This page has been archived and commenting is disabled.

European Banks Now Face Huge Margin Calls As ECB Collateral Crumbles

Tyler Durden's picture




 

In what could prove to be the most critical unintended consequence of the ECB's LTRO program, we note that as of last Friday the ECB has started to make very sizable margin calls on its credit-extensions to counterparties. While the hope was for any and every piece of lowly collateral to be lodged with the ECB in return for freshly printed money to spend on local government debt, perhaps the expectation of a truly virtuous circle of liquidity lifting all boats forever is crashing on the shores of reality. This 'Deposits Related to Margin Calls' line item on the ECB's balance sheet will likely now become the most-watched 'indicator' of stress as we note the dramatic acceleration from an average well under EUR200 million to well over EUR17 billion since the LTRO began. The rapid deterioration in collateral asset quality is extremely worrisome (GGBs? European financial sub debt? Papandreou's Kebab Shop unsecured 2nd lien notes?) as it forces the banks who took the collateralized loans to come up with more 'precious' cash or assets (unwind existing profitable trades such as sovereign carry, delever further by selling assets, or subordinate more of the capital structure via pledging more assets - to cover these collateral shortfalls) or pay-down the loan in part. This could very quickly become a self-fulfilling vicious circle - especially given the leverage in both the ECB and the already-insolvent banks that took LTRO loans that now back the main Italian, Spanish, and Portuguese sovereign bond markets.

 

 

This huge increase in margin calls can only further exacerbate the stigma attached to LTRO-facing banks - and as we noted this morning (somewhat presciently) both the LTRO-Stigma-trade, that we created, and the potential for MtM losses on the carry-trades that LTRO 'cash' was put to work in could indeed start a vicious circle in European financials, just as everyone thought it was safe to dip a toe back in the risk pool.

 

What should also start to worry the Germans is the fact a 37x levered hedge-fund central bank with EUR3 trillion balance sheet that has extended credit in a 'risk-managed' approach on what appears to be an ever dwindling supply of performing collateral is starting to see dramatic 'gaps' in its asset-liability exposure (but rest assured Bernanke told us that our FX Swaps are safe as houses).

 

One last point should be noted - the hopes of an LTRO3 or some such are surely now out of the window as clearly banks have run dry of any and all reasonable collateral or can the sovereign bonds purchased using LTRO1 and LTRO2 funds be lodged once again in a rehypothecated miasma circling the drain?

Charts: Bloomberg

(h/t WallStreetMane)

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 03/07/2012 - 00:53 | 2231100 francis_sawyer
francis_sawyer's picture

and POOF! It's gone!

Wed, 03/07/2012 - 01:22 | 2231151 knukles
knukles's picture

No shit.
Really.
Sincerely.
Nobody saw this coming?
Whothe fuck figured this shit was gonna work in any case. 

Collateralized term loans mean posting and maintaining enuf collateral that ultimately pays money good in the coin of the realm at end of term. 
Jesus. 
Anybody need a lesson in mismatching quality, duration, counterparty and potentially currency risks.
And that doesn't even consider term structure.

Moreover, it assumes the fucking stuff pays.

Wed, 03/07/2012 - 01:24 | 2231154 flacon
flacon's picture

Didn't that fat fuck Greek guy (Vaseline) say just a few days ago that "Default is not a problem?"

Wed, 03/07/2012 - 01:28 | 2231161 prains
prains's picture

i thought a counter party needed at least one person to provide the pressed ham

Wed, 03/07/2012 - 01:30 | 2231166 knukles
knukles's picture

Do the bankers take pork products as collateral?

Wed, 03/07/2012 - 01:34 | 2231182 TruthInSunshine
TruthInSunshine's picture

Central bankster thieves have been taking already been chewed bubble gum as collateral for the last several years, but those days are coming to a close, and they will have no say as the free market actually wakes up and lays the thunderbolt upon their heads.

Wed, 03/07/2012 - 02:47 | 2231291 imaginalis
imaginalis's picture

I hope they dump a load of bullion and crash the price of gold so I can buy another mother load

Wed, 03/07/2012 - 03:41 | 2231345 economics1996
economics1996's picture

Here is the quote of the day for these mother fuckers;

"I got a serious question for you: What the fuck are you doing? This is not shit for you to be messin' with. Are you ready to hear something? I want you to see if this sounds familiar: any time you try a decent crime, you got fifty ways you're gonna fuck up. If you think of twenty-five of them, then you're a genius... and you ain't no genius. You remember who told me that?"

 

http://www.wearysloth.com/Gallery/ActorsR/15023-2166.gif

Wed, 03/07/2012 - 05:13 | 2231410 Harlequin001
Harlequin001's picture

I recommend that the ECB buys some gold, just to bolster its collateral a bit...

GLD should do it, then all the CB's could buy the same fucking gold, until that blows up when any one of them ("cos they'll all be Authorised Participants') tries to take it out and then they can all come and pay me a fucking fortune for my real stuff.

One almighty multi-gazillion dollar dodgy gold fund crash. Sounds good eh...

Wed, 03/07/2012 - 08:49 | 2231568 GetZeeGold
GetZeeGold's picture

 

 

Wait a minute......we just got done pounding gold down!

 

OK......buy it back. Embrace the burn of the whipsaw.

 

Did I hear someone mention something about a margin call?

http://www.youtube.com/watch?v=_gekaEzqj5g

 

 

Wed, 03/07/2012 - 09:19 | 2231646 JPM Hater001
JPM Hater001's picture

I work with brokers and I will never forget how badly they didnt want to call clients in 01 or 08 with a margin call.

This is the mother of all margin calls.

Ring ring.

Wed, 03/07/2012 - 09:28 | 2231661 GetZeeGold
GetZeeGold's picture

 

 

Phone's ringing...

 

Hi......this is Berry......WAZZUP!!!!!!!!!

http://www.youtube.com/watch?v=7yr7odFUARg

 

 

 

Wed, 03/07/2012 - 12:05 | 2232294 CEOoftheSOFA
CEOoftheSOFA's picture

My favorite movie, Body Heat!

Wed, 03/07/2012 - 06:01 | 2231448 youngman
youngman's picture

If I was one of those banks that took the LTRO loans......i would go out and buy gold with it....not park it at the ECB.....and in three years you have something to sell...its an asset not a promise to pay or paper.....but I am sure there is a under the table rule that that would be a no no.....

