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"Pied Piper Always Gets Paid And Hamelin Still Rests On German Soil"

Tyler Durden's picture




 

Via Mark J. Grant, author of Out Of The Box,

Hamelin Still Resides In Germany

“Never believe anything in politics until it has been officially denied.”
 
                                                                              -Otto von Bismarck
 
I spoke last night at the Palm Beach Strategic Forum. It was an interesting event. The former Prime Minister of Pakistan and the former President of Peru seemed to be in agreement that the lack of decent leadership in the world was the main problem. I could not quite bring myself to agree that this was issue number one but they did have a reasonable point. The Assistant Secretary-General of the United Nations called for further investment in Latin American countries and was met with some opposition in his assessment of Venezuela. I took up the plight of Europe and explained why the stated debt to GDP ratios were incorrect and I present numbers that are more accurate which included contingent liabilities, government guarantees and Derivative obligations and then addressed the leverage issues as some of the European Banks particularly Deutsche Bank at 62 times and Credit Agricole at 66 times and the danger that this represented for the financial world. I was markedly the most pessimistic of the speakers but then nobody was very happy with my predictions for Greece, Portugal and Ireland in 2010. After dinner I was accosted by some woman from Europe who claimed that the debt of the ECB and the European Union had nothing to do with sovereign debt and I could not decide if she had a few too many glasses of wine or if she had an unfortunate family background where a proper presentation of manners had been left out of her schooling. All in all; an interesting event full of quite bright people and a vast array of viewpoints and a forum that is worth attending.
 
As our day gets underway we find the credit-default swaps for Spain hitting another new record at 521, out 19 bps, as their 10 year yielded 6.15% in London while the CDS for Italy also gapped out to 443. Everyone will be watching the Spanish auctions tomorrow as the positive effects from the LTRO are wearing thin just four months after their inception. What might come to pass is anyone’s guess but it can be said with certainty that there is no Quantitative Easing or Monetary Easing now taking place at the Fed or the ECB and the largesse of the last four years has stopped. Each day then that passes, as the cash river runs dry, will change the dynamics of the investment world. Treasuries will trade in one fashion as the harbinger of safety while risk assets, credit assets, will begin a widening that will be most unpleasant for many portfolios. The equity markets, in my opinion, will deteriorate as bond yields rise and as the problems in Europe frighten people out of the lowest rung of the capital structure.
 
There are some key dates forthcoming that will shake the capital markets and you should mark them on your calendar. First are the weekly new assessments by Moodys of the world’s banks which could result in significant downgrades causing much higher borrowing rates for many financial institutions. Then there is April 22 and May 6 which are the French elections and the run-off with Francois Hollande leading Mr. Sarkozy by a wide margin so that the two largest players in the European Union, Germany and France, are likely to hold quite different views of governmental spending, the ECB and the strategy for the European Union. Then there is May 6 which is the date for the Greek elections as polls now indicate a preference for parties that are opposed to the EU/IMF austerity measures and so we may find some sort of coalition that refuses to take part, any longer, with what is demanded by the Masters in Brussels and Berlin. Finally there is May 31 which is the Irish referendum which while now looking somewhat positive for the EU could change in a heartbeat if the EU continues to refuse debt relief or if Spain or Italy show up asking for help. In short, a quite difficult time to invest in any market as political events could overshadow economic announcements by a wide margin. I continue to suggest that profits be taken, that bullets are exchanged for step-ups, fixed-to-float bonds and for bonds tied to inflation. The drop in yields and the compression against Treasuries has taken place largely because of the easing of the central banks and now that it has come to a halt; a major reversal is in progress in my opinion which is only beginning.
 
The biggest change that I see forthcoming on the landscape, beyond those which I have noted, I believe will take place in Germany. China is heading towards some sort of landing and most of Europe is now officially in a recession. The bite of the austerity measures will deepen the process and between the two I think we will begin to see a decline in the finances of Germany which will bring all manner of howls and screams. Germany cannot keep heading in one direction while the rest of its partners founder all around them. The demands of Berlin are self-defeating eventually as demand falls off and I think we are just at the cusp of deterioration in Germany. The problem, all along, has been that Eurobonds or other measures representing a transfer union will cause the averaging of all of the economies in Europe so that the periphery countries benefit with a higher standard of living while the wealthier nations have standards of living that decline as the result of accumulated debts for the troubled nations. This will bring out nationalism again in force as the grand dream succumbs to the grim reality of the costs for nations that have lived beyond their means. The Pied Piper always gets paid and Hamelin still rests upon German soil.
 
