The first from Zero Hedge. This looks at a report out from Morgan Stanley on the status of Euro banks and the issuance of LONG-TERM debt. The bottom line is that as of August there is no long-term debt market for the EU financials.
NOTE: This is not T. Durden talking. This is the white spats boys @MS. When “The mother of all cheerleaders” starts writing stuff like this; it is worth noting.
Next from FTAlphaville who comments on a Fitch report Re: US money market funds draining cash from European banks. This was a July data report. Things have gotten much worse since then. The July data scared the crap out of (even) me.
It has been well know that the MMFs were leaving the weaker countries in the EU. What is scary to note however is that the money funds are leaving Germany too. The largest month over month decline came from German banks. Shocking!; is my reaction. Essentially the MMFs are saying, “NO EUROPE”.
There is some evidence in the money markets of what is going on behind the scenes. Libor rates for Euros and dollars are elevated. The forward currency swap spreads are also evidencing a tightness in the dollar funding market. That said, I don't see the evidence on my screen that we are at a bend point in this story. I think the quoted prices are not where real business is getting done.
The interbank deposit rates that are the basis of the quoted pricing may well be the rate that a Citi does business with a Chase. But these quotes have nothing to with the rates that a Banca Nazionale del Lavoro is currently paying for cash money.
I believe that a number of the big liquidity providers to EU banks are charging a big premium for money these days. I'm sure that there is growing list of EU financials that are looking for money and finding that their traditional providers are no saying:
.
Note: On that title I used today; a side story.
At one point long ago I found myself in the position of being long an FX cash position with a London based French bank. On the other side of this was a short futures position with a street broker by the name of Refco.
There are only two ways out of this situation. One has to either (1) unwind the futures and also the cash or (2) try to do a “give up” of the cash position to the broker. (netting).
This was a several billion dollar position. More often than not the unwind approach costs money (the futures market is very smart at spotting this type of stuff). So I asked the French bank if they would do the wash trade with Refco. (Note: this was very common)
I recall the exact response that was given (with a heavy French accent).
.
At first I didn’t get it. The wording was not the usual, “We don’t take that name”. But it did mean the same thing. The French bank simple would not do business with Refco. I undid the position(s), and it cost me. The "Bad Address" thing stuck with me.
One side note to the story is that on 10/10/2005 Refco was busted for lying to the public. Refco claimed to have a $530mm IOU on the books. Actually, it was worthless. Refco went Chapter 11 a few days later. Phil Bennet, the Refco CEO went to the slammer for 16 years.
The other side note is; Europe is becoming a “Bad Address”.
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Granted, Europe may become a bad address, but with all these problems, how do you explain the resilience of the €/USD? To me, it is a real mystery. Who's buying the euro?
There may be a PM dump in a forced firesale caused by cascading insolvency in Europe (like 2008). If so, it's a great buying opportunity, as it was in 2008/09. Longer term, if *real* rates remain suppressed then the PMs will just keep on performing and performing. Rates will likely stay suppressed because central banks don't know how to do anything else.
Here's a good article that illustrates a link between gold prices and real rates. The magic number is ~2%, anything lower and gold moves up with leverage.
http://www.crossingwallstreet.com/archives/2010/10/a-model-to-explain-th...
Almost all the industrialized economies are struggling under the weight of enormous debt levels. The problem is their government revenues are too low. Debt-ridden countries like the United States, the UK, Ireland and Japan need to raise their taxes to a similar level to Germany.
The USA started this mess and will not get out of this mess by beggar thy Neighbour schemes and megalomanic pipe-dreams of stimulation and spending their way out of US 15 trillion DEBT into oblivion !
Just look at the low Revenue to GDP income of the United States, the UK, Ireland and Japan and you know that the situation for the british empire is beyond repair !
It seems to me that Americans are only Patriotic for as long as they can get a free ride by Governments, any Governments. If Americans feel so "patriotic" they will eventually realize that to get out of their mess, they will have to increase taxes and also cut spending to get their deficit under control.
