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Details Emerge About Spain's Cramming Down "Bailout" Loan

Tyler Durden's picture


While details are largely missing in the aftermath of yesterday's historic announcement from Spain, the one thing that we did catch inbetween the various conferences and announcements, and probably the most important thing, is that the ESM/EFSF funded bailout loan, whose use of proceeds will go to fund the FROB, not one which will rank pari passu with the FROB, will have "terms better than market" - always a code word for priming and cramdown of other debt classes. Today, we learn that this is precisely the case, and the worst case outcome from Spain's pre-primed sovereign creditors.

El Pais reports: "European aid (through the EFSF or ESM) are actually loans to recapitalize the financial system, which the Treasury. Again, the State comes to the rescue of the bank. Of course, it is soft loans, in much better shape than the market: around 3%, according to sources familiar with the negotiations between Spain and its European partners. Faced with this 3%, Treasury currently pays interest of 6% over the 10-year debt." And there you have it: Bankruptcy 101, lesson on Equitable Subordination, where one always gets a priming DIP at terms much better than other classes of debt, when secured and guaranteed by unencumbered assets. Such as what is happening here, because for one to accept 3% rate compared to 6% for 10 Year Spanish GUCs, there obviously has to be some security incentive. It also means that, as we suggested yesterday, subordination has come to Spain.

El Pais continues:

In return for subsidized rates, Spain will cede sovereignty over its financial system, but also lose tax sovereignty, contrary to what the Government said yesterday.

So yes, there will be conditions in exchange for priming. As anyone with the most rudimentary understanding of waterfall analysis could have suggested.

More Google translated:

The Economy Minister Luis de Guindos, said flatly that the only conditionality for banks will require assistance . "There will be no fiscal or macroeconomic conditions," he said repeatedly in a crowded press conference, reports Amanda Mars. But he amended the flat Eurogroup: along with the praise for the Spanish efforts to address their varied and acute imbalances, the communique finance ministers of the euro area makes it clear otherwise. Europe monitored with an iron fist that Madrid continue on the path of fiscal consolidation, structural reforms and labor market. "We will look closely and regularly review progress in these areas, in parallel with financial assistance," the statement said.

The biggest problem, as Greece learned, is that once the priming begins, and the various sovereign debt classes start becoming subordinated, it doesn't end, until the PSI. At which point the crammed down debt gets impaired and receives 20-some cents on the dollar recoveries... which is roughly when Grey Wolf will say going long Spain it is the "no-brainer trade" of the year.

Keep a close eye on Spanish sovereign bonds at the moment when the bond market understands what just happened, and once the euphoria over the very short-term bailout of insolvent Spanish banks passes. Because a month from today another €100 billion will be required, then another €100, and so on.

At that point even the officially acknowledged Spanish debt/GDP will surpass 100%.

* * *

Finally, for all to whom any of this comes as a surprise, we once again urge rereading the Zero Hedge January 2012 walk thru for the sovereign default generation: "Subordination 101: A Walk Thru For Sovereign Bond Markets In A Post-Greek Default World", which includes the discussion on UK-law vs local-law bonds, and why in the case of Spain it will be all the difference.


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Sun, 06/10/2012 - 11:08 | 2512008 veyron
veyron's picture

Do the other european countries really wish for these terms?

Sun, 06/10/2012 - 11:39 | 2512069 DormRoom
DormRoom's picture

Germany's supreme court should weigh in.   Although it may not violate Article 123 of the Lisbon Treaty, it comes pretty f8cking close.

Sun, 06/10/2012 - 11:47 | 2512099 Ookspay
Ookspay's picture

Yep, but with 40% of German GDP derived from Euro trading partners, they have no choice. there are no good choices.


Sun, 06/10/2012 - 11:52 | 2512114 Rich Bagg
Rich Bagg's picture

Shorts have their balls in a vice once again.  Look for new cycle highs this week.  So dang funny.



Sun, 06/10/2012 - 12:08 | 2512145 BlueStreet
BlueStreet's picture

The higher it rises the further it will fall.  Sell the morning rip.

Sun, 06/10/2012 - 12:38 | 2512208 Chris Jusset
Chris Jusset's picture

Says ZH: "a month from today another €100 billion will be required, then another €100, and so on."

This is such a colossal clusterfuck.

Sun, 06/10/2012 - 12:50 | 2512219 AssFire
AssFire's picture

Spanish Bondholders to rank behind "official loans" after bail out...Holy shit, they just overstepped the fucking that was put to the secure share holders of automotive stocks here and apply it to their own bondholders.. How do they expect to sell another bond??  Really?? The government's sole job is now simply picking the losers?? Safe havens except for PM are turning to shit everywhere.

Mon, 06/11/2012 - 00:27 | 2513395 Harlequin001
Harlequin001's picture

ho, ho, ho, ho, ho, just try 'cramming down' my gold bullion, I fucking dare you...

