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Guest Post: Euro Tarp - Why It Will Be A Screaming Failure

Tyler Durden's picture


Submitted by Lance Roberts of StreetTalk Advisors

Euro Tarp - Why It Will Be A Screaming Failure

eurozone_crisisIs Dick Fuld running this show?

The Eurozone bailout, now being referred to as Euro TARP, is doomed to fail.  While nothing has been officially announced the markets are rallying broadly on the back of a news article published by CNBC on Monday.  The details are lacking as to the actual structure but speculation is already running rampant across the financial markets as to what it might look like.  

What is presumed is that Euro TARP will follow the proposal originally proffered by Tim Geithner on his European trip recently.  That proposal had been widely dismissed by the G20 as they couldn't come to terms on any type of structure.   The current idea outlined by CNBC will bypass the G20 entirely and allow the European Investment Bank (EIB), a bank owned by the member states of the European Union, to take money from the European Financial Stability Facility (EFSF) and capitalize a special purpose vehicle (SPV) that it will create.  

The SPV will then issue bonds to investors and use the proceeds to purchase sovereign debt of distressed European states, which will hopefully alleviate the pressure on the distressed states (PIIGS) and the European banks that already own their sovereign debt.     

If alarm bells aren't already going off they will be in just moment as you get the gist of the rest of this disastrous plan. 

The special purpose vehicle could then be used as collateral for borrowing from the European Central Bank (ECB), allowing the central bank to make loans to banks faced with liquidity shortages.  Let me be clear on this.   The European banks which are already undercapitalized and on the brink of failure will buy bonds issued by the SPV that is full of bonds issued by broke countries.  The banks will then used these bonds as collateral to borrow money from the ECB.   The ECB winds up with loans to broke banks and holding bonds backed by debt issued by broke countries as collateral. This is worse than circular logic, its circular borrowing akin to the Credit Default Swap (CDS) markets that helped sink Bear Stearns and Lehman Brothers, just with a European flair.

Are you getting the picture yet?   It get's better.  Let's throw in some leverage.

The EFSF fund has already committed to providing emergency loans to Ireland, Portugal and Greece – the worst bets on the table. It is expected to provide over 100 million euros ($134.9 million) in additional funding for a Greek bailout.  According to some estimates after those loans, the fund will be down to about 295 billion euros ($400 billion),  So we assume they take roughly $200 billion or so from the European Financial Stability Facility to fund the special purpose vehicle.

$200 billion is not NEARLY enough to solve the problems that Europe faces so the SPV will likely, as suggested by Tim Geithner, be levered up to 9x its capital giving the this vehicle about $1.8 Trillion to work with.  The SPV, as stated will take the PIIGS debt in and the banks will get EIB paper which they can then use as collateral to get liquidity from the ECB.  Doesn’t this sound a lot like the “good bank/bad bank” solution that Lehman tried to sell?

Yes, the EIB paper is of stronger credit – barely - than the PIIGS paper but you are still left with the fact that broke countries are taking in debt from countries that cannot pay their debts, issuing a SPV to sell to other broke banks so that they can use it as collateral to borrow money after it has been leveraged 9x.   9x times a problem doesn’t make the problem smaller does it? What could possibly go wrong?

There is no doubt that the banks and the financial markets want a solution but the reality of the situation is that this is not really a solution to the problem -- which is the fact that the PIIGS are broke and they need an orderly default process to clear the excesses from the system.   However, this leveraged solution will inevitably "kick the can" and shift a massive level of toxic debt to France and Germany which are not in a tremendously strong position to handle it.  

The other problem is whether or not the German government can actually get this solution passed.   This out of Germany this morning "Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent.  He stated that 'The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution),'  There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people, he told newspaper Frankfurter Allgemeine."

Therefore, if the expansion of the EFSF, including the SPV, isn't legal from a German perspective without a formal vote of the people, then this deal is most likely dead before it starts.  If that is the case then the markets are in for a lot of trouble and most likely soon.  Again, this sounds a LOT like what the UK government said to Barclay’s when they wanted to buy Lehmann. Is this sounding more and more familiar? Are you getting as worried as I am?

However, if Europe is going all in with leveraged bets that will water down the credit quality of both France and Germany -- which leaves no strong credits in the Eurozone --then there will be further complications down the road as borrowing costs for Germany and France push higher dropping the Eurozone into a deeper recession. 

Of course, SPV's have a dubious and disastrous history to start with and it is highly likely that this whole process will end badly.  The reality is that PIIGS need an orderly mechanism to default, figure out what banks to save and which ones can be let go and start the process of clearing the years of bad debt and excesses from the system.   The only question is not whether this "clearing process" will occur it is only a function of when and under what terms.


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Tue, 09/27/2011 - 19:33 | 1716732 jdelano
jdelano's picture

Why is ZH even lending credibility to this "plan" as though it hasn't already been debunked? See the telegraph's finance section

Tue, 09/27/2011 - 19:45 | 1716765 bluengolden
bluengolden's picture

Perhaps BC it was the latest dose of hopium administered over the last two days to prop up otherwise death-spiraling markets?

Tue, 09/27/2011 - 19:51 | 1716782 Buckaroo Banzai
Buckaroo Banzai's picture

In the immortal words of admiral ackbar, "it's a TARP!"

Tue, 09/27/2011 - 19:58 | 1716799 bluengolden
bluengolden's picture

If Tyler weren't posting this, quoth the retrospectives: "TD-420, why aren't you at your post?"

Tue, 09/27/2011 - 20:10 | 1716825 jdelano
jdelano's picture

Yes yes-- granted. My point was, might have been worthwhile to mention that the Germans are openly mocking the "plan" as a ridiculous rumor as not doing so perpetuates the notion that liesman didn't just concoct this nonsense out of his ass to goose the market. Got puts on that will suffer if people continue to assume there's a scrap of validity buried somewhere in this dungpile. No offense to the tylers.

