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Chart Of The Week: European "Fear And Loathing" Hits Record $1.3 Trillion

Submitted by Tyler Durden on 10/08/2011 10:49 -0400

The topic of the European "Ice-nine"phenomenon is nothing new to regular Zero Hedge readers: every day we point out the increasing freeze in European interbank lending (in both the traditional and shadow formats), in various money markets, in commercial paper, in broad fixed income issuance, and in the overall collapse in market liquidity, so deftly masked for now by daily political and central bank rhetoric, which for all its market kneejerk reaction glory is merely unsubstantiated innuendo and lies - keep in mind that the last time the incoherent and disorganized Troika came to an actual decision was July 21, with the second Greek bailout, and even that has not yet been implemented! So while hopes still percolates faintly on the surface, the riptide just below it has grown to record proportions. Presenting the chart that everyone who has an opinion on Europe, one way or the other, has to see. Here, courtesy of Diapason's Sean Corrigan, is the epic "Fear and Loathing" in the European banking system, in all its $1.3 trillion glory, or nearly double where it was when Lehman filed for bankruptcy. Banks may say they trust each other, they may promise the system is viable, they may even submit bogus (if increasing) Libor indications to the collusive organization that is the BBA, but the truth is, in vivid color, presented below. Never before have European banks parked as much of their hard earned cash with the only two remaining pillars of "stability", the Fed and the ECB. And with Dexia about to be nationalized, and an unpredictable, and highly contagious, waterfall chain of events about to be unleashed on Europe all over again, will the worst case scenario transpire and the ECB's credibility be swept away? If so, prepare for all the money in the world to funnel into the binary number-based safety deposit box located in the servers of 33 Liberty street. Then the two ultimate questions become: how long before the Fed's own viability is questioned by the global vigilantes (who have finally started asking the right questions), and who will bail out the central bank tasked with bailing out the world?

Source: Diapason

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Sun, 10/09/2011 - 07:56 | 1754306 Cat On A Ledge

What you've described is a good old-fashioned bank run. That's why bankers huddled together to form central banks in the first place. Should Greece exit the euro, the only guaranteed outcome is capital flight. There will be a brief (fixed-rate) window where the ECB supplies as much liquidity as needed to keep greek banks (at least a select handful) in operation so as to facilitate the transition (read as: continue servicing their euro liabilities - that includes foreign/corporate deposits; the local residents can simply be forced to accept drachma conversion). Couple that with deposit insurance at failed banks, your scenario is rather unlikely. Sure the eurobanks will be paid back with overvalued drachmas, but nobody in their right mind is expecting 0 loss from this whole thing.

They are preparing for 'controlled default' because those high-minded bureaucrats finally accepted the fact that they can't transform greek culture into german culture overnight.

As for other peripheral countries, i'll venture to guess they'll heave huge sighs of relief to be finally rid of the burden that is Greece... until the next one in line gets the spotlight. Maybe as early as next year.

Sat, 10/08/2011 - 11:43 | 1752886 falak pema

the question now is what is the value of "fear and loathing" in the US economy? 25 trillion including derivative net outs?

Sat, 10/08/2011 - 12:08 | 1752948 disabledvet

Let us observe more closely then!: http://www.youtube.com/watch?feature=player_detailpage&v=G_WgS-qbUlI scary to think that may have been a true story. He was a journalist however. as they say "don't be the story." doesn't look good for the economy if we are either. If you're "made to be the story" however... What are you then? I say "story upon story upon story upon story...

Sat, 10/08/2011 - 11:48 | 1752899 spekulatn

Mr. Lewis has a new book out:

http://www.npr.org/2011/10/04/140948138/how-the-financial-crisis-created...

Tony at macro story put this up:

http://macrostory.com/2011/10/07/kyle-bass-interview/

Sat, 10/08/2011 - 12:17 | 1752962 disabledvet

A seemless transition from the Big Short to The Big (bull)Shit. What's Greece gonna repay the German bank known as Goldman Sachs in? CDS's? Hahahahahaha. Yeah right. The Germans who set this thing up through the Goldman/Saxon right from the beginning are going to eat that cooking now. And THAT AIN'T Liars Poker phucker.

