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Der Elefant In Das Room: Germany - The Ultimate Doomsday Presentation

Tyler Durden's picture


* Please stop emailing us: we know the German is gramatically incorrect. That was not by mistake.

Two months ago, Carmel Asset Management came out with what we dubbed "Spain: The Ultimate Doomsday Presentation." Since that day Spanish yields have exploded, the domestic (and global) stock market has collapsed, and as of hours ago, Spain for the first time requested an official bail out from its European partners. But Spain was easy - only Nobel prize winning economists and TV anchors could not foresee the final outcome for the country. Today, we redirect our attention to real elephant in the room: Germany. Recall that it was right here on Zero Hedge where we warned, just under a year ago, that "the cost of the euro not plunging today as a result of the ECB not proceeding with outright monetization, is that Germany is now the ultimate backstopper of all of Europe's risk... Germany has directly onboarded the risk associated with terminal failure of this latest and riskiest "bailout" plan and in doing so may have jeopardized anywhere between 32% and 56% of its entire annual economic output. One wonders if the risk of runaway inflation is worth offsetting the risk of a plunge into the worst depression in the nation's history?" Simply said: Germany's opportunity cost to preserving the status quo right now, is at a cost of hundreds of billions in the future, yet even that pales to the cost of letting it all fall apart. But this was a year ago, and out of headlines means out of mind. Today, we are happy to remind readers of just this dilemma, once again courtesy of Carmel. And if the hedge funds' predictive ability is gauged by the response in the Spanish market (and economy), Germany should be worried. Very worried.

In summary:

To summarize, as we inquired on July 21, 2011:

  • The Cost to Save the Euro is Much Less Than to Let It Fall Apart, but Do the Germans Have the Political Will?

Read on. It only gets better. And by better we mean terrifying for all our German readers.


h/t Peter Tchir


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Tue, 06/05/2012 - 10:59 | 2495911 LawsofPhysics
LawsofPhysics's picture

Still does not account for resource cost to keep the German machine going.  Fuck these eCONomists and paper-pusher's bullshit already.

Tue, 06/05/2012 - 11:09 | 2495929 Biggvs
Biggvs's picture

And I suppose the "Euro stays together" column assumes no default in Spain or Italy. The numbers will grow massively. Better to leave the Euro now. Take the bigger pain now or get an even bigger flogging soon enough.

Tue, 06/05/2012 - 11:13 | 2495973 Ivanovich
Ivanovich's picture

So where's the column that shows the costs of staying in the Euro, and then adding the collapse of the Euro after "staying in the euro" doesn't work?  Shouldn't there be a sum of both?

Tue, 06/05/2012 - 11:17 | 2495986 Biggvs
Biggvs's picture

+1 Exactly

Tue, 06/05/2012 - 11:28 | 2496020 fockewulf190
fockewulf190's picture

+1 Deutschmark.

Tue, 06/05/2012 - 13:00 | 2496327 augustusgloop
augustusgloop's picture

+1 Reichsmark to replace Papiereuro

Tue, 06/05/2012 - 14:50 | 2496861 JeffB
JeffB's picture

Unless the strategy all along has been to cause/allow a meltdown and then take advantage of it from a globalist standpoint. "Allow no crisis to go to waste" and all.

If the (interim?) goal is to bring about a unified Europe, allowing a collapse of a country here and there and holding out the carrot of a bailout in return for giving up sovereignty, then maybe things are going quite well according to "the plan".

Who knows?


Tue, 06/05/2012 - 11:10 | 2495955 jdelano
jdelano's picture

"People close to Mr. Paulson said he was attracted to Hala Ranch for its vast land and forest filled with aspens and pines." 

Wonder if he verified the trees are actually there this time?


Tue, 06/05/2012 - 12:29 | 2496233 OttoMBMP
OttoMBMP's picture

Unfortunately, this possibly interesting presentation starts with outright BS:

"Germany becomes an export powerhouse because of the Euro." ---- No, Germany has been an export powerhouse long time befor the euro introduction. THe share of exports to countries outside of the euro zone is now higher than before the euro introduction.

"The effective exchange rate was set far too low vs. other Euro countries." ---- No, research, for example by Ifo Institute, shows, that the D-Mark was overvalued ahead of the Euro introduction. Thus the exchange rate was too high and Germany suffered from a lack of competitiveness in the early years of the Euro.

So, can I trust in the rest of this presentation? Rather not. I will not spend my time reading it.

Tue, 06/05/2012 - 11:11 | 2495958 withnmeans
withnmeans's picture

If I were Germany, I would leave the Euro immediately.  I'm not sure that I would agree to the above "respectively", the Eurozone will implode regardless, do not throw your money away Germany! Start backing your "Marks" with gold now, prepare for an unraveling. 

Tue, 06/05/2012 - 11:15 | 2495978 Reggie Middleton
Reggie Middleton's picture

Do realize that if Germany yields budge just a tiny bit, there goes ALL of those European insurance portfolios and the rest of the bank HTM inventory - just about all of it. See and then The Biggest Threat To The 2012 Economy Is??? Not What Wall Street Is Telling You..

Tue, 06/05/2012 - 11:18 | 2495988 GeneMarchbanks
GeneMarchbanks's picture

You could say the same for Japan. Twenty years and counting now...

Tue, 06/05/2012 - 13:00 | 2496330 tarsubil
tarsubil's picture

Isn't Japan different from Germany in more ways than one that make it more able to extend and pretend? If this goes on for 20 more years, I'm not sure I'll be able to keep what is left of my sanity.

Tue, 06/05/2012 - 11:56 | 2496122 Cognitive Dissonance
Cognitive Dissonance's picture

This game has a long way to go before the great unwind. We haven't even begun to consider the impossible.....which is simply impossible NOW under current conditions.

