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Goldman Remains Cautious On Europe As Negative Feedback Accelerates
As seems obvious from the market's reaction over the last week, European problems are not solved by short-term liquidity band-aids. In fact, as Goldman notes this week, the same economic and political risks remain even if some funding relief has been put in place. With sovereigns and financials leading one another to new lows since the LTRO, the negative feedback loops remain in full force. Given the difficulties on the road ahead – and significant ongoing differences across governments on how to resolve them – the risk of political miscalculation or errors is unfortunately still very clear. In the limit, those instabilities could still put the union on a path towards a break-up. Economic weakness in the meantime will intensify the challenges for the weaker sovereigns.
Goldman Sachs: Global Economic Weekly - New Questions For The New Year
Does recent European news change our view of Eurozone risks?
Not really. Funding relief was our central case, and the same economic and political risks remain.
The last month since our forecast has seen renewed policy action by the ECB and fresh proposals from Eurozone leaders. The expansion of USD swap lines, easing of collateral rules and the 3-year LTRO all help to assure cheaper and stable funding across the banking system, which should help reduce systemic risks. We have always expected, however, that the ECB would do what was required to prevent a major funding breakdown (and we think they will continue to do so). The larger issues continue to center on how to settle the sovereign funding situation and to reverse the cyclical weakness in the periphery. On that front, the story remains largely the same.
The outlines of the process for dealing with the sovereign crisis have become a little clearer.
The plan is to move towards a set of new fiscal rules, as set out by the latest summit, in exchange for further risk-sharing on the existing stock of sovereign debt both through expanded ECB purchases and some mutual support by governments. But there is still a long road ahead. There is no Eurozone-wide purchasing facility or insurance scheme yet up and running, nor is there likely to be for several months.
The SMP purchases are likely to continue, but we think they are also unlikely to be scaled up significantly given the ECB’s desire to see a new fiscal framework more concretely delivered. And the negotiations over a new fiscal framework are also likely to become more difficult as specifics are agreed and approvals sought.
This means that even the best case for early 2012 is likely to involve volatility around key events – programme reviews, auctions, IMF disbursements and periodic summit meetings – as in 2011. And we remain skeptical that upcoming events (the Merkel/Sarkozy meeting on January 9th or the EU leaders’ summit on January 30th) will give discrete breakthroughs.
Given the difficulties on the road ahead – and significant ongoing differences across governments on how to resolve them – the risk of political miscalculation or errors is unfortunately still very clear. In the limit, those instabilities could still put the union on a path towards a break-up.
Eurozone Feedback Loops: Focus Back On Sovereigns
Economic weakness in the meantime will intensify the challenges for the weaker sovereigns (Chart above). The good news is that Germany’s data have been better than expected for Q4, which should support Eurozone aggregates. But Italy’s economic picture has remained difficult, Spain’s deficit estimates were recently increased and the commitment to fiscal austerity across the Eurozone is broad-based. Economic weakness and its feedback into public debt sustainability are likely to be even more strongly in focus. The combination of weaker growth and public sector shrinkage is also likely to keep the political landscape in many Eurozone countries turbulent, particularly with elections ahead in France, Greece, Slovakia and Finland in 2012H1.
So our expectation is still that the European growth and market picture will worsen before any more sustainable resolution is achieved.
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Can someone comment on supply lines. How will these weaker countries feed themselves or run their eCONomies if the stronger nations refuse to support any solutions. I simply don't see how war is avoided at this point. Perhaps the "liberation" of Iran will come sooner rather than later?
Somehow i think the war never ended, there was WW1 and WW2, then a change in strategy and use of weapons.
Now we will probably see a change to more conventional warfare as WW3 gets closer.
The results are always the same, destruction of wealth and misery for us and money and power for the Elites.
The chart is BS. What needs to happen is the federal governments involved lay off millions of useless federal workers, balance the budgets, and stop wasting time refinancing debt, Pay the fucking debt off or go bankrupt. Get the fuck out of the way of the productive citizens.
Y = C + I - G + NX. Notice the negative in front of government spending. The sooner these fucks realize they are a parasite the sooner the people can scrape these assholes off and get a real job.
"the circle of life"
the stone age [hunter & food gatherer's]
the bronze age [ hunters/ other's food gathering]
the iron age [the hunted/ other peoples possessions]
the nuclear age [savagery/ total destruction of all peoples possessions]
*the stone age [caves & cadavers]
the circle of life?
They won`t!
War is impossible in europe, nobody has a standing army except maybe for Germany. Civil unrest, rebellion, revolution, possible, war, they don`t have armies to carry out such endevours. Who the fuck will be willing to go to war? All those young eu-brainwashed teenagers? They are high on weed and synthetics, busy listeting to loud music in all kinds of basements & clubs. What war? They don`t have a clue how a tomatto plant looks like! They will starve to death.
Where in Europe are you? That is not the picture I am seeing.
Russians. I suspect they won't forget how to wage war.
I agree. The Russian people are well-aware of the ways of war and know a thing or two about retribution.
No, no. Russia and Germany are forming a new "relationship". Russia's resources, and German knowhow. The dynamic duo will be the next Uber-power.
all your bonds are belong to us!
