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Coming Collateral Crunch Charted

Tyler Durden's picture


To better comprehend the chaos that is currently viciously circling in European funding markets, its critical to understand the difference between 'linear' collateral needs and the highly non-linear self-destroying re-pledging collateral crunch that is about to occur. Perry Mehrling, of INETeconomics, does a good job of explaining, in his chalkboard-style video, the three lending-based demands for collateral among the European banks and their central banks (Interbank, National Central Bank, and TARGET-2). He notes the IMF's proposed interjection might help to relieve the collateral crunch that we have been so actively discussing. However, these are all lending channels that rely simply on haircuts and specific collateral needs, what is being missed here is the much bigger problem of re-hypothecation (or re-pledging) of the collateral which leaves the considerably larger shadow-banking system facing a run on ever-decreasing piles of assets. So simply put we have a crunch in credit as increasing needs for collateral for 'pure' lending will be greatly exaggerated by the shrinking 'net' availability of collateral (as risk manager after risk manager tightens up their systemic risk criteria and reduce availability of funds for re-pledging). Put another way, while policy-makers focus on the big bazooka top-down, it is the smallest fund manager 'cog' in the chain of re-pledged collateral that will inevitably bring the system down.



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Sat, 12/10/2011 - 17:39 | 1966636 Newsboy
Newsboy's picture

Promises, promises, promises...

Where does it all end?

Sat, 12/10/2011 - 17:49 | 1966658 falak pema
falak pema's picture

the profits in the Oligarch's pocket, the losses on the country BS. 

Sat, 12/10/2011 - 20:30 | 1966776 sqz
sqz's picture

Pretty charts, but:

0. IMF does not buy sovereign debt. It makes loans to sovereigns and with highest seniority. This idea has also been completely squelched by ECB head Draghi's most recent conference stating EZ NCB's will not be involved (think about it: it deliberately bypasses ECB's monetary system and European treaty).

1. Europe's collateral crunch is a lot larger than just sovereign debt. Moving this little bit around different balance sheets would change nothing. In fact, they risk undermining the currency directly (I do not mean mere devaluation).

2. Europe's crises are more than just a collateral crunch. Entire funding markets have dried up, most importantly unsecured lending. This is why there was a switch to collateralised lending in the first place and this is why intermediaries are facing the ECB and their NCBs (ELA etc).

3. It is even worse than above. Due to the total funding requirement in the EZ, it barely matters how much the ECB changes their eligible collateral requirement (which are already the widest of the majors), all the collateral that could be used to secure liquidity has been already.

4. This is a trust and confidence led crisis. That is, we are well past the point where these issues can be fixed by monetary solutions. The core problem are the EZ institutions and the fiscal plus structural policies that underpin the Euro currency.

5. There is plenty of liquidity available already both inside the banks (e.g. ECB deposits) and outside, though not enough once bad and encumbered collateral is taken into account in the banks, i.e. bank recaps are required too. The fact is that few are in interested in taking the risk of putting it directly to work within the Eurozone financial system which is causing the problem. This includes foreign funding, such as in USD.

In short, the core problems of the Eurozone are fiscal (banks, sovereign backstops) and structural (ECB, treaties). You cannot bailout such problems from outside the Eurozone. It would be as ridiculous as the world coming together to bailout the US during its subprime crisis. There are some problems that must be solved alone because they strike at the very heart of your existence and future.

Sat, 12/10/2011 - 22:24 | 1967028 economics1996
economics1996's picture

So what has happened since 1971 as we prepare to march over the fiscal cliff of financial insolvency?

Since the complete transfer from a fiat currency the Dow Jones Industrial Average (DJIA) has increased 1,262% and the Gross Domestic Product (GDP) 1,233% using “nominal” numbers or numbers not adjusted for inflation. More or less in lock step as one would expect.

Total credit market debt owned has increased 2,902%, outstripping GDP growth by a factor of 2.35.
The Federal Reserve monetary base, (coins, paper money, and commercial banks’ reserves with the central bank) has increased 3,658%, outstripping GDP growth by a factor of 2.97.

The third central bank of the US will end its reign soon mired in inflation, corruption, and scandal

Gold, the traditional source of real monetary value, has increased 4,177%, outstripping GDP growth by a factor of 3.39.

Sat, 12/10/2011 - 22:34 | 1967043 economics1996
economics1996's picture

Translation the haircut needs to be 43 cents on the dollar.

