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Saxo Bank CEO On The 'Eurozone Minefield': "This Crisis Will Not Pass"

Tyler Durden's picture




 

Niall Ferguson recently remarked, "[Europe] is a politicial experiment gone wrong. The experiment was to see if Europeans could be forced into an even closer union - despite their wishes - by economic means, because the political means failed." In this brief clip, Lars Seier Christensen, co-CEO and co-founder of Saxo Bank, tells an audience at the Saxo #FXDebates in London that the eurozone will eventually break up as Brussels claims even more power from nation states. He warns investors that Cyprus was indeed a template for bail ins and that outright confiscatory wealth taxes, disguised as solidarity payments, could be used to raise funds. "The governments of Europe need money, and the private sector has it. It is as simple as that. Be very paranoid," he said, warning investors that the mattress may be a safer place to deposit money over the weekend than their bank accounts. "Frankly, it is a complete mess. And it is a mess that gets worse and worse every day," is how the outspoken truthiness begins, adding, "anyone with a rational view of the world now sees the currency collaboration as a historic failure that can lead to even further fatal consequences for Europe and the continent’s competitiveness vis-à-vis the rest of the world."

 

Via TradingFloor.com, Full Transcript

...let us turn to the situation in the Eurozone

 

Frankly, it is a complete mess. And it is a mess that gets worse and worse every day. Only not in Brussels. There we hear an endless litany of promises of recovery in six months time, always in six months time, we hear the Euro is safe, and that if just we all hand over more responsibility to our Masters in Brussels, everything will be just fine.

 

Nothing could be further from the truth. We have just been through the bailout of the fifth Euro zone country, and both Slovenia and Malta are queuing up to be next. When, not IF, the Troika arrive in these two countries, it will create to an absurd situation where nearly half of the Eurozone countries have been broken by their adoption of the common currency, the same EURO they joined with such high hopes for the future.

 

Now these are small countries, and can be treated as such…  just look what happened to Cyprus. I would suggest to Malta, Slovenia and other bailout candidates that they hang on for dear life until after the German election. After Cyprus, we now know what happens if you get in the way of a German leader seeking reelection.

 

What is it that is going so wrong in the Eurozone? I think we all know very well by now. The Euro is a political construct, and it simply has no sound economic or fiscal foundation. Unless that is put in place, the Euro will be doomed eventually.

 

The political capital invested in Euro is gigantic, so the will to keep it alive for absolutely as long as humanly possible, should never be underestimated. Every tool in the box - and I seriously mean EVERY single tool in the box- will be tried, before the unelected, unaccountable people in Bruxelles capitulate to reality. But doomed it is, the Euro, be in no doubt about it.

 

Actually, a lot of people knew this already when the Euro was introduced. Saxo Bank's chief economist, Steen Jakobsen, that did work related to the Delors commission back in the nineties, has often told me that the dangers playing out now, were openly discussed at the time. But the political pressure to move forward back then was relentless, and the momentum in the EU seemed so strong, that it was expected by many that the foundation could be put in place after the house was built.

 

Not so. Because during the first decade of the Euro, it became clear that the suggested benefits from the Euro never materialised. There was no strengthening of Europes clout in the world, there was no discipline among the members, there were serious issues beginning to show for the weaker countries that could not keep up with Germany when it came to competitiveness and productivity. There was no way to manage the economy without controlling your own short term interest rates. There was no way to devaluate your currency to create renewed equilibrium and ability to compete. There was no long term beneficial impact on long term interest rates, as the big winners from the Eurozone, Germany could and would not sell to their citizens that they should underwrite a common Eurobond, or make large transfer payments to the weaker countries forever.

 

And now, there is no way that the European populations are willing to move forward with the necessary further integration. Not that they get asked directly a lot,as almost all decisions are made by their parliaments or in Bruxelles behind closed doors, because no one dares to ask their populations via a referendum - they know the answer would be a resounding NO! And a NO it should rightly be, because Europe is not, and will never be, the United States. Our cultures, our economies, our populations are far too diverse to ever integrate efficiently and happily in a forced union.

