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Citi On Whether Europe Can Ruin The World; Or How To Use An Insolvent Continent As An Excuse For Global Printing
While Citi's Stephen Englander does not go as far as concluding that a collapse of Europe would be sufficient (but certainly necessary) to "ruin" the world, he does have a very relevant conclusion in a piece just released to clients: namely that central banks everywhere, but in Europe, are using the recessionary slow down in the insolvent continent, which nobody seems to believe any more will be able to avoid a recession (an event which S&P stated in no uncertain terms would lead to a downgrade in France and other core countries), as the perfect political smokescreen to push the turbo print button on their respective money printers. To wit: "Eurozone weakness has also generated indications that policy will be eased elsewhere (even if not in Europe). Policymakers in the US, UK and elsewhere [ZH: and Japan as of 2 hours ago] are using the euro crisis as cover to ease policy. For example, the FRBNY's Dudley yesterday characterized even the improved US numbers as disappointing and pointed to further measures if growth did not improve. Chinese growth targets and policy maker comments imply that measures might be taken if there is any sign of slowing. The BoE has already expanded it QE program. At a minimum the comments are suggesting that the policymakers are willing to take aggressive action to offset any weakness. Overall the bias towards stimulus appears to remain in place outside Europe." What is supremely paradoxical is that with the ECB stuck, any incremental QEasing by the world will merely result in an ever stronger euro, until exports by Germany become almost as impossible as those of Switzerland pr peg. As a result, organic European growth at whatever remaining centers of productivity and commerce will be truncated until it is gone completely, even as the EURUSD approaches 2.00, as the Fed embarks on what will be by then something between QE5 and QE10. And there are those who wonder why gold makes sense not only here, not only at $1570 a month ago, but at $1900 under two months ago...
From Citi's Stephen Englander:
The downgrading of euro zone growth rates has led to concern that euro zone economic weakness will derail global growth. For FX, a global downturn driven by euro zone weakness would dramatically change the prospects for risk-correlated G10 currencies along with EM currencies.
We think these concerns are significant, but are probably somewhat overstated. Europe matters and the direct effect on global GDP from a likely drop in European imports will matter. However, there are other forces that could matter more. We think the major threat from Europe is through financial markets and financial institutions in the event that no adequate resolution is reached to the euro sovereign debt crisis, rather than from the direct demand effects. However our economists and we expect that the euro zone leaders will cobble together enough of a solution to keep the worst from happening on the financial side, even if the comprehensive solution still eludes them.
First consider the bad news:
1) Figures 1 and 2 show EU imports from the US as about 1 3/4% of US GDP and 5 1/2% of China GDP. In 2009, EU GDP dropped 4 1/4% in 2009 and the drop in US exports to the EU was about 0.5% of US GDP; the drop in Chinese exports to the EU was about 1.5% of China's GDP. Such a drag to growth is perceptible, although far from the worst problems these economies faced in 2008/09 or are facing now.
Also, a 4% GDP drop in the EU is well below what our economists and other analysts expect so far. European policymakers would have to make a bad situation a lot worse to for the global growth impact to be truly first order.
2) The other side is that the weakness in the euro zone is not happening in a vacuum. Figure 3 shows that as sovereign risk spreads have driven euro zone rates up (and are contributing to the slowdown in the euro zone), they also have driven rates down elsewhere in the world. So as was the case in 2008/09, the sharp drop in demand in hard-hit countries is driving liquidity provision elsewhere. This is crowding-in, however imperfectly. At a minimum the rate drop will serve to mitigate the external demand impact of slow growth in Europe.
3) Eurozone weakness has also generated indications that policy will be eased elsewhere (even if not in Europe). Policymakers in the US, UK and elsewhere are using the euro crisis as cover to ease policy. For example, the FRBNY's Dudley yesterday characterized even the improved US numbers as disappointing and pointed to further measures if growth did not improve. Chinese growth targets and policy maker comments imply that measures might be taken if there is any sign of slowing. The BoE has already expanded it QE program. At a minimum the comments are suggesting that the policymakers are willing to take aggressive action to offset any weakness. Overall the bias towards stimulus appears to remain in place outside Europe
It may seem paradoxical to argue that risk will be bought when the EU's expected contribution to global growth is being downgraded. However, as we have seen over the last two years, Newton's third law should be modified to 'every negative shock generates an equal or stronger policy response', so we would still argue that the few currencies with attractive fundamentals will be bought, even if the mechanical arithmetic of growth points otherwise.