Tue, 06/05/2012 - 12:14 | 2496173 carbonmutant
carbonmutant's picture


Tue, 06/05/2012 - 12:01 | 2496137 BandGap
BandGap's picture

Reggie, enlighten me. What holds them in place?

Tue, 06/05/2012 - 12:22 | 2496205 NotApplicable
NotApplicable's picture

Fiction. Pure fiction, instilled during childhood.

Tue, 06/05/2012 - 12:25 | 2496217 Cognitive Dissonance
Cognitive Dissonance's picture

The L O N G con is coming to an end.

Time to set up the game board for the next one.

Tue, 06/05/2012 - 11:23 | 2496001 jus_lite_reading
jus_lite_reading's picture

G7 emergency meeting in effect. I predict, nothing will be accomplished.

More ponzi in every form. Australia cuts rates today. Spain will get bailed out by Uncle Ben. Flood the whole system until it explodes... great plan they have. 

Oh and BTW... expect to see martial law "traning exercises" across the country... tick tock tick tock...

Tue, 06/05/2012 - 11:41 | 2496071 LongSoupLine
LongSoupLine's picture

don't worry, idiots on CNBS say their "sources" said we are setting up for a "rip your head off rally" in the SPX because that's what happened on Oct 4, 2011 when the headlines were similar.


You just can't make this fucking stupidity up.  These assholes would go out and hump telephone poles if they thought it could lead to a market pump. 

Tue, 06/05/2012 - 11:48 | 2496097 jus_lite_reading
jus_lite_reading's picture

Hey, a man has gots to make a buck, eh?

Would you buy a stock knowing that tomorrow you might not be able to sell it or tomorrow it will be worth half? Would they sell you something now if they thought it would have more value tomorrow? The game is over...

Tue, 06/05/2012 - 11:54 | 2496117 caimen garou
caimen garou's picture


Tue, 06/05/2012 - 13:05 | 2496344 Things that go bump
Things that go bump's picture

I'd pay to see that.  

Tue, 06/05/2012 - 11:24 | 2496007 eclectic syncretist
eclectic syncretist's picture

We market some bonds, we market some debt.  We just Weimar.  What's the problem?

Tue, 06/05/2012 - 11:31 | 2496032 LULZBank
LULZBank's picture

A guy with a drill machine thinks solution to every problem is drilling a hole.

Tue, 06/05/2012 - 12:36 | 2496246 CrashisOptimistic
CrashisOptimistic's picture

LoPdood, watch Russia's play to control Germany.  Germany is shutting down its nukes and the only natgas source for them is Russia.

 Pipelines uber alles.  I don't think Germany is ramped up with LNG terminals so it DOES have to come from Russia.

I am looking for Russian dictate of German policy within 18 mos.

Tue, 06/05/2012 - 15:18 | 2496995 TwoHoot
TwoHoot's picture

When Germany looks East they see endless natural resources for their industrial machine. When Russia looks West, they see financial discipline, efficient labor and access to global markets. Merkel and Putin are made for each other. The only problem is that their familes have been feuding forever and will disapprove. Plus, they both want to be on top when they screw each other. That can be worked out after the wedding.

But make no mistake, Germany is growing tired of the silly, lazy, irresponsible, undisciplined, something-for-nothing part of the EU. Germany will throw them to the dogs sooner or later. As always, Poland and the rest of Eastern Europe will have to make their accomodations to survive.

You are absolutely correct in thinking the breakup of the EU will drive Russia westward and Germany eastward. "Dictate" may be too strong a word. I think it will be a two-way "accomodation" with attempts to "Dictate" at regular intervals.




Tue, 06/05/2012 - 11:00 | 2495914 mrktwtch2
mrktwtch2's picture

maybe they let the euro collapse as payback for losing ww2??

Tue, 06/05/2012 - 11:04 | 2495928 LawsofPhysics
LawsofPhysics's picture

maybe, but only if they can profit from WWIII.  The world is much bigger than germany, or europe for that matter.

Tue, 06/05/2012 - 11:09 | 2495952 The Big Ching-aso
The Big Ching-aso's picture



Germany is like the plantation owner of Europe.  Sooner or later the slaves R gonna wanna be free 2 be poorer.

Tue, 06/05/2012 - 11:18 | 2495963 hedgeless_horseman
hedgeless_horseman's picture



maybe they let the euro collapse as payback for losing ww2??

"Germany, like Japan, are post-war pawns. Their currencies are DESIGNED to be debased, as and when needed, to achieve synchronized diving with the pound and dollar. If Germany wasn't in the Euro, its prior experience with hyper-inflation would prevent it from debasing when instructed to do so (obviously not a problem with the Nips). Both countries go along as willing pawns simply because they have been re-created post-war as export nations totally reliant on weak currencies."  -said I.

It is all just cover for more money printing by everyone. 


Tue, 06/05/2012 - 11:23 | 2496003 GeneMarchbanks
GeneMarchbanks's picture

Gross oversimplification. Certainly there is an outside presence that has a relentless motive with both of these nations.


Tue, 06/05/2012 - 12:10 | 2496159 dark pools of soros
dark pools of soros's picture

Rothschilds and the likes of Soros...  for no sovereign nations just a NWO with an army against the people, paid by the people

Tue, 06/05/2012 - 11:00 | 2495917 spinone
spinone's picture

What? There's a problem in Europe? Why wasn't I notified?

Tue, 06/05/2012 - 11:34 | 2496045 LULZBank
LULZBank's picture

You never went to Ivy League colleges nor had a subscription to the EU newsletters.

