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Jefferies: The Fed Should Print... In Europe
One could be forgiven for suspecting a hint of self-preservation in a research note by the firm that faces the most intense pressure given its apparent European sovereign exposure but David Zervos' note today seems extreme in many ways. With the sanctity of the known world at risk, Zervos describes the group-think of sado-fiscalism that has invaded German minds and how the Fed is the only one left with the 'bazookas' big enough to get the job done.
David Zervos: The Fed Should Just Do QE for Europe
If you want to read one of the most misguided pieces of research on the euro crisis look no further than here. After reading this you will understand the dark and disturbed German disease that my good friend, and esteemed global strategist, James Aitken has diagnosed as "sado-fiscalism". It has contaminated the minds of Merkel, Schauble and Weidmann who continuously vilify ECB monetization and envision a peripheral Europe of indentured servants working to pay for their government and banking sector's past borrowing sins.
Leaders infected with this disease induce so called "market forces" of higher funding costs, sadistically and strategically, on peripheral (and now core) overextended levered balance sheets. This ensures, ex post, that bad borrowing decisions are penalized – in size. Of course, this should have been done ex-ante so that no excess borrowing was done in the first place, but those same sado-fiscalists were happy to let their home town bankers expand balance sheets with zero risk weight sub-prime sovereign lending at low rates during the good times. Sound familiar?
In the article referenced above, the author goes on to at least acknowledge the obvious - forcing a sado-fiscal depression in the non-German parts of Europe might create systemic problems. Duh? Ya think? His solution – jam the banks, pension funds and insurance companies. His words - "If I am wrong and acute risk aversion in euro area sovereign debt markets remains and fear continues to trump greed in the face of reform implementation and progress, euro area regulators and policy makers must be ready to adopt new tactics. One of them would be a kind of soft "financial repression," in which reforming European governments would effectively direct nominally private euro area investors towards greater investments in peripheral government debt. Put another way, euro area governments overseeing a currency union in rough external balance—and one in which reform and progress are achieved—should not allow their pampered and politically protected domestic financial services industry to reduce its holdings of euro area sovereign debt."
So in the middle of a systemic crisis, where the banking system is choking on excess exposure to debts that are about to become credit impaired and EMU is breaking down, the solution is to force the banks to buy more toxic assets. Seriously, can there be a dumber idea? We in the US need to snuff out these sado-fiscalists and fast, they are danger to the world! More on that below.
But first, the foundation of "sado-fiscalist" solutions is built on cognitive dissonance - it cannot work. Using "market forces" to generate austerity and reform will backfire. Nearly all European countries do not have the ability nor the desire to pay back - in real terms - the debts racked up by their over indulgent governments and banks. And the good news is, if they don't have to pay them back. They can just leave EMU, default or monetize, and go on their merry way.
The reason the Germans are trying so hard to implement a "sado-fiscalist" solution is that without it, they lose - and lose big. If the debts are defaulted or monetized away, the savers of Europe - the Germans in large part - get crushed. This idea that the vendors to Europe are paid back by indentured servants perpetually sending 50 percent of their wages up north to pay for previous sins is folly. The Germans cannot win this game. The question how much systemic pain is created as they waltz down the path to losses?
A mass exit from or a complete breakdown of EMU will be determined by the German stance on monetization. There have been hundreds of calls by non-German Euro area leaders, US politicians, academics and private sector business leaders to monetize. And if the Germans block it in Euros, the printing presses in Drachma, Punt, Escudo, Peseta, Lira and Francs will surely be fired up once again. In the end of course there will be more paper money in the world chasing the same amount of goods and services - that is the end game!! The path to the end game is of course messy! And let's face it, we would all like to avoid "messy" if possible.
