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The Corzine Trade Vs French Downgrade
From Peter Tchir of TF Market Advisors
The Corzine Trade Vs French Downgrade
Today it seemed that the market latched on to the idea of the Corzine trade as being the new bazooka. banks would borrow lots of money from the ECB to buy sovereign. It certainly seemed to be the case this morning when 3 year and in PIIGS bonds rallied hard.
There are several flaws with this as a plan to save the euro.
Banks can already buy virtually unlimited amounts of Spitalian bonds. The repo market for these remains orderly so they could finance themselves without the ECB. Maybe the ECB terms are more favorable but the reality is banks could already buy as much sovereign debt as they wanted. The issue is that they already have more than they want. As banks use ECB funds to buy more PIIGS bonds, private investors will be squeezed out. The banks will have concentrated risk that private investors may not be comfortable with. As banks rely on the ECB to fund themselves and to put on disproportionately large positions who will lend to them? Who will buy the shares? At first it may seem good, but they will be at the mercy of the ECB and the politicians. With Greece the politicians have already shown a willingness to try and dictate policy for banks. The on again off again rumor of a financial transaction tax will come back.
MF didn't have unlimited central bank backing but it is a bit strange to believe that the trade that brought them down will be the salvation of Europe.
This unlimited lending will be inflationary and reduce pressure on countries to address their deficits. The risk of a solvency problem hasn't been reduced it has just been shifted. If this deal is so good for banks, why bother lending to corporations or individuals? I think that is a key issue. For all the QE efforts we have made little of the cheap money has been let loose on the economy by the banks.
A little buying by banks, 20 billion of ECB purchases and an IMF rumor or two might be enough to get the markets to pop for a bit. The bearish bets on the euro have hit an extreme, making it even easier in thin markets to prop it up for a bit.
Belgium got downgraded. Not much impact but a clear warning shot that bailouts have a cost. Belgium bails out Dexia. Belgium borrows money. Dexia borrows from the ECB to buy Belgium bonds. That is not a solution but it is what we have.
I'm surprised S&P did not follow through this week on any sovereign debt downgrades. They had the air cover with Moody's and Fitch stating how disappointing the summit was, but S&P remained silent. Have they agreed to remain quiet until next year? The market has NOT priced in a downgrade. The market action today made that clear. The question is the timing of an announcement. I would now bet that if it isn't out early on Monday, they will hold off until next year. That makes it easier for the market to forget that it is out there and try to rally.
Why is France trying to get England downgraded? Do they really think adding more uncertainty is going to help? I understand that they are miffed but trying to get more countries to lose their AAA only adds to uncertainty.
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Downgrade everyone a notch, and what does it matter?
AA+ is the new AAA Bitchez!
Very good point Strut. True global collectivism.
We will ALL GO DOWN TOGETHER...... such a nice, warm feeling to that eh? And Corzine's trade coming good after the fact is no surprise.... who holds MFG's portfolio now? Who WILL benefit ultimately?
ori
/this-that-and-the-4th-reich/
Or as the official report from the US Financial Crisis Inquirey Commission said,
When MF Global went down it did so because its repo, derivaitve and hypothecation partners essentially foreclosed on it. And when they did so they then ‘looted’ the company. And because of the co-mingling of clients money in the hypothecation deals the ‘looters’ also seized clients money as well.
So what we have, courtesy of the change in the bankruptcy laws is the means for banks to loot each other. Simply become a major short term funder via repo or hypothecation or a major counterpary in derivatives deals with the ailing bank and in both cases should the bank you are lending to go bankrupt, you will keep all the assets it pledged to you before any other creditor get a chance.
Because the repo and derivatives traders ran no risk – they could get their money out of a failing bank before anyone else, it meant they had no reason at all to try to stop a bank from going under. Quite the opposite.
http://www.golemxiv.co.uk/2011/12/plan-b-how-to-loot-nations-and-their-banks-legally/
I uploaded a new vid to my Youtube channel.
Dr Ron Paul Joe Rogan Man Love Moment on Jay Leno Dec 16 2011
http://www.youtube.com/watch?v=JuFW264OKag
Ron Paul Asks Ben Bernanke What Real Money Is?
http://www.youtube.com/watch?v=Q-mxlTsq73I
see best part at 4:26
good video Michael, TY. But the heart of the debate is this : "making money out of thin air". Its true except its not true as long as Ben says, "I am currency as I am reserve and even at .3 % the world wants my 5 year treasury bills." He does have a point as it is a relative world. Until Rome burns and its money becomes dirt. That is outside the brief of BB, its in the court of Potus.
