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Risk Transfer Has Begun As Germany Net Notional Overtakes Spain

Tyler Durden's picture


The last two weeks have been full of headlines regarding the volatility and decompression of sovereign spreads around the world. What has been more intriguing to us than day-after-day of discussing Greek 2Y yields or French 5Y CDS has been the relative increases in net notional credit protection outstanding on Germany. The German credit worthiness and sovereignty stands at the heart of any solution to the crises in the Euro-zone and it appears market participants are increasingly pricing in that risk transfer. This is exactly the same transmission we saw in the US when the Fed/TSY announced day-after-day of acronym-laden support mechanisms and shouldered more and more of the private balance sheet risk.

This week, both Brazil and Germany overtook Spain in terms of net notional CDS outstanding with gross notional rising around $670mm on the week for Germany. Interestingly, on the week, Italy and Brazil saw the greatest relative decompression (16% and 10% respectively), but Germany widened 5bps or 6.5% over the course of the week (as Bund yields dropped notably) taking 3rd spot among the Top 5 highest sovereign net notionals.

Data: DTCC


During 2008/9 we saw similar risk transfers in the US and Europe, as evidenced below by the drops in VIX (relative to the USA)


..and VSTOXX relative to Germany protection costs.

Chart: Bloomberg

Of course this time, we start from already elevated levels of risk with greater levels of incumbent balance sheet stress and an investing public who has seen these tricks before and is not as easily persuaded of the magical forces of a politician's or central banker's words.


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Thu, 09/15/2011 - 22:28 | 1675955 Yen Cross
Yen Cross's picture

 Tyler? Respectfully, do you sense a default over the weekend?

Thu, 09/15/2011 - 22:31 | 1675961 oobrien
oobrien's picture

How can there be a default?

They're just gonna keep printing money while hitting the folks with austerity measures.

Wash. Rinse. Repeat.

Thu, 09/15/2011 - 23:06 | 1676028 CrazyCooter
CrazyCooter's picture

Default can occur in three ways, in practical terms, which are (1) don't pay, (2) restructure, or (3) inflate. I am pretty sure inflation is on the menu. Don't expect the news bulletin proclaiming 1.

I don't think the end game is so simple, as this whole shit show is going to spin out of control for a while.

In my mind, default has already occurred and I started preparing well over a year ago. Just be safe and prepared ZHers!



Footnote: that was agreement ... came across kind of terse after it went up ... but that is sort of my nature!

Thu, 09/15/2011 - 23:37 | 1676076 CrashisOptimistic
CrashisOptimistic's picture

The subject is Europe, but very much like last month's 6% CPI print, this morning's 4.8% CPI print is being HUGELY ignored.

THAT'S FIVE FUCKING PERCENT, and sportsfans, September's number is what decides next year's Social Security raise.  Yes, that is done with one month's number.  Either today's or the September number released in October.  Given WTI's runup this week, next month's number is on track for higher.

The 10 Year Debt Ceiling Bullshit Did NOT have 5 or 6% inflation in the projections.  Every state and local pension plan in the nation is looking at a 6% jack in January, and the S&P is down for the year.

Things are going to fucking blow up and no one is noticing.

Thu, 09/15/2011 - 23:55 | 1676105 e1618978
e1618978's picture

It was 3.8%, not 4.8% - and last month was 3.6%, not 6%.

Fri, 09/16/2011 - 01:10 | 1676179 CrashisOptimistic
CrashisOptimistic's picture

From Bloomberg:

"Inflation at the consumer level remained surprisingly warm in August. The consumer price index in August barely slowed to a 0.4 percent increase, following a strong 0.5 percent jump in July. The August figure exceeded the median projection for a 0.2 percent increase. Excluding food and energy, the CPI rose 0.2 percent, matching the pace the month before."

0.4% X 12 (annualized) is 4.8%.  It's the headline number.

0.5% from last month is 6% annualized, and was the headline number last month.  

Fri, 09/16/2011 - 01:22 | 1676194 xtop23
xtop23's picture

Are those percentages being calculated the way the government / FED does it or Shadowstats ?

You actually both may be correct depending on who you're using as a benchmark.

In the end its irrelevant. This farce will play out until it doesn't and Ragnarok cometh.

( Regardless, at least the FED CPI will be re-evaluated upward anyway so those quoted numbers are fantasyland )

Fri, 09/16/2011 - 02:08 | 1676252 CrashisOptimistic
CrashisOptimistic's picture

Shadowstats doesn't matter.  It does not determine pension payment increases.

Only the official numbers do.

I'm going to correct myself.  September is the important month because it represents end of 3rd quarter.  It is the CPI-W at the end of Q3 compared to the CPI-W the last year there was a COLA (Q3 2008) that determines the amount of SS (and other pension) COLA.

