Rosenberg Defines European Insanity

Tyler Durden's picture




 

The situation in Europe goes from bad to worse. Gluskin Sheff's David Rosenberg is back to his bearish roots as he remind us that 'throwing more debt after bad debts ends up meaning more debt'. As he notes, the definition of insanity is (via Bloomberg TV):

When you realize that of the potential $100 billion to spend, 22% of that has to be provided by Italy and their lending to Spain is at 3% but Italy has to borrow at 6%. They have to lend to Spain $22bn at 3% - it is just madness. Everybody is getting worried again. The solution that they seem to have come up with seems to be worse than the problem in the first place.

As we have pointed out vociferously over the past few days, even though the assistance is being earmarked for the banks, the Spanish government assumes the responsibility and so this once 'low national debt' sovereign is following in Ireland's footsteps as its debt/GDP takes a 10pt jump to 89% (based on the government's data) and much higher in reality (when guarantees and contingencies are accounted for). As Rosie explains succinctly, this is right at the Reinhart-Rogoff limit of 90% at which debt begins to erode the nation's economic fabric.

It is probably not long before this credit - two notches away from junk and having to raise money at 6.75% when its economy is contracting at nearly a 2% annual rate - is going to require external assistance as it follows Ireland onto the sidelines.

The situation in Europe indeed goes from bad to worse.

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Tue, 06/12/2012 - 14:33 | 2518860 vmromk
vmromk's picture

Nothing that a few well placed swaps couldn't fix.

BTW......FUCK YOU Bernanke.

Tue, 06/12/2012 - 14:46 | 2518926 ACP
ACP's picture

Madness?

THIS......IS......PONZI BITCHEZ!

Tue, 06/12/2012 - 14:49 | 2518939 Doña K
Doña K's picture

Watch that UK Ponzi explode/implode after the Olympic games.

Tue, 06/12/2012 - 15:01 | 2519007 Manthong
Manthong's picture

But the situation will improve by next month, wont it?

Tue, 06/12/2012 - 15:21 | 2519079 economics9698
economics9698's picture

Print mother fuckers print.

Tue, 06/12/2012 - 15:24 | 2519093 Pladizow
Pladizow's picture

Borrow at 6%, lend at 3% - makes complete sense in the banking world of fiat paper!

Tue, 06/12/2012 - 15:27 | 2519098 Sudden Debt
Sudden Debt's picture

IT SURE DOES!

I wonder how you explain that to a six year old who's getting it's first math lesson...

Tue, 06/12/2012 - 15:42 | 2519155 Pladizow
Pladizow's picture

Easy, you explain to the six year old, that the banks are lying, cheating, thieves!

Tue, 06/12/2012 - 16:25 | 2519394 malikai
malikai's picture

Is this the dip we've all been waiting to buy?

Tue, 06/12/2012 - 18:25 | 2519784 Cadavre
Cadavre's picture

betting most still waiting for FB to strike above 42$ per share to get to re accumulate their grub stake - margin calls must have been a real bitch ... BUT: that con was beautiful - CNBC should, at least, win A Golden Goebels this year at the Annual Fascist Ball  for their part in that beautifully run pig in a poke. Never ever seen an IPO that included underwriters (who, BTW, probably already owned most of the FB shares at 3.20$/per - or less evun!) publish their buy "low water mark (thinking it 38 bucks).

And how `bout that underwriter (was it Milken wearing a Doug Fugly toupee?) who was hanging at the Zuck's commemorative NASDQ bell ring that fateful morning!! One thing happened for sure - they set a brilliant new and audacious benchmark for running a high stake fast money ponzi. It was totally beautiful.

Tue, 06/12/2012 - 15:40 | 2519145 Citxmech
Citxmech's picture

This sounds like one of those jokes where the punchline is:  "volume."

Tue, 06/12/2012 - 16:16 | 2519353 ACP
ACP's picture

Exactly:

"What we don't lose in margin we lose in volume!"

Tue, 06/12/2012 - 15:33 | 2519114 Cupid Stunt
Cupid Stunt's picture

BoE still has a little dry powder left to keep it going well after the Olympfest.