Everyone knows that you can't just keep spending without enough Revenue income to cover your expenses. You can NOT hope to ever pay down DEBT by creating more and more DEBT, without causing bankruptcy and recession or even a deep Depression ! You can NOT "stimulate" or "spend" your way out of DEBT! http://www.usdebtclock.org/
The only "Patriotic" way for America to get out of Debt is to increase Tax-Revenue relative to GDP and at the same time cut spending on " Patriotic " Bullshit ( like the failed invasion of Iraq and the corrupt war in Afghanistan and the megalomanic american dream of world-domination )
Such Ventures have always failed and much can be learned from Germany :
German Example Shows Way Out of Debt Crisis
Almost all the industrialized economies are struggling under the weight of enormous debt levels. The problem is their government revenues are too low. Debt-ridden countries like the United States, the UK, Ireland and Japan need to raise their taxes to a similar level to Germany. http://www.spiegel.de/international/world/0,1518,779893,00.html
Its the ultimate Dollar Bitch vs Gold Bitch fight - winner takes all.
nice anecdote.
i'm personally predicting a group with influence, (not sure which group yet, but perhaps russian?)
will take a truck bomb and explode the hq of dexia in belgium. we'll see how much worse the 'bad address' gets.
but the truck bomb will be blamed on a 'terrorist'. in fact, it will be one of the many central banks that are in a currency war with the fed.
Thanks Bruce.
Thanks, Bruce,
Maybe, we are in more desperate straits in the US, so that with gun to head---ours boys are bringing the dough home for the' good of the country'. They are pretty patriotic, after all, and just love the people here.
All through this past year the Euro has been bad-mouthed as it should have been, but the press had beaten up the E U far more than the 'AAA-rated' US of A. If one were prone to conspiracy theories, a case might be made for propaganda, but the ethics of MSM are far too elevated for this to be a possibility. In any event, the dollar is not as strong as the Euro, imo---it just hangs there day after day as gold goes parabolic and the market manipulates itself along algorithmically merrily, merrily down the dead-end road it has chosen.
The thought occurs to me, though, that for the past two years, the US has crowded everyone but the EU out of the debt market, re-fis included, so that it looks like US treasuries are 'the only game in town', and the Euro's problem are compounded. When the music stops we may find ourselves frozen out by the rest of the world as in boycott so that instead of sitting in every chair of this game of musical chairs---we might discover that no one cares any longer.
I don't know where or when or how this game will end----except that the bankers will escape to their gated paradises and laugh at us for the rest of human history because they have all the gold and guns.
I do have confidence, however, that human society will re-organize its economic system in some functional manner because there will be survivors of the banker's black humor---
In the meantime I'll just hang out on ZH and laugh with the rest of my blogmates
good piece--thanks, again om
Here, call ME
867-5309
And middle east stopping delivetring of oil to US?
Me thinks the Banque de France has been hitting the gold button lately - when their banks get into trouble thats what they do.
Is the pic a take off on Vettriano's "Dance Me To The End of Love"?
My wife made me ask ;)
Pete
This is a Banksy. The foreground is a famous painting. But I'm struggling with that. Banksy did the knockoff and inserted the guys in Haz Mat suits. He hung the picture in a museum. Then he took pictures of the people who saw it and were confused by it.
I will "pay" one Zero Hedge hat to the first person who confirms the correct identity of the foreground. That's a money good promise.
bk
Hey Bruce-
Sorry to be such a N00b, but can you, or anyone else, point me to a site that shows how much money was given to the banks, vs how much has been paid back?
Some idiots on another site are saying the banks have paid back all the trillions they "borrowed" and that the banks are now free of FED debt.
Thanks for the help- you rock!
You refer to TARP. This was the investment by Treasury in Senior preferred stock. There have been both gains and losses from this. There is one situation where the outcome is not clear. But even with that, the banks will cost the US nothing. Some, CITI,BAC,GS,MGT made the government money when the pref was sold.
