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Decision Time For Europe: The Definitive Presentation On The Future (Or Lack Thereof) Of The Eurozone

Tyler Durden's picture




 

When dealing with the daily barrage of headlines from Europe, it is easy to get lost in the trees and forget what the forest looks like. That's perfectly understandable - after all, it is precisely the intention of the Eurocrats to confound everyone with noise, so any track of the fact that the big picture is unfixable is if not lost then promptly forgotten, with reactionary newsflow dominating the flawed decision-making process. Luckily, the fact remains that no matter what, no matter the scale of lies out of Europe, the problem still remains: the math just does not make any sense. Conveniently reminding us precisely of this, we present to our readers the must read presentation by Swiss private bank Pictet titled "Decision time for monetary union" which puts the forest right back into focus, and explains why all attempts to kick the can down the street will be met with a prompt and furious response by the bond vigilante crowd, which has now officially been thawed out of cryogenic stasis. Because, all noise aside, the Eurozone has two options - continue the current course which is catastrophic: "Current response to the crisis has created conditions leading the euro area towards depression" or accept the reality and do something about it, yet "things are going to get worse before European authorities decide to wheel out their heavy artillery." Said otherwise: lose-lose. So without further ado, let's dig in...

1.Italy has put its head above the emergency parapet

2. The good news: Italian public accounts well on track

  • Italy and Germany are the rare countries likely to record primary surpluses in 2011

3. The bad news: Italian public debt: a weighty millstone

 

4. All benefits from the creation of the euro have been erased: Spreads above levels prevailing before the euro's birth

5. The light at the end of the tunnel is a trillion and a half euro oncoming train: €1,500bn to be financed in peripheral euro area states between now and 2014

6. From Arab Srping to European Winter: Winter and springtime will be busy seasons for refinancing

7. Surveys now clearly in recession territory

  • Only the post-Lehman deterioration was as rapid as the current downswing

8. Orders/inventory ratio has continued to deteriorate

  • As a result, production has to be scaled back further

9. The bad news: Recession looming

  • Q3 should turn out better than heralded by surveys, but full-blown recession is likely to hit this winter

10. The worse news: Threat of a credit crunch looming

  • Bank deleveraging will translate into shrinking credit

11. The worst news: Current response to the crisis has created conditions leading the euro area towards depression

  • Germany's refusal to back other member states' debt has brought about a savage repricing of the risk. Highly indebted countries have become insolvent owing to the steep increase in their debt-servicing bills.
  • The German recipe for solving the crisis is geared towards deleveraging all economic agents simultaneously. This is
    utopian. This policy will brutally
    • depress aggregated demand – most European economies are likely to sink into recession this coming winter
    • limit the availability of credit
  • This is the route that led towards the Depression of the 1930s.

 

12. What can be done -  a blend of measures:

  • German recipe combined with a lack of means will not stop the crisis spreading
  • Response should be two-fold

1 . Urgent measures: stop the haemorrhage

  • ECB interventions to be increased (SMP: 180bn)
  • EFSF guarantees (<300bn leveraged to 1,000bn)
  • IMF precautionary line of credit ($300bn currently available)
  • ECB large-scale guarantees (theoretically unlimited)

2. Long-term solutions: save the euro

  • German recipe
  • pro-growth policy on the periphery (EU structural funds, EIB investment projects)
  • stimuli in creditor countries in order to foster domestic demand
  • increase transfers (fiscal union, euro-bond, etc.)
  • public debt restructuring
  • members exiting

13. ECB has bought €110bn since resuming sovereign bond purchasing programme

14. Even after full monetisation, the ECB's expansion will remain below the Fed’s

  • If the ECB finances the entirety of peripheral countries' financial needs up to 2014 (€1,500bn), its balance sheet will expand by 2.6X compared to its pre-crisis level

15. Euro break-up would represent massive loss of competitiveness for Germany

  • Expected devaluation on the periphery (in the range of 30%-40%) would hit German exports hard

16. The opportunity cost: Germany's huge external assets would suffer from a euro break-up

17. The cost of a euro break-up: Germany particularly exposed to a euro break-up

  • Without wholesale 'socialisation' of euro area members' debt (through a form of fiscal union, ECB guarantees), the current situation is likely to move towards a break-up of the euro.
  • A euro break-up would have dire consequences for all euro area countries
    • banking systems severely shaken
    • loss of competitiveness for core countries
    • massive asset haircuts due to defaults on the periphery
  • The overall cost of a euro break-up is likely to exceed the bill for the bail-out by a significant amount.
  • Creditor countries' reluctance to bail out is not motivated by a lack of means, but by their determination to avoid moral hazard
  • When sufficient evidence has been accumulated for Germany to guarantee future adherence to fiscal discipline in peripheral countries, the German authorities could opt for further fiscal integration