The Q3 2008 CPI-W was 215.49.  The Q3 avg (lacking Sept's number) is 222.54.  No change in September would yield (222.54 - 215.49) / 215.49 =  3.3% raise.  That would be no inflation in September.  

If September has another 0.5% number like July's (that 0.5 was rounded down slightly), it would be a 4% raise.

These are numbers well beyond all projections.

Fri, 09/16/2011 - 01:07 | 1676170 Oh regional Indian
Oh regional Indian's picture

When it finally rains in spain, then the world will feel the pain.

Anyone wondering how that most defunct of PIIGS is hardly ever in the bad news section of the press lately? Hmmmm? In-debted, under-employed Spain? Housing bubble Spain and mostly......

As many centuries ago, Europes Sword into South America's side.... Banco (Not in the least Blanco) Santander......

The more thigns change, the more they remain the same same.

It's Spain.....


Axis of Evil Doing

Fri, 09/16/2011 - 02:10 | 1676255 Michael
Michael's picture

It looks like Timmy Geithner's presence in Europe this week is embarrassing the USA again just like he did in China when they laughed in his face.

Ok, they scrubbed the Youtube video of it so this will have to do, please post it if you can find it.

Tim Geithner Gets Laughed at Reassuring US Dollar and Economy



Fri, 09/16/2011 - 02:48 | 1676292 Michael
Michael's picture

When world central banksters let some of their member banks get hurt by a Greek default, and when those members get hurt, will they take revenge?

That is the question.

We're talking some aristocrat families of Europe going kaput here.

Fri, 09/16/2011 - 06:44 | 1676408 BandGap
BandGap's picture

Bingo! Santander is a beast in South America.  Or a lesion. 

There are so many webs interconnecting this shit that it's hard to follow, except when you step back. That's when you see the house of cards and something tugging on the first floor Jack of Spades.

Thu, 09/15/2011 - 22:40 | 1675981 High Plains Drifter
High Plains Drifter's picture

come on yen, little timmie is over there now handing out money. how can there be a default.........?  another words. message to the european banks. we got your back because our banks have so much of your garbage on their off balance sheet books, that they have no choice but to get involved in the bailout.  as  a gold and silver bug, i see this stuff and i yawn.  i love it (sort of) when a plan comes together.......

Thu, 09/15/2011 - 23:13 | 1676027 Yen Cross
Yen Cross's picture

The Polish Drift? Yes, you are correct.   I'm not sure???    The <> of the weekend. Thanks for your time!


   For the Forum, we are discussing the lending terms for the E/U to function... Timmah in Poland to reitterate payback!!!

Thu, 09/15/2011 - 22:41 | 1675986 wombats
wombats's picture

Bullish for Goldman?  It wouldn't decrease their bonus pool would it?

Fri, 09/16/2011 - 00:21 | 1676127 Yen Cross
Yen Cross's picture

A Fortutius thought>  Being Sovereign, Is so   "GREENSPAN"!!!!

Thu, 09/15/2011 - 22:29 | 1675957 LongSoupLine
LongSoupLine's picture

Einstein's definition of insanity is quite fitting here.

Thu, 09/15/2011 - 22:43 | 1675993 wisefool
wisefool's picture

Einstien could not even figure out his personal income tax. Timmy can solve this ... err wait.

Thu, 09/15/2011 - 22:29 | 1675958 oobrien
oobrien's picture

So is this fucking thing gonna crash or not?

I'm tired of waiting.

Thu, 09/15/2011 - 22:34 | 1675969 Galen Slade
Galen Slade's picture

Exactly - they'll just keep printing and kicking the can down the road, probably for months still.  Wonder when the Bernanke will get the idea to just print and not bother buying bonds with the money.  It's all just 1's and 0's anyway, what's a few more '1' bits?

Thu, 09/15/2011 - 22:47 | 1676005 HoofHearted
HoofHearted's picture

I like that idea of mixing metaphors...soon they'll kick the can down the road and right into the house of cards. But how soon? With the big hootenanny where all Central Bankers joined hands and sang "Kumbuyah" today, it might be longer than we think...

Thu, 09/15/2011 - 23:00 | 1676020 whstlblwr
whstlblwr's picture

Anyone see this? Someone just forward:

* Many people do not know that the Federal Reserve is a private company and not a government agency.
* In fact, the Fed is not part of the government in any way.
* We believe that abolishing the Fed needs to be our number 1 national priority.
* We intend to beat the Fed in court similar to the way the Big Tobacco companies were defeated.

Thu, 09/15/2011 - 23:09 | 1676040 CrazyCooter
CrazyCooter's picture

Aw shit, seriously? Lawsuits and lawyers are the answer? If it was, we would be a bit higher on the hog right now, just sayin ...



