Number Of The Year: "Unlimited"

Tyler Durden's picture

For the first time this year, Brussels is awash with the opulent optimists of Europe as the finance ministers meet to decide how much of the EUR500bn ESM funds can be funneled direct to their banks and bypass the greedy governments. The problem, of course, as Bloomberg notes, is that with officials declaring the worst of the region’s three-year market emergency over, finance ministers are debating whether the ESM should take over earlier bank bailouts that were routed through governments and what to do with so-called legacy assets.

The issue is that the actual amount of ESM funds available for direct aid to banks may be less than 100 billion euros because the fund needs to fulfill its main mission of lending to governments that lose market access.

However, at the core is an uncomfortable reality that all is not well, one Brussels-based think-tank noted: "It’s really about signaling, the only thing that really has an impact on markets is when the word unlimited is uttered by somebody in charge, so in the end it’s not a question of how high the big number should be." The dilemma is Draghi's 'unlimited' promise, which has now been adopted by the Fed and the BoJ, has been hailed as the "breakthrough in tackling the causes of the euro-zone crises" but has instead unraveled into a combination of "complacency and political resistance" from creditor countries.

Retroactive assistance remains a political hot-potato but, as we noted yesterday, it would appear Cyprus will be garnering attention (though not yet - as they prefer to wait until after the Feb elections) as once again beggars may become choosers.

 

Via Bloomberg:

European finance ministers gathering for the first time this year begin the long march to enacting policies they promised to subdue the debt crisis, beginning with how to channel firewall funds directly to banks.

 

...

 

With officials declaring the worst of the region’s three- year market emergency over, finance ministers are debating whether the ESM should take over earlier bank bailouts that were routed through governments and what to do with so-called legacy assets. A European Union aide who briefed reporters defined those as loans already on a bank’s balance sheet that could cause problems in the future.

 

“It’s really about signaling,” said Nicolas Veron, senior economist at the Brussels-based Bruegel research group. “The only thing that really has an impact on markets is when the word unlimited is uttered by somebody in charge, so in the end it’s not a question of how high the big number should be.”

The actual amount of ESM funds available for direct aid to banks may be less than 100 billion euros because the fund needs to fulfill its main mission of lending to governments that lose market access, Veron said. Bank aid may also require additional set-asides for the ESM to maintain a high credit rating.

 

Creditor Concerns

 

Borrowing costs in bailed-out and debt-laden euro nations have plummeted since the European Central Bank pledged to commit to backing their bond markets. Spain’s 10-year yield has declined more than 200 basis points. The cost of insuring Ireland against default has dropped 84 percent since July 2011.

Creditor nations such as Germany, the Netherlands and Finland have sought to limit the ESM’s availability to nations struggling to shore up their financial sectors. Finnish Prime Minister Jyrki Katainen said last week that bank shareholders and bondholders should bear the brunt of future rescues, bringing in taxpayer money to clean up troubled financial businesses only as a last resort.

Ministers also face whether to convert past bank bailouts such as those they routed through the Spanish, Irish and Greek governments. Delays risk spooking markets, said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.
‘Political Resistance’

 

What was hailed as a breakthrough in tackling one of the principal causes of the euro-zone crisis has steadily unraveled due to a combination of complacency and political resistance on the part of creditor countries,” Spiro said by e-mail today.

 

...

 

EU leaders dangled the prospect of direct bailouts as a way to assure investors that they’d protect the euro from an onslaught of banking problems that threatened to overwhelm individual nations. Since then, they’ve relied on announcements from the ECB to keep markets calm.

 

...

 

For countries like Spain, Ireland and Cyprus, which is seeking aid and hasn’t yet reached agreement with international authorities, access to direct bank aid via the fund will be a trickier matter.

Retroactive assistance is a political question, an EU official told reporters in Brussels on Jan. 18.

...

 

(h/t aguesseau)

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nmewn's picture

"To infinity and beyond!"- Buzz Draghi

SafelyGraze's picture

on michael king day,
http://en.wikipedia.org/wiki/Michael_King_(disambiguation)
one resolves to read more scholarly works 

Tango in the Blight's picture

$19 to read an article from an old journal which was written by some guys who didn't get paid for it and whose research was funded by the tax payer!!??

Aaron Swarz was right to download the JSTOR database, that he could have ended up on the slammer for 50 years is ludicrous.

That King was a plagiarizer has been known for a long time but has been consistently been muffled under the carpet for most of that time.

Catflappo's picture

You can use it in a sentence such as:  "The upside in gold is unlimited".

evolutionx's picture
Gold Repatriation continued : Azerbaijan to Withdraw All Gold From JP Morgan Vaults

http://homment.com/DqFUhmE2i3

Dr. Engali's picture

Draghi to the Bernank...I'll see your infinity and I'll raise you an in perpetuity.

lindaamick's picture

Capitalism is built upon the concept of "unlimited".  Capitalism demands growth (profit).  Because the earth is finite, Capitalism will result in exhaustion and collapse.  It is the only outcome possible. All these machinations are but temporary solutions to stave off the inevitable. 