Sun, 06/10/2012 - 12:16 | 2512161 maxmad
maxmad's picture

Rich Bagg, looks like you got screwed over by them making thee announcement on Saturday when the markets are closed!  By the time the market opens tonight, reality will set in and whatever rally there was will vanish into thin air, (similar to your account at MF Global)!

Sun, 06/10/2012 - 12:20 | 2512170 maxmad
maxmad's picture

One would think they would be smarter than to make a huge bullish announcement on Saturday while the markets are closed and the Hopium addicts are higher than a kite!  LOL  Every drug addict knows that you can't shoot up on Saturday with the hopes of staying high till Monday morning!  The buzz wears off quickly... Amatuer hour in Spain announcing this while the markets are closed... They cost the bulls 200+ points!!!

Sun, 06/10/2012 - 12:30 | 2512179 The Big Ching-aso
The Big Ching-aso's picture



Wait.  I thought Spain had to put up some collateral?  Ok so does bullshit count as collateral these days?

Sun, 06/10/2012 - 12:43 | 2512212 slaughterer
slaughterer's picture

"Amateur hour in Spain announcing this while the markets are closed..."  The announcement time was in the interests of state: Rajoy needed to get to the Spain EM game on time on Sunday to keep watch over the COLLATERAL for this loan.  

Sun, 06/10/2012 - 13:53 | 2512368 Law97
Law97's picture

Easy to see that one coming just by lookig at the put-to-call ratio.  Another one of those soooo obvious easy trades that is taken to the slaughter.  Of course this is only a very short-term bounce, but will shake out several billion dollars of weak shorts.

Sun, 06/10/2012 - 12:27 | 2512190 OttoMBMP
OttoMBMP's picture

Hardly 40% of EXPORTS, my friend. And German GDP is not 100% exports.

And what are exports worth which you effectively give away?

THere are very esay choices.

Sun, 06/10/2012 - 14:01 | 2512398 Nussi34
Nussi34's picture

Better to have 2 days of unpaid vacation per week, than to work 2 days per week for the PIIGS!

Sun, 06/10/2012 - 12:34 | 2512200 Ookspay
Ookspay's picture

Read this link posted by EB1 here at 0hedge, regarding Germany's choices, then junk my comment...

Sun, 06/10/2012 - 12:39 | 2512211 YuropeanImbecille
YuropeanImbecille's picture

The shit thing here is that they are taking our pensions and playing with that money. And we pay % tax that goes into the pension pot.


I see now that the only way to stop this evil bullshit is to boycott the German products of all sorts. If the German government does not have money to splash around things should calm down.


The German people are being taken on a ride once again, they have no clue that international bankers (code word for joos) run their fucking country and play geo politics and imperial building with their tax money.


So in the end the Germans will be blaimed for something they did not have a clue was happening and the evil zionist-satanist banksters will move on to another victim and suck it dry on blood (gold).




Sun, 06/10/2012 - 13:56 | 2512382 carbonmutant
carbonmutant's picture

Well in the MF global model stuff just vanishes... of course this might be different.

Sun, 06/10/2012 - 12:47 | 2512013 slaughterer
slaughterer's picture

Want to find out what the Greek politicians thought of the Spainish bailout this weekend?

It is as if Tyler wrote the script for the Greek politicians yesterday. 

Sun, 06/10/2012 - 11:09 | 2512015 silvermaister
silvermaister's picture

silver is gold


Sun, 06/10/2012 - 11:18 | 2512033 Ancona
Ancona's picture

The denial is astounding. These Eurocrats actually think all of this is somehow going to go away  if they just throw a little more money at it. Of course,  having not learned their lesson from the cartoon that is Greece, they will simply keep chasing rainbows.

Sun, 06/10/2012 - 11:46 | 2512097 disabledvet
disabledvet's picture

you mean "they throw more control at it." who's paying the bills once the euro-crats go down this road seems to be what the article is implying. and i agree.

Sun, 06/10/2012 - 12:18 | 2512168 Mountainview
Mountainview's picture

And obviously Ireland will now ask for equal conditions as Spain... and on and on it goes...

Sun, 06/10/2012 - 11:18 | 2512035 bugs_
bugs_'s picture

if only they could outlaw time

Sun, 06/10/2012 - 11:20 | 2512038 RoadKill
RoadKill's picture

Its not really fair to criticize the ESFS or ESM for this.  All DIP loans are Super Senoir.  No one would provide a junior or mezz loan at 3% this late in the game.

But it is fair to point out that Spain ACCEPTING a DIP loan means it is admitting it is bankrupt and that this entire episode is going to play out just like Greece.