Thu, 09/15/2011 - 23:17 | 1676047 whstlblwr
whstlblwr's picture

Aren't you just so pissed off to sue the fuck out of them? Have to be many rich shorts who are sick and tired of this bullshit too, plus consumer groups who are mad about rising food and gas.

Thu, 09/15/2011 - 23:02 | 1676023 AUD
AUD's picture

It will be as long as central banks can offer a decent profit in the form of rising bond prices. At the short end of the yield curve potential profit is all but gone. At the long end it could go on for a while yet but central banks monetising increasingly large amounts of long term debt is 'risking up' that's for sure.

Fri, 09/16/2011 - 00:24 | 1676129 Yen Cross
Yen Cross's picture

The short end of what curve>? (:

Thu, 09/15/2011 - 22:40 | 1675982 LongBalls
LongBalls's picture

When they let it go it will be in the winter months. The food chain will break with no relief and it's more difficult for people to move around and assemble. So IMHO we are close if it be 2011.

Thu, 09/15/2011 - 23:02 | 1676022 GIANTKILR
GIANTKILR's picture

Screw this! I have been following this site since the beginning, and I have read this post multiple times now. "The world is going to end next week" "The summer of hell" "The winter of discontent" "The fall of the American empire" "The spring of discontent". I can't even keep the slogans sraight anymore. Honestly, this is getting tiring. I think I will start watching American idol and ignore the world. I think those people are a lot more content! Not knowing might be the best thing going!!!!!!!

Thu, 09/15/2011 - 23:06 | 1676030 wretch
wretch's picture

Here's the tough news: you're going to have to think for yourself.

Thu, 09/15/2011 - 23:11 | 1676042 whstlblwr
whstlblwr's picture

I remember several posts about short squeeze and watch out for evil central bankers. If you hold all the power, would you just let it slide through your fingers?

It's why we have to do more than read Zero Hedge blog. What did you do today to make change happen?

Thu, 09/15/2011 - 23:13 | 1676046 GIANTKILR
GIANTKILR's picture

No changes. Just burned out on the economic collapse that never happens.


Thu, 09/15/2011 - 23:16 | 1676049 caerus
caerus's picture

it is happening...just very slowly

Fri, 09/16/2011 - 01:16 | 1676191 JohnG
JohnG's picture

Just mho, things will speed up, and then goes down.  "They" will try to hide it as long as they can.

That's why I keep much physical, and some cash because it will be needed when the "BANG" happens, at least for a little while.  Also at least three months of provisions.

I pay constant attention.  I really have not been able to sleep nuch since 1971 (Vietnam....), so that's something I take advantage of.  Doc's say that's OK.  Coping strategy??  I refuse meds, just drink, that's all.

So far, it works for me.


Thu, 09/15/2011 - 23:20 | 1676057 whstlblwr
whstlblwr's picture

LOL, it's my point you need to work for change. If you want Federal Reserve to stop stealing from taxpayer to give to Wall Street or other countries, you need to get to work. Do your part, then you won't be so exhausted.

Thu, 09/15/2011 - 23:25 | 1676065 GIANTKILR
GIANTKILR's picture

Don't presume. Doing my part is what exhausted me.

Thu, 09/15/2011 - 23:36 | 1676075 whstlblwr
whstlblwr's picture

Oh, sorry, I presume becuase I'm the opposite. If I'm working on what I believe is right, I'm invigorated, even if process slow, it feels better than just watching or complaining for me.

Thu, 09/15/2011 - 23:44 | 1676094 GIANTKILR
GIANTKILR's picture

Go get 'em, Slick! YOU CAN CHANGE THE WORLD!

Fri, 09/16/2011 - 00:11 | 1676119 whstlblwr
whstlblwr's picture

We can change the world. If everyone who read this blog gets to work, we can change the world.

First time ever called Slick, sounds like you just lazy ass after all.

Fri, 09/16/2011 - 00:19 | 1676125 GIANTKILR
GIANTKILR's picture

And you sound like a troll with bad sentence composition and name calling.....There is no changing the world IF you have been reading this blog. Everything is fucked, and there is no unfucking it! Put down the pom poms and get ready for the SHTF! I am burned out on waiting for it, but it will day!

Fri, 09/16/2011 - 00:38 | 1676147 caerus
caerus's picture

i feel your frustration and share your impatience, but i believe what we are witnessing is not a cataclysm but a slow rot and a societal erosion of ideals and a silent surrender of liberty and principle...i hope that there are enough informed and compassionate souls left to forestall an apparently inevitable collapse

keep fighting the good fight

Fri, 09/16/2011 - 06:43 | 1676406 Optimusprime
Optimusprime's picture



The slow erosion may lead to sudden and dramatic consequences, however.  My wife was driving down a familiar country road nearby, and saw to her amazement that the whole side to an apparently well-built older home had collapsed, leaving the interior visible.


