Did Fitch Just End Europe's Hope For LTRO3?

Tyler Durden's picture




 

While it will come as no surprise to ZeroHedge readers (as we discussed why LTRO3 is not coming here and here), it would appear that the ability to turn worthless assets into useful liquidity via a raft of collateralized lending operations with the ECB is at an end. As Fitch's, MD of financial institutions Bridget Gandy just confirmed:

"Some of the European banks are becoming short on collateral to pledge with the ECB, unless they can delever and sell some of their assets, which is difficult."

Of course this means the banks that need the facilities the most are now in dire need to sell assets and delever further exaggerating the vicious circle in Europe's symbiotic banking-sovereign relationship. Without postable collateral, there can be no more help from the ECB to the banks and thus any further banking system help will further subordinate the sovereign (hence our call to swap into non-local law bonds) since it will necessarily need to be funneled through them (a la Spain). Once more the ball ends up in Bernanke's lap.

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Tue, 06/12/2012 - 23:17 | 2520292 Tom Servo
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Bullish!

Tue, 06/12/2012 - 23:35 | 2520333 The Monkey
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We already know how this ends. The central bankers print. Why is this the only outcome? Because it's expedient. Does it solve anything? No. Will it lift asset prices even higher? Probably.

It doesn't matter what fiscal policy makers do, or don't do. Central banks have shown that they will step up every time.

Wed, 06/13/2012 - 00:33 | 2520430 The Big Ching-aso
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"Once more the ball ends up in Bernanke's lap."..............

Correction:  "Once more the ball ends up in U.S. Taxpayer's lap."

 

Wed, 06/13/2012 - 02:18 | 2520603 macholatte
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Yup! One way or the other it will be the American Tax Payer who gets hosed, and that's a dying breed.

 

"Some of the European banks are becoming short on collateral to pledge with the ECB, unless they can delever and sell some of their assets,....

 

What sort of assets could they sell; stocks, bonds, gold, silver???

 

 

 

 

 

Wed, 06/13/2012 - 02:24 | 2520608 The Big Ching-aso
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Lattes, truffles, and beer.

Wed, 06/13/2012 - 06:10 | 2520716 Zero Govt
Zero Govt's picture

tickets to Davos 2012 must be worth a few Euros

it's a declining Club, there's probably some floating around for a refund with Draghi

Wed, 06/13/2012 - 06:48 | 2520765 markmotive
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They'll reduce collateral requirements then, won't they?

Tue, 06/12/2012 - 23:17 | 2520293 JLee2027
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Fuck you Bernanke!

Tue, 06/12/2012 - 23:33 | 2520329 Dr. Engali
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I wonder if we can do a search on the Hedge to tell us how many times that's been typed. I'm not knocking you,I agree, but I do see that a lot.

Tue, 06/12/2012 - 23:46 | 2520364 JLee2027
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Google says about 150,000. Doesn't count the rehypothecated ones though.

Wed, 06/13/2012 - 02:29 | 2520611 CrazyCooter
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Oh, make no mistake Bernanke has balls ...

on his chin ...

central banker 101 ..

WTF do you think Greenspan bailed? LOL!

Regards,

Cooter

Tue, 06/12/2012 - 23:19 | 2520294 b-rad-is-rad
b-rad-is-rad's picture

"The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt.16

I need to tread carefully here. Because the economy is a complex and interconnected system, Fed purchases of the liabilities of foreign governments have the potential to affect a number of financial markets, including the market for foreign exchange. In the United States, the Department of the Treasury, not the Federal Reserve, is the lead agency for making international economic policy, including policy toward the dollar; and the Secretary of the Treasury has expressed the view that the determination of the value of the U.S. dollar should be left to free market forces. Moreover, since the United States is a large, relatively closed economy, manipulating the exchange value of the dollar would not be a particularly desirable way to fight domestic deflation, particularly given the range of other options available. Thus, I want to be absolutely clear that I am today neither forecasting nor recommending any attempt by U.S. policymakers to target the international value of the dollar.

Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation."

