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JPMorgan Estimates Immediate Losses From Greek Exit Could Reach 400 Billion

Tyler Durden's picture




 

While our earlier discussion of the implications of Greece's exit from the Euro are critical reading to comprehend the real-time game of chicken occurring in front of our eyes, JPMorgan's somewhat more quantifiable estimates of the costs and contagion, given the results of the Greek election have raised market expectations of an exit of Greece from the Euro, also provide key indicators and flows that should be monitored. Identifying what has gone wrong with Greece's co-called 'adjustment' program, they go on to identify key transmission mechanisms to Spain and Italy, how it could potentially improve (Marshall-Plan-esque) and most critically, given the exponentially growing TARGET2 balances, if and when Germany throws in the towel.


JPMorgan: Greek Contagion

The results of the Greek election have raised market expectations of an exit of Greece from EMU. How exactly could this exit happen and what flows should we monitor?

 

Market forces could induce a Greek exit. A potential deadlock between the Greek government and the Troika which terminates funding from the EU/IMF, has the potential to create fear and panic and accelerate the capital and deposit flight out of Greece. Once this capital flight accelerates Greece would likely have to ultimately introduce capital controls. With EU funding being cut and the economic situation deteriorating, Greece will likely to start paying at least part of salaries and pensions in promissory notes or Greek bonds.

 

Greek banks have run out of ECB eligible collateral already and can only access Bank of Greece’s ELA, but even with ELA, the collateral, typically loans, is not unlimited. They have already borrowed €60bn via  ELA which, assuming 50% haircut corresponds to around €120bn of loan collateral. Outstanding loans are €250bn, so Greek banks have a maximum of €130bn of remaining loan collateral which allows for a maximum of €65bn of additional borrowing from Bank of Greece’s ELA.

 

This corresponds to around 40% of Greek bank deposits which stood at €170bn as of the end of March. The true maximum amount that Greek banks can borrow via ELA is likely though to be significantly smaller because not all loans are accepted as collateral via ELA. The alternative is for Greek banks to be allowed to issue more government guaranteed paper but the ECB can, with a 2/3rd majority, block a steep and unsustainable increase in Bank of Greece’s ELA. This would effectively cut Bank of Greece off from TARGET2 and force it to eventually issue its own money.

 

Unfortunately, we need to wait until the end of June for the ECB’s monthly MFI balance sheet data to get an accurate picture of the impact of Greek elections on deposits. Anecdotal evidence from the Greek press and elsewhere suggests that deposit outflows re-accelerated post elections.

 

It is often stated that Greece’s low primary deficit (projected at 1% or €2bn in 2012) increases the incentive for Greece to walk away from the bailout agreement. This is not true, in our view, given that Greece is still on the hook for the €6.3bn that is needed to clear general government arrears and the extra €23bn that is needed to complete the bank recapitalization plan. And as described above, a deadlock with Troika raises the risk of an accident that leads to Greece’s departure via market forces even if this was not the original intention of the Greek government.

 

The consequences for Greece would be clearly negative, if not catastrophic following an exit: high inflation, fuel shortages, big reduction in living standards, increase in social tensions or even unrest, political isolation internationally. This is why the chances of a Greek exit should be logically significantly below 50%.

What would the consequences for the rest likely to be?

The main direct losses correspond to the €240bn of Greek debt in official hands (EU/IMF), to €130bn of Eurosystem’s exposure to Greece via TARGET2 and a potential loss of around €25bn for European banks. This is the cross-border claims (i.e. not matched by local liabilities) that European banks (mostly French) have on Greece’s public and non-bank private sector. These immediate losses add up to €400bn. This is a big amount but let's assume that, as several people suggested this week, these immediate/direct losses are manageable. What are the indirect consequences of a Greek exit for the rest?

 

The wildcard is obviously contagion to Spain or Italy? Could a Greek exit create a capital and deposit flight from Spain and Italy which becomes difficult to contain? It is admittedly true that European policymakers have tried over the past year to convince markets that Greece is a special case and its problems are rather unique. We see little evidence that their efforts have paid off.

 

The steady selling of Spanish and Italian government bonds by non-domestic investors over the past nine months (€200bn for Italy and €80bn for Spain) suggests that markets see Greece more as a precedent for other peripherals rather than a special case. And it is not only the €800bn of Italian and Spanish government bonds still held by non-domestic investors that are likely at risk. It is also the €500bn of Italian and Spanish bank and corporate bonds and the €300bn of quoted Italian and Spanish shares held by nonresidents. And the numbers balloon if one starts looking beyond portfolio/quoted assets. Of course, the €1.4tr of Italian and €1.6tr of Spanish bank domestic deposits is the elephant in the room which a Greek exit and the introduction of capital controls by Greece has the potential to destabilize. In this respect, it is important to keep a close eye on Chart 1.

What has gone wrong with the Greek adjustment program?

After all, Greece has managed to reduce its primary deficit by 8 percentage points in two years, something that no other country has achieved. And according to Bank of Greece, given announced cuts, unit labour costs are likely to be down by 13% this year vs. the end of 2009, an adjustment that is only comparable to Ireland’s “success” story. From a technocrat’s point of view, this must be impressive performance.

 

Perhaps the best way to understand what went wrong with the Greek adjustment program is to compare it with Iceland’s program. On Nov 3rd 2011, the IMF issued the verdict on its 3-year adjustment program for Iceland. The IMF’s verdict was that its “program for Iceland was a success” due to 4 factors:

  1. the decision not to make taxpayers liable for bank losses.
  2. the decision not to tighten fiscal policy during the first year of the IMF program.
  3. preservation and even strengthening of Iceland’s welfare state during the crisis.
  4. prudent use of capital controls. The IMF said: “capital controls were necessary and are now seen as useful addition to policy toolkit”.