Inquiries revealed that termites had been at work.

Fri, 09/16/2011 - 01:19 | 1676195 JohnG
JohnG's picture

There is little to be gained by taunting a suspected troll.  Cearus?  isn't a troll.  There are many here though.  Just don't feed them, ignoring them is best.  They tire, and go away.

Fri, 09/16/2011 - 01:37 | 1676213 Raynja
Raynja's picture

when they write the history books everything will have collapsed very quickly, its only slow when you are in the car wreck

Fri, 09/16/2011 - 00:03 | 1676109 rocker
rocker's picture

@whstblwr.   LOL   My point is simple.  How do we wake up 95% of the sheeple when they have been grazing on green shoots for a year.

  They are still hungry looking where they can steal a patch from the little sheep.   They have NO Clue.  

Fri, 09/16/2011 - 00:13 | 1676121 whstlblwr
whstlblwr's picture

Wife is making me come to bed, but here I save this post I wrote for lynnybee who say the same as you:

Just read lynnybee comment that she tried to spread word and her family think she nuts. It’s not what I mean. Yes, you spread the word that end of the world coming and must stockpile goods, then people think you are nuts, most don’t have that experience and don’t look to future. Example see what is happening now in Vermont, did you hear family trapped in house on CNN, no candles, no extra food, water, they thought all would be okay. We are here on ZH because we are prescient, not many people like us. So don’t convince them things are going to be worse in future, because maybe not, I happen to believe it will be better in future after initial break.

My point is talk to people about what happening now, what they can see. Everyone can see that gas and food prices are up and it doesn’t make sense. If their house worth less, and get less money at job, why is food and gas more expensive? Now you can educate with what you know. Tell them there is Federal Reserve who print money (I say print because easier to understand, keep simple) to pay off America’s debts. They need to print because not enough revenue coming in and spending on wars, etc. So Federal Reserve printing money and money goes to banks who use it to buy stock and gas and oil and food. Keep simple. Stock market goes up, but so does gas costs for your car.

Without Federal Reserve gas prices would be…I don’t know, but I say a dollar a gallon, and food would be half the price. So show them what a higher stock market is costing them. Most people on social media could care less about high stock market, but they care about gas prices. If they believe it free market that control prices, think again. Yesterday clear example: One Fed guy mentions more support, money printing (I don’t say QE because what the hell is that), and immediately oil, gas, food prices go up. What is more clear than that???

Get to work people on Zero Hedge, spread the word.

Thu, 09/15/2011 - 23:21 | 1676062 eduard khil
eduard khil's picture

smile.  gold is a little cheaper for a little longer.

Fri, 09/16/2011 - 00:25 | 1676132 HarryHaller
HarryHaller's picture

I'll toast to that.

Fri, 09/16/2011 - 00:39 | 1676149 tiger7905
tiger7905's picture

John Hathaway has a great piece out on why the gold miners are depressed and why investors should have exposure to miners.



Fri, 09/16/2011 - 01:27 | 1676206 xtop23
xtop23's picture

Bought Au and Ag on the dip and bought 400 more rounds of 270 for my rifle

Thu, 09/15/2011 - 23:19 | 1676056 CrazyCooter
CrazyCooter's picture

Bored drinking Shiner tonight (my project goes live on Monday - been elbows and assholes for a couple weeks now) ... so ... I'll bite ...

1 year 19 weeks (your profile age)

Um, not the beginning. ZH actually started on blogspot. Not to be pedantic but ...

Lastly, collapse is a process, not a destination. Ask any dead roman emperor.



Thu, 09/15/2011 - 23:26 | 1676067 CrazyCooter
CrazyCooter's picture

Oh, and since I am bored ...

I occasionally doubt the genius of TD/ZH. I mean, it is a lot of content, a non-stop chain of events. There is a team, of this I am sure. But the continuity is very much there. I mean, I love good sarcasm. Additionally, someone lamented the difficulty of reading a sentence of a post (forget which - within the last month?) and suggested Tylers punishment should be diagramming said sentence. From one of the first posts ever on ZH (see previous link), not only do you get Monty Python, but an impossible to diagram sentence.

Just as our funny-speaking cousins 3 hours east of us (via Concorde; probably more like 15 hours if using one of American Airlines' retrofitted B-707 with almost two wings and a fully operational engine, and that includes the 8 hour unairconditioned tarmac wait at JFK and Heathrow) thought that the Waxman witch trials would be confined to the likes of Jim Simmons and Phil Falcone (whose wife Lisa has given over $111,000 in political donations in 2008 and prudently hedged (one would say much better so than her husband in the last year; Lisa is listed as "homemaker" on her political donation records, and what a home it is... maybe it is only fitting that it used to house Penthouse honcho Bob Guccione previously, keeping in mind the hits one gets when the name Lisa Falcone is referenced in IMDB) equally between Democrats and Republicans, throwing money away in the losing presidential campaigns of both Rudy Giulliani and Chris Dodd), the tables turn, and the most prominent reps of London's oracular class are suited to be cross-examined by the Commons Treasury Committee, the local equivalent of public semi-lynching, On January 27.

