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Ponzi Comes Full Circle: ECB Will Rate Sovereign Bonds It Accepts As Collateral
Two days ago we noted with muted disgust that Europe has legislated to scrap the use of rating agencies, who were everyone's best friend during the up-phase in the global ponzi, but now that deleveraging is accelerating and ratings downgrades are coming, are like the drunk guest who refuses to leave the insolvent party at 4 am. Sure enough, the time has come to enact rules to kick them out. But wait, there is much more. Moments ago Reuters reported that the European Central Bank is discussing a medium-term plan (as in indefinite) to scrap rating rules on euro zone sovereign bonds and instead set their value when used as collateral in lending operations on its own internal assessment, central bank sources said. You read that right: the ECB itself will decide what the collateral value is of pieces of paper it accepts, in exchange for other pieces of paper with the faces of famous dead people on one side (even if technically the whole operation takes place electronically). And to think that for some odd reason allowing drug addicts to write their own prescriptions is illegal. Apparently all is fair in love and breaking all rules of sinking monetary systems.
More from Reuters:
With the ECB not yet ready to take over the technical but highly political responsibility for rating sovereigns, the bank's policymakers will also discuss more immediate ways to help Spain and its banks at their meeting on Thursday, such as further widening the types of collateral Spanish banks can use.
The discussion come as Spain braces for a downgrade from small rating firm DBRS, which without a change in ECB rules will trigger an extra 5 percent penalty on Spanish bonds when used to get ultra-cheap ECB funding.
ECB members have heavily criticised the actions of rating agencies during the euro zone crisis and have vowed to reduce reliance on their assessments.
"In the case that the ECB Governing Council decides this, it would reduce the widely criticised influence of Standard & Poor's, Moody's and Fitch," one euro zone central bank source who spoke on the condition of anonymity said.
And the punchline:
"On the other hand, this could also expand the shrinking pool of collateral which banks in troubled countries have available."
Bingo. Only not "expand" it, but make it worth whatever Goldman ex-banker Mario Draghi decides it is worth. In other words, the last remaining market test of even the faintest credibility, the one backstopping roughly ten trillion in deposits, has just become worthless.
There is still some hope:
Opposition, in particular from the Bundesbank, has been strong, however. The German central bank has argued that the dramatic loosening of the rules has increased the risk of lending to banks for the ECB and the national central banks.
It is still unclear what criteria the ECB would apply in the future if it ditches the use of rating agencies in the area of sovereign bonds.
One central bank source said there would continue to be a sliding scale of haircuts (charges) that would be applied to the different countries' bonds.
"It is clear that the ECB will continue to make reductions depending on the creditworthiness of the country whose bonds are submitted to it as security," said the insider.
Sadly, at his point not even Germany can turn the ponzi choomwagon around.
It will make for some great comedy though, when in retaliation for continuing German obstinacy to hike German retirement age to 100 so that the French can retire at 60, the ECB itself will downgrade Germany's credit rating.
You laugh, but it's coming.
Obviously, once the general public comprehends that the ECB has now gone full tilt with its entire deposit base, backstopping it by now officially worthless paper in the biggest and most corrupt failure of circular valuations ever, and everyone decides to invest in the First and Only Mattress Bank, it will be too late. And the ECB will be saying how nobody, nobody, could have possibly predicted that it itself is the precipitating factor for the terminal bank run.
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Any gaming lawyers here?
Is it possible to create a "real ponzi" game? Like that Russian guy I read about here?
I think it would make for some fun and profitable social apps, phone apps, etc.
We would do full disclosure, etc.
I can program it if it would be legal.
If we could just get Obama to pardon Madoff....we could fix this crap.
Ministry of Truth Rating Agency
Just now from that so called news channel bbc
NatWest and RBS customers hit by technical problems
Barclays has the same issues nearly every month just before pay day!
http://www.bbc.co.uk/news/business-18535060
I'm again left agast at the ability of these agencies to wreck havoc in world markets. Its no different to a naughty boy in school saying calling the school beauty a slut and spreading nasty rumors around - ultimately leading to her suicide. Thats exactly what the rating agencies are doing with some of our best institutions - and the best of the best, sovereign governments. They are literally playing around with poeoples livelihoods. and even if some of the rumors were true, what good does it to bring it to light. Everyone knows the world economy thrives on confidence; we either thrive together, or we go down together, it really is that simple. Thats why I'm calling for the nationalization of all rating agencies - we can get the best minds from our universities to do the job, selected by the best minds from the government. We'll get the right people that way. The way these cowboys are carrying on at the moment you'd say they let just any unqualified simpleton decide the fate of an entire nation. Imagine how much better the poor old greeks would be today if it wasn't for the rating agencies.