1st they lend money to the banks.  The cramdown means any debt Spain issues in the markets is more risky.  Not only does the country have 10% higher debt/GDP then it had yesterday, but their is now a super senior block that takes 10% of GDP in potential collateral from the common pool avalible to non-super senior creditors.  So Spains interest rate goes decisively above 7%.  It might drop next week, but by end of summer we are probably closer to 10% then 6%.  This will gear up Spain to be "taken off the market" for 2-3 years.  IE all of its future borrowing will be 3% super-senior money from ECB/ESFS.  This money will come with Austerity demands.  Market rates on Spain's non-UK foriegn bonds will start rising towards 20%+.  Then we will start talking PSI after the regions get bailed out.

Now that's all without Greece and Italy thrown into the pool.  Next week Greece is going to be a potentially game changing event.  If Syrza wins BIG (and I mean big enough to create a coalition government) then we get Grexit and Pandamonium.  If SYRZA or ND/PASOK win - but not by enough to form a government then we stay in a holding pattern.  Greece will probably end up with a technocratic government in this case.  If ND/PASOK put togeather a coalition - the riots might make GrExit look fun.

As for Italy - once the Bond Vigilanties force Spain on the full dole - they will go after Italy.  And this time the play book has 100% been proven, and anybody that doesn't jump in with them is an idiot.

Now you've been warned.  Go out there and buy UK and other Foriegn law bonds HANDS OVER FIST.  Short the hell out of Spanish law bonds and buy CDS on them.

We need Tyler to create a post where everyone can post the tickers and details of any issuances they want help junking.

Sun, 06/10/2012 - 11:51 | 2512111 Unbezahlbar
Unbezahlbar's picture

Thnx Roadkill....excellent explanation.

Sun, 06/10/2012 - 12:02 | 2512131 Ghordius
Ghordius's picture

Excellent comments. Some parts don't tie up, IMHO.
Syriza winning and exiting the EUR? Not this year.
And I think Spain will be more tough than that...

Sun, 06/10/2012 - 12:05 | 2512141 Mae Kadoodie
Mae Kadoodie's picture

Terriffic post Roadkill.

Sun, 06/10/2012 - 12:20 | 2512172 francis_sawyer
francis_sawyer's picture

 "Go out there and buy UK and other Foriegn law bonds HANDS OVER FIST"


Money shot right there... (+1)

Sun, 06/10/2012 - 12:23 | 2512178 CrashisOptimistic
CrashisOptimistic's picture

I don't like to rain on your parade because the layout of logistics is pretty good, but you're wrong.

You are ignoring the Great Lesson of 2011.  Governments will do ANYTHING to keep the wheels turning.

If UK law bonds are a threat to the system, the UK will cooperate in repudiating them. 

Simply that.  Don't worship at the altar of the rule of law because in a world where you frame the head of the IMF for rape because he has threatened to allow Ireland to default and you need him removed, there is no such thing.

Sun, 06/10/2012 - 12:51 | 2512232 Ropingdown
Ropingdown's picture

If the UK joins in repudiating the terms of UK law bonds the City will suffer and Frankfurt will benefit.  I would be extremely surprised to see the UK sacrifice one of its only two advantages.

Sun, 06/10/2012 - 13:19 | 2512302 francis_sawyer
francis_sawyer's picture

That's right...

Sun, 06/10/2012 - 15:21 | 2512590 CrashisOptimistic
CrashisOptimistic's picture

The point is one of survival.  If "the system" requires the UK to repudiate those bonds, then they will, because governments will do ANYTHING to keep the wheels turning.

And if you were in government, so would you.

Sun, 06/10/2012 - 16:58 | 2512751 francis_sawyer
francis_sawyer's picture

When you're "bought & paid for" you have no other choice (or at least don't imagine that you do)... Just ask the TOTUS...

Sun, 06/10/2012 - 12:56 | 2512246 AssFire
AssFire's picture

I agree, buying any bonds in Europe is no longer a safe bet...the same undermining will lead to the failures to the US bond market.

Sun, 06/10/2012 - 12:39 | 2512209 unununium
unununium's picture

Once depositors have started to take physical possession of their currency, the only tool left is to debase that currency.

Sun, 06/10/2012 - 13:05 | 2512267 AssFire
AssFire's picture

Excellent point, fiat has become the sacrificial cake to the masses.

Sun, 06/10/2012 - 11:21 | 2512043 LULZBank
LULZBank's picture

Oh the fearmongering!! The world is falling apart, blah blah blah!!

C'mon guys ... everything is fine, what are the lot of you talking about?!

Euro is winning.

Spain's Rajoy hails bank rescue as 'victory for euro'

Sun, 06/10/2012 - 11:37 | 2512073 ThirdWorldDude
ThirdWorldDude's picture

Eh, you don't think it would've sounded any better if it said "Spain's Rajoy declares bank rescue is a shameful capitulation", now do you? And it wouldn't do any miracles for Rajoy's popularity neither with his London masters, nor with the Spanish serfs... 

Spin'em till they're sick and then some more.

