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Evolution Securities Warns Of "Total Carnage And Meltdown" As European Bank Sales Of CDS On European Sovereign Debt Soar

Tyler Durden's picture


As much as we hate to say it, Europe is now without a shadow of a doubt the new AIG, only this time such heretofore considered insane (in retrospect) activities as doubling down to infinity on ones TBTF status are out in the public record for all to see. At least AIG conducted Joe Cassano's "made in London" $2.7 trillion bet on home prices never dropping in the shadows of Curzon 1. Whereas two days ago we made it  clear how the unwind of trillions in rehypothecated securities could be the avalanche that buries first Europe and then the world, we explicitly excluded the impact of synthetic products such as CDS. Now it is time to bring the picture full circle, and put CDS front and center. As Bloomberg reports, "BNP Paribas SA, France’s biggest bank, sold a net 1.5 billion euros ($2 billion) of credit- default swaps on the nation’s sovereign debt, according to data compiled by the European Banking Authority. UniCredit SpA, Italy’s biggest lender, and Banca Monte dei Paschi SpA are net insurers of more than 500 million euros each of their government’s bonds, and Oesterreichische Volksbanken AG, the Austrian lender which has yet to pay interest on 1 billion euros of state aid received in 2009, has guaranteed a net 839 million euros of its national debt, EBA data show." (EBA source - link). For those confused by the above, here is the explanation: European banks, in order to generate modest cash flow from collecting on the pariodic interest premiums owed to them in order to plug increasingly large capital shortfall holes that otherwise would simply keep growing ever larger, have sold and continue to sell massive amounts of default protection on their very own host countries! As a reminder, it was precisely this that destroyed AIG when the illusion of the credit bubble burst.

Furthermore, our speculation of what caused the mindboggling surge of over $100 trillion in derivatives in the first half of the year to a record $707 trillion, has been confirmed. It was nothing short of every single European (and likely US) institution dodecatupling down on wrong way bets. Nothing more. As a reminder we said:

in order to satisfy what likely threatened to become a self-feeding margin call as the (previously) $600 trillion derivatives market collapsed on itself, banks had to sell more, more, more derivatives in order to collect recurring and/or upfront premia and to pad their books with GAAP-endorsed delusions of future derivative based cash flows. Because derivatives in addition to a core source of trading desk P&L courtesy of wide bid/ask spreads (there is a reason banks want to keep them OTC and thus off standardization and margin-destroying exchanges) are also terrific annuities for the status quo. Just ask Buffett why he sold a multi-billion index put on the US stock market. The answer is simple - if he ever has to make good on it, it is too late.

Today's EBA data confirms this.

Most importantly, this means that now US bonds are now completely irrelevant and don't need to blow out for the final unwind to occur: all that needs to happen is for European bonds to continue collapsing, which will in turn put the banks who have sold CDS on said countries into bankruptcy, as what selling CDS effectively is is a marginless way of going long the underlying security, i.e. naked longs. And no, ISDA's attempt to destroy the sovereign CDS market will have no impact as an event of default does not need to occur: banks will simply bleed to death due to daily variation margins demanding more and more and more cash each and every day as spreads blow out wider. Recall that in CDS trading, variation margins has to be posted and positions netted at the end of the trading day with virtually no exceptions. Which means that a CDS trading at infinity (or the underlying bond trading at zero which is equivalent) will put the seller of such product into insolvency, whether or not an actual event of default has been declared, thus making ISDA involvement irrelevant.

At this point we would like to request a moment of silence for Europe (and thus America, which will promptly implode without its transatlantic counterpart) because it is now inevitable that AIG's fate will be shared by Europe when (not if) global central banks finally lose control of European rates, which in turn will collapse.

And once again, lest we be accused of hyperbole, here is Bloomberg, citing the head of fixed income at Evolution Securities

“Some of this is trading rather than pure hedging,” said Gary Jenkins, head of fixed income at Evolution Securities Ltd. in London. “If European counties the size of France or Italy actually defaulted and triggered CDS, there would be total carnage and meltdown. It would be the end of the world, and at that stage it’s likely your counterparty would be the least of your worries.”

Alas, since nothing will ever change until the final blow up destroys everything, the time to start quoting T.S. Eliot has arrived.


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Fri, 12/09/2011 - 14:20 | 1963634 Tsar Pointless
Tsar Pointless's picture

So I should count on seeing another seven or eight low/no-volume melt-ups in US and EU equity markets between now and Christmas?

Okay, then. S&P 1330 here we come!

Fri, 12/09/2011 - 14:32 | 1963692 Chris Jusset
Chris Jusset's picture

"If European counties the size of France or Italy actually defaulted and triggered CDS, there would be total carnage and meltdown. It would be the end of the world,"


Oooh ... now things are starting to get really interesting ....

Fri, 12/09/2011 - 15:15 | 1963886 LawsofPhysics
LawsofPhysics's picture

Threats of financial terror from paper-pushing fucknuts.  How did that Greek CDS thing work out for them again?  Fucking bring it!

Reminds me of an old Bug Bunny cartoon.  I dare you to step over this line, okay, now this line, this line, now this one... etc. etc.

Fri, 12/09/2011 - 15:34 | 1963959 Ahmeexnal
Fri, 12/09/2011 - 15:53 | 1964004 Dr. Richard Head
Dr. Richard Head's picture

Who was that assfuck on CNBC today, interviewing Peter Schiff, that said yields should be capped on European bonds.  It's those damn vigilatnes he said.  Caps would fix everything. HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

Fri, 12/09/2011 - 21:58 | 1965141 StychoKiller
StychoKiller's picture

Nirvana here we come!  Bonds priced at zero, paying an infinite (∞) interest rate!  Do the math...

