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Macro Commentary: We Are Moving To Disneyland

Tyler Durden's picture


From Peter Tchir of TF Market Advisors

After a recent trip to Disneyland the kids decided we should move there.  The vote amongst the children was unanimous. So, are we moving to Disneyland?  No!  There votes don't count.  They are not the decision makers.  What does this have to do with anything going on in the markets?  I think everything.  I think it may provide the best lens with which to watch the noise out of Europe.

There are only 2 countries that really need to be watched closely, and 1 in particular.

Germany, the strongest economy in the Eurozone, the country with the strongest balance sheet, is against massive expansion of the EFSF.  They are against proposals that trick their people into providing promised EFSF money, only to lever it up massively.  They, the only ones who seem to have gotten the concept of what AAA is supposed to mean, say it is a stupid idea.  They are the adult in the room.  They have managed their way through the entire crisis better than anyone else.  It is mostly their money that everyone else wants to play with.  Whatever is coming out of Germany is most important because they have the money, but should also be listened to since they are the only ones who have been consistently right.

France.  We will come back to them in a moment.

Greece.  Yes Greece is 110% committed to austerity and yes at every review their debt needs are 120% greater than projected.  Realistically you can only be 100% committed to something, and it is not clear that Greek is even that committed to austerity, and it is clear that it isn't working.  Debt levels can be greater than 100% of projections and Greece has rarely disappointed on that account.  Why will any of this change?  Why won't Greece just have a bigger and worse default 6 months from now?  Greece is along for the ride.  They will say anything to keep getting money but will be very careful about what they actually do. 

The United States.  Let's not forget our own debt situation.  Debt to GDP is high.  Current deficit is high.  The economy is weak at best.  We have lost a AAA agency.  In spite of 2000 some odd pages of Dodd-Frank all we have learned from the economic crisis is "TARP" and "No Lehman Moment".  It is amazing to me that somehow we have defined the problem as having let Lehman fail and the solution as TARP, in spite of evidence that they were only small parts of the overall situation.  In any case, we should be more worried about out own plans and their credibility than running around in complete confidence that we understand all the world's problems.  And heck, we aren't even part of the direct family, this is like the crazy uncle in the corner putting in his 2 cents.  If the IMF takes a bigger role in the new massive bailout, will taxpayers here revolt?  We can say what we want, but Europe is unlikely to pay too much attention.

Barroso, Junker, and the EU in general.  Their whole life and livelihood are tied to the Eurozone remaining the Eurozone.  The more integration, the better for them.  Every statement uttered by them is self serving.  Period, end of story.  Ignore them.

The rating agencies.  I am not a big fan of them, and generally prefer to ignore them, but S&P has already come out saying the new plans risk the AAA rating of the top countries.  Other than Germany, where the bond market, like those of Japan and the USA, could shake off the downgrade, the rest of Europe would face additional funding pressures.  France is already starting to diverge from Germany in terms of funding costs.  Last thing it needs is the AAA taken off the table.  I cannot disagree with the view of the rating agencies at all.  If the US could be downgraded, at least in part due to stupid economic decisions made by politicians, Europe abandoning any prudence to avoid a Greek default, would qualify.

IMF.  Why do we still have an IMF when most of the countries that are funding it, are negotiating directly with the recipients on other packages?  The only thing the IMF does is hide how much money the US and the EU are giving to the bailout because it requires a second step.  We read that the IMF is giving 10 billion, but the reality is the US is giving 4 billion and the EU is giving 4 billion.  It just makes it more politically palatable to keep the IMF around.  There are also enough cozy jobs at the IMF that no one really wants to examine it too closely.  They can say a lot, and even do a fair bit, but they are under a lot of pressure to not lose money and do seem to be treading carefully.  Their opinion is important and real, but actually seems mostly rational.

The BRIC's.  They have money (how much is debatable) and are willing to use it.  But they already contribute some through the IMF, already own some bonds outright, and are definitely NOT a charity.  Whatever they do, it will be out of their own self-interest.  Anything that sounds too good to be true, is.  These countries do not act as a block, in fact they compete with each other, and they all have strong nationalistic priorities.  Since they have money, it is worth listening to what they say.  But listening carefully.  Russia has said they "will invest in bonds of the eurozone('s strong countries)"   Reading only half of a sentence can create a false impression of what they are willing to do.  Our positions always skew how we read a headline, but it seems that we have wilfully chosen to ignore caveats in the statements coming out of BRIC countries to feed the false optimism.