Tue, 09/27/2011 - 20:30 | 1716884 Spirit Of Truth
Spirit Of Truth's picture

The truth is authorities are just changing the tune in their endless charade of musical chairs to keep the global banksters' Ponzi-scheme afloat.  Here's the newest song:

Tue, 09/27/2011 - 20:43 | 1716928 Libertarians fo...
Libertarians for Prosperity's picture



Legarde, Trichet, Merkel, Bernanke, Geithner, et al. are all crafting a European version of TARP - le TARP Royale - which will temporarily re-capitalize the Eurozone and delay the inevitable implosion of the Euro by several years, just as the original TARP delayed the insolvency of American banks. Despite what you hear from the doom and gloom cultists, the original TARP was a monster success, if only temporary.  Quite impressively, it yanked the financial system from the abyss and delayed the inevitable reset indefinitely. The problem with TARP is that it worked!  

So now the Europeans will give it a go.  Just as soon as le TARP Royale is crafted (October), Greek bonds will be allowed to blow up in a gigantic, controlled, sovereign toilet flush (November).  A roiling miasma of low-grade financial flatulence will hang over the EuroZone, pushing them well into recession territory as a massive deflationary buzz saw cuts across Europe indiscriminately.   

Rest assured, though, thanks to le TARP Royale, the euro-banks will be encased with layers and layers of bubble wrap and a thick coating of marshmallow creame - metaphorically speaking, of course. As always, the story for the working class will be a different one, as they'll see significant haircuts to their pensions and retirement accounts.  But the plutocrats and bankers who control the puppet strings don't care about that.    


Tue, 09/27/2011 - 20:54 | 1716952 jdelano
jdelano's picture

You sir, have a problem of ethnocentricity, meaning you can't conceive that there are people in the world who don't think like Americans. E Germans for example, having experienced first hand the horrors of hyperinflation, are not so blasé about printing/leveraging as you might think. Or, to put it another way, you're just wrong. Euro tarp DOA.

Tue, 09/27/2011 - 21:13 | 1717004 Libertarians fo...
Libertarians for Prosperity's picture



You, sir, have a problem with coherence.  I am perfectly capable of understanding that Europeans don't think like Americans.  First of all, you folks don't believe in deodorant; we do.  Secondly, you folks like your women hairy; we don't.  

But everyone likes their banks well capitalized, and that has nothing to do with nationality.  There are exceptions, of course, such as those who enjoy watching the world burn.  Fortunately, though, the vast majority of the world doesn't listen to these carnival barkers.  

You cannot compare the situation in Weimar (with their debts denominated in foreign currencies) with the situation today, and any European who conflates the two is, most likely, suffering from the effects of acute ignorance.  If hyperinflation was solely a function of money printing, the USD would have imploded, and the USD denominated commodity markets would have gone parabolic.  Instead, after QE1, QE2, and now in the middle of QE2.5, we find USD denominated assets mostly flat for the year and within a narrow range over the past 2 years.  Except gold.  But everyone is cuckoo for cocoa puffs with gold right now.  That's another story. 



Tue, 09/27/2011 - 21:25 | 1717042 FinalCollapse
FinalCollapse's picture

Unlike Germans we believe that shower is better than deodorant. However continue the use of dedorants, as long as you  stay away. As for women - when it was the last time, Miss Germany won the world title?

Tue, 09/27/2011 - 21:35 | 1717068 NumberNone
NumberNone's picture

Germany calls Timmy stupid..."I don't understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense," he said.



Tue, 09/27/2011 - 21:53 | 1717116 jeff montanye
jeff montanye's picture

some americans like hairy women a lot.

Tue, 09/27/2011 - 23:01 | 1717267 snowball777
snowball777's picture

Leave Rachel Maddow out of this.

Wed, 09/28/2011 - 00:14 | 1717386 crazyjsmith
crazyjsmith's picture

We put hairy women in charge of departments that enforce public groping

Wed, 09/28/2011 - 07:09 | 1717782 Dingleberry
Dingleberry's picture

I saw a porno call "Dirty Hairy" was both.

Wed, 09/28/2011 - 00:27 | 1717401 Mr. White
Mr. White's picture

That quote from Schauble is great -- he's a real hardass. He'll defend German capital to the bitter end. I'd like to hear what he says about Timmy in private.

Wed, 09/28/2011 - 00:38 | 1717416 walküre
walküre's picture

Kleines Timmilein.. so eine DUMME ROTZNASE!

Tue, 09/27/2011 - 21:48 | 1717104 jdelano
jdelano's picture

Whoops--did I say ethnocentric? On second thought solipsistic would have been far more apropos as clearly you can't see far enough out of your own sad little bubble of reality to see that I am not European. I'm 100% amerikan (fuck yeah!). The rest of your diatribe I consider too feeble to be worth dignifying with a response. Buona notte, figlio di puttana.

Tue, 09/27/2011 - 22:03 | 1717146 JW n FL
JW n FL's picture



did you know.. that when the moor's invaded italy that they did so much fuckin that they changed the whole genetic makeup of every wop? did you know that?

now call your cousin in da white house ( pun intended ) and tell him to chill the fuck out!

Tue, 09/27/2011 - 22:10 | 1717165 jdelano
jdelano's picture

I bow before the almighty wit of the joo, endowed with such gifts as the ablility to plagiarize hackneyed slurs from a Quinten Tarantino flick. Is there anything you people won't stoop to steal? (seriously though, not sure why you felt the need to stick your undoubtedly protuberant nose into this feud--joos and I-talians are supposed to be simpatico...)

Tue, 09/27/2011 - 22:53 | 1717255 LeonardoFibonacci
LeonardoFibonacci's picture

not always simpaitco.  Hanno amazato il nostro caro gésu quelli bastardi con il naso lungo

Tue, 09/27/2011 - 22:54 | 1717256 Andy Lewis
Andy Lewis's picture

Yer breath stinks like shit.  Why don't you go brush yer teeth?

Tue, 09/27/2011 - 22:56 | 1717258 LeonardoFibonacci
LeonardoFibonacci's picture


how can you smell it on the computer BASTARDO

Thu, 09/29/2011 - 03:29 | 1721034 Andy Lewis
Andy Lewis's picture

I wondered about that myself.  I guess he's speshul.

Wed, 09/28/2011 - 00:09 | 1717379 TBT or not TBT
TBT or not TBT's picture

Don't think it was a Tarentino. Anyway for sure it was Christopher Walken delivering the insult along those lines, that the wops are "niggaz" because the moors did so much fuckin.