The current situation is amusing in some respects. The IMF is rushing about like a street urchin begging for more money as they turn to China, the G-20, the BRIC nations and anyone else that they can think of to bolster their finances. I think this is provoked by Germany and France who do not wish to contribute more to the various war chests because it will cause ratings downgrades and a serious questioning of the financial positions of these two countries. “Caught between a rock and a hard place” would be my assessment of Germany and France now as the possibility of a quite hard landing looms larger and larger for the European Union. I think there is a dawning realization that Europe cannot support what they have undertaken without more pain than several nations are willing to bear. Pain at the periphery, pain at the core and now Spain heading past a recession and into a real Depression which is marked by their financials, property values and unemployment numbers matching America’s during the Great Depression. I honestly believe that the fort will not hold and that serious preparation now will save you from calamity in the upcoming quarters.
 
“All treaties between great states cease to be binding when they come in conflict with the struggle for existence.”
 
                                          -Otto von Bismarck

 

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Mon, 04/16/2012 - 09:00 | 2348203 I think I need ...
I think I need to buy a gun's picture

bernanke is a very smart man he's pounding zero hedgers and gold bugs with a strong dollar

Mon, 04/16/2012 - 09:08 | 2348213 GOSPLAN HERO
GOSPLAN HERO's picture

Bernanke is pounding sand.

Mon, 04/16/2012 - 09:22 | 2348247 machineh
machineh's picture

... up his own arse.

Mon, 04/16/2012 - 09:24 | 2348250 Oh regional Indian
Oh regional Indian's picture

The IMF is hardly begging. It's power is not that of an Urchin. Hardly. It has choked more nations to death and dependence than many armies.

And it seems, industrially, Germany ALONE vs. the rest of the world. China is just a factory. 

Instructive to know that German Pharma/chemical complex controls the world (Bayer, Hoechst, Agfa, BASF etc.)/

ori

/stream-of-consciousnesstwo/

Mon, 04/16/2012 - 09:48 | 2348302 LFMayor
LFMayor's picture

Germany vs. the World?   I've seen these films, they don't end nicely.

Mon, 04/16/2012 - 09:50 | 2348305 Oh regional Indian
Oh regional Indian's picture

Precisely LF, precisely. But it's hard to recognize it as such. Germany Vs. Ze Vorld. 

ori

Mon, 04/16/2012 - 11:55 | 2348744 Canucklehead
Canucklehead's picture

You need to read the tea leaves, or vapor trails, or animal spirits.

As long as France and Britain are beating on Germany, things are going in Germany's favor.  Once those opponents submit to common sense, they will adopt the German position.  What we are seeing here is the remnants of old European empires giving ground to the new power in Europe.

All Germany needs to do is buy for time.  Time is the friend of Germany.  Time is the enemy of the Rest of Europe.  If the rest of europe adopts austerity, they become Germans.

Mon, 04/16/2012 - 15:29 | 2349414 Greyhat
Greyhat's picture

"If the rest of europe adopts austerity, they become Germans."

They are just stopping to suck our tit then. It takes some more to become german... :)

To be German means to fight even harder if you stick in some mud, even if you had to reinvent yourself.

Mon, 04/16/2012 - 09:17 | 2348232 SheepDog-One
SheepDog-One's picture

Bernank is just living a lie, getting by on fake data and strategically placed rumors of QE now and then. In reality, he's got nothin.

And this article has nothing to do with Bernank anyway, FED troll.

Mon, 04/16/2012 - 09:21 | 2348237 Everybodys All ...
Everybodys All American's picture

Bernanke is smart? What has been solved? A reminder ... this brilliant man you speak of created this mess.

Mon, 04/16/2012 - 09:22 | 2348248 PaperBear
PaperBear's picture
New Jose Escamilla Film… “UFO: The Greatest Story Ever Denied”… A Next Step in Disclosure?

So far watched 1h20m of this 1h43m video.

“ “The US Airforce assures me that UFO’s pose no threat to National Security.” – President John F. Kennedy. -- They NEVER said they don’t exist.”

