Liquidity Options Running Out For European Banks - "Liquidity Crisis Scene Set"

Tyler Durden's picture

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Popo's picture

“The financial wreckage at many of these banks is along the lines of World War Two,” added the global markets chief. “There is so much detritus. But a lot of them don’t want to sell at these current prices, they know there will be a capital hit if things are properly priced.”

This is *exactly* the Japanese scenario.  Europe should take a good look at what happened to Japan.  For more than 2 decades they have dragged their people through economic pain, all because they couldn't take their lumps.

Weisbrot's picture

Liquidity Crisis based on an Equity Crisis due to False Equity from Toxic Assets that were never properly resolved - Jst like in the good old USA.

BigDuke6's picture

Came across this.

anyone from the good ol' usa out there?

he seems moronic and very sensible at the same time - who is he?  Ratigan.

NumberNone's picture

He used to be a talking head on CNBC Fast Money.  It seems Dylan's on-air self-control is in direct correlation to his self-control at the dinner table.  Keep eating Dylan, you're making more and more sense every day. 

BigDuke6's picture

He really goes off his nut admirably for a baby boomer and comes to the correct judgement that congress is bought.

it needs to be said.

one for you JW.

snowball777's picture

Not sure how an infrastructure bank addresses our campaign finance whorehouse, or how the president isn't just as beholden to the moneyed interests as congress critters.

In some sense, it would be nice to see Obama step up and show people the difference between his policies and real socialism....nationalize a few shitty national banks, for example.

BigDuke6's picture

double post - site playing up...

Manthong's picture

He has been on a rant pleading with Obama to show leadership and to magically produce government solutions out of our socialist, kleptocratic and grifter bankster financial sinkhole.

Some people think he has a refreshing perspective.

I think he's one of the many indications why we are doomed.

Cvillian's picture

My new avatar reflects the only logical savior to their solutions. And yes, he is a Uni-Brow-Corn.

machineh's picture

'the world's carry trade funding currency (once known as the reserve currency).'

Ah -- so that's what 'zero percent till mid-2013' means: unlimited guaranteed carry trading for GS and MS.

Thanks, Ben. You're a real tool.

Oh regional Indian's picture

And this has the feeling of one of the big stories, the ones that will rattle everyone this weekend.

China says no loan for you! Of course China's loans/liquidity injections are nothing but American money pumped into China, patiently over the last 20 or so years, so it could become a hands off weapon, today.

Duck, ducks!


cbaba's picture

Not surprised, thats what i was expecting.

Banning the short sales will not help and will do just opposite , interbank lending will stop just like in 2008 . Wait and see the BIG BANG in coming weeks.

espirit's picture

Jus' print more fiatsco bitchez. Bring on the end game.

thunderchief's picture

Zero Hedge is my homepage.

It shoud be everyones..

Please text message this post to the sheeple people closest to you.

espirit's picture

The sheeple only care about their psychotropic rose colored outlook, the fall teevee lineup, and McBurgers.  Why bother?

Chump's picture

Sort of a Catch-22 there.  If the sheeple understand this post then they aren't sheeple.

monopoly's picture

September is going to be an interesting month.

We just have to get through the dog days of summer with low volume, no volatility and all the traders gone.What a sleepy week this has been. Let the teenagers party. Grown ups will be back soon enough.


24KGOLD FOIL HAT's picture

Yep; theyre in the hamptons or their very own private Gilligans Island!

The Govt is the Skipper, public is Gilligan, Professor is quants, MaryAnn the hard workin single mom, Ginger the "social director", Howells are shadow owners of earth.

These big things seem to happen in the fall- see Marty Armstrongs theories on financial history.

24KGOLD FOIL HAT's picture

Bill Banzai- I need your graphic talents to burnish Goldmans Island!

Silverstar's picture

ehh... that is bullish yes ???

Mediocritas's picture

After having so much taken away from them by austerity measures, the ECB is then going to turn around and devalue whatever euro-denominated savings Europeans had left.

Long: riots. Short: parked cars.

Is there an intrade market for Germany to leave the euro by the end of 2012?

No Bid's picture

flash crash in eur fra/ois @ 5:15amET

back to normal now and rising.  

falak pema's picture

This is the killer question. As we all know the so called sovereign debt in the West is in reality a private sector debt created by USA's laxist monetary and deregulatory policy that allowed the private sector to create the leveraged, toxic world wide financial ponzi, into which the private sector banks of the EU bought in massively. Now the governments, having panicked and thrown in the towel, have socialised this massive debt into government debt and have done nothing to stop the ponzi from growing since three years, 2008-2011; a criminal neglect.

Now without growth and with the market barking at their necks the EU sovereigns having no game plan run around like headless chickens, their banks all exposed and with falling equity to debt ratios as their market capitalization melts like snow in front of our eyes. 

