The Battle Begins

Tyler Durden's picture

Submitted by Mark J. Grant, author of Out of the Box,

If the leaks from the European Parliament are to be believed then the lines are being drawn in the sand for quite a fight. The rumor is that Mr. Draghi is going to propose a plan to buy short sovereign debt (0-3 years) without limit if a nation fills out the requisite form and officially asks for aid with conditionality. The rumor further states that this short term-buying, which involves lending money directly to various governments and not just buying bonds in the secondary market, does not violate the mandate of the ECB which specifically forbids the ECB from doing exactly what he may be proposing. I find his argument spurious as defined by maturity and it will be quite interesting to see what reaction Germany and her allies may have to this scheme. The dog fight will begin later today as he releases his actual plan to the various central banks in Europe. The constant speculation will end and the reactions of the various governments will be front and center upon the world’s stage.
“He thinks it’s not a violation of the treaty and you can do it under the current legal framework,” said Gauzes, a French Christian Democrat. “He said for example three years is ok, 15 years no.”
I find this once again proof that the rules and regulations in Europe, the very stipulations that we rely upon, can be changed, modified or distorted with the blink of an eye and the wave of a hand. It seems that nothing is set in concrete, nothing is firm and that everything is moveable upon a moment’s notice. I find Mr. Draghi’s argument ridiculous, if the report is to be believed, and one fraught with fiscal danger as it would probably mean that all new sovereign financing would be within the timeframe that he sets and so the amount of upfront debt, which would constantly have to be rolled, would present a series of dangers including the inability to finance it as it comes due along with a balance sheet at the ECB that could swell well past the $4 trillion mark where it is now or 45% larger than the current balance sheet at the Fed. The world does not receive funding from alien worlds and there are consequences that append from having a ledger that expands without boundaries and where the slightest imperfection pricks the balloon and the whole bloated piece of plastic twizzles off into the air with frightening results and a dreadful sound.
If this rumor is at all accurate and Mr. Draghi is going to redefine the European treaty under his own terms then we may expect quite a reaction from various countries including Germany, Austria, the Netherlands and Finland. One supposes that they think the ECB should follow the rules and not make them and the Parliaments of various countries may not be too happy with the ECB overruling their political decisions for the good of Greece, Spain, Italy, Portugal and whomever might show up next. Personally I think it is going to get quite tense, as in backs up, teeth bared and the possibility of someone or another refusing to fund if this is going to be the scheme. The flashpoint may also be conditionality as the EU may have to agree first and then refuse to agree when it comes down to it which would be the can kicking play if this particular case. It is both Greece and likely Spain that will demand money and more money and there is only so much capital available regardless of what is sometimes touted in the Press where it seems that cash flows in daily from the next solar system and that no one is accountable for it.
When Mr. Draghi releases his grand plan to the other European central banks, likely after the close of the markets on the Continent today; the head banging will begin. I have called it the Battle of Frankfurt because it will be just that with the majority of nations, the countries that are troubled and need assistance, squared off with the minority of nations, those with the capital, in what I believe will be a demonstration of Mortal Combat. I think it will be that serious, that bone shattering and that the stakes are as high as they have even been in one of these contests because the divergence in needs and desires is strained to the limit. We could well see all kinds of erratic blows and then counter-blows and serious consequences as the positions harden and as the demands for capital increase.
The fourth and last Armada left Spain in 1598 sailing to rendezvous with the French. Greece, Italy and Portugal have joined the fight. Light the beacons along the shore. The fleet is approaching.

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CDSMonkey's picture

The battle began a long time ago, and the day 2 ECB members both mentioned "transmission" you knew their lawyers had found a loophole.

GetZeeGold's picture



Never take a lawyer to a gun fight.....totally useless.


BadKiTTy's picture

Actually, i think a lawyer in a gunfight would be a good thing...... get them to stand in front of you....! 



GetZeeGold's picture



Yes.....but it only works once.


gojam's picture

God save your majesty!

