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As Hope For EFSF Solution Vanishes, Europe Comes Crawling To Uncle Sam
With less than 48 hours left until Europe's latest and greatest summit on Wednesday (no point in keeping count: it is certain that yet more extensions wil be demanded and granted, letting the EURUSD have just that much more space from where to fall) Europe has, as it usually does in the 12th hour after it whips out the abacus, realized that the EFSF in its latest incarnation is Dead on Arrival (as expected). So what does Europe do? Why come crawling to Uncle Sam of course, only in this case it manages to save face as the uncle is really Aunt Lagarde, one of Europe's own, and ironically up until 4 months ago, the Finance Minister of what has emerged as the most distressed core European country. From the WSJ: "Europe may ask the International Monetary Fund to create and run a special new fund to help solve its debt crisis, according to a person familiar with the matter. The idea is one of several options still in the formative stage that European officials are considering as a way to prevent the crisis from engulfing its largest economies. The IMF and world financial leaders fear that if Europe doesn't act forcefully now, it could push the global economy into a recession and spark another global financial meltdown." And yes, there is a reason why three weeks ago we made big news out of the IMF scrambling to "Double Bail Out Capacity To $1.3 Trillion, May Issue Bonds." Because when in doubt always follow the money, or in this case the US taxpayer bailout, because this is what the IMF's turbo intervention will be: it will always give the right answer.
So what is the latest and greatest that Europe, under the wise alleged tutelage of JP Morgan, has up its sleeve, just two days before it is supposed to have a complete and convincing resolution to the European debt crisis? And why should Joe Sixpack be very angry?
European officials are considering several ways that a newly created fund could buy or insure bonds of ailing countries such as Italy and Spain, and raise money to boost capital levels at weak banks. One option is to ask the IMF to administer such a "special purpose vehicle."
The IMF could give such a financing tool more legitimacy than if Europe created and administered it, especially to prospective financiers, the person said. European officials are already assessing interest from potential lenders, including countries such as China and Brazil, the private sector and sovereign wealth funds, the person said. It could also be financed by the Europe's EUR440 billion bailout fund.
Unfortunately, the mere rubberstamp of US taxpayer-backed funding is no longer sufficient:
There are certain restrictions on the use of the IMF's existing resource base. One is that it can only be used to lend to countries, not regions. Another is its financial assistance usually comes with tough conditions and regular reviews. The IMF's lending rules also make it difficult to use its cash in some of the innovative ways that Europe is considering. The E.U. may insure a percentage of potential losses on purchases of state bonds as a way to leverage the impact of its rescue fund, encouraging investor appetite and pushing down the cost of state borrowing.
The IMF has created "special purpose vehicles" before. So technically, it wouldn't be very difficult for the IMF to create and administer. But the politics of financing and lending conditions could make the concept challenging to implement.
Said otherwise, while the superficial complexities can be easily overcome, the fund, whether in SPV or otherwise format, will not be able to participate in bank bailouts, which means that the European structured vehicle will need to have a little bit of everything in it: a PPIP, an SPV, a CDO, in fact: any of Geithner's bailout aphabet soup acronyms? You name it- it will have to participate. The only problem is that with the ECB no longer independently credible and capable of operating without Bundestag checks and balances, Europe is scrambling to get the next best thing: the US taxpayer as unlimited backstop, and if the Fed can be avoided in the process to prevent a political backlash in America, so much the better.
So where does Europe go?
Why the IMF of course, which is the US in all but name.
And here is where things get funny, because it was none other than the pathological tax cheat responsible for most of America's current economic disaster who personally was "demanding" Europe fix itself, even as he was quietly promising the moon and the stars to Europe behind the scenes. After all, not even Geithner is that dumb to not realize that if France goes, America is next, even though no bank dares to admit it has any exposure to France - a promise we would test in under 15 minutes when FrAAAnce becomes FrAA+nce.
The U.S., for example, wants to keep pressure on Europe to develop its own solution to the crisis. Treasury Department officials fear that by giving the nod to alternative financing options, European leaders may relax their efforts to craft a comprehensive strategy. Also, offers of funding from emerging markets may come with conditions such as promises for greater power at the IMF. The U.S. and Europe are reluctant to cede more power to emerging market economies at the IMF, particularly after reaching a hard-fought agreement on IMF governance last year.
So while it is certain that no monetary authorities will contest what they will say is an act of emergency, it will be once again up to the massively gridlocked legislative to screw this one up: after all the GOP will have no better opportunity to terminally humiliate Obama than to tie America's IMF-funding hands, in the process accelerating the debt spiral, first in Europe, then in America, and leading to a complete collapse in the US economy, just as the presidential race is really heating up.
And with that, something tells us the balance of the week will be quite thrilling...
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"No one is in a position to teach lessons to their partners."
What, like under a thirteen-year-old?
Italy will send the whole thing into the trash bin, Berlusconi knows this, he doesn't care if Italy is in the EU.
Total f*cking chaos ahead.
How much of this shit is just political theater until the redemption window closes? Then once it does they will punt until next year.
I always find it interesting to watch all the haggling and hard nose negotiating when one is trying to trade his dead horse for someone else's dead cow.
I think they will vent on gold during this OpEx...show how their latest bullshit plan has such credibility that gold ate it up....Oct 26 announcement, there are no co-incidences.
End the IMF.
Oh and the 'don't panic we have everything under control can't see this being a problem' sh*t from 2007 US subprime meltdown. Then it all went south. Well China's subprime is about to do the same.
http://www.sacbee.com/2011/10/18/3986785/debt-panic-in-chinas-wenzhou-ma...