 

-Da Helicopter

Tue, 06/12/2012 - 23:34 | 2520332 lasvegaspersona
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A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation.

 

you left out the part about the seizure/theft  of thousands of tons of gold from US citizens...try that again?...did not think so...

Wed, 06/13/2012 - 00:07 | 2520407 CompassionateFascist
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Roosenfelt's stabilization of the Depression endured only until 1937; then the Central Planning Ponzi collapsed again, and it took a World War to recover. That option - tho it may happen anyway, through drift and accident - is no longer open. 

Wed, 06/13/2012 - 02:38 | 2520615 CrazyCooter
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There is a reason for this ...

Regards,

Cooter

Wed, 06/13/2012 - 00:04 | 2520401 The Monkey
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Let's see if they can pull all that off while keeping the long end of the treasury curve anchored. We already saw what happened during QE2, and it is nominal rates that pose the greatest risk to housing.

They are threading the needle with large scale asset purchases. Rewarding the long junk bonds / short treasury trade seems "iffy" as ongoing policy (& just as Gross has Mom and Pop all loaded up).

Tue, 06/12/2012 - 23:20 | 2520300 Poor Grogman
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Who needs collateral when the PTB have millions of willing debt slave sheeple to pledge as future collateral.

Wed, 06/13/2012 - 01:36 | 2520525 Poor Grogman
Poor Grogman's picture

That's right!

If the sheeple take their cash out of the banks AND,
Stop paying taxes and their mortgages

then the debt slaves as future collateral model is gone and the gig is truly up.

Until then bailouts rule.

My Personal viewpoint only.

Edit you just got me thinking...

Couldn't that be a possible end game????

A feedback spiral where sheeple rebel against paying Anything, as the bailouts are seen as easy solutions. thus less and less in real terms flows to "the system" in the form of taxes and interest. While the bailouts cause higher inflation resulting in less purchasing power for People and government, which in turn creates a greater need for bailouts to provide a level of Social services to the public who then vote for...

even more government spending and bailouts,

hyper inflationary voter initiated bail out currency death spiral.

Kind of has a ring to it don't you think?

Wed, 06/13/2012 - 02:48 | 2520616 CrazyCooter
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I dont see how a rebellion is necessary, at least as far as making the system implode goes.

As I understand it, the system has to grow, year over year, forever. When it stops growing (i.e. debt), it starts to implode. Too many years of not enough borrowing, and the contraction starts. Once the contraction gains enough momentum, BB and his BlackHawk can't make a shits worth of difference.

The system relies on indvidiuals, behaving a particular way. BB can not force GMaw in middle america to borrow money. He can only make rates cheap. BB can not inspires businesses to borrow to expand. He can only make rates cheap.

And you know what? Barry O fucked BB in the ass. The big Red White and Blue Dick, shoved right up his ass.

God I love the smell of socialism in the morning!

Regards,

Cooter

Wed, 06/13/2012 - 03:57 | 2520650 Poor Grogman
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That's right they can't force people to borrow money or act in a certain way.

But governments are a different animal altogether, we have clearly seen since 2008 what most governments do when the going gets tough.

They borrow and spend, and the cartel supports them.

if one major country breaks away from the script, will the other debtors follow and bring the whole ponzi down?

Is there enough political will, or will of the sheeple to bring the collapse on and thus to bring on a depression the likes of which has never been seen. While at the same time leaving most of the mechanics of the ponzi intact, such as fictional reseve banking?

Or will all the sheeple just continue to demand more and more of the system until the whole thing just disintegrates into wheelbarrow confetti.

My bet is on the latter

PG

Wed, 06/13/2012 - 04:03 | 2520652 AnAnonymous
AnAnonymous's picture

As I understand it, the system has to grow, year over year, forever. When it stops growing (i.e. debt), it starts to implode.

______________

Save that growth in US citizen economics is achieved the US citizen way: by dismissing the decrease.

So it is quite funny to read US citizen screamers trying to evade what they know.

The system is defined through borders, an exterior, an interior.

A matter of definition. The current stage is about determining who is part of the interior and who is not.