Wed, 03/07/2012 - 06:45 | 2231478 Harlequin001
Harlequin001's picture

It's called a banking license, which requires that they support the economy, which is why they push investors into paper gold and then short it...

Wed, 03/07/2012 - 09:14 | 2231635 disabledvet
disabledvet's picture

it's called "government banking" which means "the bankers are required by the law of your money or your life" to do what they are in fact doing. "with the exception of Greece" of course which is "parking all their money everywhere but Greece" while in the process of "being bailed out." Hmmmmm. I'm sensing a "Big Trouble in Little China" moment coming. Espana...Espana...Espana...

Wed, 03/07/2012 - 02:49 | 2231294 Real Money Wins
Real Money Wins's picture

Not to worry, they aren't done yet. It's just time to change the rules. You know the one where if you or i wanted to borrow cash from a bank to buy stock and the bank says no and you ask why? and they say because it's unsecured paper and not collateral. Well the Central banks can now buy stocks on the open market and as we know the rules don't apply to them, NOW the stock they own will pass as real ownership in real companies an hence real collateral with which they can borrow and lend to their hearts delight. There is nothing like borrowing and lending on someone else's collateral.

Wed, 03/07/2012 - 02:51 | 2231299 Michael
Michael's picture

Damit. Giving away my grad plan to make the privately owned world central banks the bag holders choking themselves to death on their own toxic waste.

Wed, 03/07/2012 - 04:56 | 2231405 Acet
Acet's picture

Unsurprisingly the moth ridden old socks and last winter's snowmen they started accepting as collateral have turned to have a steadilly depreciating value.

Wed, 03/07/2012 - 07:50 | 2231544 Bobbyrib
Bobbyrib's picture

They do seem to be cannibalistic.

I'll be here until 7:15, don't forget to tip your waitress.

Wed, 03/07/2012 - 08:36 | 2231595 spankfish
spankfish's picture

I'm getting divorced from a Greek... they will steal it if its not nailed down, then go get a pry bar.

Wed, 03/07/2012 - 06:51 | 2231485 twotraps
twotraps's picture

Knuckles. I agree and you illustrate a bigger problem.  All that you mention used to mean something...cheapen the process and you cheapen/weaken everything.  Simple.   These extra layers of complications by the Fed and ECB just mask problems we already have rules/laws/mechanisms for.  Instead, its turned into a silly game.  No more.

Wed, 03/07/2012 - 06:57 | 2231494 twotraps
twotraps's picture

Politically driven situations that have no real consequences just continue their course, amending rules along the way.  Look no further than US Govt or any other political group/govt.  The Euro is a purely political construct, now in the hands of politicians.   That part is simple.  I guess it can go on for a while, will it matter that a ride on the bus is $25, coffee $40 and a pint of beer $65?  Even the Ritters could make a fucking mortgage payment at that point.

Wed, 03/07/2012 - 09:17 | 2231643 blindfaith
blindfaith's picture

 

 

 

I see you have been to Australia.  I'd like to know how they get wine to the USA so cheap when a chicken sandwich in a coffee shop is $57.00.

Wed, 03/07/2012 - 07:28 | 2231520 StychoKiller
StychoKiller's picture

They're trying to pull a reverse "Weekend at Bernie's", where they keep trying to hide Bernie, instead of showing him off -- For Pete's sake, DO NOT LOOK UNDER THAT ROCK!

Wed, 03/07/2012 - 08:14 | 2231571 Colombian Gringo
Colombian Gringo's picture

Oh oh, looks like the markets are crumbling. Time to start more wars and distract the sheeple.

Wed, 03/07/2012 - 06:33 | 2231466 disabledvet
disabledvet's picture

"My God, we're all broke" said the Greeks. Then this headline in the Athens Morning Bugle: "Angel investor announces Acropolis 2.0." with this follow up: "discreet real estate tycoon who made his fortune going hog wild in Bezerkistani Bonds announces numerous building projects throughout the entirety of the "heart and soul of democracy itself." discreet indeed...travelling by huge limo and from what we can tell "appearing to be a bearded woman." Who is this mystery man? WHOOOO ISSS HEEE????!!!!

Wed, 03/07/2012 - 01:00 | 2231108 Mr. Fix
Mr. Fix's picture

Is this more "hype",

or are things finally becoming unglued?

Wed, 03/07/2012 - 01:14 | 2231134 francis_sawyer
francis_sawyer's picture

It's never good when the words "rehypothecated" & "miasma" crash together in the same sentence...

Wed, 03/07/2012 - 01:26 | 2231158 knukles
knukles's picture

or "buttfucked"
That's not good either.

Wed, 03/07/2012 - 02:54 | 2231303 phungus_mungus
phungus_mungus's picture

Unless she enjoys being buttfucked... 

Wed, 03/07/2012 - 01:34 | 2231180 Thomas
Thomas's picture

you get "remiasmiated"

Wed, 03/07/2012 - 02:10 | 2231237 mr. mirbach
mr. mirbach's picture

I can't breathe...all this bank stress has triggered miasma...

Wed, 03/07/2012 - 09:13 | 2231634 GetZeeGold
GetZeeGold's picture

 

 

Here buddy.....this outta help.

http://www.youtube.com/watch?v=LbIajaSH4dg

 

 

Wed, 03/07/2012 - 02:30 | 2231264 Calmyourself
Calmyourself's picture

Whenever it is possible to change rules or ignore laws it is part of the hype, not that it will not lead to more problems.  With small exceptions everyone is party to the ponzi, that is part of the genius The only thing that brings it down finally will be hunger.

Wed, 03/07/2012 - 07:12 | 2231506 jeff montanye
jeff montanye's picture

or heat and cold.  don't forget them.  thirst too. 

japan is turning off 30% of its electricity (nuclear) this summer with hydrocarbon imports to make up the difference.  japan now has a foreign trade deficit and a sharply contracting economy.  may not buy as many u.s. bonds.  maybe even sell some.

http://www.chrismartenson.com/blog/japan-another-spinning-plate-global-e...

Wed, 03/07/2012 - 09:56 | 2231757 Calmyourself
Calmyourself's picture

My point being physical factors that can not be legislated or lied away.  The physical world and its realities are the only factors not mitigated and covered up by the daily emesis from our propaganda organs and lying leaders.  Our central bankers, politicians and most normal citizens will create any condition, believe any lie, endure hardship based on keeping the ponzi functioning.