Sat, 12/10/2011 - 06:23 | 1965705 tooktheredpill
tooktheredpill's picture

so i guess Merkozy and the squid won't be allowing any credit events anytime soon. Until they want the next crisis that is.

Fri, 12/09/2011 - 16:00 | 1964052 Stares straight...
Stares straight ahead's picture

Naw, that's just an OWS campsite...

Fri, 12/09/2011 - 23:18 | 1965322 Mauibrad
Mauibrad's picture

@Ahmeexnal Beautiful.

Fri, 12/09/2011 - 16:04 | 1964065 Mr Pink
Mr Pink's picture


Fri, 12/09/2011 - 16:10 | 1964083 Mr Pink
Mr Pink's picture

Bring it, huh?  


Fri, 12/09/2011 - 17:01 | 1964273 Captain Kink
Captain Kink's picture
PRECISELY, exactly,  This is exactly the point.  They are right, CDS triggered through a massive event is the end of the entire system AND denial of contracted CDS terms annhiliates the value of Sovereign Debt as every holder sells down their exposure to levels that CDS would have ameliorated via hedge and thus "netted" lower...   This drives higher, unsustainable borrowing rates and the end of the entire system!   There Is NO Way Out. 
Fri, 12/09/2011 - 17:38 | 1964436 LawsofPhysics
LawsofPhysics's picture

Fine with me, that was my point.  The banks are calling in their CDS hodlings on their own countries in some cases.  So who do they expect to actually pay?  Are you saying these banks are now going to turn to their own governments and taxpayers and say "pay up, or else"?  Now that is fucking funny.  End the system, fine.  Many of us still deliver things that people need.  Let the massive restructuring begin already.  It will be good for all of us.

Fri, 12/09/2011 - 15:22 | 1963920 Joeman34
Joeman34's picture

Nope, TPTB will never allow a 'credit event' meaning CDS will never be triggered meaning this won't happen.  Perfect example is the fact Greek CDS has not been allowed to trigger...

Fri, 12/09/2011 - 15:45 | 1963992 JLee2027
JLee2027's picture

The article states a CDS trigger has become irrelevant. As CDS prices rise, cash needs will overwhelm and destory the banks anyway.

Fri, 12/09/2011 - 15:49 | 1964008 Joeman34
Joeman34's picture

Who will continue to believe the CDS market knowing that its a sham?  You need new buyers for prices to rise.

Fri, 12/09/2011 - 15:55 | 1964032 Dr. Richard Head
Dr. Richard Head's picture

But then the typical liquidity argument comes into play.  I heard a good argument that liquidity shouldn't be provided if there is no longer a market for the shit someone is selling. I agree with that premise indeed. 

Fri, 12/09/2011 - 16:01 | 1964058 Vergeltung
Vergeltung's picture

I see reading comprehension is not your strength. Article indicates it's ALREADY BEEN BOUGHT, by those banks, on their own countries, in amounts that will bleed them dry regardless of a CDS trigger event.


Fri, 12/09/2011 - 16:19 | 1964137 tarsubil
tarsubil's picture

Oh dear, it appears I've gone crosseyed.

Fri, 12/09/2011 - 19:08 | 1964616 smiler03
smiler03's picture


T. S. Eliot

edit: spelling mistook

Sat, 12/10/2011 - 05:21 | 1965667 onebir
onebir's picture

"I see reading comprehension is not your strength."

Nor yours:

"BNP Paribas SA, France’s biggest bank, *sold* a net 1.5 billion euros ($2 billion) of credit- default swaps on the nation’s sovereign debt, according to data compiled by the European Banking Authority."

(If they'd bought them, the seller would be in trouble...)

Fri, 12/09/2011 - 16:17 | 1964128 Amish Hacker
Amish Hacker's picture

 I think you are being far too logical. What's relevant and irrelevant is a matter open to adjustment. Even if  "positions are netted at the end of the trading day with virtually no exceptions," that might mean that we're about to see some exceptions.

Fri, 12/09/2011 - 15:52 | 1964021 Crisismode
Crisismode's picture

TPTB will never allow a 'credit event' meaning CDS will never be triggered meaning this won't happen.


Until one bright sunny morning when two snowflakes nudge each other, and those two nudge four more, and those four nudge eight more. . . . and 10 seconds later a small drift rolls into another small drift . . . . and 20 seconds later the avalanche begins . . . . 30 seconds later the entire side of the mountain is sliding downhill . . . and 60 seconds later the city at the base of the mountain is buried under 200 feet of snow.

TPTB will exercise control . . . . until it doesn't. And when it loses control, it will lose it very, very fast indeed.

Fri, 12/09/2011 - 15:59 | 1964046 LongBallsShortBrains
LongBallsShortBrains's picture

joeman...Did you miss this part?

"banks will simply bleed to death due to daily variation margins demanding more and more and more cash each and every day as spreads blow out wider. Recall that in CDS trading, variation margins has to be posted and positions netted at the end of the trading day with virtually no exceptions. Which means that a CDS trading at infinity (or the underlying bond trading at zero which is equivalent) will put the seller of such product into insolvency, whether or not an actual event of default has been declared, thus making ISDA involvement irrelevant'

Fri, 12/09/2011 - 17:40 | 1964442 LawsofPhysics
LawsofPhysics's picture

Yes, what is the best way to short the entire CDS market?  Perhaps this simpy means the end of paper altogether and the question is mute.