Will he use his nuclear stick to ensure Rome NEVER burns from without, all the while it burns from within...?
Check it out Tyler, officially a new word, de-hypothecation
http://www.urbandictionary.com/define.php?term=de-hypothecation
how about re-de-re-hypothecated spiral. Its call the yoyo asset. Now you see it now you don't.
GiantVampireSqu...I really hope everyone reads this Plan B
If everyone did, there would be a bank run come monday.
AA+ actually means FFF- :o)
-John
http://www.youtube.com/carmarketer
Downgrade everyone a notch, and what does it matter?
Gold doesn't need a credit rating.
Gold doesn't need someone telling you a counterparty's ability to pay off, because gold has no counterparties.
Gold has no spot price because gold exists outside formal financial markets.
Paper gold has a spot price and a formal market tracking it. But paper gold is fake gold. It's not really there. You just think it's there. Try to take delivery and see what happens ...like Gerald Celente found out.
Is it true that Jon Corzine died of a massive heart attack this morning? He will be missed as he joins Jeffry Picower in the Caymens livin la vida loca!
note: Jeffry Picower, a longtime friend of Bernard Madoff and a figure who had been under scrutiny in the criminal investigation surrounding Mr. Madoff's fraud scheme, died on Sunday in Palm Beach, Fla., according to police. The Palm Beach Police Department said they responded to a 9-1-1 call just after noon Sunday from a woman who said she had just found her husband at the bottom of their swimming pool. Mr. Picower, 67 years old, was brought to the hospital, where he was pronounced dead. So they say but i smell a conspiracy theory forthcoming.
Tchir is spinning a fantasy, and I don't think he has his facts straight. The European banks simply do not have that much cash available, or else those that do are holding on to it.
"Why is France trying to get England downgraded?"
Is this a rhetorical question?
PS. It's not England that the French wish downgraded; it's the UK.
Jesus...
You realize that if everyone is toast, effectively no one is toast...
OOOOOO...which ones land butter side up with cinimamon on top?...I smell a new financial product.
But French toast is better than ordinary toast.
And don't even get me started on Joan of Arc!
Corzine is scum!
Can't he be downgraded to hell?
BTW, the Euro Zone is toast, All of it!
Don't matter what they grade it!
Ditto for O, and his USSA.
"Why is France trying to get England downgraded?"
Well, you see back in 1734 Mark Weston stole a baggette from Francios du Mond Duesch. Still not sitting right with the people...
What you forgot about that little tête a tête in 1066?
I thought they were trying to taunt the British into sending a large wooden rabbit through the chunnel.
What happened to the cool names anyway? William the Conqueror, Vlad the Impaler, Catherine the Great (HiHo Silver), Ivan the Terrible etc.. We're getting screwed out of everything these days even the monikers for the tyrants, Angela the Indecisive and Gordon the WishyWashy doesn't do much for me.
Well we do have Helicoptor Benn, but that pales complared to Vlad the Impaler.....
Nope, you have 'Ben the Impaler', Bend over ...
You can't even do it right.. Hello, Ben Dover? Keep your day job dude.
Guess my GMGMQ is out of the running for repoland.
- sigh -
I don't see how the ECB loaning money to banks to purchase sovereign bonds is so different from the ECB just purchasing sovereign bonds directly.
Where does the ECB get the money that it will loan to the banks for this?
'directly'
'Money' comes from you, wherever you are.
These are balance sheet crises, so think of it in terms of assets not "money" (which ultimately only as useful as what backs it).
1. There are lots of toxic assets around, this includes Eurozone sovereign debt due to its unsustainability within that framework.
2. Central banks have many ways to increase liquidity in the system, all of them increase the banks balance sheet. Quantitative Easing is a special measure because it "permanently" increases the central banks balance sheet by purchasing assets as if they are a buy-to-hold investor. Against these assets, liquidity is released (the liability side for a central bank).
3. Central banks also maintain the fractional reserve system. So, for example, in the US, a 10% reserve ratio means a total level of participating bank reserves of $1 trillion can support $10,000 trillion of deposits. If you increase the reserves by say $600 billion as part of a QE program to $1.6 trillion, now you can support $16 trillion of deposits!