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http://mikenormaneconomics.blogspot.com/2011/10/this-is-powerful-great-video-with-some.html
I've figured out when the Lehman moment will occur. Some day soon, someone fed up or jilted on the inside is going to blow the lid off the fact that the 3:30 pumps are actually Bernanke via HFT shops. It will become widely known by the mainstream and in a rage, investors will pull every red cent from the market. This will happen. In their arrogance they are taking the manipulation far too obvious.
9:30-10 & 3:30-4 moves are from leverage ETF rebalancing, not the Feds.
Where'd you read that--school paper? Try again dormie.
Feel bad about leaving it like that--ought to at least shine a light on your ignorance. Marinate on this for a second---if a triple levered long SPY and a triple levered short SPY are both "rebalancing" at the end of the day, what would the net effect be? Depends on the color of the index ticker, you'd have to say--but, the action on your 3:30 move only goes one way, up up up. Now, get off the computer and go get laid kid. I'm old. At least I have excuse for being a ZH cretin.
You just need to look at the little DIA/S&P/NASDAQ chart on Google Finance.
If they had a thicker crayon, it would be one brown line. The markets are being manipulated in unison.
Interesting to note that the colors blue, amber and red blended together produce a brown color.. how apropos.
"manipulation" and "correlation" are two different words...both with negative meanings however. We like our markets highly "un-correlated." for example "oil falls to 20 bucks" and "equities power higher."
I think an American received a Nobel prize in Economics for showing that when markets(assets) start moving together that a recession soon follows. Hasn't ECRI's Lachsman Achuthan stated we are entering into another recession? (he's been batting 1000 by the way)
That's just negative correlation. :-p
lol wut..
I suggest you get yourself an internship on a trading desk to understand market dynamics. ETF rebalancing is done overnight and merely dictates what the first print will be during the very early premarket where only institutions trade. Into the close its corr and stat arb desks making sure their deltas are flat on the day, among other voodoo.
If they squel, they'll likely end up dead first. But yeah, they do this machine stuff so brazenly that it's unbelievable to me know one questions it.
As I was drinking coffee this morning, I just had to turn on CNBC to see what the monkey's were saying. "A reader chimed in and asked me (Cramer) if I thought this rally was all a big fake." To which Cramer replied to this question: "Who cares! The market went up!."
And that pretty much sums it all up.
really fed up of fed
"Savers Protect Your Deposits From Bankrupting Banks and Quantitative Inflation"
http://www.marketoracle.co.uk/Article31124.html
we few, we happy few, we band of silver holders !
And of course we gold holders are happy too.
It should be clear to all that everyone should have 5% - 10% (minimum, even mainstream financial advisors are OK with 5% in gold) of their (liquid or total, you pick) assets in gold and silver. I am there and I sleep better as a result.
Last I checked, gold was up $50 + and silver even higher on a percentage basis.
And somewhere between gold and silver being the currency of choice and food and fuel becoming the currency of choice the Feds will take your currency of choice and everyone will laugh at you like you are laughing now.
Viejito: Since no one can predict the future you are correct to not be at the All Inn. Food, fuel, water, guns & ammo and medical supplies are all good.
Depending on each person's situation. Condo dwelling Bearing chooses not to store gasoline...
Re Feds coming to take what belongs to me (and millions more), that will STOP once somewhere between 20 - 50 Cops / Feds / Fascist Thugs are shot DEAD by thoise who say "No". Come and get it, bitchez.
http://www.youtube.com/watch?v=GuqZfaj34nc&feature=player_embedded
hedgefunds and daytraders are picking up pennies in front of a steamroller. Modern finance is too interconnected to prevent the logical conclusion of systemic collapse. When agents try to rebalance one part, it creates shocks to other parts. There hasn't been proper international supervision. There is no structure, but spaghetti code, as financial agents arbitrage regulation with exotic financial products.