Hell if I know if its a run on ... I sure as hell can't diagram it ... I just write software for a living ...



Thu, 09/15/2011 - 23:32 | 1676072 GIANTKILR
GIANTKILR's picture

Just because I didn't join in the beginning doesn't mean I wasn't loitering. Drink another Shiner! I don't post a lot and don't like to "belong".

Fri, 09/16/2011 - 00:33 | 1676138 CrazyCooter
CrazyCooter's picture

I called myself out ... I was being pedantic ... sorry it came across as mean.



Thu, 09/15/2011 - 23:38 | 1676081 JohnG
JohnG's picture

ZH started before blogspot, actually :)

Thu, 09/15/2011 - 23:57 | 1676106 GIANTKILR
GIANTKILR's picture

ZH actually started in my ass. I took a big dump one day, and shazamm! Tyler Durden was born!

Fri, 09/16/2011 - 00:15 | 1676122 JohnG
JohnG's picture

Easy fella, remain calm at all times.


Fri, 09/16/2011 - 00:23 | 1676128 GIANTKILR
GIANTKILR's picture

I'm tryin'! But, I thought that was a funny comeback!!!!



Fri, 09/16/2011 - 00:54 | 1676150 JohnG
JohnG's picture

Hey, it works for me,  Prevents strokes.....ZH is a gift.  Please try to see it as that.

Read.  Learn.  ZH is a grail of truth if you can get through the sarcasm.

The comments.....I don't read them so much any more.  Too much discord.  Many of the old-timer's have left.  I expect they still lurk, and see a comment once in a while.

The articles, I read, and take them as more knowledge.  That is what I seek.  Information.

It is always best to remain calm.  It's saved my life more than once.


Fri, 09/16/2011 - 00:37 | 1676145 CrazyCooter
CrazyCooter's picture




Fri, 09/16/2011 - 00:43 | 1676153 JohnG
JohnG's picture

I can only give a hint lest Tyler take a contract on me.

Look up the 10 most influencial financial blogs and find TED.  Google may your friend, for now.....I think "they" watch me, to be honest.


Fri, 09/16/2011 - 00:53 | 1676165 JohnG
JohnG's picture

Not TED talks......

Fri, 09/16/2011 - 00:50 | 1676164 JohnG
JohnG's picture

Oh, and I sent that sentence to a colleague for a diagram.  Should make her crazy!! :)  It'll be  funny to see her come back.  Probably get a paper on it......  We mess with each other from time to time.  I'll refuse to take run on sentence for an answer and see her fume :) When she comes back I'll bet her on something...



Fri, 09/16/2011 - 00:00 | 1676107 jdh2358
jdh2358's picture

Sign seen on a homeless man peddling for change this morning: "I read zerohedge and now I have zeromoney".

Fri, 09/16/2011 - 00:08 | 1676116 whstlblwr
whstlblwr's picture

Funny because without zerohedge have zeromoney. Think you are confused with main media CNBC or Bloomberg news. ZH pretty much called this turn and posters were all here in comments doubting ZH opinion. Go back, look.

Fri, 09/16/2011 - 00:44 | 1676155 JohnG
JohnG's picture

He'd have got a Jackson from me.

Fri, 09/16/2011 - 01:38 | 1676212 xtop23
xtop23's picture

Had to have been getting his investment information from FOX, like that UBS Delta 1 trader, rather than 0Hedge.

Thu, 09/15/2011 - 22:40 | 1675983 chump666
chump666's picture

There will 100% be a default in a mid-term time frame.  There is NO WAY Germany will agree to a Euro-Bond or further bailout of Greece.

As for Germany CDS spreads, they get almost a week worth of -15% losses on the DAX; for the strongest economy of the EZ...that is frightening.

Thu, 09/15/2011 - 23:09 | 1676038 Yen Cross
Yen Cross's picture

Stay minus/ that default idea!

Fri, 09/16/2011 - 00:56 | 1676169 IQ 145
IQ 145's picture

The DAX is up 400 pts. from its recent bottom. It was a real doozy of wipeout alright.

Fri, 09/16/2011 - 01:04 | 1676176 Yen Cross
Yen Cross's picture

The DAX a great market.  The DAX is off close to 15% (YoY)...   I Love those Germans!

