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We're Getting Closer
I couldn’t be more delighted than to see the DAX get tagged for 2.5% today. This is a consequence of the “Successful” vote yesterday in the German Parliament to throw more good money after bad. The hit (so far) to German investors comes to $40b. That should make them happy this weekend.
It’s not just investors that a giving the raspberry. According to this WSJ article yesterday, 75% of the folks in German are fed up with more bailouts.
A poll for national German broadcaster ZDF earlier this month shows three-quarters of Germans are against the expanded European rescue fund.
How can this happen? Politicians are doing what the voters don’t want. It can only mean that new politicians are coming and the bailouts will be curtailed.
Keep in mind that the expanded EFSF is still woefully inadequate to address the debt problem in the EU. There has to be a much bigger effort. In my view, anything less than Euro $2 Trillion is not going to work. A big bazooka is required, a popgun is being offered.
This brings us to the speculation this week about a Euro SPV. There was the “Leisman Plan” (I wanna puke) and the EURECA Plan. These are confusing to most people. Let me make it easy. What is being proposed are Euro Bonds in disguise. This is just financial engineering to cosmetically create a joint and several EU debt obligation.
This won’t work. The ratings agencies and investors will see through this. If something silly like this is going to come I would anticipate that Moody’s and S&P will downgrade both France and Germany within weeks. Everything that is being offered is just a half-assed effort to deal with a very big problem.
The conclusion for me is that the Euro has to continue to suffer on the crosses as a result.
I see the dollar as the backbone for the markets in general. In a “perfect” world an orderly depreciation of the dollar (5% a year) is a “good thing”. It supports US inflation (that makes debt look smaller). A weak dollar is beneficial for tourism, and encourages foreigners to buy real assets like real estate. It gives US manufacturers of big-ticket items (planes/construction equipment) a pricing advantage. It also provides a big boost to translated earnings for the S&P multinationals.
The very worst thing that could happen to the US economy in the 4th quarter is that the dollar gains 10% against the Euro. That looks like what is coming to me. Don’t buy the dips, sell the rallies.
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BLATANT BREACHES
On the subject of the EU and the banks, an interesting speech by Hans Hoogervorst, Chair of the International Accounting Standards Board (IASB). He spoke at an investors conference in Boston (PDF) yesterday. I wasn’t there. He was quoted as saying:
European banks carried out "blatant breaches" of IFRS in valuing their holdings of Greek debt.
Mr. Hoogervorst’s comments were consistent with his letter (PDF) to the European Securities and Markets Authority. Some tidbits from that letter:
There have been indications in the market that some European companies are applying the accounting requirements for fair value measurement and impairment losses in a way that seems to differ from the objective of IAS 39 Financial Instruments: Recognition and Measurement.
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This is evident particularly in their accounting for distressed sovereign debt, including Greek government bonds.
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The bottom line from the chair of the International Standards Board is that the European banks are fudging their books. This is not the Blogs making this assertion. It’s coming from the highest authority that exists.
This conflict can’t be ignored much longer. It’s possible that the EU banks will try to wash this over one more time in their third quarter statements. I think it will be damn near impossible for them to issue annual reports for 2011 without full disclose. In other words, don’t load up on the EU banks just yet…
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Bruce Krasting you are one prolific moofoo and agree or disagree time reading your posts is time well spent.
Ass Logan, no one cares what you think, assuming you can think, which might be a leap.
Only 2 of the 17 Euro countries had a referendum asking whether the people actually wanted to join. That's because they knew what the answer would be
Yep, and in the UK the Labour Party said they would hold a referendum on whether to sign the Lisbon Treaty, which gave increased powers to the European Parliament.
The Prime Shithead Gordon Brown said "fuck the voters, I'll do whatever I want" and signed up anyway. Twat.
Don’t buy the dips, sell the rallies.
STFR... Bitchez!
" Politicians are doing what the voters don’t want. It can only mean that new politicians are coming and the bailouts will be curtailed."
It could mean that the bailouts will continue and the people are free to elect whomever is offered to them. Pretty much the situation in the USA.
Yup, the 'new' politicians will promise to repeal the funding. Then, once they're elected, and the time comes to deliver on their promises, they'll regretfully inform us their hands are tied.
The picture refers to Mubarak...game over for him....fitting for Greece as well.
I just hope that Europeans will deal with it 100% on their own, without lining up in front of the Fed window with their hands stretched out.
The Europeans would love to deal with it on their own.
The US government won't let them.
If Greek goes boom, so does at least one major US financial institution.
Too late for that.
- Ned
The IMF bond story indicates to me that the US is going to be on the hook here as well, even if it's kept "off balance sheet".
