Guest Post: As The World Crumbles: The ECB Spins, FED Smirks, And US Banks Pillage

Tyler Durden's picture

Submitted by Nomi Prins

As The World Crumbles: The ECB Spins, FED Smirks, And US Banks Pillage

Often, when I troll around websites of entities like the ECB and IMF, I uncover little of startling note. They design it that way. Plus, the pace at which the global financial system can leverage bets, eviscerate capital, and cry for bank bailouts financed through austerity measures far exceeds the reporting timeliness of these bodies.

That’s why, on the center of the ECB’s homepage, there’s a series of last week’s rates – and this relic - an interactive Inflation Game (I kid you not)  where in 22 different languages you can play the game of what happens when inflation goes up and down. If you’re feeling more adventurous, there’s also a game called Economia, where you can make up unemployment rates, growth rates and interest rates and see what happens.

What you can’t do is see what happens if you bet trillions of dollars against various countries to see how much you can break them, before the ECB, IMF, or Fed (yes, it'll happen) swoops in to provide “emergency” loans in return for cuts to pension funds, social programs, and national ownership of public assets. You also can’t input real world scenarios, where monetary policy doesn’t mean a thing in the face of  tidal waves of derivatives’ flow. You can’t gauge say, what happens if Goldman Sachs bets $20 billion in leveraged credit default swaps against Greece, and offsets them (partially) with JPM Chase which bets $20 billion, and offsets that with Bank of America, and then MF Global (oops) and then…..you see where I’m going with this.

We're doomed if even their board games don’t come close to mimicking the real situation in Europe, or in the US, yet they supply funds to banks torpedoing local populations with impunity. These central entities also don’t bother to examine (or notice) the intermingled effect of leveraged derivatives and debt transactions per country; which is why no amount of funding from the ECB, or any other body, will be able to stay ahead of the hot money racing in and out of various countries.  It’s not about inflation - it’s about the speed, leverage, and daring of capital flow, that has its own power to select winners and losers. It's not the 'inherent' weakness of national economies that a few years ago were doing fine, that's hurting the euro. It's the external bets on their success, failure, or economic capitulation running the show. Similarly, the US economy was doing much better before banks starting leveraging the hell out of our subprime market through a series of toxic, fraudulent, assets.

Elsewhere in my trolling, I came across a gem of a working paper on the IMF website, written by Ashoka Mody and Damiano Sandri,  entitled ‘The Eurozone Crisis; How Banks and Sovereigns Came to be Joined at the Hip” (The paper does not 'necessarily represent the views of the IMF or IMF policy’. )

The paper is full of mathematical formulas and statistical jargon, which may be why the media didn't pick up on it, but hey, I got a couple of degrees in Mathematics and Statistics, so I went all out.  And it’s fascinating stuff.

Basically, it shows that between the advent of the euro in 1999, and 2007, spreads between the bonds of peripheral countries and core ones in Europe were pretty stable. In other words, the risk of any country defaulting on its debt was fairly equal, and small. But after the 2007 US subprime asset crisis, and more specifically, the advent of  Federal Reserve / Treasury Department construed bailout-economics, all hell broke loose – international capital went AWOL daring default scenarios, targeting them for future bailouts, and when money leaves a country faster than it entered, the country tends to falter economically. The cycle is set. 

The US subprime crisis wasn’t so much about people defaulting on loans, but the mega-magnified effects of those defaults on a $14 trillion asset pyramid created by the banks. (Those assets were subsequently sold, and used as collateral for other borrowing and esoteric derivatives combinations, to create a global $140 trillion debt binge.) As I detail in It Takes Pillage, the biggest US banks manufactured more than 75% of those $14 trillion of assets. A significant portion was sold in Europe – to local banks, municipalities, and pension funds – as lovely AAA morsels against which more debt, or leverage, could be incurred. And even thought the assets died, the debts remained.