18. All sovereignty abandon ye who enter: Sovereignty progressively transferred from the periphery to the EU

  • The European Commission (EC) has established a monitoring capacity on the grounds of ensuring compliance with the Greek adjustment programme.
  • Surveillance of member states' budgets under the so-called 'European Semester' by the EC and the EU Council through
    peer pressure
  • EC and the EU Council will be allowed to examine draft national budgets and pass judgement on them before they
    are adopted by the relevant national parliaments
  • Members' ability to challenge EC decisions to launch disciplinary proceedings against profligate governments would be curtailed

19. Scenario: Things are likely to get worse before authorities adopt definitive measures, as confirmed by today's interview between the FT and Jens Weidmann

  • Changes in government on the periphery (Greece, Italy, Spain) could offer some temporary relief as adjustment programmes will be easier to implement.
  • But the benefits of adjustment programmes are likely to disappoint again as recession will probably hit home next winter.
  • So, the crisis of confidence related to imbalances between the huge financial needs and the responses in terms of aid packages will continue to loom large.
  • At this point, pressure will mount on the ECB to step up its intervention significantly. This action will offer the relief needed to give authorities the time to mould the new shape of monetary union
    • institutionalise a form of fiscal transfers
      • European Monetary Funds, fiscal union or euro-bonds…
      • new Treaty
  • The euro should survive, but things are going to get worse before European authorities decide to wheel out their heavy artillery

20. Greece: only €120bn out of €280bn debt held in private hands

  • Reducing public debt to sustainable levels without affecting official holders implies haircuts harsher than 50% for the private sector

21. Periphery bidding for the bulk of the ECB’s liquidity

  • Periphery (34% of GDP) bid for 67% of the ECB’s liquidity

 

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Sun, 11/13/2011 - 22:52 | 1874542 slewie the pi-rat
slewie the pi-rat's picture

even the loose change in the couch is already spoken for...

Sun, 11/13/2011 - 22:53 | 1874544 bigdumbnugly
bigdumbnugly's picture

and trade derivatives of same.

Sun, 11/13/2011 - 23:24 | 1874591 malek
malek's picture

Ja! It's all the German's fault!

Sun, 11/13/2011 - 23:50 | 1874631 He_Who Carried ...
He_Who Carried The Sun's picture

Go read the interview with Bundesbank's Weidmann on ft/US and drive your eyeballs through some carwash in order to get rid of the 'blurrrr'...

"The role of the central bank is clearly defined. It is to ensure price stability and to support the competent authorities in ensuring financial stability. With this formulation, it is clear that the responsibility for financial stability lies with governments."

Mon, 11/14/2011 - 00:17 | 1874664 Goldman Hufs
Goldman Hufs's picture

Yep, nothing like a drug dealer calling his customer a junkie after he can't pay anymore without every acknowledging the fact that he was the one supplying the client with increasing dosages of smack over the years.

Mon, 11/14/2011 - 00:29 | 1874683 DeadFred
DeadFred's picture

A lot of people have a lot of fiat riding on what a small handful of German officials. How confident are you that they will do what is best for Germany and the world rather than what is best for themselves? There are a lot of ways to convince someone to turn on his/her countrymen. Take into consideration that most of this handful are politicians.

Mon, 11/14/2011 - 00:44 | 1874714 He_Who Carried ...
He_Who Carried The Sun's picture

Where did you grow up? Kongo Republic, Guatemala? This is Germany you're talking about, don't worry, they will defend their Bundesbank to the last!

Mon, 11/14/2011 - 08:24 | 1875110 jeff montanye
jeff montanye's picture

imo the fiscal union with austerity that the post holds out as a medium term "solution" will not survive even the vestigial democracy still extant in europe.  especially in even a "mild" recession.  the banks are insolvent.  the financial "services" industry really, really, wishes that were not the case. but it is.  and endless bailouts will not fix it.  ASK JAPAN!  

an organic recovery cannot happen until the banks are restrained and reformed and transparency re: counterparties is restored.  some major reregulation to control derivatives, end the possibility of many, many mf globals, separate "investment banking" from "commercial banking" and, not least, reform campaign contributions from corporations, etc. must be done.

imo the best on this subject: http://www.hussmanfunds.com/wmc/wmc111114.htm

Mon, 11/14/2011 - 07:25 | 1875055 spankfish
spankfish's picture

Nice coat rack.