Wed, 09/28/2011 - 04:28 | 1717655 jballz
jballz's picture


written by tarantino...

and you all should really be more polite to each other as you're going to need all the friends you can get when the cannibalism starts.

Tue, 09/27/2011 - 22:57 | 1717259 LeonardoFibonacci
LeonardoFibonacci's picture

JW = jehova's witness?

Tue, 09/27/2011 - 23:02 | 1717272 snowball777
snowball777's picture

Junkie Whitetrash

Wed, 09/28/2011 - 02:50 | 1717571 EasterBunny
EasterBunny's picture

You really are a cretin.

Obviously not very well travelled. Do you have a pssport?

Wed, 09/28/2011 - 04:09 | 1717637 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

European Women vs American women...hmmm...tough one...

Wed, 09/28/2011 - 14:21 | 1719134 BigJim
BigJim's picture

It's true... if I were given the choice between choosing (sight unseen) either an average European woman or an average American, I'd choose the former.

Tue, 09/27/2011 - 21:14 | 1717007 sushi
sushi's picture


The UK is a member of the EIB but outside the monetary zone. No way will they agree to putting themselves on the hook for this fantasy of a delusion inside an improbability.

Tue, 09/27/2011 - 21:33 | 1717063 ??
??'s picture

right on sushi

Cameron would never, I mean never sell out to the bankers.  He's one great guy, a man of the people, a winston in waiting.


Tue, 09/27/2011 - 21:48 | 1717108 sushi
sushi's picture

Cameron would never sell out to French or German bankers. As for a winston in waiting I think of him more as a Disraeli in desuetude.

Tue, 09/27/2011 - 21:59 | 1717136 tumblemore
tumblemore's picture

Cameron and Osborne are 100% going to bail out the eurobanks and will throw their deficit reduction plan under the bus to do it. They're owned by the London banks and the London banks don't want contagion from the eurobanks.

The only barriers to eurotarp are Germany and some of the smaller countries like Finland (who i assume could be rail-roaded if neccessary but not sure on that).

Tue, 09/27/2011 - 22:04 | 1717151 andrewp111
andrewp111's picture

If they want to do a EuroTarp, there is a very simple way. The horrendously convoluted scheme described above is both stupid and unnessesary. All they have to do is have the ECB print up a trillion Euros, and then buy newly issued bank stock with those Euros. Voila! The banks are recapitalized.

Tue, 09/27/2011 - 23:21 | 1717307 abalone
abalone's picture

Isn't that the problem. They can't. It's like an eposide of "Underbelly" Benny & the Fed have got a press & the ECB want it.

Wed, 09/28/2011 - 12:42 | 1718784 fuu
fuu's picture

That's a gem right there: "Despite what you hear from the doom and gloom cultists, the original TARP was a monster success, if only temporary."

Tue, 09/27/2011 - 21:25 | 1717033 M.B. Drapier
M.B. Drapier's picture

The leverage-the-EFSF masterplan has been around since days before Monday, and it's pretty clearly not the invention of any journalist; it's something which is being pushed hard on journalists by, evidently, the US government. Maybe Liesman added the use-the-EIB flourish, but I wouldn't even bet on that - $5 says that notion was fed to him too.

Some Germans like Schäuble are indeed mocking the idea of leveraging the ECB (whether through the ECB or whatever), but it's being pushed frantically by the US; it has partial or full support from the UK, France and many other significant countries; it apparently has domestic support in Germany from business types, the SPD and so on; and it's likely going to come down to a decision by Merkel, who's always given in and supported the bailout every time so far that push has come to shove. So the rumours can't be lightly dismissed, I'm afraid.

Tue, 09/27/2011 - 21:37 | 1717073 ??
??'s picture

sounds great Drapie

could you perhaps provide some substantiation to your assertions?


I do agree that this is an American based initiative but then that's my opinion so a link to a source that supports such a claim would be greate

Tue, 09/27/2011 - 21:59 | 1717133 jdelano
jdelano's picture

Missed the part about constitutionality and the need for a referendum....?

Wed, 09/28/2011 - 00:39 | 1717419 G-R-U-N-T
G-R-U-N-T's picture
"Germany and America were on a collision course on Tuesday night over the handling of Europe's debt crisis after Berlin savaged plans to boost the EU rescue fund as a "stupid idea" and told the White House to sort out its own mess before giving gratuitous advice to others."

Germany pulls White House covers. Absolutely classic.


Wed, 09/28/2011 - 00:52 | 1717433 Manthong
Manthong's picture

"politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent"

Thank goodness politicians do not have such silly constraints in the U.S.

Tue, 09/27/2011 - 22:43 | 1717238 JB
JB's picture

TK-421. ;)


Tue, 09/27/2011 - 20:28 | 1716879 Two Towers AU AG
Two Towers AU AG's picture

I understand that I understand that I did not understand the understanding which one had to understand to understand that I said I did understand the plan after reading this article...

F***.... this plan seems more twisted than a pretzel.. took me two readings to understand that the people have no understanding of its implication...

Tue, 09/27/2011 - 21:31 | 1717045 tekhneek
tekhneek's picture

A graph/flow-chart would pretty much sum this up.

Someone please detail this debt circle jerk so we can be done with this.

Tue, 09/27/2011 - 22:53 | 1717253 Golden Receiver
Golden Receiver's picture

A flow chart would imply some logic to this madness. An Escher or Dali rendering might be easier.

Doesn't parts of this sounds suspiciously like the mortgage backed securities bs that got so opaque nobody knew what anybody was holding and what risks were being assumed by which parties? Could this be an intentional consequence?

Wed, 09/28/2011 - 00:07 | 1717376 Dr Hackenbush
Dr Hackenbush's picture

it's a corporate check kiting ring with 8 to 1 leverage - done in broad daylight by those that sit above the law. 

Wed, 09/28/2011 - 06:45 | 1717760 MaximumPig
MaximumPig's picture

So who is showing up with the E1.6 trillion of lending to provide the leverage?  That is strangely missing from the 'plan.'

Wed, 09/28/2011 - 10:38 | 1718324 covert
covert's picture

maybe failure is the goal? if poverty is the goal, then it will succeed.


