Europe - You Are Here

Tyler Durden's picture

Between credible and non-credible political and fiscal policies and a reflationary or deflationary monetary policy aimed at the financial system, Morgan Stanley provides a quick-and-dirty 'map' of where Europe finds itself and the four different scenarios that await this troubled region. The 'Quantum Leap' of credible fiscal integration with term liquidity support and even easier monetary policy is where everyone hoped we would be by now (especially post the October 26th Grand Plan decisions). However, the sad truth in reality is the drop in credibility of political will (or direct nationalism emerging) combined with some concerns over inflation and the dramatic fading of the liquidity impact of the ECB's latest actions means we are drifting rapidly towards 'Debt Crisis Derailment' as the elite continue to confuse insolvency and illiquidity and stick their heads in the sand with regard the reality they face under the restrictions of Maastricht. With implicit monetary conditions dramatically easy and peripheral banks over-stuffed with sovereign debt, there is little room for anything but more encumbrance or ECB-Treaty-busting direct printing (which is the rumor floating all boats this morning).

Implied Monetary Conditions (green) are already dramatically easy...

But we find ourselves sliding into the non-credible non-timely region of stress once again as even short-term liquidity starts to fade...

Charts: Morgan Stanley

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Badabing's picture

Looks like a map of the mall

GetZeeGold's picture



Long duct tape, superglue, and bailing wire.


TBT or not TBT's picture

Quantum leap?   To an alternate universe I guess where Europe doesn't have deathbed demographics and massively unsustainable socialist wealth redistribtion schemes strapped on the backs of its dwindling supply of motivated productive people.

Sudden Debt's picture

All roads lead to Starbucks and McDonalds!

youngman's picture

now I know why Starbucks is adding liquor........there is going to be a lot of pain in the future..and you might as well start drinking early in the morning

SheepDog-One's picture

Frappe latte please, 3 shots of Jack.

Hugh_Jorgan's picture

A Venti will require 4 or 5 shots to get you through the morning...

Mentaliusanything's picture

Welcome Europe. you are here

Welome the toilet paper. after that comes the water and flush. 

Do not worry we all shit and we all stink.... but I have to say that smell eminating from your posterior is enough to make a skunk run over a cliff.

TBT or not TBT's picture

Death smells worse than shit, to most people, and what Europe has a lot of coming along, is death.   Show an actuary friend the age distribution of any zeropean country and ask them what this portends.     A whole lotta dyin'

101 years and counting's picture

"but more encumbrance or ECB-Treaty-busting direct printing (which is the rumor floating all boats this morning)."

the EUR is up on this?  any rumor of ben printing immediately sends the USD crashing.  and so goes the manipulated world, including fx.

DeadFred's picture

The EURUSD has been rising on asset liquidations to cover margins for the piigs downgrades, probable done for now (my guess). There are multiple layers of resistance above and a good deal of room to fall. This is not a good place for anyone to turn bullish on the Euro. The crisis cometh.

GeneMarchbanks's picture

The crisis cometh.

Hence it must be EwwwRope right? There is world out there, other places do exist. Quit tunneling.

gmrpeabody's picture

"the EUR is up on this?  any rumor of ben printing immediately sends the USD crashing"

Perhaps they prefer sickness over death...?

TBT or not TBT's picture

I guess the ECB can't print after it ceases to exist, and this is starting to price in. 

The Fed on the other hand will carry on printing the world's reserve currency, the more so given everywhere else is in bad shape.

Peter K's picture

EUR/USD > 1.3250 = EUROLAND Fixed :)

eigenvalue's picture

Anybody still remembers Greece? May is coming. It's time for Greece to pay its foreign law bonds. A hard default of Greece in May?

TBT or not TBT's picture

Say what you want about the Danes.   No really, go ahead.   

Harbanger's picture

A single currency to meet the needs of 17 different economies is inherently flawed.

Individual Nations bound under one currency cannot adjust a particular nation’s money supply in response to economic change.

Dr. Engali's picture

Is that a chart for the U.S.?.......  Japan?

GeneMarchbanks's picture

'Debt Crisis Derailment' as the elite continue to confuse insolvency and illiquidity

Says MS after their very own insolvency was back-stopped by the very sovereign who is now hopelessly, you guessed it, insolvent.

Should we play another game of 'divert-attention-to-someone-who-is-more-bankrupt-than-ourselves-for-the-sake-of-Status-Quo' or we ready for a grown-up discussion?

SheepDog-One's picture

I dont think the 'elite' are confused about anything other than they held a scam, and no ones believing in it anymore. The bankers desperately wanted to be bailed out, they wanted the free money, and now dont really know what the hell to do next now that its all diminishing returns.

Ghordius's picture

Our dear global banks prefer the game - they don't have grown-ups anyway

SheepDog-One's picture

Where the hell is Orange Julius on that map?

youngman's picture

So how does the Euro stay so strong??????? It really should be below the dollar now..say 95%

The Vizier's picture

Clearly some one out there doesn't think this matters....

SheepDog-One's picture

Those in denial, who believe retail will show up any minute to buy the garbage off their hands, doesnt think this matters.

LawsofPhysics's picture

This from a company that may be the next "Lehman event".  Does not pass the smell test.

MarsInScorpio's picture

It is not nationalism, it is a revolt against the financial elite. The problem with mass education is that people know when they are being looted. They don't care so long as everyone is being looted equally. But they see the ruling elite are doing nothing but getting fatter, while they watch their life's dreams - to put it in SEC investigation speak - vaporized.


