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A Change To ESM Seniority Status Is Not Coming
In a world desperate for any positive news, today's borderline idiotic rumor du jour, of course after Monti's gambit blew up in his face literally in minutes, comes from Germany where interested parties leaked that Germany is considering changing the seniority status of the ESM, obviously to ameloirate subordination concerns of Spanish and soon, Italian, bonds. To wit, the headline machine has focused on this part of the recent Reuters report: "A leading ally of German Chancellor Merkel told a closed-door meeting of her conservatives on Tuesday that euro zone governments were discussing removing the preferred creditor status of the bloc's new permanent rescue fund, sources told Reuters." What is very conveniently missed out is what actually matters: "Neither Merkel nor Finance Minister Wolfgang Schaeuble spoke out in favour of such a move at the meeting, the sources said, leaving it unclear whether the idea had the firm backing of the German government." And whatever Merkel (and Schauble, of course), wants Merkel (and Schauble, of course) gets. Because both of them realize that investing €500 billion of what will in the end be purely German cash as more and more countries move from ESM guarantors to ESM recipients, in addition to the hundreds of billions in sunk TARGET2 costs, amount to a number increasingly roughly the same size as German GDP, as we explained last July. Also, as we explained last July, lots of angry Germans are getting angrier by the day.
So... next rumor?
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I disagree with this groupthink assessment. Merkel is not Frau Nein. Hollande is Monsieur Non.
The problem is not Merkel, but Hollande. Merkel wants the EU to have more control over sovereign budgets and banks (before she agrees to a banking union and fiscal compact), but Hollande refuses to give up any France sovereignty to Brussels or Frankfurt (ECB).
If Hollande (France) cracks, we could have an "unexpected" changing the seniority status of the ESM or a banking union announcement this Friday, just to name a few possibilities.
fuk that (in french)
I think that would be "niqué que"
It won't be long before Frau Merkel will be forced to ask herself, "What would Kitler do?"
Meh, what's a few angry Germans when the fate of Western Civilization is at stake?
They must sever great food at these confabs.
How else would anyone with a dollop of sense be able to attend these Ground Hog Day festivities?
But then again, the qualifier was "sense"
My sister makes 3 cents a day on the internet selling 2nd hand turds.
Sincerely
Phyliss
Psssst...
Hey, there may be a job opening in Italy pretty soon.
They could use some people who generate positive cash flow....
If Hollande cedes French soveriegnty in any way to Germany(in whatever disguise)
the guillotine will be wheeled out of the museum, and quickly be given him as the
test dummy.
The French will not give away what they lost three wars over.
Never.
Will increased German budgetary control solve unsustainable trade imbalances or sate peoples demand for free lunch? Or is the point to increase the centralization of power and profits. How would you invest in it. It seems exclusionary in its design.
No soup for you
...
"What is very conveniently missed out is what actually matters:......"
Silly Tyler. In the land of economic OZ it only matters if we/they agree that it matters..........until (of course) it really matters.
Nothings matters actually. The iceberg has already been struck and now the frantic rearrangement of the deck chairs fiasco in is full progress.
Actually I can deny the "reality" of the sinking ship right up to the point where my shoes get wet. Such is the fascinating magic of the self deceived human mind.
Nothing matter out of Europe for the next 3 days. Wall street is paid a fee of 1% to 3% of assets under management. they have 3 days to maximize their take home pay for the end of Q2. It is very expensive to have a Hamptons home so the market ramp up will be in full swing by tomorrow if it has not started already.
I advise Merkle to stay away from Schaeuble. The man has been shot at plenty already.
Nein!
Nein!
Nein!
Germans take themselves too seriously. They have come up on the top again, but as we all know too painfully well, nothing stays up forever (if you know what I mean).
Don't you take it seriously when other people ask you to sign a legal contract to share their own (still currently increasing every minute) debt in exchange for nothing?
Of course I do. It's more complicated than that, though.
May be' german people will be' happier when one Volkswagen will cost only 300.000 US dollars, and one Ferrari only 100.000.
If those prices are then discovered by free markets, so be it.
We have a buyer, well for trhis reason german people should think what will happen to' their economy if euro will break up.
Preferred, subordinated, whatever, who cares, none of the debt will ever be paid off. They're just trying to keep the ponzi going a bit longer.
One morning everybody will wake up realizing it's a huge fucking joke, head for the exits, and that'll be the end of the Euro ponzi. Sovereign bond market collapses and every bank in the EU collapses.
next rumor? monti was seen with his hand up merkels skirt only to find that she has bigger balls the him, he was seen leaving the building in tears! it is now confirmed hollande wears womens underwear as he has an account with victorias secret, when confronted,he simply replied,"they are not womens underwear, they are mine."
Bloomberg News, Jun 26, 2012:
"Angela Merkel was quoted as telling a meeting of one of the parties in her coalition on Tuesday that Europe would not have shared total debt liability “as long as I live.”"
If Germany gives up her sovereignty to a banking union and fiscal compact, then the banks lose their economic control; if you don’t have a strong Germany, the bankers will be cut into pieces. The competitors come in. The reason the eurozone has had some success so far is the strength of the German economy. If you water down Germany’s progress and strength then you decrease the importance of the eurozone and its ability as a marketing region to compete with America and Asia. Can you imagine a vibrant eurozone without a vibrant Germany?