 

Instead, integration is brought in via the back door, via contributions to the bailout mechanism, by corruption of the ECBs balance sheet, by the banking union that would destroy the credibility of even sound banks if fully implemented, by passing treaty changes quickly and uninformed via the parliaments, claiming that representational democracy justifies that. Well, it doesn't. A parliament that gives up national sovereignty knowing full well that their population would reject it, are committing treason, in my view.

 

But one thing is politics, another is economics, although it gets harder and harder to tell the two apart.

 

Anyone with a rational view of the world now sees the currency collaboration as a historic failure that can lead to even further fatal consequences for Europe and the continent’s competitiveness vis-à-vis the rest of the world.

 

In my view, there are a number of things that are very clear. The Eurozone will eventually break up. It could happen in a multitude of different ways.

 

The weaker countries could leave. If this process was managed in an orderly fashion, it could be done at lower costs than the current and future bailouts, and it would quickly set the exiting countries back on a recovery course.

 

Germany could leave. As the sole beneficiary of the Eurozone until now, this is not likely to happen anytime soon, but as the bills begin to pile up even higher, that may all of a sudden seems an attractive solution to the German citizens. Of course, this would mean a much higher German exchange rate, but with the pressure off for a while, it would reduce the urgency of the crisis for the remaining 16 countries, that would experience a growth boost from a significantly, but not catastrophically lower Euro rate.

 

A multi-currency zone could evolve, with countries with more similar economic conditions and objective could group together and achieve more appropriate currency levels.

 

But all of these scenarios would require rationality returning to Bruxelles. It could be certainly be achieved with less chaos and less economic mayhem than what otherwise awaits the Eurozone.

 

This could even secure attractive outcome of an EU returning to focus on a common market, reducing trade friction between the economies, and benefit from the big diversity of different competences across Europe – we have the benefit of both highly educated workforces and low cost industrial workers,  more than 500m consumers, and the benefit of competing tax and social welfare systems.

 

Again, I repeat, all of this requires rationality to return to the Eurozone.  And frankly, this does not seem to be on the cards, unfortunately.

 

If rationality does not return, what can we expect…

 

In my view, recession will continue for years, and even turn into depression. Forget about recovery in six months, it will always be six months from now.

 

Euro denominated  assets will remain unattractive, and downright dangerous, to hold for years to come.

 

Bond yields will rise substantially, in all the 17 countries as the unsustainability of the situation becomes ever clearer.

 

Bruxelles will claim ever more power, and use it ever more poorly. The financial sector will be drowned in self defeating regulation, taxes and cross border responsibility for failing banks, that will eventually destroy also the healthy banks.

 

Cyprus WAS a template. Expect not only bail ins, which if defined clearly ahead of time could be part of the solution, but also outright confiscatory wealth taxes, disguised as solidarity payments. The governments of Europe need money, and the private sector has it. It is as simple as that. Be very paranoid.

 

Expect latent surprises in the Eurozone minefield. The Cyprus chaos has ensured this. A normal private depositor that has worked hard to save up for his family, will not move his account to Switzerland or Singapore. But what will he do when his country is having a bailout over the weekend? I would say the mattress will look a safer place than his bank over that weekend. So bank runs could start instantaneously.

 

Of course, the answer to bank runs is capital restrictions. Expect a lot more of that, always introduces as short term and temporary, but very hard to remove once in place. Iceland is in its 5th year of “temporary” capital restriction – just for your reference.

 

There are a lot of things to worry and think about if you are a citizen or investor in the Eurozone.

 

...

 

This crisis will not pass.

 

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Sun, 05/12/2013 - 14:45 | 3553902 Ban KKiller
Ban KKiller's picture

Does anyone have any "money" left in Euro Banks? I mean really? Who, name names, has faith in the European model of "Democracy" and the Euro? Aren't we really talking about what Germany will do and that no other country has a word in the matter? The banks now RULE Cyprus, Ireland, Spain, Portugal...who else?