The Banks.  They don't need money, but want cheap funding lines.  They don't need capital, but wouldn't mind if governments made it available at off market rates.  They don't need capital or money if the governments which just pay par for all their bonds.  Banks are their for the benefit of their management, their employees, and their shareholders (in that order).  They will say and do what they need to get the best deal possible for banks - it's why people invest in them.  They clearly made a lot of horrible decisions to get to this point, but they are in full lie, deny, and counter-accuse mode to get what they want.  They pull out the "Lehman Moment" card any time it seems as though the EU has come to its senses and will allow some sovereign defaults in order to support a simplified, but stronger world. 

Italy.  They are just having fun.  They are part of the problem and part of the solution.  They are so big, the EU can't let them fail.  They are so big, they could walk away if they wanted.  It is hard not to picture Berlusconi sipping wine with some colleagues and some "friends" asking them what strings they want him to pull the next day.  I think they don't care that much because it will come out fine one way or the other and in the meantime it seems like its fun for them.  They don't seem particularly serious about austerity, but certainly aren't opposed to getting some leveraged EFSF money.  For all the talk about the problems Italy is having funding, their average 5 year yield from 1999 until the end of 2008 was 4%.  Yes, it is currently close to 5%, but if we really live in a world where a country having to pay rates 1% above their long term average is unsustainable, then we are in deep trouble.  Seriously, think about it.  5% isn't great, but it is a long way from crisis mode, and to "fix" this, we are going to create leveraged EFSF?

ECB.  They are so deep into this mess that it is hard to tell what is real or not.  They have spent so much money buying bonds, at such bad prices, that a lot of what they say has to be taken as posturing to protect their legacy.  Trichet is the only Frenchman who can say the word sterilization and keep a smile on his face.  They have done a lot, it is worth paying attention to them since they have power, but they have an agenda to hide their big losses from open market bond purchases.  In the end they will either have to print, find some bizarre program to take them out of their positions, or ask member countries for more money. 

France.  Since Germany seems to be fighting the plans to lever up EFSF, then one can only assume that France is the adult that is pushing it.  I am not sure what they are thinking.  They seem to be too afraid of default.  Too afraid of the Lehman moment.  Too afraid of their own banks.  The world seemed about as ready as possible to accept a Greek default coming into this week.  Instead of pushing the button and letting Greece default and working incredibly hard and ensuring that liquidity and capital are sufficiently available, they stepped back, and with a wave of the hand decided they can create some bigger bold plan.  Maybe it is all the jokes about France constantly surrendering that made them decide not to retreat.  Retreat is not always bad, and living to fight another day has a lot benefits.  Maybe the fact that the French still control the IMF and ECB gave extra confidence, but this latest push makes no sense to me.  I think France in particular is at risk of losing its AAA rating even before a plan gets implemented.  Its finances aren't that great.  Its debt already trades significantly behind that of Germany, and now they seem willing to subordinate their own finances to prop up banks and weak countries.  The original EFSF was a drop in the bucket compared to this.  Proposing the plan may be enough to force a downgrade, accelerating the crisis rather than kicking the can down the road.  Their position is nonsensical, particularly when the market was prepared to deal with a Greek default.  Whatever the result of this push to lever up EFSF, the Eurozone will become more complex, more intertwined (in the bad way that two cars in a high speed head on collision become intertwined), and who knows what the unintended consequences will be.

I think the European leaders should go to some management bonding exercise and spend a weekend with a psychologist who tries to talk them out of their fear of default.  Their fear of default is bordering on irrational, and maybe they need to be reminded of it.  Maybe they should also be reminded that they represent their people and have some shred of responsibility to do what their citizens want.

Anyways, back to the headlines, but I think if you filter out who to listen to, the outcome becomes more clear.  In the meantime, it seems like 3% daily moves with big intraday volatility will be the norm.


