Via Mark J. Grant, author of Out of the Box,
The Red Ink in Europe
Sometimes you look at different stories and your focus is on the particular tilt of the headline. Recently there have been posts about the declining exports in both China and Japan and the slant has been on these two countries; some further consideration, however, also tells another story.
The exports by China to Europe were down almost 18% last month and, in some cases such as Italy, the decline was almost 38%. Today Japan reported out its export numbers and their shipments to Europe declined by 28% with Germany off 18% and the UK off 42%. These are quite steep declines and not insignificant numbers from two of the major economies in the world. Then if you consider the recent contractions in Europe, which are fairly minor, you begin to add up numbers that do not jibe. The discrepancy cannot be defended based upon internal demand or demand from other European nations or from America so, unless there is a significant lag time which would mean that the upcoming GDP numbers in Europe are going to horrid, something is amiss. While, in the past, I have calculated more accurate debt to GDP figures for a number of countries in Europe including all of their liabilities, current and contingent; I have never questioned the accuracy of their GDP data before and I have accepted it prima facie as provided. Now, however, I am beginning to wonder if that was a mistake.
Each nation in Europe compiles their own GDP figures and it is checked by no one. This data is accepted by Eurostat and the BIS as given. This only changes when the EU and/or the IMF lends some country money and then they are audited by outside sources. It is my opinion, such as with Spain that this is one of the primary reasons that Spain and also Italy are so reluctant to ask for funding. They want the capital no doubt but without a full blown bailout; they are scared to death of the audit and the actual numbers becoming public. Spain, we already know, engages in “dynamic provisioning” so that their data is highly suspect as they publically admit to making changes in the national ledger and their banks’ ledgers as they see fit. In the case of Spain, I pointed out a year ago that the property values in Spain did not match with the valuations of property on the books of the Spanish banks and that eventually came to public attention. In the case of the export fall-off from China and Japan to Europe I suspect the same type of thing; European GDP’s not exactly as stated and perhaps way overblown in an attempt to mollify investors.
Three Card Mario
“One of the classic short cons, three-card Mario is a new swindle that uses official and misleading statements and trickery to swindle victims out of large amounts of cash. It’s one of the oldest cons around, and dates back to “the shell game,” a similar scheme that was popular during the Middle Ages. The new version uses a Central Bank and a Ponzi Scheme that loans money for debt, substitutes debt for collateral and then returns cash back to the grifter as he pledges the collateral back to those that lent him the money. This new European con has eliminated the use of cards in its play. Investors are the ‘marks’ and governments are the perpetrators.”
Following the Bouncing Ball in Madrid
There was the usual fluff this morning concerning the Spanish bond auction and the yields were down almost one full percent for their ten year. Many are attributing this to the recent action of the ECB with their “conditional” no cap and unlimited language. This is likely part of the story but certainly not all of it as we size up what is going on. Data published Tuesday by the Spanish Central Bank showed that non-performing loans rose to 169.33 billion euros ($222.13 billion) in July, or 9.9% of outstanding loans, from EUR168.37 billion in June. The data also showed that July deposits stood at EUR1.287 trillion, down 7.8% from a year earlier. Given this data I am forced to wonder how is it then that their funding rate has declined so dramatically and the answer is beyond the recent jawboning of the ECB in my opinion.
In August the Spanish banks borrowed $531.77 billion from the ECB which compares to $520 billion a month earlier and $106 billion just one year ago. This is a new record high and it represents 34% of all of the borrowings at the European Central Bank. So the game becomes apparent; the Spanish banks borrow from the ECB, they buy the sovereign debt of Spain and we have “Euroloans” which is the approved replacement for Eurobonds. I submit this morning that “Euroloans” are the strategy, the mechanism, and even the “con” if you will that is taking place in Europe. Germany is accountable for 22% of the ECB and they make their case for no Eurobonds on the basis of not assuming the liabilities of other nations but this is not an accurate statement; they have substituted, along with the ECB, “Euroloans” for Eurobonds while denying liability which is, in fact, incorrect. The banks borrow from the ECB, they buy the debt of their country, they submit the sovereign debt as collateral at the ECB or to Target2 for more funding and they receive the cash back on their balance sheets. Utilizing this circle of borrowing, buying debt, use of it as collateral and then receiving their money back they have replicated Eurobonds and have just employed a different strategy to accomplish it.
“But you're a con man! And you blew it like a pimp!”
-The Sting
I'm totally going to win that damn game......someday.
I already won.
I quit.
Small correction: The German ECB capital key is 27.1%. Your 22% is the meaningless share of ECB capital including the non-Euro 10 nations.
What's in your collateral? So many paper promises, so few real assets.
Always go with unsecured if you possibly can.
10,000 acres of South Dakota prime with oil wells pumpin'...and there's gold in dem der hills too...
Spain is claiming the Dakotas? Didn't see that one coming.
Spain claims the revenue from our toll roads ...
The deals, common in Europe for decades, got jump-started in the U.S. in 2005 when Chicago enriched its treasury by $1.8 billion by selling a 99-year lease of the Chicago Skyway to Spanish roads operator Cintra and Australian bank Macquarie. At about the same time, Texas bagged $1.2 billion to let a Cintra-led consortium build the first part of the Trans-Texas Corridor and collect tolls on it for 50 years. In 2006 Indiana signed a 75-year lease for the 157-mile (253 km) Indiana Toll Road in exchange for $3.8 billion, funding the state's transportation needs for the next decade--and grabbing the attention of other budget-conscious states.
Read more: http://www.time.com/time/magazine/article/0,9171,1673288,00.html#ixzz2718WT43A
Ahh, but the real question is, are yeast smarter than humans?