Mon, 11/14/2011 - 20:27 | 1877582 malek
malek's picture

Maybe I should have added a /sarc tag to my post... In a time of Universal Deceit, telling the Truth is a Revolutionary act. Just like preaching austerity in an empire of gluttony.
Weidmann is correct, but he will be silenced or removed from his post quicker than you can imagine...

Sun, 11/13/2011 - 23:24 | 1874593 I think I need ...
I think I need to buy a gun's picture

so when are those european bankers going to turn their physical gold into real claims?

 

 

Sun, 11/13/2011 - 23:23 | 1874588 DosZap
DosZap's picture

#18, is the GOAL of the entire debacle.

Mon, 11/14/2011 - 03:58 | 1874928 Element
Element's picture

The numbers and the graphs mean nothing in a fiat whirld, the only thing in play is #18, it's the reason they don't want to see the Euro and EU Commission get de-fanged by eruo apostates leaving the flock.

"no! ... ramming speed!! ... we'll surprise it! ... and sink the iceberg instead!" - Ollie's epitah

Sun, 11/13/2011 - 23:50 | 1874630 The Big Ching-aso
The Big Ching-aso's picture

 

 

Just because they call it a union doesn't mean it is one.    The Euro situation is akin to New York and Wyoming willingly and enthusiastically becoming sister states.

Sun, 11/13/2011 - 23:57 | 1874639 tempo
tempo's picture

Or CA and Texas having common goal and objectives.  Of course, I am from CA and love receiving entitlements paid for by Texas.  Thank you Texas for the love.

Mon, 11/14/2011 - 02:02 | 1874837 knukles
knukles's picture

Well, SF and Houston could be sister cities.

Mon, 11/14/2011 - 02:15 | 1874856 longonSpam
longonSpam's picture

In what alternate dimension? Fuck Houston, fuck Texas and fuck das Bundesbank

Mon, 11/14/2011 - 08:00 | 1875081 paarsons
paarsons's picture

Good Citizens of Metropolis,

I no longer care about the Eurozone.

I just want a larger cock.

Is that too much to ask for?

http://fucklloydblankfein.blogspot.com

Sun, 11/13/2011 - 22:56 | 1874550 monopoly
monopoly's picture

And have a nice day! Geesh,they are toast!

Mon, 11/14/2011 - 08:28 | 1875114 jeff montanye
jeff montanye's picture

what's this "they"?

Sun, 11/13/2011 - 22:58 | 1874553 bigkahuna
bigkahuna's picture

Is this the end of the beginning or the beginning of the end?

Sun, 11/13/2011 - 23:47 | 1874627 TheFourthStooge-ing
TheFourthStooge-ing's picture

Yes, yes it is.

 

Sun, 11/13/2011 - 23:00 | 1874554 RockyRacoon
RockyRacoon's picture

Looks like a depression is in order.   And the U. S. not be far behind.   That #14 chart is a buzz-killer, eh?

Sun, 11/13/2011 - 23:25 | 1874594 Freebird
Freebird's picture

Yes

Mon, 11/14/2011 - 00:07 | 1874652 Manthong
Manthong's picture

After the next big market drop, the Fed will be go for "throttle up".

.. or maybe more aptly, "warp factor 9".

Mon, 11/14/2011 - 08:44 | 1875139 jeff montanye
jeff montanye's picture

qe 1 and 2 were surprisingly impotent, imo.  got a weak recovery from 1 after a huge drop in gdp and a mild ramp up in equity prices from 2.  both now seemingly fading big time as republicans and obama here and bundesbank hawks and euro "visionaries" there compete to reduce debt through austerity.  

world fiscal policy is becoming contractionary in a deflationary, deleveraging depression.  monetary policy is zero bound, in a liquidity trap, pushing on a string, yadda, yadda.  

we have an epic but vain attempt to disguise near universal insolvency with an increasingly unconvincing facade fronting corruption, venality, fraud and theft on an unprecedented scale.

Mon, 11/14/2011 - 02:19 | 1874862 longonSpam
longonSpam's picture

At least it'd be honest, bring it on.. I actually kinda like bean soup and I have plenty of shoes when the beans run out.