I'm guessing the way they always have in bad times. Grow their own food.
Many European countries still rely on farms of less than 10 acres for much of their food supply. I believe this is still true in France.
There is more of an age demographic problem than a capacity problem as far as I can tell. As of a few years ago the average age of the English farmer was 65. With few younger farmers coming up to replace them. Portugal has a similar problem.
Maybe a run up in energy costs and a decline in the euro will help the local farmers compete against foreign factory farming.
I had similar thought, but being in agriculture I know many in Europe are still factory farming and everyone is still dependent on the commercial fertrilizers and other chemicals. Your scenario would lead to food hyperinflation overnight, but so be it, just don't know how thinner these folks can get. The last time around there were exponentially fewer mouths to feed, but I digress as most sheeple do not understand basic math much less exponential equations.
We took a barge trip through Burgundy in 2009 and were surprised at the number of fenced fields we could see from the waterway. However, we were also surprised by the very few people we saw during the day in the country and the fact that most fields had no crops on them. A few had charlet cattle or a few sheep but not much else. The small villages where one would expect farmers to live were run down. If I had to guess, it looked like younger people have moved off the farms and only older people still reside in those village homes. Very few cars or trucks could be seen and no farm equipment was visible. It was late August but one would have expected to see crops ready for harvest in such bucolic country.
I thought Goldmansucks was bullish on Euro banks just a few weeks ago...assholes!
Diagramming Euro food-chain (feed-back/suck-back) which is a "4-way Ponzi Eurocopulation Contagion Conflagellation" with necessary (hidden) fluffers staged in the middle.
Amazing diagram of the chain-reaction.
Cautious.
He said "cautious"
Huh ha ha hu hu huh huh
Fucking investment value worse than Bevis and Butthead.
But not as funny.
Jon Corzine was bullish as well.
Just read in VF that the Corzine was looking for French Chateaus (in France) the day before his MF (missing funds) went BK. Maybe he is taking his lead from DSK or Madoff, or maybe Arnold ? Hasta la vista baby ! Corzine's next gig might be running for French Prez or head of Italy ? He might be "up" to it...he might be learning all those Euromancer calestenics. Maybe DSK, Corzine, and Silvio Berlusconi can form the "3 amigos" troika and take over the EU ? Things would devolve more efficiently that way, with 1000:1 leverage of course.
'So our expectation is still that the European growth and market picture will worsen before any more sustainable resolution is achieved.'
Thanks Dr.Obvious.
The story remains largely the same.
Really Goldman? Really? No shit. You cannot magically get rid of these problems. The debt bomb continues to climb and there is nowhere to hide when it ignites.
More debt and printing will do nothing at this point and whoever thought this last move by the EU would save it well the clock is ticking.
Singing...
"What goes up must come down
spinning wheel got to go round
Talking about your troubles it's a crying sin
Ride a painted pony
Let the spinning wheel spin
You got no money, and you, you got no home
Spinning wheel, spinning all alone
Not many seemed too concerned to expose the positive feedback loops as we leveraged up in the great debt/credit money - fiat/fractional reserve global Ponzi scheme. The negative feedback loop is simply gravity taking hold as we retrace our steps. We've had some positive technological advances over the past 40 years, but our monetary system is about to be wiped out... GD2+ and WWIII+.
And BAC is up 6.9% .... bad news is now good news in our markets.
silver is catching a little bid
if this keeps up, we'll rocket thru $30 by Mother's Day!
I notice SLV is trading inverse to TLT since the late sept flush in the pm's anyone know what that's all about ?
w/ ETFs, i think that's just the way da boyz are trading them since the last take-down
silver is "risky" + bonds are "safe" = price inversion
of course, this is 'true' in the world of paper trading games for FRNs & tax liabilities only; if you gamble in the bucket shops, that is up to you
remember: even in las vegas, 70% of the players will be up at some point today...
in the physical world, folks may think differently about what is risky or safe to be holding, right now...
and i said holding, not trading
and on to "$60 by next week"
but trav!
what if those who claim in their "analyses" that silver is worth more than gold are right? in the long run, of course...
L0L!!!
WSJ is indicating the Fed may buy foreclosures and other homes and convert them into rentals which would apparently help B of A. Crazy. Just call me Chairsatan.
A whole new level of crazy. Instead of allowing the market to readjust to reality and let home value become affordable, the gov't will make public the losses that the banks should be showing and then rent us lodging. Of course that lodging will serve a couple of purposes... it will become a vote buying scheme as rent control will seem popular... and it will provide a home for the indentured servants of our next great public works programs that begin when the greater Great Depression finally forces its way through the final flailing attempts to deny reality.
looks like the schematic for the new Magic8BallTM
Betcha if I printed it out, I could run 9 rounds out of 10 inside at a 100 yards, offhand with my Mini-14....
Shouldn't we assume at this point Goldy is taking the opposite side of this statement?
as always yes.............
L0L!!!
i yam wondering just what trade are you discussing w/ the nooob, here?