Fri, 09/16/2011 - 02:08 | 1676253 chump666
chump666's picture

well it was extremely oversold, busted through all supports before the rebound.  The markets (all) are technically broken.  You are not going to see new highs, but iMO markets will range trade into Oct, then hell on earth.

Thu, 09/15/2011 - 23:02 | 1675995 X.inf.capt
X.inf.capt's picture

i think this maybe worthy of making a special trip to the store....

popcorn  ? check.

why do i keep hearing about a major correction in the markets on OCT.25th?

Fri, 09/16/2011 - 01:06 | 1676177 JohnG
JohnG's picture

Well, there were many things historically that happenned on 10/25's.

This one sticks out:

1933 U.S.A. Gold Buying

25th October, 1933 : The Roosevelt gold buying policy was inaugurated today with the government paying $31.36 per ounce 27 cents higher than quotations on the London Gold Exchange.

The London Price is currently $31.00 based on the exchange rate of $4.78 to the British Pound


Bury yer gold????  I'm not scary though.

Thu, 09/15/2011 - 22:46 | 1675998 apu123
apu123's picture

I agree, I think they can juice this situation for at least a couple of more months.  With nicely timed rumors, Fed and CB announcements they might even get us to spring before the wheels come off.

What you can count on for sure is nobody in the US will notice anything until the price of Cheetos, Big Gulps and electricity go up too much for them to enjoy their nightly dose of House Hunters/American Idol/Jersey Shore.  At that point they will hit the streets screaming for the blood of those evil rich people.

Fri, 09/16/2011 - 00:38 | 1676144 chump666
chump666's picture

Central bankers are bizarre human beings, close 2nd are the braindead politicians.  But yes, they have juiced the market, good for maybe 2wks max.  Some rallies, spreads narrow, then BAM! something happens (again).  Greece will default (Olive oil exporters!!! hahahah, what a joke), they are toast, close 2nd is Italy...

Thinking October Meltdown part 3 'It ends - The Euro Zone implodes'.  

Then end yr it's all China, maybe sooner, once we find out that their mega bubble is bursting at alarming rate. 

Thu, 09/15/2011 - 22:46 | 1676001 lolmao500
lolmao500's picture

Big news!

Merkel rejects eurobonds as solution

GERMAN CHANCELLOR Angela Merkel has dismissed eurobonds as the “absolutely wrong” cure for the euro zone’s ills, amid growing political pressure from her junior coalition partner to toughen her stance towards Greece.

Thu, 09/15/2011 - 23:22 | 1676058 lano1106
lano1106's picture

sounds like a politcal game. If she still want to get reelected this is what she has to say to please the germans but I would not be surprise that she change her mind at the very last minute. Or she knows upfront that she will support euro bond but saying otherwise in public.


It reminds me Obama that was saying that he would not respect NAFTA to boost US economy during 08 election after having warned the neighbor countries to disregard what he would say as it was only electoral BS.



Fri, 09/16/2011 - 03:01 | 1676306 AnAnonymous
AnAnonymous's picture

sounds like a politcal game. If she still want to get reelected this is what she has to say to please the germans but I would not be surprise that she change her mind at the very last minute. Or she knows upfront that she will support euro bond but saying otherwise in public


Dangerous touch of sanity here.

Yep, people looking at financial instruments to decipher a political issue are at a disadvantage.

The Euro is a political issue. The Eurobonds is a big, big step. It boils down to writing european nations to oblivion. Big, big.

As Europeans operate under US political philosophy, one has to play by the rules.

Exercize of institutional power in this philosophy is more resilient than in the others as legitimacy in institutional power is renewed every x year (compared to one lifetime in monarchies)

For the Euro crisis, one has to wait for the major political nations legitimacy to be renewed.

Once France and Germany have renewed the legitimacy of the institutional power, then in the following year, the eurobonds are going to move forward.

It will be through Merkel or another German leader. What matters is the needs of the institutional power. The institutions need the Eurobonds and any elected politician will do what is the best for the institutions.

All it takes is that the legitimacy of the institutions is renewed, that any elected politician can tell to the constituents "well, you showed once again your consent to be governed so I will take the decisions required for the institutions to be preserved, maintaining your capacity to consent to be governed"

It is how the US political philosophy works.

Thu, 09/15/2011 - 22:48 | 1676006 jm
jm's picture

Spain and Brazil.  Interesting for Santander, no?


Thu, 09/15/2011 - 23:36 | 1676078 bob_dabolina
bob_dabolina's picture


Fri, 09/16/2011 - 01:10 | 1676184 Yen Cross
Yen Cross's picture

b_d    Always appreciate your input.    YEN

Thu, 09/15/2011 - 23:36 | 1676079 insidious
insidious's picture

I'm sick of all the bailouts.