Tue, 06/05/2012 - 11:01 | 2495918 JR
JR's picture

Mark Grant says Spain is going to come under the heel of the jackboot.

It’s the bankers who wear the jackboot; who’ve always worn the jackboot; it’s the bankers' economic engines that are strip-mining Europeans’ financial future, especially that of the German people. Will these peoples’ necks ever be free of the boot?

Alejandrito points to the source:

WASHINGTON (MarketWatch) — “Germany will ultimately take whatever steps necessary to keep the euro zone intact, said Deutsche Bank’s former Chief Executive Officer Josef Ackermann on Monday.

“’If it comes to worst, before the euro zone collapses, everything will be done to bail the euro zone out,' Ackermann said in a late afternoon speech at the Atlantic Council. Read more on Deutsche Bank's CEO handover.

“Later he said that he had ‘no doubt’ that the German people would support a rescue operation for the euro zone.”

And I have no doubt that he has no doubt.

It wasn’t for nothing the NY Times two years ago designated this Jewish banker “the most powerful banker in Europe and, depending on whom you ask, possibly the most dangerous one, too.” 

Tue, 06/05/2012 - 11:01 | 2495919 francis_sawyer
francis_sawyer's picture

Just sign on the dotted line...

Tue, 06/05/2012 - 11:06 | 2495939 Boilermaker
Boilermaker's picture

In your childrens blood.

Tue, 06/05/2012 - 11:03 | 2495923 walküre
walküre's picture

This is stupid propaganda!

There are no losses. Germany says FUCK YOU Eurozone and goes back to the DEUTSCH MARK. Will pay as much as Greece, Spain, Italy and the rest - WHICH IS NADA. Will say FUCK YOU Wall Street and reneg on any obligations they'd have there. FUCK YOU IMF and World Bank, go skim someone else.

Then Germany which OWNS more patents, industry, collateral than all the others can REFOCUS on being innovative and entrepreneurial instead of being forced to deal with the debt of their ugly stepchildren.

NO LOSSES, ONLY BENEFITS if we cut off the gangrene. Some of the good flesh will get cut off with it.

So, where is the problem?

Tue, 06/05/2012 - 11:06 | 2495937 LawsofPhysics
LawsofPhysics's picture

Yes, so long as the rest of the world accepts the DM.  Now tell me sir, will that DM be backed by something real (like gold), or simply more german promises.

Tue, 06/05/2012 - 11:10 | 2495954 walküre
walküre's picture

Gold and the promise to pay in real hard DM, not diluted through the pigs at the FED trough. Germany is proving right now they are not interested in diluting currency. The only reason Germany diluted currency in the past when the world forced Germany for the first time to pay everyone's debt loads. Not a single shot has been fired (yet) and Germany is asked a second time to pay everybody's debt? WTF?

Tue, 06/05/2012 - 12:00 | 2496134 NotApplicable
NotApplicable's picture

Isn't this the third time?

Collective guilt is a real bitch.

Tue, 06/05/2012 - 13:22 | 2496391 walküre
walküre's picture

so is collective pride

you know, I wouldn't bring it up but regardless of where I am, who I speak with, no matter what language I represent myself in ... it all comes back to "you're German?"

Tue, 06/05/2012 - 13:51 | 2496507 LawsofPhysics
LawsofPhysics's picture

Wrong. Most people are not asking germany to do shit. Tell me, how will everything work out for them when they have no customers? Or better yet when the rest of the EZ has no wages or purchasing power. They will have the best house in the slums, winning indeed.

Tue, 06/05/2012 - 14:25 | 2496711 walküre
walküre's picture

Finding customers was never Germany's problem before.

Tue, 06/05/2012 - 11:21 | 2495996 JR
JR's picture

Hugh A. Thomas:

Productive labor is the fundamental and underlying essence of all economic activity.  Exchange is the partner to productive labor. It is these two activities that create an economy…There is a medium of exchange, but it isn’t money…

Man has the ability to store his labor, and this faculty is the foundation of economics….

Stored labor is the common denominator of value…commodities are those things which are first produced by labor, and then utilized by man. Labor creates utility….

Man has the ability to store his labor, and this faculty is the foundation of economics….

Money is stored labor. Labor is part of life. To control money is to control life… When the state declares the exclusive right of the issuance of money, freedom is impossible.

Tue, 06/05/2012 - 13:53 | 2496518 LawsofPhysics
LawsofPhysics's picture

Money is not stored labor when said money can be devalued by some paperpusher, FAIL

Tue, 06/05/2012 - 11:39 | 2496063 Bunga Bunga
Bunga Bunga's picture

Maybe you are too young to know that for one dollar you paid only 1.32 DM in the nineties.



Tue, 06/05/2012 - 12:22 | 2496207 optimator
optimator's picture

And in the early fifties for one dollar you got four marks.  A stein of draft was twenty-five cents.

Tue, 06/05/2012 - 13:19 | 2496384 Things that go bump
Things that go bump's picture

Yes, but my father made 75 cents an hour at Cutahy's slaughter house in 1953.  In 1965, they bought a nice 3 bedroom house for 17,000 with a VA loan.  Yesterday, I watched a guy buy a carton of cigarettes and he laid down more than half of their monthy mortgage payment for it.   

Tue, 06/05/2012 - 13:56 | 2496529 LawsofPhysics
LawsofPhysics's picture

It isn't the nineties anymore idiot. I can also remember buying over 6500 rubles for one dollar too. Do you have a point or are just another troll?

Tue, 06/05/2012 - 11:51 | 2496105 jus_lite_reading
jus_lite_reading's picture

I heard the other day on Deutschewelle that Germany has too much money in the krankenkasse... go figure!!