Sat, 12/10/2011 - 22:38 | 1967049 economics1996
economics1996's picture

For the USA.  I don't know shit about Europe.

Sat, 12/10/2011 - 23:21 | 1967099 tom a taxpayer
tom a taxpayer's picture

sqz - You hit the nail on the head. Truer words were never spoken:

"This is a trust and confidence led crisis. That is, we are well past the point where these issues can be fixed by monetary solutions. The core problem are the EZ institutions and the fiscal plus structural policies that underpin the Euro currency."

Sun, 12/11/2011 - 00:07 | 1967147 malek
malek's picture

Aren't you confusing the trigger (lack of trust and confidence) with the cause (too much debt)?

Sun, 12/11/2011 - 15:42 | 1968016 AldoHux_IV
AldoHux_IV's picture

I would say it's more of a crisis led by inherent design flaws of a monetary regime aided by incentives to over leverage thus making the system even more vulnerable to real life stresses (i.e. difference in fiscal regimes), thus it's a crisis of reality-- one where the flawed nature of the current monetary system is coming into question because it doesn't work when there are no proper checks and balances and only political career risk being the main driver behind decisions.

Sun, 12/11/2011 - 17:18 | 1968243 FinHits
FinHits's picture

This is good for debtor nations: Germany,  Netherlands, Luxembourg, and Finland. According to FT Alphaville, their central banks have TARGET2 balances of €65 billion, €89 billion, €85 billion and €33 billion, respectively, for a total of €672 billion owed to the rest of the Eurozone central banks, including France (!).

If they can shift €200 billion to IMF, that is a much safer trade than keeping it within TARGET2.

Sun, 12/11/2011 - 23:31 | 1968977 sitenine
sitenine's picture


4. This is a trust and confidence led crisis. That is, we are well past the point where these issues can be fixed by monetary solutions. The core problem are the EZ institutions and the fiscal plus structural policies that underpin the Euro currency.

With all due respect, and as great as that sounds, no.  This is a ponzi, fraud, and theft led crisis.  Get your head out of Buffett's ass please.

Sat, 12/10/2011 - 19:16 | 1966800 MolotovCockhead
MolotovCockhead's picture

Yeah right. Let me eat your lunch first and I promise that I will let you eat my children's lunch, okay? How does that sound? Not very convincing eh?

Sat, 12/10/2011 - 22:13 | 1967016 Dre4dwolf
Dre4dwolf's picture

It ends soon, I promise.


Sun, 12/11/2011 - 02:12 | 1967248 LouisDega
LouisDega's picture

Then what?

Sun, 12/11/2011 - 13:25 | 1967651 TruthHunter
TruthHunter's picture

"It ends soon, I promise."

IT starts soon, promise or no promise...

Sat, 12/10/2011 - 22:28 | 1967033 ISEEIT
ISEEIT's picture

With you, with me.

Small is the opposite of large.

Large = bad.

Get real.

Ron Paul.

Sun, 12/11/2011 - 12:25 | 1967505 johnu78
johnu78's picture

It's going to end soon. That much is for sure!



Sat, 12/10/2011 - 17:43 | 1966644 riley martini
riley martini's picture

 Jim Sinclair is calling for $4500 gold . I didn't see a time line though , before the euro implodes .

Sat, 12/10/2011 - 18:04 | 1966678 Global Hunter
Global Hunter's picture

Who's Jim Sinclair?  Tell him I call $100 gold, mind you a dollar when gold hits that level will be enough to feed a family of 8 for a week.

Sat, 12/10/2011 - 18:26 | 1966721 NuYawkFrankie
NuYawkFrankie's picture

Wasnt he a wide-receiver for the Green Bay Packers back in the '85=86 season?


Sat, 12/10/2011 - 18:34 | 1966733 DosZap
DosZap's picture

Global Hunter

Who's Jim Sinclair?

No one special, I think he's cousins with Cramer./sarc

Sat, 12/10/2011 - 19:15 | 1966798 fonestar
fonestar's picture

Your dollar and its attendant cult is going to hell.  I will wipe my ass with it and then you can eat that for a week.

