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Goldman: "As The Endgame Approaches, The Rally In AAA-Euro Area Sovereign Bonds No Longer Seems Sustainable"

Tyler Durden's picture





 

Goldman Sachs has for the time being been very quiet in joining all of its colleagues from around the street in screaming for an immediate intervention by the ECB or else. The reasons are glaringly obvious: with a Goldman alum in charge of the ECB, and a 23 year Goldman veteran acting as ambassador to Germany, whatever Goldman wants, Goldman will get, without the need for convincing pitchbooks and dramatic expostulations that the world is ending unless... Intuitively it makes sense for Goldman to wait: after all why not take advantage of the situation a la Bear and Lehman, and wait for 3-4 major European banks to collapse, which will be the green light for Goldman to do what it does best: step in and fill the financial and power vacuum. Needless to say, when UniCredit, Commerzbank or Raiffeisen are down, the ECB will have no choice but to intervene with or without the Fed's help. Which is why anyone looking for clues as to what will happen in Europe has to focus on Goldman alone as we already know too well how everyone else is axed. Luckily GS' Francesco Garzarelli and Huw Pill have just released a much overdue note presenting just how the firm feel ont he topic of Europe's continuation as a going concern, or, alternatively, collapse. While we present the full note below in its entirety which naturally seeks to avoid broad panic, here are some notable extracts from a nuanced read: "considering how much damage to confidence has now been inflicted, one must also entertain the possibility that the intensification of market tensions and/or deterioration of economic activity reinforce each other feeding domestic political and social pressures precluding a final agreement among EMU member states from being reached. In this case, rather than being the ‘forcing mechanism’ that drives agreement, the economic and financial environment could feedback into the political process in a negative way, leading to a vicious downward spiral and, ultimately, to the failure of the Euro project." Simply said "an alternative scenario of a ‘break-up’ of the Euro area certainly cannot be ruled out", which leads to Goldman's conclusion: "For the same set of reasons, as the ‘end game’ approaches the rally in AAA-rated Euro area sovereign bonds (Germany’s especially) no longer seems sustainable and could reverse in coming weeks. In our base case of more intrusive control on future deficit financing, the core countries will, in exchange, have to shoulder a greater part of the legacy credit risk of their peers if they want to keep EMU alive. In a ‘break-up’ scenario, the creditor ‘core’ countries will be confronted with a wave of insolvencies, which would also worsen their fiscal position. And in the middle ground between these two outcomes, where we currently stand, the ECB will be intermediating growing intra-Eurosystem imbalances. Through this monetary channel at the heart of EMU, the ‘shadow’ credit risk of the core countries is already rising, and at an increasingly rapid pace." As expected, it appears that Goldman sure will like occupying those European bank HQs for about $1 in equity.

So, starting with Goldman's conclusion:

The Rising ‘Shadow’ Credit Risk in the ‘Core’ Countries

 

To summarize, we interpret the current turmoil in financial markets and resulting weakening of the real economy as forcing mechanisms for agreement across EMU countries on fiscal governance to emerge: The history of European integration is littered with examples of crises forcing change. Viewed in this way, the current pain is a (necessary) part of the resolution process.

 

With market pressures mounting, economic activity weakening sharply, electoral pressures becoming more intense in some key countries, and the need to rollover large blocks of sovereign and bank debt in the New Year, the need for a breakthrough to the political impasse is increasing. Such a breakthrough should lead to the formulation of a road-map for institutional and governance reform that would limit the scope for undisciplined fiscal policy in the future. If sufficiently convincing, it should pave the way for an at least partial mutualization of the legacy debt of EMU countries, and a more pro-active response by the ECB.

 

But in order to avoid the large (if difficult to calculate) costs of a Euro area break-up, action on all policy fronts is urgently required. Nor can countries alone – for example, through further and necessary fiscal austerity – correct a situation that has become systemic in nature. The widening in spreads following the appointment of governments in Italy and Spain resolved to fiscal austerity is a case in point.

 

This makes investing across Euro area sovereign bonds (and the currency) at present time a very difficult proposition. True, spreads are abnormally high relative to credit fundamentals associated with our baseline scenario, as we have repeatedly said. Moreover, the ECB is likely to remain heavily engaged in secondary markets, ‘home bias’ alongside the relaxation of some regulatory constraints should help the primary government bond market, and access to central bank funding will remain unlimited. If the market is a forcing mechanism in the way we describe it, now that Italy and France are under so much pressure could mean a resolution is within reach. But the potential downside associated with break-up scenario is, for the reasons reviewed above, incommensurable. And even assuming that a political agreement on fiscal flows is reached, the exact form of mutualization of the sovereign debt currently outstanding could change expected returns considerably.

