Europe's Collapse Of Confidence In One Chart

Tyler Durden's picture


Those who were transfixed by whether Cypriots would rumble and unleash their anger at the €300/day dispensing ATMs formerly known as bank branches this morning, may have missed what probably was the most important monthly chart coming out of Europe - that showing aggregate money (M3) growth and, far more importantly, loan creation. Those who did pay attention will know that in February M3 grew quite obediently in a Eurozone flush with cash, this time by a respectable €15 billion, or 3.1% y/y, after €37 billion in January (of which, however a whopping €47 billion was M1 so the balance actually declined). Of course, this was the easy part: creating money via various central bank conduits has never been the issue: the concern has always been getting that money into private consumer hands through loan creation.

And it is here that things just keep on getting worse by the day. Because in a continent in which there is no confidence whatsoever: no confidence in the banks, no confidence in the financial system, no confidence in end demand, no confidence in any reported data, no confidence that one's deposits won't be confiscated tomorrow, and last but not least no confidence that a sovereign nation won't just hand over its sovereignty to the Troika tomorrow, nobody is willing to take on additional loans and obligations. This can be seen in the dramatic divergence between European money creation (blue line), and the bank lending to the private sector (brown), which is at or near an all time record year over year low. So much for restoring confidence in Europe.

SocGen explains this deplorable divergence:

Loans to the private non-bank sector (adjusted for securitizations and sales) increased by a modest €6bn (after €-10bn in January). The yoy rate prints a tick up at -0.4%, but remains in negative territory. On the details, signs of a credit crunch for corporates in the peripheral countries are materializing. Loans to non-financial corporations (NFC) dropped by €9bn (-2.6% yoy) for the whole euro area but figures show strong heterogeneity within the euro area. In Spain, the outstanding value of loans to NFCs fell by 18.5%! Certainly, financing conditions for banks in southern European remain challenging, despite market improvements and this continues to point to tighter lending standards. However, there is little incentive to borrow in the current environment given the lack of confidence in future growth.

So where is said "credit crunch" the worst? Where else, but Spain, Greece and Portugal of course: the three countries that give the word "depression" a bad name.

Of course, one can now add Cyprus to the list: the country is about to see what trading away complete economic depression, sovereignty and even the smallest hope for an Icelandic recovery in order to remain a pawn in the hands of the EURocrats truly means.

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Thu, 03/28/2013 - 10:22 | 3385230 TeamDepends
TeamDepends's picture

We propose a new chart:  The Nausea Index

Thu, 03/28/2013 - 10:40 | 3385306 redpill
redpill's picture

Why, are you feeling QEasy?

Thu, 03/28/2013 - 11:13 | 3385412 TeamDepends
TeamDepends's picture

Yeah, we just ZIRPed.

Thu, 03/28/2013 - 11:19 | 3385430 Manthong
Manthong's picture

At least I am confident that Obamba has my back…

cheeks.. firmly in his grasp.

Thu, 03/28/2013 - 16:27 | 3386639 mkhs
mkhs's picture

It's your own damn fault dressed that way.

Thu, 03/28/2013 - 10:22 | 3385232 mayhem_korner
mayhem_korner's picture



Yes, but what are the projected roster changes for Real Madrid????

Thu, 03/28/2013 - 10:22 | 3385234 Hohum
Hohum's picture

Sure, but it's great for asset prices!

Thu, 03/28/2013 - 10:31 | 3385269 reload
reload's picture

Perhaps you are being sarcastic - but if not your comment is absurd.

Why? because if the private sector does not participate in the purchase of assets, then price inflation in those assets is merely a fiat blown bubble - which will end in the time honoured fashion.

So we have rising nominal `asset` prices, low and falling demand for credit, minimal monetary velocity........join the dots for yourself. 

Thu, 03/28/2013 - 10:46 | 3385327 Offthebeach
Offthebeach's picture

The Eureeple( Europeans+sheeple) are really fuking up in not getting with the program. The elite create debts, and the serf cram it down their own throats( oh, and smile why you gag. It makes the debt fisting easier on the bankster work proles. )

I don't know. The EU/ECB is going to have to resort to ....harsher measures.

Thu, 03/28/2013 - 10:52 | 3385355 ArkansasAngie
ArkansasAngie's picture

Is it time to start our own little ole bank that doesn't have any bad debts? 