Greek banks bought US-minted AAA assets and leveraged them. Norway did too (through the course of working on a Norwegian documentary, I discovered that 8 tiny towns in Norway bought $200 million of junk assets from Citigroup, borrowed money from local banks to pay for them, and pledged 10 years of power receipts from hydroelectric plants in return. The AAA assets are now worth zero, the power has been curtailed for residents, and the Norwegian banks want their money back--blood from a stone.) The same kind of thing happend in Italy, Spain, Portugal, Ireland, Holland, France, and even Germany - in different degrees and with specific national issues mixed in.  Problem is - when you’ve already used worthless collateral to borrow tons of money you won’t ever be able to repay, and international capital slams you in other ways, and your funding costs rise, and your internal development and lending cease up, you’re screwed - or rather the people in your country are screwed.

In the IMF paper, the authors convincingly make the case that it wasn’t just the US subprime asset meltdown itself that initiated Europe’s implosion, but the fact that our Federal Reserve and Treasury Department adopted a reckless don't-let-em-fail doctrine. Even though Bear Stearns and Lehman Brothers failed, their investors, the huge ones anyway, were protected. The Fed subsidized, and still subsidizes, $29 billion of risk for JPM Chase's acquisition of Bear. The philosophy of saving banks and their practices poisoned Europe, as those same financial firms played euro-roulette in the global derivatives markets, once the subprime betting train slowed down.

The first fatal stop of the US bailout mentaility was the ECB’s 2010 bailout of Anglo Irish bank, which got the lion’s share of the ECB's Irish-bailout: $51 billion euro of ELA (Emergency Loan Assistance) and $100 billion euro of regular lending at the time. 

After the international financial community saw the pace and volume of Irish bank bailouts, the game of euro-roulette went turbo, country by country.  More 'fiscally conservative' governments are replacing any semblance of population-supportive ones. The practice of  extracting ‘fiscal prudency’ from people and providing bank subsidies for bets gone wrong has infected all of Europe. It will continue to do so, because anything less will threathen the entire Euro experiement, plus otherwise, the US banks might be on the hook again for losses, and the Fed and Treasury won’t let that happen. They’ve already demonstrated that. It'd be just sooo catastrophic.

In the wings, the smugness of Treasury Secretary Tim Geithner and Fed Chairman, Ben Bernanke is palpable – ‘hey, we acted heroically and "decisively" to provide a multi-trillion dollar smorgasbord  of subsidies for our biggest banks and look how great we  (er, they) are doing now? Seriously, Europe – get your act together already, don't do the trickle-bailout game - just dump a boatload of money into the same banks – and a few of your own before they go under  – do it for the sake of global economic stability. It’ll really work. Trust us.’

Most of the media goes along with the notion that US banks exposed to the ‘euro-contagion’ will hurt our (nonexistent) recovery. US Banks assure us, they don't have much exposure - it's all hedged. (Like it was all AAA.) The press doesn't tend to question the global harm caused by never having smacked US banks into place, cutting off their money supply, splitting them into commercial and speculative parts ala Glass-Steagall and letting the speculative parts that should have died, die, rather than enjoy public subsidization and the ability to go globe-hopping for more destructive opportunity, alongside some of the mega-global bank partners.

Today, the stock prices of the largest US banks are about as low as they were in the early part of 2009, not because of euro-contagion or Super-committee super-incompetence (a useless distraction anyway) but because of the ongoing transparency void surrouding the biggest banks amidst their central-bank-covered risks, and the political hot potato of how many emergency loans are required to keep them afloat at any given moment.  Because investors don’t know their true exposures, any more than in early 2009. Because US banks catalyzed the global crisis that is currently manifesting itself in Europe. Because there never was a separate US housing crisis and European debt crisis. Instead, there is a worldwide, systemic, unregulated, uncontained,  rapacious need for the most powerful banks and financial institutions to leverage whatever could be leveraged in whatever forms it could be leveraged in. So, now we’re just barely in the second quarter of the game of thrones, where the big banks are the kings, the ECB, IMF and the Fed are the money supply, and the populations are the powerless serfs. Yeah, let’s play the ECB inflation game, while the world crumbles.

