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The "China Bails Out Europe" Rumor Is Back

Tyler Durden's picture




 

It's been a while since the ridiculous "China bails out Europe" rumor made the scene: in fact, the last time we can find with definitive confirmation was back in September of 2011, just before the bottom fell out of Europe, and when the FT, based on "anonymous sources" tripped over itself to report that "[insert European country] is in talks with China to buy bonds, assets." Sure enough, now that Merkel came, and saw, but hardly conquered Beijing, it is the turn of China's Wen Jiabao to add his 10 pips to the EURUSD rumormill: Reuters reports: "China is prepared to buy more EU government bonds amid a worsening European debt crisis that is dragging on the world economy, Premier Wen Jiabao said, in the strongest sign of support for its biggest trading partner in months." Naturally, considering how often this rumor (re)appeared in the past it will be excusable if nobody but the dumbest vacuum tubes fall for it this time, especially considering that the Chinese economy itself is going down in flames faster than the October Iron Ore contract. And lest there be any confusion, China's commitment is about as definitive as a Best Buy LBO "preunderwritten" with a Jefferies highly confident letter: "China is willing, on condition of fully evaluating the risks, to continue to invest in the euro zone sovereign debt market, and strengthen communication and discussion with the European Union, the European Central Bank the IMF and other key countries to support the indebted euro zone countries in overcoming hardships," [Wen] said after meeting Merkel." Ah, conditional aid. The kind that gets Mario Monti to break out the petulant ex-Goldman child act and refuse to leave the Belgian catered dining room until the beggees succumb to his technocratic platitudes. Needless to say, we'll believe China's "continued" investment in Europe when we see it.

As to what China's premier really thinks, here it is:

Wen... said he remained worried about the crisis in the euro zone.

 

"Recently, the European debt crisis has continued to worsen giving rise to serious concerns in the international community. Frankly speaking, I am also worried," Wen told a news conference.

 

"The main worries are two-fold: first is whether Greece will leave the euro zone. The second is whether Italy and Spain will take comprehensive rescue measures. Resolving these two problems rests with whether Greece Spain, Italy and other countries have the determination for reform."

 

He said a briefing by Merkel assuaged his concerns slightly, but warned that no quick resolution for the crisis is in sight, underscoring Beijing's worries about the debt problems in Europe, China's biggest trading partner.

 

"After I heard her views, it increased my confidence. But I must honestly say, the implementation of these measures won't be completely smooth," Wen said.

 

China's latest promise to buy more European sovereign debt if certain conditions are met encapsulates Beijing's hitherto cool response to Europe's requests for financial aid.

 

Attempts by the head of one of Europe's rescue funds to get funding from China last year floundered on Beijing's fear that it was not getting sufficient protection against losses.

Considering that nothing has changed since then except a lot more jaw, and recently, fingerboning by the Goldman head of the ECB, coupled with Europe down to its last snickers bar wrapper as money good ECB collateral, one can see why one would be skeptical to buy any of this. Except for the EURUSD algobots. If only for 5 minutes.

 

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Thu, 08/30/2012 - 06:06 | 2748979 Debtonation
Debtonation's picture

I wish eveyone would just give up on socialism.

Thu, 08/30/2012 - 06:17 | 2748986 aleph0
aleph0's picture

"socialism"  ... Poverty for All ... except the Ruling Class.

 

 Same ol's theme : the "isms" are all about keeping the masses distracted with "intellectual arguments" while those with the real power never lose.

Thu, 08/30/2012 - 06:30 | 2748996 Popo
Popo's picture

China is in no position to bail out anyone.

And the idea that China buying Western debt in order to stimulate its own exports is in any way "new" is laughable.

This whole idea is just another permutation of the "more debt to solve a debt crisis" idiocy.

Thu, 08/30/2012 - 08:06 | 2749075 GetZeeGold
GetZeeGold's picture

 

 

At some point in time even an ant sez........screw this.