Tue, 09/27/2011 - 19:33 | 1716733 SeventhCereal
SeventhCereal's picture

I am not following the details of this one bit.  Why?  The solution to this problem involves the creation of a perpetual motion machine, e.g. getting something for nothing.  I don't care how complex of a Rube Goldberg machination these PHD's from "top-tier" universities graduating with "first class honors" can come up with, they will be doomed to failure.

Tue, 09/27/2011 - 20:18 | 1716848 pasttense
pasttense's picture

Perhaps someone could explain to me why the U.S. "solutions" since 2008 are NOT also a "get something for nothing" Rube Goldberg unworkable monstrosity? Yet the U.S. dollar is the supposedly sound currency everyone is fleeing to.

Wed, 09/28/2011 - 00:05 | 1717373 tumblemore
tumblemore's picture

If you were on a melting iceberg and bits around the edges were falling into the sea you'd run to the centre of the iceberg in the hope something might turn up or at least so you'd drown last.

That's the dollar.

Wed, 09/28/2011 - 00:40 | 1717420 buck4free
buck4free's picture


Wed, 09/28/2011 - 04:19 | 1717646 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

at some point the euro will become so over sold that people will flee there too, but thats all short term noise

Tue, 09/27/2011 - 20:30 | 1716890 Two Towers AU AG
Two Towers AU AG's picture

When compared with this plan.. its easier to find the starting point of a cirle.

Tue, 09/27/2011 - 23:03 | 1717273 snowball777
snowball777's picture

2 Pi from the end and R from the center.

Tue, 09/27/2011 - 20:33 | 1716899 DeadFred
DeadFred's picture

A guess would be that this was never meant to be followed but just to pump the market a bit so somebody can offload more equities at a higher price before we hit the dark days. A convoluted plan might get the benefit of the doubt when some people think they must be the the ones missing something. It's impressive what the market can do based solely on air. Doesn't matter, storm's a comin.

Tue, 09/27/2011 - 21:39 | 1717080 TheFourthStooge-ing
TheFourthStooge-ing's picture

This plan is just another in a series of burning bags of dog shit left at Germany's front door by the Eurocrats. The Germans haven't been tricked into stomping it out, at least not yet.


Tue, 09/27/2011 - 22:08 | 1717161 UP Forester
UP Forester's picture

The bigger the lie, the more easily swallowed.  USS Maine, Lusitania, FRS system will promote stability, SS is sound, commies burnt the Reichstag, Gleiwicz, the gov't didn't know Yamamoto was northwest of Hawaii, lone gunman, Gulf of Tonkin, no one manipulates the market, 9/11, WMD's, ad infinitum....

Tue, 09/27/2011 - 19:36 | 1716736 vast-dom
vast-dom's picture

it's not even a cat corpse bounce's hopium let out of over-stuffed shitbags. 

Tue, 09/27/2011 - 20:42 | 1716921 Cursive
Cursive's picture


LOL.  The expansion of sewer gases.

Tue, 09/27/2011 - 19:39 | 1716742 SwingForce
SwingForce's picture

The Politicians forge the names of the Taxpayers on the Incredible Unlimited Spending Credit Card! Its ILLEGAL, wake up Fukkerz!!!!! America especially. 

Tue, 09/27/2011 - 20:29 | 1716888 Caviar Emptor
Caviar Emptor's picture

The 30-year anesthetic is slowly wearing off and people are gradually waking up to serious pain and injury. It will take time but the scene will be ugly when the patient is fully conscious

Tue, 09/27/2011 - 21:44 | 1717098 Imminent Crucible
Imminent Crucible's picture

...especially when he realizes that he is a quadruple amputee.  And gelded besides.

Wed, 09/28/2011 - 00:51 | 1717432 buck4free
buck4free's picture

"... telling the tale of a soldier whose body is severely damaged by a mortar shell. His arms, legs, eyes, mouth, nose and ears are gone and he is unable to see, speak, smell, or hear. His mind functions perfectly, however, leaving him trapped inside his own body..."


Tue, 09/27/2011 - 19:39 | 1716744 knukles
knukles's picture

The bankrupt countries will all contribute more fiat currency to purchase the equity layer in a newly established CDO/SPV which will in turn buy the bankrupt countries and country's bank's debts which will serve as collateral for the debt to be issued by the SPV which will hold the bankrupt paper issued by the bankrupt banks and countries debt obligations, which will be purchased by the same bankrupt countries and banks which are already bankrupt.

World saved by the same people who got us into the mess.
What could go wrong?

Tue, 09/27/2011 - 21:20 | 1717025 slewie the pi-rat
slewie the pi-rat's picture

they can get to the SNB without publicity (the fuking banksters) but this shit is so styoooopid as to be a straw man w/ all the buzz words.  but it is funny!

no collateral!  all the broke countries gonna go for it; why not?  but, again, hard to do in a federation called the EU without looking like a buncha scam artists

the problem is that they ARE a buncha scam artists, so where they gonna hide at this point? 

LET the insolvent FAIL! 

it's best!  even the chairsatan is on board w/ slewie on this.  trust me!  L0L!!!


Tue, 09/27/2011 - 21:30 | 1717058 NumberNone
NumberNone's picture

Don't worry there will be trillions of credit default swaps to cover them.  Everything will be fine.

Wed, 09/28/2011 - 01:11 | 1717451 crazyjsmith
crazyjsmith's picture

Credit Default Swaps will absolutely default. It will be anti-climactic after entire country/continents/planets default. It will be the little fart after a really massive/nasty double deuce.

Tue, 09/27/2011 - 23:13 | 1717292 j.darkness
j.darkness's picture

Thank you knukles,  for the tautology, poetry in motion.  I quoted you to my "friends."

Tue, 09/27/2011 - 19:39 | 1716746 kevinearick
kevinearick's picture

Beggar-Thy-Neighbor Empire Economics,

Illusions of Space, and Cascading Collapse

A leveraged bailout backstop fund going into end of quarter. Why does that sound familiar?

Every time the VIX swings the next group of “investors” gets wiped out. Let’s see who survives the next round of pop-goes-the-weasel, as all eyes fall on the IMF.

Stagflation is locked in globally, and the global recession, depression, technically began in August, as American borrowing exceeded 50% of spending. Their only play left is to slash government spending, jack up interest rates, and monetize new community banks fast enough to catch the knife.