The fightback starts here...
This is a very proud moment for Sir Charles Ponzi ... as it is now beyond question that his thesis has become the ultimate guiding principle for all Eurocrats and Central Bankers.
And the funny thing is when the SHTF all CNBC/CNN/FOX/MSNBC talking heads will say NO ONE SAW THIS COMING
Time to call Bagdad Bob.
http://www.youtube.com/watch?v=CXl1GkWWGmA
Ratings ? We dont need no stink'n ratings ?
We also dont need no Basel III requirements either.
Excellent troll. I thoroughly enjoyed that, thank you.
The ultimate circle jerk.
Better yet, make him Secretary of the Treasury - who is better qualified, really?
i'm first in (bottom of pyramid gets money back!).
Just more rearraging deck chairs on the Titanic.
The list of the deck is getting a mite steep now so it's hard to keep things looking tidy. These measures are unreal. We heard it was coming, we believed it and now we're seeing it and I still am amazed at what I'm watching. How do people with half a brain not see this for what it is? I use Phil Davis for my (somewhat) bullish counterpoint to ZH and this morning he said "GET OUT NOW!" (His caps)
whats next? Obama will executive privilege 10 trillion in debt down to 6 trillion?
Declare it so...and why stop there? Just wipe out all corporate/govt debt and transfer it to the peasant taxpayer.
Monetize everything.
I'm sure those assets will be marked to par and not market, as is traditional for central banks.
Fucking Joke. Rate themselves, that always works well, will give a lot of confidence to the market...
What? self-rating doesn't work?
You mean the 10 one see's on their local "please date/shtup me" website is photoshopped. That one needs to read in an extra 50 lbs, 10 years, and perhaps a sex change....unpossible.
And yet another reason why staying married is a happy thing. Thanks
Why do I see the collateral as being the same suitcase used in Dumb and Dumber?
pods
What was her name, swisson, swanson?
Look Lloyd it's written on the suitcase.
Bernankonite, man I was way off.
--------
What is that?
Those sir are BOU's, just as good as cash. Everything is accounted for.
What's this thing a "deposit" you speak of?
EU Collateral and Sperm Bank Deposit Authority
Henhouse, meet Fox. Of course, this could NEVER happen in America with all of our governmental checks and balances among the 3 branches of government. Oh, and as for that 4th branch that is not mentioned in the sacrosanct "Constitution", I am told by the Fed that it is completely independent of the political process. So, no, no way this is gonna happen in Amerika.
By fourth estate, you do mean of course your right and privilege to write and post your opinion, right?
The federal reserve is nowhere mentioned as an estate in the original writings. Coining of money was however, and it took nearly 150 years before the insidious private sector script was surreptitiously adopted by the sovereign government of the US as "legal tender". The 100 year old federal reserve has proven itself a most cruel slave-owner and has "legal" claim to US government issued promissory notes whose compound interest bearing accumulations are such that our grandchildren will be unable to pay off, yet alone touch the underlying "principle". Isn't 100 years old the "legal" definition of a life span? I say it's time for its burial.
"Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days." Last days indeed. Time for a new beginning. One with sovereign issued non-interest bearing script redeemable in lawful money coined in legally specified weights and measures as prescribed by law. imo.
subprime central banking.
Truly the Zimbabweization of a Central Bank Balance Sheet
Knukles Insight of the Day
The Fed's taken in all sorts of MBS and has an UBSO (Unidentified Balance Sheet Object) called Other Assets... which we know of naught... probably funky shit as well, the ECB's now gonna take in everything and anything that walks upright....
How do you say Currency Debasement?
With what do you protect yourself?
I knew you knew the answers.
This is a formal confirmation that fiat is worthless.
The Credibility Trap.