Mon, 11/14/2011 - 03:57 | 1874931 UP Forester
UP Forester's picture

Good thing I'm going long canned venison....

Sun, 11/13/2011 - 23:00 | 1874557 LookingWithAmazement
LookingWithAmazement's picture

Eurozone: printing bitchezzzz!

http://www.marketoracle.co.uk/Article31516.html

Where's that hyperinflation? Or will the dollar crash after the failure of the Supercommittee and the unwillingness of Obama to cut big time?

Sun, 11/13/2011 - 23:04 | 1874562 Mike2756
Sun, 11/13/2011 - 23:08 | 1874565 vegas
vegas's picture

From where I sit, the forest is on fire.

Politicos long ago pissed away valuable credibility by dragging their collective feet; bringing out worthless trial ballons to see if the market would bite.

They are now left with no easy choices, and no time to make them. Don't expect a pretty outcome

 

http://vegasxau.blogspot.com

Sun, 11/13/2011 - 23:12 | 1874569 lizzy36
lizzy36's picture

Yes, post election 2012, is looking more and more like post election 2008 (stock market wise).

But between now and then perhaps just lots of lots of foreplay? (UGH)

They will juggle these balls for as long as they can. The longer they do, the greater the chance they all fall at once (see fall of 2008).

Sun, 11/13/2011 - 23:13 | 1874571 Seasmoke
Seasmoke's picture

its going to be a spectacular crash !

Sun, 11/13/2011 - 23:14 | 1874572 Richard Whitney
Richard Whitney's picture

Regarding #18: Sounds OK to me. But surrendering sovereignity and fiscal unity is not a one-way street. The EU countries should also lose their national seats at international bodies, starting with the U.N.

Sun, 11/13/2011 - 23:22 | 1874587 BoNeSxxx
BoNeSxxx's picture

The U.N needs to be disolved.  Private.  Worthless.  NWO tool.

Mon, 11/14/2011 - 07:28 | 1875056 Oh regional Indian
Oh regional Indian's picture

Indeed Bone. BEcause along with the UN will disappear so many other alphabet agencies that are th ereal Vampire Squid.

World Bank, IMF, UNESCO, UNDP....... those are the tentacles. And now of course their Blue Helmeted Peace-keepers (Drug Trafficers, Child Rapists actually).....

But the UN is also just a front.

Secular Humanism, FTW!

ORI

Caveat Emptor

Sun, 11/13/2011 - 23:21 | 1874577 Freebird
Freebird's picture

Pictet are pretty darn good & not a primary dealer, so refreshing - tx, even if they are pond scum bankers

Sun, 11/13/2011 - 23:19 | 1874579 cowsense
cowsense's picture

More noise. They have already picked the stud that's going to oversee the EU. We'll all meet him soon.

Mon, 11/14/2011 - 00:40 | 1874707 DeadFred
DeadFred's picture

and be very unhappy about it. What could be worse than Goldman ruling the world?

Sun, 11/13/2011 - 23:22 | 1874580 DormRoom
DormRoom's picture

It's nice to hear how the EU is getting advice from JPMorgan.  The same outfit that advised Jefferson County, the largest Muni bankruptcy in US history.

#EUROWINNING /s

 

 

Sun, 11/13/2011 - 23:21 | 1874584 catch edge ghost
catch edge ghost's picture

I liked the part about sovereignty.

Now I want someone to make little plastic green bankers for me to play with.

Sun, 11/13/2011 - 23:28 | 1874589 MrPalladium
MrPalladium's picture

Gotta love those short term measures!

 

"ECB interventions to be increased (SMP: 180bn)
EFSF guarantees (<300bn leveraged to 1,000bn)
IMF precautionary line of credit ($300bn currently available)
ECB large-scale guarantees (theoretically unlimited)"

Translation??

Massive money printing to mop up all bad sovereign debt.

Money printing in the short term and then stern discipline later!!

Classic!!

 

Sun, 11/13/2011 - 23:31 | 1874601 gjp
gjp's picture

Yep, we promise we'll be good, but in the mean time we want unlimited guarantees ... The debt will never be paid. Stop pretending. The interest burden is killing the economy, not half-hearted austerity. F*** pictet and all other advocates of monetary destruction.

Sun, 11/13/2011 - 23:28 | 1874599 caerus
caerus's picture

usdx will go to 75...carry on

Sun, 11/13/2011 - 23:31 | 1874603 Tater Salad
Tater Salad's picture

Houston, we have a problem!