Tue, 06/12/2012 - 17:48 | 2519650 Cadavre
Cadavre's picture

Don't know if-en he be the same dude - but went to school with a guy named Daviid Rosenberg in Hawaii. Freckles, bad teeth, but he always wore Bass Weejuns (depending on his outfit wore black, brown or burgundy Weejuns) , Gant shirts (with the little loop in the back - had to have that), Adler socks that matched his Gant shirts), color coordinated pants (although it was difficult to find the brand names that suited his taste - no Pincus Brother Clothiers on the Islands) and when he screwed up in public his dad would beat the sh*t out of him. One time it was so bad (David screamed like a girl) someone called the cops. David never went to the beach and was the only boy in PE that wasn't barefooted (it rained a lot - most girls wore fake sole less shoes that were little more than a piece of cloth covering the top of the feets from big toe to ankle). At PE when we played "Hawaiian Style" "touch" foot ball (meaning every player could pass or receive the ball and was tackled instead of "touched"). He showered in the girls locker room - and cheated at "match stick poker" and never ever owned a surfboard or went to the beach , BUT, he did have some humongous zits despite the 30 pounds of clearisel per week therapy (ya just wanted to reach out and pop them suckas when you saw them - the sun and salt at the beach left most of us pretty much zit free).

Enough about David EXCEPT , he should bring his analysis home - he should "onshore" his tripe for a while.

The US sells debt to China (or anybody else dumb nuff to buy it) at 3.30%. AND F*CKING LOANS IT TO INSTITUTIONS AT BELOW COST!

Perhaps the spread in the US cost to borrow and price to offer ain't as wide as the Italy Spain fandango, BUT IS IT STILL BE A F*CKING MONUMENTALLY INSANE  WAY TO RUN A PONZI when you consider the shear amount of debt weighing down the US economy. In fact Italy, Spain, the PIIGS and the entire EZ , all have better debt (correction - at least a much lower principal burden) to GDP (GDP turns a 100$ purchase into a 1000$ GDP - that's f*cking insane too!)

CNBC gave viewers a few minutes of sobriety today as the three paisanos (Pento, Pisani and Santelli) tore apart another one of the Gleiberman's drunker zero brained "i suck FED dick" tirades a new asshole (again) , regarding the Spain Italy SNLesque debt comedy of horrors. Italy has 2,700 tons of gold. The jest of the discussion put forth by Santelli was that Italy should issued gold backed bonds (don't know enough to weigh in on that one way or another).

Santelli suggested also that being a politician should be like jury duty - you do it - then you et out - most with a pair that can still land a turd in the pot when they take a shit probably agree.

The problem with the EZ is the same as the US - the are governed by Goldman alumni - shutdown Goldman's and humans might get their world back!

Your verbotten Ministry of the Fatherland Insecurity content flag word for today is:
2600

(You going WTF `bout 2600 ... urs true too .. mean what the f*ck is so threatening about that - unless it be the address of Bins Tora Bora Cave - or his old phone extension at ALCIADA's Langley Branch Office)

Tue, 06/12/2012 - 21:09 | 2520095 Buck Johnson
Buck Johnson's picture

Yep, thats exactly right it will.  They don't want it to happen before the olympics so they wait until after and then the nasty austerity and such that will be put on people.

Tue, 06/12/2012 - 14:57 | 2518989 TrumpXVI
TrumpXVI's picture

Exakatickly, these guys are soooo negative!

Tue, 06/12/2012 - 15:29 | 2518927 AlaricBalth
AlaricBalth's picture

As of today the Fed has $23 billion in outstanding swaps with the ECB. The ECB then turns around and lends this to their troubled banks to give them the appearance of solvency. In essence, the Fed is helping to bail out Europe while debasing the USD. It is time for a full audit of the Federal Reserve.

http://www.ecb.int/mopo/implement/omo/html/index.en.html

http://www.newyorkfed.org/markets/fxswap/fxswap_recent.cfm

If the Fed has done nothing illicit, then they have nothing to hide. (Borrowed that from the Dept. of Homeland Security. The pendulum should swing both ways. )

Wed, 06/13/2012 - 06:19 | 2520717 Cadavre
Cadavre's picture

Exactly - problem is don't think the ECB can print. If the EURs are used to re capitalize banks who sold sovereign debt to bond holders that insured those bonds with CDS purchased from ISDA members, then there seems the demand for USDs would be diminished cause there are fewer EURs available for USD devaluation (right?). Meaning stagflation or deflation - gold up when the markets down - never imagined those trends would print so soon,

The question is: Where and who  "Bend Over" Ben go (down) and do next for an excuse to counterfeit? Who else can he swap USD for EUR with? Are there even enough EURs out there to load Ben's spoon for a righteous fix? Is there enough excess EUR capacity for the swaps?