On 8th December, the ECB did three key things:
A. Cut the reserve ratio from 2% to 1% starting 18th Jan 2012. With EUR 400 billion reserves at 2% ratio, EUR 20 trillion deposits could be supported. With 1% ratio, now EUR 40 trillion can be supported.
B. Announced intention to conduct two long term repo operations with maturity of 36 months (3 years).
C. Eased collateral rules.
It is B that enables the Corzine (aka Sarko) Trade. In effect, with its already wide and now even wider collateral acceptance rules, the ECB is swallowing the banks asset books. In addition, with the new LTRO duration of three years, within the time frame of the EZ crisis (some participants expect the Euro to fail next year or 2013), this may as well be considered a "permanent" balance sheet expansion. Thus, stealth QE.
So, to directly answer you question: the difference is that the banks can give up almost all their toxic assets and get easy funding to buy whatever they like. Some will take full advantage of their "sovereign backstop" to carry the risk of holding EZ sovereign debt, in preference to other assets such loans to the real economy. Initially, the markets may be pleased to see the yields slowly climb down, but then they will eventually realise that all that has happened is that the credit risk is stuck in banks since they get paid to act as an extension of the sovereign!
So, why would you buy bank debt or equity? You have just shuffled the deck with what are now mere extensions of the sovereigns (the banks) and not fixed anything with the Eurozone. Non-bank and non-EZ investors are highly unlikely to look upon this mess favourably.
sqz - Thanks for the insights.
No, problem. Just noticed I made a typo: "$10,000 trillion" should be "$10 trillion" (I must have originally thought to write $10,000 billion). ;p
Quadrillion is the new trillion anyway.
Well, you see, it's quite simple actually.
See, the sovereigns lend to the ECB, and the ECB lends to the skanks...er...banks...and the banks lend to the sovereigns. Now, it wouldn't make much sense if the sovereigns lent to the ECB and then the ECB lent to the sovereigns, would it. That's sort of transparent bootstrapping. Peolple see right through that, so the perpetual motion machine never gets up to terminal velocity, so to speak. PLUS, the banksters get cut out of the loot...erm...loop,,,skimming the flow, and we can't have that now, can we? Also, once the ECB loans to the banks, the shadow-banking infinite ponzi can multiply the liquidity of the deltas between the liability to the ECB and the asset to the sovereign to the moon. It's all perfectly sensible.
"It's all perfectly sensible."
Even for the mouse running on the wheel.
It's sort of like how the US Govt Treasuries get issued to the primary dealers who flick them on to the Fed. It would be much cheaper and direct to cut out the primary dealers but how would they get their cut?
And this way the baks make the interest to pay huge bonuses. If the ECB made the money some would go back to taxpayers rather than traders at the banks.
Right on.
It is so different in the US where the treasury sells to the primary dealers who are funded by money from the Fed. The promary dealers then sell to the banks, who still hold a bunch of very crappy consumer, mortgage, corporate and sovereign debt. The banks then keep the treasuries, but sell the crappy toxic MBS and other stuff to the Fed. No inflation yet because all the dollars are sterilized (they have effectively been converted into the really crappy "assets" on the Fed's balance sheet).
Oh, and what do the banks do? Well now that the Fed/Treasury gymnastics have converted their crappy debt into treasuries, they are free to leverage up again (which is what they have done). Only creating a worse problem the next time around.
Now the ECB is rerunning the scenario.
It is amazing the markets seem to have accepted this bootstrapping by the US (because it has the money to pay, they say) but they are punishing Europe.
Let justice prevail and unish them both, I say.
@ pancho_v: Where does the ECB get the money that it will loan to the banks for this?
recent indications point to germany!
The bank liquidity funds come from triple-reverse repo on swap lines with other central banks, that have the unique property that when anyone inquires about them, the triple-reverse repo is itself automatically reversed so the source of the funds can, technically, never be found, although the key central bankers can access that source at any time.
Peter Tchir, on top of things in Europe as usual, writes above:
« Belgium bails out Dexia. Belgium borrows money. Dexia borrows from the ECB to buy Belgium bonds.»
Local comments here can be translated as:
'Cool.'
'It works, doesn't it?'
LOL
You might like this (actually think it is good):
http://www.geek.com/articles/geek-cetera/youtube-channel-teaches-sorting-algorithms-through-folk-dance-20110418/
The Triple Lendy?
ever hear of Target2?
my source for the "germany" answer, doug noland, explains it all here: PrudentBear
1/ ECB loaning money to banks to purchase sovereign bonds is so different from the ECB just purchasing sovereign bonds because it removes one opportunity to hyper-rehypothecate.