 

 

Sun, 11/13/2011 - 23:34 | 1874607 Caviar Emptor
Caviar Emptor's picture

Since Freidman, central bankers have insisted that capitalist economies could be in a state of permanent prosperity if the wizards were just allowed to practice their dark art. 

Well it's the future and we've got a huge hangover. The wizards are still mixing their potions.  

Mon, 11/14/2011 - 00:57 | 1874731 catch edge ghost
catch edge ghost's picture

Presume at least one or two of them over the decades in fact did understand math and knew that infinite growth is an impossibility.

An elaborate double secret central plan to transition to a sustainable era of zero growth could hardly not exist.

Sun, 11/13/2011 - 23:37 | 1874614 Georgesblog
Georgesblog's picture

The timeline is now dictated by the debt service schedule. Think of it as a margin call on the GNP of Europe.

http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/

Sun, 11/13/2011 - 23:40 | 1874618 pudding
pudding's picture

The european is just slow, too slow

Sun, 11/13/2011 - 23:40 | 1874620 twotraps
twotraps's picture

The Euro is a political construct....they are in a jam due to economic as much as politics.  They want the 'magic of the market' and hope it covers the promised social safety net.  It should be interesting to see what they come up with.  Its funny to see the phrase 'crisis management' lumpted in with the latest meeting.....seems this crisis is throwing Europe around like a rag doll!  Not inspiring much confidence.  Real question is how can we make money from this?? 

Sun, 11/13/2011 - 23:49 | 1874624 sasebo
sasebo's picture

Lets see, we've got a real economy that produces goods & services. The dollar is the medium of exchange we use to exchange these. One can acquire dollars by (1)producing goods or services, (2)inhereting them, (3)stealing them, (4)gambling with someone who has acquired them by the other means listed, (5)printing them or (6)if you're a bank or the fed by creating dollars with a computer.

The only problem is that none of these dollars produce wealth. Only entrepreneurs & workers produce wealth. All these dollars are suppossedly backed up by the guvmunt. But, all the guvmunt has is what they confiscate from those who actually produce. So, if the producers some day quit producing, all those holding all those paper dollars will have nothing.  

Mon, 11/14/2011 - 07:34 | 1875061 BigJim
BigJim's picture

If we divide this list into voluntary and coercive exchange, we get

Voluntary:

Producing & exchanging goods and services
Gifts (eg, inheritance)
Gambling (with a willing counterparty)

Coercive (ie, either involuntary, or can only happen if the government is backing the agents involved)

Stealing/taxation
Printing/counterfeiting/fractional reserve lending

It's plain to see that the only wealth creation that is going on is "producing goods & services"... the rest are just ways of redistributing the proceeds. And if the 'proceeds' are no longer being produced... what will there be to redistribute?

Sun, 11/13/2011 - 23:52 | 1874633 disabledvet
disabledvet's picture

This happens THIS WEEK. There is no market credibility vis a vis the economic union (the same obviously cannot be said of the euro itself--hence the contradiction between the currency and the "union.") the reason this will happen this week--as it has been happening for two years consistently and WITHOUT pause is because Europe has run out of "the usual places to flee." Switzerland has stepped aside and Mr. Draghi's "mild recession" will now meet the blunt force trauma of bans on short selling and refusal to effect the CDS contracts. The entirety of the debt valuation has been called into question: the Union will now be confronted by this reality. Having expected Greek yields to go back to where they where from the week ago last Friday bailout--i was mistaken by four days. It only took the weekend. This week it was the bailout of Italy--will it be Monday again only additive? Anywho...is this the only media outlet on the entirety of Planet Earth that can even conceptualize this? "Never has so much been owed by so many to so few." And it is poetic justice indeed...because it is given forth hear...the PTB will not listen...and the PTB will now fail like the empty shell they have always been as a consequence.

Mon, 11/14/2011 - 07:37 | 1875064 BigJim
BigJim's picture

Nice dream. But the PTB's shells aren't empty - they're full of willy pete. And until enough of our fellow sheep wake up, ZHers are outnumbered 1,000,000 to 1.

Sun, 11/13/2011 - 23:53 | 1874635 Josh Randall
Josh Randall's picture

I like my molotov cocktail shaken and not stirred, with a zippo on the side

Mon, 11/14/2011 - 04:00 | 1874932 UP Forester
UP Forester's picture

Don't forget the powdered laundry detergent.  Mothballs are too expensive, and don't fit down a MD 20/20 neck very easily....