Tue, 06/05/2012 - 11:04 | 2495925 bigdumbnugly
bigdumbnugly's picture


ist: der elefant in die zimmer.


Tue, 06/05/2012 - 11:08 | 2495949 The Reich
The Reich's picture

leider nein. ;)

Tue, 06/05/2012 - 11:58 | 2495995 bigdumbnugly
Tue, 06/05/2012 - 11:04 | 2495927 zilverreiger
zilverreiger's picture

Heard this argument before

"The Cost to Save the Euro is Much Less Than to Let It Fall Apart, but Do the Germans Have the Political Will?"


BUT HELLO they do not look medium term, the future is UNKNOWN BLACK, why would germany run these risks!

Tue, 06/05/2012 - 11:06 | 2495930 lineskis
lineskis's picture

"Do the Germans Have the Political Will"

In the end Germans will just do the math. :) And when the total estimate on the left is bigger than the total estimate on the right, then the Euro will be allowed to break apart.

Tue, 06/05/2012 - 12:13 | 2496170 Amish Hacker
Amish Hacker's picture

The chart shows German exports falling bigtime whether the Euro is dumped or saved, though, of course, the decline is much larger if the Euro implodes. One outcome that isn't getting talked about (and I would love to hear from German ZH-ers on this) is the possibility that Germany gives up on Europe and aligns itself more closely with Russia. Sounds absurd, but after a few more years of arguing with Jose and Luigi and Pierre, Germans might decide that Ivan isn't so bad after all. And Ivan's the one with the petroleum.

Tue, 06/05/2012 - 12:47 | 2496286 Rynak
Rynak's picture

"Exports" aren't really the "always good" thing the banking propaganda is making it look like.

Look at it from a really fundamantal POV without all the misleading economic concepts: You've got a society that produces some stuff, and needs some stuff. Now optimally, it would just produce what it needs, and be done - no imports or exports needed. More importantly, it is neither relyant on other countries affording to buy from oneself (export) nor relyant on other countries selling to oneself at nice prices (import). And perhaps even more importantly, it isn't relyant on "selling out" the own economy to attract multinational corps to export.

Plus, one's own surposed "surplus" in the trade-balance (the exports) of course is the DEFICIT of other countries! Meaning: If you constantly trade with another nation, and your nation in this relationship has a constant export-bias and the other nation a constant import-bias, the other country will - ignoring other trade relations - either go broke, or you will have to start outrightly PAYING your "customer" to buy your stuff! (Which makes no fucking sense, and is exactly what germany has been doing! It hasn't "gained" all it has done, is giving goods away for free.... "for free", because it was clear from the start, that the other nation wouldn't be able to pay the debt back.... there never was a true expectation of payback... it was given away for free)

In practice, it of course isn't as simple as this. Various factors including local ressources, will result in oneself producing more than one needs in one area, and not producing enough of what one needs in another area.

Now in a sane mindset (read: has nothing to do with nowadays economic doctrines), two considerations follow from this:

1. Even though there may be inbalances, one would try to keep them as low as one can. Heck, you know originally the whole purpose of a "market" was to balance the economy.

2. Optimally, one would want to export enough, to pay for the imports (the so called trade-balance). This does NOT mean that "the more exports, the better" (for reasons explained earlier)... it just means avoiding a deficit in international trade.

Now, here is the real problem with germany: In seeking to maximize exports, it has ruined its domestic market! It is now is as much a pusher of debt, as it is a junkie on exports (THIS is why the whole economic situation (and the one of USA-China as well BTW), isn't a plain abuser-dependent relationship.... none of the involved nations are winners... they just in a MUTUALLY-abusive-dependent drag each other down.... so, while both sides each in a schizophrenetic way see themselves as winner and the other as loser - they're actually both going down.... it is a THIRD PARTY that is the actual winner.

So, germany's main problem with dissolving the euro, isn't "where to export to"... its problem is the wasteland that is its own domestic market.... that it now lacks the means to sustain itself, which it mostly was capable of before the euro.

It would be quite hard to engage in such a rapid domestic market buildup program, without accumulating more debt. So on top of its current debt, and on top of the PIIGS debt then shifted to it, it also would need to finance rapid reconstruction of its own domestic market.... cannot pay this back. It would have to default as well....


As for a closer relationship with russia - i proposed this myself a few days ago. Primarily because of natural ressources.

Tue, 06/05/2012 - 14:16 | 2496645 noses
noses's picture

You could be wrong. Germans (not "Germany") could decide on the principle "to teach the culprits a lesson" even if its price is much higher. It's just a question of game theory – sometimes you have to tell the other players that cheating is frowned upon even if it costs you money.

Tue, 06/05/2012 - 11:05 | 2495934 Boilermaker
Boilermaker's picture

Keeping the Euro together is cheaper in the SHORT TERM.

Breaking the Euro up at least gives you the LONG TERM control over your own destiny.  Getting the ticks off your body should be the first priority.

Either way, how the fuck to do they actually fund either of these scenarios?

Tue, 06/05/2012 - 11:20 | 2495991 Caggge
Caggge's picture

They fund both scenerio's with your children and your grandchildrens blood.

Tue, 06/05/2012 - 11:10 | 2495935 The Big Ching-aso
The Big Ching-aso's picture



Supporting the Euro =  Deutschland Uber Fallin'.

Tue, 06/05/2012 - 11:07 | 2495944 The Reich
The Reich's picture

Who payed you to post this Utter bull$hit.

If the Euro won't break now BuBa TARGET2 losses (of 637 bn€) will grow to all eternity.

ESM is a money sink.

Tue, 06/05/2012 - 11:26 | 2496012 GeneMarchbanks
GeneMarchbanks's picture


Funny in truth.

