Repost: Why A €1 Trillion EFSF Is Not A "Bazooka" But A "Peashooter", And Is Woefully Inadequate

Tyler Durden's picture

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Newsboy's picture

It's hopeless. How much time will this buy? Swaps will be triggered, this won't save the banks or the sovereigns, and Greece needs 100% default.

Manthong's picture

ES still at 1250.

I wonder how long it will take for them all to figure out that this is the haircut process:

kengland's picture

CNBCW reporting that the efsf will be levered up 3 to 4 times. No explanation for how this will be done

strannick's picture

Bloomberg baiting. A response to the reguritation of press releases passing for news from Bloomberg, to its writers and editor...

Now here's reporting...Whaddya think? Impressive, eh? Kinda makes everything else seem like Time Magazine
1. Here Is How The 50% Greek Haircut Is Actually Just 28%

2. Barclays Explains Why A 50% Greek Haircut "Would Be Considered A Credit Event, Consequently Triggering CDS Contracts"

3. Repost: Why A €1 Trillion EFSF Is Not A "Bazooka" But A "Peashooter", And Is Woefully Inadequate

markmotive's picture

Anyone buy gold on the dip? In my opinion, the EFSF is ultimately going to get monetized when the world discovers it borrowed money to guarantee it's debt.


Isn't that called a ponzi scheme?

dark pools of soros's picture

there are no rules.. just favors

lunaticfringe's picture

two measley ounces. i am out of powder

Johnny Utah's picture

Johnny Utah bought the F'ing dip...Olivia Newton John Baby...Plus you got to have some Sprott PSLV/PHYS for the best case scenario.

Disclosure: Special Agent Utah is long PSLV, PHYS and SLW...I don't have any physical metals as they were lost in a boating accident :)

Rakshas's picture

The "boating accident", nice,  I've decided on a more or less hide in plain site approach and converted a bunch of my oz's into average looking household items so as -hopefully - to fool the confiscation type entities (cops/robbers); but, if they insist I guess I'll have to turn my Ag over 180grains at a time...... smile, look here and wait for the flash...

Sequitur's picture

Yes have been buying gold. For a while I was thinking strongly about deflation. But looking at this Euro episode, and the disgusting self-interest of central banks and bankers, it's once again shaken my faith in paper. Will continue to accumulate gold.

bullonparade's picture

Why do people think gold cant inflate? though i must agree it is better than owning any kind of paper apart from perhaps dollar long 2 months ago.

Gief Gold Plox's picture

I've been saving up on cash for just such a dip, but have decided, in order to spread my risk, purchase half of the intended quantity before and the remainder after the Eurocrats did their pointless crap or self-centred posturing. As luck would have it I've pretty much hit the lowest price I could during my dealers working hours. Now I'm just waiting for the news to settle in before I decide how to proceed. I wouldn't worry too mush if you missed this dip, another one is sure to come.

i root for that fat jersey governor's picture

no matter how stupid these acts are, the market will jump on the news. well, i pay my due - first day on my short position (after over a week long), it looks like I will be stopped out tomorrow. damn!

WVO Biker's picture

It was bullish for Gold when they shouted so loud last weekend that they could be heard on the floor.

And the breach of law regarding the CDS is bullish for Gold.

Plain and simple fundamental analysis. KISS 

kito's picture

how can swaps be triggered if they arent "triggered" by the newly revamped isda definition of a "trigger"?? if the 50 pct cut on greece doesnt qualify as a "default", then why will anything else? 

rocker's picture

You do not know who Ben Bernanke is? Interesting. Otherwise, it would be a stupid question.

Al Gorerhythm's picture

!00% default. Go Icelandic!

jdelano's picture

Since you guys love to bash Paulson so much I should probably be the one to tell you that he recently bought a bunch of euro sovereign CDs. Man--maybe you're right, he must be in karmic debt for the Goldman CDs trades. That guy can't catch a fucking break.

bullonparade's picture

Its not a haircut, greece is getting extensions. Must say im very dissapointed by a 1 trillion EFSF, it seems everyone has forgotten 2008 and what the "marginal" support of our banks did. I wish someone in public office would read ZH, but i guess their too busy eating donuts and getting reelected. Wish we would have true republicans here in Europe, with unfouded biggotry and corporate favoratism we would have been alot farther along that these "talks".

erg's picture

Must consume mass quantities.

philipat's picture

Even if Greece takes a 100% default, it still needs to borrow money again the next day because it is still spending more than it takes in. It needs to leave the Euro and borrow one of Ben's printing presses but with the "D" for Drachma not Dollars. I'm looking forward to those cheap Greek vacations again.

Mutatto's picture

If the CDS's are worthless then the value of the debt will have to be re-priced. 

I would expect rates to jump immediately.


LawsofPhysics's picture

Yep, game over for all debtor nations, hence we will stall a bit longer, at least June.