Although permissible under EU treaties, factor 4 is admittedly not consistent with a monetary union. But none of the remaining 3 factors were present in the Greek program. No debt relief was given to Greece early, the fiscal adjustment was front-loaded rather than back-loaded (a massive 5% deficit reduction was required in the first year only), and not much attention was paid to protecting those at the low end of the income distribution.

How could the situation improve?

The Marshall plan for Greece is probably the best hope. Much has been said about Greece’s Marshall plan over the past months but little has been done. Estimates are close to €20bn or 10% of Greek GDP. Assuming Greece is changing its bureaucrat and deficient administrative/tax/legal structures quickly enough to allow for fast absorption of these funds, a Marshall plan has the potential to at least stop and perhaps reverse the economic decline.

 

 

 

Clearly such a Marshall plan represents a transfer from the core to periphery. These transfers are necessary in a monetary union where the core diverges from the periphery or, more correctly, Germany diverges from all the rest. Charts 2 and 3 show that both TARGET2 imbalances and real GDP levels continue to show a widening gap between Germany and the rest.

 

Without these transfers the likelihood of repeated crisis in the euro area will remain very high especially if tight financial conditions, uncertainty and lack of private sector investment condemns the periphery to a path of rising unemployment and never ending economic decline. And unfortunately Greece is not alone in facing these persistent headwinds. As we highlighted in F&L April 27th, the drag from tight financial conditions on periphery remains heavily negative.

 

It is possible that necessary fiscal transfers are not politically feasible or that Germany is eventually far too different from the rest to coexist in a monetary union. In this case the horrific scenario of a break up becomes more likely. We would like to make two observations: 1) it is less painful and makes more economic sense for Germany rather than periphery to leave. See above discussion on consequences of a Greek exit for Greece, 2) the cost of a breakup is rising exponentially over time. Bundesbank TARGET2 balance reached a new high of €644bn in April.

 

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Mon, 05/14/2012 - 02:12 | 2422829 Temporalist
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That's a lot of ouzo.

Mon, 05/14/2012 - 02:28 | 2422832 THX 1178
THX 1178's picture

That's a lot of pastitsio, greek salad for the lady.

Mon, 05/14/2012 - 03:26 | 2422882 AldousHuxley
AldousHuxley's picture

where is your high frequency trade bots now?

 

 

Mon, 05/14/2012 - 05:40 | 2422969 jeff montanye
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where indeed.  

my favorite takeaway is the successful example of iceland cited by, of all sources (admittedly a quotation of the imf) j p morgan: stiff the banks, increase social safety nets and tough it out.

Mon, 05/14/2012 - 08:16 | 2423130 GetZeeGold
GetZeeGold's picture

 

 

400 billion just for Greece? Stop nickel and diming me and just give me the overall figures for everyone. I'm tired of screwing around here!

 

Mon, 05/14/2012 - 08:26 | 2423158 cat2
cat2's picture

News flash, those losses are already real.

Mon, 05/14/2012 - 08:29 | 2423162 GetZeeGold
GetZeeGold's picture

 

 

Plenty of road left......you know the drill. Just kick the damn can.

 

Mon, 05/14/2012 - 08:53 | 2423200 krispkritter
krispkritter's picture

 

Only after the last tree has been cut down,

Only after the last river has been poisoned,

Only after the last fish has been caught,

Only then will you find that money cannot be eaten.

 

Cree Indian Prophecy 

Modern version: substitute 'economy', 'banker', 'Corzine', 'fiat'.

 

Wed, 05/16/2012 - 17:11 | 2433085 CClarity
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And how much has the Troika already poured in?  IMF, ECB, not to mention banks and gov'ts.  Slosh slosh losses are inevitable. Bring it on already!

Mon, 05/14/2012 - 08:30 | 2423164 JPM Hater001
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Love happy smile joy peace

Love happy smile joy peace

Love happy smile joy peace

Love happy smile joy peace

Love happy smile joy peace

Love happy smile joy peace

Love happy smile joy peace

Love happy smile joy peace

Mon, 05/14/2012 - 09:07 | 2423274 goldfish1
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Niiiice

Mon, 05/14/2012 - 09:06 | 2423270 goldfish1
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When $6 Tril of counterfeit treasuries are found floating around, hub bub about $400 B seems ludicrous.

And the $500 Tril or more of derivitives...

The Morgue is showing a $5 Bil MTD loss. To put it into perspective, the entire government salary of Contra Costa County in CA for a year is roughly $2 Bil.

And the minds we have on this is Bernanke and Dimon? Wow.

 

 

Mon, 05/14/2012 - 09:42 | 2423392 cranky-old-geezer
cranky-old-geezer's picture

 

 

my favorite takeaway is the successful example of iceland cited by, of all sources (admittedly a quotation of the imf) j p morgan: stiff the banks, increase social safety nets and tough it out.

Stiff the banks is something no other government would dare do ...except Greece if they leave the EU.

That's what Greece would be doing, telling euro-banks fuck off, all our bonds you're holding are worthless now ...unless you can get other EU nations to pay them off ...and good luck with that.

Sure, Greece would have to bite the bullet and get it's fiscal house in order, along with the Greek people getting off their lazy asses and start producing things the rest of the world wants, or the drachma would drop in value so fast it would be another Zimbabwe.

The Greek central bank must not give in to pressures from the Greek government to print and buy government bonds, and pressures from Greek banks to print and buy all their worthless paper.  That shit has got to stop if Greece hopes to make it on their own and prevent the drachma from collapsing.

But that's the solution for ever other nation deep in debt, including America.  Stop printing currency, stop deficit spending, stop the welfare state mentality, live on taxes collected ...and stop bailing out the banks. 

There should be no currency printing beyond private sector GDP growth.  No, government spending doesn't count in GDP since government doesn't produce anything of value.