Tue, 06/05/2012 - 13:10 | 2496353 Rynak
Rynak's picture

Look very closely at the bottom of the article:

"h/t Peter Tchir"

Oh wait, didn't that guy originally provide GUEST ARTICLES to ZH, but now he is posting under the "official" tyler account?

So let's see - in one year, we have gone from articles being clearly market as "sponsored", over articles being called "guest articles", over articles not marked guest articles in the headline but in the article at the top..... to sponsored articles outrightly posting as the tylers, with just a small footnote at the bottom of the article.

I guess that pays better, huh?

Tue, 06/05/2012 - 11:08 | 2495946 the 300000000th...
the 300000000th percent's picture

I'll trade you your sovereignty for some of our soon to be even less valuable funny money

Tue, 06/05/2012 - 11:11 | 2495947 Rynak
Rynak's picture

Banksters: "Where's ma debt???"

PIIGS (NOT their banksters): "Default! Hahah!"

Banksters: "Where's my debt plus PIIGS debt???"

Germany (NOT their banksters): "Default, arschloch!"

Banksters: "Where's ma debt plus PIIGS debt plus germany debt?"

UK (NOT their banksters): "GFY, Default!"

Banksters: "Where's ma debt plus PIIGS debt plus germany debt plus UK debt???"

USA (NOT their banksters): "Do you also take food stamps? BTW, Default, bitchez!"

Banksters: "Where's ma debt plus PIIGS debt plus germany debt plus UK debt plus USA debt?"

China (NOT their banksters): "^_^ LULZ!!!"

Central Banks: KABOOOOOOOM!

Nations: "Oh dear, looks like we'll need to order a whole bunch of new currencies.... can we get a bulk discount?"


And while on the topic of "bulk" - did the ZH staff just get a bulk order for germany hitpieces?

Tue, 06/05/2012 - 11:09 | 2495950 d_taco
d_taco's picture

Buy US Treasuries Buy US treasuries!! Leave the Euro I repeat Buy US treasuries.

The Euro blows up and within a year it's value is 50% of what it now. That means you in the US can buy Mercedes for 50% of the price you pay for it now and we do not pay more for USA cars in Europe because nobody wants to have them.

Tue, 06/05/2012 - 11:38 | 2496058 Treeplanter
Treeplanter's picture

Buy gold now, Mercedes later.

Tue, 06/05/2012 - 11:44 | 2496087 Bunga Bunga
Bunga Bunga's picture

Then GM and Ford are fucked.

Tue, 06/05/2012 - 12:38 | 2496259 Carl Spackler
Carl Spackler's picture

GM is shaftedas Opel is a drop in their bucket.

Ford, not so much. The Fords in Europe are made in Europe -many in Deutschland- and completely different models than a consumer can buy in the old U.S. of A.

Tue, 06/05/2012 - 14:17 | 2496657 noses
noses's picture

That's fair. Looking at the quality of GM's products it's unfair to only screw the customers.

Tue, 06/05/2012 - 11:10 | 2495953 Caggge
Caggge's picture

They need another column in the chart. The cost of bailing still bailing out the ugly stepchildren after 5 years. It would cost them less by far to just cut the cord and let it fail. The bonus would be the bank.....the people who caused the problem would be the ones who lose their money.

Tue, 06/05/2012 - 11:13 | 2495970 Rynak
Rynak's picture

Err, i don't understand. I thought nations are banks and their balance sheets, where the paper that one has given away, is counted as something one still has.

Tue, 06/05/2012 - 11:10 | 2495957 Rainman
Rainman's picture

Good luck with the United States of Europe idea....uh,  wasn't Adolph the last guy to work on that ?? 

Tue, 06/05/2012 - 11:39 | 2496060 Muppet Pimp
Muppet Pimp's picture

Seems to be moving along according to plan so far.  The foolish periphery countries will be happy to sign up and get things going.  The trouble will come later when they want their sovereignty back.  At that point it is all over but the crying and infighting.

Tue, 06/05/2012 - 11:42 | 2496077 Treeplanter
Treeplanter's picture

No, Adolf wanted the Subjected States of Europe.  Uncle Joe won that one. 

Tue, 06/05/2012 - 14:21 | 2496674 noses
noses's picture

Actually no, Dolferl wanted the United States of Germania (which is something slightly different). Good that he didn't get it; I prefer riding my bike across northern France without the additional danger of getting rolled over by a tank (if I want to play with that kind of risk going to Switzerland where everybody and his dog is taking his locally stored tank for a Sunday ride is enough for me).

Tue, 06/05/2012 - 11:29 | 2495961 Mercury
Mercury's picture

The thing is the"Pay for rescue programs" option will almost certainly fix nothing beyond the very short term.  There will still be no political union, PIIGS will still think they're in Club Med and a bunch of half-wit Eurocrats will still run from luncheon to luncheon putting out fires.

So, "Saving the Euro" may as well be called "Giving the can one more kick."  And the price tag is a lot bigger than what is noted above.

Tue, 06/05/2012 - 11:12 | 2495964 Matt
Matt's picture

So Germany is at 82 percent debt-to-GDP as of FY 2011. If the Euro stays together, Germany goes to 183% Debt-to-GDP. If it breaks apart, it goes to 213% debt-to-GDP. This is assuming no decline in GDP. Sounds pretty cheerful all around. Their best bet is to keep the Euro together, and issue as much debt at negative yield as possible.

Tue, 06/05/2012 - 11:14 | 2495976 Rynak
Rynak's picture

No problem, just let germany default as well. Defaults for everyone, asshole.