Sat, 10/08/2011 - 11:50 | 1752905 Motley Fool

"I hate to say this, but this place is getting to me. I think I'm getting the Fear." :P

Sat, 10/08/2011 - 11:55 | 1752914 americanspirit

I wonder at the purpose of dragging all this out? Could the plan be that once people are completely exhausted with fear fatigue they will be unable to resist martial law? The only possible 'out' for TPTB is to completely subdue the population, confiscate all private property, shut down all forms of communication, jail or kill all those who resist, and put the remainder to work as slave laborers on government farms and factories.

Sat, 10/08/2011 - 12:19 | 1752968 disabledvet

when there is no law and there is no war what do you have left?
http://www.youtube.com/watch?v=RaaVbWD3USI&feature=player_detailpage

Sat, 10/08/2011 - 13:47 | 1753090 Wakanda

TPTB are under very strict orders to extend and pretend for another week. The timing is very, very important. After next weekend all hell breaks loose in a bunch of different areas - economic, social, political, earth changes...

The purpose of dragging this out is to match the symbolism of collapse and change with long term cycles that we are all involved with.

10 days until Black Monday II

Sat, 10/08/2011 - 14:23 | 1753149 DoChenRollingBearing

@ americanspirit and Wakanda

Green!

Well they can try their various plans out on us, but some of us are getting ready as fast as we reasonably can.

When does all hell break loose? Bearings don't know the furture.

When they come to put me to work on the Elite / TBTF / TPTB plantations? I'll will not come. I will either leave first (taking my gold with me) or vote with a bullet when they show up here.

Gold, Guns and Liberty, Bitchez!

Sat, 10/08/2011 - 14:42 | 1753188 samsara

Yes, Green. Super Green, Crystal Green

Sat, 10/08/2011 - 15:39 | 1753275 DoChenRollingBearing

Absinthe Green!

Sat, 10/08/2011 - 11:56 | 1752917 Fix It Again Timmy

We're getting to the last Matryoshka doll...

Sat, 10/08/2011 - 12:01 | 1752928 Stuck on Zero

Golong this company: http://www.inxinternational.com/us/index.aspx

Sat, 10/08/2011 - 12:05 | 1752940 Fips_OnTheSpot

And just to add oil to the fire, the Troika just reported:
"Very unhappy w/ current success, it's like two step ahead, one back -- and the really needed reforms are still not visible" (via HB http://www.handelsblatt.com/politik/international/troika-erhoeht-den-dru... )

Default, RSN.

Sat, 10/08/2011 - 12:06 | 1752945 Mattress Money

So when fiat money dies or crashes, how will you be able to know what gold is worth? Im trying use my last 10K to buys some bullion

Sat, 10/08/2011 - 12:45 | 1753003 JLee2027

Value becomes infinite against a dying currency. A good example is the German Weimar Republic where a 25 ounces of Gold could buy an entire commerical block during hyperinflation. Compare that to what 25 ounces would buy today....less than one building.

Sat, 10/08/2011 - 13:40 | 1753078 Marco

Which is partly because hyperinflation is almost certainly followed by a wave of nationalization as central planning takes over ... making the ownership of easily taxed/confiscated property shaky at best.

Sat, 10/08/2011 - 14:25 | 1753154 DoChenRollingBearing

Good point Marco. The way around that is to stay diversified. Having some Au or other assets in other safe places can help maintain your wealth and your freedom.

Central planning? Come and get it, Bitchez!

Sat, 10/08/2011 - 14:42 | 1753189 disabledvet

same could be said of The Great Depression as well. That's when prices go DOWN while gold just sits there with its happy face.

Sat, 10/08/2011 - 12:19 | 1752957 Flounder

Isnt this just because they are giving away free toasters with each $10 billion deposited? Who can match that offer?

