The Buyers Have Left The House

Tyler Durden's picture

Via Mark J. Grant, Author of Out of the Box,


“We are on strike against the morality of cannibals.”
                                               -Ayn Rand
Slowly, surely the largest investors in the world are no longer buying the debt of Europe. Recently the Chinese sovereign wealth fund, China Investment Corp., said that they were done and would no longer be buying European debt. The institutional readers of “Out of the Box” number somewhat more than 5,000 money managers and I can report that one after another they are either seriously pairing back on their holdings or exiting Europe. The risks are just too great and the way Europe does business is also having a serious effect. You see, Europe does not count any contingent liabilities, sovereign guaranteed debt, derivatives, bank guaranteed debt, regional guaranteed debt or promises to pay for various entities as part of their calculation for their debt to GDP ratios. The CEO, CFO and the Board of Directors of an American corporation would go to jail for Fraud for operating in this manner but this is the devised scheme in Europe. This is also why it sets my teeth on edge each and every time I see some country brandishing their debt to GDP ratio in the press; it is just factually inaccurate or to be more succinct---it is a lie.
Let us consider what is happening with Bankia in Spain. The Spanish government’s bank fund has $7.40 billion left in its coffers according to the government. Bankia will require about $23 billion in recapitalization. Spain is floating the idea of guaranteeing Bankia’s debt so that Bankia can then pledge it to the ECB and get cash and since it is a guarantee and not a direct issuance of sovereign debt then Spain is waving the banner, and proudly, that it will not affect their debt to GDP ratio. There is a certain kind of madness about all of this and it is taking place in Spain, Portugal, Ireland, Italy, Greece, Belgium et al. What can clearly be said then is that the numbers we are given, the data that is flouted day in and day out as accurate is nothing short of a con game built on a Ponzi scheme that rests on the back of a financial system that has been purposefully designed to distort the truth.
Regardless of your opinion about all of this there are consequences to this type of manipulation that are in the process of becoming realized. Eventually, when hopes and prayers give way to reality, losses are taken and I submit that we are just at the beginning, just at the start, of seeing realized losses begin to hit balance sheets. A case in point would be Credit Agricole who reported that they had suffered a $3.4 billion loss because of their exposure to Greece, eliminated their dividend and watched the price of their stock sink to an all-time low which is down 72% on the year. Then with the new European bank scheme where regulators, not the judicial system, will decide just who will get what in the case of any bank impairment you can be sure, 100% positive, that the regulators will decide for the benefit of the State and the investor can go hang. While it is certainly true that many European institutions are coerced, forced may be more accurate, to buy the sovereign debt of their country or other European countries the sugar rush from the LTRO is waning while the rest of the non-coerced world is fleeing from European sovereign and bank debt like Floridians from a hurricane.  To be sure markets have been gamed before but this is one bubble that will make the American financial crisis or the debacle seem insignificant in size when the moment comes that it is pushed past the point of redemption. The European nations and banks have performed a neat new trick, nailing themselves to the Cross, and it is now only for Pontius Pilate to pick up the spear and begin.
“He who created us without our help will not save us without our consent.”

                                -St. Augustine

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jekyll island's picture

Well, investing in Europe is like taking dog shit and mixing it into a sandwich.  There is still some good stuff in there,  it's just hard to figure out where to take a bite.  

Ethics Gradient's picture

You have a stonger stomach than me, my friend.

Colombian Gringo's picture

Much stronger. Even the good parts will be contaminated by the crap.

El Oregonian's picture

Not any different than what Micky D's puts out. Lots of ground brown...

midtowng's picture

China can't have stopped buying. I was told that they were going to bail out the rest of the world.

GetZeeGold's picture



Where did all the zombies go?


battle axe's picture

A new kind of debt, Stealth Debt. It is there but it is invisible.... Awesome.

smb12321's picture

No, it's virtual debt to go along with virtual food, virtual energy and virtual money. 

Zero Debt's picture

Feasting on government regulators, courts, legislative and executive branches

francis_sawyer's picture

They took their talents to South Beach...

falak pema's picture

who cares ! As long as super mario is there! He will priiiiiint!

guiriduro's picture

Either we're going to have to default on everything soon, or inflate it all way soon... there is no other option (euro break-up is another possibility but that comes under a 'mix of the previous two'.)

