s called Surviving a Crisis Four Times Worse Than 2008 and it’s chock full of information on how to not only survive but thrive during if this particular black swan (or any of the others lurking in the system) comes to pass.
This report is 100% FREE. You can pick up a copy today at: http://www.gainspainscapital.com under the OUR FREE REPORTS tab.
Good Investing!
Graham Summers
PS. We also feature four 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.
And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com
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Spoken like a true socialist. Give everyone else what you have. Otherwise we will call you a racist and even cry about a war that happened before your parents were even born.
What about the wars hundreds or even thousands of years ago. Shouldn't you get free shit for those too? PRODUCE SOMETHING YOU FUCKING USELESS ASSSHOLE.
The Black Swan NO ONE is Talking About:
It wouldn't be a Black swan if people were talking about it.........
Not gonna fucking happen.
Merkel is licking boots and the other parties too. There's no party in Germany with enough cojones to tell the banksters to go to freaking hell.
Even if they did, the banksters would implode Deutsche Bank and Germany would be screwed.
You're forgetting that it is Germany in particular, that's been insisting for years on cutting deficits and keeping them perpetually below 3% of GDP, specifically so that countries are NOT continually going to bankers like GS, to obtain loans which they can't pay for, thus creating massive EU systemic dysfunction.
i.e. if Merkel got her way the bankers would be less powerful, with much smaller bonuses in future.
So the Bankers will do whatever they can to get rid of people like Merkel who insist that such a binding EU rule to limit deficits should have legally binding teeth, in all EU capitals.
but the whole 'problem' with imposign this now is that belatedly enforcing that rule is much too late.
Thus bankruptcy, default and banking system failure becomes assured.
In other words, it is Germany's political leadership that's pushing hard for this austerity to occur any way, to force defaults, via recessions, thus collapsing globalist banksters in the process.
i.e. Merkel knows what she's doing here, it's no accident Greece is falling into depression, she knows it's inevitable, and she intends to use it to crucify banks with it.
It's Germany that's seeking to bring about the conditions needed for bad banks to fail and to lose their political leverage to blackmail the taxpayers, and to remove their financial and economic advantage (and also is saying no to monetisation).
I don't know why people can't plainly see that implication of Germany's insistence on deficit cutting (that's being labled 'austerity') when that is otherwise known as living within your means.
Why is that being called 'austerity' policy?
The very fact that they are being permitted to default formally, as well as simultaneously receiving about 20% further from a bank bailout as well, is hardly unfair, of Germany and Merkel.
$1.5 tillion deficits being slashed will do that to USA also, that's why Ben is printing, to stop the Banksters imploding.
That is well put. None of us can spend "to infinity and beyond" (as Buzz Lightyear would say). The unfortunate thing is that people of the world did not realize that their "prosperity" of so many years was really a fictional dynamic entirely dependent on central banking/politician shenanigans. We have learned of our servitude too late.
I read a good article the other day about the success of many non-private banking systems. I am starting to think that might have been a good idea, but our debt slavery has put us in a tight spot. Will that kind of a non-FED system be possible?
A couple of weeks ago commenting on a ZH article I postulated that the Black Swan could be the exit of Germany from the Euro. Perhaps Mr. Summers read my comment. I still believe this event is in play but to what degree is a closely guarded state secret I'm sure. I would look to some report that Germany has had it's GOLD returned from the NYFRB as one signal that it might happen. We all know that ZH had at least one article detailing the printing of marks. I believe the German exit is the only move that can cleanly cut the tie from the PIIGS grip of germany's check book. No it is not without real pain and consequence. Weimar was 80+ years ago and to this day they seem to be the only ones who grasp the significance of printing. They may have come to the conclusion that none of us are savable as only the experience of Weimar could gives a common frame of reference. What would happen to other currencies? I think the dollar would initially soar along with the mark but I'm guessing. What night be more interesting is what the FED does if they indeed find out that Plan B is the real endpoint for Germany!!!
You are not the only one here. I have posted here during 2011 spring and summer that Merkel should have to keep ALL her options open as Bismarck's daughter faced with the banksta cabal of USA. But Draghi's nomination and LTRO play changed all that in fall 2011. THe FED/US cabal got the Eurozone totally into the international scam via LTRO, and Germany is now hooked. Euro break up will cost that much more to nation states all hocked in support the ECB print press; something that the Oligarchs want, as what happens to the 99% population of first world is not their vital concern. Its making money parked in Cayman's, built on the AAPL model of Foxconn conmanship slave labour; international labour arbitrage and the 1% rules the world. Who gives a flying fukk for the sheeple of the world! They will only be offered democratic choices which "they cannot refuse"; aka red/blue options of Oligarchy front men; carbon copies of the Chinese one party Oligarchy in a pseudo two party tradition. The new face of Oligo-democracy; like Genetically modified Monsanto corn on the cob!