 

Sun, 05/12/2013 - 14:52 | 3553908 knukles
knukles's picture

In the true spirit of the New World Order, why limit the description to Europe alone?  Where's the Rest of the World?  Have some sympathy or else some folks will fell left out.  (Hooray)

And the guy saying this is one of the criminal thieves (banker) as opposed to a victim (JQPublic).
(Jeepers!)

Sun, 05/12/2013 - 15:05 | 3553931 Skateboarder
Skateboarder's picture

He'll talk about the mess all day, but he won't do a goddamn thing about it. Bankster scum.

Sun, 05/12/2013 - 15:51 | 3554043 markmotive
markmotive's picture

...which is why the case for gold is still strong.

But at the same time some guys are calling for gold $1100...

http://www.planbeconomics.com/2013/05/futures-trader-says-golds-going-to...

Sun, 05/12/2013 - 16:26 | 3554106 Skateboarder
Skateboarder's picture

I wouldn't place an organized attack on gold out of speculation. As paper gold eats shit day by day, the scramble for phyzz will get wilder and wilder. Who are the biggest hoarders of the shiny? Certainly not the people, outside of India and China. An orchestrated attack on bringing it down to $1100 will scare a shitload of people on the edge to give up the phyzz for fiat. At the end of the day, an ounce of gold in your hands is an ouce of gold in your hands. As the age old saying goes, "if you aint got phyzz, you aint got shit."

Sun, 05/12/2013 - 16:31 | 3554121 Non Passaran
Non Passaran's picture

As opposed to you, the brave Skateboarder, who has done wonders such as.... oh, well, maybe we can discuss that next time

Sun, 05/12/2013 - 16:38 | 3554136 Skateboarder
Skateboarder's picture

I apologize for my inability to positively shape the future of man at the global scale. I do what I can to help my friends, family, and strangers who aren't douches.

Sun, 05/12/2013 - 16:35 | 3554131 WVO Biker
WVO Biker's picture

Last time I checked their market prediction, Saxo bank was utterly wrong. And they have a rip the customer off reputation and history. Schopenhauer said character cannot change.

Sun, 05/12/2013 - 14:58 | 3553915 i-dog
i-dog's picture

 

"Who, name names, has faith in the European model of "Democracy" and the Euro?"

Citizen Ghordius, for one. He speaks of it in glowing terms...daily!

It's obviously just a simple misunderstanding on the part of Saxo - and the rest of us.

Sun, 05/12/2013 - 15:41 | 3554022 Peter Pan
Peter Pan's picture

Well Europe is faced with a Ghordius Knot but no Alexander to cut the knot at this juncture as they are all political pygmies. All that will be left at best will be the Eurovsion song contest and I am afraid that the fat lady will be the outright winner.

Sun, 05/12/2013 - 16:40 | 3554139 knukles
knukles's picture

Did you hear the French entry?  "I'm from Parie and don't give a ding a ling."

Sun, 05/12/2013 - 17:06 | 3554179 Colonel Klink
Colonel Klink's picture

Yep and the German one will be "Deutchland uber alles"!

They'd be smart to move back to the DM but that means Douche Bank and several others will go tits up!

He who panics first starts the stampede.

Wed, 05/15/2013 - 12:30 | 3565178 Ghordius
Ghordius's picture

a proper Gordian Knot is actually something that binds and can't be dissolved

in the same way as family bonds, btw

the true significance of the Gordian Knot was that you can have peace without a king - peace without tyranny and succession wars

Gordius and his son Midas are also known for introducing gold as an universal currency, which also can promote peace through commerce

Alexander the Great cheated, and the very fact that he used a sword, cut the knot and so proclaim himself King of Asia after Gordius is telling. note that his empire did not last

let the pygmies squabble, I'd say, then as long as they do they don't fight wars between brothers

Sun, 05/12/2013 - 15:01 | 3553924 Sudden Debt
Sudden Debt's picture

I got a message from my bank to pay off my morgage with my savings as much as possible.
I now also heard that my brother in law and a friend also got the same message to do the same.