Bruce,
The Bundestag voted in favor of a TARP increase by 80 billion to support (GERMAN) banks in the future. Nothing else.
Now why do you think would Merkel risk all her political capital and pushing for this if it was only a pre-emptive measure?
She had alot riding on this and she did get it passed. Good for her. I'm not in support of anymore TARP action for banks BUT in this case, I will accept that the expansion will help first and foremost GERMAN banks in the coming weeks and months WHEN (not IF) Greece defaults.
Do you or anyone else here really think that Germans will a) support the Greek or any other Non-German national and their socialism and b) step in to support any Non-German banks? Unless there is counter risk to Germany, they'd be foolish to do so.
Europhoria has its bounds. This is not a charity event!
W.
Merkel will -- in a few week's time -- now be rewarded with a loss of Germany's shiny AAA rating.
That's cute... You don't think there's any counter risk from any of the non-German banks. So basically you're saying its fine if Germany bails out all of Europe as IT'S ALL COUNTER PARTY RISK TO GERMANY!!!
I'm saying that in the likely event of a Greek default or other credit and liquidity squeeze the German banks can access TARP provided by the German taxpayers.
Exactly to prevent a watershed moment when a non-German bank implodes over sovereign default.
The counter party risk fyi is probably more so with American banks which is why American politics is getting more and more concerned about the events in Europe.
To each their own. Every man for himself... words and mutual assurances mean nothing unless they're contractual... and even then. Which law will be applied in front of which court and which jurisdiction. It's all on the table - again.
Merkel is: (pick one)
A. An Idiot
B. Incompetent
C. Corrupted by the Banks
D. All the Above
More choices!
E. A Clone
F. Android
/sarc
You forgot C½!
Merkel is: (pick one)
A. An Idiot
B. Incompetent
C. Corrupted by the Banks
C½. One of the Lizard People.
D. All the Above
C1/2 is completely out. no way would any of them voluntarily shape shift into THAT.
Thanks Bruce,
This is the biggest long wave credit cycle in the history of mankind getting ready to / starting to implode.
There aren't more than a handful of banks or governments that are close to solvency in the entire world.
The really scary thing is IMHO the unwind is just getting started.
The FED has nothing left, all their usual policy "fixes" have failed.
When people start talking about the FED I start hering the Darius Rucker song line, "I got nothing".
Late October will be interesting. The "Geithner Plan" is supposed to be completed by the G20 Summit in the first week of November. When it becomes clear to the markets that Germany really does mean NEIN !! when it comes to a leveraged EFSF or any other EuroBond scam, the markets are going to throw a major fit, led by Italian banks and bonds. The unions will strike and riot when the next next next austeriry program is announced.
Get some popcorn and watch the pretty lights in the eastern sky.
You know, Bruce, you are a phony son of a bitch: What about your article "You Can't Blame Bernake"? No comment, bud? What is up with your shit?
Guy, the moment you log onto a site with the hosts known as Tyler Durdens you should realize that it is all part of the social programming. Call it controlled dissent, balkanization, or whatever. You get a mix of 4:1 reality to bullshit, which isn´t to bad considering...
Everyone who is for a weak dollar and thinks kicking the can down the road is a good thing like the living-dead economy of Japan, raise your hands. Now please move to Japan so we can get on with our collapse.
Last week Hakim Bey and his writings on Ontological Anarchy were quoted on this site. After reviewing the aesthetics of the western world from Surrealism to the present, I had to concede to my daughter that we are over here sucking on the tit of gloom.
Thanks Tyler Durdens for doing your part.
Atch Logan wrote:
Atch Logan, where are your writings that explain to us where Bruce is wrong? Unless you have something constructive to add, please keep your thoughts to yourself. Thanks.
I just checked. I have 620 articles in less than three years. I have said some smart things and some dumb things too.
I don't recall the article you refer to. I'm not questioning you. I just need to jog my memory.
Could you post the link?
bk
The link is below (thank you). I tried to make the point that Bernanke was contributing to inflation. I WAS RIGHT!!!
CPI is north of 3%. We have achieved stagflation.
hahahaha! yeah, right! prices are plunging and should the EU implode GOOD LUCK! The real issue is going to be the "Greecification" of planet earth as entire nations are looted to try and keep the financial insane asylum from instantaneously collapsing. my advice: get out while you can. Those who threw Ms. Whitney under the bus were WAY premature.
http://oilprice.com/Metals/Commodities/Can-We-Blame-Bernanke-for-the-Rise-in-Food-and-Commodity-Prices.html
This is the only thing I could find in which you may have partially deflected some of the blame on Bernanke's monetary policy. It seems like you were just trying to be even handed about it. I didn't really see anything indefensible here. I think it's just a fellow that's looking to project his anger about something completely unrelated to your writing.
just the messenger here
http://www.zerohedge.com/article/wsj-ben#comment-932580
Can We Blame Bernanke for the Rise in Food and Commodity Prices?BK is a ZH treasure
BK provides a boatload of useful articles, 9/10 are worth the read. Thanks Bruce.