This will, mark my words, come back, standing out as a seminal moment. Defining the formal destruction of the Euro... of the Current Fiat Regimes.
Gold will be under CB selling pressure in this light.
Cannot let the market confirm the inanity of this decision.
It means Draghi can now launch LTRO-3 with these toilet papers as collateral?
I thought LTRO 1 & 2 already accepted T.P. So I guess for LTRO#3 they'll have to resort to accepting used T.P.
That'll never work.
The Crouts will screw the whole thing. They still consider themselves superior to the rest of Europe. They hate America too for annihalting them in WWII. The EU is doomed.
And, most signficantly, most people are starting to undertstand that.......the black swan this time is truth.
We are raising your chocolate ration from 30 grams to 20 grams!! You have earned it!!!
Whatever rating they choose to give those bonds , it does NOT change the fact they will be acquiring garbage, perhaps at a faster rate which will speed up this slow motion movie!!!!
More popcorn please...
WHAT....they klepotocrats are changing the rules mid game to benefit themselves again.....color me NOT shocked.
So far EZ is doing a great job at breaking that whole bank/sovereign, incestuous realtionship thingy.
Why not ? Thats how banks do it and we know how well it worked for them.
It seems we can't get enough morphine anymore so we're going to supplement our diet with LSD.
Someone sounds butthurt that their corrupt rating agencies are finally getting kicked to the curb.
When all they had to do was get rated by the agencies more often so as to pay more fees to the ratings agencies....
Sorta in the same vein as heroin, campaign contributions, hearings, etc.
What a clusterfuck.
LTRO3 coming now that Fed has basically said no QE until 2013?
Just one question:
How do I open an account at this ECB? You see, I am an Nigerian prince ...
Wait, they'll send you an email.
"Ratings? We aint got no ratings....we dont need no ratings....we dont have to show you no stinking ratings!
http://www.youtube.com/watch?v=VqomZQMZQCQ
ECB is zombie bank
The check is in the mail?
Yes. We sent a blank one......fill it out for whatecer you need.
Pay to the Order of: Fuu
Amount: Eleventy Brazillion Dollars and xx/100
Hopefully the models they use aren't produced by Jamie and his crew.
Well, at least now we know the mechanism they will use to justify printing the shit out of the Euro.
Finally, the ECB is catching up to the Federal Reserve! Think how much excess cash the TBTF got by not marking to market and dumping collateral for cash onto the Fed in 2008 and 2009. Money does not grow on trees but it does appear in cyberspace.
Finally, the ECB is catching up to the Federal Reserve!...
The ultimate irony is this is the main accusation the west has had on China's currency. These currencies will now be meeting each other on the same road. The difference being they're headed in opposite directions.
The lessons learned from the Tim Geithner Lecture Series have finally sunk in. Europeans, you are a little slow getting on board, but welcome aboard!! Next stop, over-the-cliff.
That being said, I would like to inform all of you that I am the best contributing member to Zerohedge, as rated by me. I will, in the near future, be authoring several accredidations and references in this regard, and anything anyone comments about in regards to my most execellent rating will be ignored.
All your comments about me are belong to me.
Thank you and have a great day!
I traded you that priveledge and now your first payment is due. Would you like to make your payment today or would you prefer creating a new line of credit to help you with your financing? Any collateral?
I wonder if the bank will accept my appraisal to the value of all of my crap when I apply for that one big loan that will save my ass? See, it really is all about how we feel about ourselves, our self image! Why i'm feeling right good about myself today. As a matter of fact i feel like a BILLION dollars! A conservative bank should be willing to loan me at least $800,000,000. on that, right? Just call me collateral...damage!
“Men shall speak with men who hear not; their eyes shall be open and they shall not see; they will speak to them and there shall be no reply; they will ask pardon from one who has ears and does not hear, they will offer light to one who is blind, and to the deaf they will appeal with loud clamour”
LDV
pick a number! any number!
I agree the rating agencies are FUBAR and worthless as teets on a boar.....BUT didnt we know this on the way up?
Now that it's not fair we chuck em?
Should have chucked them long, long ago!
This nothing but fancy shmancy check kiting.
Doin' a heckuva job!
