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Credit Suisse Explains "The Real Issue", And Why There Is Two Months Tops Until France Is In The Bulls Eye

Tyler Durden's picture


Credit Suisse's William Porter is strangely laconic and oddly brief in his latest issue of the European Credit Flash titled "The Real Issue":

"It’s all about Spain”, so now we are cutting to the chase. Recapitalization of the banks versus funding the sovereign is of course a semantic issue given the nature of the interplay. But it enables the attempted finesse we describe below.


"Portugal cannot rescue Greece, Spain cannot rescue Portugal, Italy cannot  rescue Spain (as is surely about to become all too abundantly clear),  France cannot rescue Italy, but Germany can rescue France.” Or, the credit of the EFSF/ESM, if called upon to provide funds in large size, either calls upon the credit of Germany, or fails; i.e, it seems to us that it probably cannot fund to the extent needed to save the credit of one (and probably  imminently two) countries that had hitherto been considered “too big so save” without joint and several guarantees.


The issue can be finessed for a while by addressing the issues as bank issues and recapitalizing the banks by bond transfer. This hides from the  (primary) market and is simply another manifestation of the “Sarko trade” given by the LTRO. That rally lasted four months. Given the market’s adaptive learning behaviour, we suspect that this finesse might last two. The eventual denouement should be flagged by symptoms of the failure of  the credit of EFSF/ESM and/or France.

And there you have it. As evidenced by today's reaction to the bailout, which had a half life of 2 hours, and was a complete failure in 6, the market is learning much, much faster than expected. Which also means that Porter's estimate for the length of time before the next wave of the contagion tsunami strikes somewhere in the middle of the 8th arrondissement is furiously optimistic, but we agree: 2 months tops.

Which is in keeping with the Soros' estimate of T minus 3 months before the Eurozone ends without a major intervention by Germany (which will eventually happen, courtesy of a Berlin-funded DIP loan, but purely on Germany's terms), but also that of Christine Lagarde who just doubled down on Soros' three month estimate as well.

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Mon, 06/11/2012 - 19:14 | 2516309 The Alarmist
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France, first round: $2T

Mon, 06/11/2012 - 19:21 | 2516319 veyron
veyron's picture

France, second round: $2Q

Mon, 06/11/2012 - 19:25 | 2516332 knukles
knukles's picture

La France!  Mais, non.  C'est impossible!

Mon, 06/11/2012 - 19:31 | 2516346 AssFire
AssFire's picture

Paris, busy working at becoming the Detroit of the East.

Mon, 06/11/2012 - 19:48 | 2516380 uno
uno's picture

Has it fallen off the cliff, I have not been there since 2002.  I remember 4 muslim teenagers (2 boys, 2 girls) getting on the subway next to me, when one of the girls drinking a soft drink throws the can out the subway on the next stop, middle of the day, packed subway.  Even growing up in New Orleans and taking public buses everyday I did not see that.

Mon, 06/11/2012 - 20:08 | 2516427 Clint Liquor
Clint Liquor's picture

France will be OK, they just elected a Socialist. That will fix everything.

Mon, 06/11/2012 - 20:41 | 2516494 francis_sawyer
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CREFLO DOLLAR ~ The new spiritual leader of France...

Mon, 06/11/2012 - 20:51 | 2516516 Michael
Michael's picture

The market will be taken advantage of in whatever state it is in. Quote me on it.

Mon, 06/11/2012 - 22:21 | 2516749 AldousHuxley
AldousHuxley's picture

free market loves slavery and monopoly.

Mon, 06/11/2012 - 22:45 | 2516819 markmotive
markmotive's picture

Capital controls (aka bank holiday aka ATMs shut down) are so much closer than most think. How much cash is in your pocket right now? Enough to survive a week-long bank shutdown?

Reuters reports EU officials are discussing capital controls: http://www.planbeconomics.com/2012/06/11/warning-eurozone-capital-controls-possible/

Mon, 06/11/2012 - 23:27 | 2516920 jeff montanye
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and meanwhile, in the only country showing the way to a better future,  http://www.bloomberg.com/news/2012-06-07/iceland-court-sentences-ex-byr-...

Tue, 06/12/2012 - 00:05 | 2517004 old naughty
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week long? Thats all?


Tue, 06/12/2012 - 17:17 | 2519583 mkkby
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Germany will give in and bail out France but "will dictate the terms".

How will they ENFORCE THE TERMS?  Thanks for the money, suckers.  Time to lower the retirement age again.