I know two humans who do not surpass the intellectual prowess of a yeast cell. But on the average I'd say we got 'em beat.
What surprises lurk that the 10yr futs are coiled up and ready to launch higher out of a large wedge possibly to new highs ?
http://fiatflaws.blogspot.com/
Ultimately it's two-card Mario: cash for trash.
But I would think that the ECB would still prefer to be able to issue honest-to-God Eurobonds instead of running this circle-jerk since that would actually attract outside money.
But since fiat is trash it's really trash for trash; a square deal for both sides.
Eurobonds and political union would help eliminate exit risk. So yes, they would prefer it.
I have this image of a map of the EU. And the leader of each country standing on the map within the confines of their country - butt naked and espousing how all is well within and how finely they are dressed with their clothes tailored by the ECB.
A lone child (could be a cat or a dog) off to the side says "But, they are not wearing anything at all".
Tilte: The Emperors New Clothes 2012
http://en.wikipedia.org/wiki/The_Emperor's_New_Clothes
So maybe Merkel should not be naked.
Buddy, NONE of them should be naked.
I was talking with my Latvian friend who works as a big dog in a manufacturing plant here in the US. Yes, Manufaturing.....in the US.
He says they are a'comming back.....I disagreed. He shot me a figure.
30k for a plane ride or 4k for a boat ride to the Far East....Keep in mind the passengers are little plastic pieces used in cosmetics and other places....
BOTTOM LINE: OIL IS SO FLIPPING HIGH YOU SPEND A FORTUNE MAKING IT IN CHINA AND SENDING IT HERE.....
The costs are getting even....meaning they are going to start making it here to ship to Kentucky for example instead of China to Kentucky!!!
I agree on Economic principles.....COSTS, COSTS, COSTS to manufacturing is like Location, Location, Location in Real Estate.....
NOT TO MENTION MY KIDS DONT NEED MORE SHIT FROM CHINA IN THEIR HAPPY MEALS OR AT BIRTHDAYS OR ANYWHERE.....WE HAVE ENOUGH JUNK!!! TAKE IT BACK!
"and the Jester sang for the King and Queen...
Bullish for local plastic pumpkin growers!
I have contended for some time that the one thing we have going into this collapse is the fact that we dont manufacture anything.
We can only go up from here.
Oh, and farmers are about to become the richest people in America.
Never happen. Monsanto, ADM and the banks will make sure of it.
Monsanto & ADM are the small publically traded fish in a very large pond dominated by a privately held whale which even Wall Street treads very carefully in the presence of.
It's not just about oil; it's also about the cost of labor. If Benny exports inflation faster than he whips it up at home, manufacturers are going to run out of places to do effective cost arbitrage -- especially if unemployment keeps a lid on wages here. Interesting to think that one possible outcome of this global debt tsunami is a balanced domestic economy (as long as you print a new currency with a couple of less zeros on it).
This works as long as the consumer has a job and sees a need for little plastic pieces in their discretionary spending.
more simple than two card
one mind at a time...
http://jonrappoport.wordpress.com/2012/09/18/the-basis-of-mass-mind-control/
As long as nobody looks in the vault, the vault can be said to hold anything.
The claim that the collateral is worth something seems to be all the market needs. The ECB will never open their books, just like the Fed will never be audited and we will never see the gold in Ft. Knox.
People love a great illusion, and never want to look behind the curtain to see the trick is so simple that a toddler could pull it off.
The illusion of control is sometimes more powerfull than a standing army.
<-----The cat at fort knox is made of gold
<-----The cat at fort knox is made of tungsten
No, a wearhouse, or vault is empty until proven full.
False. Only one fool has to believe it contains something of value.
pm's are not playing the game
All the while the banksters are forcing the people into desparation. The bailout money is not being loaned it is being taken from the people of each individual countries to fill the pockets of the banksters and to bribe and blackmail their government's politicians and even in some cases, like the US, to pay for an army of DHS that will eventually kill the citizens. People would go to jail or be killed if they outright grabbed the bankster and beat the shit out of them so they kill themselves, or die of lack of medical treatment, malnutrition or from boredom from waiting for Greece to default. But Greece, Spain, Italy, Germany, France will never default because that is how the banksters are transferring money and gaining political over each of their countries--by putting them into greater debt.
Even worse is that since the banksters now run the militaries from opposing countries they can effectively have a controlled nuclear exchange without worrying about it going to mutually assured destruction because, for example, the US military could be told to stand down while china or whoever, if Cheney's inhumane mechanical heart is still spinning, even a division of US forces, hurls a nuke into a US city or two. And, vice versa for China, Europe and Russia. The controlled nuclear exchanges, along with controlled bio-weapon attachks, would thereby seal the omni-potence of the central banking cartel, decrease the population, burn any last morsel of meaning from sovereign constitutions and herald in the reign of the NWO.
Since these fuckers have been murdering millions of people by waging war for the last 20 years against people, whether muslims or children, that they blow their faces and jaws from, don't be naive and ever for a second think that they would not do the exact to you and your family because they are preparing to do just that at exactly this time.
Three card Mario no. Three horned demon of incarnate evil yes.
People are sheeple: they don't know what's going on and the "Silent Weapons for Silent Wars" are being used like never before.
If someone hurts you physically to steal your money, like a bag snatch or an armed robber, you feel the pain and realise what's going on, but through inflation, derivatives and these three card games of financial scams, you need to have at least a minimum economical knowledge to grasp what's going on, therefore, the silent war goes on and sheeple is getting fleeced.
With my regards to WB.
http://www.flickr.com/photos/39170442@N05/8006097537/in/photostream/
Trying to buy time, waiting for that 'growth' to show up and magically allow everything to return to 'normal'.
No more growth, it's done. Never to return again, even if we give it candy ...