Count on the ECB, in collusion with the FED, figuring out a way to print, and save the ruling elite from revolt.


boiltherich's picture

So, the center-right government in Romania just fell.  I know they are not in the eurozone but they are pegged to the euro, as a newer EU member they have reformed their economy to acceed to the EZ and they are attempting to meet all EZ and ECB requirements to replace the RON with the euro.  The trigger for the no confidence vote that collapsed the government was... you guessed it, excessive austerity.

Next up, the Czech Republic with is teetering on the verge of collapse.  Oh boy, two more countries for the Germans to occupy without firing a shot.  Bow down to your new masters in Frankfurt boys, it is going to be a long hot summer.

Harbanger's picture

I was surprised when the Dutch Govt. collapsed.  If the Netherlands cannot balance it's books without the Govt collapsing, which European Govt. can?

boiltherich's picture

The Greek government DID collapse, a new technocrat PM was appointed to carry out the will of the banks.

WyMi's picture

The Final Solution (thanks to this key advisor) is Morgan Stanley for Furher.

WyMi's picture

The Final Solution (thanks to this key advisor) is Morgan Stanley for Furher.

Peter Pan's picture

The USA is trying to get out of trouble by spending and the Euro area is attempting to do the same through austerity. This schiziphrenic behaviour however does have one common point. And that is that both sides of the Atlantic have pampered the banks for too long and too much. As long as the banks are still standing that is all that matters to them.

Sandmann's picture

Charts are pretty but are essentially wallpaper nothing more. After the French elections no President will have any mandate and the Assembly elections could bring real headaches. Street Action is the future in France and if Rajoy isn't careful with how he handles devolved government he might get a civil war in Spain. i am really surprised noone has organised bus loads of economic refugees from Greece and Spain to enter Germany or the UK en-masse and claim benefits as EU Citizens - but there's time yet.

Capital Controls will come inevitably and Managed Trade. The Future will be different from The Present - it is simply a question as to which part of The Past it will resemble. Probably in a year or two ALL the Banks will be nationalised without compensation and turned into utilities to service economic regeneration - it is what the Chinese used to grow and their banks are as insolvent and flaky as those in the West

mendigo's picture

I would use aig or mfg as the norm.

Winston Smith 2009's picture

The "Credit Crisis Derailment" would, of course, be in Morgan Stanley's "non-credible" portion of the graph, the quadrant where they are currently situated and will remain.

mendigo's picture

Its a shame because it was a great idea and at least these countries. were willing to make the effort and take the risk. I hope to see a spike on sales of torches and pitch-forks as those bureaucrats only used the experiment to make themselves rich - as was to be expected.
So what will be our excuse for why we trashed a formerly great nation and are now entering a state of soviet style facsism mixed with financial slavery masked as socialism.

TahoeBilly2012's picture

Come on, what single American male is complaining about all this. When is the last time you flew into a European capital where your average American paycheck made you a "stud" with the local ladies? I am saving up right now!

TBT or not TBT's picture

A bigger deal, for a European dude trying to attract a mate, would be HIS OWN, SIZABLE PLACE to establish a small family.

Why does Europe have deathbed demographics?   Because young people are so crushed, real estate development so controlled, that they don't feel they can afford the space to comfortably raise a family.   Thirty and forty year old males living with their mom is so typical now that courtship is about, well, hedonistic stress release, not about the future.

boiltherich's picture

The Czech government faces a confidence vote today after more than a month of turmoil. Since March, Czechs have been protesting austerity cuts, with many, including a civic group called The Holesov Appeal, calling for the government’s resignation. The movement culminated in a march on 21 April that by some estimates drew 100,000 people. At the same time, the government has been mired in a scandal that saw the conviction on corruption charges of Vit Barta, owner of a large security firm and leader of Public Affairs, the junior coalition party. After the court ruling, which also saw another parliamentary member (formerly of Public Affairs) sentenced to three years in prison for fraud, the party started to disintegrate. A faction formed around Deputy Prime Minister Karolina Peake has pledged its continuing support to the government, which should be enough to ensure a razor-thin majority.


WTF?  Say it is not so, one of the three party leaders in the coalition government heads a securities firm and turned out to be corrupt?  Now the government is on the verge of collapse as soon as this afternoon? 

boiltherich's picture

So the list of toppled governments now reads:

Greece, Ireland, Portugal, Italy, Spain, Holland, Slovak Republic, Romania.

Czech government will be gone soon and maybe today, Sarkozy will be gone in a week, Belgium has finally got a Prime Minister (a gay socialist born in a squatters camp) after more than a year and a half without being able to form a government, but the ultra conservative Dutch speakers in Flanders are unlikely to put up with this government longer than it takes a Nazi to identify a Jewish conspiracy.  The new Hungarian PM is in big trouble with the EU over constitutional changes that violate many clauses in the EU treaties, and Finland is on record as demanding real collateral for future bailouts.  On top of all that next month the Irish will hold a plebiscite on the ratification of the ESM which is unlikely to be passed, if it is not passed they will be cut off from future welfare, I mean bailouts. 

It seems the only nation that is THRIVING is the single solitary nation to give the bankers and the ECB the finger, Iceland.  The message is clear, go your own way and repudiate bankster claims on your sovereignty and you will be OK!