 

For the same set of reasons, as the ‘end game’ approaches the rally in AAA-rated Euro area sovereign bonds (Germany’s especially) no longer seems sustainable and could reverse in coming weeks. In our base case of more intrusive control on future deficit financing, the core countries will, in exchange, have to shoulder a greater part of the legacy credit risk of their peers if they want to keep EMU alive. In a ‘break-up’ scenario, the creditor ‘core’ countries will be confronted with a wave of insolvencies, which would also worsen their fiscal position. And in the middle ground between these two outcomes, where we currently stand, the ECB will be intermediating growing intra-Eurosystem imbalances. Through this monetary channel at the heart of EMU, the ‘shadow’ credit risk of the core countries is already rising, and at an increasingly rapid pace.

And then proceeding backward:

Goldman on how the risk of a Euro ‘Break-Up’ is starting to be priced

The situation in the Euro area funding markets took a sharper turn for the worse following the Greek government’s announcement at the beginning of November that there would be a referendum on the austerity measures associated with the second Greek financing program. In response to this announcement, policy authorities at the highest level started to make explicit reference to the possibility of a country leaving the Euro area and (by implication) re-introducing a national currency. Although the Greek referendum was eventually aborted, such references to a ‘break-up’ have led to an escalation of market tensions, as the whole structure of EMU was formed on the basis that adoption of the Euro represented an irrevocable commitment.

 

No sovereign issuer, not even Germany, has been immune to the ensuing escalation of tensions, suggesting that the sovereign and banking crises have now assumed a fully systemic dimension: investors are increasingly questioning the survival of the Euro and the Euro area. In this context, French bonds have suffered in particular, owing to the large size of France’s banking sector and its reliance on wholesale funding, the significant exposure of these banks to peripheral sovereigns, and the state’s implicit guarantee of its banks. France is also currently debating its 2012 Budget and the opposition Socialist party (which controls the Upper House) is resisting the introduction of fiscal restrictions in the Constitution.

 

In currency markets, in spite of a sharp increase in option skew, the spot Euro exchange rate against the Dollar has declined moderately up to now, considering what is at play. As Thomas Stolper and team have argued in our Foreign Exchange Research contributions, the dislocation in sovereign and bank funding markets has largely been reflected in intra-Euro-area flows across countries (as ‘home bias’ has increased), rather than capital flight from the Euro area as a whole. On the contrary, inward flows have picked up, reflecting the sale of foreign assets from financial institutions.

 

Moreover, the ECB’s full allotment policy against a wide collateral pool (extended in some cases by national provision of Emergency Liquidity Assistance, or ELA, where depository institutions can pledge poor quality assets that are no longer accepted in the ECB’s repo operations to obtain cash) has played a significant role in intermediating these intra-Euro-area flows. This has led to an accumulation of credit risk at the ECB and rising intra-Eurosystem (im)balances (sometimes labeled TARGET 2 imbalances). This assumption of credit risk implies that creditor countries (like Germany) face significant losses in the event of a disorderly dissolution of the Euro area, and this helps explain why even German yields have come under upward pressure.

 

But, as the market situation deteriorates and the possibility of a break-up of the Euro area is re-priced, there is the potential for capital flight to occur from the Euro area as a whole (rather than from specific countries within the Euro area to other countries within the Euro area), creating pressure for a weaker Euro exchange rate at least until the policy stalemate is resolved.

Goldman on "Market Pressures as a ‘Forcing Mechanism’" -  as in the same pressures that forced Silvio to step down in less than 48 hours.

To be clear, our base case remains that the Euro currency and the Euro area will survive intact. We are of the view that the intensification of market pressures in the ‘core’ countries (notably France and the Benelux) will play a crucial role as a ‘forcing mechanism’ of a political breakthrough in the ongoing negotiations over the Euro area governance structure (and news of a Franco-German initiative to be unveiled ahead of the EU Summit on 9 December is a step in this direction). In return for some ‘socialisation’ of the risk in the stock of outstanding sovereign liabilities (the ‘debt overhang’), weaker EMU countries are likely to agree to being subject to more intrusive scrutiny over their public finances and ultimately a loss of fiscal sovereignty should adverse circumstances emerge.

But whereas the ‘flow problem’ of this debate is becoming more intelligible along the dimensions discussed earlier, how the ‘stock problem’ will be handled is still very unclear. Indeed, a number of schemes to achieve what a mutualization of credit risk can be envisaged.

 

The ‘cleanest’ (and thus, given the markets’ search for clarity, probably the most effective) solutions offer an unconditional underwriting of that risk among EMU members. The refinancing of existing public debt and new deficits through the issuance of joint and several Eurobonds would give an unambiguous signal that all Euro area sovereigns stand behind the legacy debt and that the credit risk in individual countries’ liabilities will be shared on all countries of the area.

 

Potentially unlimited purchases of sovereign debt by the ECB to enforce pre-announced yields caps would achieve a largely equivalent result in economic terms, since – as we have argued in the past – the Eurosystem’s balance sheet and capital structure offer an alternative vehicle to achieve such Euro area-wide risk sharing. In order to sterilize the injection of liquidity resulting from these purchases, the ECB could issue term bonds under its own name, which de facto would replicate the structure of a joint and several Eurobond.

