Guest Post: EFSF - Too Small? Too Big? Or Just Wrong?

Tyler Durden's picture

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Hedgetard55's picture

Since there is no free lunch, this whole convoluted scheme is merely a mechanism to transfer wealth from the stable Eurozone countries to the deadbeats. Sort of like Bubbles Ben transferring my potential interest income to his bankster buddies through ZIRP. Am I right, or did I miss something?

mason5566's picture

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DormRoom's picture

Your analysis ignores China.  China has become the world's PPT.   It willl buy into the EFSF vechicle to ensure Europe's stability, because China's stability depends on it. 


The wolfpack will contend with China soon.


scratch_and_sniff's picture

unintended consequences, i cant work out if thats genuinely funny or if im actually going insane due to too much whack a mole.

Either way, when euro politicians are in the shit, this is who they consult these days...


lewy14's picture

Just wrong, as in that's just... wrong...

knukles's picture

Lemme see here.
The capital contributors to the ESFS are the one and the same EU members.
The ESFS is nothing more than an SVP.
The buyers of the PIIGGY banks debt are gonna be the EU members.
The EU stuffs new money created at the flip of a digital switch from each national central bank member of the ECB or alternatively contributed by a national treasury of an EU member.
Which is put into a SPV that issues debt which will be supported by some form of national, ECB, EU menber guarantees (else nobody'll buy the unrated shit which it would be without the support mechanism).
(For that matter, even with the support mechanism, it's just rated shit, IMHO.)
To turn around and buy the rancid paper of the PIIGGys at a discount to market.
Wherupon, ta-dah, the total notional face value of the PIIGGs debt remains the same as before, meaning that the same interest cost in nominal and real Euros remains the same as it was before, so the true debt burden has not unservicably changed one unservicable iota.  Brilliant!
And any privte entity who sells the stuff at a discount no longer gets to carry it at cost, realizing a loss.  Impairing capital.  Brilliant squared!
But if the ESFS forgives the interst payment on some PIIGGy debt it holds then it is still likely a default across all debt of the same issue, pari passu.
So, the interst cost ramins the same, so what the fuck is who kidding who with all this crap that has been contrived and birthed by numerous politicians scattered aimlessly about 3,000 committees each with its own whothefuckknowswhat hidden agenda other than to kick the can down the road to keep a cushy high paying do naught fuck all job at taxpayer expense, including the US via the IMF portion of the clusterfuck?

Sounds solid to me. 

SwingForce's picture

Hey, where's this money coming from? And where is it going? Does it go straight to the banks to pay of the redemption of the previous bond issue? Well, that would mean no net-new-debt except for interest & fees, so where does the rest of the money go if they are incurring new debt? Banksterz Bonuses? Gov't workerz paychecks? Wow, everybody's getting fat except Mama Cass.

Atomizer's picture

Collapsing all currencies in a strong upward motion is the plan. " We never saw it coming" will be the tall-tale. We still have time to alter the future.. very limited time. Winks.

Manthong's picture

Hmmm.. a sub-prime soveriegn fund.

It worked so well with housing for the crooks and impoverished  here, it's bound to work well for funding crooked and impoverished nations over there. 

They should get Franklin Raines and Barney Frank to help out with it.

Religion Explained's picture

You think they'll securitize it? I'm so all in ...

oogs66's picture

i think the EU is all in, with a 2,3 in hand, and a 4, 7,8,9 showing, non suited.  maybe they will get what they need on the river? :D


Atomizer's picture

Through the window

Its hard not to see these days. Read between the lines, my warning is right in front of you.. You'll thank me in the future

bluehorsesandal's picture

Amazing how many people are fooled (intentionally or not) by such a stupid solutions and plans, particularly those from the sell side and MSM. Few folks out there with minimum intelligence and dignity, Peter Tchir being one of them, are able to spot the amount of rubbish that is being put together. It is not that difficult to get it. It would be much simpler, easier and strait forward to allow a hair-cut clean up throughout the system. Why insist in the same error and make it exponentially bigger by the day. Weak up from the Euro dream (or nightmare) go and move on to the real priorities, social reforms, job creation and investments.  

tradewithdave's picture

Let me see if I can put this in Donk-Fraud terms so that everyone can understand.  I've been building businesses and buying real estate for thirty years.  For those thirty years, I often borrowed the money from the bank.  In 2008 the bank quit lending money for just about anything and if they did the collateral requirements made deals so onerous that the linked to so many other aspects of your base that new deals were destructive to your vested interests.... but wait it gets better.