I do not know what is studied in faculties of economics, if the only thing they do over and over again is to launch the creation of Carlo Ponzi
Ponzi didn't have the central banks watching his back or he would still be in business.
Maybe then Ponzi coulda Madoff with the money
"Obviously, once the general public comprehends ..."
Oh come on. No chance. Surely by now it is obvious that they don't comprehend anything that requires any sort of mathematical understanding and an attention span of more than ten seconds.
The only things in this mess that will get the attention of the general public are (1) switching off the ATMs, or (2) a litre of petrol (gasolene) costs 100 euros. Guess which one is most likely to happen.
Thanks god... they can make it AAA+ again.
....Bad news for gold apparently, "the Market is talking". Another bullish development accross the pond, sell gold, buy the Ponzi.
.... Not so good for BBBY, Broadening Island of distribution fully engulfed in one red swoosh.
their madness is showing now,
What , I have a 620 FICO score, no I don't use that, I have an 820, rating by Me , myself , and I.
Farcism.
@Tyler(s) .. any chance of getting this report onto the German MSM TV News tonight ?
;-)
Bwahahahahahahaha.
Pardon my ignorance, but isn't this what got us into trouble in the first place. AAA rated junk being leveraged up? Either they are complete idiots or their plan is coming together perfectly. There are no accidents in politics.
The rating agencies should not be trusted for this very same reason. That is why the ECB should take over rating it's own debt.
Wait, how fucking convoluted is that? The irony is the rating agencies started doing the RIGHT thing, and subsequently got the boot.
This is AWESOME!! The bank tells the appraiser what to value the home at, and then the borrower is loaned money to buy the home at 97.5% LTV that he doesn't qualify for under any objective criteria, as dictated by the whims and wishes of ignorant politicans. What the fuck could go wrong with this plan? It's fucking genius, and you H8Rs need to leave Mario alone - this will end the cycle of boom and bust!! Hooray, martinis and bonuses all round!!!!
No shit.
"I'm OK, you're OK" OK?
In similar news - LOL @ Tyler on Twitter: "The Fed downgrades gold to CCC"
Must be coz it aint backed by anything.
Cue the bimbos......if you can't find one just call Liesman.
The only financial fascination left is watching how far this ponzi can be pushed without being called on it. Whatever is left of the market, MSM on both sides of the Atlantic, the Accounting Profession, European Sovereigns and US Congress will either intervene or forever stay silent.
Watching human nature at work is very entertaining. Mass denial is a powerfull tool indeed.
The ECB just gave andrex a triple A rating. Europe is fixed!
They should do it for Greek, Spanish, Portugese, Irish, Italian bonds too. The pen is mightier than the sword.
The ratings version of mark to model. Awesome.
Each sticky candy bar wrapper 'collateral' is worth 1 BILLION doellars!
So since the FED is going to start buying individual stocks, REIT's and who knows what else........does the mean that they will own absolutely everything that they purchased with money created out of thin air?
Yes
You know this may work - knukles;
Since the FED and other Large Central banks are now the market - we no longer need the "actual market." Marry this with HFT and you have the perfect closed loop for bonds, equities and precious metals. The FED will now determine asset prices and as long as the vig gets funded, everyone is happy.
The only fly in the ointment is the price of consumable natural resources as well as productive commodities necessary for life itself.
Who needs pesky markets? One less thing to worry about - right? Whatever will our learned ecomomists do for a living? Their horror will be endless.
Well yes this is called 'monetizing the debt'.
better known as 'back-door imposed state-owned everything' (aka, communism), willfully and voluntarily handed to them by the American sheeple - brilliant plan - brilliant!!! - those dum old Soviet communists got nothin on our Amerikan communists
Hard to say which is sinking faster:
Gold, oil, or sovereign bond prices?
Tough call.
Robo! You're back? What the hell happened? I thought you died or something; you just disappeared all of the sudden. What's that? Momo summer camp? Never heard of it.
Be gentle.....or the rehab could backfire.
Easy, fiat. Just checked on the diesel and PM storage. Both are fine.
It is really pathetic to watch isn't it. All these individuals who all read the same leadership manuals can't think for themselves on what the best approach is to fix the problems.