The US will grow if they manage to kick Europe out of the interior. The system will keep growing. It will simply no longer include Europe.

Wed, 06/13/2012 - 04:31 | 2520662 Poor Grogman
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I think I understand what you are trying to get at, but where does that leave Chinese citizen

Inside or outside?

Wed, 06/13/2012 - 06:47 | 2520764 Bobbyrib
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"The US will grow if they manage to kick Europe out of the interior. The system will keep growing. It will simply no longer include Europe."

Growing without Europe as Europe falls into a depression is a dream. If deflation is the end game and they don't print, meet the end game.


Tue, 06/12/2012 - 23:21 | 2520302 wisefool
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Fitch was the agency that did not downgrade the USA, but they told maria bartiromo it is bizzare you dont have a consumption tax in america.

Why dont we tax the Fed's bailouts? Geithner needs to resign long before Holdner does.

Tue, 06/12/2012 - 23:21 | 2520304 cherry picker
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What a damn mess.  This is the kind of stuff that ends up in violence.

Forests have fires and the forest regenerates. Nature has a recycling mechanism, a way of balancing things.

We mortals are probably in line for a little shake up.

Wed, 06/13/2012 - 00:49 | 2520463 The Monkey
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How did we get to a place where the only viable strategy is to perpetuate a ponzi system? Each administration and several generations of central bankers bought into the fallacy that it was was desirable to manage the economic cycle by stimulating credit growth when the cycle turned down.

As it turns out, we should have let some of those earlier downturns run their natural course without stimulating credit.

Oh well, it's a moot point now.

Tue, 06/12/2012 - 23:21 | 2520305 junkyardjack
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I just heard a rumor that ECB will accept cum filled socks as collateral.  Bullish!

Tue, 06/12/2012 - 23:26 | 2520318 Alpo for Granny
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"I just heard a rumor that ECB will accept cum filled spiderman towels as collateral.  Bullish!" <-----all fixed now.

Tue, 06/12/2012 - 23:35 | 2520335 DeadFred
DeadFred's picture

Too bad Italy got rid of Silvio.

Wed, 06/13/2012 - 02:59 | 2520623 CrazyCooter
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Oddly enough, he must have been in the way? A patriot for Italy?

Regards,

Cooter

Disclaimer: Ben Franklin philandered a bit himself.

Disclaimer-er: Ben Franklin was not so ostentatious about it as to earn a nick name like bunga bunga. I mean, there is classy way to womanize, then there is pimping.

I mean, some times women like a classy man, even if it is an affair. But, I suppose, other women like a Ben Franklin.

Stay classy ZH!

Tue, 06/12/2012 - 23:22 | 2520308 RiverRoad
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The fuse on that stick of dynamite is getting mighty short.

Tue, 06/12/2012 - 23:31 | 2520311 Dr. Engali
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Just fucking print Ben,and send the whole stinking system down the drain! Do it now before I have to make another mortgage payment!

Tue, 06/12/2012 - 23:37 | 2520337 DeadFred
DeadFred's picture

August, not June.

Tue, 06/12/2012 - 23:43 | 2520350 Dr. Engali
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I agree it will be in August, but I'm growing impatient. I'm hoping for the surprise mega print. Like 4 trillion dollar print.

Tue, 06/12/2012 - 23:50 | 2520371 JLee2027
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At this point, does it make sense to pay the mortgage? The system is folding, putting the bank out of business before they can complete the foreclosure.

Wed, 06/13/2012 - 06:50 | 2520767 Bobbyrib
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If they kick the can and he doesn't pay they take his house and he loses all of the equity. Do not make any irrational decisions. You can't time the market or the ponzi collapse. You just have to sit and wait.

Wed, 06/13/2012 - 01:00 | 2520477 Bohm Squad
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I don't think it will be a surprise for everyone.  I think this was overlooked:  Bullish butterfly spread in SLV

Tue, 06/12/2012 - 23:24 | 2520314 Conman
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As we have seen, +500 points on the dow on frontrunning QE is good enough. Dont have to actually do it.