There is one easy way to do that - get the Americans involved. The US can force monetization at the ECB. If the Colonel deems sado-fiscalism as a global systemic threat (which it is), the Fed could act. The Fed has an account at the ECB in Euros. When the pesky Europeans borrow dollars from us on currency swaps to fund their insolvent banks we get this lovely account. And right now the Euros just sit there! If things get messy we just jack the "unlimited" lines up, back up the forklift, and buy Euro area bonds. Lots of them. Say a trillion or two across all non-German markets. The Fed already owns nearly 100b in German and French bonds. And if anyone tries to default down the road, well we have a few hundred billion in European gold to confiscate in the basement of the NY Fed. And if that's not enough we just institute "annual fees" for NATO membership or start confiscating European assets in the US.
If the shenanigans in Europe are going to mess up a US recovery, or even a presidential election, then there should be a serious US response. We did not spend all that money on the Marshall plan just to have Europe blow up the world again!
(h/t Shawn)
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Like Ben hasn't already thought of this. He has wet dreams about it.
Utter treason. These assholes would destroy Americans' savings just to cover their imploding european bond exposure. Scum of the earth.
These people are so evil.
Right... because the USA is just looking for more places to spend money??? We don't have enough shovel ready projects domestically. The air reeks of desperation.
It is a sign of desperation. Everything is coming apart and the canary's in the coal mines are dying. All this is about is self preservation, and the rest of civilization be damned.
Bernanke's biggest problem right now is that if this euro money deserts the euro system and flows into commodities it will raise prices in dollars and with it US inflation leading to higher rates and a US default.
He will print because he has no choice.
I thinnk there should be WWIII.
Rules: Bankers vs. Politicians. (Themselves physically)
Weapons: Knives, bats, chains, etc.....
The pay per view tickets alone should provide a substantial bump to global GDP.
They are on ths same side. They only feign opposition for the sheeple's sake.
Would the world not be a better place in their absense?
I want to watch Bernanke vs Blyth, retiarius vs secutor, to the death.
It's really Public Sector Vs Private Sector, only the private sector has 400 million personal fire arms. It's all about Sector Warfare stupid.
Bailout companies check. Bailout banks check. Bailout foreign nations check. Bailout the people...send checks to IRS on time OR ELSE.
Europe is not blowing up the world! Alan Greenspan is the architect of our current mass financial destruction and he's from the USA.
I love you Alan Greenspan, my hero.
It's all insanity run by madmen who probably believe in their own nonsense....
That said, as long as we live in a world of fiat, who's central bankers enable misallocation of capital everywhere, we might as well have the FED implement a policy that offically transfers NYC gold to the US gov. At least that way the US gets something for their 60+ years of supporting EU solialist policies.
Maybe that was the plan all along....
You are right, the language of this note is 'extreme' --even insane. Sado-fiscalism? WTF? Are the change management people walking into Jefferies right now? To think that Buffett was asked if he was going to buy Jefferies today on Bloomberg. Yeah, analysts like this are going to fit into the Berkshire Hathaway grandpa culture realy well. On second thought, I admire this Jefferies analyst.
HelluvaEngineer, but Bernank HAS already done it! What was the $1 trillion Euro bailout 12 months ago? Did everyone already forget that one?
pardon the source but:
http://finance.yahoo.com/blogs/daily-ticker/europe-crisis-u-rescue-183924622.html
SShhhhhh! You're not supposed to tell anyone about the Euro bailout. What do you think will happen in the US when we go under and EVERYONE KNOWS THAT ON TOP OF EVERYTHING ELSE STUPID THAT WAS DONE, US taxpayer monies were burning in Europe... and no postcard for that!
Jesus is this guy serious about QE exported for EuroZone? How is this fucktard allowed to open his mouth?
It's already happening on a stealth level.
When will Jefferies go away???
5.......4.......3.......2......
Now that Bill Keane is dead, you would think that that little whiny kid would finally go away. </humor>
Never, most of their board members are the "finest" the banking and investment community offers. In fact I'll be surprised if you are surprised at the names ringing the table.
Thank God! What a relief. And here I was all worried that they might be, you know, incompeten...Well, I'll let you finish that thought.
Agree, seems self-serving but would bet the Fed has already weighed the option of offering up $1.5T to ECB to throw water on the fire
So in an tragicomic twist, the US will bomb EZ while the EZ bombs Iran?