We have nothing else and the combination of the PTB's desire to implement whatever plan they have combined with the ennui of the masses is a very dangerous combination.  It will take longer than most think but when it comes it will either be a monumental crash or a daily grind of poverty and propaganda.  After all, we have always been at war with East Asia Winston..

Wed, 03/07/2012 - 13:31 | 2232685 BooMushroom
BooMushroom's picture

Head-in-the-sand government doesn't stop until people start starving to death in the dark, or war, or genocide.

Wed, 03/07/2012 - 02:11 | 2231111 ml8ml8
ml8ml8's picture

Surely this was considered when the Troika modeled out the sov debt of the PIGS and the EZ banking system prior to implementing the Greek rescue package?

Wed, 03/07/2012 - 02:55 | 2231305 phungus_mungus
phungus_mungus's picture

LOL... yeah, right. 

Wed, 03/07/2012 - 01:00 | 2231112 ACP
ACP's picture

Is this the point where everyone just breaks out in hysterical, frightful, insane laughter?

I think so.

Wed, 03/07/2012 - 01:01 | 2231113 lolmao500
lolmao500's picture

Europe is screwed beyond repair now.

What does this mean?

- EU banks are screwed.

- Germany, France, Italy, Portugal, Spain and many others are KABOOOOOOOOOOOM.

- The US too is in big trouble, it needs to find a shitload of money to cover the upcoming losses in Europe... hundreds of billions

/amiright?

Wed, 03/07/2012 - 01:04 | 2231118 ACP
ACP's picture

"Hundreds of billions?"

That's so 1998.

Wed, 03/07/2012 - 01:16 | 2231137 SAT 800
SAT 800's picture

You're not following the script we're already signed up to provide the money. It's no trouble, really, just a few documents and records thereof, need to be created. merely the work of a few moments.

Wed, 03/07/2012 - 07:15 | 2231509 Zero Debt
Zero Debt's picture

All backed by 1 oz of gold

Wed, 03/07/2012 - 10:15 | 2231822 Winston Churchill
Winston Churchill's picture

All to be signed by Linda Green no doubt !

Wed, 03/07/2012 - 01:18 | 2231142 SAT 800
SAT 800's picture

Cheap vacations next year, in new Francs, and new pesetas.

Wed, 03/07/2012 - 01:28 | 2231160 Caviar Emptor
Caviar Emptor's picture

But..in this fully interdependent world, one domino will eventually push all the others down. So cheap dollars too. Race to the bottom. Beat ya!

Wed, 03/07/2012 - 01:32 | 2231171 LowProfile
LowProfile's picture

He said NEXT year.

Not the YEAR AFTER.

Wed, 03/07/2012 - 02:35 | 2231270 macholatte
macholatte's picture

It's always next year. That's what they said last year and now it's this year.

Today is the tomorrow you worried about yesterday.

 

Dark Helmet: What the hell am I looking at? When does this happen in the movie?
Colonel Sandurz: Now. You're looking at now, sir. Everything that happens now, is happening now.
Dark Helmet: What happened to then?
Colonel Sandurz: We passed then.
Dark Helmet: When?
Colonel Sandurz: Just now. We're at now now.
Dark Helmet: Go back to then.
Colonel Sandurz: When?
Dark Helmet: Now.
Colonel Sandurz: Now?
Dark Helmet: Now.
Colonel Sandurz: I can't.
Dark Helmet: Why?
Colonel Sandurz: We missed it.
Dark Helmet: When?
Colonel Sandurz: Just now.
Dark Helmet: When will then be now?
Colonel Sandurz: Soon.
Dark Helmet: How soon?

 

Wed, 03/07/2012 - 01:06 | 2231117 chump666
chump666's picture

And the Hedge Funds are going to pull the pin on the rest of the PIIGS (rumor Portugal bonds have been dumped by hedge funds).

Cue the FED massive swaps in the next few days.    This whole system is becoming unstable.  Gold bugs rejoice, safe haven flows are coming in, looks like oil is bid too.  Equities...brutal selling and volatility.

Wed, 03/07/2012 - 01:06 | 2231123 Thomas Jefferson
Thomas Jefferson's picture

Doom.  Its whats for dinner and the menu is long.

Wed, 03/07/2012 - 01:13 | 2231132 SAT 800
SAT 800's picture

Bernanke says FX swaps "safe as houses"; bha, haa, haa, haa. snicker-snicker. The Euro; the little dollar that almost could, almost could, almoost coouuld, puff and chugg its way up the hill; almost. then it stopped and all the steam ran out in fizzles and drizzles and all the kings men and all the kings horses couldn't put it right aygain. Ol, well. The works of man are temporary and often tinged with humor.

Wed, 03/07/2012 - 01:28 | 2231162 knukles
knukles's picture

"safe as houses"
Hah ha ha ha haha hah haha ha ha
Best get the White House working on this one.

New meaning to underwater lenders.
Hah ha ha ha ah ahhaha ha ha ha

Wed, 03/07/2012 - 02:19 | 2231253 francis_sawyer
francis_sawyer's picture

"safe as houses"??

You mean those "subprime is contained" houses?

http://www.youtube.com/watch?v=INmqvibv4UU

Wed, 03/07/2012 - 10:24 | 2231852 Thamesford
Thamesford's picture

Swap Schmop! What about Bernanke's reverse repos with the banks by holding MBS as collateral?

Thank goodness interest rates are going to stay low for the long term...

 

Wed, 03/07/2012 - 01:16 | 2231141 morning_glory
morning_glory's picture

Aren't the ECB basically taking the same punt as MF Global?

Wed, 03/07/2012 - 01:19 | 2231145 SAT 800
SAT 800's picture

Yes, they're the clean up team in that league; going to be a bit messy, me thinks.

Wed, 03/07/2012 - 01:19 | 2231144 eigenvalue
eigenvalue's picture

They can lower the collateral standard once again. Problem solved...

Wed, 03/07/2012 - 04:04 | 2231372 malek
malek's picture

Exactly. Still way left to go lower...

Wed, 03/07/2012 - 01:20 | 2231146 Subprime JD
Subprime JD's picture

I love fading ZH

Wed, 03/07/2012 - 01:33 | 2231177 LowProfile
LowProfile's picture

So that means you've been short gold what, 4 years now?