2/ ECB gets the money that it will loan to the banks for this by pre-rehypothecating the rehypothecated rehypothecation that the hyper-repothecated sovereign rehypothecates post-rehypothecation of the rehypothecatismus. It's very simple.
They, the ECB now in eleventh hour clutch play, are just CUTTING and PASTING the US FED style re-hypothetcated ponzi system, albeit FIVE-TEN years later, after the intial spiral began....Madoff must be crying his eyes out and laughing his head off at the same time in prison, as he epitomizes this totally schizophrenic system. "I did it MY WAY and ended up in prison."
He sings on,
"While THESE guys whom I cut and pasted get bonuses instead, all the while ruining the whole world. Why MEEEEEEEE???? I'm small fry!"...He just may have a point...
The City has been at the heart of the ORIGINAL ponzi that burst in 2008. So now they have no other option than to sing, "I'M ALL IN!" to the ECB and MErkozy; BoE is NOT all powerful, like FED, living off "exorbitant reserve currency privilege" and nuclear big stick overkill backup. "And you better chip in or we all burn in Hell!" Sang Cameron in Brussels. Merkozy said NEIN to it. Whence the teeth gnashing and blanket pulling going on. Don't fall for this "thieves falling out" drama. It's our blood that feeds the Squid, either way the cookie crumbles. And the ONLY way to solve the Oligarchy charade now, global financial tsunami, is for the Oligarchs to SHUT DOWN the market, stifle all entrepreneurial correction, and let statism solve the problem that Oligarchy play, central bank support and surrogate political collusion have created over THIRTY years. They've done God's work using international labour arbitrage to fill their own pockets and to ruin the 99% whose money they burnt in building their own wealth. Socialzed debt, privatised profits; 25 T stashed away in perfect symmetrical play...Well done Oligarchs, poor suckers we first world sheeple.
So... I have it from good source (my cousin) who works at Fort Hood... he's being sent along with 400 US troops to the middle-east in an ``urgent deployment``... he thinks it's for Syria... and they've been told they won't be back for christmas. That deployment was out of nowhere.
So me thinks NATO is gonna announce this week-end that they are going to impose a no-fly zone on Syria starting next week.
Best of luck to your cousin. A no fly for AF1 or 2 is outta the question.
So the first night of Hanukkah was lies & propaganda that the Iraq War was over, haha..
The second night of Hanukkah is troop deployments to Syria..
I figure about night five will be when we bomb the facilities in China where they're picking apart that drone and that'll be an embarrassing debacle too.
The Menora should not be lighted until next week. Am I wrong?
Jeez what a bunch of fucking pussies S&P is. MAN UP and do the deed already.
Who the hell knows what goes on with the French.
Remember this is the country where they thought the Maginot Line was going to be their salvation and when it wasn't folded, almost as fast as a catholic girl at her prom.
They dent the blantly obvious, i mean doesn't anyone else think that it was odd that the fallout from Chernobyl oddly missed France. At first the french government denied any risk and then minimized the risk. Mostly to protect the French Nuclear Industry.
So, the french play book is to deny, point out how some other country is worse off, deny again, and then fold.
But the French make good bread. You want to mess with baguettes?
"Why is France trying to get England downgraded?"
The law of relativity.
Size doesn't matter. It's how you abuse it.
"Why is France trying to get England downgraded?" The wheels are coming off the EU. The EUmobile that so many have invested so much in has a structural defect and is being recalled. France lashing out at Britain is the beginning of EU member outbursts of anger, recriminations, the blame game, etc.
Or, La Belle France as usual...drama queen and bitch.
That is the pattern of 2008. Very little of the bailouts reached the street level of the economy. The banks shifted "liquidity' from one pocket, to the other. it's the old Shell Game.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
Who here would allow themselves to be at the mercy of the ECB and the politicians? Would anyone here in good conscious lend a penny to them? Would anyone here lend money to fascist oligarchs?
well, you can choose either the FED or the ECB, it comes to the same. You can buy any colour of car in Oligarchy land...provided its black! Dixit Henry Ford!...
And, the Oligarchs never ask you to lend them your money, they just take it, one way or the other!
They make you an offer you can't refuse! Simple.
OT: Portugese politician: Debt is our atomic bomb
http://www.newsmax.com/StreetTalk/Europeandebtcrisis-Portugal-PedroNunoS...