If you run the linear programming model to solve all the variables, and find equilibrium, the output is this :(
capital is fucked. welcome to labor's world. project mayhem.
#occupywallstreet
Dormroom, can you PM me your email address please?
I prefer to remain anonymous. =S
Fool, trying to use a linear model on a non-linear quantum stochastic system. Let me guess, you are using Excel to model the market.
Linear programming model, nonlinear quantum stochastic system: you are a bunch of ignorant monkeys here, using various smart words without glimse of any understanding. That is the reason why the world collapses: it is overrun by growing group of idiots just pretending that they are in the know.
The price of gold will depend on Bernanke (and others) printing machines. Other than that it is just seasonal variations.
Remove Bernanke. Defeat Marxist Obama!
What the hell is Quantum about it?
Off topic, but watching Herb Greenberg call Cramer out on the table over his Netflix calls is F'ing hilarious!!! Cramer is getting louder and backpeddling like a MF'er.
Cramer was also touting none other then Agnico Eagle mines when he was on his little gold trip. AEM dropped by 18% recently because one of their mines is caving in.
AEM is a solid company but their misfortunes look good on Cramer.
PAL cratered about 70% after Cramer pumped it.
The hypocrisy is getting a little too thick even for me. Time to pull on my full body head to toe shit waders.
Just as long as it's not a SCOPAS Suit.
picked up some Amazon oct 205 and 215 puts; wish me luck
was tempted but didn't have the balls. Good luck, sincerely.
i wish i had read your comment half an hour ago, d.c.h.
but on the bright side, the beers are on you
well played
Good ahead and print you slave paper, Mr non-Federal non-Reserve, it will transfer some of the stolen wealth to those with physical gold/silver.
To the ZH audience, keep educating your fellow humans about the real story of gold/silver.
I've pretty much given up on "educating fellow humans" about MONEY.
They've been conditioned far too long....it's like trying to teach Quantum Field Theory to an audience of kakkerlakken.
Anybody else read Insolvent Continent as Incontinence?
Not that there's much difference.
I had thought Incontinent is more when you print and print and print...
$1.2 Trillion....(plus a Gyro and a case of Ouzo) for starters.
Another $1 trillion the next 6 months...this is just for the Eurostan.
Euro land does not want to print. They want to liquidate and consolidate.
Been saying this for a while now....
http://freegoldobserver.blogspot.com/2011_09_01_archive.html
Agreed, Eurozone does not want to print. I wonder if the adjustement mechanism can really be internal devaluation (hard cuts in salaries and benefits) and hard write-offs of debt.
Greece certainly would point that Europeans prefers the above hard torture over the seductive inflationary sedative pain.
EuroZone does not want to print and is trying to find any excuse for delays, yes
According to the Austrian School this would cause a sharper, stronger, shorter pain...
Very painful.
Nature abhors a vacuum.
Would be great to know when that shorter uber-schock arrives: supposedly Euro tanks then and Eurozone share prices shoot trough the roof.
Until then Euro strengthens and share prices drop.
QE to infinity! Or at least until they run out of digital ones and zeros.
www.pmbug.com
Nice forum. pmbug.com is a is little less hectic that Turd Ferguson's. Best of luck with your site!
QE will obviously not go to infinity, but QE10 is certainly possible. Inflation is almost always more politically palatable than .gov cutting spending, debt haircuts, etc.
Here comes your daily 3pm algo rally! Brought to you by your friends at PPT!
THIS IS TOTAL BS. BEFORE EUROZONE WENT INSOLVENT, THE US IN 2008 SHOWED THE WAY IN PAX AMERICANA FINANCIAL DECAY.
THIS IS ALL PART OF THE SAME SAD FILM OF THE DEMISE OF PAX AMERICANA...BOTH FINANCIAL AND SUBSEQUENTLY GEO-POLITICAL.