Sat, 12/10/2011 - 19:22 | 1966808 MolotovCockhead
MolotovCockhead's picture

I will wipe my ass with it


Friendly advice to you. Do not use dollar bill as toilet paper!! Again, not with dollar bill. The reason? It's not water only mess yourself up, yack! Worthless fiat make high quality wall paper though

Sun, 12/11/2011 - 00:38 | 1967180 malek
malek's picture

That is too stupid for a snarky reponse...

Sat, 12/10/2011 - 21:20 | 1966958 jbc77
jbc77's picture

I suspect when the Euro collapse gold will plunge in the first days of the carnage. Obviously this will be the time to pounce depending how easy it is to procure physical. Could be one of those everything that isn't nailed down gets sold scenario. Or shit will get sold to satisy margin. At any rate hopefully some bargains will be found....

Sun, 12/11/2011 - 03:34 | 1967295 FlyPaper
FlyPaper's picture

+1     Liquidity requirements will unwind the paper "gold" market at the point where the dominoes kick over.   If you have the ability to hold the gold, it'll go back up with the Bernanke express starts to print.

The question is: how far will the paper value of Gold fall before Central banks and other buyers step in and buy? 

Sat, 12/10/2011 - 17:46 | 1966650 dcb
dcb's picture

When you st5art to understand this, you start to understand that to have the debt destruction you need to make the ystem safer, you need to have deflation. The insqane focus on deflation being the root of all evil makes them unable to fix teh system. In theory you could print so much money that much of tyeh debt becomes real money, and then make sure they don't leverage up again. But I don't know how to do this. Please note, you also must add the minsky monent to your understanding of the problem, and incomes that can't support debt. the system is really designed to fail

Sat, 12/10/2011 - 17:48 | 1966654 Seasmoke
Seasmoke's picture

they refuse to deflate.....thus it will be a great collapse

Sat, 12/10/2011 - 17:54 | 1966665 pineyard
pineyard's picture

Come on ,,, STOP this fake pseudointellectual MUMBO JUMBO                                                               I dont have time to get pulled around by some fancy emperors Clothes                                              and it doesnt impress me either                                                                                                                                                   I believe in SIMPLE THINGS                                                                                                                                                                                                if IF money cannot be explained as that ...  its FAKE and not worth wasting time on

Sat, 12/10/2011 - 17:58 | 1966672 Global Hunter
Global Hunter's picture

I'm fascinated by just how fake it is and how deep it goes

Sat, 12/10/2011 - 18:05 | 1966679 bugs_
bugs_'s picture

It is so deep and so fake that even cynics have a challenge getting their heads around it.

Sat, 12/10/2011 - 18:20 | 1966707 Global Hunter
Global Hunter's picture

children, the insane, most drug addicts and only a select few normal able bodied adults are able to understand

Sat, 12/10/2011 - 18:26 | 1966720 Nate H
Nate H's picture

its not 'fake', its just disconnected from the productive capacity it was once supposed to track.  and marginal cost of energy now permanently (until things crack of course) going up -so productive capacity going down while debt going up - not good trends.

Sat, 12/10/2011 - 23:47 | 1967128 tarsubil
tarsubil's picture

Bills of legal tender not backed by precious metals are like radiators without coolant. There is nothing getting in the way of a meltdown.

Sat, 12/10/2011 - 18:01 | 1966674 Atomizer
Atomizer's picture

Chalkboard to eraser to hide devriatives BITCHEZES

Sat, 12/10/2011 - 18:09 | 1966684 Hedge Fund of One
Hedge Fund of One's picture

Sorry, but the accountant in me had to speak up: On the chalkboard, when the assets are transferred to IMF from the NCB, they should be drawn in the Assets side of the IMF not the Liabilities side of IMF. Correspondingly, with the assets transferred from NCB, Liabilities should be created on the NCB balance sheet to show that it would owe that amount to IMF. The Assets on the IMF balance sheet would be Liabilities of the NCB. Supposedly, the IMF would be funded by contributing entities, which would create Liabilities on the balance sheet of the IMF for the amounts owed to those contributors (the U.S. Fed?). And where would those contributors get the money? Create it from thin air?


Sat, 12/10/2011 - 18:16 | 1966696 Global Hunter
Global Hunter's picture

sorry but the accountant in you is hurting my head, I really am walking around and living surrounded by absolute insanity

Sat, 12/10/2011 - 18:54 | 1966763 TheFourthStooge-ing
TheFourthStooge-ing's picture

The accountant in Hedge Fund of One speaks of archaic accountancy terms and practices from a bygone era of non-fictional accounting, when books had to balance and book entries were tied to reality.