Sun, 06/10/2012 - 11:41 | 2512086 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

Any guesses as to how soon Spain needs a 2nd loan because the 1st one is only a fraction of whats really needed.  And of course no one will have foreseen it.  Who could have known.

Sun, 06/10/2012 - 12:54 | 2512241 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

Certainly, as Spains banks are being audited, it will not come out that GS has "professionally" prepared their books.

Sun, 06/10/2012 - 12:28 | 2512193 LULZBank
LULZBank's picture

Tsk ... You guys are just drama queen! :)


P.S. 4 down arrows ... lol ... seems like a sarc intolerance sunday!!

Sun, 06/10/2012 - 13:03 | 2512262 Ookspay
Ookspay's picture

LOL, I hear ya, tough crowd for a Sunday. Just wait until Rodent, LTER or MDB get here, things could get really ugly.

Sun, 06/10/2012 - 11:25 | 2512051 Towhog
Towhog's picture

They have superior knowledge. That which is superior to reality. What a crock! They have no respect for human beings.

Sun, 06/10/2012 - 11:26 | 2512054 agent default
agent default's picture

There is a difference between Spain and Greece.  In Spain it was the banks that dragged down the public finances, same with Ireland.  In Greece it was the public sector that went bankrupt and dragged down the private sector.  Greece is the exact opposite of Spain and Ireland.  They will not get the same treatment despite what they think.  If they push it, they will be thrown out.

Sun, 06/10/2012 - 15:04 | 2512544 taraxias
taraxias's picture

Oh, you mean the EU will throw them out so Greece can devalue and build a functioning economy while the ECB and IMF eat losses along with European banks who own the rest of the Greek loans?

Got it, move along, nothing to see here.

Sun, 06/10/2012 - 16:24 | 2512644 agent default
agent default's picture

Greece will get thrown out.  Create a functioning economy?  Sure they will devalue, but then again so did Zimbabwe.  But a functioning economy?  With SYRIZA and the Marxist/Stalinist/Maoist mob it carries with it?  Don't fool yourself here, Greece will go down the path of 50's Cuba more than anything else.

Sun, 06/10/2012 - 11:29 | 2512059 Fredd00
Fredd00's picture

Euro short squeeze bitchez!

Sun, 06/10/2012 - 11:33 | 2512066 williambanzai7
williambanzai7's picture


Sun, 06/10/2012 - 12:12 | 2512151 JR
JR's picture

Trained by maestro Alan Greenspan, and God’s Goldman helper, Lloyd Blankfein.

Sun, 06/10/2012 - 11:34 | 2512068 Bay of Pigs
Bay of Pigs's picture

$11T went out the backdoor of the FED in 2008/9. Maybe the Bernank loaned them the money?

He has plenty of 'extra cash' to dish out as needed.

Sun, 06/10/2012 - 11:38 | 2512078 101 years and c...
101 years and counting's picture

does this mean spain will not be contributing its 95B EUR to bailout out spain?

Sun, 06/10/2012 - 11:47 | 2512100 Spastica Rex
Spastica Rex's picture

Global Perpetual Money Machine

Sun, 06/10/2012 - 12:09 | 2512147 Matt
Matt's picture

someone will lend Spain the money so it can be retroactively contributed to the fund to bailout Spain.

Sun, 06/10/2012 - 11:46 | 2512095 Freegolder
Freegolder's picture

As ever, I am confused by ZH.


Are they saying that PSI is a bad thing?

Should not those who have lent money foolishly to Spain suffer losses?

Europe is way ahead of the States and others in addressing its issues.

And in so doing it is preserving the stability of the Euro, avoiding the risk of currency collapse facing the UK, US and Japan.

Sun, 06/10/2012 - 11:48 | 2512102 Spastica Rex
Spastica Rex's picture


Sun, 06/10/2012 - 12:32 | 2512195 ebworthen
ebworthen's picture

I'm spending more than I make, and my siblings are giving me money to fill the gap.

This makes my family and I "way ahead" of the other families in the neighborhood.

Uncle Sam from across the street is giving me cash in unmarked envelopes he puts in my mailbox in the middle of the night.

I promised him I would use it to cut the weeds and paint our house so it keeps up the value of homes in the neighborhood.

Just don't tell his children please!

Sun, 06/10/2012 - 12:53 | 2512239 Non Passaran
Non Passaran's picture

You got a point, but why should the government fucks get paid in full while private investors get dicked?

Sun, 06/10/2012 - 11:47 | 2512101 disabledvet
disabledvet's picture

ECB I'll have you know I KNOW Ben Shalom Bernanke. And YOU SIR are no BEN SHALOM BERNANKE.

Sun, 06/10/2012 - 11:49 | 2512106 MFL8240
MFL8240's picture

And the gangsters win again and NO ONE in the USA can see the connection with this courrpted toilet here on Wall Street.