I think the bigger point is being missed. What is actually happening is that Euroland is coming to the IMF to be bailed out. Just like all the other failed states before it. And with respect to the US, I will not worry about the last best hope for man. Will gladly put it in the safe hands of the GOP and Mr. Market, and let the chips fall where they may. And BTW, socialism's western rite, ala socialist Europe es muerte:)
You had me until GOP. Do you mean you want a sales tax so that the government gets more of your monie, and illegaly at that?
I hope that everyone understands that saying the Euro will fail because Europe is not allowed to print unlimited while the Fed is allowed to print unlimited is a strawman. Just because the Fed has no oversight does not mean it is untouchable; quite the contrary; the Fed is the idiot in the spotlight, the Euro is the underdog.
Anyone want to play contrarian trade 101?
To get out of this mess, just slip out the back, Jack....
Buy silver, or if you can, gold, but get out of the fiat ponzi to save yourself.
Capital is like a loose cannon on a ship. And right now the US (or IMF) is the "potential well"; the point of lowest risk. The fact that this is leveraged by the US taxpayer is a given, not really worth mentioning. Just lead the cow up to the milking machine. It will do as its told. It always does.
PS. What happened to all the OWS hippie warriors? Seems to be a bit toned down now. Cold weather? Jeez, I am disappointed. This makes the Tea Party movement look like 1776 and the French revolution combined.
The whole structure they are proposing is a farce. Its a throwback to bad securitisation and worse, the maths don't even make any sense.
http://viewfromthewilds.blogspot.com/2011/10/toxic-cdo-not-monoline-insurer.html
IMF to the rescue - TOLD YOU SO.
million billion trillion euro bailout
Must admit, I always chuckle when I hear of the US TAxpayer bailing out Europe - or anything/anyone else for that matter... unless it's with bullsh!t!
The US taxpayer coudlnt bail-out a fart in wet brown paper bag - so dont worry you aint gonna be on the hook for anything, not that you'll be left with anything either...
Any while we're on the subject of taxes: I see that that Buoffant Buffoon fron Tex-Ass - Dickhead Perry - is floating the idea of a 20% flat tax. About time these bums realised that if anyone get thru this, then we'll decide what to put into the kitty - and what its gonna fund - not some dumb-ass politician. That game is O-V-E-R.
This deal through the IMF will go both ways: IMF bails your EUR banks out with freshly printed reserve currency,because politically you are unwilling to print Euro's yourself (at this stage).
When the focus turns to us and to our bankrupt banks, you will lend us your gold so that we can offer that as collateral to the Chinese.
All of this "indirectly" via the IMF. " The West" practices solidarity so that America's coming dollar devaluation can be matched by the required Euro devaluation. No trade war between allies...
They're not allies (US and EU). Make no mistake, this is a hostile takeover and the staff (people of Europe and people of the USSA) have no say in it whatsoever.
The US is under occupation and is simply providing a mercenary army to TPTB. Have a look around...the furniture (manufacturing base) has already been removed and the liquidators (DHS) are boarding up the windows already. Soon (IMO, 12 months, or less) the doors will be locked and bolted.
SECEDE NOW!!
Hmmmm. Triangulation. That makes sense. Thank you for your time on the analysis Tompooz.
The acronym for the "Special Purpose Investment Vehicle" is SPIV..how appropriate!
Gee, couldn't see this one coming..... Oh, except for how shitty the Dollar has traded against the Euro since this crap started.... From day 1, the EU figured they could threaten the US with "a global meltdown", knowing that Geitner, Bernanke, and Obama were dupe enough to fall for it- stupid.....
its still less than a couple hundred billion
I am starting to think Uncle Sam is getting rid of the Euro. One of several threats to the oil dollar.
Thanks! One of the funniest articles I've read in awhile. Oh Lordy! We is crawling on our bellies for some of your chitlins massa Sam. We is begging for some of your magic greens to be your happy, happy slaves to debt.
No, please have your fun poking at the Euro while it lasts, but the triangle of lunacy that is the Fed, Treasury, and TBTF banks make Europe look like a haven of sanity. I wouldn't wipe my arse with the dollar (It's riddled with bacteria and coke), or the Euro for that matter. The farce is strong with this one.
"Why the IMF of course, which is the US in all but name."
Perfectly correct.
What this article describes as “Europe” is in fact the “Eurozone”.
Why does this matter? Well, the UK for example is part of “Europe”, but has nothing to do with the shower of shit that is the “Eurozone”.
I doubt this is something the average doughnut munching American would realise, and hence the need for more accuracy in such articles.
Since you're being pedantic: "American" includes Canadians, Mexicans, Hondurans,.....
Are you insultingly suggesting that Hondurans and Panamanians are "doughnut munchers"?
You "need more accuracy" in your critiques! Now, go back to your fish and chips!
Your being very rude Loftgroove. Was the subject of the content and commentary about the UK? No? Then tell you what. We're working on some problems and will get back to you. Next time, may I encourage you to add value?
It is Fight Club. Was this your first post? If it is then I am going to flatten you with proper British insults...
" The IMF and world financial leaders fear that if Europe doesn't act forcefully now, it could push the global economy into a recession and spark another global financial meltdown.""
Translation: "The IMF and world financial leaders fear that if Europe doesn't act forcefully now, it could cause the uber wealth to loose their wealth, power, status, contol'