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Here’s the REAL DEAL NO BS Situation with Europe (Warning What Follows is EXTREMELY BAD).
Here’s the REAL DEAL NO BS Situation with Europe (Warning What Follows is EXTREMELY BAD).
The media is rife with misrepresentations and analysis of the EU. Here’s the real deal.
- The ECB is tapped out. Having provided over €1 trillion in funding via LTRO 1 and LTRO 2, taking on over €700 billion in PIIGS debt putting its own solvency at risk, it simply cannot launch another LTRO scheme for the following reasons:
- Those banks accepting LTRO funding are being punished by the market, thereby indicating that ECB funding is no financially toxic to a firm’s reputation in the market place
- The positive effects of LTRO 2 lasted only one month compared to several months for LTRO 1. Thus, we find that with each additional intervention the benefits are shorter lasting.
- The Federal Reserve cannot step in. I know the blogosphere is rife with claims that the Fed will just print and print and print to save the day. The people writing these claims fail to see that:
- The last time the Fed printed (just $600 billion at that) food prices hit all time records and revolutions erupted around the world.
- Back home in the US the Fed came under massive political pressure forcing it to go on damage control mode (Bernanke’s town hall meetings and opening the Fed to Q&A sessions)
- This is an election year. The Fed has done all it can to support Obama’s re-election (for good reasons: Obama re-elected Bernanke and the GOP is targeting the Fed as a major issue). If the Fed launched some massive printing campaign, Obama will certainly lose.
- The IMF cannot step in because:
- It’s ultimately a US-backed entity
- The political environment in the US will not tolerate a bailout of the EU (see the negative political reaction to the Fed’s moves to lower Dollar swap costs during November 2011).
- This is an election year: how many times has the IMF asked for additional funding and been rejected?
- Germany is politically fed up and monetarily tapped out:
- Merkel’s political party is getting destroyed in state elections due to her support of the EU. And Merkel is running for re-election in 2013.
- Merkel is committing political suicide by continuing to put Germany on the hook for Europe’s problems. Speaking of which…
- Germany is already on the hook for over €1 trillion in EU losses… and the ECB has made it so that it can roll the losses from its PIIGS portfolio back onto National Central Banks (AKA the Bundesbank).
- Inflation is showing up in Germany and becoming a political issue: see recent union demands (and success) for pay raises.
- The German constitution does not permit the creation of Eurobonds.
- If Germany permits additional bailouts or funding it will lose its AAA rating, leaving Europe without an AAA rated large economy to fall back on.
- China cannot be a savior:
- Having pumped its system full of liquidity it now faces inflation at the same time as its economy is slowing. This in turn means…
- That China’s Government is starting to lose its already tenuous control of the populace. As a result…
- China will be focusing on domestic issues rather than saving Europe (when was the last time the “China to back the EU” story appeared in the media?)
- Germany and others have already taken steps to prepare for a break-up of the EU. In Germany’s case:
- It’s re-instated its emergency bailout fund providing €480 billion in potential assistance to Germany banks in case of a Crisis.
- German banks will be permitted to dump their EU bonds into the emergency fund if need be.
- German corporations with operations in Greece have put clauses in their contracts to allow for the acceptance of the Drachma.
- The ECB has taken similar actions permitting it to roll back the losses from its PIIGS holdings onto National Central Banks.
- Spain is on the verge of a banking collapse. Its efforts to deal with an insolvent banking system by merging crappy banks and shifting losses onto its public balance sheet are proving to be absolute failures due to the fact that:
- Total Spanish banking loans are equal to 170% of Spanish GDP.
- Troubled loans at Spanish Banks just hit an 18-year high.
- Spanish banks need to rollover 20% of their debt this year.
- Spanish private sector debt is nearly 300% of Spanish GDP.
In plain terms, having spent two years and hundreds of billions (even TRILLIONS of Euros) dealing with the EU Crisis, the powers that be over there have backed themselves into a corner from which they cannot escape. Let me be blunt:
THERE IS NO ENTITY ON EARTH THAT CAN BAILOUT EUROPE.
