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If Europe is Saved Why Are Corporations Storing Cash With the ECB?

Phoenix Capital Research's picture




 

While the financial world
becomes euphoric based on an unsubstantiated rumor of yet another European
bailout package cited from an unnamed source and reported by one of the least
insightful financial commentators on the planet, the reality is that Europe is
imploding.

 

Indeed, a mere two weeks ago
FIVE central banks intervened to help the European banking system. The benefits
of that intervention last one week.

 

Dollar Funding Costs Rise As Central Banks' Plan Seen
Inadequate

 

European banks are finding dollars an
expensive commodity once again, as the afterglow fades from a coordinated
central bank plan to improve liquidity.

 

Swapping euros for dollars now costs about as much as it
did before the European Central Bank said Thursday it would work with
counterparts in the U.S., Europe and Japan to provide dollars for banks struggling
to access U.S. currency.

 

http://online.wsj.com/article/BT-CO-20110919-708511.html 

 

Things are
now so bad in Europe that corporations are now pulling their money from private
banks and depositing directly with the ECB:

 

Siemens shelters up to €6bn at ECB

 

Siemens withdrew more than
half-a-billion euros in cash deposits from a large French bank two weeks ago
and transferred it to the European Central Bank, in a sign of how companies are
seeking havens amid Europe’s sovereign debt crisis.

 

The German industrial group withdrew
the money partly because of concerns about the future financial health of the
bank and partly to benefit from higher interest rates paid by the ECB, a person
with direct knowledge of the matter told the Financial Times
.

 

http://www.ft.com/cms/s/0/dca4cc08-e096-11e0-bd01-00144feabdc0.html#ixzz1YUDV8yBw

 

Lloyd’s of London Pulls Euro Bank Deposits

 

Lloyd’s of London, concerned European
governments may be unable to support lenders in a worsening debt crisis, has
pulled deposits in some peripheral economies as the European Central Bank
provided dollars to one euro-area institution.

 

“There are a lot of banks who, because
of the uncertainty around Europe, the market has stopped using to place
deposits with,” Luke Savage, finance director of the world’s oldest insurance
market, said today in a phone interview. “If you’re worried the government
itself might be at risk, then you’re certainly worried the banks could be taken
down with them.”

 

http://www.bloomberg.com/news/2011-09-21/lloyd-s-of-london-posts-697-million-pound-loss-on-disasters-1-.html

 

This hardly suggests
that corporations have confidence in the European banking system. And why
should they? One of the key market props for the Euro, China, is pulling out.

 

China bank stops FX swaps,
forwards with some European banks –sources

 

A big market-making state bank in
China's onshore foreign exchange market has stopped foreign exchange forwards
and swaps trading with several European banks due to the unfolding debt crisis
in Europe, two sources told Reuters on Tuesday.

 

The European banks include French
lenders Societe Generale , Credit Agricole and BNP Paribas .

 

"Apart from spot trading, all
swaps and forwards trading (with the European banks) have been stopped,"
one source who is familiar with the matter told Reuters.

 

http://www.reuters.com/article/2011/09/20/idUSB9E7K102K20110920

 

 

China to keep buying U.S.
Treasuries: report

 

China, the largest foreign holder of
U.S. government debt, will keep buying U.S. Treasuries, the official People's
Daily, the ruling Communist Party's mouthpiece reported on Tuesday, citing
government researchers.

 

In an article about the reasons for
China's increased purchase of U.S. Treasuries, the newspaper cited Yan Xiaona,
a researcher with the Chinese Academy of Social Sciences, as saying that the
dollar "is relatively safer than the euro" because of the unfolding
sovereign debt crisis in Europe.

 

Yan was quoted as saying that
dollar-denominated assets remained attractive for investors around the globe.

 

Wang Chaocai, a Ministry of Finance
researcher, was quoted as saying that "what
else we can buy if not U.S. Treasuries? It's more risky to buy into
equities."

 

http://www.reuters.com/article/2011/09/20/us-china-us-treasuries-idUSTRE78J0BL20110920

 

 

I will be
blunt here. Until an actual NAMED GERMAN official comes forward and says that
an expanded EFSF plan is on the way, all rumors are complete and utter BS. Anything
coming from a Greek official, Italian official, or an unnamed source is just
garbage and means nothing.

 

No German support. NO more Bailouts. NO EU
in its current form. End of story.

 

Indeed,
while the lemmings pile into stocks believing in this nonsense, smart investors
are already preparing for the next leg down in the markets. The reason is simple:
last week’s sell off is JUST the beginning of what's coming.

 

This is no
mere correction nor is it just a brief hiccup for the financial markets. This
is the GREAT COLLAPSE and the markets will be going to new lows (below the
March 2009 lows) in the coming months.

 

We're also
going to be seeing major banks go under, market crashes, food shortages,
government shutdowns, and SYSTEMIC FAILURE.

 

Yes, I
believe that before this mess ends, the financial system as a whole will have
collapsed. What's coming is going to make 2008 look like a joke.

 

If you have
yet to prepare yourself for what’s coming, my
Surviving a Crisis Four Times
Worse Than 2008
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Within its
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investments my clients used to make triple digit returns in 2008).