I feel sorry for your rectum.

Wed, 03/07/2012 - 09:17 | 2231640 disabledvet
disabledvet's picture

how's shorting all those debt markets treatin' ya then?

Wed, 03/07/2012 - 02:54 | 2231302 prains
prains's picture

JD

 

talk - action = shit  

 

it's real simple math, even you can put this one together. show us the math. not the accounting.

Wed, 03/07/2012 - 01:23 | 2231153 Ras Bongo
Ras Bongo's picture

Why in the world would Draghi increased the collateral requirements? It would be like shooting itself in the face....Or maybe that's the whole purpose?

Wed, 03/07/2012 - 05:02 | 2231406 Acet
Acet's picture

It's not that Draghi increased the collateral requirements, it's that due to it's dubious quality, the collateral parked at the ECB has gone down in value triggering margin calls to make up for the shortfall.

If you start accepting in all kinds of junk from banks as collateral, it's bound to happen that some of it doesn't hold its value.

 

Wed, 03/07/2012 - 07:32 | 2231524 StychoKiller
StychoKiller's picture

Used condoms really having a tough time finding buyers in the marketplace...

Wed, 03/07/2012 - 09:46 | 2231721 HurricaneSeason
HurricaneSeason's picture

20% of condoms in Florida are empty and 25% are underwater.

Wed, 03/07/2012 - 10:41 | 2231922 Thamesford
Thamesford's picture

are they fixer uppers or upper fixers? Messy business!

If you avoid them is that extending and pretending?

Wed, 03/07/2012 - 01:26 | 2231155 Caviar Emptor
Caviar Emptor's picture

Just shred the collateral, replace it with an IOU from Ben. Poof! Problem gone. 

That was easy

Wed, 03/07/2012 - 01:26 | 2231157 Dubaibanker
Dubaibanker's picture

I love the smell of Napalm in the morning...calling the tops in the markets this week of March 2012....With results of Q1 due in April and elections in US, India, Russia et al (40 countries in 12 months, I am told) Govts will be forced to spend more while business strategisation for the remainder of 2012, post bonus bonanza in Feb 12, will slow down the corporations and printing presses globally...See China for slowest growth in 11 years and India for 6.1pct, slowest in 7 quarters...expect more of the same in coming months. Banks force closures whether due to subprime in 2008 to 2010, Greece and Portugal in 2011/12 and slow GDP growth of India/China in 2012 and 2013 or high inflation due to oil or Iranian hyberbole/sanctions along with FATCA of 2012/13 or impending and current 'defaults' in Greece, Dubai, India etc. If banks slow down further, then businesses surely have to follow!

 

http://www.youtube.com/watch?v=bPXVGQnJm0w

Wed, 03/07/2012 - 04:10 | 2231379 Dr Zaius
Dr Zaius's picture

Oh come on now.  Next you'll be telling me this isn't all priced in.

Wed, 03/07/2012 - 01:31 | 2231167 Caviar Emptor
Caviar Emptor's picture

Modest proposal: Call Alan Stanford! (excuse me SIR Alan Stanford) He'll know what to do!!

Takes a Ponzi artist to fix the plumbing in the house of Ponzi, eh? 

 

Wed, 03/07/2012 - 02:10 | 2231238 CuttingEdge
CuttingEdge's picture

No need for Alan Stanford when you have the odd vampire squid bank to ponzify your debt:

 

http://www.bloomberg.com/news/2012-03-06/goldman-secret-greece-loan-show...

 

Just amazes me that Papademos di such a great job at hiding the Greek's problems ten years ago as head of their central bank (former GS - expert training), but is failing miseraably now.

Wed, 03/07/2012 - 06:48 | 2231481 JR
JR's picture

I liked this line: “the country didn’t understand what it was buying and was ill-equipped to judge the risks or costs,” which I believe to be true. Goldman Sachs and the Fed have taken the trust out of banking while placing the blame for the lurid situations they create on those who still believe in the legitimacy of the developed world’s financial system. Third world corruption that exacerbates poverty now is structured into the laws and policy that define the economic system shaping the current form of globalization. Hence, the vindication of GS's criminality in Bloomberg's play of the story you link that begins:

Greece’s secret loan from Goldman Sachs Group Inc. (GS) was a costly mistake from the start.

“On the day the 2001 deal was struck, the government owed the bank about 600 million euros ($793 million) more than the 2.8 billion euros it borrowed, said Spyros Papanicolaou, who took over the country’s debt-management agency in 2005. By then, the price of the transaction, a derivative that disguised the loan and that Goldman Sachs persuaded Greece not to test with competitors, had almost doubled to 5.1 billion euros, he said.

“Papanicolaou and his predecessor, Christoforos Sardelis, revealing details for the first time of a contract that helped Greece mask its growing sovereign debt to meet European Union requirements, said the country didn’t understand what it was buying and was ill-equipped to judge the risks or costs.

“’The Goldman Sachs deal is a very sexy story between two sinners,’ Sardelis, who oversaw the swap as head of Greece’s Public Debt Management Agency from 1999 through 2004, said in an interview.

“Goldman Sachs’s instant gain on the transaction illustrates the dangers to clients who engage in complex, tailored trades that lack comparable market prices and whose fees aren’t disclosed. Harvard University, Alabama’s Jefferson County and the German city of Pforzheim all have found themselves on the losing end of the one-of-a-kind private deals typically pitched to them by securities firms as means to improve their finances…”

Should the nimble Goldman with its KGB tactics continue to run roughshod over the world’s economies through control of the New York Federal Reserve Bank and the  issue and control of the world’s reserve currency, day to day living around the world will grow ever more painful as the corruption affects all lives and standards of living.

Wed, 03/07/2012 - 09:32 | 2231677 francis_sawyer
francis_sawyer's picture

Everyone knows you don't serve rabbit with a tosased salad, you serve wild turkey surprise...

http://www.youtube.com/watch?v=FOTlNOZB4Zo

Wed, 03/07/2012 - 11:21 | 2232091 Piranhanoia
Piranhanoia's picture

Isn't "breach of fiduciary duties" still a valid reason to unwind?   That was old law, sorry,  don't know what I was thinking.

Wed, 03/07/2012 - 01:35 | 2231169 Banksters
Banksters's picture

Change the rules, problem solved... So sayeth the masters of the fiat realm.

