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Thin Ice
I’m not surprised that the halo effect of political changes in Italy and Greece had a very short half-life. Why would it? Nothing has changed.
I’m not surprised that the contagion has worked its way to France. After all, the ECB intervention policy insures that France becomes a target. “If you can't sell Italy, sell France”, is the market’s response.
But I’m absolutely blown out by the pace of things. France’s bonds are being devalued on a daily basis. Italy has been functionally shut out of the new issue market. Market liquidity has dried up. What were once routine transactions are now difficult to price. E100mm bond transactions for France and Italy were normal; today E25mm is a market amount.
What is becoming scarily clear is that there is no more announcements coming that are going to make a difference. All the news is out on expanding the EFSF. The only thing that could reverse this tide is an agreement to “federalize” the debts of Europe. This would leave Germany (massively) on the hook. There is zero chance of this happening.
The central question that the market will ask and answer in the next few weeks is whether France can withstand the onslaught. The ECB will not intervene in the French market. Will debt capital continue to move out of France? Two charts. One says France is probably okay. The other says we are headed for a hard landing.
These numbers (CIA) are a year old but they tell the story. Italy had $2.1T of public sector debt (119% of GDP) while France had only $1.8T of debt (82% of GDP). Looking at this it’s understandable why Italy is in trouble. But it does not explain why France should have a problem. This chart is the reason that there could be an issue:
On this basis France has double the debt of Italy. I call this the Money Center Bank Syndrome. The banks have debt outside their borders (they have assets too). This debt is getting sucked into the French government bond market as world investors trim exposure to the country (“If you can’t reduce exposure to the banks, sell government bonds”).
Italy and France have an average debt maturity of ~7 years. There is a total of $3T. The market value of this stock of debt has fallen by about $200b since October 1st. This is not a loss that will be recorded on anyone’s books (except the likes of MFG) but it does cause a strain on funding as the repo value has fallen.
Remember that all night conference by the EU deciders on October 26th? Central to that meeting was the commitment that the EU banks would undergo a recapitalization of E106b ($150b) by June 30 2012. The EU banks have had their assets impaired by at least that amount in just the past two months.
That all night meeting was just a joke! Anyone who trusts these people are making a mistake.
The Merkozy’s of Europe will be making “calming” statements over the next few days. We are dangerously close to a death spiral, and they know it. But they have nothing on their shelf but words. I don’t think this will prove to be enough.
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I recommend rabbits:
1) Chickens are noisy (can't let the zombie hoards hear your food supply giving itself away)
2) They breed faster than chickens
3) They taste like chicken
The only drawback to rabbits is that they are cute and cuddly, making it difficult for you to teach your kids how to break their necks and peel their skin off...
Here is the post that should be enshrined for every "you can't eat gold" troll:
TheSilverJournal
It's amazing how many people care enough to be a member of this site and read the articles that zerohedge puts out but still don't understand that when fiat crashes, all of that wealth doesn't just disappear because the wealth isn't the fiat, it's the goods that the fiat buys and all of that purchasing power that fiat had will be transferred into something else because the goods will still exist.
Aww, Rocky, when fiat collapses, our beloved leaders will just print more currency in a slightly different color (I like the sound of 'bluebacks' myself) and everyone who got burned in the previous fiat conflagration will dance a dance of joy, immediately forget their prior losses, and start accepting it as a store of value. Just like that!
And that applies to all our international trading partners too, of course. I mean, we're all in this together, right? Why wouldn't they accept the new blueback in exchange for their oil, machine tools, foodstuffs, etc, etc.
+1
no one who says "you can't eat gold" is saying "you can't buy a an entire Planation with your gold." What they're sayin' is "when 100 million people are starving they park their skinny little butts on your property and ask for food." Plus they give you the lost puppy dog look when they do it..."so you feed them as well." Eh, forget it....I understand.
link doesn't seem to go anywhere, mr. honorable racoon.
Bruce
well said.
I disagree with one thing. I think there is a greater than 0% chance that they federalize and ECB buys bonds across the board. German historic guilt and all that. I would put it at 30%
your tax dollars hard at work ...
Fannie, Freddie execs score $100 million paydayhttp://money.cnn.com/2011/11/15/news/companies/fannie_freddie_executive_...
No, no! This is a democracy! They wrote a Constitution!! That guarantees that bad things can't happen!!!
Doesn't it?
Hitler was elected.
He was an usurper like our muslim. They are more than a few f**ks posting here who voted for the usurper muslim.
Christ on a bike, get it into your thick head. Obummer is lots of things (fully paid-up Ziopuppet, for instance) but a dirty evil Mooooooooooooslim he is not.
In the first election in which women were allowed to vote. Go figure.