Incubus's picture

Game's been over:  the "players" are just grabbing their pieces and're making for the exit. 

Mark123's picture

I'll believe there has been a real solution when gold rockets higher....until then I think this is mostly funny math posturing to defer the problem as long as possible.

LawsofPhysics's picture

Does this mean I can leverage $300,000 into $1,500,000? Because I will take that deal tomorrow.

Mactheknife's picture

Zero minus one trillion equals negative one trillion as any faithful ZH reader already knows unless of course you work for the EU and then you think that you're talking about real money. "Just their imagination, once again, running away with them."

eigenvalue's picture

Stock markets will soar on Thursday. Bears on Zerohedge will have to capitulate once again.

mt paul's picture

don't capituale ..

till you see

the glint

of their gold

Motley Fool's picture

Change your moniker. Since basic math( such as that in this post) is beyond you, eigenvalues definitely are.

Goldman Hufs's picture

On ZH opinions are expressed as to how things should behave in markets that are not being directly manipulated by the government to the extreme level that they are today.  If you honestly think that anyone with half a brain is applying "what should happen" or what historical charts would indicate is on the horizon with significant money in this environment then you haven't been here long.  If you're going to keep playing the "market" - that's fine.  I just wouldn't bet my life savings on a game that changes the rules in the middle of play.  The only thing you need to be thinking about is how these guys think and what they need to do to survive because nothing else matters.  They need to print because it is the only way to semi-manage our insurmountable debt. However, inflation is too high and unemployment is off the charts.  Be patient - let TPTB massage these numbers down a bit and then get short because it will be followed by a massive market selloff so that the sheeple are begging to having their purchasing power destroyed via another large scale round of QE which allows them to maintain the illusion that their 401k is still worth something.  Everything else is static.

Incubus's picture

Everything else is static.


"Nothing is static.  Even the Mona Lisa is falling apart."



melanie's picture

"Never compromise, never surrender" - Winston Churchill

Incubus's picture

"To infinity, and beyond!" - B.S. Bernanke

HD's picture

I'm just numb. No matter how bad or manipulated the reality may be - the S&P seems to float higher. I'm 40% in gold now - I may just forget the Dow go "all in" gold and be done with it. I think I'll sleep better.

Yardstick of Civilization's picture

it might not be enough to save europe but is enough to kill anyone short es overnight.

ACP's picture

Especially since everyone with half a brain will be dumping Italian, Portugese, Spanish and Irish debt.

rocker's picture

Time to become a bleacher watcher. No Shorts. No longs.
Let Goldman Sachs suck the blood from their own children.
They should have put Lloyd under arrest today. They keep getting closer but always miss.

jdelano's picture

Why on earth would I give up my shorts over this? Are you kidding me? I'm freaking creaming my pants here--sure there might be a knee-jerk reaction but do you realize how quickly Italy's yields are going to blow past 7%? it could happen fucking tomorrow! These stupid assholes just signed their death warrants---Europe spirals into depression dragging down the states and sparking a hard landing in china. It is fucKing GAME OVER for the global bull ponzi. Hahaha aha aha : )

Manthong's picture

I hope you're right, but I think I"m going to go on a bender until Monday.

When I sober up maybe the market will be doing the same.

chump666's picture

  Just saw a wire report saying how EVERYONE is watching the bund to PIIGS yields.  Sh*t won't change, it will get worst, Germany/France both could go into a recession very soon.

And Italy could exit the EU...on it's own.  That will send the whole thing into the toilet very quickly.

Italy bond aution on Friday, ECB will be sidelined.  It will flop, hopefully you'll get your trade.

Then we have the CDS zero value trade, there is 100% an event there.

Fibz's picture

Probably also going to lose a lot of tourists who are sick to death of hearing about Europe. I have traveled around Europe, but at this point if I never hear about or see Europe again it will be too soon.

HD's picture

I agree with everything you said mate...I'm just losing faith that reality will actually take hold anytime soon. The volume is so thin that the HFT bots have no problem just pushing the market where ever they want (or need) it to go...

If it does implode however - I will make out like a bandit - so here's hoping.


Mark123's picture

I thought they had already established that 50% was the absolute minimum write, how does this have any impact?  Also, what does this solve?  I think the only thing it does is to open the door to lots of unknowns.



ACP's picture

With all sovereign CDS now worthless, who in their right mind would own Italian bonds?

chump666's picture

Wow, what a post!  Very good!



Youri Carma's picture

A “Peashooter” to ralley the market for a while under the false impression of things are getting fixed while in reality they are lightyears removed from getting anything fixed at all.

On the contrary ‘bare down the hatches!‘. Or ‘run for shelter!

Manufacturers offer a bleak outlook – Cutting profit targets and running for shelter

To all the bankster and politician nincompoops out there I like to say: “Well! That’s Another Nice Mess You’ve Gotten Me Into!”