New plan of attack, they'll just dump USD across Iran, it's cheaper than bombs.
Money bombs!!
Ben's Apocalypse Now !!!
HAHAHAHAHAHA!
Needed that...the train is about to fall off the cliff and the morons left on board asking where the steering wheel is.
Actually, they're calling for the food cart girl to bring the more bottles of scotch... and whiskey.... and beer... lots and lots of beers....
and that's the plan...
always has been...
.... and what, no pussy?
You're missing the point here my friend. LOTS AND LOTS OF BEER!
Please print and save our firm. We don't care what you do to the American sheeple.
That is about the strangest thing i have read from an analyst for a long time.
They must be frustrated and desperate.
They get the very best medications, my friend.
its called QE 3 and it is coming to my friends in europe...... first you have deflation and then comes ..........you guessed it..........by the artist formerly known as printz........
Printing will come, "crisis" over. Merry Christmas.
Nope, sorry, you lose. There will be no 'printing' and everyone with a brain knows it.
I could see the foam frothing from Zervos' mouth while reading this. "We did not spend all that money on the Marshall plan just to have Europe blow up the world again!"????? Clearly insane!
There is a general sense of surrealness in the totality of the various sources of financial malfeasance. In a next few years all these fianncial stunts will come to a crescendo and the floor is going to open underneath financial markets in general. Enter Jubilee of a Century.
The Fed should print on the bottom of the fucking Atlantic. With all their staff present and Ben at the helm.
Safety first y'know.
The U.S. taxpayers bail out Europe to compensate for the problems caused by U.S. companies that have already been bailed out by U.S. taxpayers.
Ahhh...so *that's* what they mean by double-dip recession!
when in doubt, always return to good old amerikans...........they can take a fuckin and keep on tickin.....
Wait, I thought the EZ was "fixed", isn't it time for the 2:30pm hopium bounce?
Right, what problems? Eurozone was declared fixed last week. Now 1 day later we need the FED to print and hand them money? Not going to work, I think this guy was just talking hoping to get a Hopium market bounce, but those days are over as well.
WTF is wrong with these people????
They are on the wrong side of Eurobond trade, bigtime. That makes people say and do crazy things. Google "Jon Corzine".
We should?
They should?
You should?
The way I see it, there is far too much 'shoulding' on each other going on!
The damage is done. Any further dithering just makes the situation worse.
Debt is everywhere. Only two ways out - pay it off or default and start over. Period.
There's far too much debt to pay off, so that leaves default as inevitable. The question now is how they'll default. Either they default honestly and restructure debt, or default through hyperinflation. The hyperinflation route doesn't force anyone to take blame and make tough decisions and it also keeps the game going longer, so I think they'll default through hyperinflation.
And yet they dither on.
The debt is not supposed to ever get paid off. It's supposed to continue generating interest payment income forever.
The problem is that fools loaned money that they didn't have to other fools who can't make the monthly interest nut and can no longer borrow more money to make the monthly interest nut. End game, unless someone prints more money.
Who says a recession is going to "mess up a presidential election?" If it gets rid of Obozo, then it will have served a very useful public service!
Not sure how they hold an election that will put an Independent in power.
It will come. The Fed bailed them out last year on our butts. I have a better idea how about stringing all the idiots up and start all over.
It's all going to eventually come down to the FED bailing out everybody. They will most likely come up with some kind of global version of the ESFS where the FED contributes most of the money in exchange for 'supervising' the recipient's treasury/economic policy going forward. Next step toward a NWO. Screw the US taxpayers, total IRS receipts have long been dwarfed by the amounts we're talking about since the 2008/2009 alphabet soup of bailouts. US citizens and taxpayers mean about as much to these guys as people cramming into a PeopleExpress flight mean to the guys across the tarmac in their G4, nothing.
The FED is just waiting to be 'asked' to be the world's saviour. The plan is already set-up.