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Wed, 09/28/2011 - 07:48 | 1717854 Sequitur
Sequitur's picture

Ugh. Both LIESman and Caruso-Cabrera are yapping on CNBC. Both are beyond annoying and disgusting. Seriously, who would want to tap her junk?

Wed, 09/28/2011 - 09:04 | 1718006 spiral_eyes
spiral_eyes's picture

Their fear of default is in no way irrational.

They're not working for Europe or their countries.

They are working for the banks.

But even then they still can't co-operate. 

Wed, 09/28/2011 - 08:02 | 1717897 LongSoupLine
LongSoupLine's picture

...and the fact they're "interviewing" Dear of CALPERS for his "expert opinion" only reinforces how f'ing total left-wing-harry-nut retard they have gone.

Wed, 09/28/2011 - 08:31 | 1717949 Gully Foyle
Gully Foyle's picture

"The vote amongst the children was unanimous. So, are we moving to Disneyland? No! There votes don't count. They are not the decision makers."

Does that mean in Disneyland votes don't count?

Which reminds me of this poll via the heinous Ace of Spades site

Who is your current favorite choice to be the 2012 GOP presidential candidate?

Ron Paul is NOT listed. Neither is none of the above.

Sucks ass don't it.

In that Disneyland votes don't count because those particular cartoon characters aren't worth the effort and time wasted to click oold Mickey Mouse for a selection.

Wed, 09/28/2011 - 10:01 | 1718113 Zero Govt
Zero Govt's picture

The kids don't need to move to Disneyland.. just watch the President, Senate and Congress any day of the week on TV for all the Goofies, Mickey Mouses and Loony Tunes characters you can stomach ..and then there's EuroDisney, NipponDisney and ChinaDisney ...plenty of non-stop comedic cartoon entertainment, laugh your guts out

But more than an hour watching these 2D stiffs cardboard cartoon cut-outs go through their theatrical acts to fake 'democracy' and your flatscreen tv may not be all in one piece.. it's a farce, and has been for decades

Govt : the Biggest Social & Economic Mistake of the Century 

Wed, 09/28/2011 - 09:00 | 1718000 Pegasus Muse
Pegasus Muse's picture

Thanks Peter.  Great stuff.

Thu, 09/29/2011 - 13:10 | 1722425 New_Meat
New_Meat's picture





Wed, 09/28/2011 - 11:37 | 1718553 covert
covert's picture

you would get bored there and it's overpriced. semase street is more fun for the money,lol


Wed, 09/28/2011 - 07:49 | 1717858 papaswamp
papaswamp's picture

Disney World is much nicer....

As someone commented on a different article...Eastern European situation is being largely ignored...and it is nightmarish....Austria has rather large exposure there.

Wed, 09/28/2011 - 08:10 | 1717910 BorisTheBlade
BorisTheBlade's picture

It's not Disney World, it's The Onion World:

(Hint: Onion first suggested AQ would be pissed at conspiracies on 9/11)

Wed, 09/28/2011 - 08:33 | 1717953 johnQpublic
johnQpublic's picture

screw disney world....i'm going to Graceland


elvis aint dead,and he has the solution to the eurocalypse!

Wed, 09/28/2011 - 07:49 | 1717859 Edward Fiatski
Edward Fiatski's picture

Europe is in RED! WE NEED A RUMOUR, NOW!

Wed, 09/28/2011 - 07:50 | 1717867 Sequitur
Sequitur's picture

Queue Financial Times/LIESman in 3, 2, 1 . . . .

Wed, 09/28/2011 - 09:07 | 1718010 SheepDog-One
SheepDog-One's picture

Not to worry! US markets all green for lift-off of course! Nevermind theres not ONE reason in the world for it, we now live in Disneyland.

Wed, 09/28/2011 - 09:28 | 1718095 BorisTheBlade
BorisTheBlade's picture

As part of "New Normal" red will be renamed into green, green will remain green.

Wed, 09/28/2011 - 07:53 | 1717871 The Deleuzian
The Deleuzian's picture

The comparison between a 6 year old trying to lie their way out of a lie...out of a lie...out of a lie... to the whole 'EU' thing is freightening...!