 

Best of all,
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Good
Investing!

 

Graham
Summers

 

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Wed, 09/28/2011 - 00:16 | 1717378 Zero Govt
Zero Govt's picture

 "...the financial world becomes euphoric based on an unsubstantiated rumor of yet another European bailout package cited from an unnamed source and reported by one of the least insightful financial commentators on the planet.."

Yes the accuracy, integrity and rigourous questioning of modern journalism and our mass media channels is mightily fuking impressive is it not?

I've never felt so well informed and close to the devine truth as picking up another Rothchild-fed newspaper or tv station

nice to know maverick media moguls like Conrad Black is in jail doing time and Murdoch is close to joining him.. i don't like competition in the market place either, there is only one voice God speaks through and he's worth about $50 Trillion by pure coincidence 

Tue, 09/27/2011 - 19:36 | 1716738 Lord Welligton
Lord Welligton's picture

The "Corporations" fail to recognise that the ECB/FED is bankrupt.

The "Money System" has failed.

The "Corporations" need to set up their own "Money System".

The "People" need to set up their own "Money System".

Let both engage in trade.

Tue, 09/27/2011 - 19:23 | 1716703 Georgesblog
Georgesblog's picture

The vultures are circling, ready to pick the bones of defaulting nations. It may not look like default, and it won't be called default, but corporations will acquire assets for pennies on the dollar. It will be the biggest fire sale in the history of the world. That's how Corporatism works.

http://georgesblogforum.wordpress.com/2011/07/03/the-never-never-land-of...

Tue, 09/27/2011 - 18:52 | 1716621 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

So, er, simply question, where do the central banks get all their 'money' from to keep bailing out the world. Do they make imitation iPhones for the black market as a sideline or sumink? 

Tue, 09/27/2011 - 18:42 | 1716592 Robslob
Robslob's picture

 

 

The start date of the Central Bank intervention is a Banking Holiday....a.k.a. Columbus Day.

 

Stackem high or die a bitter Benocide Bernanke death.

Tue, 09/27/2011 - 18:42 | 1716591 PulauHantu29
PulauHantu29's picture

$2 Trillion at minimum is what they need to pay the bankers, pensioners, defaulters, refugees, and so on......

Tue, 09/27/2011 - 18:01 | 1716470 max2205
max2205's picture

Getting steamedrolled by one of these newsflows is worth avoiding.

ESP if you were short Cac Dax

Gappy days are here again....

Tue, 09/27/2011 - 17:34 | 1716383 falak pema
falak pema's picture

1° Siemens hates the french for having being snubbed by Sarkozy (Alsthom/Areva deals where it was marginalised in France).

2° Lloyds in going John Bull. City is now dead against the Tobin Tax that EUroland will promulgate. EU is going to push hard regulation of shadow banking that is totally unregulated in WS  and the City hates that. Lloyds is expressing concerns about this trend. 

3° China stopped FX swaps, because somebody (FED/Timmy)  told them that they needed their help to scare the shits out of EU for not going whole hog on EFSF. ( USD Swap lines were momentarily tightened). Timmy has owned up to this caper now.

4° China keeps buying US treasuries. Same reasons as 3°. It pressures EU. China needs EFSF full blown as it helps kick the can on a global level...

5°  German reticence on EFSF : Continuing psy-war between Anglo and Euro Oligarchs. Merkel is still dithering.

THE KEY ISSUE IS  : EITHER THE EURO FINANCE SYSTEM IS TOO CORRUPTED, LIKE THE ANGLO SHADOW BANKING IN WS AND CITY, FOR IT TO BE RECOVERED. GAME OVER, WE ALL FALL DOWN. Corrupt, shadow finance will have destroyed conventional finance. 

IN WHICH CASE THAT TRADER ON BBC IS RIGHT : BOTH EU AND US CAPITALISM ARE DEAD.  GS rules the world to rocky bottom as it all burns to hell. 

Or else, EU can still survive and avoid the fate of WS. But this is up in the air : As...

We don't know how bad the true situation is in EU. France, Italy and Spain are unknowns. But its looking terrible based on what is visible, the dominos are all lined up....as even Greece can bring the banks down. 

Tue, 09/27/2011 - 19:41 | 1716754 Buck Johnson
Buck Johnson's picture

Insider Trader was correct, all we are doing is playing we know what we are doing nothing more.  You just keep piling debt upon debt on countries that couldn't pay the original even when they had the money to do so.  Now they don't even have a big enough tax base to tax people for the money on the debt.  Even if they could tax at 100% of salary, they wouldn't be able to pay for it in one year make it mostly 10 to 15 years.

Tue, 09/27/2011 - 17:29 | 1716370 radarthreat
radarthreat's picture

Is this a poem?

Tue, 09/27/2011 - 16:56 | 1716260 DavosSherman
DavosSherman's picture

Even Homer Simpson can answer this question.

Of course, the fucking morons at CNBS can't.

Tue, 09/27/2011 - 18:49 | 1716612 Cynical Sidney
Cynical Sidney's picture

expect massive selloff when eurozone passes the lastest round of bailout

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