What you care about is not the nominal price of PM, but rather who owns it and what they are converting it into as they exit forward into unique effective surplus, in volatility iterations, locking everyone else behind in the dollar black hole.

Every nation building the same products for export results in stupid algebraic reduction. Also take another look at demand for single generation housing, multi-generation housing, & multiple generation economic re-integration (income producing). Now, Japan is promising to fuel Europe; it just gets dumber and dumber, as the black hole efficiently lines up debt leverage. They don’t have until the 2012 election.

The integral factor is not a flexible/slimy default barrier; it’s the structure that matters. On what basis does it reorganize the nation/state system to unlock the economic profit enzyme, in a feedback loop? If the last leg down is a curb, that is some curb.

Consumption creates time/space for debt, until the counter-parties lose faith, in the Dreamliner illusion of Space, and the circles collapse in on each other, toward the focal point.

Tue, 09/27/2011 - 20:22 | 1716857 Bicycle Repairman
Bicycle Repairman's picture

Not sure I'm following you here but you appear to be saying something different.

"Their only play left is to slash government spending, jack up interest rates, and monetize new community banks fast enough to catch the knife."

Don't see how this can work.  Community banks?

Tue, 09/27/2011 - 20:30 | 1716889 Bicycle Repairman
Bicycle Repairman's picture

Unless that was a drive by "junk", you really should explain yourself.

Wed, 09/28/2011 - 18:50 | 1720106 kevinearick
kevinearick's picture

As you see in Finland, they are well behind the market timing curve, with tried and failed historical remedies. (the latest executable code line is iterated from the 70s, which tries to loop surplus foreign dollar holdings, which is iterated from, which is iterated from...). They always "think" they have it all figured out.

They must jump, and do so faster than the market can respond, until they are in front of sentiment again.

Backlash propulsion is counter-intuitive.

They can only see what is on the historical stack, and will destroy anything they have not seen before (new/do not understand), so entry appears only on the event horizon, and is loaded out of order/hidden/in another dimension, so they can take CREDIT for the INNOVATION as it appears. The trick, of course, is to locate the innovation correctly, to catalyze the appropriate return on intelligent labor, without revealing the source.

(not that I owe an explanaition at this point in the game)

Wed, 09/28/2011 - 00:30 | 1717408 sgorem
sgorem's picture

with ya dude. we should put these words to some Pink Floyd. btw, compliment.

Tue, 09/27/2011 - 19:40 | 1716749 Arius
Arius's picture

ohhhh  Dick fuld ....bring him back .... we need some suckers .... Lehmans history .... that history ... some real sucker .... they dont make them his size anymore ....

Tue, 09/27/2011 - 19:41 | 1716750 Gubbmint Cheese
Gubbmint Cheese's picture

Funny how the market completely ignored that little story about how Germany's top judge said they'd need to do a referendum and make a new constitution before this plan could be adopted...

Yeah, I guess that is a nothingburger..


Tue, 09/27/2011 - 20:19 | 1716851 The Navigator
The Navigator's picture



German turmoil over EU bail-outs as top judge calls for referendum

Tue, 09/27/2011 - 20:24 | 1716862 Bicycle Repairman
Bicycle Repairman's picture

They'll "back door" this.  The Germans won't know what hit them.

Tue, 09/27/2011 - 19:41 | 1716751 NERVEAGENTVX

This sounds like alot of gobbeldy gook/deck chair rearranging to me.
Not to mention the dizzying array of acronyms. The desperation is palatable.

Wed, 09/28/2011 - 03:29 | 1717605 StychoKiller
StychoKiller's picture

Palatable != Palpable


Wed, 09/28/2011 - 06:11 | 1717722 mvsjcl
mvsjcl's picture

But with a few grains of salt even desperation can be made tasty!

Tue, 09/27/2011 - 19:42 | 1716757 mikmid
mikmid's picture

If it looks like a piigy bond and smells like a piigy bond it probably is  piigy bond and only a piigy could want that bond.

Tue, 09/27/2011 - 21:16 | 1717014 upWising
upWising's picture


Now that this PIIGS fiasco is spilling over to France and the UK, we have a NEW MONSTER...drum roll::

PIIGS + F + UK  (And this just in....the CYPRIOTS want to join the party....WE HAVE AN ACRONYM!!!.)

NOW let's just cover these fornicating swine with a TARP and call the Coroner.

Tue, 09/27/2011 - 19:44 | 1716761 Spitzer
Spitzer's picture

The ECB knows that tarp will be a failure. That is why they dont want to do it.

Tue, 09/27/2011 - 20:30 | 1716891 THE DORK OF CORK
THE DORK OF CORK's picture

Spitzer your faith is touching - the ECB is GOLDMAN and the rest - they want to destroy whats left of the nation states through a massive leverage crisis.

Its their core objective.

Tue, 09/27/2011 - 21:01 | 1716974 disabledvet
disabledvet's picture

it looks a lot more like a hail mary to rescue the French Banks. I'm not sure how this could have any impact on European sovereign debt issues since obviously now that Greece is "being restructured" so must all the rest of the european nations. the fact is until the euro plunges in value none of this is to be taken seriously. TPTB (with HQ in NYCity of course) are throwing everything they've got into keeping Frankenstein's monster known as the euro dancing--but they're pretty much out of ammo now. once Europe is awakened to the fact that they are in fact flat broke THEN the conditions for an appropriate IMF restructuring will be enabled. for now it's still "when the Chinese crossed the Yalu"
i'm not sure what the soundtrack for the collapse of the euro will be. this one's pretty good though!

Tue, 09/27/2011 - 19:45 | 1716763 Sequitur
Sequitur's picture

I'm sure J.P. Morgan can lend a hand to this structure a la Enron's Mahonia.

Looks like the investment bankers are out of fresh "technology" to sell (i.e. rip off) their clients with.

Tue, 09/27/2011 - 20:06 | 1716817 buzzsaw99
buzzsaw99's picture

JPM's clients are the moist stupid and gullible evah!

Tue, 09/27/2011 - 19:45 | 1716767 Davilis
Davilis's picture

All reasonable options must be excluded before the IMF's actions can be justified.