This whole shooting match will impoverish the world and make the new Oligarchy masters of world and its resources. A closed club of people who control the riches of the world, while the nation states of yester year control the socialised debts. Superb Houdini style sleight of hand there, now openly played since 2008!
I believe you are on the right track. Always follow the money (ie GOLD). However, it's a virtual certainty that the US Dollar will see a rush in value due to a collapsing Euro. This could even be a nightmare scenario for the price of gold, but I somehow doubt gold will be falling if the world is falling apart.
And what of the Fed swap lines with the ECB? Will the Fed get back worthless Euros in exchange for bailing out the ECB's dollar liquidity crunch? What of all the mortgage debt denominated in Euros? The Fed will resist any surge in the value of the Dollar due to the obvious negative consequences that will have on exports, supporting inflation, and asset prices. But they will have to print a gargantuan amount of money.
If Germany left the Euro, it would be to reinstitute the DMark. Germany has benefitted by the weak euro, that is, a currency weak relative to the value that the DMark would otherwise have had. The DMark when reinistituted would soar, especially against their export victims: the eurozone countries, along with the drachma, the escudo and any other reinstituted Monopoly money.
So just how would they benefit under that exchange rate? When their export-driven economy collapsed, they would be looking at the dilemma of reflating. Better they should find a way to stay within the euro and retain as many europatsy nations in the euro as they can.
Correct. Glad somebody else understands this crucial point.
I'm afraid I disagree, for reasons please see my reply to Trilliontroll above.
The trade deficit nations of Europe have been bled dry. Now Germany is faced with the choice of giving their surplus back to the deficit nations as a "fiscal transfer union" which is unacceptable to Germany. They would rather there be no surplus than to recycle it back into bankrupt nations.
When the German people tire of taking it "Greek style" (pun intended) subsidizing the PIIGS they will ditch the Euro and reinstitute the mark. It's a no brainer. Bet on it.
If Germany leaves the Euro and the EU collapses, everyone will be grateful. It was a stupid idea. The idea that we must do anything the elites come up with at the expense of everybody else is madness. F 'em.
Oh I wouldn't bet on that.
The MSM could be use to put the sheeple into a frenzy : THE GERMANS ARE THE CAUSE OF THE DEPRESSION!! THAT'S WHY YOUR KIDS ARE STARVING!! THOSE DAMN GERMANS!! THEY DESTROYED US, TIME TO DESTROY THEM!!
I can already see it.
the germans....no
the germans again....no
LOL
Finally, "Plan B, from outer space". Aliens were bound to get involved in this thing, sooner or later...
>It will be Lehman Brothers times 10 if not worse.
This could be 911 times a hundred..
Oh my god, you mean... 91100!?
Worse than that even
http://www.youtube.com/watch?v=JmzuRXLzqKk
The Great Ponzi is ending. Germany has no physical resources. Long-term it's fucked. All the others are fucked starting REALLY SOON.
true, but something tells me it will still be "ending" ten years from now.
The germans may not 'physical resources', have they have a resource that is infinitely more wealth-creating - a work ethic.
Once they default on their sovereign debt like everyone else, and lose their fondness for socialism, they'll do a lot better than most of the rest of us.
Actually, resources = china, china sells resources to germany, germany produces high-end machinery and cars, germany sells high-end machinery and cars to china.
?he point nevertheless remains that Germany is both uneasy about future developments but also preparing for worsening scenarios.
I for one can believe that Germany has already printed deutschmarks and anybody wantingto use them will have to play by her rules.
The whole debate is : does Germany have the ball to leave the Euro and the EU? While there is a distinction between Euro and Eu; in reality the two are intertwined. So if Germany thinks that it will be clobbered anyway going the current route of printing money to bail out one domino after another, it might just take off on its own and treaties and laws etc be damned. it could very well exit Eurozone, declared null and void all past contracts and treaties. Reintroduce the Mark. Or maintain all law and treaties, but then re-introduce the Mark and denominate at one Mark to 20 Euro thereby significantly reducing its obligation, whatever that might be.
The whole thing seems far-fetched, but so were WWI, Hitler, WWII, Hiroshima, Nagashaki, Chinese Cultural Revolution, Pol Pot, Rwanda etc etc.. and to be seen Iran, WWIII, nuclear holocaust, nuclear winter.
I've stated before, I think that Germany is leaving. They aren't dumb, they know that they are the bank for the EU and they are being forced to bailout they EU and Greece and soon to be the rest of the PIIGS. So its better to pull out and take the hit on her economy on her terms than when everything falls apart.
It may and it may be not.
Germany will take only the solution that increases their exports. It's the German way of life:
- Work
- Export
- Do not spend and deposit money for retirement
- Die in boredom.
Mostly accurate, but you left out the "drink beer" part.
I apologize.