I really hate these guys.
reposted :
Merkel is going to make Bernanke print to infinity to save the GS banking squid world wide. The battle of who prints and who doesn't and where the socialised debt ends is on; its going to get ugly, as Oligarchs when they fall out, are worse than T Rex's in war.
The next six months will determine if saving the GS nebulous including all the Euro banks will be funded by Germany or US or a mix. This is what is ultimately going on. The US does not want contagion to hit Euroland as it'll sink US finance. As ECB won't print FED/BB will have to. Fasten seat belts as GS hits Euroland hard to get them to participate to maximum before Ben hits the print button...The drama around Italy, Spain France will heighten as GS pulls all the plugs out. Watch Merkel shake her head and say NEIN...NEIN...wow, shock of Titans.
looks like wall street has gone from cocaine to crack. a sure sign of tough economic times and the only reasonable explanation for this latest scripting of multisyllabic economic psychobabble from Jeffries.
Inflate or Die.
Global QE; Global Tarp
Regardless, one day closer to Global Hyperinflationary Dpression!
There is 'No Way Out'!!
Fucking insane, but true! If US start monetizing EU debt by $ terms, the China and other $ pegs will blow to the moon.
Trapped.
Painted into a very lonely corner and no tools left in the tool box. ECB must Print because the US people cannot help in this War. They are tapped out
Fuck it, bro.
Laugh if you want, but JEF is one of the only financials GREEN on my screen right now.
Yeah, it's called "unwinding shorts"....
Time to update your resume, Dave- game over, be sure to thank Dick on your way out the front door.....
In a normal industry, this would be shameless and embarrasing. Basically begging to be saved. Only in finance is it not.
Is this how they reassure the markets?
Strange tactic.
Something like - "our european exposure is this....our cds exposure is that...etc"
This is not helping - is it kamikaze time?
Time for the daily meltup in everything? (except gold)
Bitchez from Bali to Boston Beg Bernanke: Bail out Brussels!
let japan do it!
Hey, Tyler, ye old fiat currency confetti plan is not a bad idea, it is just that those ignorant bozos who would think that to have it banked and in their numbered accounts makes them personally rich and powerful, are really screwing up the system which identifies them as being the problem to be sorted. If you aint smart enough to spend it and have nothing, then you aint smart enough to lead anything at all ..... and they aint smart enough at all, and are proving it in spades with their every dumb move to maintain things as they were rather than change them into what they should be. Only the latter will see them saved and hailed as heroes.
The system has idiots running it for themselves and not for everyone else and that is why it's crash is inevitable as the abuse of currency power is broadbandcast around the world, with simple messages such as these and those on this board and its threads.
Capiche.
The Fed should print in Europe? How about writing off your loss? How about taking the pain of making a bad investment instead of passing it on to the masses. How about a total reset of your bond and shareholders when you screw up. Bankruptcy is an option.
If we print in Europe ... well good luck with keeping Joe six pack from losing it.
Ben, print Euros, no problemo. Where is that Italian helicopter?
what's the problem? just do what MF did, and raid bank accounts in the name of saving the US. problem solved!
Welp, this explains the EURUSD to ES breakdown in correlation. We have to let EU print and levitate stocks.
Of course they do...black Friday and the Santa rally are primed, no? Boner Season...
Drastic asswipes call for drastic measures..
..and history is once again repeating itself.
Write off earllier the gangrenous limbs or book a funeral if the printing machines are cranked up.
Fools, already happened and is continuing to happen!!!!
....its just a question as to what extent. They are acting.......
Somehow... I'm not surprised...
I mean... not as much as I should be...
If I am reading this correctly he is arguing the ECB has to print since it let the bankers and sovereigns make all these mistakes. And if you want those who make mistakes to pay for them, you're a "sado-fiscalist."
From now on let it be known that the term "sado-fiscalist" in the Jefferies lexicon refers to one who derives pleasure from the pain of a bankster who did not get his bonus, or his way. Even if he threw a tantrum and threatened to go poopie in his pants.
Refer this publication to the appropriate health officials in charge of providing medication for the deranged.
Does this guy get paid for this sort of "thinking?" Good lord - Jefferies must be becoming unhinged.