I hope the sons of Jefferson will find a way out of this mess like the sons of Voltaire and Beethoven.
What is supremely paradoxical is that with the ECB stuck, any incremental QEasing by the world will merely result in an ever stronger euro, until exports by Germany become almost as impossible as those of Switzerland pr peg.
I'm skeptical that the EUR will be able to be held together without "new" money coming from somewhere. It's clear why there are zero grand plans to date: Germany isn't going to go all-in Willy-Nilly WITHOUT serious control over budgets in Greece, Italy, Spain, and possibly even France.
So, expect some very loud thuds coming soon.
The US dollar has been falling for 10 years yet the trade deficit got larger and not smaller. Sure puts that theroy to rest...
How much of that is with China, Japan and the oil producers?
Quite allot.
Funny how Japan has higher wages then the US and they have trade surpluses with China.
Kinda helps those trade barriers and cultural resistance to imported goods.
EZ and China both depend on the US as a final export market, the quid pro quo is that they buy its debt.
China is now trying to do the same to the EZ, but isnt near as enthused about repeating the same mistake with EZ debt as it did with USTs.
There is no final export market with any residual savings left to export to big enough to allow the EZ or China to export its way out.
The Japanese arent interested in the crap everyone else makes, the Chinese have a monstrously skewed income pyramid, the ME is too busy shooting each other and well the Germans, French and Italians are going to have to pay for the banks at some point.
Perhaps the martians will buy?
Aren't we due for a rumor from someone to lift us into the green for the close?
I think the FED (taxpayers) is going to have to bail out the EU to keep the USD ahead in the race to the bottom, among other things.
this market is 100% massaged by machines.
How about we don't besmirch Newton's laws inorder to explain gross negligent economic policy.
citi should worry about citi.
Mother fucker if I don't hate goddamn banker-speak.
Policy easing: printing money
Quantitative easing: printing money
Stimulus: printing money
Measures: printing money
TARP: taxpayer money stolen and given freely to control-fraud banks
Technology: a key investment banker bullshit term for their investment "products," i.e. bullshit ways to use "structuring" to conceal debt, goose GAAP earnings, and move steaming piles of shit off balance sheets.
However our economists and we expect that the euro zone leaders will cobble together enough of a solution to keep the worst from happening on the financial side, even if the comprehensive solution still eludes them. - Citibank
Now Citi abandons the "Europe finally gets it" meme while attempting to keep the hopium rolling. Will Buiter hire Jean-Claude Junker to work on semantics?
Highlights at 11
Wtf is going on, whynis the market going down when the summit is tomorrow?!?!?!!!!!!!!!!
Short gold Bitchez
Civilization can not exist with growing population and oil production that can not keep up.
Civilization cannot exist with an average Brent price over $100 all year.
Everything else is hand waving bullshit.
If Barry O., Timmeh, The Bernank and TPTB around the world allow more printing of money I believe they will have signed their own death warrants. Think about it, the system they have supported has allowed Big Business and the TBTF Banks to break laws and prosper with no accountability and the little guy has bailed them out when they have failed. Meanwhile, the little guy has watched his savings dwindle as he lost his home and the small businessman in this country has become an endangered species. The TBTF banks are the biggest owners of homes. To continue to bail them out, irrespective of their actions, Barry O presents a refi program and Benny and Timmeh start talking about starting up the presses again. As more homes are foreclosed upon and as inflation becomes more pronounced the criminal rich (not the hard working non-criminal rich...I have nothing against rich people, but do not like criminals) will become richer and more untouchable. The crony capitalist system that Obama has perfected for his advantage will set off a rebellion the likes of which none of has ever seen. I wonder how they justify choosing a large inflationary cycle over a painful restructuring. One thing is certain, the playing field will never be level again and hard work will never be rewarded as it was in the past. The only way to get ahead will be to lie, cheat and have money to buy influence.
What is supremely paradoxical is that with the ECB stuck, any incremental QEasing by the world will merely result in an ever stronger euro, until exports by Germany become almost as impossible as those of Switzerland pr peg.
You say it: prior to the peg.