 

However, the likelihood of such a ‘clean’ solution being introduced is, in our view, low, at least at this stage. The clarity of the commitment to risk-sharing that underpins these schemes stems from its unconditional nature. But those providing the financing are unwilling to offer such an unconditional commitment. Absent a pooling of the tax base across countries, both these outcomes would result in a transfer of credit risk onto the shoulders of the existing AAA-rated issuers, either explicitly or indirectly via the ECB’s balance sheet.

 

Leaving aside the binding constitutional impediments in taking this route, the German authorities are not prepared to ‘sign a blank cheque’ underwriting the fiscal situation throughout the Euro area, as an unconditional Eurobond would imply. Equally, the ECB’s reluctance to cap sovereign yields stems from its concern that the unconditional commitment this implies could soften governments’ budget constraints and again offer opportunities to free-ride on the fiscal strength of others, leading to fiscal indiscipline and accumulation of new imbalances. No wonder, the ECB requested a series of fiscal measures before starting to purchase Italian debt this past summer.

 

Given these constraints, different schemes are required that recognize the need to satisfy the concerns of those effectively providing the underlying guarantee (the ‘hard’ core countries around Germany and the ECB), and concomitantly to impose discipline on governments to ensure that new imbalances do not emerge in future, while offering the clarity and simplicity of support that the financial markets currently demand. Said differently, the challenge facing the European authorities is to offer a sufficiently unconditional guarantee of credit risk socialization to satisfy markets, while simultaneously making the guarantee sufficiently conditional to discipline governments (incidentally, the same principles apply in relation to bank funding). Stated that way, the magnitude of the challenge is clear.

Europe's only hope: "Towards a Mutualization of the Legacy Debt"

The ongoing discussions in Brussels and between European capitals are edging towards formulation of schemes that address these issues, and some basic elements of an agreement are starting to transpire. Specifically, the fiscally stronger countries are prepared to accept some form of mutualization of the risk in the existing debt stock in return for a new, enforceable scheme for fiscal discipline in the future. That way, they are not writing a ‘blank cheque’, i.e., underwriting the rest of Europe forever without first ensuring a pooling of their tax bases, but rather making a finite one-off (albeit large) payment to cover the mistakes of the past and create opportunity for a ‘clean start’ by countries currently under market pressure. In our view, such mutualization of the risk in national debt overhangs should be enough to ensure the survival of the Euro and the Euro area, from which the fiscally strong countries – that underwrite this mutualization – benefit significantly.

 

Judging from the material emerging from Brussels and other capitals, technical work on various aspects of these schemes, each carrying its pros and cons, would appear reasonably advanced. A proposal to set up co-Investment Funds (CIFs) for sovereign bonds of selected issuers seeded by the EFSF (which would take the first loss on any credit event) forms part of the list of options under consideration. The EU Commission published last week a lengthy Green Paper on the design of Eurobond instruments. These could be used to fund a sovereign ‘bad company’ warehousing a large chunk of legacy liabilities of EMU members, until they run off. Of course, making decisions operational will take time: Treaty change in the EU is a lengthy and risky process, as we have seen in the past.

 

Given such reassurance from governments, we believe the ECB would move from its existing stance of passive ‘containment’ of bond market tensions to a more forceful response. The ECB’s actions would represent a ‘bridge financing’ of sorts ahead of Treaty revision regulating the flows, which would be associated with the mutualization of the risks in the debt overhang. This shift could take place ahead of the heavy calendar of bank and sovereign bond rollovers starting in the first quarter of next year. Any increased purchases of sovereign debt arising from this new stance could be justified as a form of ‘credit easing’, in the face of already low ECB policy rates, a substantial weakening of economic activity amplified by the ongoing contraction of bank funding avenues, and the potential emergence of downside risks to price stability as inflation falls. Our forecasts and current PMI readings imply the Euro area is already re-entering a recession, supporting the case for further monetary easing of this type.

Goldman's observations on a Potential Break-Up Scenario

The above scenario sketches one path on how the Euro can be sustained, even from the current unfavorable starting point. Given that negotiating and agreeing Treaty changes (which, despite their current presentation by European leaders, are hardly ‘limited’) is necessary to resolve the current impasse but likely to be a drawn-out process, it is not difficult to foresee the recurrence of potentially destabilizing events of the kind we have witnessed in recent months during the interim: Failing bond auctions, political instability, bank failures, and simply outright disagreement. And all of this is occurring in an environment where a deepening recession is likely to make achieving current fiscal targets extremely challenging.

