Europe Is Knock, Knock, Knocking On Chairman's Door

Tyler Durden's picture


In the middle of the European crisis last fall, EUR-USD cross-currency basis swap spreads were on the tip of every trader and media-personality's tongue as the critical means for providing banks with access to short-term USD liquidity was ratcheting lower and lower. This means the European banks were willing to pay a higher and higher premium to be able to offload their EUR funding into USD funding. With LTRO funding now faded and perception of the sustainability of European banks becoming dismal, US banks are charging ever higher rates for Eurozone banks to borrow. What is more worrisome is that with the relative liquidity of USD assets, it would appear that the widening in the basis swap spread means the European banks have run dry of money-good USD collateral to unwind. This repricing of USD liquidity costs (now at 4 month highs and increasing rapidly) suggests that the Fed-provided swap lines could get a fresh calling to save the day and/or just as we have noted so many times in the past, the collateral squeeze continues to be the critical part of Europe's demise (and thus negates anything but absolute monetization by the ECB as a solution for the banking system).

EUR-USD basis swap spreads plummet back to crisis levels...

Chart: Bloomberg

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Fri, 05/18/2012 - 08:50 | 2439135 LawsofPhysics
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From the swap window -"We are closed now" -


Wishful thinking?

Fri, 05/18/2012 - 09:15 | 2439226 The trend is yo...
The trend is your friend's picture

"out to lunch" will be back in 2 hours.

Fri, 05/18/2012 - 09:22 | 2439249 Colombian Gringo
Colombian Gringo's picture

Europe is broke. They will print their way out.

Fri, 05/18/2012 - 09:31 | 2439285 SheepDog-One
SheepDog-One's picture

Its worked so well for the last 3 years and all....obviously the 78th time is the charm!

Fri, 05/18/2012 - 09:44 | 2439355 Short Memories
Short Memories's picture

'The way is shut. It was made by those who are dead

Fri, 05/18/2012 - 09:19 | 2439232 Zero Govt
Zero Govt's picture

Draghis 'solutions' are lasting about as long as Trichets it possible to say "robust resolution" in a micro-second before the floor falls in again?

Fri, 05/18/2012 - 08:53 | 2439146 tocointhephrase
tocointhephrase's picture

Lets twist again, like we did last summer

Fri, 05/18/2012 - 08:56 | 2439157 CPL
CPL's picture

I read the title in Axel Rose's voice.

Fri, 05/18/2012 - 09:14 | 2439217 WmMcK
WmMcK's picture

And I read it in Bob Dylan's. I am (getting) old.

Fri, 05/18/2012 - 09:19 | 2439237 Dr. Richard Head
Dr. Richard Head's picture

Slow Hands was the version in this yuppie's head.

Fri, 05/18/2012 - 09:13 | 2439218 LMAO
LMAO's picture

For puns' sake that's a cheap knock-off.

Fri, 05/18/2012 - 08:53 | 2439148 Doubleguns
Doubleguns's picture

The drowning euro grabs the floundering dollar. Yep that will save ya!!!

Fri, 05/18/2012 - 08:54 | 2439149 GeneMarchbanks
GeneMarchbanks's picture

Watch it bring you to your shanananananana knee knees, knees
I want to watch you bleed!

Fri, 05/18/2012 - 09:21 | 2439244 WonderDawg
WonderDawg's picture

I'll settle for watching LNKD bleed today. Please please please...

Fri, 05/18/2012 - 08:55 | 2439152 Village Smithy
Village Smithy's picture

If someone who works at the Bank of Canada could let us know when "Mr. Carney goes to Washington" that would be great as we could then start buying this little dip in anticipation of the inevitable ES launch.

Fri, 05/18/2012 - 08:58 | 2439155 q99x2
q99x2's picture

Can't concentrate with the Kenyan's wifes crooked chompers staring at me from the propaganda advertising voodoo early morning campaign ads.

But I think this is an argument for shorting vs FB put.


Fri, 05/18/2012 - 09:01 | 2439177 Village Smithy
Village Smithy's picture

No, TPTB were surprised by the fact that retail did not come to buy all the ramped up crap at the top so they (TPTB) still have some unloading to do. They need at least one more euphoric ramp to sell into and this ploy worked very well last time, a "global coordinated effort" I believe it was called.

Fri, 05/18/2012 - 09:34 | 2439303 SheepDog-One
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I agree, I really do think the Cenatral Banksters thought if they staged a market ramp they'd create another stock buying mania and it never even came close to happening and are now very much stuck.