 

Mon, 05/14/2012 - 08:46 | 2423190 sessinpo
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From article

"The Marshall plan for Greece is probably the best hope."

" Clearly such a Marshall plan represents a transfer from the core to periphery."

"It is possible that necessary fiscal transfers are not politically feasible or that Germany is eventually far too different from the rest to coexist in a monetary union"

 

Comment:

The above summarizes the article. The jist or conclusion is that it will fail. The euro is a failed expesive experiment. As economies crumble, nationalism rises which is anti monetary union.

It's basically its a lot of BS. Each day or week that we see a new plan or some political posturing is simply an attempt to delay the inevitable, or as I like to say, time for TPTB to position themselves.

Mon, 05/14/2012 - 02:27 | 2422833 Michael
Michael's picture

Oh BooHoo.

Mon, 05/14/2012 - 02:34 | 2422840 Temporalist
Temporalist's picture

BooHoozo

Mon, 05/14/2012 - 10:12 | 2423521 mick_richfield
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Boo, you two!

Mon, 05/14/2012 - 08:38 | 2423175 mayhem_korner
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So the Morguesters are now the experts in estimating losses? 

    ...What's the irony index trading at today?

Mon, 05/14/2012 - 02:20 | 2422830 Manthong
Manthong's picture

OK.. Marshall plan for Greece.. Chester plan for Spain, Doc plan for Portugal and the Kitty plan for Italy.

Oh.. France can be Festus.

All good..  finally?

Mon, 05/14/2012 - 08:23 | 2423154 FlyoverCountryS...
FlyoverCountrySchmuck's picture

"Marshall Plan for Greece"

Paid for, of course, BY THE U.S. TAXPAYER

Mon, 05/14/2012 - 08:42 | 2423177 Terminus C
Terminus C's picture

yea, when I read this I was disturbed.  There is an obvious lack of understanding as to why the marshal plan was 'successful'.  It was designed to put the entire world on the dollar system. The official understanding of it was that we used the money (debt) to fund the reconstruction of Europe, as in to pay for the development of hard and productive assets like buildings, factories, rail lines etc... that had been destroyed by the war but in reality this was merely an expansion of the money supply.  Interestingly this rapid expansion caused severe inflation back in the US because all of that new "money" was used to purchase American manufactured goods at the end of the war, making it more difficult for Americans to access these goods (prices increased).

This new JPM "Marshall" Plan is to go into repairing imaginative assets that had been re-re-rehypothicated and are now collapsing under the weight of their own stupidity.  Dumping more debt onto these assets (being destroyed by odious debt in the first place) is the solution of the insane or the sociopath (who seeks to intentionally destroy society in order to benefit from the opportunities created by chaos).  That part of the world is already on the dollar system so... any new "Marshall Plan" is doomed to fail, though it will not fail to increase our inflation.

Mon, 05/14/2012 - 09:11 | 2423280 goldfish1
goldfish1's picture

Start with 1000% inflation and go from there.

Mon, 05/14/2012 - 02:24 | 2422831 Bastiat009
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So the euro is down and done. Banks are done too. Stocks are going nowhere. Gold is falling further everyday. US$ and US Treasurys look good. I can't figure what is the scariest position.

Mon, 05/14/2012 - 02:33 | 2422838 PhattyBuoy
PhattyBuoy's picture

 ... a greek behind you!

Mon, 05/14/2012 - 02:59 | 2422858 tocointhephrase
tocointhephrase's picture

Full of Greece ;)

Mon, 05/14/2012 - 03:02 | 2422859 Max Fischer
Max Fischer's picture

 

 

The "scariest position" is clearly silver.  It's tracing the 1980 bubble/collapse identically. I can't even imagine how many silver bagholders are facing total wipeouts in the coming 12 months.   

http://www.mcoscillator.com/learning_center/weekly_chart/silver_is_traci...

And what's so tragic about all this is that the "silver pumpers" just keep pushing more lemmings off the cliff.  Just two days ago, I read another bullshit analysis (on a different blog) by a well-known silver pumper and he said, "silver has to go down, in order to go up."  WTF?  *LOL* Really? Then why was this very same person pushing everyone into silver all the way up to $50?  Now, at $28, he thinks it needs to go further down before it can make everyone rich?  Pure delusion.  This is a perfect example of someone so fanatically and emotionally attached to his investment that he's totally incapable of recognizing how absurd his thesis is.   

How do you know if you're too fanatic about your positions?  When you see your investment continue to lose value day after day, so you convince yourself that this is 'all part of the plan' and that the more it loses, the higher it will, some day, go.  

*LOL*

The scariest position?  Silver. No doubt.  Silver lemmings are gonna ride that one straight into the ditch..... and when they're flat on their face, they're gonna say, "See... this is perfect... now that we lost most of our wealth, it should start to go up!" 

MF.

 

Mon, 05/14/2012 - 03:16 | 2422872 James_Cole
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I'm actually a silver skeptic to some extent (though have a large position, made $$$ selling at $47) but my God that is a moronic chart comparison.

Nothing on the two charts relates (timeframes / price moves), give your head a shake.

Mon, 05/14/2012 - 03:23 | 2422876 James_Cole
James_Cole's picture

Also, as that chart is from 2011, continue the line and the comparison is even more asinine.

Mon, 05/14/2012 - 03:34 | 2422890 Max Fischer
Max Fischer's picture

 

 

Who cares if the x-axis is off a bit...even the author says the time scale is not accurate.  It doesn't matter at all.  If you can't see the similarities, then nothing I could say would convince you.  You'll see whatever you want to see.  

By the way, when you tell others on the internet that you timed the top of a bursting bubble perfectly, no one believes you.

MF. 

Mon, 05/14/2012 - 04:10 | 2422914 James_Cole
James_Cole's picture

Both axis are way off. Take any commodity and you'll be able to find such historical comparisons which may or may not be useful, this case being the latter (actually PROVING itself useless).