 

Thu, 08/30/2012 - 10:30 | 2749407 ElvisDog
ElvisDog's picture

Exactly, Popo. A Chinese Euro  bailout would imply that China had excess capital to invest around the world. China is going to need every bit of capital it has just to navigate their now all-too-obvious hard landing.

Thu, 08/30/2012 - 06:13 | 2748980 Temporalist
Temporalist's picture

More confidence builders:

 

Euro-Area Confidence Drops More Than Forecast to 3-Year Low

http://www.bloomberg.com/news/2012-08-30/euro-area-confidence-drops-more...

 

German Unemployment Rises for a Fifth Month Amid Crisis

"German unemployment increased for a fifth straight month in August as the European debt crisis curbed demand for exports and companies held back investment."

http://www.bloomberg.com/news/2012-08-30/german-unemployment-rises-for-a...

 

Hollande’s 100-Day Popularity Is Lowest for a French President

http://www.bloomberg.com/news/2012-08-29/hollande-s-100-day-popularity-i...

 

Thu, 08/30/2012 - 06:12 | 2748982 q99x2
q99x2's picture

And let me get this. China is going to print up some fiat to purchase worthless counterfeited bonds from Europe and citizens from both areas are going to pay the banksters for it. Nah that can't work.

Thu, 08/30/2012 - 06:30 | 2748995 AlphaDawg
AlphaDawg's picture

If they could do it it would be a steal, buying out Europe using some sh1tty paper before the whole currency collapse thing happens.

Would kick the can down the road a wee bit longer and China would have aquired a very strong position in Europe.

Before TSHTF in China

Thu, 08/30/2012 - 06:32 | 2748999 AlphaDawg
AlphaDawg's picture

China could be playing this fiat thing well here.......

Buying Gold, Silver and making Europe its bitch

Thu, 08/30/2012 - 06:53 | 2749012 Popo
Popo's picture

In the end it's always war. Yes, there will absolutely positively be a war with China. Either by proxy or directly. Both sides want it and need it, and it's the only way this whole game concludes. The notion that debt gets repaid is silly. It will either be war "over there" or war at home, and both sides will opt for "over there" because they always do.

All wars are always economic in nature. Everything else is kabuki.

War is the last phase, when overhangs in productive and demographic capacity are culled.

At this point the charade of new debt simply buys time before the war drums start beating in earnest.

Currencies won't implode before both sides have emptied their arsenals, depleted their armies and exhausted their energy capacity. The only reason the DM imploded before the last big war was that Germany was still reeling for WW1. This time the fighting comes first.

The big loser will be Europe in the coming global shit show.

Hunker down folks.

Thu, 08/30/2012 - 07:12 | 2749022 Ghordius
Ghordius's picture

MAD still applies. IMHO we could witness a new round of the "Great Game", with the whole world as a chessboard. And this could easily go on for 40+ years. China is trying to extend to Iran, Russia is currently helping us NATO in Afghanistan. Japan is starting talk of trade arrangements with the EU that could make it a kind of honorary member. China is already all over Africa. The BRICs are on the sidelines.

We are in a currency war, and not long ago I was expecting a trade war that would easily mutate in trade blocks (one of the reasons of the EU).

Apple just started to elbow Samsung out of the US markets. Could be a beginning. Economic wars don't have to traduce in military wars. In the 17th, the Dutch still thought you could have trade between two countries at war. Now it's somehow the other way round, in a twisted way.

The big game is not the EUR, kill it and you have 17 "fresh" new/old currencies. Reboot/restart/repeg.

The big game is King Dollar. The lifeblood of the Pax Americana. The currency that propels the biggest military might the world has ever seen. At stake is the Second Era of Globalization.

Thu, 08/30/2012 - 10:34 | 2749416 ElvisDog
ElvisDog's picture

Before TSHTF in China

Have you been paying attention to world events? TSHTF is happening in China right now. All the sudden China is on the wrong side of economic history (over-built infrastructure, over production of consumer goods in obsolete worker-bee factories, etc). And you think China loaning money to Euro countries who clearly can't pay it back and have rapidly rising nationalistic political movements would be a good move by China?