Maybe. But not necessarily anytime very soon. I could mention Ireland, but there's no need when I can just point to the US, where in the wake of the highly unpopular TARP most voters remain hypnotised by the kabuki dance of the two major parties.
As the US discovered, 'new' isn't necessarily better, or even competent.
Still, the "new" Perry has my interest. His "I'll fire Bernanke" is intriguing but not enough. [Has Ron Paul made any such commitment?] If Perry would only go a little bit further and commit to disbanding the Fed, I'd gamble on him.
daily bread
You now if he did that, I would go along also(because Ron has no chance of getting elected).
If he splits off,goes Independent , he will guarantee us Obama for the last POTUS of these United States.(he will have become Perot II)
That said, the scary part is it is as scary, if not more so, to think that OUR CONGRESS would take over the power of our monetary system again.
Talk about scroomed(as Tyler says).................GOD in heaven have mercy!
i believe i heard from a reliable source that MY MAN Ron Paul would actually stick the Washington Monument up Bernanke's ass if he was elected. (as a side note, don't any of you fucking dimwit dumb fucking trolls show your stupidity AGAIN, and come back and ask for an url to this information), thanks
If you were to go back in history and take every president, you'll find that the numerical value of each letter in their name was equally divisible into the year in which they were elected. By my calculations, our next president has to be named Yellnick McWawa.
He's got my vote.
Ron Paul will abolish the Federal Reserve.
That's a lot more than what Perry will do with the next monkey in line to push the "PRINT" button.
Notice, thank Goodness, when the shit is all over the fan, nothing from the great Obama and staff. Monday could really be a rip. I hope there are not a lot of longs on this board.
Obama's last statement which came last night I believe is that America is getting soft.
Personal income dropped again
Savings rates are dropping as more and more people are living off of them
Goods-producing payrolls dropped again
Personal income receipts on assets dropped again
More and more people on welfare
More and more people working below their skillsets
More and more people depleting food banks faster
Yeah, we're just so soft.
The savings rate decline has some obvious and some not so obvious components.
Fewer people working and making less, prices of necessities rising---obvious.
Less obvious are:
Bank disintermediation: why bother to keep money in the bank if interest is zero and there are fees for every transaction?
Physical PM buying.
More barter in the economy as people try to limit the tax burden by hiding transactions.
Zero interest. David Stockman estimated this costs savers $400 billion per year, which is money neither saved nor spent. Of course the other side of ZIRP is high Wall Street bonuses, so that "good news" might negate this factor slightly.
Interesting how some of the PIIGS tried last year (and obviously failed) to stop the "underground economy":
http://globaleconomicanalysis.blogspot.com/2010/02/greece-outlaws-cash-transactions-above.html
http://www.zerohedge.com/article/italy-banning-cash-transactions-over-%E2%82%AC5000-latest-european-austerity-package-revealed
Expect similar provisions in the US as the recession deepens and the politicians begin to panic...
Epic fucking legion of unemployed hungry good God fearing Americans getting really pissed with this downright criminal shit going on. People might not know why and how, but they Know "Is" Firsthand.
Would recommend Shirer's Berlin Diary and/or Rise and Fall of the Third Reich for a tidge of perspective. No, that's not a political statement. No bitching, pissing or moaning. Nothing to be inferred. Just some interesting parallels.
Shhhhhhhhhhh
Quiet on the tee box.
Looks like Timmay was giving out 'a-countin' advice to these guys on his Eurojunket...
It's childish nonsense to think that a German government rules Germany. It's got nothing to do with the German government or the German people. The government of the world is a financial government. The power of money and of money alone.
Oswald Mosely works wherever you go.
http://www.youtube.com/watch?v=3NqG2lAojNQ
Mark to Fantasy has been working pretty well in the USA s far. Why not Europe???
I personaly think I should be able to take out a $100 million loan against my house. It may be pure fantasy but hey if corporations can do it.
I personaly think I should be able to take out a $100 million loan against my house. It may be pure fantasy but hey if corporations can do it.
If you find a counterparty to take that bet....
They could simply suspend IAS 39, as they did with the US equivalent FASB 157....
Frankly, the entire global banking system is insolvent, the only thing keeping it alive is dishonesty...
In case anyone is wondering what the graffiti says, it's in Arabic and says "Mubarak" (game over) "The People of Egypt."
Yes, I speak Arabic... but do you speak Greek?
-DYSG