Fri, 12/09/2011 - 19:37 | 1964789 WonderDawg
WonderDawg's picture

"Moot" is the word you're looking for there. Not mute. Moot.

Fri, 12/09/2011 - 19:50 | 1964819 LongBallsShortBrains
LongBallsShortBrains's picture

'what is the best way to short the entire CDS market?'

Jump on the same side of the trade as the banks and go short. (not advised)

Fri, 12/09/2011 - 15:40 | 1963937 TruthInSunshine
TruthInSunshine's picture

707 trillion USD notional value of derivative contracts floating out there, chiefly amongst major financial players, all interwoven throughout what is a repository of what would be the receptacle of fungible source of payment, fiat (chiefly USD/EUR).

So, just for purposes of simplicity, cut that number in 1/2 as a first step, as, and again, bear with me for a moment in trying to reduce this to the basic elements, 1/2 of the derivative 'bettors' will win, and 1/2 of the derivative 'bettors' will lose.

Thus, we are left with approximately 358.5 trillion in derivative 'bets' that would become payable to winning counterparties, over some period of time.

As a second step, let's just throw a SWAG out there that in the event of systemic, global event that throws world credit markets into turmoil, 10% of outstanding derivative 'bet' losses would be triggered, and thus become payable (you can use whatever % you'd like, since this is mental masturbation).

10% of 358.5 trillion USD = 35.8 trillion USD.

As a third step, this is just the derivative, off market, unregulated exchange, but that will have major implications for any adversely affect counterparties and creditors of those counterparties, who have relationships with those counterparties based on deposits, leases, equities, bonds, mortgages, etc. etc., so that the contagion affect of the [10%/20%/whatever%] of the derivative 'bets' that would become triggered in the event of a global systemic crisis would become quite large, and impact the banking, equity, credit, general bond and sovereign debt markets, including pensions, 401(k)s, mutual funds, money markets, etc. etc. etc. pretty quickly.

I wonder what % of the 10% of the 50% (which is the winning side of the total ledger) that would have to pay up would be able to, if such an event were to take place...

I don't have any specific point, but was just thinking out loud.

Fri, 12/09/2011 - 15:55 | 1964031 Chief KnocAHoma
Chief KnocAHoma's picture

All very good points and analysis. The total nut is not 700-trillion... it is a fraction of that as you have sumarized, but also as you have noted...37 trillion is more money than even Corzine can steal. Where will it all come from?

Fri, 12/09/2011 - 15:57 | 1964045 Dr. Richard Head
Dr. Richard Head's picture

Where? From my ass, your ass, and anyone's ass not connected to the lips of Goldman, Londan, the IMF, ECB, and other assorted legalized theft operations. Fuck fiat and the Congress it rode in on.

Sat, 12/10/2011 - 02:25 | 1965540 earwiggle
earwiggle's picture

Agreed Richard, the workers create the wealth. Our skills are not lost. Money is nothing, Capitalism is flawed.

Fri, 12/09/2011 - 14:39 | 1963708 vast-dom
vast-dom's picture

Precisely! SP up is what's truly mind-boggling!!!!!!!!! 




I got some derivatives to the Nth I'd like to peddle against ur CDS's pls.

Fri, 12/09/2011 - 14:52 | 1963790 john39
john39's picture

why not?  they know that the ship is going down.  why not steal money by selling this shit.

Fri, 12/09/2011 - 14:39 | 1963729 The Axe
The Axe's picture

I am with you on the melt-up......5 melt up no big volume wash out it again until new years...

Fri, 12/09/2011 - 14:46 | 1963757 AbelCatalyst
AbelCatalyst's picture

It's like a bum on the street selling million-dollar life insurance policies... Anyone who buys this crap is an idiot!

Fri, 12/09/2011 - 15:13 | 1963878 billhilly
billhilly's picture

Well put Abel.  An analogy even a billhilly can understand.

Fri, 12/09/2011 - 16:07 | 1964070 Honey Badger
Honey Badger's picture

Or like selling insurance against the end of the world without a reserve fund to back up your policies.

Fri, 12/09/2011 - 16:32 | 1964185 Willzyx
Willzyx's picture

selling insurance policies to good christians to take care of their pets after the rapture

Sat, 12/10/2011 - 11:26 | 1965964 matrix2012
matrix2012's picture


"Or like selling insurance against the end of the world without a reserve fund to back up your policies."

ha ha quite funny...WHY an end of the world needs any fund??? does heaven or hell need any mundane fund??? LoL

+1 coz it's amusing :)

Fri, 12/09/2011 - 17:08 | 1964259 TruthInSunshine
TruthInSunshine's picture

I am planning on starting a company, whereby most of my initial investment goes into hiring an esteemed and highly credible spokesperson/executive, marketing firm, and in the event that I want to go public some day, payments to a prestigious underwriter giant of Wall Street, with my said company engaged in the bisnazzz of selling all types of derivative, insurance, hedging or any other type of policy/contract/indenture, etc. at a price that is far below competitors (and for good reason, as follows).

In the event that the revenue my company receives is at any point unable to pay out liabilities outstanding, I will simply declare bankruptcy, after having fleeced the company for what will have been hopefully many years, pulling down ludicrous salary, stock options, pensions, use of corporate assets, and generally filtering the bulk of the initial revenue derived from operations into my pockets and those of my co-execs and board of directors.

Hey - isn't this how the equity game is played, anyways (with shareholders last in line, and bond holders having relative priority, but still a shitty posiition, next)?