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AUD's picture

Today, the stock prices of the largest US banks are about as low as they were in the early part of 2009, not because of euro-contagion or Super-committee super-incompetence (a useless distraction anyway) but because of the ongoing transparency void surrouding the biggest banks amidst their central-bank-covered risks

Maybe but what are these stock prices denominated in? Why, I thinks it is obligations of the most hopelessly overleveraged & insolvent banks of all - the central banks.

But who gives a shit? Nobody that's who, so what are you complaining about?

Michael's picture

At least the epic Chinese housing bubble bust should cure America of its China Envy.

jomama's picture

epic collapse, bitchez.

Andrew G's picture

And finally - the inevitable Hitler spoof on the Euro collapse: http://www.youtube.com/watch?v=29F50dGbfM8

Eireann go Brach's picture

Fuck black Friday! Let's rename it blow up a fucking banker day!

gangland's picture

start with ? i got at least a 10-way first place tie....line 'em up. we can do ten every friday for a year. Jubilee!

stopcpdotcom's picture

$21.57 for a 16-pound turkey this year?

In the UK a similar turkey would be about $140.

Phew!

 

Vlad Tepid's picture

I guess that just means the Brits don't have the same warm spot for welfare millionaire farming-industrial complexes as red-blooded Americans.

BandGap's picture

Could be that Britain doesn't have a lot of turkey farms, too.  Think about it.

achmachat's picture

here in Luxembourg they've started to sell "thanksgiving" turkeys as well in the frozen aisles of the big supermarkets.

People have been watching so many US TV shows all these years that they've been brainwashed into thinking that eating turkey at that particular date is the normal thing to do.

And yes... a frozen turkey costs WAY more than $22 over here as well.

Scalaris's picture

Here in Cyprus we don't even celebrate thanksgiving -bar a small percentage affected by the past decades of rampant westernization surge- so I guess we mainly have roasts or steaks during "festive" meals. Then again we are quite an ungrateful bunch.

Not surprised to see the absurdities of the food pricing phenomenon is worldwide, thank god for the US exported inflation/EU destructive monetary policies/Southern European political incompetencies, and of course Goldman Sachs.

Happy thanksgiving everyone.

BrocilyBeef's picture

Ahh, did your Pilgrims and Indians split a bowl of cranberries as well?

Scalaris's picture

Shit, we 've been occupied by Egyptians, Persians, Arabs, French, Italians, British and Turks since 10000 B.C. so I'm assuming it'd be something along the lines of brie and foie gras stuffed shrimp and lamb kebab wrapped with month old cured prosciutto with a side of mash and yorkshire pudding.

j0nx's picture

$140 for a turkey?? Get the F out of here. Go shoot one yourself for $.080 (the cost of the shell) if that's true. ROFL @ $140 for a turkey...

Jimmy Carter was right's picture

turkey comes with free growth hormones for the kiddies

Schmuck Raker's picture

"You can't eat turk......oh, wait?

PulauHantu29's picture

Deflationary Death Spiral.

40% unemployment.

$250 oil.

SuperStagflation.

Good luck!

Syonara.

 

 

JW n FL's picture

 

 

Uploaded by on Nov 21, 2011

From: http://www.youtube.com/user/ReutersVideo

November 21, 2011 - The United States has named Iran a "primary money laundering concern" as Treasury Secretary Timothy Geithner warns global banks should beware of doing business with Iran as it might aid its nuclear program. Rough Cut (no reporter narration).

http://www.youtube.com/watch?v=EvYHa4raAJA&feature=g-all&context=G1d4e0ALTsssmgAKAA

 

dr.charlemagne's picture

Translation: Iran is going to be bombed, no TBTF exposure there please, we have enuf bad bet contagion already

Michael's picture

Thank God Iran has a shitload of UNSTOPPABLE missiles.