Wed, 03/07/2012 - 01:33 | 2231173 yogibear
yogibear's picture

The Euro was toast from the start.  It just took a while to prove it. It's what happens when you run out of other peoples money.

Eventually Japan and the US will get a wakeup call as well. Much of the Japanese debt is owed internally. The US owes to everyone outside it's borders. Next, the US debt ceiling being hit again.  The US won't change it's ways until it's force to be responsible by the rest of the world.

Wed, 03/07/2012 - 01:35 | 2231183 LowProfile
LowProfile's picture

Actually, the euro will survive. They MTM their assets, one of which is...  Gold.

So it will take a major beating, but it won't go to zero.

Wed, 03/07/2012 - 11:13 | 2232052 steve from virginia
steve from virginia's picture

 

Hmmm ... more likely the Euro-nation central banks have leased all their gold. Euro is backed w/ lies and more lies ...

Wed, 03/07/2012 - 11:13 | 2232054 steve from virginia
steve from virginia's picture

 

Hmmm ... more likely the Euro-nation central banks have leased all their gold. Euro is backed w/ lies and more lies ...

Wed, 03/07/2012 - 01:33 | 2231175 WoodMizer
WoodMizer's picture

No worries the, metaphorical can just landed in the ditch, the Bernak can fix it QEazy

Tune in next month as the clusterfuck spreads to the new world, and santorum reigns from the sky.

Wed, 03/07/2012 - 01:33 | 2231176 I am a Man I am...
I am a Man I am Forty's picture

hope everyone has some dry powder

Wed, 03/07/2012 - 01:35 | 2231184 yogibear
yogibear's picture

The Euro was toast from the start.  It just took a while to prove it. It's what happens when you run out of other peoples money.

Eventually Japan and the US will get a wakeup call as well. Much of the Japanese debt is owed internally. The US owes to everyone outside it's borders. Next, the US debt ceiling being hit again.  The US won't change it's ways until it's force to be responsible by the rest of the world.

China and other creditors, it's time to ask Obama for keys to the White House.

 

Wed, 03/07/2012 - 01:51 | 2231203 wee-weed up
wee-weed up's picture

They can have Obama (please, take him!) but the White House is ours!

Wed, 03/07/2012 - 08:21 | 2231574 j0nx
j0nx's picture

Better get used to him because he aint going anywhere for another 4.5 years. GOP is in disarray and none of the current crop of clowns can beat him in November (besides RP whose own party hides him in the cellar and openly calls him the crazy uncle) and believe me that is REALLY saying something about the GOP that they have nobody on their bench that can beat a ridiculous weakling President like Obama. Sad days for the people of this once great country. And the most sad part is that the people don't really seem to care too much. Some tranny in Ohio was told he/she couldn't get ladies night drinks and the next day all the queers and trannies had mobilized to protest this 'act of injustice'. Yet you can't get hardly anyone off their ass to protest the fact that our food and gas have doubled in the past 2 years, UE is still easily in the mid double digits, or that bankers seem to own our government. The people of this country are living an idiocracy style existence. I'm disgusted with my fellow Americans for letting ridiculous liberals and political correctness ruin us.

Fri, 03/09/2012 - 23:36 | 2242386 wee-weed up
wee-weed up's picture

j0nx said...

and believe me that is REALLY saying something about the GOP that they have nobody on their bench that can beat a ridiculous weakling President like Obama.

 

When one considers how the sycophant MSM is in Obama's back pocket, what you say is not surprising. But the GOP won't defeat Obama - conservatives will!

Wed, 03/07/2012 - 01:41 | 2231191 FischerBlack
FischerBlack's picture

So, Draghi calls up European Bank X and says, "Dude you need to cough up Y Euros because your shitty collateral is getting shittier by the minute." Banker says, "I understand. But if I have to cough up Y millions, it really won't be possible to hide our insolvency anymore. Cash flow doesn't lie, of course, and this will lead to a run on the bank, and then, obviously, the system itself is at risk." Draghi pauses, "Never mind the margin call, amico. I'm such an idiot. I was using 2008 math, I forgot we're using the New Math now. Someone really needs to update these outdated HP calculators. There's only one operation now -- addition. And only one number to available to add -- par." Banker is serious, "And that's the way it must stay...

"...forever."

True story.

Wed, 03/07/2012 - 07:36 | 2231529 StychoKiller
StychoKiller's picture

I believes ya!  WHY would a Delta lie to me?

Wed, 03/07/2012 - 01:41 | 2231192 Seasmoke
Seasmoke's picture

i dont think we get out of march without a major event

Wed, 03/07/2012 - 12:07 | 2232302 3FrenchHens
3FrenchHens's picture

@seasmoke Agree on major event. seems like quiet calm before storm. Originating Europe, shows up US ?  We were born for this.

Wed, 03/07/2012 - 01:43 | 2231195 lolmao500
lolmao500's picture

So now the ECB is starting to mark-to-market their assets instead of mark-to-rainbow?? BS.

Wed, 03/07/2012 - 11:45 | 2232201 lineskis
lineskis's picture

Yeah, I'm pretty sure the ECB will find (or vote) an accounting gimmick shortly so they can mark-to-rainbow. And all will be well in wonderland...

Wed, 03/07/2012 - 01:52 | 2231205 FischerBlack
FischerBlack's picture

Tyler, what do you think it would take to get a copy of the Manhattan Madam's client list? If Anonymous had some sense, that's the kind of thing they'd be going for. Is it just too much to wish for?

Wed, 03/07/2012 - 01:53 | 2231207 Unprepared
Unprepared's picture

Go to sleep Tyler. The Algos are.

Wed, 03/07/2012 - 01:54 | 2231208 Mike Cowan
Mike Cowan's picture

What is the interest on a Greek Bond now? A 1000%?

Wed, 03/07/2012 - 02:33 | 2231265 Calmyourself
Calmyourself's picture

One year was 1006% last time I checked 3/5/12

Wed, 03/07/2012 - 01:54 | 2231209 Jayda1850
Jayda1850's picture

The whole reason for the LTRO was that the ECB could not buy sovereign debt outright, though they did so on a limited basis with the SMP, so they lent money to banks hoping they would instead. Now that the ECB has almost no one with enough collateral to lend to, how long before the ECB, not only has to take a loss on these LTRO loans, but has to massively expand their SMP program to keep sovereign yields down?

