Nowotny "Hilsenraths" EUR, Futures By Reviving Doomed "Red Herring" Discussion Of ESM Banking License

Tyler Durden's picture

Europe is once again scrambling by clutching at broken straws and juggling dead ends. To wit: instead of actually proposing a realistic solution to its massive debt overhang, the ECB's Ewald Nowotny said "there are arguments in favor of giving Europe’s rescue fund a banking license, reviving the debate on bolstering its firepower as leaders face the prospect of a full-scale Spanish bailout." As a reminder, this is an absolute dead end that Germany and the ECB have both repeatedly rejected as implementation would confirm just how hollow the European gutted shadow banking market (you can't have shadow banking without credible collateral). Reuters explains: 'Nowotny, however, said the issue was far from settled and that it was not being actively discussed right now - an indication that, if were to be considered, it would take time to agree on the measure. "There are also other arguments, but I would see this as an ongoing discussion," he said, adding that he was "not aware of specific discussions within the ECB at this point." France has been behind a push to give the ESM access to ECB funding operations. The ECB has repeatedly rejected the idea, arguing it would be thinly disguised monetary financing of governments. The ESM is an entity that is funded by governments."

Further slamming the Nowotny comment was Daiwa which called the Nowotny statement a Red Herring and that "remarks that ECB council member sees arguments for giving bailout fund banking license "look to be just noise," Grant Lewis, head of research at Daiwa Capital Markets Europe, says in client note. Comments appear to have been off the cuff and purely personal opinion; such a move remains “highly improbable,” as Germany and ECB “implacably opposed” to this. Finally Daiwa adds that markets will soon focus again on fact that if ESM can’t be activated in early autumn, there’s no money available to bail out Spain, “let alone Italy." 

"Oddly" enough, just like yesterday's Hilsenrath non-fact stick save minutes before Apple's miss would have dragged futures down by several hundred more points, this non-event come just at the right time to prevent the EURUSD from sliding to a 1.1 handle, and has pushed not only the EURUSD higher by 100 pips, but futures well into the green. Good timing.

Efficient and unmanipulated markets.

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Gief Gold Plox's picture

"this non-event come just at the right time to prevernt the EURUSD from sliding"

I'm starting to think that it's actually the other way around. The algos running IT guys call up the ECB, or whoever's turn it is on a given day, and say: "OK we're ready on our side. As soon as I say 'NOW" you publicaly announce something really really stupid. Anything, just so we're covered."



*An idiot starts talking*

dexter bland's picture

Jawboning is is the cheapest form of stimulus there is and for most EU agencies its all they've got. It briefly scares a few shorts out of their positions and the trend resumes shortly thereafter. A shame it has no effect whatsoever on consumers.






DeadFred's picture

Officially the Fed acknowledges that jawboning is one of the few bullets they have left. The use prettier wording but that's the jist of it. Reality is that it's time for a brief rally here and if you look at the trends lines for US equities the uptrend is still alive.

Christoph830's picture

I love the smell of desperation in the morning

i_call_you_my_base's picture

I love the smell of Hisenraths in the morning?

bank guy in Brussels's picture

They have been reading Ambrose Evans-Pritchard

Great new article of his yesterday talking exactly about this, the banking licence plus the sinking redemption fund as the way to fix the euro-zone

Peter K's picture

Doesn't don anything about the competitiveness gap that is the root problem of the Euro. Just long distance can kicking.

But as for AEP, he is the best:)

Ghordius's picture

ok, so I'm going to be wildly unpopular (again) for vehemently disagreeing with Ambrose Evans-Pritchard. I look forward for the personal attacks "how I dare to tarnish his reputation".

AEP has a team of geniuses that say "...absent this collective response, the euro will disintegrate...". So AEP is concerned about keeping the eurozone intact?

If you really, really look hard at what AEP's talking ponts are in the last year, you'll notice that they are exactly what the City is demanding:

Either a Full Fiscal Union (no thanks) OR a return to the old currencies (no thanks, and for sure not during a currency war) but whatever you do, don't have defaults. Save the whales!

Please feel free to point out if AEP is not just talking the books of the banksters of the City of London. It's all about the debt, folks, not the currencies.


Meanwhile I've found a gem for all those that are not familiar with the English-Scottish situation: an article where it's idiotically debated that Scotland should not leave the British Pound because they would be "forced" to join the EUR.

I had a long discussion here 2648297 -> nobody can force a country to adopt the EUR, the whole idea is preposterous and pure propaganda. Ask Sweden. But of course, is sounds believable, for some.