"IRAN WILL CLOSE THE STRATEGIC STRAIT OF HORMUZ THE WORLD'S VITAL OIL SUPPLY LINE BY IMPLEMENTING ASSYMATRIC NAVAL WARFARE WITH MASS AND DISPERSED SWARMING TACTICS. THE UNITED STATES NAVY AIRCRAFT CARRIERS AND CARRIER BATTLE GROUPS (NAVY FLEETS) WILL HAVE NO CHANCE. THEY ARE ALL DESTROYED JUST WITHIN A FEW MINUTES AFTER THE WAR STARTS. THE BEST OPTION FOR IRAN IS TO ATTACK FIRST. IRAN WILL USE VERY POWERFUL SUPERSONIC C802 ANTISHIP MISSILE (NOOR MISSILE) ATTACK FROM LAND BY USING SHORE BASED MISSILE BATTERIES AND MOBILE MISSILE LAUNCHER VEHICLES. C802 ANTISHIP MISSILE ATTACK FROM AIR BY USING C802 LOADED IRANIAN FIGHTER JETS AND ATTACK HELICOPTERS. IRAN WILL ALSO USE ITS MOST POWERFUL ULTRAFAST MISSILE BOATS LOADED WITH C802 MISSILE AND RUSSIAN MADE ULTRAFAST SHKVAL TORPEDO (IRAN HOOT TORPEDO) THIS SUPER TORPEDO IS SO FAST THAT IT IS CALLED A UNDER WATER MISSILE. IRAN WILL USE INNUMERABLE SMALL SUPERFAST SPEEDBOATS ARMED WITH POWERFUL ROCKET LAUNCHER AND POWERFUL SMALL ANTISHIP MISSILE IN MASS AND DISPERSED SWARMING STRATEGY. THE SLOW MOVING UNITED STATES AIR CRAFT CARRIER SHIP AND ITS SUPPORTING CRUISERS AND DESTROYERS ARE ATTACKED BY ALL SIDES FROM LAND, WATER AND AIR WITH INNUMERABLE SUPERSONIC ANTISHIP MISSILES, POWERFUL ROCKET LAUNCHERS AND UNSTOPPABLE SUPERCAVITATION SHKVAL (HOOT) TORPEDOS. IT IS JUST IMPOSSIBLE TO DEFEND FROM SUCH ALL SIDE ALL WAY ATTACK THE U.S.A. NAVY CARRIER BATTLE GROUP HAVE THE DEFENCE MEASURES SUCH AS THE RIM-116 Rolling Airframe Missile AND THE Phalanx CIWS SYSTEMS. FOR EXAMPLE IF TEN C802 ANTISHIP MISSILES ARE FIRED FROM LAND, AIR AND WATER TO ATTACK A U.S.A. NAVY SHIP AND SEVEN C802 MISSILES ARE INTERCEPTED OUT OF TEN AND ONLY THREE C802 MISSILE CAN HIT THAT NAVY SHIP TAHT WILL BE ALL. THE SHIP WILL BE COMPLETELY DESTROYED. AND THAT IS THE GAME IRAN WILL BE PLAYING. IRAN ALSO HAVE A SUFFICIENT NUMBER OF SMALL FAST SUBMARINES EQUIPPED WITH THAT UNSTOPPABLE SHKVAL SUPERCAVITATION TORPEDOS AND VERY POWERFUL LATEST GENERATION INNUMERABLE "BOTTOM" NAVAL MINES. INFACT THE NAVAL MINE CAPABILITIES OF IRAN'S MISSILE BOATS, SMALL SPEEDBOATS AND SMALL SUBMARINES IS MORE THAN ENOUGH FOR COMPLETELY BLOCKING THE STRATEGIC STRAIT OF HORMUZ FOR YEARS AND THAT IS THE GAME. --------------------------------------------------------------------------------­--------------------------------------------------------------------------------­------ AND NOW THE GRAND FINALE EVENT -------- THE ULTIMATE U.S.A. CARRIER KILLER WEAPON FOR IRAN TO KISS THE ASS OF U.S.A. NAVY CARRIER BATTLE GROUP ------- THE SUPERSONIC STEALTH UNINTERCEPTABLE SOLID FUEL ANTISHIP BALLISTIC MISSILE ----- """"" PERSIAN GULF MISSILE """""" -------- THE SUPER WEAPON OF IRAN. ----------- JUST FIRE "THREE" PERSIAN GULF MISSILE FOR EVERY SINGLE NAVY SHIPS OF THE U.S.A. NAVY ""5 TH FLEET"" AND THATS IT. ---------- PERHAPS 15 PERSIAN GULF MISSILE FOR THE BIG BOSS SHIP -- "AIRCRAFT CARRIER SHIP" -- ALONE. --------- THE U.S.A. 5 TH FLEET IS JUST SITTING DUCK FOR IRAN TO KISS THE ASS."