Tue, 06/05/2012 - 11:16 | 2495981 Matt
Matt's picture

Correction: the debt-to-GDP estimates in the article include all current debts, so it isn't that bad for Germany.

Tue, 06/05/2012 - 13:37 | 2496446 walküre
walküre's picture

Dummes Zeug.

If Euro breaks apart, Germany's debt/GDP goes to 40% but banker's are losing their shirts. BIG EFFEN DEAL.

Just watch.

Tue, 06/05/2012 - 11:12 | 2495965 piliage
piliage's picture

This misses the big lederhosen in the corner, the payment to 'save' the Euro is not a one time payment. It will require decades of continued transfers ad nauseum to pay for the periphery while they restructure...or not. This only looks at the 'set up charge' to 'save' the euro, not the liquidity drip drip drip afterwards.

This underestimates the costs by potentially trillions.

Tue, 06/05/2012 - 11:13 | 2495968 Ropingdown
Ropingdown's picture

It would seem more reasonable in calculation to assume the Target 2 funds have already been lost.  That money's not ever coming back, so scratch that large amount.  Other items absent are the money Germany will save by ending subsidy and competitiveness payments to various parties.   Further, the 'lost exports' item must be balanced against the 'gained exports' as Germany shapes its production solely for profitable markets with buying power.

Tue, 06/05/2012 - 11:23 | 2496005 Village Smithy
Village Smithy's picture

Agreed, Germany can compete with any industialized nation in the world. They should just call it quits with the EU and start rebuilding. It will be an infinitely easier rebuild than the last time.

Tue, 06/05/2012 - 14:28 | 2496725 noses
noses's picture

Actually the best idea would be quitting to see this as a national competition, really throw resources together and rebuild everything, starting with the least damaged parts. But to quote Chris de Burgh:

"In a rage Saladin struck him down with his knife and said

 I Know that this man lies

 They quarrel too much

 The Christians could never unite"


The same is still true about Europe. If they could the USA would have become the third world prison camp with random torture of even their own citicens which it is now thirty years ago.

Tue, 06/05/2012 - 11:20 | 2495992 libertus
libertus's picture

Take the pain now and deal with Europe as a set of seperate soverign countries or take the whole thing over by force. The latter option was tried several times last century and did not end well of Germany. The Krauts should take their medicine now, STFU and let the house of cards fall apart. While they have the smarts, cash and culture to lead there is no way the French, British and the rest are going to let them. Europe's goal now should be to avoid a war and maintain a small degree of freedom. 

Tue, 06/05/2012 - 11:42 | 2496079 WAMO556
WAMO556's picture

Hey bud, that ain't the way it works in the real world. I owe you money, I walk a mile out of my way to pay up. YOU owe me money, I walk 15 miles out of my way to collect. Wars have been started for less. And understand another thing, if you take my money, you my bitch. Don't think that the Germans will allow the Americans to enter into a future conflict - EVER!

Winston Churchill famously noted that a new European unity was the path to the people of Europe forgetting the “rivers of blood that have flowed for thousands of years”.

Well it looks like some of the memories of those rivers of blood are about to be unleashed. How was it possible that a regime set up ostensibly to create more and deeper European unity seems to have sown the seeds for division and nationalism? Quite easily, really.


The second and third paragraphs are directed at you. Read and understand the phallacy of your comments. No Approbations needed.

Killing stupidity wherever it is found.

Tue, 06/05/2012 - 14:04 | 2496578 ddtuttle
ddtuttle's picture

Rivers of blood should never be forgotten

Tue, 06/05/2012 - 11:23 | 2496000 RoadKill
Tue, 06/05/2012 - 11:25 | 2496004 SoNH80
SoNH80's picture

Well, if Germany craps the bed, that's the ball game.  I must say, I have more respect for Germany's political and economic leadership than these squirrely "Eurocrats" from Benelux, the dodgier Med countries, etc.  Like Queen Beatrix with her "Bil-duh-burg" Klub, sneaking around Virginia, plotting against one of the nations that saved her sorry ass in 1944.  I guess the humiliation drives them to undermine their friends, eh?  Rompuy, Baroso, the whole trashy crew.  It will be sweet when these clowns realize that their dreams of garlic-butter lunches forever are dashed into pieces, and the Deutsche Mark rises again.  Hell, if I were a German, I'd want to bring back the Kaiser, and make some noise.

Tue, 06/05/2012 - 11:25 | 2496009 Nonexistent Uni...
Nonexistent Uninvented God's picture

We should all just calm down. If Germany demonstrates the WILL it takes to keep the EURO together then the system implodes eventually, on the other hand if it doesn't then the system implodes eventually. See? No need worry, just let out a nice loud "whoop", wave your cowboy hat, and enjoy the ride.

Tue, 06/05/2012 - 11:27 | 2496018 piliage
piliage's picture

Like Slim Pickens in Dr. Strangelove...a ride straight to hell.

Tue, 06/05/2012 - 11:26 | 2496013 Bartanist
Bartanist's picture

This is so sweetly ironic!!

How can the globalist powers make Germany pathetic, weak and dependent like the rest of Europe. Simple, you make Germany the nanny for the rest of Europe, tied by chains and then throw the kids overboard into the middle of the ocean with cememt blocks on their feet.

Germany "could" swim, but not tied to all the cement laden kiddies.

