Europe is Out of Options and Out of Money

Phoenix Capital Research's picture

 

The big news out of Europe is whether or not Cyprus will be a template for future bailouts.

 

Having seen that issues like personal property, rule of law, and democracy got thrown out of the window in Cyprus as soon as things got hairy, investors and depositors throughout Europe are panicked as to whether they will be targeted next when the next European Domino starts to fall.

 

EU politicians are out claiming the usual fluff “don’t worry, Cyprus is a one off deal, this won’t happen again!” Sure. Greece was a one off deal until it needed another bailout. Spain was a one off deal. So was Ireland and Portugal.

 

Obviously, European bureaucrats are the sorts of folks you can trust.

 

Let’s cut through the nonsense here.

 

Europe is totally and completely bust. The European banks are leveraged at 26 to 1 because they CANNOT raise capital… because no one in their right mind wants to invest in them… not even European countries.

 

European nations are bankrupt because AGAIN no one in their right mind wants to buy their bonds UNLESS they believe they can dump their investments on the ECB at a later date. Who is the greater fool there?

 

At the end of the day, the reason Europe hasn’t been fixed is because CAPITAL SIMPLY ISN’T THERE. Europe and its alleged backstops are out of money. This includes Germany, the ECB and the mega-bailout funds such as the ESM.

 

Germany has already committed to bailouts that equal 5% of its GDP. The single largest transfer payment ever made by one country to another was the Marshall Plan in which the US transferred an amount equal to 5% of its GDP. Germany WILL NOT exceed this. So don’t count on more money from Germany.

 

The ECB is chock full of garbage debts which have been pledged as collateral for loans. If anyone of significance defaults in Europe, the ECB is insolvent. Sure it can print more money, but once the BIG collateral call hits, money printing is useless because the amount of money the ECB would have to print would implode the system.

 

And then of course there are the mega bailout funds such as the ESM. The only problem here is that Spain and Italy make up 30% of the ESM's supposed “funding.” That’s right, nearly one third of the mega-bailout fund’s capital will come from countries that are bankrupt themselves.

 

What could go wrong?

 

At this point, Europe is literally beginning to run out of options. It’s only a matter of time before the Crisis goes into hyperdrive and we have an event even worse than 2008.

 

If you’re an individual investor worried about what Europe’s Crisis really means for your portfolio, we’ve published a FREE Special Report outlining exactly that. It’s titled, What Europe Means For You and Your Savings.

 

In this report, we outline the risks Europe’s banking crisis holds not only for those in Europe, but for savers around the world. We also explain how this crisis will most likely unfold, including which areas are most at risk in the financial system. And we cap it off by listing multiple backdoor plays on Europe that investors can use to profit from Europe’s Crisis.

 

You can pick up a FREE copy here:

 

http://gainspainscapital.com/what-europes-collapse-means-for-your-savings/

 

Thank you for reading!

 

Graham Summers

 

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diogeneslaertius's picture

just print a giant bagel made out of tungsten and get it over with

Shell Game's picture

"Europe is Out of Options and Out of Money"

 

Which, of course, is bullish.  Why did I ever expect a place for reason and sanity in this insane world?

 

Our lives, our individual pursuits of Liberty and happiness are mere experiments and are fully expendible to the last to these sociopath control freaks...

Ancientkarma's picture

Where oh where does an ex banker keep HIS money

NEOSERF's picture

What is amazing is if you ask the question, how did things get so bad in Europe?  You come to the answer that subsizing college, healthcare, poor loans etc. is not too far from the US future.  Capitalism simply doesn't work with this level of disparity in income, nor redistribution from the middle class to the poor, sick and retired.  Moral issues aside, standard of living for the bottom 90% will get much worse in the coming decades as robots and outsourcing continue.  Globalization means that Western wages will continue to come under attack from the next "Asian Tiger"...Japan, then Mexico, then China, now SE Asia.  Current levels of cost for assets in the Western world are completely inconsistent with declining real wages.  End of story...Asset costs will have to come down. Period.