Thu, 08/30/2012 - 07:53 | 2749050 Vince Clortho
Vince Clortho's picture

It's a con game between the guys with the printing presses.  China, the U.S., or the Eurozone could easily print up enough money to do the job.  The trick is to print ludicrous sums of money without everyone realizing that your currency is now worthless paper.

It's great sport, and all the central sociopaths are in balls deep.  For myself, it's comforting to know that all the key players are intensely dedicated to doing the right thing for the rest of humanity.

 

Thu, 08/30/2012 - 08:53 | 2749142 falak pema
falak pema's picture

they are already doing it with counterfeit usd! to a very big tune as the US pays them high interest on that debt. 

Printing money is now considered very respectable even if its not supported by collateral!

Saving the banksters is the #1 aim of the Oligarchy, as all their money is parked with these same shills. 

Thu, 08/30/2012 - 06:13 | 2748983 buzzsaw99
buzzsaw99's picture

A man's got to know his limitations. [/dirty harry]

Thu, 08/30/2012 - 06:14 | 2748984 GoldMeUp
GoldMeUp's picture

nice article

Thu, 08/30/2012 - 06:22 | 2748987 theorist
theorist's picture

Taking a look of the text supplied here (this does not require a sophisitcated reading between the lines) indictes that the Chinese probably won't invest in the Eurozone. If I am a country with large foreign reserves and I say that I am worried about the situation in Europe, and a European leader has only partially addressed my concerns I would be pretty silly to be investing in the Eurozone. Yes, Europe is China's biggest client, but take the example of a shopkeeper who has a customer come to the store and buy a lot of stuff on credit. You find out that the customer has recently got into financial trouble, would you continue to lend to him in order just to keep your trade numbers up? Doesn't sound like a sensible strategy to me. The Global slowdown and China's own problems are probably starting to indicateto China that they really do need to create internal demand, and depend less on foreign trade. Would you rather feed a bad creditor with very little chance of return of capital or feed your own people?

 

Thu, 08/30/2012 - 06:22 | 2748988 falak pema
falak pema's picture

ha, ha ha, the Chinese revolutionay party of people's supreme will as expressed by the great Communist unified elite, vanguard of human progress, are the beacons of the World.

Europe will align itself to the country of the great leap forward into the age of one party state rule! 

Unquantifiable losses becomes an investment for the great helmsman's dragon-gold war chest.

Marco Polo brings back the silk to Europe! 

Thu, 08/30/2012 - 06:45 | 2749008 Ghordius
Ghordius's picture

lol. the rumour is particularly idiotic because any such decision has to wait until the Chinese have completed their political renewal cycle, this year.

Thu, 08/30/2012 - 08:49 | 2749136 falak pema
falak pema's picture

here is a more realistic evaluation of Merkel's China visit :

Chine: Angela Merkel tente de calmer l'inquiétude de Pékin sur la zone euro

or this :

WEN ON MERKEL: 'After I Heard Her Views, It Increased My Confidence' - Business Insider

ZH headline goes overboard on this. There is a definite trend to hype the Euro panick button. Not that Euro zone is not in panick mode; it is. But there is panick and panick. 

Thu, 08/30/2012 - 10:19 | 2749374 i-dog
i-dog's picture

... and panic.

The way I see it, is that there is a general panic being generated in preparation for, and as part of ensuring, the actual collapse ... plus selective panics against either the EU or the US in any given week in order to "manage" the "correct" order of failure at the "correct" rate. Complex systems are a bitch to manage....

Thu, 08/30/2012 - 06:29 | 2748994 moskov
moskov's picture

The real news is here:

"The two leaders also agreed to do an increasing amount of their trade in euros and yuan."

Thu, 08/30/2012 - 06:41 | 2749006 buzzsaw99
buzzsaw99's picture

China = #WINNING! :chuckles:

Thu, 08/30/2012 - 10:41 | 2749448 ElvisDog
ElvisDog's picture

Euros, yuan, so what? How are the 24% of Spaniards who are out of work going to pay for Chinese-made consumer goods? An increasing amount of trade in euros and yuan doesn't mean anything if the level of trade itself is decreasing.