IRAN NAVY POWERFUL ANTISHIP MISSILE FOR STRAIT OF HORMUZ BLOCK WAR

http://www.youtube.com/watch?v=-41OyuzSyKw

Vlad Tepid's picture

No need for caps.  And, no offense, but whatever it is you're quoting from sounds like a breathless Iranian propaganda organ.

You'll notice, in the STRATFOR updates that TD provides, that carrier battle groups rarely enter the Straits of Hormuz.  In the prelude to war they will certainly not be found there.  No need for the Iranian "superweapons" you mentioned...older Exocet's could just as easily close the Strait and it's tankers and merchant ships that would be Iran's trump card in a war, not carriers.  Most of their weapons are export versions of Soviet weapons, including the Shkval torpedo.  However capable they might have been in the hands of the Soviet Navy, the Iranian Navy are not the Soviets and the Persians would be wise not to rely on the strength of their sea-faring tradition.

That having been said, they would shut down the Strait, wreak havoc in the world oil and shipping markets, probably obliterate the 5th Fleet HQ (stupidly based in Bahrain instead of Diego Garcia) and might take out some escorting US warships like the Iraqis did (using Exocets) in the Iran-Iraq War.  But the naval war will not be theirs.  Within days, their naval infrastructure, ships, and logistics will be a smoking ruin, but the Gulf will still be held hostage by a few mobile SSM launchers hidden in caves or underground along the coast.  Iran will win if they can draw the US (and whichever hapless "coalition" members join) into a ground war in the country.  

The war will indeed go asymmetric, but I expect direct or proxy terrorist events will be the main show of asymmetric force, not a bevy of littoral and suicide craft. Those will be a one time thing.

 

Michael's picture

Their missiles are not for American ships necessarily, their for places like Dimona.

LeBalance's picture

my iMIC is bigger than your iMIC!

whose iMIC will sell to both sides?

we can paint this iMIC blue and that iMIC red and have those "so different" iMICs sell to each side.

profit: chaos: distraction from iBANK iLeeches: multi-WIN.

:)

Popo's picture

Silly Iranian propaganda.  First off,  carriers won't enter the straits.   The entire Iranian port infrastructure would be taken offline in the first 3 hours anyway -- along with principal bridges and airports.    Communications infrastructure shortly thereafter.     

And as for your "supercavitation torps"... just LOL.

Oil of course, will shoot the moon.

vnguru's picture

You are right! I afraid that Obama will let his sodiers attract Iran soon. I don't know what will happen after all. However, many people will be put down. Poor him! Viec Lam Dong Nai & Viec Lam Vinh Phuc are two of my friends, they live in Iran now. They work in  a futures trading company. They also give advices in forex trading. However, if the ward uccur, the company will closed. 

Michael's picture

Cheer up.

Credit default swamp land for sale.

Say that ten times fast.

tickhound's picture

Does Frederick even know Sam is fucking Marie?  He acts like he doesn't know.  Tommy knows... he's weird.  And i don't trust that Tera chick 100%... There's somethin' else goin' on here, you can tell.  I hope nobody dies...   

Peter K's picture

"Because US banks catalyzed the global crisis that is currently manifesting itself in Europe."

Huu????????????? What movie are you watching?

Or maybe the proper question should be: Assclown Ratigan, is that you?