I thank you, good people—there shall be no money; all shall eat
and drink on my score, and I will apparel them all in one livery,
that they may agree like brothers, and worship me their lord.

The first thing we do, let's kill all the lawyers.

Nay, that I mean to do.

Henry The Sixth, Part 2 Act 4, scene 2,

old naughty's picture

"Never take a lawyer to a gunfight..."


"If you want to shoot, shoot, don't talk!"

                 ~ The Good, the Bad, and the Ugly.

BadKiTTy's picture

Ah... true.. but good news..... there are LOADs of lawyers! 


maxmad's picture

At this rate gold will be 5000 before the little fatty tries to come down my chimney!

MillionDollarBoner_'s picture

Gold is now a mere ten Euros from its all time high of Euros 1,357.57/oz, set almost one year ago to the day!

Hooja think is gonna win that battle !;O)

slaughterer's picture

There will be no battle, but the final form of the bond buying plan will disappoint somewhat.   The ECB will drop rates to .50% to appease this disappointment.  Merkel/Schaueble/Asmussen are all, more or less, in Draghi's pocket at this point.  The money-grubbing, beggar periphery outnumbers the core and they will win a battle here.     

paulie's picture

Come on Mario, print little plumber, print !

nmewn's picture

Rules?...laws?...its what we say it is TODAY!!!

As for tomorrow, I'll let you know.

NewWorldOrange's picture

" It seems that nothing is set in concrete, nothing is firm and that everything is moveable upon a moment’s notice."

Hence the rationale that went into my entry in the Draghi the Duck contest yesterday, "A Fiat Lacks Absolute Conditions - AFLAC!"

Not to beat a dead duck or anything.

nmewn's picture

Clearly, a bunch of quacks ;-)

Hugh_Jorgan's picture

"It seems that nothing is set in concrete, nothing is firm and that everything is moveable upon a moment’s notice."

Welcome to the illustrious world of centrally planned governance, unbridled propaganda, and public sophistry - our future awaits. It's a brave new world you know.... Yea!!! I'm so excited.

Daedalus's picture

I would expect that any question of LEGALITY under an EU Treaty would be decided by the European Court of Justice (ECJ) which, under EU Treaties, ranks superior to any national court (Question: Does this include ranking senior to the German constitutional court?).

I am unaware of any instance where the ECJ has rules in opposition to the will of the dominant pro-European forces (i.e. the European Commission (EC), France, etc.) and where such ruling has BEEN ENFORCED.

Hence it is, in my mind, more or less inconceivable that any legal means to prevent the ECB acting in a manner in the interests of the EC would every be effective or enforceable.

Who cares about what a treaty or a law says, when you control the court?


Ckierst1's picture

We're having a special on "emanations from the penumbra" today!  Maybe we should jerk that lawyer out of the above gunfight long enough to get an opinion???

AnAnonymous's picture

'Americans' make it feel like it was still 1777.

236 years after 1776, everyone knows that 'Americanism' is all about a selective application of law.

'Americans' would like to get the idea through that more evidences of this are required, to give them another free pass.

Was pretty clear from the start when 'Americans' declared property and liberty unalienable human rights, kept slaves and triggered the vastest land transfer (theft) ever performed.

'Americans' have proven their determination in a selective application of laws: they are the best at that. No new evidences required.

shovelhead's picture

Quit crying about Indians.

Stone age meets steel contest. They had a nice run, but they lost ground.

Do you think the Iroquois gave two shits about invading the Huron's territory, killing the men and taking the women and children as slaves?

 Life's not 'fair' in the migration game, it never was. End of story.

How's that Tibet thing working for you? Still being 'liberated'?

Hugh_Jorgan's picture

That is because the Constitution and Declaration were aspirational documents, a bar to strive toward. They were never a statement of what "is". Get real.

The problem is the we let Mankind administer the American system. There is no difference between the evil that reneged on the treaties with the indians or the Nazis, or the people turning a blind eye toward atrocities today. Politicians are looking out for one person, everyone else is expenable especially of they can make the case for "the greater good" or demonize something that is currently popular to dislike.