Actually Hitler wasn't elected, his party had even lost votes in the last election, as a percentage. Hitler was appointed by the Conservative parties out of fear that the Socialists would make Germany into another Sweden if they were allowed to form a government.
Which they did as soon as we allowed them to have governments again after the second world war.
Fear of another Soviet Union is the truth, and yes that was the choice, Hitler or Stalin.
Another Sweden?!!! God forbid!
Lets see, they've already used the, """Oh look, we just 'found' $XX Billion""", an accounting error, how about using fining another error. This time you can say, """Oh we just found that it was $XXBillion in EUROs, and someone mistakenly booked it as YEN"""". You can use some young person on the list for a future possible "Rouge Trader" event.
I keep reading about these 'Rouge Traders' here on ZH. Can no one bother to explain to us neophytes what cheek colouring has got to do with anything?
All that debt generates revenue in the form of interest to a very small group of a select few elite families. The debt would be alot smaller if that same elite would not have peddled their "deals" (construction is a favorite, energy supply and so on) and got major tax concessions and lastly, a government backed financing for those deals that made THEM rich.
It's a fucked up system where to this date many are slaving to support the lifestyles of the few.
Let me guess "you're a taxpayer." We have one of those here, too. He goes by the name "Tom." "Tom the Taxpayer" actually.
This is just like Congress and the 14 trillion. The safety is off, and they still don't know which end to look down, and which end to point.
Churchill was wrong, they don't try everything else before they end up doing the right thing, they just keep hitting the repeat button. Forever. We are on the sticky-pad, and we might squirm around a little for effect, but we are just getting more stuck.
Never underestimate the stupidity of self-selected leaders.
rinse - wash - repeat
double post
1.2 trillion of external debt for Switzerland? Divided by roughly 7MM people this equals to 170'000 per person, impossible to pay back.
Bruce, what is your understaning of these numbers?
This is the Money Center Bank Syndrome I wrote of. Switzerland has a big banking sector. It lends and borrows overseas.
This is no problem in normal times. But we are not in normal times. Switzerland will (I think) be able to maintain the foreign investment necessary to fund the foreign assets. France, with its very big banks, well, I'm not so sure.
Thank God Switzerland doesn't have big banks, too! Even better is Ireland...which has no banks! You know...when the Vikings sacked York it is said they left the literal TONS of valuables "just lying around" cuz "it didn't have any value in their religion." It's hard to say what caused greater despair to York..."the valuables being stolen..or the fact that the valuables had no meaning to those who stole them."
well I am not too sure about Switzerland as well, especially since Sept. 6th of this year.
Since 15 years the elite's money is being moved from the money center of Europe to the money centers of other off shore countries such as Guernsey, Delaware, Singapore, Cayman, Lux, etc.
Me thinks a lot of these claims are in the West Indies outside the tax system - I posted a very interesting BIS report on this a few weeks ago if you managed to catch it - I can't find the damn thing now.
This is no closed loop financial system - something is leaking.
You either get a bigger boat are you kill the Shark
www.youtube.com/watch?v=2I91DJZKRxs
found it
www.bis.org/publ/work346.pdf
Its a absolute cracker of a paper.
Whats Graph 10 all about Bruce ?
Cross border claims by bank location - offshore centres is the biggest fish.............
How come no one is fishing for this Great White ?
Offshore is just the Fed in a trenchcoat and hat pulled down over its face, buying all this shit with two hands.
Out of a perverted form of nationalism,I feel I must patriotically point out the UK's indebtedness,if we are to parade our insolvency as some sort of badge of pride,we and the Irish beat you all into a cock hat!!!
AT nearly $9trn, it is nearly two thirds of the entire Eurozone debt,and kept afloat by insane projections of future growth that are simply not going to happen(sorry folks - the last thirty years of "growth" were nothing more than a mirage based on debt and unsustainable consumer spending based on a housing bubble that usurped the real economy as the "engine".)
Ireland at $209trn say no more!
:-) Indeed. Well, you have had The Vampire Bankers since 1812, whereas we have only had them since 1913. Here, George Washington delayed them 100 years. But there, The Vampire Bankers have had an extra 100 years to gain control of and to use your Press and Pulpit against you, telling you to go along with each of their con schemes until the payment due for the scheme runs a great many of you out of your houses and businesses.
That 9trn is private, household, corporate, public etc all rolled into one. When you have a look at some of the corporations operating out of the UK then it makes more sense. The public debt is 900bln, around £15,000 for every man woman & child (and possibly pets too). As for Ireland owing 209trn - nice one, got a laugh - that’s about e45 million of debt for every man woman and child!
Theres a off shore centre operating in Dublin................ - I am not quite sure who is responsible for this black box - maybe its us again but nobody told us Gov !!!!!!!!!!!!