Sun, 06/10/2012 - 12:01 | 2512124 JR
JR's picture

Bailing Spain is giving public money to Spanish banks so that they can pay back their friends, the big international banks. The bailout programs for other countries, such as Ireland, would not be as comfortable for the cartel.

The essence of central planning is the practice of…with the resource of the public treasury…giving to one’s friends and punishing one’s enemies. And it’s all in the name of public service, the myth that private bankers can bring stability and vigor to an economic system where they benefit the most.

Strangely, central planning takes on a close resemblance to that other private endeavor…tyranny.

And so Spain will “cede sovereignty over its financial system, but also lose tax sovereignty.” God help her if her people don’t resist this abusive authority.

"’Get them in debt’ for centuries has been a slogan used by the power elite to control individuals and entire nations,” according to author and former Senior Associate with the U.S. Dept of Education, Dr. Dennis Cuddy.

Says Cuddy: “P.E. Corbett, a member of Rhodes' Association of Helpers, explained in Post War Worlds in 1942  “that their goal would be accomplished by linking regional economic arrangements,”  i.e., the European Monetary Union.

“‘Independence’ is not long tolerated by the power elite," says Cuddy. "A primary part of the power elite's plan was the creation of debt made as big as possible, as perpetual as possible, in as few hands as possible."

Sun, 06/10/2012 - 14:00 | 2512393 carbonmutant
carbonmutant's picture

It's hard to view the International banks as friends when they're using the Spanish banks as a proxies for their own failures...

Sun, 06/10/2012 - 11:59 | 2512127 valley chick
valley chick's picture


Keep a close eye on Spanish sovereign bonds at the moment when the bond market understands what just happened, and once the euphoria over the very short-term bailout of insolvent Spanish banks passes. Because a month from today another €100 billion will be required, then another €100, and so on.

and then in the meantime....bring on Italy.

Sun, 06/10/2012 - 12:16 | 2512160 Joebloinvestor
Joebloinvestor's picture

Anyone buying a EU soverign bond deserves the drubbing they are gonna take.

After all that has happened, why would anyone buy this shit?

Sun, 06/10/2012 - 13:10 | 2512282 LULZBank
LULZBank's picture

when the bond market understands what just happened,

Are you saying the people who invest in bonds dont really understand them? Even after what happened in Greece?

Hmmm ... Can we give them more money to invest?

Sun, 06/10/2012 - 12:14 | 2512158 Joebloinvestor
Joebloinvestor's picture

These guys are just a bunch of FUCKING LIARS.

Notice how Spain waited till the weekend?

What a fucking coincidence!

The next thing not to happen will be the run on French banks.

Sun, 06/10/2012 - 12:21 | 2512164 Tom Green Swedish
Tom Green Swedish's picture

You're right they are totally pathological.  I wouldn't trust these Euros with a nickel.  They are a total distraction and should be ignored.

Sun, 06/10/2012 - 12:14 | 2512159 q99x2
q99x2's picture

Fire walled. Ring fenced. Then when they get like Greece is now they get their own version of Golden Dawn until eventually Germany all over again.

Time to make money.

Sun, 06/10/2012 - 12:18 | 2512166 djsmps
djsmps's picture

On CBS Sunday Morning today, their resident world economist, Ben Stein, demanded that the Treasury and Federal Reserve (which can print unlimited amounts of dollars, according to Mr. Stein) bail out Europe to save the US banking industry.

Sun, 06/10/2012 - 12:32 | 2512197 JR
JR's picture

Charles Hugh Smith wrote a year ago on ZH: “The Federal Reserve invoked the threat of financial calamity and national security it its failed bid to keep its 2008 machinations secret. Only recently has the public learned the nation's central bank devoted 70% of its interventions to 'saving' foreign banks.”

Sun, 06/10/2012 - 13:21 | 2512308 Mae Kadoodie
Mae Kadoodie's picture

Ben Stein such a deuche.  Bueller?  Bueller?

Sun, 06/10/2012 - 12:18 | 2512169 Tom Green Swedish
Tom Green Swedish's picture

Where does the market go from here?  It shouldn't go higher based on history of "TARP"


I like gold as a diversification against inflation in other countries, but correct me if I'm wrong here. As past history states that devaluing currency (aka printing) is the appropriate response instead of asset sales, hence Gold went from 150 to 350?  But Europe is different, only because of the fact they have different interests. IE Switzerland; they have been buying Euros to keep their currency in check, and Europe which has increased their gold holdings because they think their products warrant higher prices because they are of better quality. IE cars, clothes, food etc.


I believe the only way European banks will be able to fund the bailout is to sell their gold (Their banks are like ours, mostly gold with very little cash).  If Europe does not in fact have the cash available they will have to hold an asset sale, which would require selling their vast gold reserves, which would imply downward pressure on it in the short term and upward pressure on the dollar (Swiss buying Dollars from Euro purchases). 