Calls for PIIGS to unite and demand better terms from France and Germany.
http://www.readtheticker.com/Pages/Blog1.aspx?65tf=422_the-markets-are-worn-out-yet-there-maybe-a-surprise-under-the-hood-2011-12
We expect Xmas week to up..
Does anyone see a way ou of this mess other than time? What can spur real growth.. I think that is the ony real solution.. And a new US admin.
Improved productivity and economic efficiency.
There are many ways to achieve that. Each strategy will piss off one special interest or another, or will be too complicated for economically illiterate politicians to understand, but if we could change the regulatory structure to squeeze out an additional 1 to 2 percent of gdp growth we could get out of this with a fairly comfortable muddle thru.
You have been here a while so I am surprised to see your answer.
We live in an energy based economic paradigm. No energy, no economy. Lots of energy, lots of economy.
It's not an infinite growth equation and we're headed down the slope.
The only way to manage the decline is to thin the herd and reallocate natural energy resources.
Everything else is noise or obfuscation of the underlying facts.
Creating more output with less input is the definition of productivity growth. Even if energy supplies decrease we can still improve efficiency, use fewer inputs and still have growth
If we dont mind the earthqiakes and polluted landscape we got enough oil and nat has to keep the plateau stable for a while.
They are now beginning to apply fracturing not just to shale, but old low producing traditional oil fields. What might be down there? I am cautiously optimistic of another oil boom in america.
Creating more output with less labor is the definition of productivity. Labor is replaced with machines using fossil fuel, labor productivity gains at the expense of fuel productivity.
Europe moving its manufacturing capacity to China -- where inputs must be shifted from Europe to China then back so as to 'save' a few pfennigs -- is not productive when fuel costs increase by an order of magnitude.
Crude cost $12 per barrel in 1998, $104 yesterday. Real fuel prices increase much faster than does efficiency which is smeared across an entire population of fuel using machines.
The price increase must be paid for with increased credit. Why is Europe broke again?
Efficiency is to a large degree a mirage. The solution to the current problem is the same as the outcome of not doing anything about it: conservation.
"What can spur real growth.."
Asking that question is the core of the problem imo.
"Growth" is a byproduct god of a debt based economy.
With sound money, growth is not necessary for economic health.
With debt based money, it is essential to grow in order to cover the debt. The emphasis on growth creates an imbalance which has to be corrected with extreme slowdowns (like where we're headed now).
Time, without clear understanding and objectives, will simply lead us into another cycle of growth after a painful slowdown.
There is only one way out of this mess (short of bloody revolution) imho, and that is to take away the primary tools used by the central planning crowd, Those are the federal Reserve, the 16th and 17th Amendments. Forgive me if that sounds pollyanna, but it really is that simple.
You are right.
Look at the Amish.
Growth and innovation are not necessary if you dont mind your society freezing at any given developmental level.
This is the difference between 'culture' (which comes out of a box stamped 'Made in China') and civilization.
The West and its wannabes wouldn't know a civilization if it smacked them upside the head with a chair.
Development is 'money' to 'more money'. Everything of value is stripped out and replaced with lies.
The last time there was any meaning or value in this world was the end of the 19th century ... "before the lights ... going out all over Europe, not to be relit in our lifetime."
They may never be relit ...
"And a new US admin."
Ron Paul
Isn't this ALL about the carry trade?
I'm paraphrasing someone's comment here from a few days ago, but it rings true:
1) Banks borrow ECB money @ 0.5% & buy PIIGS bonds @ 6% - nice spread - Europe continues to spiral - ECB begins to lend money on toxic sovereign collateral (aka - TARP buying toxic MBSs)
2) Banks trade toxic PIIGS bonds to ECB for real money, locking in the spread - taxpayers eat the default...it is not as if it is unheard of for CBs to have an "agreement" in place w/ their PDs.
There shouldnt be a default if ecb lending is available in amounts to allow banks to buy all the bonds necessary to keep rates stable.
Then banks turn around and repo it right back to the ECB for needed liquidity. The ECB secretly controls states' deficits by refusing to fund banks to buy bonds over three percent GDP deficit. If a country wants to deficit spend 5% of gdp it will have to find other buyers. The ECB wont loan banks money to buy those additional bonds and a state eill have to pay a higher rate to place it privately.
This way a unified Eurobond is implicitly available for up to three percent of gdp deficits, and "penalty" rates apply to deficit spending higher than three percent of gdp.
