Germany "Raises" €55.5 Billion, or 1% Of Its Debt/GDP Ratio, Thanks To Derivative "Accounting Error"

Tyler Durden's picture

As usual, the most surreal news of the day, perhaps week, is saved for Friday night, when we learn that Germany has magically raised over a quarter of its total EFSF obligation of €211 billion by way of what is essentially magic. The Telegraph reports that "Germany is €55bn richer than it previously thought because of an accounting error at state-owned bank Hypo Real Estate Holding. The mistake at "bad bank" FMS Wertmanagement, happened because collateral for derivatives wasn't netted between the asset and liability side, an FMS spokesman said. As a result, FMS will only contribute about €161bn to Germany's debt this year, down from €216.5bn in 2010." Another way of representing the error is that it is equal to a ridiculous 1% of the country's debt to GDP ratio. "Germany's 2010 debt-to-GDP ratio also drops, to 83.2% from the previous 84.2%, a finance ministry spokesman said." In other words, the modern world, best characterized by the imploding fiat ponzi, has discovered a way to raise capital (electronic, naturally) courtesy of CDS bookmarking errors. And now, we have seen it all.

Since money is fungible, especially at the sovereign level, the "unlocked" capital which fortuitously was in a favorable netting direction (and we can't wait to get our hands on the detailed explanation of just what the error was that resulted in €31 in 2011 and €24.5 billion in 2010 of additional "debt" issuance going to fund FMSW, also known as Germany's bad bank, and now effectively being unwound) can and will used to plug bad Greek debt shortfalls at any other wards of the state which has material exposure to bad debt. Such as partially nationalized Commerzbank, which as we noted yesterday by way of German FAZ, is dumping all of its PIIGS (and potentially US) bond exposure into a bidless market with the same urgency as US banks offloading subrpime paper in the summer of 2007, in order to preserve liquidity and raise capital. Most importantly, this is also money that amounts to over 25% of the German obligation toward the EFSF of €211. So while one can dream up ridiculous stories of €55 billion accounting errors, the reality is that the source does not really matter: after all these are merely electronic ones and zeros. And the next time Germany needs to "raise some electronic cash" to fund even greater PIIGS related shortfall, it will simply find even greater "accounting errors" which magically give justification to shift a liability to an asset, and thus validate what is effectively non-sterilized printing of euros at the national level! Is this merely an appetizer of things to come, and an explanation of how Europe will "fund" the hundreds of billions in capital shortfall once the PIIGS start falling left and right like dominoes, tipped over by what is now the Greek default of October 27, 2011? Of course not: certainly this is nothing more than an innocent accident (for €55 billion) and anyone claiming otherwise is a conspiratorial anarchist.

More from the Telegraph on this stunning development:

The ministry spokesman didn't directly comment on the accounting error, but said "the German government welcomes the substantial progress FMS Wertmanagement has made in reducing the portfolio it took over from Hypo Real Estate a year ago".


"In addition, it is positive that total assets, which include derivatives and hedging transactions, could be reduced by more than €30bn, or almost 10pc, compared with the 2010 results," the ministry spokesman added.

BBC has more:

The discovery was made earlier this month but only announced on Friday.


HRE faced a severe liquidity shortage in the wake of Lehman Brothers' bankruptcy in 2008.


The German government provided the bank with capital
injections of 10bn euros and liquidity guarantees amounting to 145
billion euros before nationalising it.

And the truly good news is that with roughly one quadrillion in derivatives floating out there, the bulk of which nobody has any clue what they are, where they are, and what they are collateralized by, it means that the world is free to find derivative-based "errors" which can magically fund well over two times the global debt which at last check was about $500 trillion. At the end of the day, no one is the wiser: after all this is merely the creation and destruction of electronic ones and zeros in the span of nanoseconds in one computer's random access memory.

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SGS's picture

Print, scam, print.  Ponzi continuum 101.

Hephasteus's picture

Someone's got to lead the servants.

What do we the people need.

Machine guns. Yes machine guns.

Hmm. Maybe now we need spycraft tools. Yes spycraft tools.

Ok now we need solar energy and windmills for the servants so we have enough oil to continue carrying our machine guns where we want them. Save the planet!! I mean our oil supply.

