EFSF Spread Back To LTRO Wides

Tyler Durden's picture

While everything negative is "priced in" in perpetuity, just as it was in January 2011 when nobody cared about Europe for months, until it hit with a vengeance and the second failed Greek bailout had to be enacted, someone appears to have forgotten to tell the EFSF that its magnificent placement of €1.5 billion in ultra-short term Bills today is supposed to confirm all is well, and that the French downgrade is for chumps. The EFSF spread has now ballooned back to December 21 levels when the LTRO took place. Then again, with the market ramping now entirely on hopes of double downing €1 trillion LTRO as Zero Hedge reported first yesterday, fundamentals are the last thing that will matter.

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pemdas's picture

In the hands of politicians grand designs achieve nothing but new forms of the old misery.

Mr Lennon Hendrix's picture

Right.  This because politicians are fucking stupid.  They never have an original thought, and base their opinion on whatever the status quo is.  Politicians get paid to do what they are told, plain and simple, and the ones paying them are those who think that Keynesian monetary policy will work (who they think it will work for I think we know), even when it has now ben proved it does not. 

The politicians will drive us further in debt because it will "increase spending" and "increase exports".  These are the talking points, but neither will happen.  The debt will never be sold to anyone other than the CBs because there are no exports and there is no production.  The First World is made up of debter nations without any capability.  No production, no resources, and no understanding of the problems at hand.

The problems can be simplified as such:  the world is living a lie.  A lie of infinite resources, a lie of fiat wealth.  The First Worlders go to their soccer/football games, listen to their pop music, and watch their soaps, only to wake up in the morning and feed like cattle off of government subsidies (or maybe they have a trust fund, or maybe they have made money, but they still have the same vice).  These habits are unsustainable because they do not promote growth, they only serve to take away from the aggregate.

This will end soon, as the Fiat Ponzi has blown up past its growth function.  Now that the US, the engine of growth, has gone past 100% debt/GDP, the world will begin to eat itself.  Yet the politicians continue down their foresaken road of insainty- doing what they have always done:  listen to their Masters, who, by the way, have set this whole plan up to create chaos and a new financial structure ruled by those who govern the corporations.

It was started one hundred years ago by laying the bricks at the Federal Reserve.  The plan was hatched well before then, maybe hundreds of years earlier when the Rotheschildes dug the first oil wells in Russia, maybe when the Rotheschildes established their banking houses, or maybe by the Rockefellers and Morgans who created the Civil War so to kill millions, sell war bonds and guns, and establish the rule of law that "corporations are people". 

Yet it matters not who started it, what matters is how it will be finished.  That is now the choice, and it lays in front of us like a steam engine coming off the rails.  There is still time to jump off and action roll to safety, but that time is soon ending.

MillionDollarBonus_'s picture

If peripheral Euro states really want to boost their economies, the smartest thing they could do right now is collateralize government assets to attain LTRO loans from the ECB. They can then use the loans to finance fiscal stimulus programs to boost aggregate demand. Italy for example, has a lot of gold sitting in a vault which isn't being used. If they were smart, they'd be pledging it as collateral to the ECB to finance domestic spending.

Mr Lennon Hendrix's picture

And that is exactly what the ECB wants to have happen.

MillionDollarBonus_'s picture

Yes, because the ECB has a duty to save large sovereigns and banking entities that are vital for global economic progress. Sorry to break it to the zerohedge community but some countries and banking institutions are simply TOO BIG TO FAIL.

Mr Lennon Hendrix's picture

I would understand saving a State like Italy if the solution could work, but simply creating more debt/credit to sustain the leverage of debt/credit that caused the problem in the first place is madness.

The ECB will issue more debt based on future credit that comes from where?  The world lacks the production needed to refund the debt.  Third World States are the creditors and producers now and they have low wages.  The irst World are debters and lack production but have high wages.

The elephant in the room is that the two sides of the world must balance into a Second World.  The hard part is explaining that to everyone.  This is the cunundrum people have allowed themselves to be put in by the oilgarchs and financiers who designed the economy.