At least America has it's foundation in something real and sustainable, we need only follow it. I would much rather have that than a Utopian list of rights and items that the government must provide to me, the air-breathing citizen, (like the rest of the world).

chinaboy's picture

The fact that ECB is comfortable only with short term bonds highlighy the weakness: its a short time measure only.

youngman's picture

They will print..they will fudge the "rules"...hell remember when deficit spending was suposed to be below 3%...France broke that in the first they will print..and now all the countries will just issue 3 year bonds...trillions will be bought....and the question is how much inflation that will bring..3%....8%....30%.....that is the investment question...

BadKiTTy's picture

Endless bloody schemes to 'save' us all.  I thought Gordon Brown "saved the world" ages ago..... oh, and the €1T big bazooka bail out fund which would put an end to market speculation and uncertainty.... and LTRO 1 and LTRO 2, Greece bail out 1,2 and 3 and .....n. ZIRP, bank re-caps, and and and. Stress test 1 and 2 which showed ALL Euro banks only needed a total of €3b of capital..... just before the safest went tits. 

Thank God we have CDS's in kazillions to offset the risk (sarc in case it isnt obvious).

I keep thinking I cant take any more of this ...... and then I realise there is WAY more of this to take.  

An the Political/keptocratic elite sing on..... "bend over.... we are not done yet"

end of rant


SheepDog-One's picture

They'll have no one left to screw over anymore, real soon....then what do the parasites do?

shovelhead's picture

Cannibalism is already on the menu.

max2205's picture

The form is multiple choice

A. We are fucked and need help
B. we've been fucked for many years and need help
C. Even our idiot population knows we are fucked now, please help
D. All the above

There you go...

LawsofPhysics's picture

Fills out the requisite paperwork?!?!?!  WTF?  Are the Vogons running europe now?  Stay away from the poetry readings.

Zwelgje's picture

If the Vogons would have had any say in this they'd have blasted this planet away a long time ago. After the requisite paperwork.

spanish inquisition's picture

Looks Draghi picked up a few tricks watching the RNC at the convention.

mendigo's picture

The only way to win this game is to not play.

NewWorldOrange's picture

In a related story, the NFL Commissioner has requested a rule change that would allow the favored team, if it initially loses a game to a field goal, to retroactively move the the goal posts.

monoloco's picture

Exactly Mendigo, I can't wait to see what the "conditionalities" are. It's all part of the plan to shift any assets that these countries have left to the criminal bankers. Instead, they should follow the Icelandic model.

Deo vindice's picture

It takes two to play the game - both lenders and borrowers. If one side feels they can change the rules, then so ought the other.

Just wait until this news fastens itself in the consciences of borrowers all over the world.

eigenvalue's picture

If Germany is outvoted this time on the Governing Council and Draghi steamrollers the bond purchase programme, will there be any German retaliation? 

mendigo's picture

It is a mistake to think that Germany is going to stand in the way of whatever is necessary to preseve the union in which they are central and from which thier banks and economy have benefitted greatly. Pay no attention to what they say. They are only creating a diversion until they are ready to reveal their true interests - prepare to be amazed.

eigenvalue's picture

I don't get it. What I have seen is that the PIIGS are blackmailing Germany. I don't see Germany is central. Besides, do you think Germany has greatly benefitted from this currency union? I doubt it. I don't believe the PIIGS can repay the TARGET-2 balances through exporting to Germany. What Germany gets from exporting to the PIIGS is simply worthless IOUs. 

Terp's picture

Show me one average German who has profited from the currency union in a way that would rectify throwing the equivalent of 3 annual budgets into the abyss.


Many are in for a very rude awakening, including Merkel and Schäuble.

Dr. Engali's picture

We have found long ago that the rules and regulations can and will be broken on a whim. The rules only apply to us proles.

