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European Banks Now Face Huge Margin Calls As ECB Collateral Crumbles
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)
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and POOF! It's gone!
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.
Didn't that fat fuck Greek guy (Vaseline) say just a few days ago that "Default is not a problem?"
i thought a counter party needed at least one person to provide the pressed ham
Do the bankers take pork products as collateral?
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.
I hope they dump a load of bullion and crash the price of gold so I can buy another mother load
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
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...
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
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.
Phone's ringing...
Hi......this is Berry......WAZZUP!!!!!!!!!
http://www.youtube.com/watch?v=7yr7odFUARg
My favorite movie, Body Heat!
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.....
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...
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...
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.
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.
Unsurprisingly the moth ridden old socks and last winter's snowmen they started accepting as collateral have turned to have a steadilly depreciating value.
They do seem to be cannibalistic.
I'll be here until 7:15, don't forget to tip your waitress.
I'm getting divorced from a Greek... they will steal it if its not nailed down, then go get a pry bar.
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.
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.
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.
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!
Oh oh, looks like the markets are crumbling. Time to start more wars and distract the sheeple.
"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????!!!!
Is this more "hype",
or are things finally becoming unglued?
It's never good when the words "rehypothecated" & "miasma" crash together in the same sentence...
or "buttfucked"
That's not good either.
Unless she enjoys being buttfucked...
you get "remiasmiated"
I can't breathe...all this bank stress has triggered miasma...
Here buddy.....this outta help.
http://www.youtube.com/watch?v=LbIajaSH4dg
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.
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...
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..
Head-in-the-sand government doesn't stop until people start starving to death in the dark, or war, or genocide.
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?
LOL... yeah, right.
Is this the point where everyone just breaks out in hysterical, frightful, insane laughter?
I think so.
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?
"Hundreds of billions?"
That's so 1998.
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.
All backed by 1 oz of gold
All to be signed by Linda Green no doubt !
Cheap vacations next year, in new Francs, and new pesetas.
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!
He said NEXT year.
Not the YEAR AFTER.
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?
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.
Doom. Its whats for dinner and the menu is long.
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.
"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
"safe as houses"??
You mean those "subprime is contained" houses?
http://www.youtube.com/watch?v=INmqvibv4UU
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...
Aren't the ECB basically taking the same punt as MF Global?
Yes, they're the clean up team in that league; going to be a bit messy, me thinks.
They can lower the collateral standard once again. Problem solved...
Exactly. Still way left to go lower...
I love fading ZH
So that means you've been short gold what, 4 years now?
I feel sorry for your rectum.
how's shorting all those debt markets treatin' ya then?
JD
talk - action = shit
it's real simple math, even you can put this one together. show us the math. not the accounting.
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?
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.
Used condoms really having a tough time finding buyers in the marketplace...
20% of condoms in Florida are empty and 25% are underwater.
are they fixer uppers or upper fixers? Messy business!
If you avoid them is that extending and pretending?
Just shred the collateral, replace it with an IOU from Ben. Poof! Problem gone.
That was easy
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
Oh come on now. Next you'll be telling me this isn't all priced in.
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?
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.
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.
Everyone knows you don't serve rabbit with a tosased salad, you serve wild turkey surprise...
http://www.youtube.com/watch?v=FOTlNOZB4Zo
Isn't "breach of fiduciary duties" still a valid reason to unwind? That was old law, sorry, don't know what I was thinking.
Change the rules, problem solved... So sayeth the masters of the fiat realm.
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.
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.
Hmmm ... more likely the Euro-nation central banks have leased all their gold. Euro is backed w/ lies and more lies ...
Hmmm ... more likely the Euro-nation central banks have leased all their gold. Euro is backed w/ lies and more lies ...
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.
hope everyone has some dry powder
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.
They can have Obama (please, take him!) but the White House is ours!
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.
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!
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.
I believes ya! WHY would a Delta lie to me?
i dont think we get out of march without a major event
@seasmoke Agree on major event. seems like quiet calm before storm. Originating Europe, shows up US ? We were born for this.
So now the ECB is starting to mark-to-market their assets instead of mark-to-rainbow?? BS.
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...
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?
Go to sleep Tyler. The Algos are.
What is the interest on a Greek Bond now? A 1000%?
One year was 1006% last time I checked 3/5/12
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?
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.
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!!
Can someone answer me this? When the FED extends swaps, what exactly are they swapping dollars for? Just other fiat?
Yep. Plus interest.
It's paper AAALLLL the way down!
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.
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.
Looks like we may be in for a legitimate stress test of those pesky European banks
TTTtttimmbbeerrr.....
SP 666 revisit.
1929 again, repeat, but going bigger this time.
agin or again?
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.
does oil count? how about natural gas? ethanol? food? commercial vehicles? aircraft? mind martians?
Disabled veterans produce something of real value ------------ our freedom.
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
Name some of those companies, please.
[Citation needed]
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.
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 ?
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.)
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.)
No matter how large and intricate you build the sandcastle on the beach - when the tide comes in, it's all washed away.
What's at the bottom of this inverted pyramid..... Cash? Gold?
Cash, then gold.
ala AIG and GS.
Merkel and Mario!
"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.
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.
Uh.....is this bad?
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.
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.
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.
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!
Don't you mean ... stay doomed!
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.
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....
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 spike? what 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!
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.
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."
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?
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?
does it come with a Dodge Powerwagon and "if so, when?"
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.
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.
You know, there is a distinct possibility that all those things could occur.
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.
China rescues eurozone rumor due in 5 4 3 2.......
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.
RP never stood a chance against Diebold
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.
fucking classic!
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.
They quit caring about the working class two years ago....its all the upper class bankers now....only the bankers now...