The losses from TARP will come from GM,Chrysler and AIG. Not the banks.
That aside, the question of how much blood have the banks sucked from the system over the past few decades? I have that number:
Umpteen uncountable cagillions
Bruce
That would be : The singing butler by Jack Vettriano
So a ZH hat it is.
Feel free to ignore my avatar.
LMAO
We have a winner!! Thank you LMAO!!
Note:
The avatar for LMAO is none other than Banksy. So this does does close the circle.
LMAO please contact me to claim your VALUABLE award.
bk
bkrasting@gmail.com
The original:
Thanks Bruce,
You certainly do have a point CAPITALIZING the said award.
In my mind it's not unthinkable this precious item will cost in a years’ time (If Jackson Hole turns out to be as euphoric as the banking cartel hopes it will be) about the same as 1 oz. of gold bullion today.
So yes, I feel honored that, on this auspicious occasion, such sign of recognition is bestowed upon me.
Again, much obliged.
LMAO
A ZH award hat? That will have significant value.
In two years this hat will be worth $1,000 of 30 year Spanish bonds.
But that will only be worth. $4.50....You're still ahead.
Who are the better dancers? The couple dancing with a barrel of toxic waste, or the rich folks?
'My wife made me ask'??????
Well, they DO get to keep our Treasuries.
BK,
Nice article as always.
OT. You mentioned QE3 announcement outside JH. Thought last night or the Sunday night of Labor Day weekend would be good bets. Are we looking for an article stating the ECB asks for half a trillion in currency swaps? I've not seen anything like that the past 48 hours.
Sweet, Bruce. Nice reminisence.... ain't your first Rodeo.
"I think the quoted prices are not where real business is getting done."
Nor is any size institutional money being lent at quoted rates.
"No, it's not OK.
Matter of fact, it's a long fucking way from just OK.
Repo? Sure; 110% bills only collateral, mark it up an 05, US branch only."
I love your posts. You are one of the great assets on this site. Everyone needs to pony up some dough, so TD can pay for the new servers to keep these sorts of posts coming, particularly the ones you write on the Swiss National Bank.
You always sign your posts with some appropriate graffitti. I thought today was different, but I see today's signature is Banksy.
Fuck the servers. I'm looking for a T-shirt....
Love Banksy. See contest above.
b
That should boost confidence....
I wonder why they don't run your stories on the lemming channels.... :)
Dam Bruce that was good
Im very caum. Any kind of epic crash should just be entirely ignored. My house wont disapear, my car wont, i gotta farmer 5 minutes away for all kinds of organic nutrition plus pigs and chickens. Im sure even zerohedge will stay online. If the Banks are bluffing, lets not buy into it and if there not, oh well the world will not stop spinning.
What have you got to offer to the farmer in exchange of his organics/pigs/poultry?
I doubt he'll take your FRNs.
Your car won't dissapear. But when oil is out of reach, pushing a car around won't be feasible.
We will help him out with the farming and get everything for free in exchange. In times of crisis poeple stick together.
The people with the guns stick together and obey their officers; the other people do whatever the fuck they're told to do. You should be able to figure this out.
Ahmex....
By the looks of the spelling he probably already pushes the "car" 'round them hollers in southern Alabama. Don't need no FRN's to snark some eggs from your half-sister-cousin down the way none.
Im German and if you can spell as good in german as i can in english then bring it on.
Gesundheit ! so there.
Them hollers are up here in north Alabama, where I am. South Alabama is flat. You don't know nothin'.
I thought the title was an impending reference to any web address ending in .eu. After reading the article I guess I wasn't that far off.
It also sounds like the title to a good song.
How what is currently happening at Greece's Proton Bank is any different than what happened at Refco is beyond me. I guess the need to make everyone think that there was systemic risk to Refco was just before its time.