My third question.  Since the USA has the largest gold holding in the world and since the dollar is not backed by gold at all anymore, what is the point of having any at all?  I know they value it at 42 dollars a ton, which is much less than the "market value".  They have been selling gold like crazy for decades now, are they just trying to get the best price?  Or are they holding it because they know it will increase in value?


Your Thoughts?

Sun, 06/10/2012 - 12:51 | 2512229 Non Passaran
Non Passaran's picture

European countries can lease out their gold, they don't have to sell it. And even if they wanted to sell it, it's a tiny fraction of their debt to the point of irrelevance. If they sold it, it'd suffice for 12 months of interest and that would be it. It's irrelevant.

But in any case, even if your unlikely theory made some sense, I don't see where you're going with your theory about downward pressure on gold. Somebody would have to buy it with USD or EUR, such as any holder of so denominated government bonds. Since debt-to-GDP ratio is about 100%, one could buy all gold with just 5% of bonds. How could that make any pressure on the price?

> I know they value it at 42 dollars a ton

Sheeeet! I didn't know that. I'd pay them twice as much per ounce! AFAIK there's no record that the US has been a (net)seller of gold. The price on the books has nothing to do with buying or selling, it's a matter of trickery in accounting.

Sun, 06/10/2012 - 12:59 | 2512253 unununium
unununium's picture

Congratulations, you have woken up. Now reach behind you and rip that contraption out of your spine and you'll be disconnected from the matrix.

Sun, 06/10/2012 - 12:25 | 2512184 XXL66
XXL66's picture

But.... Mr Van Rampuy said we were on a turning point ?...

(btw: ramp = disaster in dutch).


Sun, 06/10/2012 - 13:13 | 2512289 LULZBank
LULZBank's picture

But.... Mr Van Rampuy said we were on a turning point ?...

But did he say which way the turn would be?

Sun, 06/10/2012 - 12:25 | 2512185 Fix It Again Timmy
Fix It Again Timmy's picture

Oh hell, let's bail out the entire known Universe today and then we can start on the Unknown Universes, tomorrow......

Sun, 06/10/2012 - 12:37 | 2512207 ripper
ripper's picture

Falcon and Gladiator bond market indicators saying buy risk

Sun, 06/10/2012 - 12:44 | 2512218 JeffB
JeffB's picture

Is "secured and guaranteed by unencumbered assets" really an "unconditional bailout"?

Would a German loan with unencumbered gold as collateral be considered an "unconditional bailout"?


Sun, 06/10/2012 - 12:51 | 2512234 Dr.Engineer
Dr.Engineer's picture

Can someone please explain how Germany is in control of this because it looks like it isn't?

I have assumed that there are two main factions here:

  • Brussels who wants a United States of Europe, and
  • Germany who wants a United States of Germany

Did Germany lose power here or did I miss something?  Is Germany still holding the reigns because it has all the money?

Sun, 06/10/2012 - 13:43 | 2512348 JR
JR's picture

There are the German people and there are the German banks. And the German politicians such as Andrea Merkel are in between.

Here is a concise answer from John Wilmot (ZH commenter):

“The rulers of the EU want a new constitution; they are completing what they started, building a European superstate, which has been the goal for a century or more. "Germany" (read: the banker shills who make up Germany's government) is just playing the role assigned it by the bankers upstairs. Same with the rest of them. The nation v. nation deathmatch that's endlessly discussed in the press and regurgitated by the ignorati is just propaganda, distraction, cover-up, justification, etc. Like the Rep-Dem farce in the U.S.”

The German people lost control of their country after WWII and are still under control of their conquerors, i.e., the international bankers such as Josef Ackermann and Jean Claude Trichet and Paul M. L. Achleitner. Germany’s largest bank, Deutsche Bank, is a global banking company and is the largest private bank in the Eurozone. It is under the umbrella of an international cartel that includes the Rothschilds, Rockefellers, and their banks (JPMorgan, Goldman, et cetera), operating through the NY Federal Reserve Bank which they own.

The source of the money is in the German treasury that collects the taxes from a very successful economy of subdued citizens but is enhanced through inflation; IOW, it is the resources of private citizens used for the benefit of the financial elites.

Sun, 06/10/2012 - 13:01 | 2512257 Joe A
Joe A's picture

Details are they need 100 billion Euro now and in a month time another 100 billion, etc.

Sun, 06/10/2012 - 13:09 | 2512273 russwinter
russwinter's picture

One of Zero Hedge's best contributions has been educating the gente about this tossing pari passu concept, resulting in further subordinating of existing Spanish sovereign debt holders. When the inevitable sovereign debt restructuring occurs the losses are concentrated on private holders. Incidentially after LTRO increasingly those holders are drum roll please, Spanish banks. 

Seperately Bruce Krasting writes that this is not a rescue of banks at all, but a defacto nationalization and bail in. He points to a recent IMF report on this aspect.