Sat, 10/08/2011 - 13:17 | 1753049 RSloane

We know Dexia trading has been halted. We know its in very deep trouble. We know Belgium and France are going to bail it out and what that will do to their ratings. We know Greece is going to default. We know Spain and Italy are waiting in the wings for the same dance. We know the US is debt saturated. We know China's production is decreasing due to lack of global aggragate demand. We know we have regulations that will impact business in the US but we don't know in what manner because the Democrats are very proud to say they don't read the bills they pass and even Chris Dodd said he hasn't read the bill that bears his name. We know health care is coming but know one knows exactly how it will impact business in the US.

I don't see any Black Swans. All of this is known. There maybe some black, waddly event out there we don't know anything about, but so far, we know "very dark times" are upon us and no one will give an inch because fortunes, both private and political, are resting on no change and no hope. All of this is known. Act accordingly.

Sat, 10/08/2011 - 14:25 | 1753152 Stack Trace

What if the "Black Swan" is one of these "known" outcomes you mentioned not occurring?

Sat, 10/08/2011 - 14:28 | 1753166 DoChenRollingBearing

NICE comment RSloane! Green.

I see the same problems out there that you wrote so eloquently about. We all see them, know that they will hit us soon, very hard.

My guess as well is that a Black Swan (one we cannot see or predict) is the one that will kick doen the first of a BAD series of dominos...

Sat, 10/08/2011 - 14:33 | 1753175 samsara

Black Swan out of the blue, unexpecte, No one could foresee.

I predict Goldman goes bankrupt.

Sat, 10/08/2011 - 14:08 | 1753124 NRGTDR

its probably a good time to figure out how to grow your own food...

Battered by Economic Crisis, Greeks Turn to Barter Networks

http://www.nytimes.com/2011/10/02/world/europe/in-greece-barter-networks-surge.html?_r=2&pagewanted=1

Sat, 10/08/2011 - 14:08 | 1753125 NRGTDR

its probably a good time to figure out how to grow your own food...

Battered by Economic Crisis, Greeks Turn to Barter Networks

http://www.nytimes.com/2011/10/02/world/europe/in-greece-barter-networks-surge.html?_r=2&pagewanted=1

Sat, 10/08/2011 - 14:30 | 1753169 samsara

ICE NINE, Ah yes. Vonnegut

"Making the cat’s cradle was the closest I ever saw my father come to playing what anybody else would call a game. He had no use at all for tricks and games and rules that other people made up. In a scrapbook my sister Angela used to keep up, there was a clipping from Time magazine where somebody asked Father what games he played for relaxation, and he said, "

‘Why should I bother with made-up games when there are so many real ones going on?’

Sat, 10/08/2011 - 17:04 | 1753391 geekgrrl

Great book. And ice nine is a great metaphor for what is happening in banking. It's not a big stretch to imagine the case where a crisis of confidence leads to frozen markets and trade, as we saw briefly in 2008 and we're seeing in the EU now. Yes, they can say whatever they like to maintain the show, but this is one of those cases where the data speaks for itself. If they are really so confident, why are they all parking their money at the Fed or the ECB? It's all a farce, and they know it. They need a distraction of epic proportions to take attention away from the illegitimacy of massive debts that will never and can never be repaid. If some natural disaster doesn't happen soon, something will be manufactured, probably war.

Sat, 10/08/2011 - 18:18 | 1753490 samsara

"If some natural disaster doesn't happen soon, something will be manufactured, probably war."

Agreed

Sat, 10/08/2011 - 14:33 | 1753176 IMA5U

The 99% protestors will still find a way to blame europe on the united states

They should be protesting against europe right now. But europe gets a pass because europe is deemed as hip.

Sat, 10/08/2011 - 15:08 | 1753223 thunderchief

Nothing comes of default.

Argentina, Mexico, Russia, Greece, and now the whole world, ending with the USA.. Not good, but not a big deal.

But if you start wars over all this stuff then everyone is finished.

Sat, 10/08/2011 - 16:17 | 1753320 zippy_uk

As usual, not enough faith in TPTB.

In Europe, we are going to keep the bail-pretend-reshuffle-print cycle going until we have unified all the EU toxic debt and balance sheets into one great swirling debt singularity.