Nothing builds a relationship. Like a continual need to exchange. I suspect greece will be on weekly and then finally daily and then hourly meetings with the IMF. The more contact the more opertunity to control and influence.
Hungarian premier binds in towards EU and IMF - no crisis. Boring world we live in.
This is just code for "we haven't figured out yet how to fuck our clients [for the sake of the prop desk] so that their money becomes our bonuses."
http://vegasxau.blogspot.com
"the risk of political miscalculation "
Yeah, like any political maneuver short of default and repudiation would be a solution.
The best line ever. The total catch-all to provide whatever cover needed. This is Paul Krugman type tripe. My idea would work if not for political miscalculation. Gov't isn't bold enough, stimulus doesn't go far enough, etc. The Chris Mortenson video from his presentation in Spain (I believe) should be required viewing for the entire world. This isn't a problem, this is a predicament. There is no solution.
did the EURO just rise 5.5% ?
at least according to Google-Finance data:
http://www.google.com/finance
No.
US bank stress test leak..banks having huge move up....
Haven't seen mention of the euro breaking down past 1.2870 here today.
Seems kind of important...
nice to see you have your shit rolled tight after only 6 weeks, no_000_B! L0L!!!
EURUSD Dips Below 1.28 As All Hell Breaks Loose In Italian FinancialsSubmitted by Tyler Durden on 01/05/2012 - 09:17
[link may not work, as i'm "signed in"; just goto zH.home.BiCheZ]
This would be "positive feedback", just saying
Fuel just went up to 2.17$ per liter here in belgium.
That's 8.23$ per gallon!
In a election year, with fuel so high, that just scream right wing movemnt voting. That will be interesting to watch.
yeah, sodden_D, but you can still get outa the country for less than 10 bucks, so please try to calm down, here, ok?
take a personal day if you...what? none left and it's only the fifth? good4U!!!
sudden debt, rejoice! you have now a proper government!
of course it costs you some, but it's a great honor and you should be glad to pay for it! ;-)
As seems obvious from the market's reaction over the last week, European problems are not solved by short-term liquidity band-aids. In fact, as Goldman notes this week, the same economic and political risks remain even if some funding relief has been put in place.
Liquidity remedies don't cure an insolvency problem. They merely mask the symptoms for a while.
That's been the game since '08. Providing more money (liquidity) so insolvent governments and banks can borrow more money and put off bankruptcy a bit longer.
It's built up the biggest debt bubble in human history, and it's getting bigger month after month.
It's clear proof national leaders and bankers aren't going to do what's necessary to solve the problem.
Providing all this additional liquidity requires money printing which debases currencies and robs more wealth out of people's pockets.
...not that national leaders and bankers care. They're slowly debasing currencies to nothing to keep their huge debt ponzi scheme going, slowly stealing everybody's wealth.
Everybody knows this huge debt bubble is unsustainable. It's gonna pop at some point.
When it does it will happen so fast nobody will have time to "sell and get out". Not even "insiders".
It might just crash the American and Euro financial systems once and for all. There's no way to stop it.
And there's no way to recover from it. What are they going to do? Issue another fiat currency and start over? Doing the same nonsense all over again? Building another huge debt bubble?
I don't think so.
At that pont banks will own everything in America and Europe. They'll simply forecolse. On entire nations.
... and that's when the real revolution starts. When banks try to take over entire nations.
And no, it doesn't matter who is elected president this time around.
This enormous debt ponzi scheme is way beyond any president's ability to change.
from cranky to cranky
"Issue another fiat currency and start over?" ehmm... yes, it has be done a few times by several countries
"banks will own everything in America and Europe" you are really thinking the banks as such have a plan? Or that if they succede in this way that they can prevent a revolution?
Don't get me wrong, I do believe that you are right - just I do believe that the "real life" goes on, too, as it did in Zimbabwe, in Serbia, in Weimar Germany, in Brazil. Hell, Brazil had an hyperinflation not even one generation ago, and now they are booming.
The young will still have their greatest wealth: youth. Symbolized by your gorgeous avatars...
The old might have something to grumble and be cranky about, though...
And the banks will be taken over by the governments. So this all goes back to the Magna Carta..and private ownership of property. Even if you have *your own* piece of the action...you will be surrounded by Government land and Government housing. There won't be enough tax income to pay for prisons, so the prisoners will populate the empty houses, your neighbors will be killers and muggers. We will all live in Government supported ghettos. Food stamps will be replaced by Soylent dog bisquits. No exit.
LMAO! I bet they're "cautious"...
Those euroland CDS's they and MS hold, should they be invoked, would break GS and MS. Both would exist no more...
All in all not a bad thing, eh?
GS and ES are BS!
This diagram looks like the CERN superconducting super-collider. If we can just make the fiat print faster and spin-cycle at faster-than-light-speed, we might be able to expand the Ponzi Continuum to envelope the entire MF Global and Lehman Brothers bankruptcies (travelling at faster than light allows all sorts of new tricks).
When does QEgoogle occur to make this happen ? Has Google and Corzine gotten on-board this concept yet ? Is Corzine still a GS employee (like a Marine...always a Marine ?) ?
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