It’s game over for that idea. And the idea that one bankrupt nation (even Germany sports a REAL Debt to GDP of over 200% when you include unfunded liabilities) prop up several others is ridiculous.
And all of this is happening at the precise time that Spain is about to implode.
This is the REAL DEAL for Europe. Anyone who has some kind of counter-argument to these points either doesn’t understand the political environment we’ve entered (even Central Banks are fed up with bowing to political pressure from politicians) or is simply hoping that by ignoring these realities they (the realities) will go away.
They won’t. Europe’s banking system as a whole is at risk a la 2008. And it’s nearly four times the seize of the US banking system.
So if you’re not already taking steps to prepare for the coming collapse, you need to do so now. The US will not escape from this unscathed. No one will. The global banking system is too interconnected: some estimates put US exposure in the ballpark of several TRILLION Dollars.
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: http://www.gainspainscapital.com
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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and also (at the same time) Japan is buying US treasuries = lending money to the US.
All good arguments but who cares. They will print as they have no other options and there will be LTRO 3. Under your scenario they are really screwed and under LTRO3 they are just screwed. Nice arguments but it does not matter yet...they can still buy more time with capital controls, transaction taxes and yes, more LTRO's... I still think they have a few more years before they hit the wall.
The Spanish and French banks will get Nationalized and the equity and debt holders will be hit hard. There is no political appetite to bailout the banks... the socialists are in control.
The Central Banks are going to all that can to minimize the losses of the global banking cartel. While they deal in political theatrics, whether its Uncle Bennie or Senor Draghi, they both answer to a higher authority than the political figureheads they seem to serve.
Whether it's LTRO-3 or the next iteriation of QE.x, the global bankers will coordinate and do what they can to keep their investors whole-- they've already accepted the 'unintended consequences'. Their alternatives are the total collapse of their precious global banking system-- or eventually-- global hyperinflation. And the central issue here is that they know how to deal with (and profit handsomely) from the latter-- and they simply have no existence if they allow the former to happen.
What do you think the Central Banks will choose?
It's not that complicated. Whether it's politically popular or not, Ben will lower the swap rate and expand the balance sheet to accomodate the $200 billion or so needed to keep USD liquidity nice and rich overseas. Then the ECB will go back to the drawing board several times to develop another scheme to kick the can down the road for just a little but longer. The faux-FDIC idea will win temporary support among the masses, despite the cost (they can't really afford it)-- but I think it's more LTRO to keep the debt Ponzi going (however long it takes).
We can vote President Zero out of office here in the U.S., but there will be no alternative leader powerful enough to change the Fed's current mandate, nor will alter the hierarchy under which masters they serve. The bankers in Europe are in pretty good collusive hands under Mr. Draghi as well.
These guys will simply do whatever it takes to keep the banks alive, period.
And on China, this just in:
China Banks May Miss Loan Target for 2012, Officials Sayhttp://www.bloomberg.com/news/2012-05-24/china-banks-may-miss-loan-targe...
Hm... even behind the Great Wall one cannot push on a string?
I think that it's a pretty clear take on what is and what will be happening. Of course, one needed really spend much energy on all of this. Growth was ALWAYS going to stop, and it's been growth that keeps it all aloft.
Clarke and Dawe's piece on all of this cannot be beat, so perhaps we just need to insert it and drop any/all other comments?
http://www.youtube.com/watch?v=I5QwKEwo4Bc
What about CA and its $20+ billion annual deficit? How will the trillions in unfunded liabilities be resolved in the US. EU may be exploding and the US is benefiting short term as money tries to find a safe haven. If and when interest rates go back up, the US will be the hardest hit. Will dictatorships like China prevail through the world to establish order? They will take your gold and guns.
As they noted, China had been helping to prop up the US. But... China's economy is now starting to stall. And, really, we're talking about fucking fiat here, IT'S ALL MADE UP!
"If and when interest rates go back up, the US will be the hardest hit."
The SYSTEM will be hit hard. The PEOPLE have already been tossed to the ground and kicked, can't necessarily get all that much worse (well, there IS the issue of food...).