Back then, what he speaks of would have mattered. However, modern accounting has made things much easier; you simply start with the results you want, and then work your way backwards, creating book entries which flow from the bottom line. Just think of it as creative writing, but with numbers instead of words.


Sat, 12/10/2011 - 19:00 | 1966771 DormRoom
DormRoom's picture

when 1:1 (double entry) relationships mutate into 1:M (rehypothecation entry) relationships you have a situation for a clusterfuck.


the great reset cometh.

Sat, 12/10/2011 - 19:10 | 1966791 TheFourthStooge-ing
TheFourthStooge-ing's picture

It's not just a clusterfuck. It's a global, daisychained clusterfuck. Further, rehypothecation means that each participant in said clusterfuck has multiple penises and dozens of cloacal orifices.


Sat, 12/10/2011 - 19:31 | 1966816 whoopsing
whoopsing's picture

So, that'a a multi-cloacal rehypothecated cluster-fuck. Captain, we are doomed

Sun, 12/11/2011 - 15:40 | 1968014 ViewfromUnderth...
ViewfromUndertheBridge's picture

the new technology that has driven all this? ...Spreadsheets.

Sun, 12/11/2011 - 07:48 | 1967328 Hedge Fund of One
Hedge Fund of One's picture

That's why I started with "Sorry ..." I knew it would probably hurt. Great responses from all. lol

Sat, 12/10/2011 - 18:24 | 1966712 A Man without Q...
A Man without Qualities's picture


"And where would those contributors get the money? Create it from thin air?"

- yes, which is why this whole argument about costing the taxpayers is BS...


Sat, 12/10/2011 - 19:03 | 1966780 Pool Shark
Pool Shark's picture



And what happens to the value of the taxpayer's dollar every time new ones are created from thin air?

Exactly; it costs the taxpayer via theft through inflation...


Sat, 12/10/2011 - 21:42 | 1966987 breezer1
breezer1's picture

Think of all the fixed income people that you know who will be affected by this ' inflation' theft.

Sat, 12/10/2011 - 21:43 | 1966988 earleflorida
earleflorida's picture

they used to be incinerated, now their just electronicfied to bits  

Sat, 12/10/2011 - 21:57 | 1967003 Reese Bobby
Reese Bobby's picture

I'm no accountant but you are wrong.  The ECB is not on the blackboard but "Eurosystem Lending" is an ECB liability that becomes an IMF liability in this exercise.  The Banks "sovereign debt" assets are transferred as an asset to the IMF in return, and the other book entries are eliminated.  Again, I am not an accountant.

Sat, 12/10/2011 - 22:31 | 1967037 economics1996
economics1996's picture

Somebody was paying attention in class.

Sun, 12/11/2011 - 10:56 | 1967447 RiverRoad
RiverRoad's picture

Exactly.  Created from thin air and the old (off the books) foreign aid shell game.  Liabilities?  These guys  still owe us money from WW2 war debts!!

Sat, 12/10/2011 - 18:19 | 1966687 DormRoom
DormRoom's picture

Even if you move the liabilities to the IMF, it doesn't solve the problem of finite collateral in a system highly leveraged from rehypothecation, using finite collateral.


Eventually the synthetic liquidity will reverse, and the bubble from rehypothecation will pop. Assets you thought you owned will be put in legal dispute by a host of other parties, and the drop in confidence will exasterbate the credit crunch.  Thus the great deflation in shadow banking will hemorrage out into the real economy, and ruin it.


And if the Central Banks monetize to stabilize sytnhetic liquidity in shadow banking, they merely kick it down the road, until the future adjustment becomes apocalytpic, if it isn't already.


Then there will no one to protect bankers from pitchforks.

Sat, 12/10/2011 - 18:22 | 1966711 Global Hunter
Global Hunter's picture

You've answered my question below it doesn't solve it (moving shit on to the IMFs books)

Sat, 12/10/2011 - 18:58 | 1966770 TheFourthStooge-ing
TheFourthStooge-ing's picture

DormRoom observed:

And if the Central Banks monetize to stabilize sytnhetic liquidity in shadow banking, they merely kick it down the road, until the future adjustment becomes apocalytpic, if it isn't already.

They still haven't realized that the road down which they're kicking the can ends in a cul-de-sac.