6m25s “The Disclosure Project: Astronaut Edgar Mitchell, Apollo 14 – sixth man on the moon, Colonel Philip J. Corso, Head of Foreign Technology - The Pentagon, Astronaut Gordon Cooper.”

7m32s “Houston, this is Discovery – we still have the alien spacecraft under observance.”

8m00s “The nations of the world will unite, for the next war will be an interplanetary war. The nations of the earth must someday make a common front against attack by people from other planets.” General Douglas MacArthur – October 8, 1955.

24m “Scott Carpenter – Mercury 7 Astronaut.”

37m20s “And these are folks who have been involved in so called ‘black’ budget or covert unacknowledged projects … and they are sitting on technologies that can change the world forever.”

38m20s “They have been first hand witnesses to some of the most important events in history of the human race.”

39m10s “I have personally briefed a sitting director of Central Intelligence, James Woolsey, President Clinton’s first CIA director. I have personally briefed the head of the Defense Intelligence Agency, the head of Intelligence Joint Staff.”

41m25s “Governments must never lie to the people.” – Absolutely agree.

49m05s Is that video of an actual crash ? We hear the sound of final impact with the ground but how far away from the location is the filming position because there was hardly any delay between sight and sound ? Unless the sound was

55m45s “We are not in Kansas any longer.” – He’s got that right.

59m Mars: “Rectangular and other patterns.” - Uniform enough to be artificial ?

1h2m5s “By the way, we’ve discovered a base on the back side of the moon.”

1h5m “The Horizon Lunar Outpost Project 1959.”

1h7m30s “I wouldn’t believe this even if it were real.”

1h7m55s “38 levels above TOP SECRET, the highest is COSMIC, President of the USA #17 level. Only 25 people have been cleared to the #38 level. No president has been cleared for COSMIC level.”

1h9m5s “President Eisenhower … realised he was losing control.”

1h10m30s “National Reconnaissance Office” – combining the CIA and Department of Defense.

1h11m05s “Alien Contact Intelligence Organisation.”

1h13m “if people find out what we’ve done, they’ll chase us down the street and lynch us.” George Herbert Walker Bush.

1h15m55s “Gordon Creighton, Military Intelligence – Ministry of Defense: Measures have been taken by agencies to terminate people who appear to be inconvenient or troublesome through knowing too much.”

1h17m “Secretary of Defense James Forrestal commits suicide… leaped from the 16th floor of the naval hospital in Bethesda.”

1h19m “National Security Council, National Security Planning Group – no Congressional oversight.”

 

It is time for the human race to wake up and take down the enemy within.

Mon, 04/16/2012 - 09:35 | 2348266 Manthong
Manthong's picture

I trust them.

I think they are well intended socialists because they all seem to be reading the same book:

                      "How To Serve Man"

Mon, 04/16/2012 - 09:35 | 2348268 Non Passaran
Non Passaran's picture

Piss off

Mon, 04/16/2012 - 09:23 | 2348251 Benedict Farse
Benedict Farse's picture

Ironically the EU was Otto Von Bismark's idea. 

Mon, 04/16/2012 - 09:40 | 2348279 Oh regional Indian
Oh regional Indian's picture

BF, hardly ironic when you consider the fact that the plan is still unfoldiing....perfectly...ne?

4th Reich, 1,000 year Reich. They have NOT given up yet. Follow the money...

ori

Mon, 04/16/2012 - 09:51 | 2348311 LFMayor
LFMayor's picture

Oh come on man.  They're like Japan, all the piss and vinegar got whipped out of them 60 years ago.  They were "Brave New Worlded" when their cities got turned into ashtrays.

Besides, given the PC climate, they'd be fools to stick their heads up now.  They're WHITE, which means it would BE OKAY to hate and persecute them all over again.  Oh Salisbury steak, we hardly knew ye.

Mon, 04/16/2012 - 09:54 | 2348327 OttoMBMP
OttoMBMP's picture

 "The problem, all along, has been that Eurobonds or other measures representing a transfer union will cause the averaging of all of the economies in Europe so that the periphery countries benefit with a higher standard of living while the wealthier nations have standards of living that decline as the result of accumulated debts for the troubled nations."