So, instead of borrowing money from the bank we start buying assets, mainly real estate from the banks.  At least we try to negotiate with them.  But they act really weird like they're not allowed to negotiate.  It takes a couple of months in 2008 to figure out what's up when we realize that they can't mark any of their distressed properties to market so that's why they can't negotiate with us. 

Remember you don't do business for 30 years by making people offers on things.  You make the seller put a price tag on anything and everything before you buy it... at least that's the belief system we've been operating under for entrepreneurial generations... wrong.  Eventually we realize that asking the bank to put prices on things is working against us.  That's when it hits us that the 80/20 rule has now become the 20/80 rule.  You see, it's fairly typical if someone is asking $100 for an item you may offer then $80 for that item as a starting point and then maybe settle on a price of $85 or $90.  That's a typical negotiation, right?  Not in this environment.

That's when we realize that not only is the bank not going to put a price on things, they're not even going to negotiate with us, but it gets way, way better.  We start discovering that we can offer $20 for that $100 item and they will take it.  That's right.  The key is that as long as they aren't asked to price it and as long as we don't engage in a negotiation and as long as we show up with cash, they'll take it about 20% of the time and we only need to offer 20 - 40% of the value.  Of course, value is subjective, but we're talking about very comparable assets; $100,000 properties $40,000 and $1 million properties for $400,000 and so forth.  The key is to base the transactions on rental cash flows rather than price appreciation which is non-existent and frankly unnecessary at these price levels.

So, forget borrowing money and forget negotiating the way you have been taught for generations and start buying for quarters on the dollar.  That's right and that's all we have for the past three or four years.  This story about the ESFS bonds and the range bound aspects of their valuation strategy is the same story as Fannie Mae and the collateralized debt obligations, but there is one key different.  These are sovereigns and these are not simply government sponsored enterprises.  That's why the end game of all this is a roll-up of the TBTF Eurozone banks into an entirely new Euro bond reflection of the U.S. Treasury and the launching of a new "divorced" occidental currency as proposed by Mervyn King and highlighted in numerous blog posts on the site. 

What you're witnessing here is a classic roll-up under a bankruptcy upstreaming model.  It's just a sovereign version of the same idea. Think of it as a Western merger of the USA/Canada/Mexico with Germany/France where the foreclosed upon subsidiaries are the PIIGS.  The cute part of the plan is that via the SDR's "divorce" each sovereign gets to keep their flag, a parade and a novelty coin with their founding father's or queen pictured on the front.  Rather than me buying distressed properties from the bank, it will be the new Occidental SDR purveyors buying distressed countries on the cheap. 

Here's the background...

Dave Harrison


OC Money Man's picture


Winston Churchill warned; “An appeaser is one who feeds a crocodile, hoping it will eat him last”.  Churchill would understand the dynamics of the European and American sovereign debt crisis.  Modern warfare is not about a blitzkrieg of panzers, dive-bombers, and storm-troopers swarming across borders to over-whelm patriotic defenders.  Today’s world dominators sucker their prey into financially destroying themselves from within.  Once the quarry is crippled; the invader walks in and takes control of the victim’s economy on the cheap.  Recently bureaucrats from Austria; Belgium; Cyprus; Estonia; Finland; France; Greece; Ireland; Italy; Luxembourg; Malta; Netherlands; Portugal; Slovakia; Slovenia; and Spain quietly surrendered their sovereignty to Germany.  In contrast, Americans stand alone as the only nation on earth in full rebellion against their government’s dangerous addiction to deficit spending.        

Hitler slyly wrote: “How fortunate for governments that the people they administer don't think.”  Most Europeans did not question the too-good to-be-true claims of the euro when it was first introduced in 2002 as the continent’s common currency.  Overnight, serial debt-defaulters were granted unlimited power to raise huge volumes of cheap capital in the untested euro-bond markets.   Fans boasted the new currency created the largest economic trading group in the world; with 332 million direct users and another 175 million people worldwide who pegged their currency exchange rate to the euro. 

Thomas Jefferson cautioned: “I believe that banking institutions are more dangerous to our liberties than standing armies”; but Europeans don’t study American history.  Germans designed the euro to be dominated by the Frankfurt-based European Central Bank (ECB); who control all money printing and operate the eurozone electronic payment systems.  Member central banks  are allowed to sit on Eurosystem Board, but only as junior members.  With their supremacy of ECB rule-making, Germans implemented banking regulations eliminating reserve requirements for loans to euro members; while increasing collateral requirements against loans to the private sector.  Goldman Sachs and other camp followers gave the local banks access to derivatives; which allowed for astronomic leverage of euro member loans. 