Here's what I'd do – I’d Ponzi it to the max:

- run up the trade deficit with China as far as we can push it. Same deal for the Europeans. Both of us get as much stuff as we can and give China as many paper dollars and Euros as they can tolerate. (Give sweetheart deals to HP and IBM to create new, state of the art, printing presses and give them to Bernokio for safe keeping.)

- compensate for the trade deficits by selling China all the frigin treasury bills possible and have the Europeans do the same with their bonds (whatever kind they end up with).

- on the side, keep the printing presses humming and buy as much gold as possible. Move the titanium bars out of Fort Knox and store the real stuff there. Maybe add a new wing or two. Maybe also buy oil and fill up the strategic oil reserve while we’re at it.

- do these things for as long as China will put up with it (and I guess the Saudi’s too if we go with the idea of buying oil too). To keep it up as long as possible, periodically appoint some austerity committees and have the pres, congress, bernokio and timmy all swear that we are REALLY serious about getting the deficit under control "in the long run" and our bonds are good as gold. Promise drastic cuts sometime in the future (but not too soon).

- when this all finally falls apart have the US and Europe declare bankruptcy immediately. Declare all US and European debt, which is held outside of North America and Europe, null and void. China's war chest becomes worthless (Japan's too). US and Europe reset their currencies and sovereign debt drops way down.

- Create a new trade zone between North America and Europe. Put massive tariffs on anything China wants to sell to us. North America and Europe start manufacturing everything they need and trade with each other. The economies are humming again in no time.

- US continues spending a LOT on defense because China (and quite a few other folks) will be pissed.


Thu, 09/15/2011 - 23:47 | 1676096 wisefool
wisefool's picture

I dont think this will work unless you bait china and india to go to a hot war with each other first. Too many boots on the ground (And they both have the ability to make boots now)

drones are cool, but I dont think they are the maxim gun for the type of war china and india could bring

Fri, 09/16/2011 - 00:36 | 1676143 daxtonbrown
daxtonbrown's picture

You mean this isn't the plan already! No one sent me the memo! Maybe my iPod reception isn't so good living down under the underpass in a card board box.

Thu, 09/15/2011 - 23:39 | 1676083 carbonmutant
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"We all know what to do, we just don’t know how to get re-elected after we’ve done it” Jean-Claude Juncker 

Fri, 09/16/2011 - 00:02 | 1676108 MFL8240
MFL8240's picture

The show must go on!

Fri, 09/16/2011 - 00:05 | 1676112 PulauHantu29
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"It's not just the Greek debt that is the problem though. When the market senses a bank is on the ropes, it goes in for the kill. Not deliberately. It's just the market mechanism at work. Customers large and small don't want their cash kept in a suspect institution. So they ask for it back.

-- But as you know, banks don't have all the cash in 'liquid' form. That's because they have taken your cash and lent it to, say, the Greek government. In order to satisfy a surge in demand for cash, banks must liquidate investments or call in loans.

-- Doing this in a nervous market is a tough ask though. And if there are many banks in the same position (as is the case in Europe) the next step is a credit crunch where banks actually withdraw credit (via selling of assets and winding up of loans) instead of supplying it.

-- This makes the banks' guardians - the central banks - very nervous. So like the ECB did last night, they offer to supply unlimited 'liquidity' (cash) for eligible collateral.

-- In a true liquidity crisis, where the assets are sound but there is a panic going on, this is the correct course of action. Central banks should lend against sound collateral at a penalty rate. Doing so in size will quickly stem the panic.

-- But we are not in a liquidity crisis. It's a solvency crisis. There are billions - probably trillions - of dollars of bad debt in the system. The banks know it, which is why they don't want to lend to each other.

-- But they won't write down the value of the debt and clean up their balance sheets because a) they don't have to and b) they expect the public, via austerity measures, to help repay the bad loans they have made. And writing down the value of debt to a realistic level would force them to raise a huge amount of additional equity and dilute management and shareholders."


from The Daily Reckoning

Fri, 09/16/2011 - 00:49 | 1676162 IQ 145
IQ 145's picture

WSJ tonight from London; to the effect that some European Corps. are checking out of major French Banks and looking for banking relationships elsewhere. The deposit base is making a giant sucking noise, also.