I didn't time it, it was a combination of luck, distrust in the sudden moves / lack of fundamentals. But having bought in at 28$ there were lots of other times to offload at a quick profit. My point was only that I'm not anti silver, though I would agree it is in a sustained bubble.

Your chart was just crap.  

Mon, 05/14/2012 - 05:45 | 2422974 jeff montanye
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and would the utterly different stances of central banks between 1980 and 2012 figure in at all (20% short rates vs. zero, money supply restriction vs. growth without historical parallel in the u.s. and eurozone)?

maybe.

Mon, 05/14/2012 - 08:14 | 2423137 GetZeeGold
GetZeeGold's picture

 

 

Wait till our Weimar returns start rolling in. Wheel barrels chocked full of cash!

 

Mon, 05/14/2012 - 08:13 | 2423133 francis_sawyer
francis_sawyer's picture

 "You'll see whatever you want to see..."

~~~

What I see is that $50 top looks like your pointy head...

Mon, 05/14/2012 - 03:24 | 2422875 Camtender
Camtender's picture

So, I guess the dollar & treasuries, which are being created by the billions each day, is the way to go....

Thanks MF for enlightening us. BTW, did you for get the "G"?

Mon, 05/14/2012 - 03:54 | 2422905 Max Fischer
Max Fischer's picture

 

 

Returns for 2011:

10-year bond:  17%

30-year bond:  35%

Gold:             10%

 

Paper wins. 

MF. 

Mon, 05/14/2012 - 05:25 | 2422963 TWSceptic
TWSceptic's picture

Cherry picking is not going to make you look better.

Mon, 05/14/2012 - 08:17 | 2423139 GetZeeGold
GetZeeGold's picture

 

 

Let them eat cherries....we only accept gold. How many would you like?

 

Mon, 05/14/2012 - 08:26 | 2423160 Dermasolarapate...
Dermasolarapaterraphatrima's picture

"...Greece will likely to start paying at least part of salaries and pensions in promissory note...."

 

Maybe California has some of those 'IOUs' left over they can lend to Greece?

Mon, 05/14/2012 - 08:42 | 2423178 GetZeeGold
GetZeeGold's picture

 

 

On come on......Jerry is in charge. What could go wrong?

 

"Join our campaign to get California working again"

http://jerrybrown.org/

 

Mon, 05/14/2012 - 09:17 | 2423317 goldfish1
goldfish1's picture

California - only $ 16 Bil deficit so they say.

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2012/05/12/state/n11505...

 

California square miles: 163,707

Greece: 50,944

 

Mon, 05/14/2012 - 08:55 | 2423225 sessinpo
sessinpo's picture

According to Morningstar, Treasuries scored an annualized return of 11.03% a year over the past 30 years, squeaking past the 10.98% annualized return of the S&P 500 in that time.

Mon, 05/14/2012 - 03:24 | 2422877 ToddANON
ToddANON's picture

On a long enough timeline everything looks the same.

Mon, 05/14/2012 - 03:28 | 2422885 Central Wanker
Central Wanker's picture

In year 1980, people bought silver for speculation.

Today, people buy silver for protection.

See the difference?

Mon, 05/14/2012 - 03:48 | 2422903 Max Fischer
Max Fischer's picture

 

 

That's not true. Just more silver disinformation. 

The overwhelming majority of silver that's traded is used for industrial applications.... this normally consumes ~500 million ounces yearly.  When you say "for protection" I'll assume that's the same as buying for an investment.  For most of this past decade, silver consumption as an investment equaled anywhere from ~30 million ounces to a high of 118 million ounces last year when all the goons and lemmings worked everyone into a fever pitch. Over the last ten years, there was usually well under 100 million ounces purchased for investment.  

MF. 

Mon, 05/14/2012 - 05:28 | 2422964 ThirdWorldDude
ThirdWorldDude's picture

God is my witness how much I dispise speculators like yourself!

 

1. Here on ZH we're not talking about paper. A physical oz will remain 31.1 g no matter how fast the inflatory train starts rolling... 

 

2. Have you ever read a book on the history of economics in your life? I encourage you to go look at the price ratio between Au and Ag throughout history. The original ratio was set to 1:10 through 1:13 and today it is at 1:55. The point is that everybody and his dog expects Au to hit a min. of 2500 bucks and the underpreciated silver will follow suit. Once your paper "assets" reach their real value (i.e. the value of the paper and ink) and people reintroduce barter, you can damn well expect the gold-silver ratio to go down to at least twice the value it has today.

 

Go lick your CEO's ass instead of trolling...

Mon, 05/14/2012 - 06:04 | 2422984 Ghordius
Ghordius's picture

Why is everybody assuming that MF is a troll? Your assumption with the historical ratio of 1:10 to 1:12 was in a time where there still were countries that used silver as specie or backed a currency with silver. This is not the case at the moment. Even gold was on the brink of losing it's monetary metal "status" in 1999.

Even traditionally silver-backed countries would shun silver at the moment and would go to gold-backed first. Silver is simply more speculative. It might come back as a monetary metal, yes, but it's not a foregone conclusion. And by then, the next in line would be copper - because monetary metals need a certain degree of market stability that needs a certain amount of unused metal in the first place.

Mon, 05/14/2012 - 06:34 | 2422999 disabledvet
disabledvet's picture

and there is billions of tons of copper...a huge quantity just "lying on the ground in Argentina." Interestingly in spite of Argentina's default "prices have remained quite high." And having stiffed their creditors once didn't they just do it again recently with the Repsol thing?

Mon, 05/14/2012 - 06:53 | 2423008 Ghordius
Ghordius's picture