Maybe "bad address" is code for "Reliable insider information revealed that place is under investigation and surveillance. Anyone doing business with them will be eating a prison food soon."
The brothel down the street will be running specials later this month.
Refco was a frame-by-frame implosion. It was not an established name (yet) and when news about the CEO "borrowings" surfaced it just gave a bad feeling to the whole thing. I know some clients had "backup routes" prepared just in case, days before it imploded, just like the french bank above refusing to take that side of the trade.
Bruce, you are on fire lately. Keep it coming.
Europe is becoming a “Bad Address”. - the question is, is there any "good address" left?
Good point. Who is a good address? Aussie? Very dependant on global growth, ahem....Canada too? Brazil? population growing fast, debt under control, but inflation is going nuts, again... Same with Argentina.
Hong Kong $?? Maybe. Singapore $ yes. Is that what it has come to?
Let's face it. All G7 public sector debt is a losing investment. Either there is a default or inflation will eat you alive.
Look at the gold print tonight. That is the "address" that people are going to.
Nice article!
Sorry Bruce your, Brazil 'debt under control' statement is not accurate and as the future treads on the world will see why. A short term bet on Brazil is a good idea, but long term their private debt is going to sky rocket. Brazil's total debt is dominated currently by government debt. Unless Rousseff can unwind the damage Lula the magnificent did, long term we are looking at a reenactment of the U.S..
They have several advantages over us, but owning their own natural resources isn't one of them. The politicians have seen to this. The other thing is most Brazilians bought American dollars as a safe haven for their money and stuck it under their mattress. The poor included. It would be interesting to see if this attitude has changed and what safe haven they are running to now. I don't see sustainable purchases of gold and silver bullion in the average Brazilians reach. Finally, most middle class small business owners were pocketing their earnings because most were getting paid under the table in cash or goods. Seems they didn't like paying the tax man. Now with the easy credit attitude more business are accepting credit from individuals over astronomically long payoff periods. But, I guess they rather pay the bankers.
High interest rates are a good sign, but she will loose her voting base if she isn't able to keep the right balance. The poor in Brazil elect presidents. If they suffer from inflation, the next president will be another Lula extend and pretend. Brazilians love their champions for the poor, and could care less if their past is littered with proven scandal. If false election promises are king in the U.S. they are a god in Brazil.
Hardly a definitive example but paints an excellent picture:
http://uicifd.blogspot.com/2011/03/contradictory-views-on-brazilian-cred...
All the Addresses have one singular and deplorable fault . . .
The address numbesr attached to the doors are made of paper.
When the rain and winds come, they are wiped away and the address is no longer recognizable.
Now, if that number had been made of gold or silver, well then . . . that would be a different matter entirely.
I wonder what acid rain will do to Au / Ag?
There are few REAL economies left that are functionally healthy, but Europe is one of them, including the Nordic countries, and Switzerland. Let the banks and moneysharks leave, Europe will be on top soon and leading in energy efficiency, high tech and social equality. Cords will be cut soon, let's see who'll be looking for a lifeline...
Leading in energy efficiency and social equality !! HA HA HA, HO, HO. That's code for we're fucking socialist kool-aid drinkers who spent all our money on solar panels. Margaret Thatcher on Solialism; "the trouble with Socialism is that you run out of other peoples money to spend". Did you know that Germany, which is sooo sooo proud of it's solar panels pays the elctric bill every year to France; which has a real electrical system ? Did you? Look it up. Hippies make shitty engineers.
Including the Nordic countries... AND Switzerland??!!??
That's a good one.
May I draw your attention to the following chart?
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/mado...
I think you will find it... most enlightning, if I dare say so myself.
how can europe be energy efficient, when they all have to import energy, with the sole exception of norway?
is it coidence the norgewian templar nutcase struck a few days before a huge oilfield in norge's TW was disclosed to the public?
was someone trying to keep that oilfield "private"?
http://economicsnewspaper.com/policy/german/statoil-norwegian-discover-h...