Tue, 09/27/2011 - 20:05 | 1716815 gnomon
gnomon's picture

Yep, in the end when Euroland can't put the bankrupt back together again, the IMF (Fed) will absolutely flood Euroland with swap dollars, seeking to drown out any rebellion, while setting the U.S. up as the absolute last guarantor.  

Having the only printing press in town does have its obligations.

Tue, 09/27/2011 - 19:51 | 1716783 disabledvet
Tue, 09/27/2011 - 19:53 | 1716788 Gubbmint Cheese
Gubbmint Cheese's picture


Tue, 09/27/2011 - 19:56 | 1716792 zorba THE GREEK
zorba THE GREEK's picture

It has come down to print or chaos. Of course they may need a taste of chaos to get the printers rolling.

And no doubt printing only delays the chaos but that is what politicians do best, leave the chaos for the

next administration to deal with. 

Tue, 09/27/2011 - 20:19 | 1716850 Prometheus418
Prometheus418's picture

What do you mean, "or"?


Tue, 09/27/2011 - 19:58 | 1716797 Sequitur
Sequitur's picture

If you read The Telegraph, plainly this plan has Geitner written all over it. Why might Geitner pitch such a plan? It couldn't be the many, many billions in CDS and derivatives underwritten by the Wall Street banks that will become due and payable when Greece, and then French, Italian, Spanish and German banks come looking to collect, now could it?

Tue, 09/27/2011 - 20:11 | 1716834 oogs66
oogs66's picture

because the arrogant tax cheating idiot who is in charge of our own bloated balance sheet actually believes it is a good idea? 

Tue, 09/27/2011 - 21:03 | 1716981 disabledvet
disabledvet's picture

how do you bailout luxemborg anyways? are they part of "euro tarp?" how does that work?

Tue, 09/27/2011 - 21:41 | 1717089 ??
??'s picture

Sequi you are right on the money, cause if EZ goes down then Pres O will most assuredly be a one termer even if W were to be his opponent.

Tue, 09/27/2011 - 21:59 | 1717134 sushi
sushi's picture

They could dig up Hoover and run him against Pres O and Hoover would win.

Wed, 09/28/2011 - 00:05 | 1717372 walküre
walküre's picture

Like it matters much who would be the next Prez when EZ implodes.. just sayin'

Tue, 09/27/2011 - 20:00 | 1716802 jm
jm's picture

I agree with one thing:  there is no ideal solution here.

Accept the realities of the situation.  Every country involved needs to understand that no one is going to get out of this without some serious loss.  the goal should be to keep from going down the toilet.  Germany, Austria, Netherlands, and France will not be AAA when this is over whether they bailout their brethren or not.  The EU economy will be in the crapper for more than a decade whether they bail out their brethren or not.

Get creative.  Put some reinsuers on the case.  There are plenty of reinsurers and retrocessionaires that make a successful business out of collecting tail risks.  The problem here is that the risks are so correlated the premiums may be uneconomic at meaningful threshold.  Put some flow guys on the case too.  The SPV is kind of warehousing (on a longer time-frame), so it should be allowed to write/buy CDS on its inventory.  Frankly the SPV has a tough vig so it should write/buy CDS on its own debt.

Tue, 09/27/2011 - 20:07 | 1716819 ZeroPower
ZeroPower's picture

The reinsurer thing might be wise - but exactly as you ask, how the hell do you specify what a valid premium is when tail risks simply can't be calculated using any meaningful method? CDS writing/buying by CBs is interesting. In a way, theyd capitalize off any losses and would potentially stave off disaster for a little while when collecting premiums, or when credit event occurs. Problem is, as you know, the CDS market is nowhere near liquid enough yet for (what im guessing would be) billions of $ in purchases like they do when propping up sov bonds.

Tue, 09/27/2011 - 20:32 | 1716829 jm
jm's picture

Liquidity is an issue.

Tue, 09/27/2011 - 20:22 | 1716853 jm
jm's picture

As to the insurance issue it would be like pricing a catastrophe bond (it pays out if say a hurricane strikes in the next four years, say).  Excpet the catastrophe would be a basket of defaults.   Or maybe structure it like a CoCo except I can't think of what it would convert to b/c there's no equity.

Tue, 09/27/2011 - 20:25 | 1716869 jm
jm's picture

The Coco would convert to a 30Y floating note.  LIBOR + a spread.

Tue, 09/27/2011 - 23:34 | 1717325 j.darkness
j.darkness's picture

JM and Zeropower- clearly you understand, thank you.   Solutions are available, but those that make decisions are either not as smart as you, *likely* or not actually looking for solutions.  I can't seem to fathom the intentional collapse meme.

Wed, 09/28/2011 - 00:10 | 1717381 walküre
walküre's picture

"solutions" chuckle

No Math can fix this.

SciFi accounting or fairy tale world views... maybe. But are there enough drugs in the world to get all the people stoned enough all the time to keep believing it?


Tue, 09/27/2011 - 20:03 | 1716811 The Fonz...befo...
The Fonz...before shark jump's picture

It's all gonna come crashing we will all know how Bernie madoff felt those weeks and months prior to the fall...

Different ponzi, same outcome

Tue, 09/27/2011 - 20:06 | 1716818 ArkansasAngie
ArkansasAngie's picture

So ... what triggers this?  At what point do the politicians and the banksters have to stop? 

Is it a extended moment of insolvency on somebody's part that takes the system down? 

How do we stop Geithner et al?


Tue, 09/27/2011 - 20:34 | 1716903 Caviar Emptor
Caviar Emptor's picture

Like all high-stakes poker games: the game ends when one player is losing and accuses the winner of cheating

Tue, 09/27/2011 - 20:09 | 1716823 Chinese_Trader
Chinese_Trader's picture

Leverage by 9 times does not work simply for the reason that liability must not die while in possession in order for leverage to work. For instance, 10 dollars becoming 100, when you lend out the 40th dollar and there is a 25% dud what is left of the 60th to 100th dollar are merely fictitious monies. In a situation where the intended debtors are already heavily leveraged, a leveraged EFSF can only mean two things: One the expansion of credit in order to facilitate, two, the transfer of liability from Banks to States, period.