Then there will no one to protect bankers from pitchforks.

Don't forget the torches, tar, feathers, and nooses.


Sat, 12/10/2011 - 21:22 | 1966966 DeadFred
DeadFred's picture

They have eyes. They can see the cul-de-sac but another month, year or decade gives them more chance to loot the world. He who has the most toys won't rule after the great reset, it will be he who has the most gold.

Sun, 12/11/2011 - 15:05 | 1967909 Nobody For President
Nobody For President's picture

I love it Dorm Room:

"exasterbate"  =

exacerbate + masturbate

Which seems to be *exactly* what is going on.

Sat, 12/10/2011 - 18:12 | 1966691 earleflorida
earleflorida's picture

nothing like a drawing board to explain something  complicated that's actually simple - now if we could only get back to X's & 0's

what ever happened to double-entry?

Sat, 12/10/2011 - 18:38 | 1966740 TheFourthStooge-ing
TheFourthStooge-ing's picture

earleflorida asked:

what ever happened to double-entry?

It's been rehypothecated to octuple-entry. In other words, assets and liabilities are counted in four completely different sets of books. It works perfectly as long as nobody ever exercises their claims to anything on any of the books.


Sun, 12/11/2011 - 08:58 | 1967360 jeff montanye
jeff montanye's picture

like aig's mbs insurance that worked as long as there were no claims; like greek cds that didn't have to pay because the haircut was voluntary; like ....

Sat, 12/10/2011 - 18:12 | 1966692 Global Hunter
Global Hunter's picture

Can anybody answer how moving things from one central bank balance sheet to the IMFs free up collatoral which we know now is has be re re re re hypotheticated (sp)?

Sat, 12/10/2011 - 19:02 | 1966777 TheFourthStooge-ing
TheFourthStooge-ing's picture

It creates one more layer of obfuscation, thus delaying the day of reckoning by one more day. I'll bet you thought kick the can was a kids' game.


Sat, 12/10/2011 - 18:16 | 1966697 luna_man
luna_man's picture



Try as they may, (CRIMINALS) no good place to dispose of the TOXIC WASTE!...

As spectators, do we continue to watch or prepare for the worse?...

Heck, bunker loaded to the max, prepared to close the hatch!  U2?

Sat, 12/10/2011 - 18:24 | 1966714 Global Hunter
Global Hunter's picture

I haven't been sleeping very much the last few nights.  Its not going to be about a long life and retirement dreams any longer its going to be about survival.  One fucking day at a time, cold war has nothing on this, that was just a warm up.

Sat, 12/10/2011 - 20:26 | 1966885 sabra1
sabra1's picture

once the hatch is closed, it'll never be reopened! billions of us throwing rocks, couls easily overpower hundreds with guns! i know for a fact, armies will choose to fight on our side!

Sat, 12/10/2011 - 18:24 | 1966715 kaiserhoff
kaiserhoff's picture

The problem is NOT a "shortage" of collateral.  The problem is that the bonds these banks are holding are worth squat, which is why no one, except Comrade Ben, wants to place a bid on them.  Hence the need for all the gibberish, smoke, and mirrors.

Sat, 12/10/2011 - 18:27 | 1966722 nmewn
nmewn's picture

It looks like the good bank/bad bank scenario of the S&L crisis years. Except at the mutli-national level.

But what does it say about sovereign nations who over promise and can never meet their obligations when they have to resort to such balance sheet tricks?

They'll just do it all over again. And again.

So, again, we turn to...what is the point of taxing the serfs? Just print to the point of implosion and then dump the debt derived from printing into a concocted holding tank...errr, bank.

Rinse & repeat. Its PFM.

Sat, 12/10/2011 - 19:16 | 1966802 TheFourthStooge-ing
TheFourthStooge-ing's picture

nmewn asked:

So, again, we turn to...what is the point of taxing the serfs?

Control. Taxing them ensures that they remain serfs for life. It was never about revenue. I think you already knew that, but others might not see the rhetorical nature of the question.


Sat, 12/10/2011 - 19:27 | 1966813 nmewn
nmewn's picture


It is about control.

But they've gotten sloppy over the years as egomaniacs often do. Its at the point now where they ask for our trust based on nothing at all. No track record. No great accomplishment to point to.