Wed, 09/28/2011 - 07:55 | 1717873 gmak
gmak's picture

Is the authour saying that it doesn't matter what the people want (kids and disneyland) and that the politicians are the adults here? Mercy! That is why we are in the situation we are in: because supposed decision makers decided that what was best for them was best for all (I'm still wiaiting for my $200 mm windfall bonus payment... stil waiting..)

Wed, 09/28/2011 - 08:29 | 1717947 -Michelle-
-Michelle-'s picture

That''s not what I got from it.  It seems he's saying that it doesn't matter what everyone else in the Eurozone wants; Germany is the one with the money and that means they get the final say.

Wed, 09/28/2011 - 08:35 | 1717956 Gully Foyle
Gully Foyle's picture


"Is the authour saying that it doesn't matter what the people want (kids and disneyland) and that the politicians are the adults here"

No the author is saying that because he ignored his kids they will dump his cranky ass in the cheapest nursing home they can find. Of course that's a decade or so down the road and he might be homeless composing articles at whatever public library survives the big shutdown.

He already ate his Ipad.

Wed, 09/28/2011 - 09:08 | 1718017 SheepDog-One
SheepDog-One's picture

Thats right, Peters kids will make him pay DEARLY!

Wed, 09/28/2011 - 07:58 | 1717887 Edward Fiatski
Edward Fiatski's picture

Communists work for Goldman Sachs.

Wed, 09/28/2011 - 08:06 | 1717906 papaswamp
papaswamp's picture

There is a Forbes interview...the guy is a day one the BBC found him is a mystery. He seems to know less about trading than I do (I don't know much).

Wed, 09/28/2011 - 16:06 | 1719519 Diogenes
Diogenes's picture

He said in another interview he likes to get publicity and shoot his mouth off on TV. Somehow he gate crashed the Beeb and now he gets to rub shoulders with Jim Rogers and Hugh Hendry, metaphorically speaking.

Wed, 09/28/2011 - 08:16 | 1717921 The Deleuzian
The Deleuzian's picture

I thank my god(s) I have no part...never taken part...never will take part, in any Huffington post anything... The Borg of dis(information) spreads like the cancer Rastani was so eloquently warning us of!!  I will never go to the Huffington post ever again!!! I mean it!!!

I think I will finally think about donating some Ag to Tyler(s) for all of their truly wonderful work!!!! 

Yes!! I'm having fun with the (x)'s

Wed, 09/28/2011 - 08:27 | 1717942 BorisTheBlade
BorisTheBlade's picture

Doesn't matter though whether it's HuffPost or ABC, they all started bashing him. Reminder to anyone choosing to speak publicly anything contrary to a teleprompter.

Wed, 09/28/2011 - 09:19 | 1718057 hardcleareye
hardcleareye's picture

Just love the YES MEN, the Management Leisure Suit and the Reburger are priceless......



Wed, 09/28/2011 - 07:57 | 1717880 DormRoom
Wed, 09/28/2011 - 07:57 | 1717885 disabledvet
disabledvet's picture

I prefer Disney World myself. And when you talk money and preference for delusion that's like talking peanut butter and jelly. the bottom line is this: the Titanic sees the iceberg and the Germans are blaming the Greeks for it.

Wed, 09/28/2011 - 08:03 | 1717899 msmith
msmith's picture
It appears that the EURUSD correction higher may have completed, which could confirm the move lower for equities. - Anyone else has a perspective here?
Wed, 09/28/2011 - 08:13 | 1717914 papaswamp
papaswamp's picture

Fins passed the improved ESFS....I suspect it will creep higher.

Wed, 09/28/2011 - 08:08 | 1717909 GeneH3
GeneH3's picture

Excellent summary. The observations of a cool head are refreshing. I would like to forward a link to my associates; but, like many posts here, this one needs a proofreader. Misuse of there/their and won't/want are distracting and detract from the intellectual quality of the piece. Many of us, including myself, are too eager to post and overlook the fundamentals. A good post nevertheless.