Fri, 05/18/2012 - 08:57 | 2439159 manhunter
manhunter's picture

Europe is the fuse; US is the bomb. Europe is too big to fail because a rising gold price is no threat to them.

ZH is running with the ball in the wrong direction.

Fri, 05/18/2012 - 08:59 | 2439165 Everybodys All ...
Everybodys All American's picture

No way will the chairman answer with the dow trading at this level. We'll have to go much lower imo.

Fri, 05/18/2012 - 08:59 | 2439167 max2205
max2205's picture

Sign at the window says "gone to lunch"

Fri, 05/18/2012 - 08:59 | 2439168 geewhiz190
geewhiz190's picture

Philly Fed president Charles Plosser's column in today's FT is a MUST read.

Fri, 05/18/2012 - 09:00 | 2439171 buzzsaw99
buzzsaw99's picture

As long as the german banks survive the rest of europe can eat shit. heil merkel!

Fri, 05/18/2012 - 09:00 | 2439174 monopoly
monopoly's picture

Disagree. All of Europe will not fail. Some countries will move out and on their own, but the Euro will survive, for now. Do agree they do not care about the price of gold, and at the risk of getting some upset, I do not think The Bernank really monitors the price of gold as many think he does. Gold price is the least of his worries. 

Fri, 05/18/2012 - 09:34 | 2439302 BandGap
BandGap's picture

Maybe not fail, but will definately be hit with the splatter from the upcoming bloodbath. There is no stepping out of the way of this one.

What I like is that this situation, while not on the TV to a large extent, is getting into the headlines more and more. 

Fri, 05/18/2012 - 09:01 | 2439178 FunkyOldGeezer
FunkyOldGeezer's picture

I can't help believing this is all FED manipulated, to have the USA as last man standing, i.e. a FINANCIAL WAR enacted by the USA.

Surely, most of the debt will come home to roost in the USA, as that's where it all emanated from? That people still view the Dollar as a safe haven currency is beyond belief.


Fri, 05/18/2012 - 09:36 | 2439311 BandGap
BandGap's picture

The US created most of this debt? You're kidding, right? Have you seen the free shit you get for being from Europe? The vacation package is to die for!

Fri, 05/18/2012 - 09:02 | 2439183 Bahamas
Bahamas's picture

The second best windows in Europe, after the swap windows, are those with naked prostitutes in Amsterdam

Fri, 05/18/2012 - 09:10 | 2439206 WmMcK
WmMcK's picture

Long knitters.

Fri, 05/18/2012 - 09:17 | 2439229 falak pema
falak pema's picture

they are called window dressing; when you get inside you get served salad dressing from the head-waitress, and the dessert is a long generous straw-two large red berries and lots of whipped cream!

Fri, 05/18/2012 - 09:51 | 2439401 DarkestPhoenix
DarkestPhoenix's picture

And both windows are encouraging you to get fucked.

Fri, 05/18/2012 - 09:03 | 2439184 GOSPLAN HERO
GOSPLAN HERO's picture

"I live in Greece. The national pastime is not paying tax. There is wide expectation that they will be let off the hock and that somehow the socialists will be successful in claiming too big to fail so someone else will continue to pay.

Commentators who do not understand the Greek national psychology, (ripping off one's neighbour is a macho thing) make a big mistake if they believe that throwing more money at Geece will help. The intial bailout 2 years ago was supposed to be accompagnied by fundamental reforms, which would have started the process of bring Greece into the world of reliable nations, these have not happened and will not happen.

Greece is at its heart fundamentally and instituionallly corrupt. Those banks etc that leant to Greece without oversight are now paying for their negligence." -- where2now

Fri, 05/18/2012 - 09:10 | 2439203 Winston Churchill
Winston Churchill's picture

Some things never change.

Was like that 30 years  ago when I lived in Athens.

NEVER lend money to a Greek.

Fri, 05/18/2012 - 09:12 | 2439211 monopoly
monopoly's picture

GOSPLAN....In your eyes. What do you see as the ultimate solution to bring your country back from the brink. And, by the way. We are right behind you. We are just a little slower to put it all together.

Fri, 05/18/2012 - 09:02 | 2439185 monopoly
monopoly's picture

This crap about FB is making me sick. I usually watch the idiot channel for 45 minutes or so prior to market open, now even on mute it is sickening. TV off. Music on. News feeds on. ZH on.

Fri, 05/18/2012 - 09:12 | 2439210 junkyardjack
junkyardjack's picture

Facebook = American Dream still happens...

Fri, 05/18/2012 - 09:29 | 2439262 SheepDog-One
SheepDog-One's picture

Dont worry the manias only have a few hour lifespan now....only last month Apple was all the rage and CNBC couldnt shut up about 'Next stop $1,000 in the bag'.