A life spent sponging off of others hardly

Sat, 12/10/2011 - 22:41 | 1967054 economics1996
economics1996's picture


Sat, 12/10/2011 - 18:39 | 1966743 luna_man
luna_man's picture



And remember folks, were dealing with CRIMINALS! logic, common sense, plays no part in the equation...

Just be ready to close the hatch at a moments notice!

Sat, 12/10/2011 - 20:19 | 1966876 sabra1
sabra1's picture

so, criminals don't have necks?

Sat, 12/10/2011 - 18:42 | 1966746 Teamtc321
Teamtc321's picture

Chalkboard to eraser to pawn off then more debt, priceless fix!   

Sat, 12/10/2011 - 19:09 | 1966787 Art45
Art45's picture

If only we had an elastic money supply, fractional reserve requirements, and less regulation, then we could simply expand the collateral pool when needed.

Oh wait... Isn't that how we got here?

Sat, 12/10/2011 - 20:06 | 1966856 PulauHantu29
PulauHantu29's picture

$30 Trillion is the minimum they need to print.

Watch oil, food, PMs spike.

Sat, 12/10/2011 - 20:18 | 1966873 sabra1
sabra1's picture

only then, will the people finally be forced to hang and castrate the satan loving oldidorks! armies will turn ther guns towards those beasts, and we shall reclaim all that was taken! and, let's not forget to hang all those who enriched themselves in the process!


Sat, 12/10/2011 - 21:35 | 1966982 Alpha Monkey
Alpha Monkey's picture

nah, the armies will be the only ones getting paid.  Other than the oldidorks that is. 

Sat, 12/10/2011 - 21:18 | 1966956 Tuffmug
Tuffmug's picture

A "small cog" will not take down this system.  This is not Humpty Dumpty sitting on the wall. It's a dark army of fraudster spiders in full control of a very robust and dishonest global financial system. We are trapped in it and they can manipulate us at will using fiat money and fractional reserve banking to stealthily loot our collective wealth to serve their purposes. It won't collapse until we reject fiat money as a store of wealth and means of exchange.  

Sat, 12/10/2011 - 21:55 | 1966999 earleflorida
earleflorida's picture

pretty much paying our "Stop-Loss" vet's with salt now,... and we all know, salt loses it charater as time goes on,... ?

Sun, 12/11/2011 - 12:38 | 1967538 pine_marten
pine_marten's picture

 "It's a dark army of fraudster spiders in full control of a very robust and dishonest global financial system."

They also control a vicious global gulag with hit squads, torturers and all the trimmings.........

Sat, 12/10/2011 - 22:14 | 1967017 Westcoastliberal
Westcoastliberal's picture

Okay Bitchez, I read enough of the "poke the other guy in the eye" bullshit posted here.  Face it, the only way to quickly end all the crap is to declare a worldwide jubilee.  All debts are forgiven and we can all start over.  Do it however you want, but if you disagree answer me this Batman: So far the only thing that's really been tried is to give public money to private banksters.  How 'bout we turn than on its head and give the money to the people instead?  Either way the people wind up paying it back.  We can effectively set the economy how ever we want it.  The rich won't like this, but fuck 'em.

Sun, 12/11/2011 - 09:26 | 1967374 dcb
dcb's picture

You should look into the work of economist steve Keen from australia. He is one of gthe  beest in the world. revolutionary, etc. By the way your remark is 100% accurate and thqat's why it isn't working. But steve keen can give you the reasosns and numbers. The reason is because banksters control policy option, along with their owned elites. they have in fact prevented a real solution because it would mean they loose. those with the most must loose the most when a system collapses if they gained the most. that is what is supposed to happen. now they are bankrupting us making themselves rich, it will still collpase, but they will have everything then.  This is also certain there will be a lot of violence a tthe end of this. I wonder a lot if I am going to be shot by american troops when the people decide they have had enough of banker tyranny

Sat, 12/10/2011 - 22:24 | 1967024 Saxxon
Saxxon's picture

"[t]hey merely kick it down the road, until the future adjustment becomes apocalyptic, if it isn't already".

This is what they do.  To me it is the most grievous crime they commit - to sell the future right out from under the young and the unborn.  Kicking cans and burning oil so their children's children inherit debt and an arid earth.  Kin and country be damned.  Eventually the technocrats will reap the whirlwind and we will enter a Canticle for Liebovitz scenario; only instead of technology the mob will destroy anything remotely resembling banking, fiat and usury.