SAT 800's picture

I just finished reading an article on Marketwatch about anuitys; they're financial contracts, somewhat akin to insurance; that definitely involve counterparties, government regulation, etc. etc. The author was saying that many anuitys will guarantee to compensate your future earnings, (from them), for inflation. One of the responders to the article bragged that his particular contract had paid 10.8%/ per year since 1992, when he bought it. The assumption, of course, is that this is a good idea now; as the next 10 years will probably unfold in some "normal" predictable manner, with "manageable" inflation; etc. etc. To me this is like driving while looking in your rear view mirror; you get a nice clear idea of what happened in the past while you smash head on into what's right in front of you. Coming over here to Zero Hedge, and reading this, "note from reality"; is quite refreshing. I wonder if they sell 20 year anuities in Euros? I'm sure they do; I guess I better go out and get one, right away. LOL. The only thing that's guaranteed to work for this time period; as opposed to being a bet of some kind; is the same thing that allowed some fairly well-off Romans to move out of mainland Italy to various farther flung outposts of the empire, and take their Silver Money with them; so they could read about the burning and sacking of Rome in the Newspaper, so to speak. Any store of value that's not heavy and shiny, today, is just asking to be road kill.

SmittyinLA's picture

Annuity holders are going to get slaughtered.

Many annuities are actually complete and total frauds with the returns completely backed by NOTHING. California has been issuing hundreds of billions in bonds with the principal & interest rolled over for the first 20-30 years.

What this means is in 20-30 years when "investors" are supposed to get their investment capital back plus interest compounded for the last 30 years-they wont as CA doesn't set aside principal or interest payments for future known bills, they presume they can foll over more debt-like Cyprus, and "investors" won't be able to "lein" against whatever the money was spent on because the money was spent on Mexican invasion.

 They won't get principal or interest, what investors collected on their "investments" as "interest" in the interim bewteen when they donated their assets and when they get returned (not) was actually a loan taken out against the return of their assets.

Some investors may even be forced to give back some of their "Annuity earnings" and lose their principal and future interest. 

 

Colonel Jessup's picture

Guys - the ECB has been printing for some time now to support the bank runs in Greece and Spain that, at the height of the austerity talks saw outflows of a billion Euros a month in actual cash. They had to print like crazy for the banks to avoid a complete meltdown and make sure depositors could still get their fiat. This is not sustainable for much longer, otherwise they'll have 1923 Germany all over again - all over the Eurozone.

JayKitsap's picture

I agree that he Euro countries are all in one boat and they just told those with money to withdraw their deposits over the insurance limit, sell their bonds, and sell their financial stocks.  Not smart, with the 50:1 leverage a withdrawal of 5% of deposits puts them in default.

My question though - Is the UK safer or is the US.  It just seems that they are just a few years away from the same problem.

 

sosoome's picture

It doesn't matter which is "safer".

What matters is percieved safety, and the buck wins.

Kelley's picture

It's the real possibility of depositors simply removing their deposits that appears to be the weakest link.

Of course no bank will reveal the trend publicly, so we just have to rely on anecdotal evidence - at least until some bank cries uncle. When just one bank can't meet the demand for withdrawals, it'll spread like a virus in a matter of days.

SAT 800's picture

If that's really your question; the answer is Silver Bullion; and silver coins.

The worst trader's picture

dont worry Ben will print plenty.to.go.around.

 

MFLTucson's picture

Europe is totally and completely bust.

 

And they are alone?

Nussi34's picture

Germany has commited almost 50% GDP throught EFSF , ESM and Target 2...

The total worrysome debt of the EMU is 12.000 billion. German tay revenues per year are roughly 650 billion. The solution the ClubMed proposes, doubling taxes in Germany (=making Germany a labor camp) for 20 years most likely want work!