+15 Trillion. The ponzi schemes needs trillions of more dollars to keep functioning and if you don't agree with it well your just a big old meanie..ie "Sado-fiscalist".
This POS doesn't want a solution...he just wants the US to step and print to the tune of trillions of dollars so that things don't get messy. Those trillions buy about 90 days of 'feel good' and then what? Another trillion? Just keep doubling down until the roullette table comes up black...it always works.
Jeffries...please grab this guys computer, tie his fucking head to it and throw him and the computer in the East River so we don't have to read this sort of bullshit again.
Is this guy joking? Talks about printing trillions then tops it off with snarky comments about seizing the 'pesky' European's gold and assets if they decide to default. I'm sure that would make everything all right in the world.
Written like a fucking high school student's paper on "How I Would Fix the Financial Crisis".
The entire reason the Fed exists is to bail out the banking systemin crisis. They are acting. They just are not telling anyone about it.
Agreed...its just a question as to what extent.
In 2008-2009 they gave out 16 trillion in "loans" and said nothing. I can only assume the tab is going to be even higher this time.
I'm sure the fed window has been open to the European banks at favorable terms and rates for a long time.
Only a fool thinks you can borrow your way to wealth.
Read:
http://www.amazon.com/Simple-Wealth-Mr-Andrew-Costello/dp/1463523017/ref
Can this guy plase get beaton with a police baton and pepper sprayed in the face.
"We in the US need to snuff out these sado-fiscalists and fast, they are danger to the world!"
It's nice to hear the Wall St crime syndicate panicking so blatantly but it's a worrying to think how much damage they'll cause as they go down in flames. I hope the Germans stick to their guns. The worst outcome is the continued survival of the vampire banks. The alternatives might all be bad as well but the worst outcome of all is the continuation of mafia banking.
at least zervos starts w/ a Z, BiCheZ!
the marquis of fiscal fisting is a direct descendant of de sade; what is he doing @ jefferies fantasizing about ben's big bazookas? what if angela gets testy?
Island Dweller: The Fed Should Print.... In My Account!
I am thinking that we LET Europe blow up, then we go in guns blazing, put all of the royals, the popes (black and white) and the BIS in some form of demeaning work camp and just take over with Europe as a slave colony. Then when we are tired of it we hand it off to an pan-African/Asian federation to abuse at will for past indisgressions.... and we reclaim our freedom at the same time.
What goes around comes around.
Whatcha think?
Karma is a bitch!
Self-serving BS. Amazing the amount of seeming logic that greed can seem to generate.
Zervos wants "Toy Story"... to infinity and beyond!
Zervos is the marker that the euro died today. If Jefferies can release crap like this, and call it analysis by one of it's "Top Men", confidence in the Euro is dead. Confidence is not coming back.
If you want to know what panic smells like, this is it! Jefferies declaration of panic means there is blood in the water and only the sharks will feast. Jefferies is a small fish, about to get eaten.
You've got to love the position of the Germans. There is simply no way to validate any commitment made by any of the German politicians. There is so much crap coming to the surface that any commitment made by Germany to help the Euro can easily and correctly be negated by future German decisionmakers. There is no effective backstop in Europe left. European panic has signaled every man for themselves.
In this environment, you may well see countries seriously moving to clean up their acts. As usual, this is bullish, long term. Short term, not so much...
in less than a century the founders worst nightmare has come to fruition, whereas the people's freedom as landowners, have/has become the property of the oligarch 'slave holders'
http://www.bigeye.com/griffin.htm
"The Creature of Jekyll Island"
*read and weep!