Tue, 06/12/2012 - 02:14 | 2517137 Gief Gold Plox
Gief Gold Plox's picture

Cash or real money? :)

I've started carrying two silver eagles at all times. Not for monetary use, but as conversation starters. It's much easier to educate people about finance if they approach you first. Got half of the department I work for into gold and silver bullion this way. Thanks for the link.

Tue, 06/12/2012 - 05:01 | 2517208 Element
Element's picture

Great bumper sticker

Tue, 06/12/2012 - 01:15 | 2517076 Michael
Michael's picture

Lawyers For Ron Paul Civil Rights (Voting Rights) Lawsuit FAQ

Tue, 06/12/2012 - 01:57 | 2517113 Michael
Michael's picture

I never thought I'd be a party to the killing of so many people throughout the planet, with our drones Mr President?

What really haunts me Mr President, is that group of children we slaughtered in Afghanistan with our drones. What was it, like 17 kids at one time?

Tue, 06/12/2012 - 02:23 | 2517142 Michael
Michael's picture

The United States can now strike anywhere on the planet with a nuclear missile within one hour.

I think that's enough of a deterrent.

Mon, 06/11/2012 - 22:39 | 2516798 Calmyourself
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Good old creflo, he'll beat them until morale improves or Fitch upgrades them whichever comes first..

Mon, 06/11/2012 - 21:50 | 2516674 GeorgeHayduke
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So let me get this straight. The capitalist bankers create money out of thin air, have their underlings loan it out to people at 5 to 10 times the amount of money created and then sit back and make money from the interest. This is okay and electing a banker crony would have fixed thing?

The "Socialists" take the money and spread it around, even to folks who sit back like the bankers, then due to acting like a banker (Thorstein Veblen's Theory of the Leisure Class come to mind), they don't make enough money to pay the bankers parasite and this is bad. Plus, those socialists are called lazy, deadbeats, and other such derogatory names.

Anymore the evidence seems to indicate that this system has been built on false premises and ideological myths from the start, is therefore unsustainable, and deserves to collapse. However, many people are still attached to their ideologies and seek to blame those Socialist or Communists or whatever name they want to call them for causing the inevitable.

These old ideas and myths no longer serve us and we need to come up with newer models that work. However these antiquated ideas will die slowly as people won't let go of the old biases and prejudices they have come to love so easily.

Mon, 06/11/2012 - 22:26 | 2516737 oldman
oldman's picture


George, you are so in charactar with Abbey's comcept---that I must give you a green, lamenting that I cannot give a thousand.

Carry on, my friend----there is ample material just on this site to change the world.

What you wrote above is so obvious and so true, but the positions of the masses here at ZH are rigid beyond description; they are frozen in time. These dudes are not survivors, for the most part---no flexibility of mind, emotion, or body

Windmills to a man/woman    but good luck   you are fighting the good fight as someone once said    om

Mon, 06/11/2012 - 22:27 | 2516766 MrButtoMcFarty
MrButtoMcFarty's picture

Lazy minds find comfort in ideology.

Mon, 06/11/2012 - 23:31 | 2516930 CompassionateFascist
CompassionateFascist's picture

Anyone expecting Germany to "save" the Euro-zone "on German terms" is dead wrong: the Wehrmacht, Luftwaffe, and Kriegsmarine are no more. Can't enforce a thing. Not on Spain and, w/in a few days, not even on pitiful Greece. I'm sure the Germans will try...but succeed only in setting off their own debt bomb. Last to go: U.S., unless Israel begins the IranWar before before the Euro-collapse. Then we go first. Or maybe all at once. That...would be beautiful.  In any case, invest in lead.

Tue, 06/12/2012 - 02:00 | 2517123 Nukular Freedum
Nukular Freedum's picture

Do I detect a subtle shift in your position on the timing of an Iran war?

Mon, 06/11/2012 - 23:36 | 2516938 TruthInSunshine
TruthInSunshine's picture

Spain is just getting started. Any attempt to have a common monetary union with both Germany and Spain as co-members is not possible going forward.

Next stop and soon will be Italy.

Then France, and then the U.K., which is only one foot in, anyways, because the only thing it produces, unlike Germany, is banking/financial services, which have a massive net negative value (this is the real reason for the vitriol between Cameron & Merkel; Cameron, or whoever is the British P.M. (aka stooge for the banking masters), will never willingly let any alterations occur that don't include a bailout of the U.K.'s deeply over-leveraged and massively undercapitalized banking and financial sector.