 

Our baseline case that policymakers will ultimately do what it takes to avoid such an outcome requires political actors to behave in a rational and consistent manner, and assumes there will be no further destabilizing unanticipated ‘shocks’ along the way. But particularly considering how much damage to confidence has now been inflicted, one must also entertain the possibility that the intensification of market tensions and/or deterioration of economic activity reinforce each other feeding domestic political and social pressures precluding a final agreement among EMU member states from being reached. In this case, rather than being the ‘forcing mechanism’ that drives agreement, the economic and financial environment could feedback into the political process in a negative way, leading to a vicious downward spiral and, ultimately, to the failure of the Euro project.

 

In short, an alternative scenario of a ‘break-up’ of the Euro area certainly cannot be ruled out. Given the intensely political nature of the determining process at play, assigning probabilities to our baseline scenario and alternative ones is difficult. What we can say at this stage is that the next several weeks will be crucial: If a political breakthrough of the type described above is not achieved before the refunding cycle picks up in earnest in mid-January, the probability of a spiraling out of control towards a break-up would substantially increases.

 

Against this background, we offer a few considerations on the implications of the Euro’s demise:

  1. A break-up of the Euro area is, by definition, an extra-institutional event. It was not foreseen in the Treaty establishing EMU and thus there is no established legal procedure to govern the process. This implies that any such process is likely to be plagued by uncertainty and chaotic. We are in the realm of ‘unknown unknowns’ (or ‘Knightian uncertainty’ in economics parlance), rather than risks that can be associated with probabilities. By its nature, this scenario is therefore difficult to describe and hard to price and/or assess from a risk management perspective.
  2. Contrary to the opinion of some observers, we hold the view that the likelihood of an ‘orderly break-up’ or ‘managed divorce’ (the dissolution of Czechoslovakia is sometimes held up as a precedent) is low. Beyond the fact that there is no ‘pre-nuptial’ agreement in the event of such a divorce, markets operate more quickly than political negotiations. As soon as the prospect of an exit or break-up is entertained, we would expect a run on sovereign bonds and bank deposits in the weaker countries as investors seek to protect themselves from being paid in a devalued currency. And measures taken to limit these flows (and, by implication, to limit the exposure of other countries to any such devaluation) would lead to the dissolution of the monetary union ahead of any formal political announcement, as they would disrupt the equivalence between Euros held in one part of the Euro area and those in another (which is the key feature of monetary union). Moreover, given the legal and economic uncertainties mentioned above, such an eventuality could also precipitate such runs even in the fundamentally stronger countries, as investors seek safe-havens outside the Euro area. Recent experience with the Swiss Franc illustrates this case. The introduction of ‘exit clauses’ in the Treaty as a punishment for fiscal profligacy would, in our view, be similarly self-defeating.
  3. Given the deep integration of the European financial system and the deep inter-linkages we and others have amply documented and large intra-Euro-area financial exposures that result (not least on the Eurosystem balance sheet itself, as reflected in TARGET 2 imbalances), the exit of one country is unlikely to occur in isolation. While smaller strong countries – faced with the take-it-or-leave-it choice of keeping the Euro but with a potentially significant erosion of fiscal sovereignty – could possibly leave EMU without inducing a wider meltdown (we say possibly because an ‘exit’ route would have been opened, and this in itself could be destabilizing for the reasons stated in sub 2), in the event of a more disorderly exit of a weaker and/or larger country, the economic, financial, political, and psychological channels of contagion would trigger a wider market malaise, anticipation of further exits and runs on sovereigns and banks that may make further exits hard to resist. More generally, once the supposedly irrevocable commitment to monetary union is broken, the stabilizing mechanisms that result from that commitment break down. In short, removal of one country is unlikely to be an isolated event – it would quickly become systemic.
  4. The economic costs of a break-up scenario are difficult to calculate, but undeniably large. Implicit in the above discussion are very large disruptions to the system of payments and the financial system at large, as bank and sovereign funding dry up in all countries and – after exit – the ECB is no longer willing to provide alternative financing. More fundamentally, all contracts under domestic law in both the financial and real economies could be subject to renegotiation, as parties to the contracts demand to be paid in Euros or the new currency (according to the position they hold). For example, in the case of a country with a new currency that depreciates rapidly, a large number of firms with domestic income in domestic currency but foreign liabilities in Euros would likely be pushed into bankruptcy.
 


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Sun, 11/27/2011 - 20:10 | Link to Comment Carlyle Groupie
Carlyle Groupie's picture

Meanwhile the squids wife is standing in line shooting off her .38 in order to get to the front without waiting.

http://maxkeiser.com/2009/08/06/lloyd-blankfeins-wife-freaks-out-at-havi...

Sun, 11/27/2011 - 20:14 | Link to Comment SwingForce
SwingForce's picture

Are these the same bee-otches who got $Millions from TALF to buy assets backed by..., uh, those same peasants inline in front?

Sun, 11/27/2011 - 20:19 | Link to Comment Carlyle Groupie
Carlyle Groupie's picture

The Squid bish got some shoppin to do!