The next peg will be the final nail in the coffin of US Dollar hegomony.
If the Euro would really surge beyond sanity, then the Chinese will remove their peg from the US Dollar and will attach a peg to the Euro. to say float within a small frame. The rouble will do the same and then Good Night US Dollar.
Then exists a fix currency exchange area which ends all mayor forex speculation. The big banks will loose their last income pillar, forex.
This will be whether the end of Dollar hegemony or the start of another war to try stop somehow the final dollargeddon. That is to stop the oil flow from Iran to China. That is the only weak point of the dollar opponents. And this will happen I believe. Then trade war is full blown and includes already military components which are necessary to stop the flow of oil and other raw materials to China.
Got batteries,drinking water, canned food already ?
Yes Supermaxed out. The riddle of 666 and a pyramid, a lesson in geometry. :)
Cube solution requires the Quantum Computer.
why don't we all just stop this shit.
the place is falling apart - the only question is: when the wheels are finally off this rig, how many dollars will have been printed - how about for the sake of those of us who have been prudent, they stop printing the damn fiat toilet paper.
They can't. It's physically impossible. And even if it was possible, you wouldn't like your new tax bill if they did.
If you don't like printable money, buy gold.
? Fa,b = -? Fa,b = QE?
PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT BABY PRINT
Ben? Is your print button stuck in the ON position again?
Citi confirms the obvious. Currency printing is the only option on the table now for America and EZ, meaning USD and Euro will be steadily thinned out (debased) far out into the future, transferring more wealth from Americans and Europeans (and debt holders like China and Japan) to irresponsible insolvent governments and banks.
No talk anywhere of making government policy more pro-business, rebuild manufacturing sectors, bring jobs back from slave wage nations, etc.
The only option on the table is continue looting wealth from citizens and debt holders to keep banks and governments going ...and partying and paying huge bonuses and living like kings
...which they essentially are now for all practical purpsoses. Kings (central banks), Lords (TBTF banks), and Dukes (governments), the age-old hierarchy reestablished in this newly emerging feudal society model
...where their word is law ...and no other law matters.
The problem is the moment the US implent tariffs to keep production local instead of in a slave wage nation it will almost certainly lose reserve currency status and Saudi Arabia will stop giving them oil for free ... and what then?
The US needs it's reserve currency status and globalization, even as it is killing it ...
America is a beggar nation now. A beggar nation cannot keep its world reserve currency status forever. USD will lose WRC status before much longer.
Given China's position as #1 manufacturing & exporting nation on the planet, I beleive China's currency will become the new world reserve currency, if not dejure, then certainly defacto.
America will try to prevent this change obviously, via military force as usuall. But military force won't work against China. America will finally meet its match and not be able to keep China's currency from overtaking the USD as new WRC.
That's when America's superpower status ends as US government debt suddenly becomes worthless and the American economy simply implodes.
The guilty (Citi) rewriting history (Or How To Use An Insolvent “Bank”, er Continent, As An Excuse For Global Printing) and making holier than thou judgments on "Whether Europe Can Ruin the World" reminds one of Pat Buchanan’s characterization of the attacks on Nixon, which I heard expressed on NPR today:
“Nixon may have rustled a few ponies, but he was hanged by the worse horse thieves in the county.”
...and Kennedy, who tried to stop the horse theiving, was outright assasinated.
Japan is finished as an ecomomy. They are gone, oil inflation should take them out + BoJ and the MoF will send Japan into a Asian fiscal crisis. The print jobs won't offset weakening equities. This is the endgame now, very close.
eurozone doesn't want to print, they want someone else to pick up the tab like they always have - only guess what - they can't this time.
game over
the citi lights turn my blues into gold
It's always great to hear from an analyst who works for a such a stellar company (Citi), which has navigated the global crisis so effectively. The foresight to see the subprime crisis for what it was and side step it in such a way was quite impressive. Bravo! Go ahead Stephen, I'm all ears. What happens when an insolvent Europe, who accounts for 20% of world GDP, finally has to face reality? I'm sure its nothing to worry about...nevermind - Special Agent Utah