Wed, 03/07/2012 - 06:35 | 2231468 A Man without Q...
A Man without Qualities's picture

I agree with most of what you say, but remember that the LTRO was really no more than a replacement for the collapsed private sector repo market.  What had been a well-functioning market was totally broken down, because banks had lost faith in both the counterparty and the collateral.  The 3 year tenor stuff was a smokescreen, given that repo rates were variable and there are margin calls, so you can't say you know the cost or the amount.  The way the banks tried to sell it as a version of QE was disingenuous at best - there has been no rate/ credit risk transfer to the ECB.  

However, they will only take a loss if one of the counterparties does an MF Global and the ECB decides to play as tough as JP Morgan did.  In reality, the ECB has enough channels for lending to the banks that they can make sure there are no margin call crises.  I am doubtful the ECB is ever going to step up the SMP again - they seem to have decided it was a bad decision by JCT - but I may be proved wrong.

 

Wed, 03/07/2012 - 01:58 | 2231219 Sizzurp
Sizzurp's picture

I hear Bernanke's helicopter fleet firing up their turbines. He's bringing out the heavies for this sortee.  Launch a trillion in swaps, or let's just call it free money in 3...2...1 go go go!!  

Wed, 03/07/2012 - 04:16 | 2231383 Dr Zaius
Dr Zaius's picture

Can someone answer me this? When the FED extends swaps, what exactly are they swapping dollars for?  Just other fiat?

Wed, 03/07/2012 - 04:27 | 2231390 azusgm
azusgm's picture

Yep. Plus interest.

Wed, 03/07/2012 - 07:38 | 2231532 StychoKiller
StychoKiller's picture

It's paper AAALLLL the way down!

Wed, 03/07/2012 - 08:24 | 2231585 j0nx
j0nx's picture

Yup. Hope you like expensive food and gas because it's going to go full bore soon. I'm sure Americans will be out protesting the fact that they can't marry their gay lover or get free contraception instead though. Maybe they will give us two superbowls a year now to keep our attention diverted from our ever dwindling household budget.

Wed, 03/07/2012 - 10:55 | 2231978 azusgm
azusgm's picture

My fellow citizens certainly are not up in arms about the forensic evidence out of the Maricopa County sheriff's department regarding Obama's birth certificate, his selective service registration, and his use of two social security numbers to rent places to live in Wash DC while he was a senator. They absolutely refuse to look at what is staring them in their faces.

Wed, 03/07/2012 - 01:59 | 2231221 bluestaq
bluestaq's picture

Looks like we may be in for a legitimate stress test of those pesky European banks

Wed, 03/07/2012 - 02:00 | 2231224 1929agin
1929agin's picture

TTTtttimmbbeerrr.....

SP 666 revisit.

1929 again, repeat, but going bigger this time.

 

Wed, 03/07/2012 - 07:54 | 2231548 IrritableBowels
IrritableBowels's picture

agin or again?

Wed, 03/07/2012 - 02:14 | 2231233 sasebo
sasebo's picture

Amazing what all the stupid, lazy, useless assholes will do to get out of working at producing something of real value. Not much effort required to fuck around with worthless paper money. It ain't worth nothing unless somebody produces something of value. Sorry.

Wed, 03/07/2012 - 06:40 | 2231475 disabledvet
disabledvet's picture

does oil count? how about natural gas? ethanol? food? commercial vehicles? aircraft? mind martians?

Wed, 03/07/2012 - 11:13 | 2232056 sasebo
sasebo's picture

Disabled veterans produce something of real value ------------  our freedom.

Wed, 03/07/2012 - 02:25 | 2231241 q99x2
q99x2's picture

Hide the Gold. Quick.

I think the FaceBook put is in the process of going Kaput.

Employers, not GS, are now requiring personal passwords to social networking sites as criteria for employment.

See Ya Dow 13,000

Wed, 03/07/2012 - 04:17 | 2231384 azusgm
azusgm's picture

Name some of those companies, please.

Wed, 03/07/2012 - 06:15 | 2231457 pufferfish
pufferfish's picture

[Citation needed]

Wed, 03/07/2012 - 08:26 | 2231588 j0nx
j0nx's picture

Personal passwords? Get the fuck outa here. I'd tell some company to blow me if they asked for any personal passwords and then sue their ass for violation of privacy 10 minutes after I walked out the door.

Wed, 03/07/2012 - 09:36 | 2231690 DrewJackson
DrewJackson's picture

http://redtape.msnbc.msn.com/_news/2012/03/06/10585353-govt-agencies-col...

 

It's on MSNBC so it must be true.

 

In S. America I have seen so much graffiti with facebook el la CIA.   They get it....  will the rest of us sheeple ?

Wed, 03/07/2012 - 10:38 | 2231908 Dr. Kananga
Dr. Kananga's picture

Just tell the recruiter/employer that your Facebook account contains privately shared intellectual property and you'd be happy to furnish the password after they sign a standard 10 page non-disclosure agreement which acknowledges their liability to your third party Facebook "friends" should they be less than discreet with the info they obtain.

They (or their legal department) will probably think twice about opening up that legal clusterfuck. And if they don't go for it, you really don't want to work for a bunch of idiots anyway.

Or better yet--NEVER EVER USE YOUR REAL NAME ONLINE. (not yelling at anyone here--just an important safety tip.)

Wed, 03/07/2012 - 11:00 | 2231992 azusgm
azusgm's picture

Or better yet--NEVER EVER USE FACEBOOK.

And don't give Google your mobile telephone number (even if they do say they want it for enhanced security reasons).

(Sheep.)

Wed, 03/07/2012 - 02:16 | 2231246 HD
HD's picture

No matter how large and intricate you build the sandcastle on the beach - when the tide comes in, it's all washed away.

Wed, 03/07/2012 - 02:21 | 2231254 saycheeeese
saycheeeese's picture

What's at the bottom of this inverted pyramid..... Cash? Gold?

Wed, 03/07/2012 - 02:38 | 2231273 LowProfile
LowProfile's picture

Cash, then gold.

Wed, 03/07/2012 - 02:51 | 2231292 XRAYD
XRAYD's picture

ala AIG and GS.

 

Merkel and Mario!