Sun, 11/27/2011 - 20:22 | Link to Comment SwingForce
SwingForce's picture

They be about 24 hrs late for Tar'get

Sun, 11/27/2011 - 22:03 | Link to Comment He_Who Carried ...
He_Who Carried The Sun's picture

Since when does Goldman get it right? Ridiculous idea...
Other than wasting their client's money, what DO they get right?

Sun, 11/27/2011 - 20:28 | Link to Comment Schmuck Raker
Schmuck Raker's picture

OWS missed the boat IMO; Occupy the Hamptons.

Or Occupy Greenwich. Fewer rent-a-cops, hit 'em where they shop/live.

Sun, 11/27/2011 - 20:47 | Link to Comment topcallingtroll
topcallingtroll's picture

OWS isnt missing any boats.
The virus will be spread.
Protest only goes so far.
The are photographing squid, boa, and jpm employees and learning their habits.

I sure would hate to be a squid employee right now. Never knowing when I am going to be served a shit sandwich and much much worse because there are some superhard core OWS types and they are organized in small cells difficult to penetrate.

Sun, 11/27/2011 - 21:00 | Link to Comment Carlyle Groupie
Carlyle Groupie's picture

Oh please don't hurt any of the banksters or their political enablers. Please don't or they will make us pay more taxes.

Please. I'm a gentile little sheeple. I say please.

Sun, 11/27/2011 - 20:30 | Link to Comment SHEEPFUKKER
SHEEPFUKKER's picture

Squid red tide

Sun, 11/27/2011 - 20:18 | Link to Comment SwingForce
SwingForce's picture

Consulting with "Super Secret Squid Decoder Ring" for answers, rally-on! Garth.

New Saturday Cartoon Show, "The Crisis Fighters" starring Merkel & Sarkozy.

Sun, 11/27/2011 - 20:10 | Link to Comment bob_dabolina
bob_dabolina's picture

It's gona' be one of "those" nights.

Sun, 11/27/2011 - 20:21 | Link to Comment Unprepared
Unprepared's picture

One of these morning. Won't be very long.

You'll look for me, and I'll be gone.

http://www.youtube.com/watch?v=0eDMHyfezxM

Sun, 11/27/2011 - 20:42 | Link to Comment SwingForce
SwingForce's picture

This better be Zeppelin, or else........

AUGH! I'm dying http://www.youtube.com/watch?v=C6e6jFSoa28&feature=related

Sun, 11/27/2011 - 20:10 | Link to Comment BW
BW's picture

Start buying euro bonds

Sun, 11/27/2011 - 20:14 | Link to Comment DormRoom
DormRoom's picture

Aferall, Goldman Sachs originated the protocols for crisis capitalism, and the consolidation of capital & power therein.

Sun, 11/27/2011 - 20:11 | Link to Comment John Law Lives
John Law Lives's picture

Wow!  The rumor mill now suggests the IMF is preparing an $800 Billion package for Italy and Spain.

http://www.telegraph.co.uk/finance/financialcrisis/8919470/IMF-drawing-u...

It is amazing how hard the machine lashes out when the wealthy feel threatened...

100% FUBAR.

 

 

 

Sun, 11/27/2011 - 23:37 | Link to Comment Uncle Sugar
Uncle Sugar's picture

Sarkozy will be forced to sleep with Merkel if he wants her to approve an ECB printerpalooza bailout. That's what she's holding out for.

Certainly a tough task considering the prime piece he's got chained up back at the chateau.

 

Sun, 11/27/2011 - 20:11 | Link to Comment Lord Welligton
Lord Welligton's picture

Through this monetary channel at the heart of EMU, the ‘shadow’ credit risk of the core countries is already rising

Should this be the "shadow banking" credit risk?

Sun, 11/27/2011 - 20:14 | Link to Comment evolutionx
evolutionx's picture

APRES NOUS LE DELUGE

A deluge of an unprecedented magnitude is both inevitable and imminent. The consequences of the economic and political mismanagement will have a devastating impact on the world for a very long time. And the consequences will touch most corners of the world in so many different areas; economic, financial, social, political and geopolitical.


http://www.mmnews.de/index.php/english-news/7423-apres-nous-le-deluge

Sun, 11/27/2011 - 20:16 | Link to Comment DeadFred
DeadFred's picture

Cramer says it's going to be ugly and Goldman says it's going to be ugly. Sorry, the conclusion is clear, there will be a rally this week.

Sun, 11/27/2011 - 20:30 | Link to Comment bob_dabolina
bob_dabolina's picture

which will be the green light for Goldman to do what it does best: step in and fill the financial and power vacuum.

WRONG. Time to let the U.S taxpayer step in and fill the financial vacuum and let Goldman profit from it.

Goldman doesn't do shit but gamble compulsively as a "bank holding company" Still waiting for GS branches and ATM machines. 