Well, this averaging is not a thing of the future, but has started decades ago and has massively accelerated with the Euro introduction.

That Germany is exporting doesn't mean that Germany is getting richer. Germany has moved down the scale. Who in the end has financed the empty cities in Spain?

Mon, 04/16/2012 - 10:02 | 2348354 Ben Burnyankme
Ben Burnyankme's picture

I found this story linked from another site.  The Titanic is sinking and we are all talking about new bottom paint and whether we are going to pay cash or finance the work.  The bankers won, the PIIGS are on the spit and the aroma isn't very appealing.  The populace can't return to work until they have exited the Euro and replace it with a cheaper version of toilet paper.

http://theeconomiccollapseblog.com/archives/27-statistics-about-the-european-economic-crisis-that-are-almost-too-crazy-to-believe

The following are 27 statistics about the European economic crisis that are almost too crazy to believe....

Greece

#1 The Greek economy shrank by 6 percent during 2011, and it has been shrinking for five years in a row.

#2 The average unemployment rate in Greece in 2010 was 12.5 percent.  During 2011, the average unemployment rate was 17.3 percent, and now the unemployment rate in Greece is up to 21.8 percent.

#3 The youth unemployment rate in Greece is now over 50 percent.

#4 The unemployment rate in the port town is Perama is about 60 percent.

#5 In Greece, 20 percent of all retail stores have closed down during the economic crisis.

#6 Greece now has a debt to GDP ratio of approximately 160 percent.

#7 Some of the austerity measures that have been implemented in Greece have been absolutely brutal.  For example, Greek civil servants have had their incomes slashed by about 40 percent since 2010.

#8 Despite all of the austerity measures, it is being projected that Greece will still have a budget deficit equivalent to 7 percent of GDP in 2012.

#9 Greece is still facing unfunded liabilities in future years that are equivalent to approximately 800 percent of GDP.

#10 In the midst of all the poverty in Greece, several serious diseases are making a major comeback.  The following comes from a recent article in the Guardian....

The incidence of HIV/Aids among intravenous drug users in central Athens soared by 1,250% in the first 10 months of 2011 compared with the same period the previous year, according to the head of Médecins sans Frontières Greece, while malaria is becoming endemic in the south for the first time since the rule of the colonels, which ended in the 1970s.

Spain

#11 The unemployment rate in Spain is now up to 23.6 percent.

#12 The youth unemployment rate in Spain is now over 50 percent.

#13 The total value of all toxic loans in Spain is equivalent to approximately 13 percent of Spanish GDP.

#14 The GDP of Spain is about 1.4 trillion dollars.  The three largest Spanish banks have approximately 2.7 trillion dollars in assets and they are all on the verge of failing.

#15 Home prices in Spain fell by 11.2 percent during 2011.

#16 The number of property repossessions in Spain rose by 32 percent during 2011.

#17 The ratio of government debt to GDP in Spain will rise by more than 11 percent during 2012.

#18 On top of everything else, Spain is dealing with the worst drought it has seen in 70 years.

Portugal

#19 The unemployment rate in Portugal is up to 15 percent.

#20 The youth unemployment rate in Portugal is now over 35 percent.

#21 Banks in Portugal borrowed a record 56.3 billion euros from the European Central Bank in March.

#22 It is being projected that the Portuguese economy will shrink by 5.7 percent during 2012.

#23 When you add up all forms of debt in Portugal (government, business and consumer) the total is equivalent to approximately 360 percent of GDP.

Italy

#24 Youth unemployment in Italy is up to 31.9 percent - the highest level ever.

#25 Italy's national debt is approximately 2.7 times larger than the national debts of Greece, Ireland and Portugal put together.

#26 If you add the maturing debt that the Italian government must roll over in 2012 to the projected budget deficit, it comes to approximately 23.1 percent of Italy's GDP.

#27 Italy now has a debt to GDP ratio of approximately 120 percent.

Mon, 04/16/2012 - 10:59 | 2348533 Peter K
Peter K's picture

Ntionalism will come back, but the thing that will keep it from becoming a militaristic version is the socialist welfare death state. Or to put it another way, who can afford to keep a standing army if you can't pay your soldiers. :0

Mon, 04/16/2012 - 11:19 | 2348601 LFMayor
LFMayor's picture

Will fight for Food

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