and Chinese businessmen (even the smaller ones) can get easy credit from the banks if they offer copper as collateral - so lots of them store a ton or two in their basements...

btw, my argument is not for copper becoming soon a monetary metal (again) - more of the problem silver is facing... too little! as MF is writing.

Mon, 05/14/2012 - 08:21 | 2423143 GetZeeGold
GetZeeGold's picture

 

 

Propaganda : ON

Mon, 05/14/2012 - 07:26 | 2423033 ThirdWorldDude
ThirdWorldDude's picture

"Your assumption with the historical ratio of 1:10 to 1:12 was in a time where there still were countries that used silver as specie or backed a currency with silver."

 

Of course, and that is exactly where we are headed to after this fiat charade crashes. You don't suppose that 5000 years of established ratio between 10:1 (Ancient Egypt) and 15:1 (U.S. Mint Act of 1792) has existed by luck? 

 

But I digress; when I post about PM's, my starting and ending point is the household economy, not a state-based one. Having had the opportunity to see people robbed of their paper assets Weimar-style, I'd be a fool to make the same mistake again and in my calculations I implement the worst-case scenario. When this paper circus is over, people will eventually go back to a tangible currency (beside barter) and no matter what the state implements, tradition (as stated by Ben the Hamster) will prevail.

Mon, 05/14/2012 - 08:12 | 2423134 scatterbrains
scatterbrains's picture

Max might be Jamie Dimon himself in pure panic mode now that the wheels are coming off for him... so how's he going to lick himself ? ew

Mon, 05/14/2012 - 04:22 | 2422919 Bastiat009
Bastiat009's picture

I don't see many people buying silver. 

Mon, 05/14/2012 - 05:11 | 2422957 Central Wanker
Central Wanker's picture

I see one whenever I look at a mirror.

Wed, 05/23/2012 - 12:33 | 2455313 Shizzmoney
Shizzmoney's picture

Because 99% of us don't have any money

Mon, 05/14/2012 - 03:37 | 2422895 Bastiat009
Bastiat009's picture

Your crime here is to have said what people didn't want to hear. It is true everywhere. Try and say that Krugman is a moron on the NYT message board and people will soon call you to a racist homophobic kid molester.

Here you just need to say that PMs are crashing, which is just a fact, and people will tell you you don't understand a thing.

All I know is that denying facts doesn't make the conversation very interesting.

Mon, 05/14/2012 - 03:50 | 2422904 Western
Western's picture

Pretty sure it's actually because Max's previous behaviour has exposed him as a piece of CIA shit. Welcome to the club?

 

The only denial of facts is that someone, somewhere is liquidating silver in an extremely and impossibly..... meh, I got bored, everyone knows the facts. Fuck you.

Mon, 05/14/2012 - 05:12 | 2422959 The Real Fake E...
The Real Fake Economy's picture

Actually that's not entirely true.  Krugs has been getting beat up pretty badly on his blog as of late.  I've been criticizing him on there for a while, but very glad others are starting to catch on.  

Mon, 05/14/2012 - 06:28 | 2422994 LongSoupLine
LongSoupLine's picture

Bastit009,

Your crime is stupidity and real bad trolling...your punishment is a mirror.

STFU.

Mon, 05/14/2012 - 09:22 | 2423341 goldfish1
goldfish1's picture

Paper gold or precious metal?

Paper silver or precious metal?

Mon, 05/14/2012 - 03:56 | 2422900 Western
Western's picture

(edited post-partum)

Nobody was talking about silver, Max, but it's great that TPTB feel it super necessary to remind everyone to stay away.

 

Any thoughts on Greece's exit, or will you just non-sequitur into libertarians again? Maggot.

Mon, 05/14/2012 - 05:24 | 2422960 TWSceptic
TWSceptic's picture

Max you don't seem to get how this works. The precious metals (PM) work as safe haven when economies crash (like they are beginning to do now for example). The problem for the PM for the present is that it is the European economies that are crashing, not the US economy (yet). This initially creates safe haven demand for the dollar, this in turn pushes down on the PM. Add to that crude which is in a temporary correction and you will see more correction before or even during summer, which historically has been a drag on commodity prices. All these factors are the reason for lower gold & silver. There is nothing mysterious about it Max, just the market going through natural cycles. It's not the end of the secular bull market for PM either.

I'd say this is the calm before the storm for the dollar and the US economy. Take a close look at what's happening in Europe Max, because this will happen to the US some day, and it may even get much worse.

Regarding the "silver pumpers" sure they have personal interest in selling more, as they have in buying more since either way they get their percentage. But they are right: for a solid floor to develop, and attract bargain buyers, PM need to reach a low enough bottom. There is nothing weird about that Max, it's just how it works.

Mon, 05/14/2012 - 06:23 | 2422993 LongSoupLine
LongSoupLine's picture

Max,

Simple minds compare historical charts with zero consideration for "context".

Nice try...tell Blythe we said hi.

Mon, 05/14/2012 - 08:11 | 2423131 junkyardjack
junkyardjack's picture

Silver might be worth dipping your toe in around $20

Mon, 05/14/2012 - 09:02 | 2423140 XitSam
XitSam's picture

"silver has to go down, in order to go up."

Name the blog or person. No reason to keep it a secret. 

Oh, and I don't 'invest' in silver. And I don't value silver in FRNs.

Mon, 05/14/2012 - 08:26 | 2423156 PaperBear
PaperBear's picture

This is called a deflation scare. The central bankers will hit the currency destruct button also known as the PRINT button.

Mon, 05/14/2012 - 05:54 | 2422979 Non Passaran
Non Passaran's picture