At any rate, I know there are technical capital reserve requirements of 2.3% to maybe 5% (of outstanding liabilities that could unicornium-gamed be projected to be triggered any one given simultaenous point in time) to run a scheme like this, so now I need to go about the business of bribing...I mean meeting with the appropriate regulators and ensuring that I comply with these capital reserve and any other prerequisite regulations.

I've been thinking of naming my prospective entity 'London Werewolf, Inc'.

I wanna be bona fides, legit, compliant - yo.

Fri, 12/09/2011 - 17:21 | 1964371 topcallingtroll
topcallingtroll's picture

Your strategy is the classic insurance scam used for centuries until insurance became ostensibly regulated.

(Ostensibly---apparently but not actually)

New word I learned this year.

Fri, 12/09/2011 - 17:26 | 1964387 hadriansnightmare
hadriansnightmare's picture

I just watched an old movie called "high pressure"  1932
pretty much your company but they were selling artificial rubber that didn't exist.

Funny thing, the rubber industry bought them out for nuisance value at the end.... and they all made money.

Fri, 12/09/2011 - 19:54 | 1964829 LongBallsShortBrains
LongBallsShortBrains's picture


It is better not to talk about that.

Sat, 12/10/2011 - 10:25 | 1965888 tedstr
tedstr's picture

.....drinkin a pina colada at trader vics

Sat, 12/10/2011 - 14:28 | 1966291 luckylogger
luckylogger's picture

Are you taking resume's yet. I have a business degree in finance and have been trading for 7 years and would love to cut a head off of the squid. I think it is one of the best business models out there, ask Mr. Corzine.

Fri, 12/09/2011 - 15:22 | 1963921 dereksatkinson
dereksatkinson's picture

It looks like the ECB is engaged in QE afterall!


The ECB's decision to provide unlimited 3-year liquidity to banks should give them the funds they need to finance economic growth and purchase sovereign debt, helping to lower euro zone bond yields, ECB Governing Council member Christian Noyer said.

In an interview with French news channel LCI, Noyer also said that a EU summit deal on Friday to move toward greater fiscal union in Europe should help to underpin a recovery in confidence.

"What we decided yesterday in the governing council of the ECB was to use our bazooka ... so that banks can continue to do their job, continue to provide credit to the economy and ... buy sovereign debt," Noyer said.

"That is the role of insurance companies, banks and financial investors. We will give them all the liquidity they need so they can do this."

Noyer said Friday's "historic" agreement by European countries to set automatic sanctions on budget rule breaks -- agreed by all 27 EU members except Britain -- should help stabilize investor sentiment toward the euro zone.

"I am convinced that this should be well received and that should allow interest rates to fall," he said.

by Stephanie Ditta 10:28 AM


Fri, 12/09/2011 - 14:21 | 1963636 Snakeeyes
Snakeeyes's picture

Seriously folks, look at the IMF's forecast of Eurozone GDP. It STINKS! And they predict that Greece will be the big GDP growth champion! Seriously!

This is all a bad joke and just meant to prop up banks. Period. EOS.

Europe Moves Ahead With Fiscal Union, UK Declines – Europe Buys More Time With Bailout And Vague Promises Of Budget Cuts – Mission Impossible!

Fri, 12/09/2011 - 14:23 | 1963642 TooBearish
TooBearish's picture

Hate to rain on ur Armegeddon Play Mr Durden , but I think that selling soverign CDs will work for them banks and is a cheap source of "funding" for them....NOW GO AHEAD AND TRASH ME

Fri, 12/09/2011 - 14:25 | 1963653 Tyler Durden
Tyler Durden's picture

No need Joe Cassano. History has spoken.

Fri, 12/09/2011 - 14:31 | 1963685 gojam
gojam's picture

"History has spoken."


Fri, 12/09/2011 - 14:48 | 1963769 Scisco
Scisco's picture

Read Goodder

As a reminder, it was precisely this that destroyed AIG when the illusion of the credit bubble burst.

Fri, 12/09/2011 - 14:54 | 1963800 gojam
gojam's picture

Don't get me wrong, I loved Back to the Future.

Dislike comparative history though.

Don't like bullying either, it undermines debate and suppresses original thought.


Fri, 12/09/2011 - 15:07 | 1963854 Scisco
Scisco's picture

The intent was not to bully rather reciprocate the effort that went into your post. It is not possible to have a debate when an argument consists of punctuation. As for comparative history, not sure what else you have when dealing with human decision making. Is it really possible to mathematically model the point when individuals have had enough and walk away from the game? Now that would be an interesting course to take "Modeling defection rates in a Ponzi scheme".

Fri, 12/09/2011 - 15:09 | 1963860 gojam
gojam's picture

"The intent was not to bully rather reciprocate the effort that went into your post"

I'm not refering to my post but the one which had the temerity to disagree with a Tyler.

Fri, 12/09/2011 - 14:31 | 1963686 williambanzai7
williambanzai7's picture


Fri, 12/09/2011 - 14:36 | 1963704 BennyBoy
BennyBoy's picture


How do you post pics? I've tried and seen them in the preview but they don't make to the comments page.

Fri, 12/09/2011 - 14:39 | 1963726 AbelCatalyst
AbelCatalyst's picture

Only the Durden Chosen can post pics!! Thank God!!!

Fri, 12/09/2011 - 15:36 | 1963966 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

When we went to the new server, there was a moment where anyone could post pics.  Find that post and you will find what Ron Paul supporters do with their free time.

Fri, 12/09/2011 - 17:26 | 1964389 topcallingtroll
topcallingtroll's picture

Good one!
But on clear days we also go to the gun range and target practice between bong hits

Fri, 12/09/2011 - 19:46 | 1964809 WonderDawg
WonderDawg's picture

Fuckin A right.