We are like a colder wetter version of the islands operating south east of the Florida Keys.
www.youtube.com/watch?v=0QHYFXDGf4Y
Almost certainly a washing centre for the German Banks. Dublin is loaded with Dresdner/Commerz/Deutche & West LB `SIV` s etc. Simple Regulatory arbitrage to begin with, that got out of control. Commerz has loads of the things which they inherited from the Dresdner securitisation team - Commerz has very little clue at to what is realy in them. But I know a man who has a good clue - because he created a fair few of them. Nobody on here will be too suprised to learn that a lot of the `money` went east to ex iron curtain destinations including mother Russia.
alrite Dork (see you've found another Irish colony), give global warming a few years and the shoe will be on the other foot. Then again, some would say that we're already the nig***s of the world.
Eh we are good but we ain't that good - $209 billion - we can handle it.................................. ................. ........... ...... .. . . -----------------------------------------------------
I could pick you out of a crowd in one minute (or less). The argument for an energy + food +n (not gold) backed currency has been expounded upon, not only here in ZH, but among many economists. Google is your friend. I won't call you names, I don't debate like that. I honestly hope stacking works for you; I'll write my own course. When gold is $100 and a potato is $500, I'll get your gold to buy more food and energy.
My friends are all human beings. Google is not a human being. When a potato is $500, America, South America, and Ireland will be very rich. Also, when a potato is $500, a sweet potato is $600. It's higher in sweetness. Also, just as there were Tocobago Indians in North America, there were also Potatobago Indians. They grew potatoes in the bogs. In the Southern States, the Sweetpotatobago Indians grew sweet potatoes in the bogs. They were worth $600. When people write their own courses, they could post them here, chapter by chapter, for proofreading and fact-checking. :^)
I'm not entirely sure where you were going with all that, but it was funny as Hell!
+1
PS: You forgot to mention the nomadic Winnepotatobago Indians.
Legend is they came through many times, but each time the historians were back in England in the Summer or down in the Caribbean in the Winter, and the historians missed them. Legend is they were a potato-boiling, fire-water drinking, hell-raising lot, once hit a sailing frigate with such a barrage of potatoes that it foundered to starboard and spilled the whole crew out in gator-swimming water, which made the Winnepotatobago laugh so hard their spirits still come back every year and celebrate it. That's the night you can hear them, if you listen, laughing on the wind, out in the bogs by the gator-swimming water. :^)
The Bagobago indians were famous for their sturdy sacks and other containers, They were decimated by an invasion of burlap weavils which left them holding bags full of holes.
And we are supposed to take your assertions seriously, when you can't even figure out how to reply to a particular comment here? Just who is "you"?
PS: Don't forget to watch "Braxton Family Values" this coming Thursday --- I suspect it is one of your favorite TV shows.
The central banks and bankers would have us believe there is no such thing as death.
Ours came in 2008, and Trillions of $'s later it is still here and unsolved, undead, a walking corpse of an economy, with the biggest effect being to slosh the disease across the waters of the Atlantic to Europe.
They will now slosh it back our way, and the debt zombies will eventually kill many a vibrant honest citizen.
In the meantime, look for our FED and Treasury to provide some kind of backstop to Europe, and for the media to assuage reality with incessant releases of cures and plans and troikas and summits and seances to convince the public that death and zombies have been expunged from the world and all is sunshine and armistice.
To find out what happens in France, I suggest we ask Stolper. Of course, the opposite will happen, so it seems obvious.
http://vegasxau.blogspot.com
Nice post Bruce.
I feel sorry for the UK.
Thanks Bruce. You and Reggie have done the heavy lifting on France, and the whole contagion scenario.
How come BK we never hear you about the thin ice of skating in a financially corrupt system where the legislators of COngress are all declared millionaires in stock which is levitated by the ponzi, they are supposed to control; can it more thin ice than that, a people's representation that smells of dire insider trading, outside legal sanction, in a country that pretends to lead the world in moral probity and 'honest, free market' instilled innovation! That, or am I suffering from intense myopia???
I am in wonderment in this elitist, self centred, media induced, tilted table, 'whose to burn first' pecking order of nation state financial evaluation, based on a mad race to the bottom suicidal spiral;by mad capitalistic oligarchs, navel gazing obsessed arsonists of their own seats of power.
The only good news is that human cycles can resist to the worst manifestations of collective madness.
Well, quite. AND I've never seen him criticize McDonald's for reducing the size of their Filet-o-Fish. What a US shillmeister the man is. Down! Down with Bruce Krasting!
"if you give a Congressman a bag with hundred thousand in cash it's illegal. If you give him 100,000 shares of Groupon and an E-trade app however!...
I take it that english is not your first language. Your use of it is very good however.
Just guessing.
bk