Mon, 11/14/2011 - 00:02 | 1874645 Caviar Emptor
Caviar Emptor's picture

The party is over, my friend. There's still a drunk guest passed out in the bathtub. The cleanup is going to be ugly. The carpet smells like stale beer. The fridge is out of order. Someone plugged the toilet and it overflowed. There's puke in the driveway. The couch is broken and burnt. There's a used condom on the bed. Oh Lord!

Mon, 11/14/2011 - 01:39 | 1874800 Dr Zaius
Dr Zaius's picture

Not to mention that the parents are due back from vacation in about three hours. They will be none too happy with the state of the house.

Mon, 11/14/2011 - 06:47 | 1875023 DeltaDawn
DeltaDawn's picture

You tried to "pull out" with her and failed.

Mon, 11/14/2011 - 00:03 | 1874647 jomama
jomama's picture

really nice work, thanks for posting.

Mon, 11/14/2011 - 00:40 | 1874656 Mediocritas
Mediocritas's picture

The chart in #4 tells you everything you need to know about why Europe went wrong. What madness possessed Europe's banks to implement a "credit Schengen", offering loans at the same price to Greeks and Germans? You take nations with formerly high yields and peg it all to German yields and, surprise surprise, the current account deficits of those nations blows out.

I mean, what the hell did the Euro elite THINK was going to happen? That Greece, suddenly able to borrow cheap, was going to use that money to invest in expansion of its own manufacturing base to compete against Germany? How naive is that? No. Greeks are going to borrow cheap and use the money to buy GERMAN goods, and why not? German products are superior. Here is a great example of what I'm talking about, obvious and predictable to anyone with half a brain who has lived in Europe and understands that Greece != Germany: http://blogs.telegraph.co.uk/finance/ianmcowie/100012894/fast-cars-and-l...

The crisis we have is a current account crisis. Deficits got too large and the vectors of those deficits also grew to the point that markets realized there could never be any servicing of that deficit. There can be no solution for Europe until the issue of current accounts blowing out is addressed and the simplest way to address it is what we've seen since 2007, when yields de-pegged and were allowed to return to where they SHOULD have been all along. The Eurocrats want a more simplistic solution: a full fiscal union, a United States of Europe. I know, I've met my fair share of them, they think that all Europe should get along the way they get along with each other. That well-intentioned but utterly naive philosophy paves the road to euro hell. Won't happen.

Had yields never been (stupidly) pegged by banks acting like idiots and assuming (naively) that all European cultures are the same, then we never would have had this crisis in the first place. Allowing yields to return to where they should be is a good thing, but the problem is, and the source of the crisis, that by being pegged so long, imbalances built up so large that a rapid return to equilibrium (by removing pegs) means a shocking crisis. In other words, the rate of economic rebalancing is too high for governments / people / companies to handle.

The solution there is to either take it on the chin and just let it happen rapidly, which means riots, discontent, nationalistic governments and the risk of war, along with certainty of a eurozone breakup, or to try to dampen the rate of rebalancing via unconstrained ECB bond purchases (an act that Germany opposes for obvious reasons).

There's not a lot in between. For my money, I'm betting that the Eurocrats increase their pressure on Germany until Germany gives in and allows the ECB to purchase at will. Germany might be more willing to accept that outcome if the purchasing decisions are made by the nations based on current account status (ie, Germany calls the shots). 

The real Black Swan here is that Germany says a big "Fuck You" and leaves the Euro (and maybe even the EU) out of national pride. Such an event may be harmful to Germany, perhaps even more harmful than staying in, but it can't be ruled out. If it happens, then things get *really* messy. So far things actually do remain can-kickable.

As a final point, as I explained the other day in reference to Hans-Werner Sinn and Timothy Brown, the ECB has ALREADY been engaging in stealth limiting of PIIGS yields (and sticking Germany with the risk). See: http://www.voxeu.org/index.php?q=node/6599

Mon, 11/14/2011 - 01:30 | 1874783 DaBernank
DaBernank's picture

Nationalism, on tap. "True-Finn" parties in every country come next election cycle.

Mon, 11/14/2011 - 03:03 | 1874894 Mediocritas
Mediocritas's picture

I reckon you're right. Many of us predicted it years ago. Nationalism will rise and rise.

Mon, 11/14/2011 - 08:06 | 1875088 twotraps
twotraps's picture

awesome comment, a big reason ZH is worth reading, thanks.