Is this the strategy to solve the eurocrises?
Can it work?
This system would work if the numbers were accurate.
Can you trust the GDP numbers of any country? Can you trust the deficit numbers? What about off budget items? In a currency war, as in any war, truth is the first casualty.
The US claims a GDP of $15 trillion plus. Dagong the Chinese rating agency estimates it to be about $6 trillion.
War spending was off budget in the US - "the U.S. military has largely paid for the wars in Iraq and Afghanistan through emergency spending measures, in effect keeping wartime costs off the books."
What about the bailout of the GSEs estimated to cost trillions - another off budget item
What about $116.8 trillion in unfunded liabilities? Where do they figure in the deficit? Nowhere though Medicare will be broke by 2017 if not earlier.
Governments have running up their debts and they can no longer be repaid. Everyday we get closer to financial armageddon.
It still would not work. The mathematics of the current money system require perpetual, increasing growth. This is inconsistent with a real world based on real constraints. End of growth in any one critical way equals the end of the current money system. It really is not any more complicated than that. Everything else is just details, noise, etc.
The new bonds would be pari passu with old bonds so that wouldn't work but you may be on to something.
How can central banks have so much power?
No freaking way. The debt ponzi requires inflation greater than previous inflation. Austerity is what is required, which is deflationary. 3% is not enough to fuel the debt bubble. It will only accelerate the actions within the shadow banking system to increase leverage and risk in a cannabalistic manner. The best it can achieve is the kick the can just a little further as dumb money sloshes around desperately seeking yield in an environment of increasing risk.
I'm gonna laugh when Marine LePen gets elected and France gets out of the EU and the EU dies... mwahahahaha.
I don't think this scenario is as far fetched as some might think.
They are already at the mercy of the ecb and politicians now because they are technically insolvent.
Even if they become completely dependent on ECB funding that is a future, abstract concern.
There seems to be more immediate concerns that worry the banks more.
Yeah, bonuses.
This allows them to avoid nationalization, maintain profits, and get their bonuses.
Corzine figured out what the strategy was. Read my reply above and see if it makes sense, but if corzine figured out the plan he just went bust a week or two early. No wonder he was willing to comingle. He just needed to survive a few more weeks.
He is Goldman so he "knew" the plan He should have gotten a bank license and he'd be on the cover of the economist as the man who made MF big time and made billions in the process
He is Goldman so he "knew" the plan He should have gotten a bank license and he'd be on the cover of the economist as the man who made MF big time and made billions in the process
Mutually assured financial destruction. Sort of like a circular firing squad.
Peter...add to the uncertainty??????? Seems its pretty certain to me....
I would not trust a Spitalian bond as far as I could hack it. Hawkez-vous loogie toute de fucking suite?
Re the Frog's indignant petulance, they are still upset from the Limeys giving them the finger at the Battle of Agincourt.
to their credit or debit, depending if you think war is a sign of vitality and manifest destiny or the contrary, they did fight a lot of wars overs 2200 years of History going back to Julius's days. So you win some and you lose some. ONly normal for humans. And they did also invent England as we know it after battle of HAstings. All you have to do to understand that "original sin" inflicted by the French on ye aulde England is to read what it says on the British royalty shield : Dieu et mon droit, Honni soit qui mal y pense...
Now that shows you that the Plantagenets; 100% french, they even invented the Claret; were those who made England what it is and peopled the HOME COUNTIES, the very heart of noble England, with Norman blood! London Town is french refugee town in many ways over centuries, a great tradition going back to welcoming the Huguenots. Oh the channel, symbolic 22 miles of watery divide; for a thousand year love-hate, Cain vs Abel, relationship!
Ironically, the Gauls invented soap. There would be much greater influence by frogs if not for the limeys efforts at the Battle of the Nile, Trafalgar, and Waterloo where Bonaparte was broken. Amusing that the frogs find themselves sleeping with the krauts in this round of continental quagmires, sustaining and supporting bonds of the Spitalians.
well those who invented opium trade, gunboat diplomacy, as today's City shenanigans, scions of schools that lost the Empire and sang white man's burden in consolation; all invented on playing fields of Eton; should wash their mouths in due modesty. Bony got his come uppance but he wrote a page of military history rarely matched, if you like that as yardstick of regal legacy. I don't, so its no skin off my nose, Trafalgar. Those who won at Trafalgar used it to sell opium to the yellow skinned. And to conquer the brown skinned. So inspite of drinking french Claret for centuries they forget what culture means, and they learn how lying in name of God and Country can make you forget what is right from what is wrong. Remember Warren HAstings and you'll remember a man who iconised a tradition that wrote and then reneged on three hundred treaties in the name of Rule Britannia. We are as perfidious as that when we are nation of shop keepers, as then we sing 'I want my money back'.