Thu, 03/28/2013 - 10:23 | 3385237 Cacete de Ouro
Cacete de Ouro's picture

Fuck the Troika and the horse they rode in on!

Thu, 03/28/2013 - 10:25 | 3385238 LawsofPhysics
LawsofPhysics's picture

The earth is falling into a liquidity trap.  printing money to pay the "elite" interest, but the money is not getting to those who produce something  of real value.  The financialization of everything.  Remind me, what does the financial sector actually produce of real value again?  All I see are financial "products" of mass destruction.  The capital and resource mis-allocation and malinvestment continues...

Thu, 03/28/2013 - 10:29 | 3385260 Fuh Querada
Fuh Querada's picture

Good point. The "products" sorta look like the guy who emerged from the toxic waste tank in the finale of "Robocop".

Thu, 03/28/2013 - 10:32 | 3385278 HelluvaEngineer
HelluvaEngineer's picture

They produce glorious ETFs.  All the ETFs you can imagine, and triple-levered inverse variants of those!

Thu, 03/28/2013 - 10:49 | 3385338 Crash Overide
Crash Overide's picture

I am going to file this under the "what the fuck did you think was going to happen" when you let psychopaths, hustlers, junkies, politicians, bankers, criminals, algos gone wild, and all out greedy fucks run the global financial system? Burn it all down...  


Please and thank you.

Thu, 03/28/2013 - 11:49 | 3385555 donsluck
donsluck's picture

Hey hey hey! Why did you hafta go and throw junkies in there?!

Thu, 03/28/2013 - 11:17 | 3385421 eclectic syncretist
eclectic syncretist's picture

The central banks are predatory lenders (to nations) that provided the business model for Countrywide Financial. 

Thu, 03/28/2013 - 11:26 | 3385458 glenlloyd
glenlloyd's picture

the demise of the non-productive elements of this 'economy' can take a very long time, especially when they have their hands in the back pocket of the political system. they also will not go down without a huge fight.

it is not however just the non-productive organizations that have their hands in the public coffers, it's also some pseudo-production companies (aka GM) that also have had their demise postponed by political fiat.

the road to ruin can be long, tiresome and very expensive. the cleansing that could have come quickly has now been pushed back further and further into the future by those who want to believe they know precisely what is best. problem I see is that in the end we're the ones who pay for it.

Thu, 03/28/2013 - 11:34 | 3385501 LawsofPhysics
LawsofPhysics's picture

One of the first signs of major supply lines cracking (which is always the final straw in your scenario) is people doing business with physical cash or barter under the table.  Greece has been this way for some time, now cryprus.  Look around, I see a lot more of this going on around me.  What have the transport companies been looking like again?

Thu, 03/28/2013 - 12:08 | 3385610 Handful of Dust
Handful of Dust's picture

I'm waiting to grab sum of those AAA+ rehypothecated derivatives of subprime rental properties Wall Street is about to issue...better then Cypriot Bonds I hear.


It's hard to find that AAA+ stuff anymore.

Thu, 03/28/2013 - 19:42 | 3387213 StychoKiller
StychoKiller's picture

So, you gonna snort it or mainline it?

Thu, 03/28/2013 - 10:25 | 3385243 spastic_colon
spastic_colon's picture

Alcoa reports next week

Thu, 03/28/2013 - 10:43 | 3385315 madcows
madcows's picture

One of the Alcoa kids lives near me.  He has his own private castle.  For real.  A fucking midievel castle with his own lake to play in.

Thu, 03/28/2013 - 10:53 | 3385356 adr
adr's picture

If it is in Pittsburgh the castle was probably made for the CMU Spring Carnival by one of the fraternities. A lot of wealthy people buy them after the carnival to make a donation to the frat. A tax writeoff and a giant playhouse built to code for your kid.

Last year one kid got a replica of Sponge Bob's house. Three stories tall, complete with Patrick's rock.

You really want to get one made by the ASA or ISA. The Asians and Indians pretty much make up the entirety of the engineering program. The last thing you want is your kid playing in something made by a group of women majoring in humanities.

Thu, 03/28/2013 - 10:26 | 3385247 ejmoosa
ejmoosa's picture

Suppose they selected the country least likely to fight back to set the tone for the future?


Let's call it conditioning.

Thu, 03/28/2013 - 10:36 | 3385293 toady
toady's picture

Done (Greece) and done (Cyprus).