People,
I don't know who this gentleman is, I read him from time to time, but his point of view is for CAPITAL PRESERVATION AND SURVIVAL, not a quick way of making money.
Whoever has some money on the side and is scared shitless, better listen to this guy.
Dear Graham, are you a complete and utter fool? Go and get your facts straight. I'll name just a few:
1) Germany can pass any legislation it wants to, but any legislation pertaining this issue is junior to the EU treaty. At present, no country can leave the Eurozone without leaving the EU...
2) If Germany would be permitted to leave the Eurozone today, the Bundesbank (German Central Bank) would be stuck with a Target2 claim of euro 500bn on the other Eurozone central banks (mostly on the peripheral one's). No one (currently) has a single clue about how to settle that claim, so best of luck with that.
3) Quote: "If Germany bails on the Euro, the EU will collapse." No, my dear, the EU will not collapse. The Euro (and Eurozone) may collapse (it probably will in case of the event happening), but the EU will remain.
Please try and learn the difference betwen the 'EU' and the 'Eurozone' for starters. Once you do, I'll be happy to teach you some other facts...
The euro wouldn't collapse either. The fed would buy any amount needed to prop it up.
Nor would the dollar collapse. The fear/uncertainty around all this would bring out so many dollar buyers... US market up, bonds up. Every non-US crisis has this effect.
Emmmmm.
What do you think the €480 Billion is for?
How can you be sure about what you're stating?
Are you saying that a piece of used toilet paper called EU Treaty that has been shitted upon at least 3 trillion times so far has any value? THIS IS ELEPHANT SHIT.
Nobody cares about that piece of paper. If Germany leaves what are they going to do, ban exports to Germany?
Be so kind as to name the 3 trillion times. Well, just name 2 trillion or a mere 100 times if you can. On second thought, I'll settle for 10 times...
Oh, where do I begin? How about the times when France expelled the Roma in violation of EU laws, or admission of Greece when they clearly don't belong, or ECB going wild in violation of EU and Euro laws forbidding the printing of money. Look at each country in EU and Eurozone and you'll find laws being ignored. the question is can you count beyond 10?
If you care, it would be quite easier the other way around.
Try to find any law or treaty and that has not been shitted upon.
My bet is the you'll come up with one of the following numbers:
- Zero
- Nada
- Zilch
The so called Mastricht Treaty and anything after that FORCED ( check this word again)....so it forced member to allow no more than 3% inflation.
Now let's check who has complied......................................................................................................................................................................................................................................................................................
I apologize for the 3 trillion. ECB has printed only 1 trillion so far by breaking EU law.
I'm a little confused
Were not Germany and France both beyond the 3% in 2001 or so? No one payed much attention to this at the time-------
I guess Greece was just more important om
Sir
You are confused because you are a law abiding citizen and believe in laws and treaties made by elected people are being respected.
That's not the case in Europe. Greece changed the Collective Action Clause retroactively. Today UK government is bothering to state that "the crucifix does not represent christian faith".
http://www.telegraph.co.uk/news/religion/9136191/Christians-have-no-right-to-wear-cross-at-work-says-Government.html
There are thousands of cases when the government or governments are just making up laws and even telling people what God to believe and whether their religious belief is right or not.
I lived in communism in eastern europe. I am shocked but not surprised. I understand your reaction. Tough to believe for a born and raised north american.
The Maastricht Treaty doesn't force a single country to keep inflation under 3%. We've got the ECB minding about the inflation stuff. Helping you out here, you little child: you probably meant the Treaty doesn't allow any member to grow a deficit above 3% of GDP...
Sir
As a European, I have no interest whatsoever to be accurate on any piece of used toilet paper that european politicians call Treaty. Nobody cares, down there about Treaties.
And yes, it's about the deficit. But again, with due respect, it is irrelevant. Nobody cares to respect any treaty over there. I live in Canada and Europe sometimes seems so far.
lol...Rogier or Raji or whatever seems to be confused...
"2) If Germany would be permitted to leave the Eurozone today..."
I wasn't aware the Eurozone had a standing army to prevent Germany from leaving if she wanted.
I larn sumpin everday, yep.
nmewn - I wasn't aware the Eurozone had a standing army to prevent Germany from leaving if she wanted.
Actually they do ... have just such an army.
Look into it. I think no peace treaty either.
NATO or Goldman? ;-)
Right on.
What would the Mark be priced in Gold?
HAPPY MONDAY Y'ALL:)),
MIT "THE CRIT" ROMNEY
:))))))
Graham,
Thank you for these details.
The event you speak of is unimagineable. It would be catastrophic in the most desperate sense of the word. Flipping out of the Euro and unwinding the mess it would leave would be interesting to watch from afar, but not in the US holding dollars.
What would one sell his gold for---a flock of parrots, a bowl of porridge, a swissie, a yen , a yuan?
In other words----------------------------------------------
un-imagine-able om