Yes, gold is falling but I'm kinda sure it won't crash to 0.
I don't even have to check it's price every day or week. :-)
It may go down another 5%, and it may go up another 50%.
How great is that?

Mon, 05/14/2012 - 08:20 | 2423146 duo
duo's picture

We're entering the deflationary spiral.  The Bernank had better act soon or he will lose control.

Mon, 05/14/2012 - 09:25 | 2423349 goldfish1
goldfish1's picture

"or he will lose control..."

Funny.

Mon, 05/14/2012 - 10:45 | 2423639 cranky-old-geezer
cranky-old-geezer's picture

 

 

So the euro is down and done. ... Gold is falling further everyday

And silver.

Gold and silver have been tracking along with EURUSD pretty consistently for months now.  I can look at EURUSD and tell what's happening to silver.  I can look at silver and tell what's happening to EURUSD.

EURUSD is a barometer of currency printing sentiment.  When markets sense more QE, EURUSD rises.  When markets sense no QE, EURUSD drops.

Greece might leave the EU because no more bailouts are forthcoming.  They can't loot euro-nations anymore, so they'll skip town on all their bonds euro-banks are holding.

Mon, 05/14/2012 - 02:31 | 2422835 chump666
chump666's picture

"Grexit"

 

Mon, 05/14/2012 - 02:35 | 2422839 OldPhart
OldPhart's picture

I'm not comfortable about the idea of a 'Marshal Plan'.  That plan was funded predominantly by the US. 

Where would we borrow the dollars from to fund such a plan? 

What is JPMorgan proposing, warning, hoping for?

Anyone saluting the flag they just ran up the flagpole?

I have the feeling I should reach for a tube of lube once again.

Mon, 05/14/2012 - 02:37 | 2422843 Temporalist
Temporalist's picture

You can't seriously be wondering where the money would come from.  It falls from the sky these days or weren't you on the receiving end of that too?

Mon, 05/14/2012 - 05:46 | 2422977 Non Passaran
Non Passaran's picture

How about a Morgue Plan, financed by the US taxpayer?
Sounds like it may work. Why not give it a try? The only thing we have to fear is fear itself :-)

Mon, 05/14/2012 - 06:37 | 2423001 disabledvet
disabledvet's picture

Excellent question! The original plan was funded by US Army soldiers with their booze, cigarettes and interestingly LIGHTERS. (Zippo as a matter of fact...Olean, NY in case you're wondering.) I'm a big fan of bubble gum myself--Wrigley's is still a good company, and who doesn't love the Cubbies, right?

Mon, 05/14/2012 - 02:38 | 2422844 Syameimaru
Syameimaru's picture

Is this a nation-sinking amount of money?

No, it's a debt-sinking amount of money... the debt will just continue to spread throughout the system, year by year, until there is nowhere to invest in.

Mon, 05/14/2012 - 02:38 | 2422845 ebworthen
ebworthen's picture

Deutschmarks!

France will be the last to leave the Euro.

Mon, 05/14/2012 - 02:52 | 2422854 Temporalist
Temporalist's picture

 

Charles de Gaulle, Monetary Crisis Ghost of 1965

http://www.youtube.com/watch?v=Q9r1NLMFixo

 

"What the United States owes to foreign countries it pays – at least in part – with Dollars that it can simply issue if it chooses to," -Charles de Gaulle

 

"The international monetary system is functioning poorly because it gives advantages to countries with a reserve currency." -Georges Pompidou


"The Dollar cannot remain solely the problem of others," -Nicholas Sarkozy

 

http://goldnews.bullionvault.com/gold_dollar_France_Sarkozy_de_Gaulle_crisis_111020072

 

Mon, 05/14/2012 - 03:32 | 2422887 AldousHuxley
AldousHuxley's picture

reserve currency status is the privilege of a nation with the most powerful military capable of silencing any dissent.

 

Mon, 05/14/2012 - 05:44 | 2422973 Non Passaran
Non Passaran's picture

Sounds good to me.
I'm not dissenting. I buy gold and silver.
Thank you very much.

Mon, 05/14/2012 - 06:41 | 2423003 disabledvet
disabledvet's picture

England had the world's most powerful Navy...but that was about it. Their "Foreign Office" to manage their "imperial affairs" was wonderfully small! The same cannot be said of the USA. We are much more like France and Germany. And we're acting like it too...

Mon, 05/14/2012 - 09:27 | 2423352 XitSam
XitSam's picture

"...the most powerful military capable of silencing any dissent."

I guess that include internal dissent.

Mon, 05/14/2012 - 02:43 | 2422847 Bastiat009
Bastiat009's picture

Greece is nothing but a major liability to the euro. Greece leaving the euro is positive for the currency.

Mon, 05/14/2012 - 03:09 | 2422865 Thunder_Downunder
Thunder_Downunder's picture

Congratulations, You Just Scored an A in Broken Window Economics!

....

Press Any Key to be appointed to your country's Reseve Bank Board.

....

 

 

 

Mon, 05/14/2012 - 03:16 | 2422871 sof_hannibal
sof_hannibal's picture

but a B- minus in full rank econometrics

Mon, 05/14/2012 - 03:35 | 2422892 Bastiat009
Bastiat009's picture

Care to explain your analogy?

My point is that if you stopped bailing out banks that lent money to broke countries, the currency would be stronger. I really don't see how that is pertaining to the broken window fallacy.

Mon, 05/14/2012 - 04:37 | 2422922 Thunder_Downunder
Thunder_Downunder's picture

Realising losses on levered asset purchases.. the reason they started lending (bailing) in the first instance was to avoid those levered losses.

This was bad when it was 30 to 1, now its pushing 55 thanks to the mental heavy hitters in economics, and thats before mark to market write downs of their books, before a counterparty collateral driven meltdown.

 

The window, in this case belongs to Bundesbanke, and it bought it on its credit card. Greece is about to smash said window, Bundesbank gets to replace it, euro wins? It applies equally to commerz, landesbank etc.  

 