People's guns and gold WON'T get taken away, not unless people hand them over. And WHY would they do that? (perhaps a big inflation push will be the indirect method) Pretty clear that there is becoming ever-increasing awareness that these are things that won't get confiscated. I am, however, more concerned over what could happen to [my] property. I suppose that any slave owner couldn't be harder on me than I am myself: and my "profits" are so insignificant that they'd be attractive to anyone.
All will only be transitionary anyway.
Isn't a monkey a pussy, or did I just overhear that in a strip bar.
I've only heard that referenced to red heads. Something about looking like a howler monkey yelling at you... yooooooo
Ahh the good old college days.
(Graham] = ZH's pinata. Bat whack it until its guts spill out. Ahhh, you guys, so much fun at parties.
nah, that's bobby brusca.
Graham is a compulsive scare-monger...keep screamin "WOLF WOLF WOLF" long enough and maybe one shows up. Brutal.
SHUT THE FUCK UP! We heard you the other 563 times Graham!
It would be easier if we as a Nation stopped running 24/7 except in Mission Critical Infrastructure.
www.buymynewsletterNOWordie.com
no thanks, Graham.
I'm sorry, I don't mean to make fun of a very bad situation, but many of the posts are quite humorous. Graham, if only you had an army of robots, like George Washington, you could negative comment all your nay sayers to pieces. But I must repeat: Yes, the Fed will print again........ there is a cadre that will demand it out of panic, there is a cadre that actually believes it will work, and there is a cadre that want it to happen exactly BECAUSE of the negative consequences. Sorry dude, you're right about the ultimate consequnces, but the drama will continue like a lop sided sports event that you are attending in very expensive seats......... you know the outcome, but you can't leave.
It doesn't take all this to describe why the euro is finishied.
It's pretty simple. It's a fiat currency that can be printed unlimitly to fund unlimited government debt, debasing the euro down to nothing eventually ...while making bankers all sorts of money in the process ...the real reason the euro came about.
Weak euro nations stop borrowing freshly printed euros, or the euro collapses. One or the other.
It's that simple.
Graham, or should I say Chicken Little,
Most of your assertions are opinion, not fact.
Most of the balance sheet/debt issues you raise are greatly influenced by mark-to-model. So if the PTB allow one to lie, the fiat games and lies can continue far far longer than reason or math dictates.
You will one day be right in many of your "real deal no BS" scare marketing. But you've been saying the same no-deal-BS scare mongering for so long that only an utter fool would follow your warnings.
In the end, you're no different than the banksters you claim are such scum. It's only in the game you run that you differ.
Centurion
I mostly agree with you. Ultimately the issue is about money printing and how many people buy the lie. The writer keeps suggesting that the central banks will stop printing and let it collapse now. Why, what has changed so much from yesterday? What is expected inflation? Is it so high that government debt overall is collapsing in price (maybe for Greece or Spain, but what about Germany, Japan, the US …?)? Did the average person in Europe, Japan, the US, etc. wake up? Did the ratings agencies wake up? Indeed, how truly vigilant has the average or even marginal bond trader/”vigilante” been? It looks like the average Icelander woke up sufficiently to push the game over button for that country's bankers and politicians, but not even the average Greek has. For example, Greeks will likely vote for the fantasy that they can continue their free lunch (of one form or another). Wake me up when the average Portuguese, Greek, Spaniard, Japaneese, American, etc. votes to balance their budget and default on their debt (i.e., not just default on their debt). The average person may now be suspicious, but clearly hasn’t caught on enough for it to fail in the way the author claims, yet; and the average Keynesian nut job central banker, or even your common bankster, is not just going to walk away, yet. If they were willing to abstain from hitting print, why are they taking it so damn seriously and lying so damn much? No, they look like they will keep hitting some version of print until they cannot anymore. Buy PMs and lay off the “free reports” from clowns that cannot see printers for what they are. Deflation my ass, let’s get this straight, first inflation then deflation (i.e., unless you’re a Viking with some sense).
You can mark to unicorn until one shows up, but it still has a problem. And that is the real assets still exists and the counterparties still exists in order to get funding from them. That is why the banks that bundled homes into CDS's and such couldn't really change the payment for the mortgage or lower the principal. And that's because the counterparty who invested still needed his percentage and unless the govt. made up for that (which they did) the banks or issuers of the bonds would be in default and them or the insurance companies would have to pay full price on the amount of the bond.