Wed, 09/28/2011 - 08:41 | 1717971 j.tennquist
j.tennquist's picture

Don't nitpick, the substance is still their (oh sorry, THERE)

Wed, 09/28/2011 - 09:09 | 1718020 Ghordius
Ghordius's picture

Yes, excellent summary - don't know why grammar has to be an issue

What I am missing in this picture is the "pushing" by the City of London and the Squid (who started the whole Greek-is-worth-it business) - there are huge interests that have to be protected

the ECB situation, IMO, is not that bad - IF IT STOPS THERE. Meanwhile, the USD needed some windowdressing, so a faltering EUR had to be somehow constructed, eh?

I'm not sure what I would do as Italian PM - probably the same, since the external situation cannot be changed and the internal situation would take more then 5 years to change - in their view it's a matter of small degree.

the French finances are not that bad, IMO, it's the question what they are supposed to do with their banks (which are the Maginot Line of Italian Debt)

Wed, 09/28/2011 - 16:08 | 1719523 Diogenes
Diogenes's picture

Spelling and grammar are important if you want to get the meaning right.

What about the Scotchman who walked into the Ladies thinking it said Laddies?

Wed, 09/28/2011 - 09:09 | 1718022 hardcleareye
hardcleareye's picture

Grammer Nazi!!!!  lol

Wed, 09/28/2011 - 08:15 | 1717917 the not so migh...
the not so mighty maximiza's picture

Micky Mouse would run Europe better.

Wed, 09/28/2011 - 09:24 | 1718079 Ghordius
Ghordius's picture

hahaha ;-)

if TARP, TALF and QE is what Micky Mouse would do to "run Europe better" then I'm happy we don't have my beloved Micky Mouse in charge.

a lot of comments in the media go like "if the banks fail, we'll be back to the stone age"

the EuroZone has seen two world wars, a few hyperinflations and the shift of several key borders, and you know what? it's not the end of the world, it's only "the end of the world as you knew it"

Wed, 09/28/2011 - 08:16 | 1717923 falak pema
falak pema's picture

I can see the seven dwarfs in Euro-Disneyland. Merkozy the two headed one, mixture of grumpy and dopey; Van Rompuy as Doc.  BUT  No sign of Snow White. There is a guy from Euro commission, selling us juicy, poisoned apples called EFSF for FREE!, named Jose BArroso. Could he be the black witch, Queen Grimhilde,  in this psychodrama with no happy ending?

Unsung villains and Rune alphabet, to confuse and abuse the innocent. I'm no Futhark fan but a true pagan lover, Odin-Thor and law of honour.

Love to meet a true Walkyrie...that is, before the end at Valhalla!

Wed, 09/28/2011 - 08:17 | 1717924 Tic tock
Tic tock's picture

The Silver price is being pushed lower via a weak dollar, rather than in a series of outright shorts. .. for the time being

Wed, 09/28/2011 - 08:24 | 1717929 Tense INDIAN
Tense INDIAN's picture

Mankind has been  in Fantasy Land for atleast a in a system completely created by the elites for their benefit and have been pushed to accept changes , forced into compulsory education, creating an environment where living in Cities is the way forward for people who can...( which may be common now but NOT NORMAL)......we have been in fantasyland for quite sometime ...seperated from NATURE....doing things for which we are not built....anxious all the time...

Wed, 09/28/2011 - 08:23 | 1717934 pelican
pelican's picture

Is that correct that a massive amount of shorts has been taken out for Oct?


I want to move to Disneyland and have the job of wandering Donald Duck.

Wed, 09/28/2011 - 08:33 | 1717951 Casandratarian
Casandratarian's picture

It seems to me what's going on is the banks are using the PIIGS (and US mortgage-holders) as an excuse for a looting-binge before what they knew was an inevitable demographic-collapse of the fractional-reserve Ponzi-scheme.

Who is really paying 100% interest? German workers and savers, not Greeks.

Tho pols are only too happy to accomdate and cash-in too, since in the future they can blame their austere, imposed-serfdom on the banksters in Brussels or Zurich.

Wed, 09/28/2011 - 09:06 | 1717954 Mercury
Mercury's picture

Their fear of default is bordering on irrational, and maybe they need to be reminded of it. Maybe they should also be reminded that they represent their people and have some shred of responsibility to do what their citizens want.