Fri, 12/09/2011 - 20:01 | 1964846 LongBallsShortBrains
LongBallsShortBrains's picture

Bong hits for jesus (the hippie looking guy, not the gardener at the bellagio) fucking a right

Fri, 12/09/2011 - 14:39 | 1963727 DormRoom
DormRoom's picture

zerohedge uses drupal.  william banzai is a contributer, and likely has role permission to use a filtered html option where he's allowed to post img.

Fri, 12/09/2011 - 14:40 | 1963730 gojam
gojam's picture

WB7 is sub Tyler but uber alles. (and rightly so)

Plus he has an inscribed ring which gives him special powers.

Fri, 12/09/2011 - 14:56 | 1963804 ebworthen
ebworthen's picture

Special permission from the webmaster, I would guess.  If just anyone could post pics it would be...painful.

Fri, 12/09/2011 - 16:45 | 1964244 Willzyx
Willzyx's picture

it would be 4chan.  talk about painful

Fri, 12/09/2011 - 19:17 | 1964749 JPM Hater001
JPM Hater001's picture

Yeah, in this case the free market has worked hand in hand with natural selection.  The result is limited Exposure for the unproven.

Fri, 12/09/2011 - 14:38 | 1963715 gojam
gojam's picture

lol, Like it WB7. Looks like my mother-in-law

But is this rhyming history or repeating history ??

Fri, 12/09/2011 - 14:51 | 1963779 williambanzai7
williambanzai7's picture

I don't think this is intransigence. What we are seeing is a combination of stupidity and fecklessness. Until the Americans arrived in Europe about 15 years ago, Europe was a stodgy old fashioned banking venue. Man how we fucked it all up.

Fri, 12/09/2011 - 14:56 | 1963805 gojam
gojam's picture

"Man how we fucked it all up."

Yeh, but don't take all the credit, you couldn't have done it alone !"  ;-)

Fri, 12/09/2011 - 15:05 | 1963847 williambanzai7
williambanzai7's picture

We were invited to start a real drunken party. The same party they keep trying to start in Asia. But the Asians learned their lesson in 98. The Europeans just went hog wild.

Fri, 12/09/2011 - 15:24 | 1963902 gojam
gojam's picture

" But the Asians learned their lesson in 98"

Alcoholics choice 10 year hangover (like Japan) or hair of the dog  ?

Fri, 12/09/2011 - 15:34 | 1963951 wisefool
wisefool's picture

IRS Timmay UST-1099: Under way in eurozone recliaming tax deffered income from previous engagement. Venting USD ballast.

Fri, 12/09/2011 - 15:15 | 1963889 Rainman
Rainman's picture

Agree. The Euro currency was a creature born from the greed-driven libido of a US-led transcontinental financial cartel. It's purpose was to keep the stronger members of the continent on the hook for the unsustainable debt of the weaker. Doctor Evil couldn't have conceived a more devilish plan. 

Sat, 12/10/2011 - 01:21 | 1965491 chindit13
chindit13's picture

As much as Americans might like to take the credit---perfect word, credit---for blowing up international banking by being Sensei to the World, I do think the Brits had more than a minor role.  Japan did some wondrously horrific things, too, though not as convoluted as what the smartest guys in the room on Wall Street could conjure.  In fact, many nations had their own particular idiosyncracies that were tossed into the mix.

So I'd like to thank all the little people who helped make this financial Armageddon possible, because without them.....

Sun, 01/22/2012 - 11:42 | 2086415 Archduke
Archduke's picture

+1. the UK's banker class, meaning aristocrats, stoked those furnaces with all  the coke they could muster.

Fri, 12/09/2011 - 17:05 | 1963960 earleflorida
earleflorida's picture

and hank the shank' [greenberg's aig] is sueing the u.s. gov't for $25bn - man this [these] guys got somekind of huge gonads

Fri, 12/09/2011 - 22:46 | 1965260 williambanzai7
williambanzai7's picture

It's the American Rip Off mentality. They all think if I don't try to get some I'll never know.

Fri, 12/09/2011 - 14:52 | 1963787 Esculent 69
Esculent 69's picture

Hey Tyler- When u say the ILLUSION of the credit bubble bursting refering to AIG, do you really mean that AIG was brought down rather than failed? Just like Lehman was brought down rather than failed. Just like Bear Stearns was brought down rather than failed.  Has anyone ever considered this is all intentional and not some bankers who got caught up in greed?  What about these CDS derivatives, MBA, MBS, and all other BS was meant taint the system just to pull the plug on them to purposefully collapse the system to restart it as some world economy/ gov't?

Fri, 12/09/2011 - 19:54 | 1964830 WonderDawg
WonderDawg's picture

What would be the motive for that? TPTB already have the world by the balls, so what's the point of creating a collapse just to take control of a world that would be more fucked up than a box of coat hangers?

Fri, 12/09/2011 - 16:05 | 1964066 In Fed We Trust
In Fed We Trust's picture

And why hasn't s law maker stepped up and banned naked short CDS reververse repo off until bonys day,

Cus its in the endgame for merchant bankers to raid the soverigns.

Hopefully the bombs dropping on Iran will be enough to keep the sheeple lookin the other way,

While the repo man walks off with loot?

In a reversev repo till bonus day.