All mark to market aka mark to unicorn does is to have you in an economy of make believe. But reality is hitting us via inflation (hidden with smalller packages and such) and inflation outside the US. There hasn't been one country on the whole planet who was able to control the beast of monetization of the debt and inflation via printing, not one. The only way to avoid this trap is to not do it period, and thats the insidiousness of the trap. It gets easier and easier to hide your problems with printing but all your doing is making it harder to go back.
Yep, what Centurion9.41 said.
The Fed stealth QEases constantly. They have no auditing, no oversight, and lie like dogs. Suspect the same for the ECB. Money just shows up; mystery buyers keep buying sovereign debt, problem keeps looking ugly but never comes to a head.
Only challenge is drawing things out long enough so that actual paper bills can be printed to cope with the bank runs. Be funny when the last man gets his last bit of deposits, and the banks are still standing.
Zombies only really die from decpaitation.
Exactly. The Fed only talks about QE when they want that Pavlov response. The fact is they are doing massive QE right now,they just don't talk about it. JPM would be beyond saving right now if The fed wasn't covering their losses. Iwould bet they have done over a trillion in loans in this month alone.
The concept of "loan" sort of evaporates into absurd nothingness when I think about it in this context.
Wait. Reverse that.
Heee'rrrrre ssss SSDD Summers ...
Yea, that's the ticket.
"THERE IS NO ENTITY ON EARTH THAT CAN BAILOUT EUROPE."
So when do the aliens arrive, 4th July?
Hey, it's OK; all we need is tighter integration!
http://euobserver.com/19/116362
BRUSSELS, May 24 - EU leaders have tasked council chief Herman Van Rompuy with drafting a plan on deepening the eurozone's economic union, potentially via an inter-governmental treaty.
After more than five hours of talks on the need to strengthen growth policies while sticking to the already strengthened deficit rules, EU leaders on Wednesday night (23 May) agreed to come back to these issues at a formal summit on 28 June.
"Our discussion also demonstrated that we need to take the economic and monetary union to a new stage. There was a general consensus that we need to strengthen the economic union to make it commensurate with the monetary union," Van Rompuy said during a press conference at the end of the meeting.
Relax, its just paper, pull out an eraser and fix it...... whats the big deal? all the money is meaningless.
The problems are all fictional numbers , numbers can be adjusted if the will is there.
If humanity is going to let a bunch of scriblings on an imaginary piece of paper be the end of the world than we deserve whatever we get.
It's the end of the SYSTEM. Any ideas what the resultant void will be like?
The "money" was paper, but it represented stakes in the future. The future has been exhausted as far as the System is concerned, and THAT is a BIG deal.
The System has more control and more weapons. TPTB aren't going to just step out and throw their hands up. No, thery're going to take us all down trying to maintain their own positions. And, really, looking around I see no one with any realistic "solutions," in which case as bad as TPTB's solutions are they're still likely less insane than those of others. NOTE: as long as you use the word "growth" in any proposed "solution" that "solution" is automatically no better, as it leads down the very same path (yeah, maybe the scenery is different, but the cliff isn't).
Thanks, Graham, for your fresh, insightful views on this new topic. But I have two questions:
1. What do you think about that stuff that is going on in Europe? and
2. Do you have a website that we can go to, in order to learn how to protect ourselves?
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When will the sky fall? I missed that part.
haha, my thoughts exactly. Chicken Little fo-shizzle.
He might be right... chicken little was eventually.. but there is a low correlation between being right and timing it...
They will find a way to kick the can and we'll be here again in a year. Funny. Europe has dominated the news, but growth is slowing worldwide and recent corporate guidance has been deteriorating.
Wait until election year blows over; then watch the FED print to infinity and beyond. But before then every key player is in limbo until 2013 comes...
Points 1 - 8 in the article are well-reasoned, but I'll add another that puts it over the top:
9. The Indians are in first place, and just beat Verlander
Clearly, all of this CANNOT end well . . .