Tue, 06/05/2012 - 11:28 | 2496021 denis84
denis84's picture

the cost of saving the euro are unknown. the column on the left simply shows what it takes to keep the scheme going for NOW..

paul krugman said it: europe´s problem is a balance of payments problem. and what can fix this is a) unwinding those imbalances by let the surplus states give aid to deficit states (just like within the states in the US or germany) b)devaluation, i.e. let german wages rise much faster than in previous years so that a higher german inflation compared to the inflation rates in the periphery of the EZ bring german wages and prices back in line with it´s neighbours

a) is simply unacceptable und politically not feasible. here in germany we pay about 4% of GDP to the east german states as special aid after the reunification and even that (basically germans helping other germans) becomes more and more unaccetable as regions in the west have more financial trouble without receiving the same aid

b) is not going to happen because it would hit our competitevness and thereby our only growing industry for the past decades: exportes in atomobile and industrial machines


..even if the balance of payments problem would be solved somehow then theres the banking crisis that could blow the whole thing apart.

so i doubt that besides having the willingness to solve the ruo crisis we have the capability to do so.

what we have done so far is bail out EZ members and give em some time to resolve problems on their own and by doing so force them into austerity as a condintionality for this aid for no reason..what the periphery can´t do is devalue internaly fast enough things get worse day by day.

as long as greek/italian/spanish etc bonds aren´t treated like government bonds but more like corporate bonds, i.e. with an attached risk of default cause they cant print their money like they used to be able to do, as long that is the case there isnt even hope of resolving the euro crisis..eurobonds of course could buy some more time..but what good would it do. the imbalances would not disappear.

Tue, 06/05/2012 - 11:30 | 2496026 RoadKill
RoadKill's picture

Reports conclusion is total BS btw. By keeping the Euro togeather Germany prevents the periphery from ever becoming competitive and you get a decade of transfer payments and new debt such that when things blow up German losses are €3 trillion or more.

Taking the pain today is always better then kicking the can.

Tue, 06/05/2012 - 11:31 | 2496030 orangegeek
orangegeek's picture

Das ist kaputt.

Tue, 06/05/2012 - 11:31 | 2496035 muppet investor
muppet investor's picture

Just print money.

It's simple, fast and efficient.

Tue, 06/05/2012 - 11:32 | 2496038 crawldaddy
crawldaddy's picture

kind of ironic, in the case of the europeans," its divided we stand, united we fall."

Tue, 06/05/2012 - 11:37 | 2496052 muppet investor
muppet investor's picture

I would rather say: "divided we stand, united we fall and the germans pay the bill"

Tue, 06/05/2012 - 12:18 | 2496188 NotApplicable
NotApplicable's picture

As soon as I read this, Queen's song, "Hammer to Fall" came on my mp3 player.

What the hell we fighting for?
Just surrender and it won't hurt at all
You just got time to say your prayers
While you're waiting for the hammer to fall

Maybe this should be ZH's theme song?

Tue, 06/05/2012 - 11:32 | 2496039 Vince Clortho
Vince Clortho's picture

The Elephant in the Room is the Central Banksters.

They are the ones manipulating the agenda and politics of the sovereign states.

It has been convenient for the CBs to pit various nationalities against each other and let the people wear themselves out.  Divide and conquer is their ageless tactic.

People of all sovereign states need to identify the real evil and stay focused.

Don't get fooled again.

Tue, 06/05/2012 - 11:39 | 2496062 Minoan
Minoan's picture

Max Reger's letter to critic Rudolph Louis in response to his review in Munchener Neueste Nachrichten,1906:"Ich sitze in dem kleinsten Zimmer in meinem Hause. Ich habe ihre Kritik vor mir. Im nachsten Augenblick wird sie hinter mir sein."

"I am sitting in the smallest room of my house. I have your review before me. In a moment it will be behind me."

Tue, 06/05/2012 - 11:40 | 2496069 Bunga Bunga
Bunga Bunga's picture

Get over it, it's just Versailles II.

Tue, 06/05/2012 - 11:47 | 2496095 WAMO556
WAMO556's picture

It would seem that the 1.3 Trillion is again another scare tactic to keep the EU together. The powers that be don't want their money laundering scheme to wash up quite yet. Once the TPTB have sucked the place dry THEN expect the place to become a powder keg. Germany should leave, otherwise the periphery nations will just keep coming back for more money and more money ad infinitum. They just won't quit!!! Greece has had TWO bailouts and is considering a third. BET!!!

Tue, 06/05/2012 - 11:52 | 2496106 LULZBank
LULZBank's picture

I will keep an eye on the Austrians about now, if there's one with a funny moustache hangin about in Germany.

Tue, 06/05/2012 - 12:13 | 2496169 Joe A
Joe A's picture

European solidarity is a bitch. "Alle Menschen werden Brüder". Not in this way though.

Tue, 06/05/2012 - 12:15 | 2496177 Sandmann
Sandmann's picture

europe´s problem is a balance of payments problem. and what can fix this is a) unwinding those imbalances by let the surplus states


Really Denis84, Krugman is so clever but the real problem in CHINA

Krugman doesn'tt seem to do General Equilibrium. If he did he would know that China gets Tariff-Free Access to the EU  without any social costs, so it impoverishes European Labour and rewards Corporate Importers and Retailers. The Social Security Budget stretches to maintain Aggregate Demand and essentially funds Leakages to Asia which are funded by Borrowing and Credit Creation. 


The Surplus Countries that should face Tariffs - as they would have done under Bretton Woods Rules are in Asia.  The normal mechanism of  Rising Exchange Rates under Floating Systems have been impeded by recycling Trade Surpluses into Treasuries and holding down Interest Rates in OECD countries as Chinese Mercantilism destroys Western financial sanity. 


What is needed is a) Nationalise Banks  b) Capital Controls  c) Tariffs  d) prepare for Muilitary Conflict with China

Tue, 06/05/2012 - 12:16 | 2496182 mendigo
mendigo's picture

Bagdad Bob = Princeton Paul = Turbo Tim
Just swap the heads.