Earl of Chiswick's picture

The German Shepherd ate my homework

jekyll island's picture

I need an accountant like the one Germany has, I wonder if he is taking new clients.  


LeonardoFibonacci's picture

Where is Bernie Madoff when you need him.  He could Ponzi the shit out of the European finances.  As a matter of fact anyone of the same origins would be an expert to take europeans for all they have.  Yet this type of scam was ERADICATED under the Fuhrer. 

FEDbuster's picture

Using GAEAP, Generally Accepted Enron Accounting Principles, we have found ........

From each according to their ability, to each according to their needs.

disabledvet's picture

"there's a disturbance in the Force."
"i've noted it too Emperor."

cowdiddly's picture

LOOKIE, we just found a whole years worth of GDP in an old mason jar. We forgot to add our tax revenue for 2005 and 2006. Now back to work BITCHEZ.

SheepDog-One's picture

Brings to mind the scene from National Lampoons Vacation where Russ asks Clark after getting busted swimming with a topless 'poolside waitress', 'Sure I believe ya dad dad, but do you think mom will buy it'?

Raskolnikoff's picture

human nature is rotten to its very core, given the opportunity man will always find innovative ways to debase himself

Unprepared's picture


The Elysee just released a statement that Sarkozy found a trillion euro bill underneath the presidential couch.

sabra1's picture

Timmy G. was just found between Janet Napolitano's cheeks, in which he proclaimed, "i'm never doing crack, ever again!"

MFL8240's picture

Home run!  Love it!!!

LeonardoFibonacci's picture

Yeah right where he bastardly impregnated his former justice minister Rachida Dati.

Unprepared's picture

He was just explaining to her what inFELLATION means*


*She did actually make the confusion and let slip the word fellation in a TV interview.

jekyll island's picture

No, Germany just found the extra money in the suitpants hanging in the closet.  I mean in their old wallet.

max2205's picture

Come on they just wrote up the CDS trigger that never happened. Wait, we'll see more sovereigns do the same. Dexia will be solvent when they write up that 'reserve'.

FinHits's picture

Oldie but goldie (I give this one USD 2000 per ounce):

There once was a business owner of a shaky German bank who was interviewing people for a CEO position. He decided to select the individual that could answer the question "how much is 2+2?"

The engineer pulled out his slide rule and shuffled it back and forth, and finally announced, "It lies between 3.98 and 4.02".

The mathematician said, "In two hours I can demonstrate it equals 4 with the following short proof."

The physicist declared, "It's in the magnitude of 1x101."

The logician paused for a long while and then said, "This problem is solvable."

The social worker said, "I don't know the answer, but I am glad that we discussed this important question.

The attorney stated, "In the case of Svenson vs. the State, 2+2 was declared to be 4."

The trader asked, "Are you buying or selling?"

The accountant looked at the business owner, then got out of his chair, went to see if anyone was listening at the door and pulled the drapes. Then he returned to the business owner, leaned across the desk and said in a low voice, "What would you like it to be?"

Dicite justitiam's picture

Thanks!  EMP LSAT, Accountant.  got it.

FinHits's picture

Obviously the Trader and the Attorney were very close runner-ups, but their correct answers would have been:

The Trader: "I'll give you 8 for that position, if you write me a CDS", and for The Lawyer: "In the European Commission vs. ISDA, the answer was deemed to be -4".


However, I am glad to report the tale had a happy enging:

- The Trader front-runned the trade with insider information, shorting the German bank, and made €1 billion "profit" and €200 million cash bonus

- The Attorney sued the Business Owner and got €10 million compensation for unfair treatment

Milestones's picture

What next? A butter knife into an upside down piggy bank? This suggestion from my 8 year old grandson!!    Milestones 

Widowmaker's picture

He sounds like an enemy combatant. Surely a lone wolf with repressed anti semetic tendencies. A family social officer of the establishment will be required to moderate your household in the future.