Personally, I prefer default as that punishes those who have malinvested first, whereas inflation punishes everyone.  There is a third-way, and it is the one we're on at the moment - denial, austerity, death by a thousand cuts etc.  The fools think its 'fake it till you make it', that in some glorious future we'll have discovered free electricity or somesuch (in europe) meanwhile faking everything until the golden goose starts laying again.  Unfortunately, everyone can see the bureaucrats are fucking it while they fake it and will only make it worse.

kridkrid's picture

Your third way isn't really a way... more of a charade.  Austerity means paying the ever increasing interest burden while cutting services to do so.  Debt will continue to increase, not decrease... that's what austerity really is... regardless of how it's presented.  If austerity was something else... it would create cascading defaults... basically collapse... which is what I would like to see.  Of course, collapse in inevitable, no matter the path they choose... it's only a matter of timing.

Spastica Rex's picture

And the timing will be dragged out as long as it possibly can. Potemkin villages everywhere.

Vince Clortho's picture

"... or inflate it all way soon ..."

What could possibly go wrong?

youngman's picture

"Aurelio Izquierdo, will be entitled to €14 million in pension and termination benefits"..........seems to be working for the insiders really is an "US vs Them" now....those in control of the printing presses will make sure they are taken care of at the expense of the rest of us on the outside...

firstdivision's picture

Short the open, buy the close = profit to buy more supplies for my Zombie Apocalypse Kit.

Quintus's picture

"You see, Europe does not count any contingent liabilities, sovereign guaranteed debt, derivatives, bank guaranteed debt, regional guaranteed debt or promises to pay for various entities as part of their calculation for their debt to GDP ratios."


I'm in no way standing up for the Euro-clowns, but everything you say here applies equally to the US government.

It seems a little inaccurate to characterise this as a strictly European deceit when it is, in fact, pretty much universal.

Unless, perhaps, you really, honestly, hand-on-heart believe that $15.7 trillion is the full extent of the debt, guarantees, commitments and promises for which the US government is liable?

tuttisaluti's picture

I think zerohedge is to much focused on the EU and not enough on the US. They try to brainwash us.

valley chick's picture

do you always read the last chapter first?

kridkrid's picture

Ha!!!  Yes... zerohedge is designed to brainwash us... it never exposes that obscene fraud that is the US economy, US economic data, the corporatist control of our political institutions, the joke that is our regulatory system, etc. etc. etc.  Please.

GCT's picture

Krid I disagree with your statement.  Many times ZH has posts all about the USA.  Right now though the EU is just uglier and Greece is once again to the fore front of the debates.  Actually I see it as smoke and mirrors for Spain's financial problems.  I think if asked you would find most commenters here would agree the USA is not any better off and if you read the replies most state that here at ZH.

I commented on the private investments months ago when the ECB changed the rules of the game subordinating all other debt to them by making a last minute switch of bonds.  That was/is a game changer to investors.  This happened with GM in  the USA.  But not on the scale that soverign countries trying to peddle their bonds. 

AUD's picture

Still bashing Europe while ignoring the biggest deadbeats of all.

You balls deep in US Treasuries Mark? Or is it Gilts? Drinking buddies with Nigel Farage & Niall Ferguson?

SheepDog-One's picture

Right, just makes me laugh how the U.S. now apparently has no debt and no corruption? Whats this line about 'If the US behaved in this manner Europe does they'd be in jail'? Oh give me a break....either this guy is nieve or he's pullin woll over someones eyes. When does the spotlight get swung around back on U.S. 103% debt/GDP...after 'election season'? Just bullshit.

Lucius Cornelius Sulla's picture

I think the point is that the Spanish government claims a Debt/GDP ratio of about 60% which is just plane BS.  The US claims are more in-line with reality and do not include entitlement liabiliities.  Just a tad bit more truthiness.

nmewn's picture

Clearly, we need those great arbiters of truthiness (the Chi-Coms) to step in and sort this all out ;-)

FEDbuster's picture

Giant game of Liars Poker.

dbomb12's picture

When I read, "does not count any contingent liabilities, sovereign guaranteed debt, derivatives, bank guaranteed debt, regional guaranteed debt or promises to pay for various entities as part of their calculation for their debt to GDP ratios" I did not see the difference between the U.S.S.A and Europe. And have yet to see any CEO,s CFO,s,COO,s CMO,s or CVO,s go to jail for any misleading actions leading to fraud and decieving investors out of millions  

Boilermaker's picture

And the ES is up, up, and away.

Bizarre.  It's that 'invisible hand' thingy again, I guess.

SheepDog-One's picture

I dont know who they think they'll sell to higher...maybe the throngs of FaceBook IPO 'new millionaires'? Total delusion now rules the world.

Boilermaker's picture

They aren't thinking about that, at this juncture.  Only continuing the momentum.

ThirdWorldDude's picture

 The CEO, CFO and the Board of Directors of an American corporation would go to jail for Fraud for operating in this manner but this is the devised scheme in Europe...