Those who are able may buy land, PM, and guns, but not everyone can.  Their will be a bitter end for many, as their dreams of skittle shitting unicorns is dashed and they work the land like man has for its existence, until cheap oil.

Ghordius's picture

+1T excellent explanation of the consequences of globalization - The New (2nd) World Order - funny how it looks when you write it this way, eh?

WhiteNight123129's picture

LOL, MDB as usual full of shit talk, hilarious. You fake the IMF - Gov mechanical talk very very well, it almost a perfect copy of the BS coming directly from policy makers.


trebuchet's picture

this looks like the game plan. only ECB cant lend direct to Eurosovereigns, so its the banks in the periphery that are doing it 


issuings bonds with a govt gurantee, offering that as collateral and buying new govt debt when its issued.




Urban Roman's picture

...  These habits are unsustainable because they do not promote growth, they only serve ...

Growth. You use that word freely in your essay, as if it is some tenet of religious faith.

Growth is the thing we have run out of. We've hit peak oil, just as the Romans hit peak wood. The end of real growth is what will put a stop to the financial ponzi. Now the only way you can accumulate wealth is at someone else's expense.

Mr Lennon Hendrix's picture

After oil production hits the downside, then yes.

Mr Lennon Hendrix's picture

Maybe I did not make myself clear or maybe you did not read the whole eassy???

Paragraph 3/1st sentence:

 The problems can be simplified as such:  the world is living a lie.  A lie of infinite resources, a lie of fiat wealth.

Urban Roman's picture

Yes, I know. I did read that sentence.

But then I kept seeing the word "growth". It's hard to avoid, I do it myself.

Is it possible to set up a steady-state economy? Can it be done without the tyranny of central planning?

orangedrinkandchips's picture


have to yahoo that term as I am unfamiliar with it....


Keep printing....TO INFINITY AND BEYOND!


The Wiemar republic was a bunch of wimps.....couldnt handle it!


Print, print, print....

bnbdnb's picture

When are these fucktards going to get it? Solvency is the problem.

Zero real growth mixed with unlimited money printing. Sounds great.

GeneMarchbanks's picture

'fundamentals are the last thing that will matter.'

Election year. Fundamentals pause for elections, everybody knows that.

gjp's picture

Right, and last election year was ... 2008?  Fundamentals didn't wait that time did they?  This year does look different though.  New highs in SBUX, WFM, HD this morning, AAPL not too far off.  The American consumption orgy continues and they are rewarded for the consumption with higher stock prices.  Makes lots of sense, doesn't it?

GeneMarchbanks's picture

2008 was madness. Energy prices, the dip in metals and miners didn't make much sense back then.

Consumption fest is dead but the MOPE continues...

gjp's picture

You're right about the commodity madness, but at least the housing fundamentals finally hit home.

MOPE?  What's that mean?  Thx

Lord Blankcheck's picture

Management Of Perceptive Economics.


aka The school of the Fed.

ain't No Hope without that MOPE

Peter K's picture

Are you implying that LTRO = QE? Bite your tongue:) Besides, all is well in Greece. The ComedyNBC chick just said that the PSI will get done.

HoofHearted's picture

Wonder why the cruise ship had to crash near Italy??? Foreboding or foretelling?

VanillAnalyst's picture

It's a wonder the Italians didn't swim out, patch it up, and set sail. Head for the hills!

Eireann go Brach's picture

The folks in charge of the EFSF fund obviously had a conference call with Obummar and Bernanke this weekend about hope and change and Hewlett Packard!

alien-IQ's picture

I saw a fundamental once. It was at the Smithsonian. It was fossilized. Rumor has it that they once ruled the market.

Ghordius's picture

Was it a ShareHolderValueSaurus? Or a TaxoPayingMegaCorporoSaurus?