But just drink some good claret it'll wash down the fish n chips very well.
va te faire foutre
now you are showing your true colours ...honi soit qui mal y pense.
avec le robinet
Hey, the Chinese out smarted the S&P! They downgraded french wines before S&P could pull the plug on France's triple A.
I think that pissed off S&P to have been one upped by the Chinese. They will come back next week with a vengeance. France will merry Xmas with a tooth fairy, less one triple A tooth!
Joyeux Noel, you Noyer and BArion sleight of hand servants of Oligarchy Cowards. You'll still be singing like Noel Coward, "MAd dogs and Englishmen in the noonday SUN!" Now that is so funny coming from a hubristic, french bureaucrat who thinks he is the SON of Roi Soleil!
I need to be updated. Is this going through or is it just an idea? Will the ecb lend money with PIIGS bonds as securities at 0,5% interest?
Who cares about Europe? It's about the banks. Always has been. And, therein continues the fundamental corruption and unfairness of the markets. It doesn’t matter what the trade du jour is, it will always be right for the big banks and wrong for the rest of us as long as the government is there to backstop them and only them. In spite of their immense size and power advantage, the rest of us must also fund them whenever necessary so that they can double down until they get it right. The only sane bet for the little guy would be to bet with them, but, that implies we know what their bets are, and we can’t, because they hide and lie about that too. You can’t win.
Follow the money? I'm confused. Corzine sez he doesnt know where the money went. Then somebody tells us it bought Pig bonds and Jim Willie says JP Morgan got it. So who really got it, and what does that have to do with a french downgrade? It just looks like andother big obfuscation game by the same parties that are blowing all the other smoke that is helping to turn the markets into a total cluster fuck.
Thanks for the insight, Peter.
The Corzine trade will not save anyone, Euro or Corzine. It will make things worse. In the ECB's case, it will take in a lot of toxic collateral. So the ECB is expected to top Ben. And Europe, on top of figuring out how to get out of current mess, needs to figure out what to do with those toxic stuff later on.
For now , they will play it for more time. You analysis is excellent for good banks. But I suspect a lot of banks in Europe are zombies so they may not care about right and wrong.
The "$4 trillion" Forex market is as broken as Euro banks. It is happy to play for time. The risk is always another day's trade.
Thanks to MFG collapse we know virually all customer brokerage accounts are hypothecated (pledged as collateral for house bets), and if the firm goes bankrupt (from bad bets), customer account assets are grabbed by counterparties before a bankruptcy trustee is even assigned.
Why would anyone keep anything in a brokerage account anymore?
I have the solution: The sovereigns nationalize the banks and burn the bonds which they hold. Then they trade the other countries bonds which they hold for more of their own, and burn them too. Pretty soon most of their debt vanishes. Easy.
Too bad the bankers run things, or are at least old chums of the politicians. So my genius plan will never be implemented. They'll leave it for a third party to pay them off, us and our grandchildren.
EBC borrowings probably are not being used to buy much if any sovereign debt, or likely any other assets; rather, it is being used to replace wholesale funding that investors in the capital markets are no longer willing to provide. European banks are massive, and are majority funded with institutional money rather than theoretically stable retail deposits. ECB term funding and the selling of assets, especially U.S. dollar denominated loans and structured finance assets, are being used to retire maturing borrowings. As for the rally in Italian and Spanish debt, it may be short covering or a reasonable bet that these counties do not default near-term. The ECB can produce short covering for the time being by being the marginal buyer in size when pricing is under pressure.
Great post!! I agree with Why Not, but the total tab is about $4 trillion and that is beyond the capacity of the banks without the ECB. So, in the short run this game has legs, but not in the long run.
Europe is contracting and banks buying sovereign debt is devastating as soon as the world wakes up.
Of course, our banks are doing the same thing. It is a massive bank bailout of sovereign debt and the governments back the banks. Nice cycle.
http://confoundedinterest.wordpress.com/2011/12/16/fitch-hints-at-italy-...