Otto von Bismarck, Germany’s first Chancellor, opined: “When a man says he approves of something in principle, it means he hasn't the slightest intention of carrying it out in practice.”  The nations joining the euro were required to agree “in principal” to abide by strict rules against deficit spending.  It now seems preposterous that after decades of deficit spending, politicians would find the discipline to stop steering money to cronies.  After a nine year binge of borrowing and spending; euro members began defaulting.  Early in the European Sovereign Debt Crisis; euro states announced agreements in principal to solve isolated cases of small countries experiencing “temporary setbacks” with short term loans.  First Greece; then Ireland; then Portugal; then Spain; then Italy; and now virtually every euro member except Germany is experiencing rising financial stress.  The euro-debt burdens are so onerous; defaulting nations have no capacity to ever pay back their bondholding banks; making their banks also insolvent.

Hitler taught: "Economic imperialism, like military imperialism, depends upon power.”  The supposed euro benefits allowed Germany to lure its neighbors into debt traps.  Defaulting euro-members could then chose to either; start a new currency and suffer the same brutal inflationary consequences as Germany’s Weimar Republic after World War One; or surrender to Germany as the only power in Europe with economic size financial wealth to stabilize the euro-system.   In the end, bureaucrats from all seventeen euro-members nations agreed to give control of future bailouts to the European Financial Stability Facility (EFSF), a secretive private bank managed and funded by Germany.  The ESFS has authority to loan money and impose whatever financial conditions it would like on borrowers.  Over the next two years ESFS will bailout Ireland, Portugal, Spain, and their banks.  Austria; Belgium; and Italy will soon follow and France and her banks eventually flirt with insolvency.  The European Sovereign Debt Crisis is over; Germany won.   

Economist John Maynard Keynes advised: “The best way to destroy the capitalist system is to debauch the currency.”  A recent poll conducted for CNN found Americans are so concerned that deficit spending will destroy their capitalist economic system; an overwhelming 74% percent now support hand-cuffing Congress to a Constitutional Balanced Budget Amendment.  The public recognizes that Germany and China with low debt are at full employment; while America with huge debt suffers brutal unemployment.   Germany is acquiring the New York Stock Exchange to increase its economic reach to our shores, while China builds an offensive navy to challenge America’s domination of the Pacific.  The American voter’s hearts and minds have decisively turned against deficit spending; perhaps it is now Congressional crocodiles who should be worried about getting eaten.

snowball777's picture

"...74% percent now support hand-cuffing Congress to a Constitutional Balanced Budget Amendment."

"How fortunate for governments that the people they administer don't think."

"...banking institutions are more dangerous to our liberties than standing armies

"...China builds an offensive navy to challenge America’s domination of the Pacific."

When a man says he approves of something in principle, it means he hasn't the slightest intention of carrying it out in practice.” 

"...Americans stand alone as the only nation on earth in full rebellion against their government’s dangerous addiction to deficit spending. "

Ghordius's picture

Your knowledge about Germany seem profound - a pity you stopped researching so around 1948... Neither the German "Elites" nor the German People are nowadays what you are picturing and your view of the European Union as per now is profoundly skewed...

In short: you are, like many generals, preparing for the last war.

snowball777's picture

Too Small?

Yes, too small to cover the PIIGS nut.


Too Big?

Yes, too big to not cause political troubles in Germany and the other productive EU members.


Or Just Wrong?

Yes, the wrong solution to the core (pun!) problem.


Ghordius's picture

LOL. Yes, I agree, it's wrong, it's the wrong size and it is, at the end, just a bluff. Perhaps it buys a couple of years.

Peak Everything's picture

Let me summarize. They are living beyond their means and they are hoping to fix the problem by borrowing more.

markalister's picture

The American voter’s hearts and minds have decisively turned against deficit spending; perhaps it is now Congressional crocodiles cash loans who should be worried about getting eaten.

markalister's picture

The public recognizes that Germany and China payday cash advance with low debt are at full employment; while America with huge debt suffers brutal unemployment.

markalister's picture

Sorry. duplicate entry.

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markalister's picture

The American voter’s hearts and minds have decisively instant payday loans turned against deficit spending; perhaps it is now Congressional crocodiles who should be worried about getting eaten.