What Euro bankers/politicians should be reminded of is that their constituate states are rather famous for overhauling their political systems every few decades or so...often in a very colorful manner (how many types of government has France had since 1789?).

But he’s right, although default can be ugly it’s usually not even close to the worst case scenario and also the least worst option.  Hell, personal bankruptcy in the United States has practically developed into a rite of passage in the last few decades. Currency devaluation used to be a core competency of places like Italy...and now that's been taken away.  You'd think there would be a greater push to jettison the Euro just on cultural sensitivity grounds! 

 And "Lehman moments" in the marketplace are as natural as brush fires in forests.  Constructing artificial barriers to thwart them at all costs just makes the inevitable all the worse in the end.


Something's gonna give...

Wed, 09/28/2011 - 08:45 | 1717975 LeonardoFibonacci
LeonardoFibonacci's picture

pass a Mickey Mouse outfit to little Tim cause that is about the only job he will be able to do!

Wed, 09/28/2011 - 09:25 | 1718087 disabledvet
disabledvet's picture

Actually that's the most valuable one. Perhaps you meant Cinderella?

Wed, 09/28/2011 - 08:47 | 1717976 somethingelse
somethingelse's picture

An ECB plan without Germany's full support is like a NATO plan without USA on board. 

Wed, 09/28/2011 - 08:57 | 1717996 Peter K
Peter K's picture

Excellant analysis. A pleasure to read, as always.

One small suggestion as to the key to this whole crisis. The word that wansn't mentioned is the Euro currency, or rather it's demise. The key is the French, and their megalomaniacial need to be a super power. They could not do this on their own (Waterloo put the last attempt to rest), and after the war decided to 'corral' the Germans into a political union to give them the firepower. (DeGaulle's dream). Their means by getting to a political union was first a free trade zone (a great idea on its own). The 'grandeur' opportunity presented itself when the Berlin Wall fell. They supported the Germans against the Brits, who didn't want the Germany's to reunite. And the price that the Germans paid is the Euro. But as with any well laid plan, it had unintended consequences. And most 'sane' economists knew what they were (anyone remember the ECU?). Anyways, the unitended consequences appeared due to the Germans gaining relative competitiveness via a fixed internal exchange rate. And this allowed the Germans dominate the greater Euroland through an effectively cheap currency (75% of German exports are to Euroland). This internal exchange rate is the largest cause for all of Euroland's problems since it make the PIIGS uncompetitive. And the rest, like they say is history........  

Wed, 09/28/2011 - 09:46 | 1718129 Ghordius
Ghordius's picture

also a pleasure to read your comment, even if I disagree

this meme with the currency helping exports is somewhat fallacious - yes, in the short run a softer currency helps, in the long run it hinders your ability to calculate sharply your costs and to reinvest your gains in your own business

in the US nobody would dream of having separate currencies per State or group of States

in a gold standard world, the depreciation of a currency would have clear consequences

If you produce something of value, you can exchange it for something of value. At the moment this "something of value" is being debated, yes.

Portugal, Ireland, Italy, Greece and Spain have several other reason why they are in a mess. Ireland because of a building frenzy (nobody was saying the EUR is a prob for the boom they had), the others because they overspent and in some cases have simply too much "submerged economy"

No, the most important sentence you've written is here "...the Brits, who didn't want the Germany's to reunite"

The British, the British Media, and by reflection their cultural cousins' media (including Murdoch) etc. have an historic tendency of being wary of any "unification" of Continental Europe, particularly if the French are involved. It's a reflex. "Oh, the Continentals are doing it, it can't work, ever."

About the EUR: IF the ECB stops buying bonds (and no, what they have done so far is still somewhat ok) then there is no reason why it should not keep marching on for the next 70 years or so.

Wed, 09/28/2011 - 10:26 | 1718288 Peter K
Peter K's picture

Actually, the most important sentence that I have written is the one that alludes to the direct cause of the present EuroMess. And I assume that you agree that it is a mess. The prime cause is the French maniacal dream to be a superpower. And even how, as their banks disintegrate from holding tons of worthless paper, they still can't let go and save themselves. But I guess the CAP payment to their backward farmers plug their budgetary holes. But I digress.