The same can be said of America; as America grows tremendously weaker under banker socialism, her marketing leverage is dropping. What the bankers fail to realize in their quest for world socialism, IMO, is that a blood-sucking banker leech is only as strong as its host. When you look back on America’s production progress and invention, you can see what socialism has done to it. As socialism occupies more and more of the American economy, the progress of the economy slows tremendously.
You know what the non-producers do? They don’t produce.
Tarp was 5% of yank GDP and population went nuts. So now Germany is going to end up on the hook to the rest of the EU for 100% of their GDP.....yeah that is going to work.
What this author mentions in passing is the precise mechanism which traps Germany in the end game. Imagine a two sided ledger with countries on the left side currently able to contribute to financial solutions and guarantee mechanisms that keep the Euro togther (creditors, essentially). On the right are countries whose banking system and/or government need and are receiving help (debtors essentially).
As Spain moves from creditor to debtor country, followed by Italy, followed by France.......the problem grows irreversably more acute. The ability of formerly solvent and liquid countries to help Germany deal with each new spiral down of the crisis evaporates. Worse these countries are added to the growing list that need help. Whether Germany wants this process to happen or not it has functionally zero control over it and as every effort to stop the spiral down has a shorter and shorter beneficial half life the real decision point is coming.
Germany is either in all the way down until it is the primary guarantor of more debt than their GDP in which case they cave in and the printing presses roll to monetize the debt problem. Or, seeing the inevitable coming toward them they say "nein" and leave the Euro which precipitates a disastrous collapse of the Euro consumer market they covet but spares Germany the worst of it compared to others.
There is no middle scenario in this process that does anything more than slow things down momentarily. And, when financial whirlpools build momentum the inflection point.......when the poopers hit the fan........approaches ever faster.
I'm betting the printing presses roll. The alternative, a general collapse of the European banking system, would trigger an avalanche of CDS and other derivatives. So many would be triggered so quickly that the netting out process would be delayed. And, its almost certain that some of the counterparties are in no position to cover their obligations (think AIG by a factor of 5). In the daisy chain of derivative "protection" all it takes is one broken link and puts against coverage yield bupkis.
And it is through the derivative mechanism that the US Banking sytem is pulled into the maelstron. It has very little direct exposure to Europe by comparison. Europe is, collectively, little brother to the Fed and US Banking system and in times of crisis the Fed can push it around. The Fed will be the primary driver behind the ECB decision to print, ironically with promises that the swap window will be less effected than the percentage increase on Euro m supply would dictate. And, if they follow through on that then the problem begins to creep into our banking system from another angle but the can is kicked down the road some, again, for us.
I would agree with your "roll the presses" conclusion except for the "Spares Germany the worst compared with others" part. I think the "spares the worst" argument is powerful because it enables Germany to think that by crashing the whole system but remaining relatively solvent they will be able to own the continent in 5-10 years by brokering deals for extending credit to buy German exports.
This is an accurate portrayal of the first step in a two-step process. First, the system collapses until politicians give in more and more to the bankers and the inevitability of printing. But it’s important to remember the second phase of this process: the rise of the European middle class which demands a return on its work toward an improved life and an improved future. This rising demand first will push for greater sovereignty and the elimination of a single currency if that is going to mean a social and political structure favoring, by this time, the complete discreditation of central planning and the debt mongers who stand between the people and their future.
America will be following the same path to recognizing its enemies, the banking cartel, and the solution, pushing the banking cartel under.
JR, I wish that were so, I really do. And, it is possible. I think just if not more likely is the populace, middle class, basically everyone in lower income brackets, abandoning hope in the solutions offered by center right and center left parties. The center right has already been destroyed in the US. The Republican party of the New England aristocracy which was moderate centrist has been overtaken and totally reshaped by progressively more radical elements of the christian right and ultra conserative Koch brothers and the like. The democratic center/left is dead in the water due to relative fund raising limitations. The Supreme Court just ruled by the way that unions have to have member/non member consent to do political donations (opt in vs. opt out). No mention of shareholder consent appeared in the Citizens United ruling that will pollute the body politic with corporate money for decades. The double standard that keeps on giving.
No, my view is that the radical elements, mainly from the right will offer what appear to be much more effective solutions and alternatives to the center and left when the real financial crisis hits. This is precisely the mechanism that handed power historically to the National Socialist Party in Germany (Nazi's). They were marginal nothings in 1928 and then the leading party in 1933. The misinformed Fox viewing oddballs who somehow think there is an alignment between true left wing politics and Nazi politics are beyond misinformed. Since watching Fox does little to accurately inform them about current affairs let alone historical ones it bear underscoring that the Nazi party made a famous but relatively hidden accommodation with the capital class (yes minus the Jews, but all the rest) as they came to power.
And, I think here too, the radical right will likely continue to gain political ascendency over the next 4-6 years, grossly accelerated if a real financial apocalypse happens. Proximity to the Canadian border and a place to go there will become the most important asset when that happens.
She is such a tease. Total loyality and pre nup agreement required before mr midnite can approach. Typical german.