Sun, 05/12/2013 - 15:12 | 3553943 Tango in the Blight
Tango in the Blight's picture

So pay up

Or get your money out of that bank ASAP

Sun, 05/12/2013 - 15:39 | 3554010 Room 101
Room 101's picture

Say what? Are you in default? 

Sun, 05/12/2013 - 15:46 | 3554034 Sudden Debt
Sudden Debt's picture

Nop. they said that it just isn't worth it to put it into saving accounts.
I don't own the bank that much anymore, about 60k on a 550k house.

Sun, 05/12/2013 - 15:40 | 3554014 debtor of last ...
debtor of last resort's picture

My mom got a message to convert a certain part of her savings into physical gold and silver. And it was not from her bank. Her house is already paid off.

Sun, 05/12/2013 - 18:57 | 3554406 GVB
GVB's picture

Which bank? grtz from BE

Mon, 05/13/2013 - 02:50 | 3555358 dunce
dunce's picture

A mortgage can be looked at as a very long term lease with a fixed monthly rent payment. The bank may not be interested in breaking the lease  as long as you keep up the payments. Cyprus has shown that they may not hesitate to take cash from your checking and savings account. You say the bank suggested it, when has the bank had your interest as part of their business plan?

Sun, 05/12/2013 - 16:30 | 3554117 Urban Redneck
Urban Redneck's picture

I think the notorious Russian mobster/oligarch Ben Bernansky has a shit ton of dirty dollars hiding in eurozone banks, but of course he'll be able make a SWIFT withdrawal and get his deposits out before the sheeple queue at ATM...

Sun, 05/12/2013 - 17:13 | 3554188 GVB
GVB's picture

I still have money in my Belgian account. Just enough to pay my bills. Nothing more. My savings are in other assets. No way I would keep my savings in the Fractional Reserve Bank system. I just use this system for currency transactions. Nothing more. Why? I don't want to wake up on a sunday morning with news covering bail-ins. You see, they'll talk about a "%" of confiscation when bail-ins are put into effect. Well, I'd rather have confiscated "%" on €5,000 than on €50,000. There you have it. GRTZ

Mon, 05/13/2013 - 03:36 | 3555383 Buck Johnson
Buck Johnson's picture

Especially after hearing Standard Chartered may have serious issues with it's loans on there books.  I think when the hammer comes down it will be quick and nasty, and it will last for at least a decade.

Sun, 05/12/2013 - 14:50 | 3553907 W T F II
W T F II's picture

It's all goin' down WAAaay sooner than this....but hey, nice presentation...!!

Sun, 05/12/2013 - 14:52 | 3553911 Hughing
Hughing's picture

Too late

Sun, 05/12/2013 - 14:59 | 3553920 knukles
knukles's picture

Butcha know what's really nice about all of this is the new emerging upper middle class employed by the gubamints.  Why, it's even happening here in America.  In the county where I live one of the employees recently bought one of the new 4 door Teslas.  $103,000 price tag. 
Nice.
Everybody can now aspire to a reasonable spot in the self perpetuating unionized over paid lavishly benefited bureaucracy

Sun, 05/12/2013 - 15:08 | 3553935 bank guy in Brussels
bank guy in Brussels's picture

Great stuff ... spot on, especially when Lars Seier Christensen says:

« ... committing treason, in my view ... »

Yeah! Quisling governments betraying their own people, letting children go hungry, to serve the euro currency - Troika - bankster - greater Germania cabal of evildoers.

Lars Seier Christensen being damn truthy here ... God bless him

Sun, 05/12/2013 - 15:25 | 3553963 debtor of last ...
debtor of last resort's picture

Indeed. From a French and a Dutch NO to a European constitution, to the Lisbon Treason. Treason indeed.