The current valuation of the euro is a reflection of the current valuation of european assets, short term liquidity driven fluctuations aside. If the core starts rotting, no one will want to hold euros.

Mon, 05/14/2012 - 02:48 | 2422851 unununium
unununium's picture

It appears that JPM has chosen this moment for the markets to tank, and who are we to argue?

Mon, 05/14/2012 - 03:23 | 2422867 Thunder_Downunder
Thunder_Downunder's picture

Hahaha seems that way.

 

Jamie Dimon: "Where's my QE3 Damn it!?"

Secretary: "Bernanke's backing out of the deal"

Jamie: "Do I have to do everything myself? Call press conference, I wanna talk about mark to market on some derivative hedges. No one backs out on the J-Man."

 

Mon, 05/14/2012 - 08:23 | 2423151 Bill D. Cat
Bill D. Cat's picture

I'm too lazy to look around but I'm sure the obligatory Hitler 's bunker video featuring Dimon is either out there or being worked on .

Mon, 05/14/2012 - 08:24 | 2423152 XitSam
XitSam's picture

Maybe it was in the article, but I didn't see where they said how much the losses would be for JPM.

Oh, nevermind ... they're hedged if that happens.

Mon, 05/14/2012 - 02:53 | 2422855 Nobody For President
Nobody For President's picture

This feels like one of those times when it doesn't seem all that great to be right, or be able to say 'I told you so'. A year ago on ZH there was a boatload of people saying the general line of "default now, it will be a lot more expensive and a lot more painful to wait a year"; and the Greek people and Sausage the Riot Dog played in the streets, and the Eurocrats had a potfull of conferences and studies and plans and half-assed agreements and re-agreements and all the rest of the circus and, a year later - sure enough - it IS a lot more painful and a lot more expensive now that the Greek people finally got to vote on the deal, and the deed STILL ain't done.

On Tuesday, a big batch of British Law, non PSI'd bonds become due  - apparently a bunch of which are held by the Norway Soverign Wealth Fund (I think that's the deal) : what a wonderful time to say that's it, we are not payin' - nationalize the banks and have a bank holdiday, the whole 9 yards. Will never happen as long as a 'cartetaker' gubermint with a ex-squid in charge holding it together with bailing wire and spit has a Euro dime to send back to Euro banks.

And on ZH we are STILL sayin' it: do it sooner rather than later, because it only makes it more expensive for both sides of the trade and harder on the Greek people the longer you wait. Seems like the only players in this game that still enjoy keeping this shit going are the Eurobanks and Sausage the Riot Dog.

Mon, 05/14/2012 - 06:44 | 2423005 disabledvet
disabledvet's picture

I agree. What did they say in the movie War Games? "The only way you can win is by not playing"?

Mon, 05/14/2012 - 07:41 | 2423072 Vince Clortho
Vince Clortho's picture

Ex-Squid?  Is that like ex-mafia?

Mon, 05/14/2012 - 03:18 | 2422873 phungus_mungus
phungus_mungus's picture

The turd sniffers are hell bent on destroying the economy, they must have a god reason...

Mon, 05/14/2012 - 03:19 | 2422874 Bansters-in-my-...
Bansters-in-my- feces's picture

Can the U.S.A not invade Greece and make it all better ?

Mon, 05/14/2012 - 03:27 | 2422884 DutchDude
DutchDude's picture

I agree; Greece needs the USA to bring peace, freedom and democracy

:')

Mon, 05/14/2012 - 06:46 | 2423006 disabledvet
disabledvet's picture

put that cigarette out! how dare you smoke in our imperial presence!

Mon, 05/14/2012 - 03:33 | 2422891 sampo
sampo's picture

I hear they also would need your "functioning " type of democracy over there..

Mon, 05/14/2012 - 03:35 | 2422893 sampo
sampo's picture

I hear they also would need your "functioning " type of democracy over there..

Mon, 05/14/2012 - 07:39 | 2423064 Vince Clortho
Vince Clortho's picture

Only if it is a PeaceKeeping Mission.

Like Iraq and Afghanistan.

Mon, 05/14/2012 - 03:38 | 2422894 Likstane
Likstane's picture

Why would anybody listen to what these liars are saying?

Mon, 05/14/2012 - 07:56 | 2423099 mendigo
mendigo's picture

They are useful for understanding what is not the truth and so you never forget that there really are scumbags in the world.

Mon, 05/14/2012 - 03:38 | 2422896 trebuchet
trebuchet's picture

EVERYTHING in this saga is point ing to inflation in Germany to rebalance the Euroarea.

Mon, 05/14/2012 - 04:38 | 2422945 Sudden Debt
Sudden Debt's picture

Don't worry, they'll try to deny it from being so

Mon, 05/14/2012 - 03:38 | 2422897 Convolved Man
Convolved Man's picture

And for heavens sake, when we off Greece, it needs to look like an accident.  Our insurance policies won't pay out for murder or suicide.

How about, when Ben or what's his name from the ECB starts waving that bazooka around, we have witnesses to swear they didn't know it was loaded.

Mon, 05/14/2012 - 04:28 | 2422921 Bastiat009
Bastiat009's picture

I have read for the past few years that JPM was short gold and silver ... that was a great move that will cover most losses. 

Mon, 05/14/2012 - 04:43 | 2422948 Sudden Debt
Sudden Debt's picture

IF they need money they can always sell their silver and close their short positions. What else would they do with a 100 year silver supply?

 

Mon, 05/14/2012 - 04:56 | 2422951 Bastiat009
Bastiat009's picture

It looks like pretty much everybody is selling PMs these days. China, Germans, JPM ... everybody. Even the euro is not falling as fast as PMs.

Mon, 05/14/2012 - 06:27 | 2422996 Poor Grogman
Poor Grogman's picture

Interest rates are still negative,

And the value of fiat is still under centralized control.

Tell me what the PTB are going to do next and I will tell you my latest "trade recommendation".