Bail-in is defined as: the statutory power of a resolution authority to restructure the liabilities of a distressed financial institution by writing down its unsecured debt and/or converting it to equity.

I would argue that this will extend in some cases all the way through to the senior bank bond holders. The idea is to save depositors. I think bail-ins are inevitable,  necessary and the best chance Spain has of avoiding bleeding to death when the restructuring occurs. This diverts some of the burden of costly bankster bail outs.  


A bank capitalization structure typically has these components:


Senior Secured Debt

Senior Unsecured Debt

Subordinated Debt

Preferred Shares

Common Equity


Sun, 06/10/2012 - 13:08 | 2512274 SUPERIOR BULLION

While this latest bailout will ultimately prove bad for Spain in the long term, we anticipate that the news will be perceived as being good for the Eurozone in the short term. We therefore expect to see a dramatic rise in the value of the Euro over the coming weeks following this weekend's news, and consequently, a weaker U.S. Dollar. This will result in significantly higher Gold and Silver prices.

Our short-term price targets for Gold and Silver remain at $1800 and $38, resepctively, and news of this Spanish Bailout could easily prove the catalyst which takes us there.

Sun, 06/10/2012 - 13:15 | 2512281 Arnold Ziffel
Arnold Ziffel's picture

Don't loans need to be paid back? Where does all this bailout money come from? Where will the payback money come from?

Sun, 06/10/2012 - 13:17 | 2512299 Ookspay
Ookspay's picture

No! Debt is re-packaged and sold as an asset; repeat and rinse...

Sun, 06/10/2012 - 13:30 | 2512322 LULZBank
LULZBank's picture

And the label says "new and improved"

Mon, 06/11/2012 - 02:22 | 2513490 John_Coltrane
John_Coltrane's picture

Expressed by the bankster adage:  "a rolling loan carries no loss"

Sun, 06/10/2012 - 13:12 | 2512285 jimmyjames
jimmyjames's picture

While details are largely missing in the aftermath of yesterday's historic announcement from Spain, the one thing that we did catch inbetween the various conferences and announcements, and probably the most important thing, is that the ESM/EFSF funded bailout loan, whose use of proceeds will go to fund the FROB


Here's one detail about the makeup of the fund that has been largely missed-


The panel is focusing on three areas to broaden acceptance of the plan, Feld said in the interview. These include addressing “opposition to its sheer size;” concerns it might not comply with German constitution and international treaties; and the scope of its proposals on member states’ liability.

The fund, backed by euro member states’ gold reserves, would be worth 2.3 trillion euros, according to the advisers’ panel estimates. Countries would be able to transfer debt exceeding the 60 percent of gross domestic product threshold into the fund for which participating member countries are “jointly and severally liable,” according to the council’s policy paper.

Sun, 06/10/2012 - 13:12 | 2512286 XRAYD
XRAYD's picture

"US Treasury Secretary Timothy Geithner welcomed the latest
moves as "important for the health of Spain's economy and as
concrete steps on the path to financial union, which is vital to 
the resiliance of the euro area."


So ... it MUST BE GOOD!

Sun, 06/10/2012 - 14:06 | 2512410 JR
JR's picture

Yes. And more... from Yahoo:

"And U.S. President Barack Obama, facing re-election, enduring a weak economy and in need of strong trading partners, expressed strong concern late Friday over the European economic crisis...

"French Finance Minister Pierre Moscovici said the deal would 'contribute to restoring confidence in the eurozone.'

"'The accord announced tonight speaks to a reinforced solidary among the countries of the eurozone and to their resolute desire to ensure its stability,' he said in a statement."

And then Yahoo says:

“Spain's financial problems are not due to Greek-style government over-spending. The country's banks got caught up in the collapse of a real estate bubble. However, as Spain's leaders have struggled for a solution to their banking crisis, the country's borrowing costs have soared close to the level that forced the governments of Greece, Portugal and Ireland to seek rescues.”

And where do bubbles come from?  Class?

As Ambrose Evans Pritchard pointed out Friday, Spain” had a primary budget surplus of 3pc of GDP in 2007.

Spain was the victim of negative real interest rates in the middle of the last decade (minus 2pc for year after year) when the ECB committed its opposite error of loose money. It was flooded with cheap capital from northern Europe that was hard to control.

I don't wish to rehearse the pointless blame game. Spain obviously made huge mistakes as well. But sometimes you have to restate old points to restore a minimum of balance to the debate.”

Sun, 06/10/2012 - 13:14 | 2512293 Ookspay
Ookspay's picture

Spanish Prime Minister Mariano Rajoy " This is going to be a bad year."