Sat, 12/10/2011 - 01:06 | 1965478 chindit13
chindit13's picture


At this point in the game, Mr. 0-73 (as of this writing) may be on to something.  It is kind of like writing end-of-the-world insurance.  Policy holders would be just as dead as everyone else.  Daily settlement might cause pain, but the "voluntary" haircut on owned sovereign bonds (the same one on which the owner is writing CDSs) could obviate the need for posting additional collateral, as it resets the CDS "par" (well, maybe this is still being worked out in the courts).  If reset does occur, the CDS-writing bank can just rinse and repeat....write new CDSs using the "haircut" level, then when the pain becomes too great (daily margin posting), just take another "haircut", reset the CDS "par" and keep the premium.  The CDS writer collects premium as the bond corpus asymptotically approaches zero, aka its true value, just so long as a new Bavarian Landesbank is born every day.

Fri, 12/09/2011 - 14:26 | 1963659 kengland
kengland's picture

Armeggeddon play? What would ever give you that perspective? There has been talk of Euro collapse now for almost two years, yet SNP at 1253.

Fri, 12/09/2011 - 14:52 | 1963789 RichardENixon
RichardENixon's picture

What do you mean I shouldn't have jumped off the roof of the Empire State Building? Things look ok so far SPLAT

Fri, 12/09/2011 - 15:02 | 1963833 kengland
kengland's picture

Kind of. What I'm recommending folks do, knowing full well from all of the ZH posts I read almost daily, is take the largest loan you can find, and place it on short ES right NOW. The Euro is going to blow any day now as is all of Euroland. I mean this thing is about to BLOW. Nevermind that it never blows.  It's gonna blow. There's a great eatery that offers free meals tomorrow in NY as well.

Fri, 12/09/2011 - 16:03 | 1964061 Crisismode
Crisismode's picture

Would that be the New York Rescue Mission on Lafayette Street?

Fri, 12/09/2011 - 14:59 | 1963822 Nucking Futs
Nucking Futs's picture

Patience.  This is a financial cancer we're looking at.  It has spread to the major organs and is getting worse.

Fri, 12/09/2011 - 15:03 | 1963839 Lednbrass
Lednbrass's picture

Well it certainly is, but the question quite rightly posed is how much longer can it go on?  If we observe a car leaking fluid profusely from the bottom of the radiator while driving down the road we can say with certainty that the engine will seize up, even without being professional mechanics. It is a matter of somewhat minor variables as to precisely when it will cease moving and burst into flame- speed, hills or lack thereof, tire pressure, and many other factors can be pieces of the puzzle. However, saying "Well,if you cant say exctly at what time the fire breaks out and the wheels stop turning you must be wrong and are nothing but a doomer" is even more inaccurate. Nobody can say with precision as events are occuring as time progresses and many interactions between stressed components are playing out under the hood; but observations that the fluid is pouring out, the engine temperature is getting into the red zone, and final seize up cannot be avoided any longer are no less accurate for that.

Fri, 12/09/2011 - 14:27 | 1963663 GeneMarchbanks
GeneMarchbanks's picture


Fri, 12/09/2011 - 14:36 | 1963710 AbelCatalyst
AbelCatalyst's picture

A cheap source of funding?? Are you out of your mind? Do you have any clue as to what is behind that funding?? Trash you!!?? - no need as your ignorance speaks far louder than your words. Just go all in with no hedge for your little santa rally Too Bearish... Ugh!

Fri, 12/09/2011 - 14:38 | 1963719 SheepDog-One
SheepDog-One's picture

Well thats simply your opinion TooBearish....however you cant show a time where thats ever 'worked' before.

Fri, 12/09/2011 - 14:44 | 1963751 SillySalesmanQu...
SillySalesmanQuestion's picture

O.K. You were - 10 when I posted this...12 ...13...14...16 kinda like the explanation of the CDS above...LMAO.  BOOM!

Fri, 12/09/2011 - 15:20 | 1963909 HD
HD's picture

We are not zealots here on ZH. Please explain WHY you think selling CDS will work in this case. These countries are holding up these banks (or trying to) - so if the sovereigns default who bails out the banks to pay the CDS?

Fri, 12/09/2011 - 15:39 | 1963978 TooBearish
TooBearish's picture

wow thats pretty awesome on the trashing.... in ROBO territory!

Fri, 12/09/2011 - 14:23 | 1963643 SeverinSlade
SeverinSlade's picture

The clock is ticking.

Fri, 12/09/2011 - 15:39 | 1963982 Beam Me Up Scotty
Beam Me Up Scotty's picture

Bombs tick too......tick tick tick tick tick

Fri, 12/09/2011 - 15:44 | 1963995 earleflorida
earleflorida's picture

and it only has one hand

Fri, 12/09/2011 - 14:23 | 1963644 Nate H
Nate H's picture

I wonder what the regulators/officialsin those countries think about that....Evil speculators!!

Fri, 12/09/2011 - 14:23 | 1963646 PaperBear
PaperBear's picture

How much more of this deflation scare are we going to subjected to ?

Will Ben do anything in next weeks policy decision ?

Fri, 12/09/2011 - 14:26 | 1963650 GeneMarchbanks
GeneMarchbanks's picture

Hypothecation is upon us.

The Wasteland, indeed.

Fri, 12/09/2011 - 14:34 | 1963696 Piranhanoia
Piranhanoia's picture

Your comment has been hypothecated and pledged as security for a figment. Carry on.

Fri, 12/09/2011 - 15:28 | 1963936 Strider52
Strider52's picture

Yesterday I didn't know what a hypothecated repo was. Now I are one.

Fri, 12/09/2011 - 14:24 | 1963651 Ahmeexnal
Ahmeexnal's picture

Yet Swinegela Merdekel sings MISSION ACCOMPLISHED as her goal of sinking europe into serfdom to the German Imperial family comes closer by the hour:

'I have achieved what I wanted to achieve [at EU summit in Brussels]. ... The breakthrough to a stability union has been achieved.'