CompassionateFascist's picture

NP is not bullseye, but somewhere on target. After all, she used to be a wheel at the Squid. Plays both sides, in series: @ http://seductivejewess.wordpress.com/type-iii76-nomi-sarah-prins-jewess/ 

lolmao500's picture

Americans are too busy playing Skyrim and watching Twilight to care.

Dr. Engali's picture

No our wives are watching Twilight, it's too unbearable for me. I'd rather have a beer with Obummer , a black professor , and a police officer for the whole nation to watch, than watch Twilight.

I take that back. At least after the movie I have a chance of getting laid, instead of getting screwed after the beer.

hardcleareye's picture

 Not all wives, I believe Nomi is married....

jeff montanye's picture

i mean really.  what a pack of bozos.

SHEEPFUKKER's picture

It's more like a horror show than soap opera. 

TruthInSunshine's picture

The Bernank is reading this tonight - I have a feeling - and his lip is quivering and he is suffering nervous facial ticks and twitches.

The Ben '15 Minutes-Transitory-ZIRP4evercure-GreenShoots' Bernank is a failure of a central banker, economist, economic forecaster and human:

Ben Bernanke Forecasting the Future Back in 2005 (You Have To Watch This)
LeBalance's picture

oh, and his bosses are?  and their orders to him are?

please gauge a man's success on his "truth in sunshine" job goals, not on some illusion of what you think his yearly review is about.

GenXer's picture

Gold was scrolling at 640 on one of those clips. That would be some tasty buying. Ben is a shill.

Dr. Engali's picture

I do not understand why people aren't storming the gates. Maybe they have just grown numb to it all and it's become part of the norm to them.

Mike2756's picture

The majority haven't a clue.

dwdollar's picture

It doesn't take a majority, only a minority. The problem is, the minority hasn't got the balls yet. The ones who do have the balls are just labeled as 'crazies' and off they go to jail.

jeff montanye's picture

it will take more pain.  freedom sometimes is nothing left to lose.  it's coming.  the first banker/politician kidnapping/torture/assassination will probably get their attention.  not that i recommend that.  

i wonder what corzine's personal security detail looks like.  i'd be a bit leery of patronizing prostitutes at this stage.

Michael's picture

I think it's best if they don't know. It's so much more entertaining to watch their clueless surprise as the shit falls apart.

Sedaeng's picture

or maybe the govt has upped the fluoridation in the drinking water to make the citizenry more docile... just saying, maybe?

http://www.fluoridedebate.com/Download/fluoridedebate.pdf

oldman's picture

Doc,

You know damned well why they are not. Read the comments above and those that follow, and your knowledge about how moronic even the majority of readers today on ZH are will be confirmed.

We are too stupid, arrogant, ignorant, and egocentric to survive. This can be blamed on many things but it still is each of us who tolerates the constant personal attacks and abuse that is responsible for saying 'no more!'. We are idiots and it is time to begin accepting responsibility for this shitty house we live in: "Clean it up, you pigs!" is what needs to be screamed out loud.

Look at how many denigrating comments there are daily here about the Occupiers of Wall Street; the only people in the street----for whatever their individual reasons---are still the only ones in the street except for the bankers dogs.

If this offends anyone here, I apologize because this not a 'personal' comment about any one of us, but an honest frustrated emotional response to a nation full of whiners and ignorant individualists who deserve the shitty house in which we live.

I leave tonight for a few months because 'Love it or leave it' is becoming the hit song, once again       om

jeff montanye's picture

good thoughts.  ron paul should be the candidate for ows and the teaparty.

dcb's picture

I have reached the conclusion that there are paid trolls who post. some conservative pac owned by koch or murdock sends folks round to attack ows, or other posts. it keeps the masses confused when you see different sides, and as long as there is confusion the money adgenda can advance more easily. think global warming.

SilverDoctors's picture

The Morgue's world might be about to crumble...not sure about ours. 
Sprott Asset Management has filed a prospectus with the SEC for a $1.5 billion unit follow-on for PSLV.  
We're talking nearly 50 million ounces of PHYZZ people!!