Although at this point it will growing exponentially, it will then get moved to Cern, where the partical accelerator based there will accelerate neutrenos several times faster than the speed of light to create an anti matter singularity. They will then both get merged and cancelled out, with the plus of a huge wave of "green energy" as a useful byproduct to power the rest of Europe for the next 10,000 years.

No problem...

Sat, 10/08/2011 - 16:48 | 1753372 ghostzapper

but, but CNBCheerleaders always seems so optimistic and happy. Pisani said everything was fine nothing to see here.

Sat, 10/08/2011 - 17:13 | 1753403 GOSPLAN HERO

Jubilee Year -- Cancel Our Debt

The solution to our debt deflation depression is debt cancellation. Debt cancellation is inevitable, but our government is determined to do it in the worst possible way: widespread bankruptcy, massive liquidation, and general inflation. Jubilee means escaping from debt and the system that keeps us enslaved.

Sat, 10/08/2011 - 17:38 | 1753435 Market Efficien...

Sure, repo markets freeze in Europe, but I would disagree with your point that the FEDs future function as global liquidity provider is a flaw to soon be attacked by vigilantes.

IMHO, it lies in the very interest of the FED to become the sole and centric controller of liquidity. The new function will not even be achieved through force but as a result of the failure of alternatives. Always a good point to defend against conspiracy theorists who claim the FEDs objective has always been hegemonial power. It would create the ultimate economic power, able to maintain or devestate the ability of every individual or entity on the planet to participate in economic exchange. And guess what, that power is not in the hands of the US government, but in the hands of those controlling the FED's constituing banks. So, the ultimate power in the hands of some faceless, hidden individuals. Scary.

Also, I would disagree that 'vigilantes' then take aim at the FED. Who would be those nationless thugs without ideology that even attack the savior of their illegitimately accumulated wealth, the FED. No, I don't think that makes much sense. The so called vigilantes pumped Europe up on credit steroids only to create a dependency on credit, then prick the bubble and gain political power from it, dictating political decision making, draining the assets out of European states and enslaving its people and their fiscal responsibilities to everlasting indeptedness. That's tactical political warfare. The so called vigilantes control the FED and it is and will be their center of power.

The BRICs and commodities will be PIGS 2.0. Same story, low interest rate policy and unimaginable credit lines by the FED to the banking cartel to kick-start the US economy, actually never reach the US economy. All that cheap money creates the next bubble in China, Brasil, Australia etc. Trough asset price inflation the banks create a vast demand for money. In such an environment, credit appears a cheap and efficient choice for the asset holders to exploit and market them. Once, the bubble bursts, the up and coming regions and assets will lose everything and will be obliged to swap their assets to repay the part of the credits. Boom, and all those soon to would be world powers are effectively controlled by the same power that is close to gaining control over Europe.

Think about it, the low interest rate policy and credit floods would from the start not have made much sense to start anything in the US. Companies had no difficultulties of funding without the overwhelming action of the FED and US citizens, wait, they lost their houses, still held part of the mortgages and three fully loaded credit cards with sickening interest rates. Well, they would sure be interested in further credit, especially if the credit card company lowered their interest rates from 20 to 18. That is bullshit and could have been demasked right from the beginning. In the current situation of US households and companies, monetary policy is dead. The only benefitting party besides the banking cartel is the US treasury department, which is probably, why they so thankfully promoted the FED's policy to the nation.

Please correct me, if I am totally running in the wrong direction, but to me it makes perfect sense.

Sat, 10/08/2011 - 20:07 | 1753637 htp

You got it. That's the plan of the oligarchs.

The risk to their plan, though, is something may go wrong in the process. If Americans weren't so divided between left and right ideologies, the OccupyWallSt movement could lead to a revolution and end the oligarchy altogether.

Alternatively, Europe and the rest of the world could wake up and find ways to defeat the plan. It may take a lot of pain for people to wake up, but eventually they will.

Sat, 10/08/2011 - 17:55 | 1753461 Dapper Dan