Any student of Aristotle can recognize the wisdom behind his teachings.  Our universe is a finite, living organism.  As such every single thing is related.  In the same manner that humans care for ALL parts of their bodies, minds and spirits, humans should care and protect all parts of our universe.  

Too bad human beings ran off track.  It will cost them extinction...sooner rather than later. 

SelfGov's picture

Wow the capital sucking sheep are going to downvote the shit out of you.

Dr. Engali's picture

You really shouldn't comment on something you don't understand. You just look silly. What we have is not, nor has it been capitalism. Capitalism does not require infinite growth, a debt based monetary fascist fiat system does.

CPL's picture

When a concept, not a number, like infinity is used there is only one modivation that reflects infinity.  That's greed.  

Capitalism as the renewable garden versus the unending hole.  We aren't even seeing capitalism or even communism right now.  It's just theft for the sake of theft with no end goal other than the complete and total destruction of any economy using the system.

 

All we can do is wait for what happens to all ponzi's eventually.  Complete and total collapse.  Until then, no sense being glum.  Make plans for when the coast is clear.  If that is next week or in ten years.  The day will eventually arrive.

dark pools of soros's picture

I dubbed it 'piñata economics'

A smash and grab mentality

CPL's picture

LOL cool...I will be borrowing that. :D

Tango in the Blight's picture

Don't worry, we will soon have the warp drive and thus we can have all the planets we need.

http://gizmodo.com/5942634/nasa-starts-development-of-real-life-star-tre...

To infinity and beyond!

 

CPL's picture

We would need the power of a sun to tear a hole in space to open a worm hole or fold space

Plus there are only about 140 running theories on worm holes with minor variations to each position with no structured laws of physics that count for anything on that scale in human terms.  We as a spieces are still trying to figure out how the sun really works.

 

Shoot for the stars of course, but most of the NASA PR is mainly fluff.  They borrow rides into space now and can't fund a gift shop.  There is no will in that organisation now.  The budget and output of the organization reflects that sad fact.

No Euros please we're British's picture

This is more to do with re-capitalizing Eire who will need another bailout by the end of 2013 unless they get a retrospective bank bailout or some other form of back door cash injection from the EU.

espirit's picture

"For countries like Spain, Ireland and Cyprus, which is seeking aid and hasn’t yet reached agreement with international authorities, access to direct bank aid via the fund will be a trickier matter."

In other words... We have no intention of paying our debts, and if forced into that corner would default on those obligations.  So, loan (hee hee wink wink) enough to make interest payments plus a little extra to keep the ponzi alive.

Wish I had that leverege.

mercenaryomics's picture

 

It's really about signaling. [...] The only thing that really has an impact on markets is when the word unlimited is uttered by somebody in charge, so in the end it’s not a question of how high the big number should be.”

 

So... If rational people think at the margin, and humans do not think at the margin, then humans are not rational. 

But I love this. So between economic fundamentals, i.e. math, and herd-psychology of mass humans, the state edifice is only concerned with managing the latter. 

Makes you wonder how bad and far gone the economies must really be for all these policy hacks to give up on their economic maths and just openly admit a reversion to misdirection of the population. 

Super Broccoli's picture

this is so desperating ! i can't see the end of the tunnel, we're just going down infinitively

slackrabbit's picture

"To infinity and beyond!" has now become

"To Unlimited and beyond!"

 

Wow what a big difference, Im glad they have unlimited money rather than just printing to infinity, that would be just stupid!


Sudden Debt's picture

European finance ministers gathering for the first time this year

yeah... the cooks took 3 weeks off... can't have a gathering without the cooks right? or was it crooks...

slackrabbit's picture

well they do cook the books...

Sudden Debt's picture

so yousay it's not because of the food... good point...

but why are they so fat if they don't eat so much?

debtor of last resort's picture

Well, physical gold supply is not unlimited i believe, dear mr. Draghi? Azerbeidzjan is repatriating it's gold from JPM vaults London.
http://www.silverdoctors.com/repatriation-avalanche-gaining-momentum-aze...

Azerbeidzjans state oil fund, repatriating the gold before the new vault is ready, why the hurry.... http://www.oilfund.az/en_US/news/814/100/State-Oil-Fund-begins-to-import...

jubber's picture

looks to me as the rate rise in German Bunds and the 10y French is having the unwanted  effect of pushing up Italian and Spanish bonds as the 10y spread between them dosen't want to tighten that much, ...could get very interesting if German rates continue to firm with everyone having piled into periphery bonds recently.......