Tue, 09/27/2011 - 20:49 | 1716941 unununium
unununium's picture

the transfer of liability from Banks to States

Clearly, that's the whole point.

Tue, 09/27/2011 - 21:13 | 1717002 Ponzi Unit
Ponzi Unit's picture

CDO tranches, baby!

The casino is open.

If Goldman's reps have learned not to slur their own product in emails, then they could acquire plausible deniability in the next round of inquiries that will punish the night janitor.

Tue, 09/27/2011 - 20:12 | 1716835 Caviar Emptor
Caviar Emptor's picture

Pygmies, Eskimos and Aborigines expressing interest in new Euro bonds. 

Also: There was a new Amazon tribe discovered only last year and the promise of many, many more. 


Tue, 09/27/2011 - 20:13 | 1716838 Bicycle Repairman
Bicycle Repairman's picture

"The sovereignty of the German state is inviolate and anchored in perpetuity by basic law."

Is basic law like the Magna Carta?

Tue, 09/27/2011 - 22:02 | 1717145 sushi
sushi's picture

Basic law is like the barbarians throwing the Romans back across the Rhine.

Wed, 09/28/2011 - 03:34 | 1717609 Ghordius
Ghordius's picture

The German Federal Republic's post-war "provisional" constitution is called "Grundgesetz" and get's often translated as "basic law".

Reporters would be better advised in just translating it as "constitution".

IMO: The EU will not end soon, the EUR will not end soon, the Germans will not relent too much and too soon, Greece can only default, and the rest follows...

Wed, 09/28/2011 - 05:50 | 1717689 Shylockracy
Shylockracy's picture

You are incorrect. The correct translation to "Grundgesetz" is indeed Basic Law since the Grungesetz itself states explicitly that it will be null and void the day the German People adopts a real constitution (GG, Art. 146, )

Article 146

This Basic Law, with validity for the entirety of the German Nation and which entered into force after the conclusion of the Freedom and Unity of Germany, will lose its validity in the day a Constitution chosen by the German Nation in a free decision enters into force.


Note that the bold excerpt above lies in absurd contradiction with the rest of the paragraph. Like the Preamble, it has been altered after the Unification to give the deceptive appearance that the Grundgesetz is a Constitution when it is not. De jure and de facto, Germany is not a sovereign country, does not have a Constitution and has a strictly political judicial system which includes a contemporary version of the Gestapo (GEheime STaats POlizei), a secret political police called Verfassungsschutz (Constitutional Protection Agency).

Btw, the Parlament of the Free State of Bavaria (Bayern) formally rejected the adoption of the Grundgesetz in a free, roll-call vote in 1949.


Tue, 09/27/2011 - 20:26 | 1716843 The Limerick King
The Limerick King's picture



The Euro TARP scheme is a joke

Some Kleptocrat mirrors and smoke

They used Liesman's tact

To help hide the fact

They're still the same PIIGS in a poke! 

Tue, 09/27/2011 - 21:05 | 1716987 disabledvet
disabledvet's picture

Repeat after me:
It's not a joke if they do it.
It's not a joke if they do it.
It's not a joke if they do it.
It's not a joke if they do it.
Repeat after me.

Is that Haiku?

Tue, 09/27/2011 - 21:29 | 1717055 Jump The Shark
Jump The Shark's picture

There once was a man from Greece
Who said " Is that TARP, may I have a piece."
He dished it all out
And then gave a shout
This money seems to grow on trees

Tue, 09/27/2011 - 20:25 | 1716866 nyse
nyse's picture

This actually might work. I mean, 9x - big deal.


Reminds me of this (whole clip is awesome, BTW):

Tue, 09/27/2011 - 20:31 | 1716870 sudzee
sudzee's picture

TARP is out financial transaction tax is in:

Europe should be up at least 10% tomorrow.

Tue, 09/27/2011 - 23:03 | 1717276 FinalCollapse
FinalCollapse's picture

More like 20% down. Transaction tax on stock market trades?

Tue, 09/27/2011 - 20:27 | 1716874 max2205
max2205's picture


Tue, 09/27/2011 - 20:31 | 1716894 Cursive
Cursive's picture

What is presumed is that Euro TARP will follow the proposal originally proffered by Tim Geithneron his European trip recently.

Hmm.  I wonder who had the bright idea to leak it to CNBC....

Tue, 09/27/2011 - 20:46 | 1716933 unununium
unununium's picture

The last time Timmay came up with an SPV was in April 2009.  It never went anywhere.  But somehow, that ended up marking a huge round of printing and a 3 year dead cat bounce.

Be careful out there.


Tue, 09/27/2011 - 20:33 | 1716900 Mr.Kowalski
Mr.Kowalski's picture

All this talk of the Euro TARP is going to come to naught.. just this morning Andreas Vosskuhle of the German Constitutional Court issued what amounts to his shot across the bow against any EFSF expansion without either Bundestag approval and possibly a national referrendum. If it comes to a referrendum, faggeddaboutit. 

Tue, 09/27/2011 - 20:47 | 1716911 unununium
unununium's picture

Lending to an entity that is designed to go broke = handing out printed money.

Tue, 09/27/2011 - 20:39 | 1716919 chump666
chump666's picture

I can't believe how insane the Europeans have become, samething over and over again...

Greece is finished, just kick them out now...they want to leave, that idoit nut of a PM of theirs, going on about how Greece will rebound etc etc etc.  Pure insanity.

C'mon Germany, lets see you kick Greece out or you leave.  Either way lets get moving on this for f*cks sake

Tue, 09/27/2011 - 21:00 | 1716967 Ponzi Unit
Ponzi Unit's picture

What about tail risk from derivatives?

It's not about saving Greece, it's about saving European banks who will suffer when Greece exits, yes?

Tue, 09/27/2011 - 21:40 | 1717087 chump666
chump666's picture

Yes true.  But EZ banks are greedy, they should take the pain.  Europe should take the pain, the whole world should take the pain.  You take the pain now, you bounce back stronger, maybe wiser.  Leave this too late, gonna be very painful.  The socialist system that overhang in Europe has failed so many times - you would think history taught them a lesson.  POint is EU is a cartel trying to support decayed assets, crazy, with the Germans being a stronger entity then have to sacrifice their wealth for a nothing nation (economically) like Greece is disgusting.