Fri, 12/09/2011 - 14:42 | 1963744 Marley
Marley's picture

Saw that too.  Double speak would convert this to:! Europe is a run-away train!

Fri, 12/09/2011 - 14:25 | 1963654 ACP
ACP's picture

End of the world? Bullish with 10X leverage!!!

Fri, 12/09/2011 - 14:26 | 1963657 redpill
redpill's picture


This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.


Fri, 12/09/2011 - 14:34 | 1963699 SoNH80
SoNH80's picture

The river's tent is broken; the last fingers of leaf
Clutch and sink into the wet bank. The wind
Crosses the brown land, unheard. The nymphs are departed.
Sweet Thames, run softly, till I end my song.
The river bears no empty bottles, sandwich papers,
Silk handkerchiefs, cardboard boxes, cigarette ends
Or other testimony of summer nights. The nymphs are departed.
And their friends, the loitering heirs of City directors;
Departed, have left no addresses.
By the waters of Leman I sat down and wept ...
Sweet Thames, run softly till I end my song,
Sweet Thames, run softly, for I speak not loud or long.
But at my back in a cold blast I hear
The rattle of the bones, and chuckle spread from ear to ear.
A rat crept softly through the vegetation
Dragging its slimy belly on the bank
While I was fishing in the dull canal
On a winter evening round behind the gashouse
Musing upon the king my brother's wreck
And on the king my father's death before him. White bodies naked on the low damp ground
And bones cast in a little low dry garret,
Rattled by the rat's foot only, year to year.

Fri, 12/09/2011 - 15:58 | 1964047 pauhana
pauhana's picture

Yup, "by the waters of Lehman I sat down and wept."  What a waste land!

Fri, 12/09/2011 - 14:28 | 1963661 blu
blu's picture

The CDS thing is an ongong joke. When the SHTF nobody is going to be liquid enough to pay out even a fraction of the notional value of these and all the CDS insurance will evaporate on the spot. This is all just window dressing for regulators; "See we've bought protection we're okay." The fuckshytes aren't fooling anyone. They're all dead walking. Knock them over with a feather.

Fri, 12/09/2011 - 14:29 | 1963681 gjp
gjp's picture

No kidding. This shit will never pay out in any scenario. Incredible that real money is being spent to buy this fraudulent insurance, but then I guess it isn't actually real money, is it?

Fri, 12/09/2011 - 14:52 | 1963791 daily bread
daily bread's picture

I think the point is people trade CDS instruments, and don't ever expect them to pay.

Fri, 12/09/2011 - 15:02 | 1963835 NotApplicable
NotApplicable's picture

Or they are purchasing seats at the table when it comes time to transfer all of the assets. As that blind pig Buffet once said, "CDSes are financial WMDs."

They're just stocking up on ammo.

Fri, 12/09/2011 - 20:03 | 1964855 WonderDawg
WonderDawg's picture

They purchase CDS so they can leverage the insured security. The CDS premium is actually a premium for leverage.

Fri, 12/09/2011 - 14:27 | 1963667 Future Tense
Future Tense's picture

Seems like a complete collapse is going to bring a short term fall in silver and the response will take it the next leg up.  It's amazing to think that all the above ground silver can be purchased today for just over $30 billion.  Seems like an accident waiting to happen.  Good review of the fundamentals I came across this week:

Fri, 12/09/2011 - 15:42 | 1963988 Beam Me Up Scotty
Beam Me Up Scotty's picture

Trucks gassed up and in reverse.  Ready to pop the clutch.........

Fri, 12/09/2011 - 14:27 | 1963675 oogs66
oogs66's picture

No downside. If the sovereign blows up, they are dead anyways. Who is buying this from them?

Fri, 12/09/2011 - 15:49 | 1964009 earleflorida
earleflorida's picture

$700 Trillion of "Fluff" does not make the world go round!

Fri, 12/09/2011 - 14:28 | 1963676 Cdad
Cdad's picture

I should have been a pair of ragged claws

Scuttling across the floors of silent seas

Fri, 12/09/2011 - 14:33 | 1963694 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Let us go then,you and I, when the evening is stretched out against the sky. like a patient etherized upon a table ...

Fri, 12/09/2011 - 14:29 | 1963679 DormRoom
DormRoom's picture

Instead of a black swan, you will see a black dragon spreads its wing across the globe.  fun times.

Fri, 12/09/2011 - 14:53 | 1963797 Capt Tripps
Capt Tripps's picture

Cataclysm inc!



Fri, 12/09/2011 - 14:30 | 1963684 BennyBoy
BennyBoy's picture

Let the lying and fraud continue and grow.

Thank goodness it's legal!

Debt forever!

Fri, 12/09/2011 - 14:32 | 1963687 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

If there's no default, the CDS are worthless. Better than the ECB printing since the Euro banks are selling paper on paper which will never BE ALLOWED to default, in the legal sense of course.

Fri, 12/09/2011 - 14:33 | 1963688 falak pema
falak pema's picture

so who wants financial carnage...act accordingly. This whole shooting match is farcical : Financial Piranhas trying to hedge their own apocalyptic collapse due to debt mountain or just cautious investors?...The ponzi bubble creates exponential appetites to wipe out exponential debts. Which is chasing which or behind the  curtain who is chasing whom?

Fri, 12/09/2011 - 14:36 | 1963711 Piranhanoia
Piranhanoia's picture

I resent that. I have never made such bets unless you include purchasing crap from other countries I did not need.