Wed, 03/07/2012 - 02:49 | 2231295 Heyoka Bianco
Heyoka Bianco's picture

"can the sovereign bonds purchased using LTRO1 and LTRO2 funds be lodged once again in a rehypothecated miasma circling the drain?" That's a screaming neon, underline it, point-some-giant-fingers-at-it YES, an absolute cast iron gear-ron-tee.

Wed, 03/07/2012 - 03:02 | 2231309 cranky-old-geezer
cranky-old-geezer's picture

 

 

This is exactly what caused the '08 crash.  Collapsing value of assets pledged (hypothecated), resulting in massive margin calls.

In '08 it was MBS.  Now it's sovereign debt bonds.

Massive margin calls were the actual trigger of the collapse.  Margin calls that had to be met by close of business that day or the debtor was in default and CDS would trigger.

I'm actually surprised ECB is doing margin calls. 

Fed has boatloads of securities on their books that have gone completely worthless, yet no margin calls.

 

Wed, 03/07/2012 - 04:04 | 2231374 Hugo Chavez
Hugo Chavez's picture

Uh.....is this bad?

Wed, 03/07/2012 - 08:02 | 2231558 Winston Churchill
Winston Churchill's picture

Ypur right.

Firtst inter bank collateral.then collateral in the REPO market.

It was the freezing of the REPO markey that did it.

The depositor there in the shadow market demanded more and more collateral

on their parked money until there was not any left.

Wed, 03/07/2012 - 09:32 | 2231676 disabledvet
disabledvet's picture

Yeah...well...these are SOVEREIGN credits now...not a bunch of "shitty" paper from Wall Street. Those are public sector UNIONS standing opposed to "your failure" now. Not saying you're wrong of course....but this is "Lehman times a trillion" if you're right.

Wed, 03/07/2012 - 03:08 | 2231319 Judge Arrow
Judge Arrow's picture

Well, my fellow citizens, as Pogo once said, "We have met the enema (er, enemy), and it is us." Look around at the cigar smoking short armed bankster fatties trying to hang onto the whole pot; the seer suckered closers blat eyed down at dud motors who can't give away a car; all those stuck in their beds buried in oreo wrappers; the dreary failures of diversity in your local ghetto; the addled political nitwits any realm - pick your favorite failed state; those with the IV drips of meth on wheels wandering the corridors of healthcare; the equestrians in need of suppositories; smug old fudds and blue hairs heading for dementia-ed near you; Euros who appear to have finally run out of bullshit; container ships run aground and what do we have now on the horizon?  Well, heh, heh, imagine that - another war - the ultimate margin call. Drinks all around, make mine a Rebel Yell double.

 

Wed, 03/07/2012 - 03:24 | 2231331 slewie the pi-rat
slewie the pi-rat's picture

because he has been writing about the degree of hypothecation of assets and re-hypothecation of assets in the EU "system", and the degree to which there is no "fresh meat for the zombies",  tyler knows what to look for and what it means

why did that spike occur, tho?  what assets took such a major dump, today?  or recntly, depending on what the actual date of that spike is?

is that the greek short-term paper?  what   IS it?

could it be due to a recent accounting change about something?  the way something is valued or "marked" for bookkeeping purposes?

that chart has this in the red letters: "the Eurosystem may in this case require counterparties to supply additional cash or assets"

i put up a link earlier documenting some changes in CDS "accounting" at a EU bank, it was on this zH article:
Erste Group's Complete 2012 Oil Price Outlook - "Nothing To Spare", Crude Could Reach $200

here is the link which speaks of the accounting changes to piigs debt & CDS:

Erste Group Bank to report big loss on govt debt - Yahoo! Finance From Yahoo! Finance: Austria-based Erste Group Bank AG said Monday it will make a net loss of euro700 to euro800 million for 2011 because of the government .. (paste) Erste Group Bank also marked down holdings of bonds issued by troubled governments such as Greece, Portugal, Spain, Ireland and Italy, and changed the way it accounts for credit default swaps it has sold. The swaps insure debt instruments against default.The bank has 3,200 branches across Central and Eastern Europe. {end}

curiouser &...  stay tooned!

 

 

Wed, 03/07/2012 - 03:50 | 2231357 Bear
Bear's picture

Don't you mean ... stay doomed!

Wed, 03/07/2012 - 03:58 | 2231363 Hugo Chavez
Hugo Chavez's picture

Dude no cds ever is going to pay out. Tyler figured out the loophole.
Retroactively make all bonds callable at a buck. Call the bonds and replace them with trash before the cds auction. The cds sellwr rhen gets to pick and choose among the newly excanged bonds for the cheapest to deliver.

Tyler kinda went over my head this time but i think i got it right.

This info is slowly being digested by the market. If my understanding is correct we should see hedge funds flee from all PIIGS debt shortly.

Wed, 03/07/2012 - 09:27 | 2231660 disabledvet
disabledvet's picture

The Greek banks themselves are fleeing from the Greek debt. Now Greece is going to "threaten those who refuse to participate"? REALLY? "Why don't you start with your own bankers first." this thing is done...a "fiatsco" indeed. the question as we all have known for some time is what is called "ringfencing." the Greeks saw this one coming a while back so hopefully "you didn't jump in when they fled the scene." but will even "ring-fencing" work? next stop "the TRUE meaning of Portugal....

Wed, 03/07/2012 - 04:23 | 2231389 slewie the pi-rat
slewie the pi-rat's picture

hi, bear! i think tyler means that by his presentation and he may sure be right, too.  and i can make the case a few ways myself, also

but i'm not sure that case is made here, except indirectly;  i'm just not sure what is goin on with that "spike"

these "accounting changes" [IF indeed this is what "caused" the spike] may be, like depreciation, a kind of "non-cash expense"  ending up on the balance sheet as less 'assets'

so, bad for 'ratios' and so on.  this is something i didn't see how it would work a few daze ago when i didn't agree that the basel III changes would whack EU banks' balance sheets, but i see what billBuckler was saying now, and shall now finish wiping the egg...

but this could also be a pretty whacky whack, as i see now...

for if the EBC does NOT ask for more collateral [and why the hell should they if they can legally avoid it?  they just gave these banks the LTRO] the cash flows at the banks will NOT be effected, imo

in other words, the "stigma" may not be enforced on the accounting-"weakened" banks by the ECB for this accounting change, and the german workers' full faith, credit, and furure earnings are pledged to this horseshit, just like your and mine and eveyone's in the NW0

this is why i asked what is this spikewhat caused this?  if this was planned, which i think it may have been, there is no margin call by the ECB, since germany has everybody covered!

we are no longer kicking cans or even beer kegs down the road, but beer trucks (with flat tires, no less!)!  soon to be semi-tankers, then railway cars, then entire trains, then...

and if there are any problems, whatsoever, people can sort them out...later...

this is what makes a fiat ponzi pyramid so... effective!  there is no "greater fool" when you can just:  CTRL+P + "promise"

this is simply a healthy function of the bankster "debt-collective" /s/ and as long as thePeople have a healthy and upbeat attitude about ever-increasing mountains of IOUs which the robo-signers are now putting their "people" names upon via captive goobermints, everything will be just fine, bear!