Sun, 12/11/2011 - 02:15 | 1967251 pineyard
pineyard's picture

As to above Trailer :

First of all ... EUROPEAN DEBT I including Sovereign Debt ) IS  ( just like in Japan ) MAINLY TO EUROPEAN ENTITIES ....

NOT to the remaining World , towards which EUROPE OVERALL ... has a POSITIVE CAPITAL BALANCE SHEET !

This enables an INSIDE EUROPE  NEGOTIATION ... HOW to ... in a structured mutually acceptable way SOLVE the problem of too much SOVEREIGN DEBT

It is said ..that there is TOO LITLE COLLATERAL ... Well ... Gentlemen .... I have previously forwarded the IDEA ( probably laughed at by many ) .. that EUROPEAN NATION STATES use the ENOURMOUS WEALTH bound in all the HARD REAL ASSETS in SOVEREIGN POSSESSION  as COLLATERAL for its DEBT.. so to speak PUT ITS PURSE where ITS MOUTH is...

 And THAT CAPITAL .. in SOVEREIGN EUROPEAN POSESSION .. by far surpasses any DEBT there may be ... INFRASTRUCTURE ..EQUITIES ..REAL ESTATE ..GOLD .. this WEALTH is ENOURMOUS .. probably the biggest Wealth ..on EARTH .

Why let that CAPITAL stand there IDLE ? It is REAL .. contrary to all the fictious leveraged products in common use in the financial world to day . It would ofc necessitate a RELIABLE STRUCTURED AND TRANSPARENT WAY .. to IMPLEMENT this.. but when looking at current ETFs .. there is ample financial expertice to set up such an asset backed currency !

 Ofc Nation states would need to ALLOCATE sufficient of  Assets in Sovereign posession into an INDEPENDANT ENTITY by sound principles of sustainable Profit .. for this to be menaingful ..

But also this is not something New such  is already in practice ..regarding many of the Assets of the Sovereigns .. throughout Europe

It is mainly a political decision ...only

And I certainly would know ..where I would put my Savings if I had the opportunity to put it in a transparent asset backed currency .. contrary to some pieces of paper ..based on some vague human promises to pay me ... in the future


Sun, 12/11/2011 - 16:04 | 1968076 ViewfromUnderth...
ViewfromUndertheBridge's picture

this worked in Germany in 1924...but the damage that had been done led to greater problems 15 years down the road.

Sun, 12/11/2011 - 02:39 | 1967267 Lmo Mutton
Lmo Mutton's picture

Hookers and blow man.
It will work it self out.

Sun, 12/11/2011 - 03:08 | 1967278 darkpool2
darkpool2's picture

Confidence.........the entire fiat system hangs on this single construct. All the smoke and mirrors just serve to try and put crutches under the imploding levels of confidence throughout the chain.
So, you are forced to ask yourself.....what is left after confidence goes?What can you trust? Self, and unhypothecated "resources"and things without counterparties.

Sun, 12/11/2011 - 03:08 | 1967279 darkpool2
darkpool2's picture

Confidence.........the entire fiat system hangs on this single construct. All the smoke and mirrors just serve to try and put crutches under the imploding levels of confidence throughout the chain.
So, you are forced to ask yourself.....what is left after confidence goes?What can you trust? Self, and unhypothecated "resources"and things without counterparties.

Sun, 12/11/2011 - 09:42 | 1967388 hardcleareye
hardcleareye's picture

Uhhh excuse me but that doesn't fix the problem..

Sun, 12/11/2011 - 10:47 | 1967444 RiverRoad
RiverRoad's picture

So, move all the soveriegn debt onto the books of the IMF..... so effectively the US can solve all their mess via "foreign aid".  Better not happen.

Sun, 12/11/2011 - 11:21 | 1967463 IamMarla
IamMarla's picture

re-pledged collateral

bipity bopity boo comes to mind because it is some how a factor of less than nothing any way.... how?

Sun, 12/11/2011 - 13:31 | 1967665 rosiescenario
rosiescenario's picture

Ah, it is the old "For want of a nail, th shoe was lost....for want of a shoe the horse was lost....etc."


Or in more modern terms, the biggest nuclear blast starts small.....

Sun, 12/11/2011 - 17:37 | 1968276 radicall
radicall's picture

I guess someone disagrees with this theory.. 



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