Fri, 09/16/2011 - 00:08 | 1676114 The Deleuzian
The Deleuzian's picture

A full systemic collapse?  More like death by a thousand cuts!  More families struggle to stay afloat...Less opportunity for the college grad...Costs for the necessities of life rise continually...Investment capital gets outright robbed or capital contols/financial repression...Interest rates so low that seniors are living like they did back when they were brought into this world...An out of control spend-pretend-extend Federal Government...State and Muni's are dead broke...10,000 boomers retiring pretty much daily...The pillar of 'the American Dream' (the home) in many areas can't be sold at all!  A mesmerized populace where turning to the Government is the path least resisted...Academic think-tanks/ Believing the only solutions are to be found in the institutions that got us here in the first place...Demographic outlook to support medicare/Social Security etc... are exposed as the Ponzi's they truly are... Obama wins the Nobel Peace Prize...Insider trading by congress is legal...1/10 (my guesstimate) in America on anti-depressants... 50 million on food stamps... Critical thinking skills/Independent thought replaced by Google the answer for mathematics take home exams...3/5 in America think the Suez canal is somewhere in LA! 4/5 of high schooler's can't find Iraq on a map!  Crony Capitalism is and outright beyond criminalization... Taxes and regulations so thick that starting small businesses have become hazardous to your health and sanity...Presidential hopefuls either blatently ignored or discredited by MSM... 

I'm sure I left some out!  The ultimate goal IMO is to make everybody the same...Dependent, Ignorant, Depressed, & Marginalized!

One of the best books I have ever come across is Ellul's Propaganda (The formation of Men's attitudes) Haven't thought about that book in a long long time...

Fri, 09/16/2011 - 00:17 | 1676124 wretch
wretch's picture

Fuck yeah: Ellul!  People should also read The Technological Society.  Jacques Ellul had a beautiful mind.

Fri, 09/16/2011 - 00:25 | 1676131 PulauHantu29
PulauHantu29's picture

"But economies always grow, right?

Well, maybe not. How much did the economy grow in 2011 BC? Nobody knows, right? But we'll take a guess. It didn't grow at all.

And guess how the real economy in the US is growing this year? Probably about as much as it did 4,000 years ago.

No, we're not kidding. The numbers are all over the place. But they're all near zero. Even the feds say the economy is "barely" growing...or that the ‘recovery is very fragile.'

Guess how many jobs the economy added in 2011BC? We don't know that either, but we'll take another guess: zero.

Okay... You see where we're going with this. This economy sucks, right?

But here's the thing. You think the suckiness of this economy is a temporary thing. You think the economy USUALLY does okay. You think that there is something inherent in technology...that it is always finding new and better ways to do things...and that as a result we all get richer all the time, right?

Well, what if you're wrong?"


taken from Bill Bonner's Blog

Fri, 09/16/2011 - 00:46 | 1676158 IQ 145
IQ 145's picture

Bonner's cool. The daily reckoning is frequently interesting.

Fri, 09/16/2011 - 00:31 | 1676136 Sizzurp
Sizzurp's picture

If we slip into another recession, gov tax receipts are going to look abysmal. State govs., already at the brink, will see their revenues decline as well. When the gov. programs are cancelled for lack of funding, and the checks stop coming, the poor will come unglued.  At that point the problem will literally be on everyone's doorstep.  I am not looking forward to it.  Life is going to get a lot harder, especially if you are looking for that gov. check every month.

Fri, 09/16/2011 - 00:44 | 1676157 IQ 145
IQ 145's picture

Thanks I ordered them from the library.

Fri, 09/16/2011 - 01:08 | 1676181 Yen Cross
Yen Cross's picture

IQ 145/  Nice Move! Knight to Rook 2?

Fri, 09/16/2011 - 01:10 | 1676183 PY-129-20
PY-129-20's picture

I think that many people would love to move on. Many of us know what is coming - fast or slow - and most of us are prepared. Still it will be tough and difficult.

People are stuck in a nightmare that is not ending. They're tired of all the lies, the corruption, the government intervention and seeing their liberties taken away, piece by piece. The cynic in us will remind us that corruption and lies were always a part of this game and things never will completely change.

The anticipated crash is paralyzing some. This might not be the best time to open a business. At least some ideas won't stand a chance in this rough climate. You're waiting for the crash, knowing that afterwards there might be a minimal opportunity to at least influence a better working system, wherein ordinary people will be able to take control over their lifes again.

There is a saying in German:
Besser ein Schrecken mit Ende als ein Schrecken ohne Ende. Usually translated as: It's better to make a painful break than draw out the agony.


Fri, 09/16/2011 - 01:13 | 1676188 Yen Cross
Yen Cross's picture

Well spoken _ 008_

Fri, 09/16/2011 - 01:21 | 1676196 Yen Cross
Yen Cross's picture

Can't pull  yourself forward. The past is great for ideas.  Let's create the Future...

Fri, 09/16/2011 - 01:54 | 1676236 steveo
steveo's picture

Dabama say "win the future"

Fri, 09/16/2011 - 01:53 | 1676235 steveo
steveo's picture

This is perhaps the clearest sign I have that things are going to appear to get better.   

The inverse head and shoulders means that this indicator should continue to go up, this is a fine basing pattern, the best.


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