But back to the Brits. PM Thatcher was a product of the past, but aren't we all? But it's one thing to live in the past, but quite another to misread the present. And this combined with pursuing the classic British policy toward the Continant, i.e. divide et vice (remember the 5 alliances agianst Napolean?) she misread who the enemy of Britian is, i.e it wasn't Germany but France. And she gave Mitterand the perfect weapon to "corral" Kohl into the Euro.

As to the assertion that weak currencies are a net benefit to the given country, and the true driver for the destructive machinations to keep the Euro afloat, look all around. Do you see any Central Bank (Except for the Poles, but that's a horse of a differenct color) intervening to strengthen their currency?

Nuff said :)



Wed, 09/28/2011 - 12:02 | 1718608 Ghordius
Ghordius's picture

mhh... let's see 8-)

I agree it's a mess

meanwhile, this mess is somehow good, since it distracts from a few bigger issues on this planet (hint, hint, wink, wink)

I still maintain that the mess is for the EuroZone banks, not the EUR/ECB (IF there is no further monetization), but yes, EuroMess it is

meanwhile, the EUR had to go down (the Currency Wars theme) together with all SafeHavensTM and the USD had to go up or the TBTF banks would have trown a derivative tantrum - this is the "true driver of the destructive machinations", aided somewhat by the Central Banks involved. And at one time in the future, the CBs will all be busy fighting the exact opposite of the current currency depreciation and will need as much FX reserves and posturing as they can, by the way.

The Austrian School of Economics teaches that a hard currency is better for an economy. Myself, I believe a stable currency is what best serves an economy, in the sense that if you somehow keep the inflation/deflation at the same rate you're doing the best thing. But of course this gives politicians the leeway to SPEND and then the CB has to PRINT and then you have the issue as we now are facing...

"The prime cause is the French maniacal dream to be a superpower"

Sorry, IMO this is a British Mania - fact is that France & Germany are no enemy of Britain, while the UK is still in 1st-Duke-of-Marlborough-Mode when it comes to Europe - your "Classic British Policy toward the Continent". Probably part and parcel of the culture, by now. But since you are mentioning the 5 Coalition Wars, you know who now is the very best friend of Germany? Not France, no, it's Russia. For what, the 5th time in history? And look at who is sharing a carrier with the UK for little excursions in Libya? France.

European Integration is by now too far for wishful thinking and please note that in all the news about the "Downfall of the Euro" nobody, really nobody ever explains why - it's just taken as a matter of faith. The Germans are still pushing for an independent, apolitical Central Bank that just delivers a stable currency. Should they continue to push enough, they might achieve this goal - even if a couple of countries and every major bank in the EuroZone defaults. And you know why? Because the banking system is not that critical to the EuroZone as commentators in the City think. Or, to put it in other terms, on the Continent we had to reset banking systems a couple of times, so we have accumulated some experience in this...

Wed, 09/28/2011 - 14:59 | 1719282 Peter K
Peter K's picture

Where do I start.

Banks are a mess because they bought (were forced to buy debt by their respective govs) Euroland gov debt that is presently trading anywhere from 50 to 80p on the pound. And now the Euroland elites are trying to figure our a way to buy the aforementioned debt at face value, firstly so that the banks don't take a loss (meaning need to be recapitalized), and secondly so that they could resume buying worthless Euroland debt to support their future spending. I think that is an accurate assessment of where we are in the process. Or in other words, it's not the banks, it's the politicians.

Derivatives causing the problems is a fallacy. I don't think anyone with an understanding of how markets work would make such a claim. The reason for the mess is that governments spent too much (spending problem) and the numbers caught up with them. Simple math, or rather a simple compounding interest problem.

I think the Austian/Chicago monitarists have the best grasp of economic reality. And I think that this crisis will only further support their position. Friedman called the Euro correctly. As to the Euro itself, no it is not to far along. Nothing is. The laws of physics as we understand them will not allow anything to be permanant. It will only be a matter of time before the Germans realize their predicament (post downgrade of France and post recession in China) and will 'cut their losses' to use an excellant trading expression.