Watch for end of month windowdressing, this is poised for the Cartel to take it up like the 4-5 days before almost EVERY monthend, check this chart for it, go back further if you need to. rsi above 30. 1345, even 1350 could be in the cards, look how they held it at 1320 today.
http://www.etfmaintrends.com/wordpress/2012/05/24/update-on-spx-daily-2/
All this bail-out clap trap is not about bailing out central banks or banks too big to fail. It is about bailing out not the 1% but the 0.1 % that have conived and stolen to get to their "position" in life.
Let the effers and their banks burn and die.
It is called a debt jubilee.
Reboot the financial mechanism and Joe 6-Pack that always has lived week to week will continue. Possibly the 1% may have to productively "work" with their manual labor to survive.
Agrarian reform, bitchez!
Comedy gold, I tells ya.
Willy Brandt (long time mayor of West Berlin) said, "Germans must become good Europeans." And so they have. Now it's time to get together with Brother Ass. Scrape the leeches off and leave the Euro swamp.
Sure, the Fed will ride in with Bernanke wearing a white hat and save the European day.
Then when the austerity hits the fan in the U.S., we the people will do the same as the Greeks and Icelanders; tell the bastards to shove their debt up their ass 'cause we're not paying!
Let the rich eat themselves.
If you're a bear, don't forget to manage upside risk.
In order to go from Point A to Point B, i.e., from regional/national currencies to a global currency, there must be a change point. A Euro crash due to any of several reasons is a likely point at which the people who know what's best for us will begin to use their pawns in the media to promote that idea.
the end of the Euro, some years off yet, will lead to national currencies returning and indeed greater nationalism. I can't see new flag-waving currencies being at all keen on a NWO one-world-currency having just untangled themselves from the failed mess of Euro/internationalisation
some very wise men are calling for a one-world-currency (global monopoly) but they forget monopolies produce fucking garbage, everytime, without fail
the answer is a free market in money (competition) and an end to national Govt monopolies on money. Let us hope in the interim the wise men wise up to the solution instead of promoting yet more monopoly money systems doomed to fail and cause economic chaos
SPAM< SPAM< SPAM
"Free report" IF you sign up for our newsletter/service/????
I'm disappointed ZH allows this type of SCAM.
Yeah, cos like, ZH is a public information service without its own interests, right? That sort of thing should be illegal, I mean, you know, publish on the internet and also have an axe to grind or agenda to promote. /sarc
If you don't like it, don't read it.
No, it's NOT SPAM. The information presented is as reasonable as any other.
Geez people, I hate reading any of these articles because I have to wade through the perpetual bitching and moaning about there being a few words that people find objectionable. If you don't like reading these words, the "free report" yada yada, then don't read them, don't read these articles!
No one is forcing you to pay anything.
That said, I think that most of this is rehashing the obvious; but, what's been totally obvious to me might not be so to others... I like to read it to see if the "professionals" are figuring things out yet; and, if they're right then that beats the hell out of being wrong.
how the fuck can anyone junk this the above by booger? Graham is a fucktard that is, in most polite terms, consistently "off"....
The IMF is structured to handle this type of event. The only difference between the IMF's involvement in Mexico, Argentina, Iceland and Greece is scale. Greece is almost in trade balance after 2 years of "internal devaluation" under austerity. Devaluation of the currency will instantly make Greece export compeitive. Six months from now people will be talking about buiness moving to Greece. The only people in the PIIGS who are opposed to leaving the euro are public sector workers. They are basically quislings for Germany right now.
first question, what has Greece got to export?
second, which business would move to riot-torn Greece with ever more hard left/right parties??
Your optimism is fun for sure but all i can see is continued Govt vandalism of an already wrecked-by-meddling-politicians economy
I love Greek wine, olives, olive oil, feta cheese, music, dancing, replica ancient art, and orthodox Christian icons. When solar power gets a little cheaper, they will have affordable energy. Tourism. Aquaponics could transform their agriculture. I'm confident there is a prosperous future for them is the global economy once they re-learn parables of thrift and diligence. Painful economic lessons for all of us coming.