Wed, 03/07/2012 - 08:18 | 2231576 itstippy
itstippy's picture

My take is that by making targeted margin calls the ECB is cattle-prodding LTRO recipients to get out there and buy more sovereign shitbonds, instead of just parking the fresh cash back to the ECB.

The banks have a choice: give back the LTRO cash to meet margin calls, or put a floor under the shitbond collateral by making a market for shitbonds.

It's part of the plan to fire-ring PIIGS shitbonds (-Greece).  It has Geithner-think all over it. 

Wed, 03/07/2012 - 09:50 | 2231733 disabledvet
disabledvet's picture

disagree with the Geithner et al comparison. That was a bail IN..."right when Goldman was scheming to blow up the world." The Federal Government took the other side of that trade...and won. "Europe is a classic bailout." This is true "free money" without any fear of "government ownership/takeovers/oversight" etc...etc...As you can see "the banks are simply not calling this a solution" and putting the money right back at the ECB. Forget mere "margin calls"...this is a recipe for bank failures. And no...it is not surprising that a banker looks at his own bank's books and decides "we're better off not being a bank anymore" and re-parks the money at the ECB instead. Either way "re-parking" is worse than "re-hypothecation" since "the money just sits there as the entire country flames out."

Wed, 03/07/2012 - 03:31 | 2231337 Peter Pan
Peter Pan's picture

Let's be reasonable. The ECB issues dodgy money and the banks provide dodgy security. I would say that is quite fair.  So what is the problem?

Wed, 03/07/2012 - 03:32 | 2231338 Peter Pan
Peter Pan's picture

Let's be reasonable. The ECB issues dodgy money and the banks provide dodgy security. I would say that is quite fair.  So what is the problem?

Wed, 03/07/2012 - 06:43 | 2231477 disabledvet
disabledvet's picture

does it come with a Dodge Powerwagon and "if so, when?"

Wed, 03/07/2012 - 03:33 | 2231341 Likstane
Likstane's picture

Good summation Judge, I think I'll head down to the Strip one more time and and watch LV Dave tear Ceasar's a new one on the big dollar card benches.  That badass sumbitch makes Corzine look like a peckerwood piss-ant.  Then I'll head out for a drive to flat country Kansas and watch the world burn.  Should kill a couple weeks. 

Wed, 03/07/2012 - 03:52 | 2231359 Knobbius
Knobbius's picture

So, speaking of Vegas....

 

Are we taking odds tonite on what the March calamity will be?  Greek implosion?  Bad February Employment numbers?  More Global slowdown news?  Or war with Iran?

I'll take Greek implosion & shitty job numbers for March.  Saving the "Downtown Esfahan Urban Renewal Project" for April or May, along with impending lousy US Q1 GDP.

 

 

 

Wed, 03/07/2012 - 04:21 | 2231388 Dr Zaius
Dr Zaius's picture

You know, there is a distinct possibility that all those things could occur.

Wed, 03/07/2012 - 03:52 | 2231360 Knobbius
Knobbius's picture

So, speaking of Vegas....

 

Are we taking odds tonite on what the March calamity will be?  Greek implosion?  Bad February Employment numbers?  More Global slowdown news?  Or war with Iran?

I'll take Greek implosion & shitty job numbers for March.  Saving the "Downtown Esfahan Urban Renewal Project" for April or May, along with impending lousy US Q1 GDP.

 

 

 

Wed, 03/07/2012 - 04:01 | 2231368 Hugo Chavez
Hugo Chavez's picture

China rescues eurozone rumor due in 5 4 3 2.......

Wed, 03/07/2012 - 04:04 | 2231373 Likstane
Likstane's picture

I'd like to see R.Paul tell both parties to FSO and go true rogue. Tell the US sheepwits that a few jewish bankers run the world, the Fed is a mafia/us corp shill along with the pope, and soylent green is people.  Hell, do it on St. Paddy's.  That would be cooler than a McMminty shake from the GOLDEN arches. 

Wed, 03/07/2012 - 04:47 | 2231404 jomama
jomama's picture

RP never stood a chance against Diebold

Wed, 03/07/2012 - 04:36 | 2231397 Sandmann
Sandmann's picture

Since Peugeot tried to offload Car Financing Receivables onto the ECB and has Junk Status Bonds, and GM has entered as a 7% Stakeholder, how does GM account for its exposure to Peugeot's financial structure ? Or does it warehouse this holding through its Swiss Holding Company for GM Europe ?

It was clear from the time that Gordon Brown, Numskull Extraordinaire, fell into the trap of injecting equity into the Banks without having a clue how to control their activities that THE LONG TERM was being sacrificed to INCREMENTAL AND REPEATED REPLAYS OF QUICK FIXES. Draghi has done the same. It is the Casino Game of never recognising losses so long as there are chips to play

The whole concept of BANKING as a Social Institution is finished.

Wed, 03/07/2012 - 04:41 | 2231400 jomama
jomama's picture

Papandreou's Kebab Shop unsecured 2nd lien notes?

fucking classic!

Wed, 03/07/2012 - 05:10 | 2231413 PlayTrader
PlayTrader's picture

I dont agree. Even if your theory were to be correct, the ECB will just change the rule book to smooth the situation.

One should be careful not to compare the ECB to a hedge fund. If things become dire they can change the rules and print as much money as they want. Whether this is morally correct (as it robs people of their savings with a disproportionate effect on the working classes) is a seperate argument.

Wed, 03/07/2012 - 06:10 | 2231454 youngman
youngman's picture

They quit caring about the working class two years ago....its all the upper class bankers now....only the bankers now...

Do NOT follow this link or you will be banned from the site!