As to British mania, of course - partly. This is product of their history. But by the same token, the French and the Germans also have their manias. Napolean claimed that he could tell the history of a nation by its geography, and I think it is fair to say that a nation psyche is grounded in its history. And these are not necessarily bad things.

As to friend or foe, these change with circumstances dictated by particular 'needs' at a given point in time. Generalizing, one could say that a direct neighbor is an enemy, and the neighbor one neighbor over is a friend. But like I said, it's not a hard or fast rule. But in the context of this thread, France is no friend of Britian. And the EU based on the German/French axis is a direct threat. The battle for the financial industry is a good case in point.

And lastly, EU integration is over. The Federal European dream is dead. An I think it's apparent for all to see. The only real question is how do you disentangle the Euro project. It's going to be a mess. You need to look no further than the posts along with the attached graphs on this website to figure it out.

But the cause of death of the federal Europe is actually not related to anything that the politicians and psuedo economist did when they introduced a currency without the backing, (good faith and credit) of a political entity, i.e. a consolidated treasury, along with the debt and transfer unions needed to keep the currency viable. And on a side note, the only reason that the Euro has lasted this long is that the Chinese, Arabs States and the Russians and their SWF's have supported it.(US hegemony reasons) But I digress. The thing that killed Euroland is actually the same historical process that killed off the former Soviet Union. And that historical process has at the center the notion that a person is an individual who owns the proceeds of his labor. And when the state intervenes in that 'natural' process, the individual rebels. This is what the founding fathers of Europe didn't understand. Or to put it another way, organizing your society along a socialist/marxist/statist model is not sustainable. And since the Soviet Union along with its satelites as well as Western Europe were built along a socialist welfare state model, it was only a matter of time before this model collapsed. And what we are witnessing now is the collapse of the socialist welfare state's western empire. And the Euro's main contribution to the advancement of human development will be that it hurried this process along.

Wed, 09/28/2011 - 09:02 | 1718004 oldman
oldman's picture

Thanks. Peter

This is how it looks from the deck of the ship. Concise and well stated!       om

ps. the Italians have it right----and we are having fun.

Wed, 09/28/2011 - 09:38 | 1718123 PulauHantu29
PulauHantu29's picture

How One Hawaiian Paradise Became a Ghost Town

Only one piece of land has sold in the past year-and-a-half after 80 "founder" lots were sold in 2006 for a total of $110 million.

Wed, 09/28/2011 - 09:41 | 1718135 jdelano
jdelano's picture

Peter--seems to me that this is all a misdirect.  The dollar liquidity facilities are being put in place and will be up and running by mid October.  Isn't it likely they are just attempting to stall the markets until then when they can "safely" let Greece default?   

Wed, 09/28/2011 - 09:45 | 1718139 Georgesblog
Georgesblog's picture

This morning, I'm just trying to say something that isn't redundant. It's difficult to avoid stating the obvious. There is such deeply held fundamental error in this global circus, that I wonder if the financial bigwigs all graduated from the George Thorogood School of Economics.  The debt says, "That don't befront me none, as long as I get my money by Friday." So far, the proposed solution appears to be, "One bourbon, one scotch, and one beer". Germany must feel like the bartender. I really do want to write something insightful, but all I can think is, "A psychiatrist walks into a bar ......". I'll just say that I appreciate everyone that stops by my blog site. If you stop by, please say hello, maybe drop off a good financial joke that I can credit you with, or just pour me another cup of coffee.  Thanks, a bunch.

Wed, 09/28/2011 - 09:52 | 1718177 NEOSERF
NEOSERF's picture

We've passed Disneyland, way past LaLa land and are now in Neverland...

Wed, 09/28/2011 - 10:03 | 1718212 Sambo
Sambo's picture

Germans dont have a choice. They are surrounded - geographically & politically.

Wed, 09/28/2011 - 16:17 | 1719545 rune420
rune420's picture

Excellent analysis for the most part. But I think you're trivializing the trouble that some of these banks will be in once the ball starts rolling for defaults in sovereigns. And I think that may be partly why the French are so eager to avoid that scenario.

Wed, 09/28/2011 - 17:56 | 1719949 TyIer Durden
TyIer Durden's picture


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