Tue, 06/12/2012 - 23:25 | 2520315 lolmao500
lolmao500's picture

Collateral ? Don't need no stinking collateral! Just print!

Tue, 06/12/2012 - 23:27 | 2520320 Timmay
Timmay's picture

Romney on record saying he will not re nominate Bernanke if he is elected. What if old Uncle Ben decides to just say FUCK IT, let it burn and we (Central bank Cartel) will buy it all later on the cheap??

Tue, 06/12/2012 - 23:40 | 2520344 DeadFred
DeadFred's picture

If the reptilian/host exchange goes well we won't even know we still have Bernanke.

Tue, 06/12/2012 - 23:57 | 2520388 GeorgeHayduke
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Yeah and Obama was on record saying he would give us change. Instead we got Bush's 3rd term. I guess the change was the guy delivering the speeches now sounds like a huckster politician instead of an arrogant drunk frat boy. That's the kind of change we can do without.

Romney is likely spouting campaign lies like all the rest of them do. Besides, who's to say Romney won't install and even bigger douchebag than Bernanke?

Regardless of any Fed Chair changes Romney may make, my guess is he will give us the collapse much quicker than Obama and the Dems, especially if he gets a bunch of those flag waving hardcore fascists Rethugs in the House and Senate with him. The Dems likely will muddle through and keep us on the slow collapse track. You can bet those firebrand Rethugs will borrow and spend just like it's 1980 and Reagan got back in. Add a few wars, more police state crap while they talk about freedom, and slashing any "welfare" for all those folks they hate (except war contractors and the Wall Street Boyzzz) and rest assured, the pot will reach the boiling point. Hell, I rarely vote for anyone in the main parties but I'm leaning toward voting for the most retarded, hardcore, right wing nutcases I can find on the ballot just get the first few cards kicked out from the base of this house of cards.

Wed, 06/13/2012 - 00:30 | 2520440 JLee2027
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George, you need to get your head out of your ass.  Obama has turned us into a food stamp nation.  This is not Bush's third term. It's not 1980, and your blind hatred of Republicans isn't helping.

Wed, 06/13/2012 - 06:55 | 2520771 Bobbyrib
Bobbyrib's picture

"Obama has turned us into a food stamp nation. "

 

Riiiight, it wasn't years of cheapening the costs of labor so the 1% could reap almost all of the benefits of our society even more, it was Obama. /sarc.

Have fun voting for Romney, I'm writing in Ron Paul. Where I live Obama will win the state anyway.

Wed, 06/13/2012 - 00:52 | 2520468 The Monkey
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Romney will retract. He said what he needed to say in the nomination process.

Romney has already sent signals to Bernanke via his staff. Google it.

Romney and Obama = 2 degrees of difference, 98 degrees of the same.

Wed, 06/13/2012 - 01:25 | 2520526 you enjoy myself
you enjoy myself's picture

not sure about that - Romney appears to be legitmately sane, prudent, and thinking on a longer timespan than a 2-week news cycle.  remember that he's on record as saying the best thing that can happen for the housing market is to just let it clear, temporary pain to those underwater be damned.  one, that's 100% correct long term, and two, that's ballsy as hell to say during an election year.  being both correct and brave is not 98% Obama.

Wed, 06/13/2012 - 03:03 | 2520628 CrazyCooter
CrazyCooter's picture

Put down the crack pipe. Step away from what ever it is you are smoking.

Over a period of 12 months, live in a working class neighborhood, in a common US city.

Return to the forums to report at that time.

Regards,

Cooter

Tue, 06/12/2012 - 23:33 | 2520324 LetThemEatRand
LetThemEatRand's picture

I am stuck on Band Aid brand 'cause Band Aid's stuck on you.

And this one is for Sophist Econidenial.  http://www.youtube.com/watch?v=jVz_yaz6Arg

 

Tue, 06/12/2012 - 23:56 | 2520379 HD
HD's picture

No one does jingles anymore. Sure, today's kids can spell cheese correctly and never go around wishing they were hotdogs - but is that the kind of world we want to live in?

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