Thu, 08/30/2012 - 06:38 | 2749004 q99x2
q99x2's picture

I sense blood in the water. Hungry feeders. ZH up all night.

Thu, 08/30/2012 - 06:59 | 2749015 Peter Pan
Peter Pan's picture

I am of the view that politicians, bankers and economists are placing far too much emphasis on paper shuffling exercises centred round the issue of debt as a solution for the economic predicament we are in.

It is time to see what ails the world as a logistical problem where the free market must be allowed to reward winners and punish losers and where resources and capital are put to highest and best use.

The capitalist model of recent years was an abortion that denied the free market a free reign in resolving issues.

Each nation must be forced to live within its means and produce to the best of its abilities. Tough luck if some nations will live a lot better than others. The economic system is not meant to be fair but efficient. The borrow and consume strategy we have witnessed produced dangerous illusions for both borrowers and lenders and now the reality of unpayable debt haunts the lenders' stability while the spectre of gutted economies haunts the borrowers.

The low pain solutions of the Draghi and Bernanke Alchemist Academy just numb the pain until we all end up on the mortuary slab of the economy.

Thu, 08/30/2012 - 07:37 | 2749039 Bogdog
Bogdog's picture

A definitive statement of "no" from the Chinese would perhaps be the deathblow for this lurching Euro-zombie. Then the money flows.........where? There's no where good to go.

Wheat futures?

Soybean oil?

Everyone takes delivery of their AAPL share certificates?

Thu, 08/30/2012 - 07:49 | 2749051 surf0766
surf0766's picture

There will not be any BRIC's on the PIIGS.

Thu, 08/30/2012 - 08:11 | 2749084 GERxit
GERxit's picture

Who takes this sh*t serious anymore?

China is stalling economically - why spend money on Europe (even if it's a large customer) - populists rather spend it at home, China makes no difference there. They need politcal stability at home not in Europe.

Thu, 08/30/2012 - 08:28 | 2749103 insanelysane
insanelysane's picture

This is the cash register game that kids play.  Europe starts out with money and China starts with goods and a cash register.  Europe buys stuff until they spend all their money.  The game pauses.  The person with the cash register needs to empty it and give it back to the buyer, Europe for the game to continue.

The game starts to suck after a few cycles when you're a kid.  When you are a politician, you need to have the game continue for your career to continue.

Thu, 08/30/2012 - 08:47 | 2749132 Shizzmoney
Shizzmoney's picture

China might need to BAILOUT ITSELF before anyone else:

China in Revolt

http://jacobinmag.com/2012/08/china-in-revolt/

For parts of the rich-world left, the moral of these opposing narratives is that here, in our own societies, labor resistance is consigned to history’s dustbin. Such resistance is, first of all, perverse and decadent. What entitles pampered Northern workers, with their “First World problems,” to make material demands on a system that already offers them such abundance furnished by the wretched of the earth? And in any case, resistance against so formidable a competitive threat must surely be futile.

By depicting Chinese workers as Others?–?as abject subalterns or competitive antagonists?–?this tableau wildly miscasts the reality of labor in today’s China. Far from triumphant victors, Chinese workers are facing the same brutal competitive pressures as workers in the West, often at the hands of the same capitalists. More importantly, it is hardly their stoicism that distinguishes them from us.

Today, the Chinese working class is fighting. More than thirty years into the Communist Party’s project of market reform, China is undeniably the epicenter of global labor unrest. While there are no official statistics, it is certain that thousands, if not tens of thousands, of strikes take place each year.

Thu, 08/30/2012 - 08:51 | 2749139 russwinter
russwinter's picture

China's Inflation Leaves No Monetary Options. two minute podcast:

http://www.wallstreetexaminer.com/blogs/winter/?p=5350

Thu, 08/30/2012 - 08:59 | 2749159 Bahamas
Bahamas's picture

1.3 billion Chinese are going to be wanting to wipe their asses with something, or not?