Sun, 06/10/2012 - 13:27 | 2512315 artx00
artx00's picture

Spain took a "payday" loan to bet the Spain/Italy game so, tomorrow spain might not need the bailout and have enough to pay back the payday loan. Problem-reaction-Solution

Sun, 06/10/2012 - 13:28 | 2512317 LULZBank
Sun, 06/10/2012 - 13:34 | 2512328 RobotTrader
RobotTrader's picture

What happens if we have made another intermediate low?


Plenty of scroom-screeching this weekend, I've catalogued many articles from those saying "The End Is Here!", so I can repost it in 9 months after the market is making new 4-year highs.

Sun, 06/10/2012 - 14:04 | 2512403 Canaduh
Canaduh's picture

RoboTard is cataloguing calls so he can call people out months later? Fuckin Twilight Zone right there

Sun, 06/10/2012 - 14:07 | 2512412 tahoebumsmith
tahoebumsmith's picture

Yeah looks like the S&P is going to fight its was back to the 1999 Levels? Looks like the Dow may break the 1999 highs as well? Looks like nothing much has happened over the past 13 years except alot of looting. Remember when stocks were long term investments? LOL Keep playing the CASINO, just remember the house never loses. OBTW, here is a chart that should really scare the shit out of you. Can anybody relate to triple peaks? Looks like a dead ringer to me...

Sun, 06/10/2012 - 14:42 | 2512495 Ookspay
Ookspay's picture

I have posted before, that if Romney wins or even when the polls show that he will win, there will be a rally in the markets. There are trillions in cash waiting on the sidelines for some fiscal sanity; repeal of obamacare, relaxed regulation, Cut Cap And Balance, a sound energy policy. There will be exuberance. This will happen, if we get that far... The news coming from Europe our biggest market has and will continue to slow down US GDP, regardless of the elections outcome.

Everytime I post anything positive about Romney and the chance of a Conservative Tea Party maybe saving this Country, I get hammered, so bang away gang!

Sun, 06/10/2012 - 13:40 | 2512345 tahoebumsmith
tahoebumsmith's picture

The Global takeover continues..Next stop, Italy. If people can't see what is really happening right before their very eyes they are obviously blind or just plain clueless. Here we go again, the same group of KLEPTOCRATS that eased monetary policy, helped institute a synthetic Casino to back their bets, the same bets that brought on the financial global meltdown are now being hailed for rescuing those they lured into their CASINO? The FED, IMF and the ECB are just continuing their march to victory, a march that has been in the works for decades and has been played out 100% according to plan.

Sun, 06/10/2012 - 13:42 | 2512350 TNTARG
TNTARG's picture

From "Der Spiegel", today:

"The German economy has seemed surprisingly resistant to the ill effects of Europe's financial crisis. But an April drop in exports suggests that Europe's largest economy may not be immune after all."


Sun, 06/10/2012 - 14:03 | 2512401 carbonmutant
carbonmutant's picture

There seems to be a shortage of Red Pills in the Eurozone...

Sun, 06/10/2012 - 16:33 | 2512721 Divine Wind
Divine Wind's picture

SSSShhhhhhhhhhhhhh !!!

You are giving away the secret. They are supposed to think there is only one pill.

Sun, 06/10/2012 - 15:44 | 2512640 tenpanhandle
tenpanhandle's picture



"terms better than market"

all US markets operate on that concept at this point.

Want a new couch? First person in the door gets one free. All others - no payments till next year and no interest till 2099.

Want a new car?  We'll sell you one cheaper than we sold to the last schlub and at no interest and no credit check.

Want a new house?  Mortgage rates lower than previous week and Uncle Sam will give you a tax credit.

Want a bag of potato chips? No? Well buy one anyway and have a chance to win a trip to Hawaii.

All markets now rely on gimmicktry.  The ponzi has failed and now it is going backward.  Whereas it use to take new customers/investors to payout to the old; now the old customers/investors lose out to the new.  And those newbies will lose out to the newer in a week, in a month, in a year. So what do people do?  They sit on their cash, knowing the deals only get better.  

 An anti-ponzi does not balance the ponzi or unwind it.  It exposes it and then crashes it.



Sun, 06/10/2012 - 18:43 | 2512897 ejhickey
ejhickey's picture

should be a warning about the ris of holding goverment debt.

Mon, 06/11/2012 - 02:13 | 2513465 Grand Supercycle
Grand Supercycle's picture

Rally Warning from last week:

'Daily chart now gives bullish warning and significant
SPX rally & USDX retracement should commence in a week or so'

Mon, 06/11/2012 - 03:02 | 2513601 Me_Myself_and_I
Me_Myself_and_I's picture

As far as I can read, none of the corrupt or inept people in the government financial system are losing their jobs over this.. and until the consequences are felt by the policy makers no bailout could possibly hope to achieve results.

Politicians appointed their friends and family to key posts, neutering market forces from cleansing the system by allocating the losses to those who signed up for the risk.

Meanwhile an entire portion of the population will be damaged, and the effects from that will knock on for decades.

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