Its every continent for itself as a transparent and efficient market does not exist in this crazy race to foggy bottom. And those three rating agencies are as much an expression of market corruption as are the PDs who control the even more dubious FED and benefit from ZIRP for all their shady ongoing deals!
Let this financial war play itself out, as it bleeds the people dry on both sides of the pond to save the Oligarchs who got us in this mess in the first place.
I find particularly befuddling to read seemingly partisan statements, in the context of this totally evident and insincerely manipulated financial monopoly game, of the nature printed hereafter : Two days ago we noted with muted disgust that Europe has legislated to scrap the use of rating agencies, who were everyone's best friend during the up-phase in the global ponzi, but now that deleveraging is accelerating and ratings downgrades are coming, are like the drunk guest who refuses to leave the insolvent party at 4 am....
I don't condone the opaqueness of markets and the ECB mantra if they apply it, no way, but I do condone that these PROVEN shills, who never saw ANYTHING coming in 2008 and who blow their subservient horn subsequently in this currency and financial war when asked to by the Banksta cabal who pay their bills, be thrown out by their necks. Good riddence of these rats who spread the global plague; by their past sins of subservient omission if not of commission. But a new type of independent rating agency is obviously required, one that is nOT at the beck and call of either the PD Oligarchs OR the central banks!
Time travel is possible. Approaching 1984 rapidly.
Excellent. I have also decided to rate my own assets as well and have concluded that I can extend myself some credit.
I might fight for Germany in the coming WW. And I'm a jew!
Boy.....that would be ironic.
ECB Ratings with same prefix as films
G - General, any muppet whatever age
PG- Provisionary General, young muppetes need parental muppet guidance
A- over 18, for a fictional pension requirement
AA- EXTREME Caution, psycopaths and rioters only
Nationalization of the ratings agencies is a logical step. Kind of a reverse deep capture!
This is becoming surreal. I cannot believe this. On second thought, why am I surprised.
Every morning we wake up to this interminable dross. This will actually be bullish for equity markets short term as the officials continue to show their aptitude for kicking the can "by any means necessary".
This is not a bad thing. Why should Europe rely on US "Banksters" that are setting the ratings? ECB are lending the money so they decide what they think is sufficient rating. The Ratings Institutes should get the F... out of here
yeah, but that slope is 890 and covered in olive oil
People will still buy that shit cuz 'there's a sucker born everyday'. The real idiots are the dummm-azzz morons who buy it - hahahahaha!!!
So...<inseret your favorite ratings agency here> downgrades banks, bonds, you name it in the EU.
The EU responds: http://www.youtube.com/watch?v=NJ_1P1Lb20o
I like how Tyler's mind is always thinking 2 or 3 steps ahead and can't wait for the ECB to threaten a German downgrade if they don't pony up their citizens money. If there was ever a reason for Germany to just walk away from the ponzi this I think would be it no ?
This whole financial PONZI makes me puke......
Ps ...Fuck you Ben B....you lying sack of shit.
Ghehe.
Hey ECB...how did those stress tests work out for you? And you think we're going to believe your debt ratings after that?
And Houdini thought he knew magic.
You ain't seen nothing yet....
Although the ECB and Europe will rate themselves now, that does not mean they will not get ratings from these firms. this is getting pathetic. The ECB can rate all they like inthe end the markets will decide. Of course the ECB will be buying all the bonds like the Fed does.
Easiest way out of this mess is for the ECB to pump the banks balance sheets back up.
"the ECB itself will decide what the collateral value is of pieces of paper it accepts"
This approach the ECB learned from the Greeks, who demand they themselves set the interest rates, terms and conditions under which they want generously accept further loans (which will never be paid back anyway).
There's greater transparency now in the sense we are now 100% sure the collateral is junk. Clears up any previous confusion.
Whoa. Déjà vu.
What did you just say?
Nothing. Just had a little déjà vu.
What did you see?
What happened?
A black cat went past us, and then another that looked just like it.
How much like it? Was it the same cat?
It might have been. I'm not sure.
In soviet Russia the goverment rates YOU!
Wow, what a joke. How can ANYONE trust the EURO now. It's a 100% lie and worthless.
If you don't want Euro don't buy our stuff, but I tell you we want buy your stuff either
why not short the euro?
http://covert.ias3.com/expose/