Goldman can suck a fart out of my asshole, keel over and die, and I wouldn't give a shit. 

edit: Goldman has an ATM machine...by ATM I mean "ass to mouth" which is all it really provides to anyone.

Sun, 11/27/2011 - 20:17 | Link to Comment CPL
CPL's picture

Hey look!

 

It's the Sunday night rumour.  Thought I might have missed it.  Should last until 10:30am EST...again.

Sun, 11/27/2011 - 20:22 | Link to Comment sabra1
sabra1's picture

isn't it just weird how the euro shot up, then was shot down, in a short time frame? i would be vewwy vewwy caweful, wabbit!

Sun, 11/27/2011 - 20:28 | Link to Comment tom a taxpayer
tom a taxpayer's picture

GS lets the screeching cat out of the bag:

"Contrary to the opinion of some observers, we hold the view that the likelihood of an ‘orderly break-up’ or ‘managed divorce’ ... is low... markets operate more quickly than political negotiations. As soon as the prospect of an exit or break-up is entertained, we would expect a run on sovereign bonds and bank deposits in the weaker countries as investors seek to protect themselves from being paid in a devalued currency. And measures taken to limit these flows...would lead to the dissolution of the monetary union ahead of any formal political announcement, as they would disrupt the equivalence between Euros held in one part of the Euro area and those in another (which is the key feature of monetary union)."

This paragraph should be in bold, BOLD, BOLD

 

Sun, 11/27/2011 - 22:08 | Link to Comment Manthong
Manthong's picture

"markets operate more quickly than political negotiations"

It's going to be a bitch when the bender ends.

“Markets move so much more rapidly than EU bureaucracy understands,” (Aug 8)
http://www.cnbc.com/id/44030170/Markets_Moving_Faster_Than_Euro_Policy_Citi_Advisor

“Markets are “pricing in the endgame” for the euro as the situation moves faster than politicians can act, UBS has warned”
http://www.telegraph.co.uk/finance/markets/8918763/Markets-pricing-in-endgame-for-the-euro-warns-UBS.html

“Europe’s Crisis May End in a ‘Violent Blow-Up’: Galbraith”
http://finance.yahoo.com/blogs/daily-ticker/europe-crisis-may-end-violent-blow-galbraith-161311592.html

 

 

Sun, 11/27/2011 - 20:19 | Link to Comment SwingForce
SwingForce's picture

"The Creature From Jekyll Island", by G. Edward Griffin  (Top Right, click DOWNLOAD and then Download Anyway):

https://docs.google.com/open?id=0B3-C4NLkRQu7MTUwYzUxM2QtYjU1NS00N2UyLWJ...

He's still alive, and writes a newsletter: http://www.realityzone.com/currentperiod.html

Sun, 11/27/2011 - 22:58 | Link to Comment my puppy for prez
my puppy for prez's picture

He's a rockstar and my HERO!

Mon, 11/28/2011 - 13:26 | Link to Comment Motley Fool
Motley Fool's picture

File is password protected...?

Sun, 11/27/2011 - 20:25 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

Where do these goldmanites get their names.

Seems like they play scrabble for them,and then leverage the letters.

Either way.....

,,,,,,,,,,,,,,,,,,,Fuck You's Goldman Sachs........................

Sun, 11/27/2011 - 20:21 | Link to Comment ISEEIT
ISEEIT's picture

Fuck Goldman sacks.

"Our alumni now effectively run the world", "and so with confidence we can assure all that they are truly and completely screwed". 

Mission accomplished.

Sun, 11/27/2011 - 20:21 | Link to Comment Racer
Racer's picture

ex Goddam Suckers also in BofE...Ben Broadbent

Sun, 11/27/2011 - 20:23 | Link to Comment phungus_mungus
phungus_mungus's picture

Just like the US financial crisis, Government Sachs has always stood to make untold amounts of money whent he EU implodes... 

 

So if Government Sachs is licking its chops then its almost over. 

Sun, 11/27/2011 - 20:31 | Link to Comment No Mas
No Mas's picture

Pssst.... Hey guys - the Futures are speaking and they don't give a shit about you dumbass gloom and doom nonsense.

The ZH Sheeple.  Lambs to the slaughter - again.  Silly, silly boys.

Listen.  Quietly now.  The futures are speaking and you should learn to listen :)

Sun, 11/27/2011 - 20:37 | Link to Comment MsCreant
MsCreant's picture

Psst....Hey guy? If the futures market is speaking to you, and these dumbass sheep can't hear it, why don't you just trade against them?? Why do you need to type inane shit like your post above? 

But alas, I could not resist answering you either.

Carry on fucktard. Carry on.

Sun, 11/27/2011 - 22:21 | Link to Comment Carlyle Groupie
Carlyle Groupie's picture

Sun, 11/27/2011 - 20:48 | Link to Comment LouisDega
LouisDega's picture

Shit , i just bought a $60,000 RV in US $$$.  Now what? BTW, 8  people were also buying an RV the same time i was.