It's epicly hilarious that some so-called economists believe that just because they can spot contagion, they can devise any plan to stop it, especially when the contagian is a resistant virus that is the result of decades and decades of credit/debt (they're the same thing in a fractional reserve banking system where toilet paper fiat is conjured from thin air at no cost) binging economic "expansion."

Mon, 06/11/2012 - 22:28 | 2516769 Poor Grogman
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"Man it has been well said think in herds, it will be seen that they go mad in herds, while they only regain their senses slowly and one by one"

Charles Mackay

Extraordinary popular delusions and the madness of crowds.

Mon, 06/11/2012 - 22:57 | 2516848 i-dog
i-dog's picture

It's simply bizarre that statists are still looking for a way to patch up the imperialist system of the past 4,000 years ... when it's patently obvious that there are no more fresh fields from which to steal resources to pay for the past profligacy. Columbus will not find a new land to plunder.

Past profligacies were solved by state-funded adventurers pushing the boundary of the known world and finding new conquests. The Spanish discovered the gold and silver hoard of the meso-Americans and simply took it from them at gunpoint and shipped it back home to prolong (for a limited period) their empire. The British discovered they could prolong their empire for a few more decades by growing opium and then shipping it into China at gunpoint in order to keep their own burgeoning pseudo-gentry sipping tea from imported fine chinaware for just a few decades longer. America itself was a means for the Europeans to continue their socialist experiment of the 'enlightenment' [sic ... lol], using America as a producer of food and 'stuff' while Europe devised new ways to do as little as possible while "redistributing" previously acquired wealth.

If the human race is to progress at all through this current mess, then it needs to come to the realisation that there is no undiscovered part of the planet left from which to fund the past profligacy and that each and every community on the planet must find a way to put away the guns and begin to trade between themselves on a "cash" barter basis.

Every adult who claims to care about their children also needs to stop using them as an ATM (through claims of future taxation) to selfishly fund wasteful excesses today.

We are at the end of the line on that past paradigm, folks!

Tue, 06/12/2012 - 06:17 | 2517230 spankfish
spankfish's picture

Hence the need to get off planet.

Tue, 06/12/2012 - 18:15 | 2519744 Totentänzerlied
Totentänzerlied's picture

"Every adult who claims to care about their children also needs to stop using them as an ATM (through claims of future taxation) to selfishly fund wasteful excesses today."

Amen, but first they need to realize that this is what they and everyone else are in fact doing, and then comprehend why it's bad, and then understand why it has to stop.

In other words, not a snowball's chance in Hell.

They will understand only after it's all over, when it's "only" a matter of history.

Tue, 06/12/2012 - 03:11 | 2517172 the tower
the tower's picture


The ones with antiquated ideas will not give up on them, but they will be left behind the fastest as there's a young generation ready to embrace a new system.

Things will be fine, things will be much better actually, they will just not be the way they were.

Mon, 06/11/2012 - 20:23 | 2516457 withnmeans
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Yes Uno, it has changed "For the Worse". It is dirtier now, it is like the French just gave up. Don't get me wrong, I love to visit France when I can, however the problem lies from illegal immigration. I'm all for people bettering their lives, but they are not, and they don't give a damn about cleanliness or France (And Spain, Italy, and so on).

I have seen a huge change in Europe in the last 10 years, not for the better...

Mon, 06/11/2012 - 20:28 | 2516466 Clint Liquor
Clint Liquor's picture

Ah, yes! The beauty of multi-culturalism.

Mon, 06/11/2012 - 20:53 | 2516523 withnmeans
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First time I have seen you on here Clint Liquor, maybe you have been on here for awhile and I just didn't notice.

One thing I did notice is the name, wow I don't usually get amused by a name, I laughed my A$$ off. Good one

+1 for you, my good Sir....

Mon, 06/11/2012 - 22:20 | 2516747 Yes_Questions
Yes_Questions's picture



You know how a French woman holds her Liquor?



Mon, 06/11/2012 - 22:42 | 2516804 Calmyourself
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By the ears.

Mon, 06/11/2012 - 22:58 | 2516850 Yes_Questions
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Ears?  I'd go deaf. 

Though I am loosing the hair on the back of my head..

Tue, 06/12/2012 - 03:49 | 2517185 savagegoose
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 or something, its been an age sinc ei was a teenager.

Mon, 06/11/2012 - 21:15 | 2516587 r00t61
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I have no problem with voluntary multi-culturalism.  I like meeting people from different countries and backgrounds.  Just the other day on a flight home I met a nice couple from New Zealand.  I'd never met any Kiwis before.