Thu, 03/28/2013 - 10:53 | 3385358 Crash Overide
Crash Overide's picture

"Let's call it conditioning."


More and more it's looking like a test run... I mean at this point what else is it?

Thu, 03/28/2013 - 10:26 | 3385249 Stoploss
Stoploss's picture

Same thing here, no none wants any debt.

One would think after five years, the PhD's could figure that out.


So, Print SoMoar!!!

Thu, 03/28/2013 - 10:28 | 3385258 NoWayJose
NoWayJose's picture

I have a lot of confidence in the EU - in fact, I'm confident that they are doing everything they can to shoot themselves in the foot and cause the EU to break apart even faster than expected...

Thu, 03/28/2013 - 10:31 | 3385272 toady
toady's picture

Debt is money. No new loans, no money going back to the fed/loan sharks.

Maybe the financialization of everything wasn't a good idea.

Thu, 03/28/2013 - 10:42 | 3385307 madcows
madcows's picture

Well, it certainly worked out well for the bankers, who've absconded with ginormous bonuses, and yachts, and lamborghini's, and jewelry, and precious artwork. 

They left the rest of us depositors with the full faith and credit part.  Nothing like faith and credit to live off of.

Thu, 03/28/2013 - 14:09 | 3386036 tenpanhandle
tenpanhandle's picture

Not unlike what the Nazi did in WW2.

Thu, 03/28/2013 - 10:31 | 3385275 Josephine29
Josephine29's picture

There have been other numbers released today showing how bad things are in Portugal.

Retail Sales are in a bad way


Month after month after month has seen the numbers for retail sales disappoint and they have contributed to the heavy fall in her domestic consumption which has been the major driving force in her economic contraction. Sadly today’s numbers continue this theme.


"The retail trade turnover index (seasonally adjusted and at constant prices) registered a year-on-year change rate of -5.1% in February 2013 (-4.2% in January)."


This series has now plunged to an underlying index of 75.6 (the lowest so far for thsi period) and if we compare to the base year of 2005 (where the average was 100) we see that February of that year registered 84.3. So again a substantial contraction over the eight years of this series of 10% on a like for like basis.

No doubt some Eurocrat or Portuguese official will pop up to tell us that this is all on track...

Thu, 03/28/2013 - 10:32 | 3385279 francis_sawyer
francis_sawyer's picture

CON + FIDENCE: Would that mean something like "trusting" a "con"?

Thu, 03/28/2013 - 10:34 | 3385287 AynRandFan
AynRandFan's picture

Imagine the EZ as other members of a team-building exercise, and Cyprus as the one who falls back expecting to be caught.  "Oops.  Well, who's next?  Spain, you're up!"

Thu, 03/28/2013 - 10:36 | 3385292 madcows
madcows's picture

Creation of debt through loans is not economic growth.  Who would want to take out a loan knowing that their country is in the first stages of a depression?

Of Course, why not just take out as big a loan as possible, and then have a "boat accident". 

Lastly, I have no doubt that the banking mafia will be coming to America as well.  I'm trying to hide as best I can figure out.

Thu, 03/28/2013 - 10:37 | 3385296 Kaiser Sousa
Kaiser Sousa's picture

" no confidence in the banks, no confidence in the financial system, no confidence in end demand, no confidence in any reported data, no confidence that one's deposits won't be confiscated tomorrow..."

and the fucking phony paper price of the only 2 forms of real money retreat and trade sideways day after day, after day?????

naw, i dont think so.....


more Silver for me today under $30 per long suckers!!!!!

Thu, 03/28/2013 - 10:38 | 3385300 nonclaim
nonclaim's picture

"... nobody is willing to take on additional loans and obligations."

Why not go out with a bang? Take the loan and get a new corporate jet.

Thu, 03/28/2013 - 10:39 | 3385302 ebworthen
ebworthen's picture

All time high on the S&P!

OMFG!  The recovery is here!

Does this mean I have a job and can afford insurance premiums!?!?

No!  But I don't care!  It's all so good!  More commercials!  More food!  More stawks!

Bad news is good news!  We can do it - we just need to steal some more deposits and go into more debt!

I can make money by putting a $1 bill under my pillow!  When I wake up it's $100 bill!  Just from BELIEVING!

Thu, 03/28/2013 - 10:49 | 3385339 Oldwood
Oldwood's picture

You're finally getting with the program! Just go with whatever is on your screen and everything will be fine.