Fri, 12/09/2011 - 14:32 | 1963689 centerline
centerline's picture

So, if I have this correct... if the ECB (or FED) does not rain money from the heaven's directly onto the banks books, they are trapped in a vicious cycle of generating necessary operating cash flow by placing loosing bets (read: manifest destiny) in ever greater amounts due to process of diminishing returns due to the recursive nature of how the cash is generated.  And the kicker is that the process effectively creates a larger and and more devastating circle of counterparty risk - as ultimately, when the chips begin to fall, net exposure suddenly becomes gross exposure.

Sound about right?


Fri, 12/09/2011 - 14:36 | 1963709 Tyler Durden
Tyler Durden's picture

100% correct.

Fri, 12/09/2011 - 14:45 | 1963755 GeneMarchbanks
GeneMarchbanks's picture


Anything about Evolution predicting Revolution? Tyler?

Fri, 12/09/2011 - 14:50 | 1963777 SheepDog-One
SheepDog-One's picture

Or Devolution.

Fri, 12/09/2011 - 14:55 | 1963802 john39
john39's picture

nothing that a war can't fix.  but it will have to be a big one.  when you are amoral, all options are on the table.

Fri, 12/09/2011 - 15:40 | 1963983 Momauguin Joe
Momauguin Joe's picture

Our war is a spritual war.

Fri, 12/09/2011 - 15:54 | 1964026 earleflorida
earleflorida's picture

yep,... based on a 'golden trojan bull"!

Fri, 12/09/2011 - 17:14 | 1964343 ACP
ACP's picture

However, the significance of that is diminished to null and void as long as Madman Ben ramrods this market to high heaven.

Fri, 12/09/2011 - 14:49 | 1963766 falak pema
falak pema's picture

Just a question : would bank nationalisation now rather than later on be a better solution for the people, as debt will have to be socialised at some time, as these so called private banks run to their own demise...? Apart from nationalisation  there is no solution. These banks HOLD the deposits of insurance and pension funds world wide. 

Fri, 12/09/2011 - 15:13 | 1963858 centerline
centerline's picture

I was thinking about that last night as I drove home from work.  Nationalization would have to occur almost overnight.  If anything, simply to reduce the anxiety and panic that will result from the banking system shutting down.  But, I don't think it matters as long we are talking about attempts to stay within the context of the current monetary system.  The nationalized banking system would only help foster (by what is familar) a reset of some nature and usher in a new monetary system.  While people really don't trust government, I think the disdain for bankers will reach fever pitch when the TBTF final F.

I wrote a post down lower in this thread about how the current fiat we know is already toast.  It has already been destroyed.  We just have yet to realize it.  Just speculation on my part course... but, if it walks like duck, talks like duck,...

Fri, 12/09/2011 - 15:18 | 1963900 catacl1sm
catacl1sm's picture

It must be a witch!

Fri, 12/09/2011 - 15:28 | 1963934 centerline
centerline's picture

+1 for anyone quoting Monty Python.

Fri, 12/09/2011 - 16:53 | 1964044 earleflorida
earleflorida's picture

btw,... the frb now holds every stock certificate in the u.s. under lock and key - must get a permission slip by dealer/brokerage to release street name - nice

ref: ____   "Ming the Mechanic: The Unknown $20 Trillion Dollar Company"      Note: dated material 10/30/2003-archive @ search box

"DTCC/ CEDE" ___


Fri, 12/09/2011 - 16:24 | 1964151 Idiot Savant
Idiot Savant's picture

if the ECB (or FED) does not rain money from the heaven's directly onto the banks books

Is there any reason to believe the FED won't loan cash, via the discount window, to maintain the status quo? They loaned how many trillion (7?) to American banks and the populace yawns. I see no reason to believe the FED won't bail out the European banks too.

Fri, 12/09/2011 - 17:49 | 1964482 fraud-fed
fraud-fed's picture

So is that deflationary at first and then hyperinflationary once the central banks give in and print? Or slow inflation, because the central banks are allowed to print a little all the way?


Fri, 12/09/2011 - 14:32 | 1963690 campag
campag's picture

 forever bearish ZH stories. Suck in the shorts and chew them up


Fri, 12/09/2011 - 14:41 | 1963737 SheepDog-One
SheepDog-One's picture

Its not a 'ZH story' at all, its from Evolution Securities. 

Fri, 12/09/2011 - 16:17 | 1964132 fiddler_on_the_roof
fiddler_on_the_roof's picture

whatever ZH has been posting/reposting all thse EURO now dead, no dying, no really going to die...

EURO still stays at $1.35. These EURO posts look crap to me.

Fri, 12/09/2011 - 20:12 | 1964866 LongBallsShortBrains
LongBallsShortBrains's picture

And the housing market is coming back soon too !!!

/ jack's sarcasm

Fri, 12/09/2011 - 16:20 | 1964140 campag
campag's picture

ok agreed but the constant  bearish nature of all articles seams to be irrelevant when the market continues to go north

Fri, 12/09/2011 - 16:56 | 1964278 earleflorida
earleflorida's picture

so why reap the fruits of tyler's labor here?

Fri, 12/09/2011 - 14:33 | 1963695 jjsilver
jjsilver's picture

Good luck collecting that bet, at least anything of value

Fri, 12/09/2011 - 14:34 | 1963697 StockInsanity
StockInsanity's picture

Now if only we didn't live in bizzaro world, the more calls for the collapse of the financial system the higher the stock market goes !  Brilliant !

Fri, 12/09/2011 - 14:36 | 1963707 centerline
centerline's picture

I heard that Zimbabwe had a rockin' stock market.

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