Tue, 06/05/2012 - 12:21 | 2496190 carbonmutant
carbonmutant's picture

The Euro has worked so far because it was an idea worth investing in.

Austerity and haircuts were not part of the plan

The current model is has turned in the the EU version of "bait and switch"

Tue, 06/05/2012 - 13:57 | 2496542 ddtuttle
ddtuttle's picture

You nailed the problem: "investing in an idea".  Ideas don't DO anything, people do. Invest in people not ideas.  The problem is these people can't get along, so don't invest in them.  If you don't understand the difference, you should get a job in Brussels.

Tue, 06/05/2012 - 12:24 | 2496210 koperniuk666
koperniuk666's picture

In the Final slide; "Will it be possible without bloodshed?"

So the E.U., which pretends that it has been crucial in maintaining peace in Europe since 1945 (when I, stupidly, thought NATO was responsible) may yet turn out to be the cause of World War 3?

My money is on War. Not yet. But everything the cretins in charge have done so far has moved us closer. People fight when there is nothing left to lose. And the wealth and assets of millions of ordinary people is being stripped away.

Soon they will realise.

Do please send me a postcard when it kicks off!



Tue, 06/05/2012 - 12:29 | 2496232 Negro Primero
Negro Primero's picture

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Tue, 06/05/2012 - 12:40 | 2496264 shovelhead
shovelhead's picture

This whole global debt ponzi-rama reminds me when  I was a kid and hid out from the old man when a deserved ass whipping was due.

Do I take the hit now or wait until he's really pissed off from looking for me?

Either way the end wasn't good but the potential to be infinitely worse had to be considered.

Germany: Better stuff yer undies with newspapers. You're gonna need em.

One way or the other. Dad ain't going to forget.

Tue, 06/05/2012 - 12:47 | 2496289 Confundido
Confundido's picture

WTF? What bullshit is this? The cost of running the Euro is an operating loss. The cost of the break up is just a one-time cost....How the fuck can someone even propose this comparison on a nominal basis? Fucking mainstream economists! I am sick of them.

Tue, 06/05/2012 - 21:04 | 2498047 nearvana
nearvana's picture

+ 1

Even better! How come this - Euro breaks up, DM skyrockets (hence exports are bad) and Germany has problem with the cost of the breakup, target2 etc? This simply doesn't fit!!!  They can print DMs to pay the cost of the break up, thus depriciate the DM and save the exports. So the appreciation of the DM and the cost of the break up offset each other.  But the fucking mainstream economists think static they do not see the dynamics. And therefore the pictures they paint are so unrealistic ...

But politically germany will pay the operation cost - the politicians ARE in the same team with the central bankers. Remember "the flow" is important not the amount

Tue, 06/05/2012 - 13:14 | 2496371 ILikeBoats
ILikeBoats's picture

Germany should jettison the Euro and become a monetary sovereign again. Money would flow into the new DM and they would be fine.

Tue, 06/05/2012 - 13:56 | 2496525 Alejandrito
Alejandrito's picture

Is that the reality to date is that Germany is rescuing its banking transferring potential losses to the taxpayer.

As stated by the presentation, the losses are being transferred, and this is only done if there is a proposal to launch a European qe.

Greek elections and the next entry in the ESM July 8 show the direction of the european union.

Tue, 06/05/2012 - 14:19 | 2496661 Vegetius
Vegetius's picture

The Math is a lot simpler than a report by a bunch of Asset managers, if Germany pays this bill it will always pay!. The PIIGS are not trying to sort themselves out they just want to get their pay and pensions and if that means the Germans have to work till thay are 100 who cares. The so called best boy in the class Ireland has recorded an increase in export revenue (thats good right), but they also have increased Government spending by half that amount (thats not so good) The so called best boy cannot and will not control its spending and if the Germans step in well everyone will bleed them till the end of time. Time the markets got a little bit real this is going to end badly and the markets and bankers created this THERE WILL BE BLOOD

Tue, 06/05/2012 - 14:19 | 2496667 malek
malek's picture do...the...WRONG thing!!!

Tue, 06/05/2012 - 14:29 | 2496730 noses
noses's picture

You're welcome to try.

Tue, 06/05/2012 - 14:37 | 2496786 malek
malek's picture

Sorry, I had run out of /sarc tags.

Tue, 06/05/2012 - 14:22 | 2496684 My Days Are Get...
My Days Are Getting Fewer's picture


Germany should pay nothing.  Let the chips fall where they may.

As long as Germany has financial strength and credibility, it can settle all IOU claims for cheap.

Pony up a 1/2 a Trillion or more, Germany will be emasculated.

Germany does not want the burden and expense of ruling others.

Germany did ok with the Euro.  Time to bank profits and move on.




Tue, 06/05/2012 - 16:47 | 2497353 ubercool
ubercool's picture

I think that the assumption that saving Europe will only cost 579 billion euros is the most debatable part of this story.

Tue, 06/05/2012 - 22:10 | 2497817 JeffB
JeffB's picture

I was a little surprised that the chart on the right side page 11 of their Scribd embedded document labeled "German CDS is Likely to Widen" comparing the CDS spreads of various countries on the y axis and debt to GDP ratios on the x axis seems to show the U.S. with a debt to GDP of around 70% for year end 2011.

From what I can see the U.S. debt to GDP ratio at the end of fy 2011 was 97.99%.*

Maybe they were only counting "public debt" and not "intergovernmental holdings"?

We're above 100% now, of course, but even back on Sept. 30, 2011 we were way above 70% or so.


* Debt to the Penny
   BEA National Economic Accounts


Tue, 06/05/2012 - 23:33 | 2498312 Paracelsus
Paracelsus's picture





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