Hahahaahahha, [wiping tears] thanks for the laugh Mark!

LawsofPhysics's picture

Exactly what I was thinking.  Who is this fucking financial shill?  Name one big CEO or CFO who has gone to jail since 2008.  Where is John Corzine?  Fuck the paper-pushers, all of them, in every fucking country.  They add no real value to the system anyway and do nothing but steal wealth from the productive through the socialization of their losses and gambling debts.  The collapse can't come soon enough for those of us who know the real value of our labor.  Bring it!

GetZeeGold's picture



Where is John Corzine?


In France.....and he would prefer you spelled his first name correctly so you can put it on your protest this...




Oh wait.....he is.


blindfaith's picture



Tha DOJ has been thinking about it.  But it is so expensive to prosecuteand how does one know who knows who knows who knows who and gets pissed off and terminates you sweet government job.  It is just easier to look busy.



GetZeeGold's picture



Tha DOJ has been thinking about it.


Heh heh......GOOD ONE!


BeetleBailey's picture

Jon "The Motherfucker" Corzine will never see a jail cell.

Simple reason?

He has dirt (read: stinky shit) on a plethora of fellow bankstas and political slime.

If he goes, so go a bunch of fellow Motherfuckers.

The list of slime is stacked so high you need a crane...

Charlie Rangle

Mark Foley

Anthony Weinie....I could go on and on and ON.

The ONLY politicians that get ka-boshed are the real assholes, that all the other political slime hates - and, they were caught really, 100% red-handed (Dan the mail box man Rostenkowski, Blago (who everyone hated), et. al. - easy targets.

The DOJ and the Feds pick the low hanging fruit. Anything tough? They take a pass and cover it up.

tarsubil's picture

No, no, no. It's the bad guy's fault. I'm as pure as the driven snow.

SheepDog-One's picture

The need for constant 'investment' is insane, Europe is already full of TRILLIONS of Euro's...they cant just grow crops and make and export chese and wine and other products and get along just fine? 

The ONLY trouble here is the .001% billionaires and trillionaries not able to increase their massive wealth exponentialy any longer.

Haddock's picture

Its just demographics - there is no return to be made with an ageing population to be catered for.

De minimus's picture

Perhaps you should consider the "investments" as instruments of conversion and then consider the targets of your blame a bit more carefully. Consider as well the fact that you can't get truthful information from the media, anything truthful or useful, unless you use international sources and then, only bits and pieces. Something is afoot and you don't need a telescope to see it.

kridkrid's picture

Properly phrased, constant investment should really read "another round of the Ponzi scheme"... because that's all it really is.... literally.

gwar5's picture

...and when the normal buyers of sovereign debt go away, governments/banks ramp up the financial repression and confiscations of retirement accounts.


valley chick's picture

not with my retirement. ;-)

The Count's picture

Con game and ponzi scheme? Yes of course. But how many know that the int. drug cartels do their business either with tacit approval by our governments or directly by the goverments themselves? Are we not in control of Afgansistan? How come the opium/heroin trade there is at or over the pre-tabliban levels? Makes me wonder if all we really wanted is to get at those opium fields... If all drug money was withdrawn from the financial system entire nations would go under in the blink of an eye.

Seize Mars's picture

Afghanistan? Ah, Afghanistan. There's gold in them thar hills.

RESTON, Va., Sept. 15 (UPI) -- More than 1 million tons of rare earth minerals were discovered in less than 1 square mile of Helmand province in Afghanistan, the U.S. Geological Survey said.

The USGS found the rare earth elements in about one-quarter of a square mile in deposits in Helmand. A 2007 survey found an estimated 1.5 million metric tons of potential rare earth resources in southern Afghanistan.

"This is just one more piece of evidence that Afghanistan's mineral sector has a bright future," Regina Dubey, acting director of a U.S. Defense Department business and stability task force, said in a statement.

The international community gets more than 95 percent of its rare earth minerals from China. Rare earths are used in a range of products high-strength magnets to alloys for batteries.

U.S. Special Representative for Afghanistan and Pakistan Marc Grossman said Washington was ready to help back Kabul in its efforts to exploit its natural resources.

"The potential that these findings have for the future well-being of the Afghan people is significant," Grossman said.

U.S. defense officials estimated in 2010 that there could be as much as $1 trillion worth of iron, copper, cobalt, gold and lithium in Afghanistan.


Winston Churchill's picture

Not to mention the oil in Azerbyzan and Iran.

South Africa(the other major supplier) is about to meltdown,

Zimbabwe style, with the Benfaction law about to pass.

Interesting times indeed.