For those of you who invest in an IRA or for long term goals, theres a better approach than buy,hold,hope. Stocks follow the economy so analyzing the economy, specifically the factors that are "leading indicators" and having exposure to equities only when the economy is headed in the right direction and avoiding equities in favor of safe haven baskets is a much more logical approach. And missing the major drawdowns is the only way to help ensure meeting your goals. If you are interested in investing in a portfolio that tactically invests in equity and safe haven baskets via ETF's automatically, please email me at:
eclark@breakaway-partners.com
and I'll add you to the weekly market commentary & portfolio update distribution list. Its free to add you and you can follow along our model and our views. We have been RISK-OFF since 6/30 so have missed all this wicked volatility. Currently invested in short duration treasury baskets as flight to safety drives interest in our debt.
when the tough get going........its every man for himself
I see the method to his madness. It is a plan that was tried before in WWII. It is called "counterfeiting". If they won't debase their own currency - we will do it for them! That way they won't violate the EU charter, and everybody is happy whilst no-one is to blame (except the bad ol' U.S.A.).
There should be a MAD-response from the USA !
Damn mr. Greenspan already made sure that WMD's algo's are in place in the system for eons now, Push da button.
I don't have any doubt that the Fed is keen to work with the ECB to make QE happen in Europe, circumventing German concerns in any way possible. I don't doubt that the Fed isn't alone here either, that the IMF, BoJ, BoE and maybe even PBoC might want to do the same.
BUT
If QE2 showed anything, it was that the Fed is a complete n00b when it comes to getting a proper read on European politics, and it's the European quest for intra-Europe power that dominates grand actions in the region. ZH was one of the first sites to point out that QE2 was actually a eurodollar bailout for Europe (whether originally intended that way or not). Bernanke panicked about Greece going up and handed out liquidity to european operations that didn't even need it. Because they didn't need it to protect against Greece, they instead used it to speculate, leading to commodity rallies and instability in the MENA. Bernanke got totally gamed and put the security of oil supply at risk in the process, no doubt drawing the ire of the Joint Chiefs.
This HAS to be playing on his mind, and everyones mind at the Fed, regarding a trans-Atlantic QE3. This time around, they'll be more cautious (once bitten, twice shy), waiting for very clear evidence that implosion is inevitable. This, in my opinion, contributes to a greater probability of a Lehman type event coming out of Europe. QE3 will eventually happen, but it will be reactive rather than proactive. If you're brave enough to play these insane markets, stay in cash, wait for the panicked selloff in all assets and pick up precious metals in the slump. The subsequent QE3 and re-inflation will be rewarding.
Europe a giant continental colony of the United States?
finally. someone said it. amen. the sado fiscalists. yea they don't want to be the only one's with a strong currency when everybody is printing like mad. there orientation is export thus export always wants weak currency. I knew this all boils down to the germans and their need for world domination all over again. Just look at the porn that comes out of germany. sado. sado fiscalists. If we had the gold standard we would be in permanent deflation. population increases yet the supply of monetary exchange medium relatively fixed. Our accounting system doesn't work under permanent deflation and neither do our minds. Twenty years later I'm making half as much yet it is double. Ha ha bullshit. more is more. less can be more. but the problem with our monetary system is that something can be created with nothing. Don't listen to your 8th grade science class. in the world of virtual particals this happens at the plank scale and vanishes before you can blink. ha ha... energy created energy gone. ha ha.. the medium of exchange can't have the value it is a token of value for the purpose of exchange. the thing you are buying is the value and that value depends on the person buying it. a 300 dollar flute in the hands of someone who can play the hell out of it is far more valuable than a flute smelted for it's silver value. ha ha... you buy silver coins I'll buy silver flutes at pawn shops that sound good. hehe. I do not long for the days where a fixed supply of money can be hoarded to create artificially high value. the days of barter are gone with exception to the most desparate. We all know the endgame. GS has their henchman lined up. the crisis is gonna happen anyway... so you wanna fall on steel or a pillow. both will hurt.
You make absolutely zero sense, try again.
that's cause I am genius and you are not. the only reason today gold and silver are going up is the existence of the ETF's and the asymetry that occurs when those ETF's are shorted. Thus they will always accumulate supply overall. I'll stick with ones and zeros. I am in reubini's camp - gold and silver are a relic of the past. There is a point when gold becomes paper too due to people's herd mentality. we all pay one way or another. inflation or physical pain in the sado sense. you choose