Mon, 11/14/2011 - 00:31 | 1874687 Moneyswirth
Moneyswirth's picture

"...but things are going to get worse before European authorities decide to wheel out their heavy artillery"

Thank goodness this is just...er, (ahem)...figuratively speaking, amirite? 

Mon, 11/14/2011 - 04:12 | 1874937 Element
Element's picture

nah ... its Operation Midas ... top secret, very hush-hush ... you shovel fiat in one end, and get gold out the other

Otherwise known as a gold mine.

Mon, 11/14/2011 - 00:31 | 1874688 palmereldritch
palmereldritch's picture

Rumor has it that once Greece is fully plundered and shat out of the EEC the Central Banksters plan to re-name it Icedland

Mon, 11/14/2011 - 00:33 | 1874691 tempo
tempo's picture

The idea that more debt will work is insane. If debt was the answer then why can't the African countries issue trillions in debt, raising their standard of living by establishing a socialist entitlement dream world where everyone receives food stamps and health care. Compounding $60 trillion in debt by 8% per year leads to more people eating at McDonald's is a f.... dream.

Mon, 11/14/2011 - 00:38 | 1874699 chump666
chump666's picture

HFT's are range trading the risk crosses (FX), equities are high on the Greek and Italian stooges, till the first Molotov is thrown...will be Italy this time.  Stocks (asia) looks like a pre-lude to a Wall Street bulltrap.  Profit taking with an additional panic.  This is topped, rangy and going no where but down.

Mon, 11/14/2011 - 01:04 | 1874748 DeltaFunctionToronto
DeltaFunctionToronto's picture

The future of the eurozone may look bleak, but understand this is a programme for Western consolidation under an unnamed entity. Following a significant revaluation in the price of both monetary metals, gold in quantity will be made available to supplant Western Central Bank supplies in order to anchor currencies once again. A revaluation of debts is neccessary for the future success of the enterprise, and is to be expected.

Mon, 11/14/2011 - 02:25 | 1874866 HyperLazy
HyperLazy's picture

Just out of curiousity Mr. Toronto, I would like to re-ask a rephrased question from a while back. You have an uncommon perspective.

What would the relationship between the consolidated governance and the individual be near and long term - citizen liberty or slave debt? Enforced laws that protect human rights or civil destruction that crushes even Magna Carta?

Mon, 11/14/2011 - 01:10 | 1874758 Mark123
Mark123's picture

I think what we are missing is the consequence of further money printing.  The central banks know they risk a loss of confidence in the CURRENCY.  Once that goes all this debt just becomes worthless...they lose control over gold and other commodity prices.

 

If we continue with short term thinking then ECB starts massive printing to buy up toxic debt.  Other central banks do the same.  In a few years we will be so messed up it won't be funny.

 

If we think longer term, strong nations will pull the plug and revert to a strong and trusted currency.  This will be really tough initially, but in the long run these countries/regions will be in great shape since their economies will be based on sound fundamentals - not unicorn theories.

Mon, 11/14/2011 - 01:32 | 1874785 cranky-old-geezer
cranky-old-geezer's picture

 

 

Pretty interesting watching what happens in a fiat currency when the central bank can't run the printing presses.

Mon, 11/14/2011 - 01:53 | 1874821 chump666
chump666's picture

euro markets open in two hrs or so, let the Italian political chaos begin.

Mon, 11/14/2011 - 02:32 | 1874874 Vaiman
Vaiman's picture

At this time the DJ EURO STOXX 50 is up 66 pts.  So I don't know.  Me thinks they are all hopeful that Mario is the answer to stopping the oncoming barrage.

Reuters seems quite positive:      The markets just keep smoking that good ole hopium!

European Factors-Shares seen extending rally on Italy, Greece

By Blaise Robinson PARIS, Nov 14 - Financial spreadbetters expect the leading European benchmark indexes to rise on Monday, extending the previous session's rally as investors bet new leaders in Italy and Greece will speed up reforms to tackle the two countries' debt problems. Financial spreadbetters expect Britain's FTSE 100 to open 17 o 30 points higher, or as much as 0.5 percent, Germany's DAX to open 46 to 63 points higher, or as much as 1 percent, and France's CAC-40 to

 

Mon, 11/14/2011 - 01:56 | 1874828 cranky-old-geezer
cranky-old-geezer's picture

 

 

14. Even after full monetisation, the ECB's expansion will remain below the Fed’s ...

Maybe so, but Euro isn't the world reserve currency.  Significant debt monetization by ECB would hurt Euro far more than Fed debt monetization hurts USD.