Sad but true, this is the world you are leaving him. Think about that shit.

strangeglove's picture

That shi Bitchezzz. Thar fixed it for ya

knukles's picture


Next should we not ask (as if you couldn't see that coming, eh?) just what these derivative contracts were on, who the counter-party is and what the terms and conditions might be. 
Like are they worthless or money good Greek paper, after all, is the WorstMonkeyShinesGeshuntiteSchankerBank that found this shit officially part of or not part of the on the budget or off the budget official institutions role or not, like is the shit money good?

And for that matter, why in the world would we at this moment bother to think any derivative is money good?  Or where we once thought the Greeks liars, the Italians sly, the Germans humorless and the French pussies, this lack of Germanic Precision leads Onkle HerrDoktor Knukles to say that there is Fuck All Nothing Left Worth Believing in the Whole Fucking EuroZone.


covert's picture

this is worthy of study, debt more than equity. maybe a bubble here?


Azannoth's picture

"..after all this is merely the creation and destruction of electronic ones and zeros in the span of nanoseconds in one computer's random access memory.." - nothing a good EMP burst could not fix

trampstamp's picture

It's like I'm going to shit on the world and there is not a fucking thing you can do about.

Atomizer's picture

They may be able to ginger up a plausible cause by pretending to own a 56 million gold Perth mint coin. By applying fractional reserve central banking principles, 55 billion could easily be created out of thin air. This solves the mystery of misallocated funds and/or keystroke error.


Perth Mint Makes World's Largest Gold Coin


peekcrackers's picture


 roughly one quadrillion in derivatives floating out there, the bulk of which nobody has any clue what they are, where they are, and what they are collateralized by,

everyday i m shuffling ( Ben brakes out in a melbourne shuffle ) 


The Big Ching-aso's picture

Germany's upcoming slogan........

'On your Deutch Mark.   Get set.  Print!!!!!!'

JohnG's picture

Debt problems, bitchez.

Element's picture

A song that says it all

It's All Over Now, Baby Blue

You must leave now, take what you need, you think will last
But whatever you wish to keep, you better grab it fast
Yonder stands your orphan with his gun
Crying like a fire in the sun
Look out the saints are comin’ through
And it’s all over now, Baby Blue

The highway is for gamblers, better use your sense
Take what you have gathered from coincidence
The empty-handed painter from your streets
Is drawing crazy patterns on your sheets
This sky, too, is folding under you
And it’s all over now, Baby Blue

All your seasick sailors, they are rowing home
All your reindeer armies, are all going home
The lover who just walked out your door
Has taken all his blankets from the floor
The carpet, too, is moving under you
And it’s all over now, Baby Blue

Leave your stepping stones behind, something calls for you
Forget the dead you’ve left, they will not follow you
The vagabond who’s rapping at your door
Is standing in the clothes that you once wore
Strike another match, go start anew
And it’s all over now, Baby Blue


Element's picture

Yeah I have a different Dylan version to that one, already, and love it, I think I like Bonnet's version just as much though.

data_monkey's picture

Maybe the US will find some accounting problems?...I bet they'd go the other direction though.

Mike2756's picture

Oh, i bet there's a couple hundred billion floating around Iraq, it might be freshly printed but it's there just the same.

unununium's picture

Here ya go!  It's on like Donkey Kong

October 25, 2011

Iraq War’s ’Missing’ $6.6 Billion Is Discovered in Central Bank

zorba THE GREEK's picture

Sounds to me , Hypo RE holdings hired Timmy's old tax accountant.

Rob Jones's picture

Amazing what you can find when you look under the seat cushions!

Aguadulce's picture

In other news the Irish just found 100 tons of gold at the end of a rainbow!

disabledvet's picture

More like "the Americans."

Pancho Villa's picture

That's funny, because it just so happens that I lost €55.5 bn the last time I visited Hypo Real Estate Holding.

I wonder what the number for their "Lost and Found" department is...

Amish Hacker's picture

But I notice that in a derivative world it's a lot easier to find the "errors" than the collateral.

Hephasteus's picture

What's really amazing is while looking for the electronic cash they found a treasure map to 300 tons of gold.

i-dog's picture

... with a big 'X' on 33 Liberty. They'll have fun getting it back to Germany.

Mr Lennon Hendrix's picture

I was wondering the same thing....

Maybe Timmah lost his NYFRB gold the same way he messed up on his taxes.