LFMayor's picture

That worked out pretty fucking great the last time around.  Those Versailles reparations and such. 
One thing about it, there were jobs for everyone.  Factories running 3 shifts, 7 days a week.  And other jobs, too.

Colonel Jessup's picture

You mean jobs like wearing a spiffy blue uniform, patting down old ladies and returning war veterans while wearing a gold badge that says TSA?

Lugnut's picture

jobs that give you 3 squares a day, a spiffy uniform and a Mauser K98 too!

Handful of Dust's picture

The "Free Market" is not the "Flee Market" as depositors run for safety elsewhere....

GCT's picture

I am not European but blaming Europe for everything does get old.  The questions we should be asking is the USA any different right now?  All of the Western governments are broke.  Looking at the USA we are in worse shape then Europe if you combine all the members of the EU.

I do not think the EMU will go anywhere to be honest.  The politicians are all in for the Dictatorship of Europe to form.  The only reason I coin this is because if formed the political elite in Brussel will be immuned to prosecution in the courts.

GhostfaceCracka's picture

I don't think anyone here is blaming Europe for everything. I'd wager that most ZHers believe that USG/ZOG and its financial masters are as screwed up or more but right now the shit is going down in Europe, so most of the hate is being directed at International Finance's satraps there. The US's turn will come, it'll just take longer for the disease to work its way from the tentacles into the central squidhead.

NoWayJose's picture

This is also a template for any investor with money still in a bank...  or rather, any investor holding an IOU promise from a bank who thinks they still own their money...

Tombstone's picture

But Benny's not.  No way will Benny allow Europe to implode.  Like a good little socialist, he will provide generous funds to Europe, as he has been secretly doing for years.

Tinky's picture

If only there were someone who could guide me through this crisis and manage my substantial portfolio...

RichardENixon's picture

Just stick with Cramer. That should solve your problem fairly quickly.

MrBoompi's picture

"money printing is useless because the amount of money the ECB would have to print would implode the system"

Not printing the money will lead to certain collapse.  By printing just enough to keep your head above water, they might be able to buy some extra time.  I'm not saying there is a good option here, I'm just saying there definitely will be more money printing.  And if that doesn't work quickly enough, they'll be looking for more depositors to fleece as well.

mammoth mo's picture

Money Printing and Lying about a system that has already imploded has worked pretty well for them.  The system imploded at Greece but by kicking the can and lying they have been able to maintain it.  They never thought they would be able to get away with it this long.  All this is gravy.  

digitlman's picture

And GS is out of fresh material.

Fuh Querada's picture

The answer: Muslim Matrimonials (new sidebar) JOIN FREE NOW!

LFMayor's picture

ROFL!

and you thought the Women of McDonald's had facial hair!

Fuh Querada's picture

I guess it just tickles a little during a blow job.

Fuh Querada's picture

now ousted by the "Silicone Tits Singles"

Mototard at Large's picture

Not only is it the template, following events in Cyprus and Spain, it is emerging that the UK, the EU and the USA are looking at new ways of taking your savings.  Sometimes through the insured deposits as well.  FDIC and Bank of England have a paper on this already (Dec 2012) and Spain has their own new measures in place as of last Friday.

 

http://tinyurl.com/c2e8zs5

Racer's picture

So they already have the template IN PLACE for the UK and US!!!!!

".....and losses would be apportioned to shareholders and unsecured creditors. In all likelihood, shareholders would lose all value and unsecured creditors should thus expect that their claims would be written down to reflect any losses that shareholders did not cover."

"....by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity."

"In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution."

http://www.bankofengland.co.uk/publications/Documents/news/2012/nr156.pdf

Buck Johnson's picture

They are going to screw us like we haven't been screwed before, trust me.

Doubleguns's picture

Benny is not out of money yet.....just saying cuz he seems to be sending it to EZ.

NotApplicable's picture

So... how did the EU run out of money? Somebody disband the ECB without telling?