" Life is good, then you die"

Sun, 11/27/2011 - 20:46 | Link to Comment calgal
calgal's picture

No mas troll

Silly silly boy
Listen....quietly....

Everyone here thinks ur a dumbass!

Sun, 11/27/2011 - 20:34 | Link to Comment MsCreant
MsCreant's picture

I was just talking to a 20 something, she is a car sales person. I told her about the Volt failing some crash tests and the recall. She had not heard about it (she sells Chevys). I commented "Just like all of Obama's other hair brained enviro schemes that he gets his name behind, that too is blowing up in his face." She looked at me and paused, then said, "It's a good thing I don't follow politics, or I'd be pissed all the time." I could tell she wanted me to just shut up. So I did.

Imagine trying to explain "euro bonds" or the rest of it to her. It kills me, she is a smart girl. She just doesn't care or want to be troubled (her life is troubled enough, she hates her job, needs to move, does not know what she is going to do, etc.)

Never mind football, NASCAR, and American Idol. There is a culture of not talking about and looking into these things that we are up against. There is also the fact that this economy has created a situation where folks are scrambling hard to take care of themselves, so they don't have time to look into economic news, and when they do have time, they just want to fuck off.

[Deep sigh.]

Sun, 11/27/2011 - 20:49 | Link to Comment nmewn
nmewn's picture

Its hard (at times) to impress on the young the importance of self determination...life can be a struggle at that age. I know I was pretty much worthless until around 25-30...lol.

When one starts accumulating "stuff" and has children perspective begins to change from self to them...then it starts hitting home. I don't fault them, actually I'm kinda envious of their obliviousness.

Sun, 11/27/2011 - 20:58 | Link to Comment chubbar
chubbar's picture

You wouldn't be if you knew the brick wall they are going to hit shortly. You at least have some preps (or should)and are mentally prepared at some level.

Sun, 11/27/2011 - 21:25 | Link to Comment nmewn
nmewn's picture

I'm not unfeeling about the young. It was tough for me and the lady who would become my wife starting out as well.

I remember I had saved a bag full of bicentennial quarters (gotten through pocket change) which allowed us a few bottles of Jack Daniels here and there & a few meals back in the day. 

Price wise, they would have little value today...the memories though are priceless ;-)

Sun, 11/27/2011 - 21:50 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

Maybe the American public is instictively wise in not thinking too hard about these matters as there is very little they can do about it... You can rail all you want about Obama this, Obama that but the reality is that he is just a cog in the wheel. It is just the nature of the human system -- this iteration's expiry date is coming up. TPTB are buying time while they figure out (and negotiate) the shape of the new arrangement that can be inflicted on America and the rest of the world -- the system will not necessarily be fair (just like the current one) but it is what that can be inflicted while finding some level of stability (every one will feel the pain, the weaker, more so).

So, chill out...

Sun, 11/27/2011 - 22:38 | Link to Comment FutureShock
FutureShock's picture

True - I hope the powers make the right moves. Talking with my family over the holiday was beyond futile. No clue and no desire to talk. I have some meager preparations but not enough and they are just clueless. If I wasn't here waiting in distress I suspose I would enjoy life more.

Sun, 11/27/2011 - 21:58 | Link to Comment Carlyle Groupie
Carlyle Groupie's picture

"I was just talking to a 20 something, she is a car sales person."

Was she hawt? Could you please go into more details about her, her height, figure, cleavage, hair/eyes, foot arch?

It would amplify the interest in your story.

Sun, 11/27/2011 - 20:34 | Link to Comment RobotTrader
RobotTrader's picture

Futures rolling over

As usual, silver is getting hit the hardest out of all the items in the Risk Basket.

Wildebeest Herd will once again pile into Treasuries for the ultimate in safety and wealth preservation.

Sun, 11/27/2011 - 21:09 | Link to Comment kito
kito's picture

robo, are you looking at last weeks charts? your fabulous hindsight is failing you. silver is up over 2 percent, as are the dow futures. when you have an alleged 800 billion bailout of italy, that tide will surely lift all boats

Sun, 11/27/2011 - 21:11 | Link to Comment Hulk
Hulk's picture

Silver getting hit hard? What fucking planet are you on ???

Sun, 11/27/2011 - 22:01 | Link to Comment Carlyle Groupie
Carlyle Groupie's picture

So what are you saying dude? No stocks now, instead Treasuries?

I've always followed you with lemming like precision. Should I be long the 10/30? Add a NOB spread?

What should I do? Please help!

Sun, 11/27/2011 - 22:07 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

as our Robo_Teacher, are you demonstrating that the squid's bullshit is smoother than yours, and thus more palatable?

or is your bra too tight?

silver is ^, R_T, and Ts are down

does this mean there is no hope for safety and wealth preservation, obi-globi kenobi?