The ECB can try to control the contraction in bank balance sheets through providing more and more funding. Of course, its asset base will become junk and therefore its “capital” base fictional, which may be the case already. Tactical realities overtake strategic calculations. Regardless, the situation will be massively deflationary unless the ECB proves the Fed to be an amateur at QE printing. Russian, Finnish and Turkish banks cannot step into the void to replace lost lending capacity in Europe, though U.S. banks are now growing their commercial books by replacing the departing Europeans here. U.S. banks are highly liquid today (and making corporate loans rather than holding more government paper probably is a credit uptick regardless of the risk weighting).
On a separate note, KB is spot on. The European banking system (i.e., the payment system) will be maintained; however, asset write-downs by the banks will wipe-out the common equity, preferred equity, sub debt and maybe much of the senior debt—assuming the banks are forced to take most/all of the marks. No investor will buy newly issued equity other than the national governments until the marks are taken and the capital structures are collapsed and then replaced with new capital.
Ironic the English langauge came from the German langauge the split was about 800 years ago . The English start came from the Roman Empire that would include Frannce and the Krauts .
Managing perceptions instead of reality eventually leads to tragedy.
france wants an equal playing field regarding these 'rating agencies' - it's not that france holds a grudge - by all means it's quite the contrary,... france wants the world to visibly see for themselves, how biased the 'three amigo's are, when the decisions actually come from their grand masters awash in 'london's financial district', period!
the rating agencies are in all reality solely responsible for the collapse [housing] of the united states financial system, which in turn has caused great collateral damage with its european trading partners [to say the least?].
let us not forget that S&P, Fitch, and Moody's,... orchestrated, with great collusion, and malfeasance the "AAA"- 'Good-HouseKeeping-Stamp' of approval. they have their slimy fingerprints all over these abominable trillion-dollars toxic assets the entire world ended up buying.
so does france and the EZ have an axe to grind? You Betcha!
just a simple explanation - probably very naive for the board - or has been a topic of discussion long ago.
PS. personally these rating agencies are as useless as tits on a bull
jmo
thankyou tyler
The market has NOT priced in a downgrade.
The market seems to have been a classic study in bull baiting since dunno when. The markets "are" pricing in headroom for the upcoming bull baiting festival as expected.
The setup: The next US downgrade will be announced after close on some not to far away friday after all the bull bait has been set.
The hoped play seems to be that the down grade will devalue the USD against the EUR, thus increasing the required token count US equities trade at. Value from devalue - pure and simple.
From the chronicles of Blankenfein the Godsmacked, " ... one should never forget grasshopper, a good bear trap by it's nature will offer the false comfort of headroom. When the down grade is announced, the Market God's generous corpora cavernosa will fully engorge once again. The exhilaration of index ascension and ensuing irresistible rut for the Market Gods's intoxicating pheromones enslaves the boy bull mob to take the bait and willingly step into the wily bears' traps ... I was never here this never happened. ."
BTW: Had nothing to do and found self listening to Sen Roberts questioning of the Jon. Really strange admission - and then it went nowhere and the subject not breached again. Roberts ask the Jon to confirm or deny the MFG had a 1.2 Billion line of credit with JPM, to which the Jon responded Yes. Less than 5 seconds and low key QA (like asking the time) and it never came up again.
MFG has a 1.2 Billion line of credit with JPM. MFG looses track 1.2 Billion from customer accounts.
Ain't saying but it sounds like someone used MFG customer accounts as collateral and the load got called.
Why am me not surprised with the fact that little (1.2 Billion) coincidence didn't get no more CSPAN airtime?
PIMCO's Gross had suggested Greece do the "Iceland". The masses that own the sovereigns and commons should suggest their political employees execute "an Iceland" or, alternatively, spend last painful seconds in world watching blood clot spurt from neck where head was severed from body" (that always works - well some of the time)
I have not read anyone else state this and so rather proudly will do so based on my own individual observations. Ireland will prove to be the undoing of Brussels in it's current form. The E.Z. will break into a two tiered arrangement, with the EURO and soverign currencies 'exchangable' within the block. A continental treaty block will survive and likely even expand but under a very different arrangment than today. The madness of centeralization will suffer a major, if not terminal blow.
I see signs in an Irish Mcdonald's listing prices in both native and EUR, likewise throughout the continent.
Our bias for the SPX is higher this week, but postions should be watched closely due to pre-holiday market conditions. Here is a Market Newsletter update with several wave potential wave counts for the SPX this week. http://bit.ly/si4o8Y