Sun, 05/12/2013 - 15:37 | 3553999 Sudden Debt
Sudden Debt's picture

The one question NO EUROPEAN CAN ANSWER:

Name 5 europe parlement representatives...
or 4...
or 3...
or 2...
heck... name one...

Sun, 05/12/2013 - 15:44 | 3554031 debtor of last ...
debtor of last resort's picture

Nigel Farage.

Sun, 05/12/2013 - 16:18 | 3554088 reload
reload's picture

And Daniel Hannan, as critical as Farage  of the EU but includes banks and fractional reserve trickery in his speeches. Good clip of him at the Oxford union on YouTube.

Sun, 05/12/2013 - 16:22 | 3554099 debtor of last ...
debtor of last resort's picture

Thanks.

Sun, 05/12/2013 - 17:17 | 3554199 Tango in the Blight
Tango in the Blight's picture

Guy Fat-arse Verhofstadt

Sun, 05/12/2013 - 22:57 | 3555036 RazvanM
RazvanM's picture

Name 5 US CONgres representatives... that you can trust ;)

Sun, 05/12/2013 - 15:09 | 3553939 Seasmoke
Seasmoke's picture

Guess they are all going to DisneyWorld Europe

Sun, 05/12/2013 - 15:21 | 3553959 debtor of last ...
debtor of last resort's picture

The best outright political investments are those hanging from lampposts.

Sun, 05/12/2013 - 15:25 | 3553967 Dr.Engineer
Dr.Engineer's picture

Finally, someone who speaks plainly and the truth!  Make him the head of the EU.

Sun, 05/12/2013 - 15:25 | 3553968 Debugas
Debugas's picture

you can not take your cash out of the bank each weekend because it costs you to widthraw above certain monthly limit

Sun, 05/12/2013 - 15:44 | 3554030 Sudden Debt
Sudden Debt's picture

nop, I can jump money for free to any account I want. hat's not the topic.

BUT

It takes 3 days to wire money to any account.
I once wired money from a bank account that was linked to my trading account. And my trading account was empty and every month, I get some costs for quotes and stuff which turnedy trading account with a negative balance.
In my bank account, I wired all the money to another account and 2 days later, the money was back into the account and My bank gave me a mail that I can't wire money with a negative trading account.
Those 3 days that you need to wire money. it goes off your account and "floats" for 3 days. hose 3 days might turn crucial when they go for the bail ins.
Nobody goes full cash.

Sun, 05/12/2013 - 15:31 | 3553982 Yen Cross
Yen Cross's picture

         Good piece, but nothing new here for the readers of Z/H. I hope Mr. Ferguson has eyes in the back of his head.

Sun, 05/12/2013 - 15:36 | 3553993 Going Loco
Going Loco's picture

Don't you mean Christensen?

Sun, 05/12/2013 - 15:50 | 3554041 Going Loco
Going Loco's picture

I see what you mean.

Interesting comments  follow the piece you have cited. It is true that there remain in Europe many people who still support the structure. In the UK not so many.

Sun, 05/12/2013 - 17:05 | 3554177 thisandthat
thisandthat's picture

 

European integration has had absolutely nothing to do with peace in Europe since World War II; that has been the achievement of NATO

Well... if you ignore NATO's Gladio TERRORIST attacks in Europe, maybe we can call it "peace"...

Sun, 05/12/2013 - 15:31 | 3553983 Going Loco
Going Loco's picture

In the UK the first cracks in the political dam have  appeared.  We (UKIP)  gave them a real fright in last week's local elections,  for the first time I think we have them on the back foot. 

Sun, 05/12/2013 - 15:58 | 3554051 Rustysilver
Rustysilver's picture

UKIP might stir things up a little bit, But, that's all.  I mean, David Cameron is having a vote to have a vote. Something about putting  or pulling a sentence out of Queens speech.

Just like Brussels.