Fri, 05/18/2012 - 10:46 | 2439742 SDRII
SDRII's picture

thre up in my mouth when Carl Kinto started fawning about how this is the payoff for taking risks etc.


Fri, 05/18/2012 - 09:03 | 2439188 mammoth mo
mammoth mo's picture

Dear US we would like to swap our worthless bank notes for some of  your good stuff.  How about it?


Sure thing - as long as we can charge you for it. 


Of course - will you take more of our worthless notes?

Fri, 05/18/2012 - 09:29 | 2439278 Miss Expectations
Miss Expectations's picture

...So youre gonna tell me that you dont have no black cats, no roman candles, or screamin me me's? you aint got no lady fingers, buzz buttles, snicker bombs, church? burners, finger blasters, gut busters, zipidy doo das, crap flappers? youre tellin me you aint got no whistling bung holes, no spleen splitters, whisker biscuits, honky lighters, hoosker do's, hoosker donts, cherry bombs, nipsy daisers (with or without the scooter stick), or one single whistling kitty chaser?!

Fri, 05/18/2012 - 09:58 | 2439469 mammoth mo
mammoth mo's picture

For collateral we have diddly divided by squat.


We are all out of whole diddlys.

Fri, 05/18/2012 - 09:09 | 2439200 Olympia
Olympia's picture

From the Wall Street Crash of 1929 to the Global Financial Crisis of 2007


It all started with the big crisis of 1929. The American economy reached a deadlock because of its social "pathogenesis"; a deadlock that led it to economic crisis in a different - faster- pace than the rest of the industrial forces of that time. Important decisions had to be made - mostly social - and the Whites didn't like that, especially the Whites' rulers, the Anglo-Saxons. The USA society had to either be homogenized and "forget" about racism against black people or find itself in a permanent deadlock that would threaten it with social uprising. If they didn't equate the black working people with their white colleagues so that there wouldn’t be an issue with the salaries that threatened the national currency, they couldn't avoid reactions and all that goes with it.


The problem which began as social but was turning into economic was simple. As long as the economy functioned adequately and the Blacks worked and asserted what they deserved for their work, the white employers had to "fund" the white working force with extra money because of their skin color. To avoid complaints from a white worker who received the same salary with his black colleague, the employers had no choice but to give them more money. The demands of the Blacks were used as an excuse by the Whites to demand more and everything ended up in the same pocket, since they were under the same employ. The problem that arose from this "strange" tactic was that the increased takings of the "superior" White employers were seeking outlet in investments and that threatened the capital. Having higher salaries, they bought more houses; they bought stocks and so on.


Authored by Panagiotis Traianou

Fri, 05/18/2012 - 09:30 | 2439270 GOSPLAN HERO
GOSPLAN HERO's picture

... and Africa is a paradigm of efficiency, comrade.

Fri, 05/18/2012 - 09:12 | 2439212 swanpoint
swanpoint's picture


Fri, 05/18/2012 - 09:28 | 2439267 willien1derland
willien1derland's picture

I wonder if the ECB will accept FaceBook stock as collateral?

Fri, 05/18/2012 - 09:15 | 2439221 q99x2
q99x2's picture

Ok I can see now. In each of the prior QEs the 50 day moving average first crossed the 100 day moving average long before the QE announcements. We haven't even reached that point yet and Faber is over there on CNBC saying to start covering your shorts within the next ten days.

The time between the crossover of the moving averages has gotten a little less in each of the last QEs. I think short for a while. The "We plugged the dam with our European pinkie" rumors aren't likely to go as far this time.


Fri, 05/18/2012 - 09:21 | 2439243 Winston Churchill
Winston Churchill's picture

No QE until the Euro contagion crosses the pond.

Coming to a bank near you soon.

Fri, 05/18/2012 - 09:23 | 2439248 SheepDog-One
SheepDog-One's picture

I think theyre perfectly happy letting everyone price-in definite QE coming at any minute while no such thing will happen at all this time.

Fri, 05/18/2012 - 09:41 | 2439335 Village Smithy
Village Smithy's picture

Hoe far they let the S&P fall is related to how long the Zombie banks still are. Soon we will know.

Fri, 05/18/2012 - 09:22 | 2439233 slackrabbit
slackrabbit's picture


I can hear Ben's 'kightrider' printer warming up ... sadly he plays the theme music of Knightrider when he uses it - the irony is Richard Basehart (the narrator) - his words are perhaps the most funny, prescient and tragic  thing about it


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