This whole bailout scheme will flop for the final time. 

As far as the derivative/credit market.  It is telling you daily that the whole thing is going to end in tears.  What it means, is that credit will dry up completely in the EZ.  That's life.

Tue, 09/27/2011 - 21:43 | 1717094 chump666
chump666's picture

...another signal.  Asian markets can't make new highs. 

It's gonna hit hard, even Bernanke may be floored by this.

Tue, 09/27/2011 - 23:38 | 1717331 j.darkness
j.darkness's picture

the marines used to say "pain is weakness leaving the body."

Tue, 09/27/2011 - 20:40 | 1716920 Caviar Emptor
Caviar Emptor's picture

US Congress acted all outraged at the debt, and then funded the debt ceiling hike. And now raised the limit again. Japanese ministers have been outraged over government stimulus...for 20 years. German and other 'fiscal conservatives' will express outrage and then approve a new spending scheme. To them the alternative is aramgeddon. They are not going to kill the golden goose which they have live off and which enriches them daily. They know that money printing has worked like opium for the last 30years (Thatcher/Reagan) and they don't want to be the first to wake up Pandora. Better to do it and pray 

Tue, 09/27/2011 - 20:49 | 1716940 jdelano
jdelano's picture

The global economy is already a flooded engine. Any more "liquidity injections" and it is just going to choke and die. Sincerely hope you're wrong.

Tue, 09/27/2011 - 21:48 | 1717012 Big Ben
Big Ben's picture

As a long term plan, euro-TARP is doomed to failure. Greece WILL default as soon as the new loans dry up, and that alone would use up the $200B in the SIV. And some other PIIGS will be sorely tempted, particularly if interest rates rise.

But as a short term measure to kick the can down the road for another year or two, it might just possibly work. If the Germans approve it. If we have another sharp selloff in the markets, that might be enough to overcome any lingering reluctance on their part.

The world is seemingly awash in liquidity which has no better place to go that into US Treasuries yielding negative real interest rates. Being able to borrow huge amounts of money at negligible interest rates helps greatly in papering over any bad debt problems. Because the difference between bad debt and good debt is so small.

Tue, 09/27/2011 - 20:49 | 1716944 Segestan
Segestan's picture

They screwed up the finances of Europa so badly with socialist dreams they lost sight of the goal......

Oh well try again if you don't succeed the first time.

Tue, 09/27/2011 - 22:25 | 1717199 Zero Govt
Zero Govt's picture

Dreams and indeed dreamers always have a nasty habit of having to be woken up's called reality ..and it's coming thick and fast, at ramming speed infact 

Tue, 09/27/2011 - 21:02 | 1716953 Jump The Shark
Jump The Shark's picture

If the Germans do not go along with this at least the new IPhones will allow the revolt faster communication with twitter and Facebook (unless Facebook switches their platform again) MY GOD....

Tue, 09/27/2011 - 20:55 | 1716958 Poor Grogman
Poor Grogman's picture

The end game of the ponzi was always going to come down to this.

A perpetual motion machine where the debt slaves are the foundation and they receive crumbs trickling down from the money machines at the power centers.

The problems are arising because people are waking up up to the scam, it cannot survive this type of close scrutiny.

Also the number of new debt slaves is not growing fast enough and governments cannot replace them because if they tax too hard they lose office.

There seems no way the ponzi can survive this crisis short of a global police state.

Oh hang on a minute....

Tue, 09/27/2011 - 21:28 | 1717050 tekhneek
tekhneek's picture

I approve this message.

But seriously, I give it another 24-36 months tops. I think it will be a fun ride though.

Tue, 09/27/2011 - 21:45 | 1717100 Poor Grogman
Poor Grogman's picture

Fun maybe ...

But I'd sure hate to see your idea of scary.


Tue, 09/27/2011 - 22:18 | 1717184 ArkansasAngie
ArkansasAngie's picture

I surely hope you are wrong.

If this is allowed to come to be ... it will be your money that they are pledging ... not theirs.


Wed, 09/28/2011 - 08:23 | 1717936 Calmyourself
Calmyourself's picture

It's a long road to reset, it's a long road of pain..  Like pulling off a head to toe bandage that has adhered to a charred burn victim and trying to make it last..  

Tue, 09/27/2011 - 20:57 | 1716961 Ponzi Unit
Ponzi Unit's picture

Moody's rates the paper AAA, then Goldman shorts it. Success!

Problem solved.

Tue, 09/27/2011 - 21:17 | 1716966 Atomizer
Atomizer's picture

It's all pretty simple. When shitsticks Timmay/Obama/carpet muncher Christine Lagarde tell the EU to recapitalize banks aka (OFP) Operation Fleece Peasants.. all bets are off.

Let's look at the Federal Reserve charter for a moment, shall we?

Now the cunt licks want to evaluate a crisis by taxpayer monies thru social networking? Bernanke - FUCK YOU!

Hours of comedy in watching central planners in the mist of their mental breakdown. BTW, the fear has now landed in the laps of the Federal Reserve/IMF/UN. Can't wait for US Community Organizer in Chief to spin a new crisis for America to bailout Greece, Italy, and other needy failing EU countries.

Sentiment Analysis And Social Media Monitoring Solution RFP

Let's roll back time and watch O'bummer talk about the Global Tax Plan. (Warren Buffet's secret tax haven butt fuck plan to spin off on J6P).

President Obama at Millennium Development Goals Conference  -2010

A release from the Obama Senate office about the bill declares, “In 2000, the U.S. joined more than 180 countries at the United Nations Millennium Summit and vowed to reduce global poverty by 2015. We are halfway towards this deadline, and it is time the United States makes it a priority of our foreign policy to meet this goal and help those who are struggling day to day.”

The legislation itself requires the President “to develop and implement a comprehensive strategy to further the United States foreign policy objective of promoting the reduction of global poverty, the elimination of extreme global poverty, and the achievement of the Millennium Development Goal of reducing by one-half the proportion of people worldwide, between 1990 and 2015, who live on less than $1 per day.”

The bill defines the term “Millennium Development Goals” as the goals set out in the United Nations Millennium Declaration, General Assembly Resolution 55/2 (2000).  

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