Mon, 11/14/2011 - 02:07 | 1874840 Seize Mars
Seize Mars's picture

...but Euro isn't the world reserve currency.  Significant debt monetization by ECB would hurt Euro far more than Fed debt monetization hurts USD.

I think you are correct. This is why I think the Euro is definitely the first to go, then the USD second. I think it goes like this:

1) EUR currency collapse

2) EUR yields explode higher

3) EUR inflation explodes

4) USD currency collapses with rumors and news of investment bank losses on EUR stuff

5) USD Treasury yields explode

6) USD inflation explodes

 

Mon, 11/14/2011 - 02:13 | 1874851 Island_Dweller
Island_Dweller's picture

Totally off topic:  Last week someone posted that they were going to go to their bank and request a cash withdrawal of $150,000; does anyone have an update? I'm most curious how that went.

TIA

Mon, 11/14/2011 - 02:28 | 1874870 longonSpam
longonSpam's picture

The cashier's check bounced & he got stuck for overdraft charges..

Mon, 11/14/2011 - 02:44 | 1874885 automato
automato's picture

You can chart all you want but the reality breaks down to simpler forces. Just as some economists will simplify to such factors as Confidence or "Animal Spirits", the EU reality breaks down to irreconcilable differences caused by an inherent mistrust, bigotry, corruption, self-interest as well as one nation in particular that knowingly has taken advantage of the others by producing high-quality goods at a non-competitive advantage and then loaning the monies to those who would purchase those same goods with little to no chance of ever being able to produce those goods themselves.

Mon, 11/14/2011 - 03:58 | 1874927 flight77
flight77's picture

one nation in particular that knowingly has taken advantage of the others by producing high-quality goods at a non-competitive advantage.
This is the same WASP fascistic picture like in the upfront of WWI. The Germans are the bad guys, right.
The whole Euro bullshit has cost us until now 500 billion Euros alone on higher interest rates, and all kind of hidden subsidies all over the place. 
The so called success of Germany is based on a Neocon wage policy plus some good products. The salary structure is completely destroyed.  People pay a dire price for the so called "success".
We are not Anglosaxxons, who think they have a natural right on making profits out of the work of others (speculating with other peoples money, expecting real profits and if this doesn´t work out make some Wars to take control of the Oil).
You want Capitalism. Here you got it. Don´t sit on the self-pity pot blaming others.
The fact is, that the U.K. is an empty pair of boots, with some military and a fraudulent pimped up financial district run by criminals.
And the U.S., brothers in soul, keeps on walking the road of self destruction, celebrating themselves as only remaining world power, completely unable to face reality.

Mon, 11/14/2011 - 03:28 | 1874911 XXL66
XXL66's picture

The same 'pictet' bank also has a nice PDF download on the right of this page on Safe Havens...

http://www.pictet.com/en/home/wealth_management/perspectives/perspective...

Guess what ...

 

Mon, 11/14/2011 - 04:24 | 1874945 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

Euro is now below Fridays close but Es are still 5 point above. Are we see decoupling? ...no wait

Mon, 11/14/2011 - 06:33 | 1875011 Onehunglo
Onehunglo's picture

#5 The light at the end of the tunnel ... has been switched off ... austerity, public spending cuts and all that.

Mon, 11/14/2011 - 07:30 | 1875058 tim73
tim73's picture

Isn't it amazing the fact Americans work about 20-30 percent more hours per year than Europeans and they are still even more fucked up! The most indebted nation in the world with huge budget and trade deficits! Is that why you guys overworked so much? Never had a decent holiday during your best years and barely know your kids! Plus as an extra bonus, three ex-wives eating your salary away still...

Mon, 11/14/2011 - 07:37 | 1875063 spankfish
spankfish's picture

Is this when somebody is supposed to say "pay up bitchez".

Mon, 11/14/2011 - 07:58 | 1875079 OutLookingIn
OutLookingIn's picture

Winter? The mid point of the long wave Winter.

The end of an era. The beginning of an new epoch.

Capitalism is in it's mighty death throws. It will die hard.

Cause and effect - listen and learn.

http://comment.rsablogs.org.uk/2010/06/28/rsa-animate-crisis-capitalism/

Mon, 11/14/2011 - 08:42 | 1875136 pufferfish
pufferfish's picture

CALL. ALL. THE MARGINS...

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