Thu, 03/28/2013 - 10:42 | 3385311 Temporalist
Temporalist's picture

If you are disraught please call the helpline.  We are there to help.

Helpline set up for distraught Ryan Gosling fans

A 24-hour helpline has been set up for fans upset by news that Ryan Gosling is taking a break from acting.

Thu, 03/28/2013 - 10:47 | 3385332 Edward Fiatski
Edward Fiatski's picture

If we can't party now, we shall party in April!! :)

Thu, 03/28/2013 - 10:54 | 3385361 Oldwood
Oldwood's picture

This is THE confidence racket. Is you in or is you out? One foot in and one foot out is what will get you murdered. I know, cause that's where I'm standing right now! A deer in the headlights.

Thu, 03/28/2013 - 11:03 | 3385385 holdbuysell
holdbuysell's picture

One can only hope this is the result of people finally starting to repudiate money that's debt by design.

Thu, 03/28/2013 - 11:19 | 3385432 toady
toady's picture

I keep hoping so... but the system is too pervasive. You WILL get a loan, one way or another. If you won't participate willingly they will get you when your car is wrecked. 20k minimum for a sub compact piece of shit? 50k for a truck strong enough to actually do some work? You could buy a house for that when the gold standard was still in place!

And God help you if you get sick. Even if you have insurance you'll be forced to get loans against your soul to pay the man!

Thu, 03/28/2013 - 11:19 | 3385434 adr
adr's picture

We need to start putting out economic statistics graded on a curve. We throw out everything bought by the 1% and see what's left.

When a bankster buys a limited edition Lambo Aventador, he creates the same level of economic activity on paper as 50 people buying a Civic. If the billionaires buy $1 million supercars and $50 million yachts every year, GDP looks great on paper. Nobody even needs to buy a Civic or a tiny fishing boat.

That is the point of the stock market. The billionaire can't generate wealth by productive means. It must be granted to him through shares of corporations that endlessly increase in value. Having 100k shares go to $100 and then split to 200k shares at $50, which becomes 200k shares at $100 within three months. He sells 100k shares to buy the new Lambo and is left with the same equity value as three months ago, but also has a new lambo. The stock market increasing created a massive level of economic activity at the dollar vaue with very little productivity needed.

When the stock market falls, there is actually an increase in the productive economy. Essential goods and services become more valuable. It is the market for disposable goods and consumer flourishes that declines. Because the majority of stock market value is based on this disposable garbage, it continues to decline and take the unearned wealth of the elites with it. My private business of creating useful products neededfor the production of goods had its best years during the finanical collapse. If a business wanted to stay open, they must sell products people actually need. There just isn't enough profit from that compared to ever increasing shares to build billionaire fortunes.

Because the elites can not create wealth by productive means, they must find a way to rebuild it through fraud. Enter Bernanke.

Now that productive products are no longer needed, and retailers can channel stuff ther way to all time stock market highs, and all time CEO wealth as well. My company's products are no longer being bought by buyers, even with masive consumer demand. Sure the consumer still wants them, but my retail space has been taken by the channel stuffed public vendors so the next quarter for them can look better. The CEO of the retailer probably owns a couple million shares of them. An EPS beat could make him a million dollars wealthier in fifteen seconds.

Thu, 03/28/2013 - 11:40 | 3385517 Debugas
Debugas's picture

Key point - no confidence in end demand

Thu, 03/28/2013 - 15:18 | 3386239 socalbeach
socalbeach's picture

I'm a little confused about the following statements in this article,

1) in February M3 grew quite obediently in a Eurozone flush with cash, this time by a respectable €15 billion, or 3.1% y/y, after €37 billion in January (of which, however a whopping €47 billion was M1 so the balance actually declined).

2) creating money via various central bank conduits has never been the issue: the concern has always been getting that money into private consumer hands through loan creation.

But according to Modern Money Mechanics, page 2,

"only the cash and balances held by the nonbank public are counted in the money supply."

So M1 has risen by "a whopping €47 billion", and that doesn't include money held by banks, therefore either consumers, non-bank businesses, or governments must be holding the extra money. And since M1 grew more than M3, and the governments in Europe are broke, it seems probable that the consumer has seen an increase in money balances.

Could European M1 and M3 be defined differently than in the US?


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