What was your point again?

 

Mon, 05/14/2012 - 09:34 | 2423369 goldfish1
goldfish1's picture

You keep beating that drum. Why?

Mon, 05/14/2012 - 04:53 | 2422950 Bastiat009
Bastiat009's picture

I know that most people here will not believe me but gold is crashing ... crashing faster than the euro. If JPM benefits from lower PM prices, then the bank is fine. If it doesn't, then the whole conspiracy, market manipulation thing was just another lie. You can't have it both ways.

Mon, 05/14/2012 - 05:05 | 2422954 sampo
sampo's picture

Maybe they're trying to create a waterfall effect to cover? You only have to look at the fundamentals to get to the evidence of manipulation. Why don't they just mine a whole lotta more silver?

Mon, 05/14/2012 - 05:30 | 2422965 chinaguy
chinaguy's picture

10 yr Spanish & Italian bonds got hammered last night

Mon, 05/14/2012 - 05:59 | 2422983 Tom Green Swedish
Tom Green Swedish's picture

I thought this Euro Crisis was solved.  I think maybe this might be a good opportunity for Ina to get some more information.

Mon, 05/14/2012 - 06:34 | 2423000 Sutton
Sutton's picture

Greece announces  JP Morgan's exit from it's IG-9 trade will cost 400 billion dollars.

Mon, 05/14/2012 - 06:47 | 2423007 disabledvet
disabledvet's picture

"and equities rally on the news."

Mon, 05/14/2012 - 06:59 | 2423011 navy62802
navy62802's picture

Wait a second, I thought this was all priced in.

Mon, 05/14/2012 - 07:10 | 2423014 insanelysane
insanelysane's picture

Have governments realized that instead of taxing the crap out of citizens, they just borrow money from their bankster friends, buy votes, reneg on the banksters, and then go to the tax payers and say that the whole world will collapse if we don't take more money from you.

Mon, 05/14/2012 - 07:11 | 2423015 Tom Green Swedish
Tom Green Swedish's picture

I think its time for the Gloom Doom and boom report by Marc Faber.

 

http://www.youtube.com/watch?v=e59rh3EV4gk

Mon, 05/14/2012 - 07:35 | 2423051 JackT
JackT's picture

Alas, they expect Greece to leave and emerge with yet another fiat, but what if she does not? What then decision makers, what does that do to your plans?

I don't think Greece has shipped her Gold out yet, as per the bailout...has she?

Mon, 05/14/2012 - 07:51 | 2423087 mendigo
mendigo's picture

JPM spins it that Europe cannot survive unless they continue to play the ponzi game. There will be hardship... It doesn't have to be the end they just need to start planning for eu 2.0 maybe.
What happened to the story of the 5 dollars that pays everyone's debts?

Mon, 05/14/2012 - 08:06 | 2423123 Alexmai
Mon, 05/14/2012 - 08:10 | 2423127 junkyardjack
junkyardjack's picture

And that's just the losses that JPM will be taking...

Mon, 05/14/2012 - 08:09 | 2423129 Snakeeyes
Snakeeyes's picture

Yikes!

Mon, 05/14/2012 - 08:13 | 2423136 Ted Baker
Ted Baker's picture

UHM!!!!!

Mon, 05/14/2012 - 08:20 | 2423142 PaperBear
PaperBear's picture

This figure will likely go higher the longer the exit is delayed.

Mon, 05/14/2012 - 08:19 | 2423144 yogibear
yogibear's picture

It doesn't matter to JPM. They have uncle sugar, Bernanke and the US taxpayer to backstop them.

Jamie and the rest of the banksters can gamble trillions more. Send the bill to the US taxpayer.

Why be responsible?  When it gets bad in the US the international banksters can just hop on their private jets to go to their private islands. 

 

 

Mon, 05/14/2012 - 08:29 | 2423161 the tower
the tower's picture

Greece's exit will not make the smallest difference to the EU/Euro. Everyone has taken their losses already.

 

Spain is and will be the only country that matters. When Spain tiilts it will be the moment for a second Euro. The day will be saved, profits will be made.

 

Mon, 05/14/2012 - 08:30 | 2423165 Dermasolarapate...
Dermasolarapaterraphatrima's picture

"...not much attention was paid to protecting those at the low end of the income distribution."

 

How odd.

Mon, 05/14/2012 - 08:43 | 2423182 nathan1234
nathan1234's picture

So now who will estimate JP Morgue's losses out of this loss !!!!!!!!!!

Mon, 05/14/2012 - 09:06 | 2423268 Day_Of_The_Tentacle
Day_Of_The_Tentacle's picture

Exactly!! I wonder how much of that sovereign debt and corporate debt is owned or protection underwritten by US banks. And if those Spanish and Italian bonds sold over the last 9 months, were from Euro country banks to domestic banks, in order to reduce the risk of contagion.

They point out that Germany should leave instead. What if the French election results mean that France is now ready to head a Med-Euro in exchange for leveling out huge Euro imbalances, the ability to print for growth and a severe blow to the current reserve currency. The two Euros could be linked somewhat in a looser peg, that can be adjusted, when imbalances build up.

From what I have head, the US has significant exposure to France, so maybe that is why they are so worked up. Way back when Another, or if I should speculate Dr. Jelle Zijlstra, wrote that the Saudis had gone with Europe. Merkel made her rounds with meetings in Saudi and China a couple of years ago. Saudi and Bahrain are meeting again about a union this week. Could it be, that we are witnessing the final steps in the plan to bring finite money back into the monetary system.

That would explain to me at least, why the paper price is imploding faster and faster, while the Euro is magically not tanking. Maybe the exorbitant leverage in the precious metals space is coming to an end.

Mon, 05/14/2012 - 08:54 | 2423213 yogibear
yogibear's picture

How many other, yet to be discovered, derivatives that are set to blow up?

This is infestation of risk trades.

 

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