Sun, 05/12/2013 - 16:11 | 3554077 Going Loco
Going Loco's picture

"UKIP might stir things up a little bit, But, that's all"

Wrong. We are close to giving everyone, including ourselves, a real surprise. The reception that we are getting from ordinary people at public meetings is astonishing. I have seen protest votes in the past. We are not getting protest votes. We are getting genuine grass roots support. The Conservatives say that we will split their vote, and let Labour in, and end any hope of leaving Europe. I think we stand a chance of decimating support for all the other 3 parties. I have never seen anything like this in the UK before. Of course it is a huge gamble, and it might all fizzle out, but I don't think so and the odds are beginning to look interesting.

Sun, 05/12/2013 - 15:33 | 3553987 i-dog
i-dog's picture

It seems to me that he is begging for Brussels to change tack. Good luck with that! ... they've been working to get to this position since the Pan European Union was formed [by a Jesuit] in 1922.

Sun, 05/12/2013 - 15:34 | 3553992 Peter Pan
Peter Pan's picture

And so it is in real life. You can get a whole lot of different nationalities to drink together all night but when the morning comes and the beer hall is fall of vomit and the bill is unpaid, then the laughter and high spirits are forgotten and the finger pointing begins.

The bureaucrats in Brussels know that failure will mean unemployment for them so they will not only hang on for dear life, but will also create as many knots as possible to make a Euro collapse as frightening as possible.

Sun, 05/12/2013 - 16:35 | 3554132 W T F II
W T F II's picture

Ferguson still has a job after overt "gay bashing" re Keynes..?? AMAZING...!!

Sun, 05/12/2013 - 17:54 | 3554255 dragoneyes74
dragoneyes74's picture

Yup.  Europe is sliding toward its destiny.  I got short the Euro from the wedge breakdown Thursday, and I'm gonna be very careful about it, but I'm looking to get aggressive with this.  I feel like this has potential to be THE summer trade.  And what's nice is there's an obvious line that proves it wrong.  If it retraces and clears the wedge top at 1.32 and holds I will stop it out and retry another time.  But this has a chance to be a home run, and if the dollar clears Friday's high at 83.52 and holds, it's lights out.  If that happens, it's long dollar, short Euro, looking for a good setup to short equities, got short the Yen but will be careful about a backtest, looking to get short the metals, but hoping to see silver get closer to $26 first.  If silver clears it's 20-day at 24.34 there's room for a long trade to the $26 dead zone, but that's kinda dangerous, we'll see.  I'm liking the currency trades if last week's action continues.  By far, the trade with the most room to run is shorting the Euro, and by extension that should pull down equities, but they're so irrational it has to be a pretty perfect setup.

Sun, 05/12/2013 - 19:23 | 3554462 10mm
10mm's picture

I don't think that suit fuckin fits him.Or he does not fit the fuckin suit.

Sun, 05/12/2013 - 19:57 | 3554544 MythicalFish
MythicalFish's picture

Sad that he reads it from the script rather than pound his fists on the podium. Bit like Marc Anthony reading "Friends, Romans, countrymen" off a teleprompter. SHTF is the new normal.

Mon, 05/13/2013 - 14:36 | 3557179 lasvegaspersona
lasvegaspersona's picture

or....if the dollar fails the Euro becomes the world's reserve currency. This would mean all the countries with gold would be in good shape...this would include Greece and even Cyprus.

The socialist regimes of Europe will eventually have to come to terms with promises made that cannot be kept, but that is another issue.

Oh...if the gold market fails the dollars will too. 

Keep a weather eye out for failure of the paper gold market...I am.

Tue, 05/14/2013 - 12:18 | 3560884 MeelionDollerBogus
MeelionDollerBogus's picture

 

That is not another issue. That is the issue. The picture you paint is one where the whole world is so fucked no one can imagine having their own economy or politicians. Given European colonization of the past this is impossible.

I know it's way before my time but ever hear of this "Boer War" thing? Now imagine that all around the planet all at once. Nope. Not a chance of just "happening" without total military control.

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