ReactionToClosedMinds's picture

I sometimes wonder about AEP ... where is he really going?  Maybe you are onto the realistic dynamic ...AEP serves as a battering ram .... but when you get down to 'first principles' ... all of a sudden .... silence or contradiction.

Have not studied this closely enough to draw a conclusion but over the years I've noticed an episodic contradictions with AEP that I cannot put my finger on ... but he is tough to ignore also



ReactionToClosedMinds's picture

Whose water bucket is AEP really carrying? >>

from a comment after AEP's piece cited:


48 minutes ago

Another "school" of economic thought. And George Soros as a "founding sponsor" .
...17 experts,none of them named.
This is piffle

All Euro supporters as AEP at least honestly states


Bogdog's picture

EURUSD slides to 1.205 later today. 

eclectic syncretist's picture

Gold and silver outperform today!

ReactionToClosedMinds's picture

gold futures have been pulsating something is up lately

Peter K's picture

Tape bombs is the last bullet left in the arsenal. Good thing that the German High Command is on holiday. No on to rebut the silly season musings. :)

firstdivision's picture

They better come up with something today, else the blood letting will continue by afternoon in the US markets.

Catullus's picture

I've got an idea: let's make a bad bank to make all that "toxic" debt go away! And then we'll put it on a space shuttle and shoot toward the sun.  Problem solved.  And we create jobs on the new shuttle creation. 

/sarc off?

eclectic syncretist's picture

Yeah!  And we'll piss off some aliens who we can identify as the bad guys so that everyone will support mountains of more debt to fight them, and that will make everything just wonderful.  Now, where's my Nobel Prize bitchez!

KNiCKER's picture

Just launch a huge EMP bomb that will reset all computers and start over... I hate rigged markets

milanitaly's picture

Quantitive easing or euro exit. This is the request today coming from the most important italiannewspapers.

Ghordius's picture

+1 btw, do you remember when the Italian Communist Party's Chairmen Bertinotti asked for a tax on the Italian bonds? And do you remember how this (for a communist understandable) request made sure his party disintegrated? Because at that time all party-card carrying member had lots of italian bonds? Those were the days when practically all debts were national...

Cangoroo's picture

Better Germany gets a voluntary haircut.  Europe needs to clean up the Target 2 mess. Will this cause a blow to Germany's banking system? No, because they are all state owned apart from DB. Would this drive Germany's debt and interest rates up? Yes, it would and in this case this is not a bad thing. Germany like China needs to rebalance and to stop capital exports. Germany would be better off in keeping the money in the first place, which could pay for the few Euros of additional interest. Negative rates are not that good, there is a bubble in the making, real estate is the most likely candidate. 

Tabarnaque's picture

"Europe is once again scrambling by clutching at broken straws and juggling dead ends."


Bravo! I really enjoyed this writing skill. Keep on the good work. 

dcb's picture

give me a break I wrote a long piece on why we were at a good buy time last evening,

viator's picture


"Moody's Investors Service has changed the outlook on the provisional (P)Aaa long-term rating of the European Financial Stability Facility (EFSF) to negative from stable, a blow to a fund that was supposed to backstop struggling EU members.

The ratings agency said the move followed on from its decision earlier in the week to change the outlooks for Germany, the Netherlands and Luxembourg to negative. All three are guarantors for the EFSF, with Germany holding the largest share at just over 29 percent.

"The change in the outlook of the EFSF reflects the now negative rating outlooks on all but one of its Aaa guarantors - namely Finland," Moody's said in a statement."

GMadScientist's picture

Just once I'd like to see one of these pinheads get a curbie for talking out of class.

No other profession could get away with this level of incompetence in a public forum.

NEOSERF's picture

The casino forges on...taking the collateral of the ESM of which seems to consist of pledges by insolvent banks and countries and then leveraging them up say 20x to create loans back to those same banks/countries so that they can keep buying eurobonds to artificially push down yields to keep their host countries from falling into the abyss...great solution

Cangoroo's picture

Both EFSF and ESM are just hidden government debt and the countries shares should be added to the offical debt to GDP ratio.

mark7's picture

Freeze the bond markets completely. Clear out American bankster speculators speculating with printed money. Force them to eat shit, issue Interpol arrest warrants. US government is not going to do anything to prevent these bankster fucks ruining everything.

Spain debt to GDP was 70 percent last year, less than that of France, UK or Germany, all over 80 percent plus USA 100 percent and rising fast. And Spain is somehow the BAD GUY among this group?! ZH is obviously working also with some of those American hedge funds.

WallowaMountainMan's picture

(you can't have shadow banking without credible collateral)


thank god the cds boys and girls have credible collateral for all those trillions of bets.