So the next step is a bank liquidity run in EU. Why does this not happen in US where the debt situation is even worse? The answer is simple : the FED has the largest printing press in the world and the USD is world reserve currency. Nobody can stop BB! So no liquidity crunch in the US ...! Simple as that!

Can the ECB print money to save the euro private banks? Its not in their current mandate! That's why the US HF are having a field day in Eurozone puts! 

And the EU countries look on and moan and groan. They don't have the balls to take on the US challenge in this global financial derivative cum currency war. By going federal and issuing true EURo Bonds, which will entail concerted fiscal reforms and structural adjustments and huge investments to make Euro economies kick start. 

Big mess... The euro has to choose plan A or plan B and two tier two money economy; one for club Med one for new DM zone.

mberry8870's picture

I don't think the result will be the same, it will be much worse. When the situation is the crap assets on the books of the banks is soveriegn debt, this is a problem of a completely different magnitude.

BlackVoid's picture

Don't worry, the ECB will print as much money as necessary. Or the books will be cooked. Laws will be broken, rules will be bent. The banks will be rescued.


It will all blow up, when:

- there will be real oil shortages

- parliaments in Europe will be burning.


That is coming soon too.

Cdad's picture

The market of "stawks" is moving inversely, tick for tick, to gold.  It has become that simple.  And while I think a correction in gold will continue for another session, the idea of getting long equities into that inverse reaction is monumentally stupid.  Of course, stupidity reigns in this vacuum tube market.

As  such, selling long positions well is  simply a matter of picking just where gold will bottom today.  

Any guesses? 

24KGOLD FOIL HAT's picture

A smaller near term result: Euro declines vs $- which helps German exports?

Seems to fit.  US and Germany each have alternate "crises" to weaken their own funnymoney.

janus's picture

yup, sixteen trillion just don't go as far as it did back in day.

liquidity's just another word for nothin left to lose/

nothin, and that's all bernake left me


freedom's just another word (period),


Stoploss's picture

All i know is there is a cluster death cross, 20/50 and 50/200 that's 2 at the same time. Pay attention because everything gets liquidated.

janus's picture

i think i know what you're talking about. but would you kindly explain what you mean by 'death-cross'?  how do you identify it?

janus's picture

does anyone know a reputable source for learning about the way the repo market works...or are you people just too lazy to casually point a finger?

24KGOLD FOIL HAT's picture

They aint lazy...its just that the markets open...they might have time Sat. I know a little but traders will be worth reading.

janus's picture

that makes sense.  just thought i'd bang the ole fist on the desk.

Cvillian's picture

James Aitken has co-authored a few IMF working papers on shadow banking that are interesting

Search last name Aitken to read some of his stuff:

Hope that helps

jm's picture

I wonder about the driving reason for the funding pool shut down. Many questions. 

Is it because banks are getting hammered for holding impaired bonds they can't use as collateral in repo?

Or is it because the banks are holding imparied bonds as tier I capital?

Something else?

Won't the ECB buying bonds resolve this? 

Tic tock's picture

ECB spends money without any thought of its value - in no way is this an acceptable form of 'financial assistance to the Banking Industry'. Is there a single person in Europe who thinks that there is any relevance of popular participation in politics?- but it is not just that - the Eurocrats are not at all interested in anyone agreeing with them,.. they are right because they will bludgeon to death anyone who stands in their way - the entire history of the EU is of the same fibre: these pig-farmers are even worse.

falak pema's picture

do you then prefer the FED method? QE and then dummy QE as they can do what they like?

papaswamp's picture

Coupled with the 6.9% contraction in the greek economy was an increase in unemployment to 16.6% with over 60% being in the 15-34 yr old age group.


All is well ...rally on.

Nozza's picture

Liquidity crisis lol

I'm heading out for a Mojito - that will solve my liquidity crisis.


mcguire's picture

ZH, any thoughts on these events from a hegelian perspective?  if fractional reserve/central banking is thesis, and lehman brothers/greece is antithesis, what would be synthesis... the bancor, right??  if there is a man behind the curtain, certainly he is not just reacting to these events, but planning them???  

Reptil's picture

reaction EURUSD schizofrenic (rising) - this market is broken!

snowball777's picture

So how long until that AAA requirement gets fuzzed out in the name of piling more sovereigns into the already tipping lifeboat?


24KGOLD FOIL HAT's picture

This story from IFR was planted by Reuters.

Guess who controls Reuters. TPTB.

Perhaps they want a little crisis Monday AM?

GiantWang's picture

"Should this liquidity crisis transform into its next and more virulent phase, even the Fed will find it does not have enough capital to prevent a worldwide short squeeze on the world's carry trade funding currency (once known as the reserve currency)."

Umm, wouldn't a short sqeeze in dollars send DX through the roof and be very, very bad for gold?

This seems very counterintuitive for those thinking in terms of hyperinflation, unless we're talking about a huge run up in the dollar that amounts to a bubble which ultimately pops. 

Anyone care to elaborate?