Thu, 08/30/2012 - 09:14 | 2749187 falak pema
falak pema's picture

Yawn, they do have their own yuan.

 

Thu, 08/30/2012 - 09:57 | 2749298 HAhyperion
HAhyperion's picture

Memories of Marrakech And Other Shangri La Fantasies

I remember sitting on the Presidential Suite terrace at La Mamounia, Marrakech,  with my Italian friend, Franco,  prior to German re unification overhearing Kohl on the next terrace below.  Besides grumbling that someone had usurped his rightful perch atop the top of the storied hotel, Kohl soon settled down to the business at hand with an assortment of Saudi royals. 

Thankfully my friend who speaks some 9 languages including German and Arabic provided the necessary translation.  After much negotiation, Kohl was able to wrestle a few morsels from the prince: but to the larger ask the house of Saud delivered a perfect German one word answer "Nein"

And so the EU was born to spread the over $2T in unification costs to sun softened heads in southern Europe.  And for two decades, out came the woodwind, and the German Pied Piper lead the rats, I mean the children astray - ever marching to the modern new plague, the new black death - the catastrophic oppressive storm clouds of crushing debt - the procession right off and over the fiscal cliff to the craggy rocks below. 

For poor ancient Greece, we can summon up the story of Sisyphus, damned to the underworld, forever pushing a heavier boulder of debt up a steeper hill. For the Spanish the story of Preyene borrowed from the Greeks (since Catalonia is officially broke) raped and pillaged, the heroine is buried under stones, the tomb to become the mountain range after her name. And to Italy, we will leave the most vivid and violent image (Ah, Romans) the Tarpeian rock, another vestal virgin raped by Titus, she opened her cities gates,  thinking she would receive the golden bracelets only to be crushed to death and buried below.  

The myth and legend too rich for the Italians to waste; they put it into practice as an execution site overlooking the Forum.  And besides murders and traitors being flung to their deaths on the cliffs below - debtors and thieving bad slaves also were tossed to the ragged rocks.  

For this is indeed Ancient Rome, many many years before "forgive us our debts..."  And there is a whole other historical dissertation on German Protestant ethos scolding the profligate Catholic bad boys -  who always feel a visit to the confessional will bring absolution. 

We fast forward to Merkel in China looking to make a withdrawal or dump some excess capacity (Benz/BMW, at least a few VW's) in the big central state.  Scrambling and the desperation showing on the furrowed brow of the fraulich, the Chinese, although polite, will not take that Great Leap Forward.  

Post her departure, the laughs could be heard from the coming from the closed Politburo doors.  The Mandarin roughly translating to she thinks she can shovel Spanish and Italian shit our way.

Alert the airports "All flights originating from Germany to be diverted to Shangri La" 


 

Thu, 08/30/2012 - 09:58 | 2749303 Freegolder
Freegolder's picture

So....

China is moving away from buying US Treasuries (as reported here on ZH).

The US Dollar is already dead, we just need to see it happen over th next few years.

The Euro is the first ever currency to have physcial gold as its main reserves. China likes gold, it likes gold a lot. Americam leaders hate gold, cos they don't like the competition.

China is guaranteed to support Europe, as it recognises (and is driving) the collapse of the dollar. It knows that its UST losses will be more than made up when gold revalues as the paper markets break, and gold is priced only its physical form.

Bye bye US superpower, hello a fairer world, with a new Euro-based monetary system.

Sooner the better.

Thu, 08/30/2012 - 10:51 | 2749483 ElvisDog
ElvisDog's picture

Wow, do you actually read anything or just spin fanciful tales in your head? Half of the EU political  leadership or more are calling for Eurobonds, i.e. the unlimited monetization of deficit spending in the PIIGS and France. The Euro banking system is an insolvent mess, the extent of which is unknown because they hide most of the skeletons from view. And you think the current situation heralds the destruction of the dollar and the rise of the Euro as the world reserve currency. At the moment, the market clearly thinks the U.S. is in the stronger economic position because U.S. govt bond interest rates have been driven down to zero.