NewWorldOrange's picture

To paraphrase former Peruvian President Oscar R. Benavides:

"For my friends, anything. For the proles, rules."

chubbar's picture

The world has an order of magnitude more fiat cash in existence than it did just a few decades ago. So I'm trying to get my head around this idea of finite cash that has to be "available" from some heretofore secret vault that we are just now in danger of fully tapping. The cash/Capital/money that isn't in existence now is going to come from the same fucking place that all the money came from that wasn't in existence 20 years ago, just a hell of a lot faster.

"It is both Greece and likely Spain that will demand money and more money and there is only so much capital available regardless of what is sometimes touted in the Press where it seems that cash flows in daily from the next solar system and that no one is accountable for it."

terex's picture

bla bla, yes we know, print or no print..., but we all know what is right and what will happen r two different tings. Tell me instead when the bubble bursts, when solvency matters over liquidity again, and when it's time to go back to earth 

eddiebe's picture

In this fight, I believe inflation will win: They will print.

JustPrintMoreDuh's picture

consequences schmonsequences ... as long as were all rich.

youngman's picture

"will demand money and more money and there is only so much capital available"

This is the problem....we think there is a limit..but they can print..and print...trillions...they so much easier than telling millions of people you do not have a job or a pension anymore...inflation can be blamed on Bush.....or some other boogieman..our problem is if you have a better pick the right savings....or it will devalue rapidly.... 

Downtoolong's picture

once again proves that the rules and regulations in Europe, the very stipulations that we rely upon, can be changed, modified or distorted with the blink of an eye and the wave of a hand.


Think of the trading margins, fees, and commissions that will be generated for the banking industry from the churn of this program. They love this craziness, unpredictability, and noise. The only thing I’ve been certain of all along it that the solutions chosen will be the ones that generate the highest revenue and profit for the banking industry itself. We all know that’s where all the ideas are coming from anyway. We all know that's really all that matters to them in the end.


Think about how much easier it is for them to steer the industry in this direction.  When your private sector customers and clients won’t do your bidding anymore, screw em. Just persuade their governments to act for them instead.



falak pema's picture

The rift is deep and the Oligarchy is divided. 

One question comes to mind, its about employment; if we stay in the global competitive model paradigm that the President of federation of German Industries just blasted Hollande about; finger pointing towards him as harbinger of industrial interventionism in France, now the lynchpin country of the Euro construct.

"If the Euro zone bond spikes hit France after Spain and Italy, its game over  for EUro"... is what he said.

And the industrial divide between Germany, which promotes open markets, and France, which promotes more "fortress Europe", is the bone of contention in the intra european debate.

Beyond the current financial crisis the President of the German Industrial federation points to the productivity divide between Germany and France, icons of the north south paradigm rift.

Draghi is promoting sleight of hand monetary "ST eurobonding" to save the southern economies (and the northern banks).

But beyond that is the fundemental question : will this generate growth and employment to pay back the debt?

"Yes by infrastructure investment Euro wide and more euro labour protection" says France. Pure Keynesian logic of the central bank kind, prevalent in debt tsunami first world.

"Not so" says the German private sector boss, as says Mutti also. "We need to stay hyper competitive and cut back on government spending not on productive investment"; aka no infrastructure projects! 

This is what will make or break the Euro conflict basically. If there is no agreement on european model the whole talk of saving the common currency becomes meaningless! 

Lets get back to economic fundamentals! And it don't look good for the common Euro !

Can the mercantile German model be made compatible with the service sector "nationalistic and self sufficient" model that France wants to encourage? 

Ze BIG KESTION of the coming years in all first world economies! 

L'industrie allemande critique la politique économique de la France



Bicycle Repairman's picture

The treaty is a "living" document that needs constant reinterpretation.  The world has changed in the 20 or so years since it was written.  The treaty was written by a bunch of white Euro-centric guys whose great-great-great-great-grandfathers probably owned slaves.  In the end it's just a goddamned piece of paper.  What's the big deal if lots and lots of new paper is issued?  It's just paper.

Now where's my PHD?

Poule Mouillee's picture

Remember, "There is no spoon".

asteroids's picture

He can change the political rules all he wants. What he CAN'T change is the mathematics of sprialling debt. It WILL catch up with him some day.