SheepDog-One's picture

No one is amused by the ongoing clownshow any longer. The only hope they have is maybe they can invent another 4 letter word to paper over the wreckage for another few days.

nudlee's picture

Lets turn the "priced in" term over and assume that currently the printing process is being "priced in".


Irish66's picture

The S&P 500 trades for 13.6 times earnings, down from 15.2 a year ago and 19 percent less than the average level since 1960, data compiled by Bloomberg show

CrashisOptimistic's picture

No, it doesn't.

We don't have a measure of earnings.  Mark-to-Market **remains** undercut by the March 2009 FASB ruling that allows banks to carry non paying mortgages on their books at full price.

If all the shit paper on the books at banks (AND GE) were priced properly at what someone would be willing to pay for it within 30 days, the companies would be insolvent.  Further, as part of the FASB ruling, they declare those non paying mortgages to be paying . . . they declare the mortgage payments they do not receive to be revenue.  And then they proceed to perform accounting as if they got that payment and have earnings.

It's all bullshit.  There is no P/E evaluation when the E is unknown.

Village Smithy's picture

Comments like this one are why smart people read ZH. Welcome newcomers, read and understand.

CrashisOptimistic's picture

I think we may be misinterpreting things.

We have not read properly what it means for Greece to default and leave the Euro (be kicked out).  

Perhaps the proper read is . . . a horrible burden is ejected.  This would be hugely bullish for the Euro.  If people die in the streets of Athens, well, people die in streets everywhere and every day.

That truth doesn't hurt the Euro.  Losing Greece would boost it.  If they ejected Italy, the Euro would explode upwards.

The only problem with the scenario is Greece and Italy would fight to stay in.  It is Germany that should be trying to leave.

The point being . . . this is not a "priced in" thing. This is a favorable event thing.  Kick out Greece and you kick out a cash drain.

alien-IQ's picture

and who leaves next? Italy? Spain? Portugal? Ireland? All of them? Surely that is also bullish for the Euro...after all, it's not like any banks or bond holders will get hit with a loss.

taraxias's picture

Thre is no bullish scenario for the euro.

The PIIGS stay in, the imbalances between core and peripheral EZ countries remain in place, the EZ debt is unsustainable, no growth in the EZ, more money printing schemes to avoid defaults, euro NEGATIVE

The PIIGS leave, core banks need to be recapitalised to fill the massive hole left behind by defaulting (and leaving) PIIGS, massive money printing necessary, PIIGS markets disappear for the core, in fact they become major competition for the core through their cheaper currency, no growth in the core,  resession in the core, euro NEGATIVE

trebuchet's picture

Cept with a depreciated Euro as we have now, this massively helps EU competitiveness, growth and adjustment which will take a few months to show up in the stats (bad for US and China) 







RobotTrader's picture

Starbucks and Whole Foods at new 4-year highs

Mr Lennon Hendrix's picture

Food costs more.  They are making more dollars.  I've been writing this to you for years now.

RobotTrader's picture

GDX getting hammered as NEM and KGC are getting obliterated.


Hands down the worst sector, next to solar and shipping stocks.

Silver Surfer 1985's picture

Yes indeed, its Financial Darwinism bitchez..........

Great Depression Trader's picture

Problem in Europe has been "solved" for the time being due to the bold actions of the ECB. Italy 10 yr sub 6.5 percent and falling. Greece will continue to suck on the Euro titty until its citizens start killing politicians. US economic growth continues as all the bears missed a 1st half recession. US ISM data never went sub 50 despite the numerous ZH predictions. Can't get it all right but I know this site has a negative bias. US exports are above pre crisis levels as is retail sales. Even residential housing has recently begun to add to GDP, so expect a tailwind from that sector. I expect the low volume melt up to continue until the next bomb goes off out of Europe, Japan or china. Could be by fall of 2012.

GernB's picture

Of course, you are looking at a symptom of the problem and proclaiming it has gone way because the symptom has gone away. What is the root cause, and in what way has it gone away?

bnbdnb's picture

Merkel said contagion is receding from Greece. There's the queue.