Sun, 11/27/2011 - 20:35 | Link to Comment chump666
chump666's picture

Yes Goldman, the endgame is so close now, but any-print job by the ECB/FED/IMF and who ever the f*ck else...oil goes to 100 you might as well prepare for a major War starting up, between superpowers.  Um, did you not notice China's joint military exercises in Pakistan last few days?...Reminding us, that a clean sweep of western forces out of Afganstan is probably going to take place very very soon...

Europe Union is dead, just a zombie now...and your banks will be next.

Global conflict is the next cue.  In saying all that, week or so rallies won't break resistance nor new highs.  Juicy short/swing trades pre x-mas

Sun, 11/27/2011 - 20:46 | Link to Comment flopwedge
flopwedge's picture

Global conflict?.......Where are the Red Armies, where is the Luftwaffe and the Panzers?....Where is Hiro Hito and his millions?..............there are no armies for globle war..........there are only low, very low IQ Islamic Jihadists, that can only shoot with one hand..............................we can take them with the Mexicans on the border.....they don' t have badges either....\

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

 

 

flop

 

 

 

Sun, 11/27/2011 - 21:37 | Link to Comment merchantratereview
Sun, 11/27/2011 - 22:41 | Link to Comment chump666
chump666's picture

...and combine that with Pakistan.  

Now remember India is kinda pissing off China at the moment re: Vietnamese oil reserves China sea etc, that and the US just blew 20 + Pakistan soldiers to hell at the time when China' s military  top brass are providing joint exercises with Pakistan.  The sugar on top?  Pakistan, China, Russia DO NOT want US/western forces in Afghanistan.

2012  there will be a major skirmish  either with Afghanistan or India/China.  So Goldman should forget about f*cking Europe, they are done.  Stock rallies will be muted, not going to see 2009 meltups underwritten by the US taxpayer.  Nothing will save that Euro zone.  It's all war now, with economic depression and dashes of oil inflation.

Markets will be sell into oblivion on a major conflict...but in the meantime some rallies into 2012.  Huge volatility swings.  Still $ to be made.

War is the next crisis.

 

Sun, 11/27/2011 - 20:49 | Link to Comment f16hoser
f16hoser's picture

We need new and more exotic Financial Products to bet on/with. The old stuff isn't working anymore. Tulups anybody?

Sun, 11/27/2011 - 20:49 | Link to Comment TheSilverJournal
TheSilverJournal's picture

If the Euro breaks up or if any of the larger Euro countries default, the world's fiat monetary system will end rather quickly. The system is so intertwined that everyone owns everyone else so if a big country goes down, it will be like watching the dominoes fall. Because of the severe consequences of breaking up the Euro (end of fiat), Germany will agree to the ECB printing Eurobonds and no large country will be allowed to default. Fiat ends when the USD hyperinflates which shouldn't be too long now.

Sun, 11/27/2011 - 21:01 | Link to Comment Eireann go Brach
Eireann go Brach's picture

So US taxpayers will pony up $100 billion to bail out Italy and Spain..insanity!

Sun, 11/27/2011 - 21:24 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

If we want to contnue to perpetuate this global financial system (which has been hugely beneficial to us), we better pony up. After all it is just dollars -- not real stuff.

Sun, 11/27/2011 - 21:06 | Link to Comment Newsboy
Newsboy's picture

Crash the Euro HARD, really HARD.

The ECB can take steps to do this.

Then all the Euro members go back to their old currencies at the same time, and they won't look too bad by comparison.

Sun, 11/27/2011 - 21:10 | Link to Comment nmewn
nmewn's picture

"...leading to a vicious downward spiral and, ultimately, to the failure of the Euro project."

Project?...lol...nothing but lab rats bitchez.

Sun, 11/27/2011 - 21:19 | Link to Comment oogs66
oogs66's picture

short csj!

Sun, 11/27/2011 - 21:34 | Link to Comment GeorgeNY
GeorgeNY's picture

"Knightian uncertainty"! I hardy think so. You just spent half the paper describing this as a possibility. Is that kind of the new shorthand for saying that the "sh*t hits the fan" or is it really sort of "life as we know it will no longer exist" i.e. everyne is bankrupt and we need to hit the reset button or just sit there staring at a blank blue screen. 

People get paid real cash money for writing this stuff?

Sun, 11/27/2011 - 21:39 | Link to Comment merchantratereview
merchantratereview's picture

Not paid in real money, just fiat. But it pays the bills....

Mon, 11/28/2011 - 00:44 | Link to Comment Tompooz
Tompooz's picture

I wonder how Goldman is trading the scenario  for itself. Has it sold or bought massive CDS'es on selected European debt? 

Or is it getting ready to purchase solid core countries' debt with overvalued USD?

(How much can they borrow  from the Fed to do that?)

The narrative of an expected selloff of German and Dutch bonds makes you think that they are quite willing to take the other side of that trade.

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