Government-sponsored, forced multi-culturalism can go to hell in a handbaset.

Mon, 06/11/2012 - 22:02 | 2516702 Bringin It
Bringin It's picture

Clint, I need to warn you that, strange as it may seem, coming out against multi-culturalism will cause you via a tortured chain of semantics, to be labled an anti-semetic somehow.

Mon, 06/11/2012 - 22:34 | 2516781 AldousHuxley
AldousHuxley's picture

nobel prize went to someone who proved that humans like multi-culturalism for variety, but only to a certain point. After 25% or so, multi-culturalism becomes a threat and forces fight or flight decisions.


white flight anyone?



Mon, 06/11/2012 - 22:39 | 2516797 Jon Bong Jovi
Jon Bong Jovi's picture

you is so racist brah.

Mon, 06/11/2012 - 23:43 | 2516961 CompassionateFascist
CompassionateFascist's picture

There is no "tortured chain of semantics". Organized Jewry means to destroy the nations by open-borders globalization. That is, the multicult. And no more Whites. So the Jews don't get holocausted again. 1900: Whites 30% of world population. Now: 9%, and shrinking. 2100, barring an uprising: an extinct race. 

Mon, 06/11/2012 - 20:49 | 2516511 uno
uno's picture

a french friend (tall guy around 6-4) told me going to the hi-rise apartments away from the city center the resident Arabs would not allow whitey to use the elevator, no matter how old the lady/man.  It was only to be used by muslims, this was back in the mid-90's, and the French girls were harassed into wearing the idiotic head garb.

Mon, 06/11/2012 - 21:22 | 2516601 withnmeans
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I understand completely, I have experienced this in Southern France as well. I think this is more of an issue then anybody really knows if they had ever been to Europe. 

The French are to a boiling point on this issue, this will be dealt with if there is a financial default. Fingers will be pointed, names will be called, something will happen.

I was back to Europe last summer, stayed with friends, you could tell things were getting tense in Europe "both financially and from an immigrant stand point".

Actually speaking from being there "Italy looked far worse off then any of them". Infrastructure was terrible, people were very down, just lac-luster overall. I am amazed they "Italians" have made it this far.

Mon, 06/11/2012 - 22:07 | 2516717 Bringin It
Bringin It's picture

re. I am amazed they "Italians" have made it this far.

Simple - Euro 2012!!



Bread and Circus!!  Bread and Circus!! 

Mon, 06/11/2012 - 21:10 | 2516531 Yes_Questions
Yes_Questions's picture



Damn.  I thought image was a big deal for the French (a classmate in Engineering school from Paris gave me this impression emphatically and I definitely remember the sense of pride taken maintaining Paris the time I was there, briefly and back in 98').   If the green street cleaning crews are not still doing their finest keeping those streets spiffy, like they did when I was there, noticeably addressing the apparent late night tradition of relieving oneself on the side of a building and collection of the rubbish early each morning: then, they are doomed. 

I can understand budget constraints letting the City of Lights fester, but not the people. 



Mon, 06/11/2012 - 23:18 | 2516891 Captain Planet
Captain Planet's picture

I saw similar aggression amongst the youth while in Paris this summer, at the techno parade no less. A party atmosphere, and guys were lit up ready for battle.

A class divide was truly palpable in Paris, and the poor where not as invisible as here in the states.

Tue, 06/12/2012 - 00:42 | 2517040 Uchtdorf
Uchtdorf's picture

On the other hand, I visited Istanbul with my wife (I am pale white Anglo and she is native Japanese) last summer. We were treated well by everyone in old Byzantium even in the areas where tourists normally don't venture. We went everywhere around the city and were helped by total strangers who thought we just might need directions. I've lived in Tokyo for 5 years, visited Shanghai, NY, Hong Kong, Singapore, Los Angeles (lived there too), Mexico City. Istanbul was the most pleasant of them all. Have to be careful when painting with a broad brush.

Tue, 06/12/2012 - 06:40 | 2517241 neidermeyer
neidermeyer's picture

UNO , you'll just adore the "no go" zones that have popped up all over France in the last few years ... whenever you hear about "youths" rioting in the news ,, you can bet your last $20 gold piece it was in one of these Sharia compliant zones that the polizei refuse to enter. http://technorati.com/politics/article/no-go-zones-for-non-muslims/

Mon, 06/11/2012 - 21:41 | 2516645 CURWAR2012
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Paris no es Uganda, es De'troit

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