Thu, 08/30/2012 - 11:02 | 2749496 Freegolder
Freegolder's picture

I read so much more than you can possibly imagine.

Just watch what happens in due course, the Eurozone issues will be sorted very soon (and you are factually wrong when you say 'unlimited' by the way).

The markets, the media, ZH, your good self, no one sees the bigger picture, and all have an agenda of one kind or another.

I just look at the monetary evolution that is the Euro, and the guaranteed death of the dollar.

You feel free to read what you like and make your own mind up, but if you really believe US yields are at current levels becuase of the US economy, I'm afraid you have some tough lessons ahead of you.

Thu, 08/30/2012 - 11:40 | 2749635 ElvisDog
ElvisDog's picture

Some of the US govt bond strength is due to Fed manipulations, no doubt. But a good part of it is due to a flight-to-safety of world capital to the U.S. bond markets. Bond investors are the smartest people around and right now they are voting for the dollar.

As far as Euroland sorting out its issues very soon, I see only two options:

1) Germany caves in and the PIIGS and France get to re-ramp up their deficit spending and reduce or eliminate their austerity measures. This outcome would be very bad for the Euro.

2) Germany-Finland-Netherlands stick to their guns and refuse to lend the PIIGS any more money. The Euro splinters into a northern bloc where the Euro is strong and all the rest who may return to their own local currencies. This would strengthen the currency, but the countries in the northern Euro are collectively too small to create a new world-wide reserve currency.

Feel free to add scenarios that you think I've missed.

Thu, 08/30/2012 - 12:13 | 2749752 Freegolder
Freegolder's picture

The option 3 they are actually going for is a measure of bond market intervention, coupled with huge cuts in govt. budgets, so no free lunch, just a message to the markets that the govts will get their houses in order, and there is no risk of Euro exit.

Just google it, it's all out in the open.

Germany will swallow it, because they want to avoid a Euro breakdown for many reasons, and also as the ECB mandate of price stability allows for some monetisation to prevent deflation. Inflation at just under 2% is the only ECB mandate.

If you want to get deep into this stuff, try reading some of Fofo's stuff, or Another/FOA, it will open your eyes to the pieces of the puzzle that most miss....and you'l end up buying some physical gold too.

Good luck.

PS Re bond investors, I can assure you not a single one of them sees the magnitude of change ahead, and when they get really scared (i.e. out of bonds altogether) there is only one market that can expand in price sufficiently to accomodate the funds that get there in time. It's yellow and shiny!

Thu, 08/30/2012 - 11:18 | 2749569 covert
covert's picture

the worst of the rumors are most likely to be true.

http://expose2.wordpress.com/2011/11/20/a-voice-from-the-dark/

Thu, 08/30/2012 - 11:48 | 2749661 Dareconomics
Dareconomics's picture

Did you read the WSJ's article on this?

The Wall Street Journal  is a newspaper aimed at businesspeople and investors. What businesspeople and investors want to see is an eternal bull-market and an ever-growing economy.

Murdoch’s media empire revolves around the tenet of giving the people what they want. The tabloids focus on celebrity scandals to sell papers; the Fox News Channel tells conservative voters what they want to hear about politics; the WSJ gives businesspeople hope about improving economic conditions.

If you subscribe to the paper, you are presumably a businessperson or an investor. This is the headline you saw regarding Merkel’s visit to China to meet Prime Minister Wen:

China to Continue Investing in Europe

Now, people who were looking for articles through a search engine received this headline instead:

China Offers Cautious Support or Europe

Which headline do you think is more optimistic? I think it’s the first one. Which one do you think is more accurate? Let’s see...

Read more here:

http://dareconomics.wordpress.com/2012/08/30/china-to-conti…come-too-risky/

Do NOT follow this link or you will be banned from the site!