Tue, 06/12/2012 - 15:22 | 2519084 battle axe
battle axe's picture

First the ARMADA then this, oh the pain.....

Tue, 06/12/2012 - 14:32 | 2518861 slow_roast
slow_roast's picture

Classic. 

Tue, 06/12/2012 - 15:11 | 2519040 Sancho Ponzi
Sancho Ponzi's picture

*

Tue, 06/12/2012 - 14:33 | 2518865 Dr. Engali
Dr. Engali's picture

SHHHHH...don't tell the market.

Tue, 06/12/2012 - 14:33 | 2518866 the 300000000th...
the 300000000th percent's picture

"everybody is getting worried again" WTF, they should have been way too worried a while ago 

Tue, 06/12/2012 - 14:49 | 2518938 flying dutchmen
flying dutchmen's picture

Worried --- they people that are worried are the ones that have been milking the systems for years.. When in reality they have added no fucking value what so ever.   People in Financials are overpaid fuck tards.. Not everyone of course--- and of course the whole goverment entitlement BS...  more people who drain wealth but feel like they derserve a golden pension that is double that of private industry..

Tue, 06/12/2012 - 15:29 | 2519105 Sudden Debt
Sudden Debt's picture

Worried?

IF THEY WHERE WORRIED THEY WOULD BE BUYING SILVER BY THE BUSLOADS!!!

Tue, 06/12/2012 - 14:33 | 2518868 slaughterer
slaughterer's picture

Nice to see Rosie recover from his "light at the end of the tunnel" fantasies.  Now we will probably have a face-ripping rally in European markets to spite his analysis.  

Tue, 06/12/2012 - 14:38 | 2518891 Deep79
Deep79's picture

Ya probably will. this guy is like Dennis Gartman now, swithces on a dime. I remember when we were approaching 1400 on sp in april he went bullish.

It's a shame, his analysis is very good, his market calls probaly one of the worst ever.

Tue, 06/12/2012 - 14:43 | 2518895 ZerOhead
ZerOhead's picture

Face-ripping still beats the new American fetish of face-eating if you ask me...

 

Tue, 06/12/2012 - 14:44 | 2518917 Zero Govt
Zero Govt's picture

Govt has been eating our faces for centuries

Rosey is an economist, but he's never worked that one out 

Tue, 06/12/2012 - 14:42 | 2518907 francis_sawyer
francis_sawyer's picture

I tried to tell him yesterday that it was an oncoming train...

Tue, 06/12/2012 - 14:34 | 2518872 the 300000000th...
the 300000000th percent's picture

And because of all this full retard activity its going to go from worse to beyond belief

Tue, 06/12/2012 - 14:42 | 2518903 ZerOhead
ZerOhead's picture

The dial has only been set to quarter-tard so far... you ain't seen n-n-n-nothing yet!

Tue, 06/12/2012 - 14:35 | 2518874 asteroids
asteroids's picture

You go broke "a little bit at a time, then all of a sudden." Europe is following the Steve Jobs philosophy of "wishful thnking" and other bullshit when he first got cancer. He's dead now. Europe is following suit.

Tue, 06/12/2012 - 14:43 | 2518909 the 300000000th...
the 300000000th percent's picture

I agree, fuck Steve jobs

Tue, 06/12/2012 - 15:39 | 2519137 Sudden Debt
Sudden Debt's picture

That would be called NECROFILIA...
I'm pretty sure there's a law against it...

Tue, 06/12/2012 - 14:35 | 2518875 Joe A
Joe A's picture

Yes, but Germany borrows at 0%.

Tue, 06/12/2012 - 14:41 | 2518902 Non Passaran
Non Passaran's picture

Until it doesn't, it does

Tue, 06/12/2012 - 14:44 | 2518918 Rich V
Rich V's picture

The Swiss borrow at -0.6% they could make $$$

Tue, 06/12/2012 - 15:32 | 2519111 Sudden Debt
Sudden Debt's picture

Imagine....

You buy a house and take out a loan of 400k
...
You don't downpay shit....
...
And every month the banks gives you 400$ because you took out a loan...
...
You want a car? Take a loan!
AND THE BANK PAYS FOR YOUR GAS!!!!

Only in the land of Oz....

Tue, 06/12/2012 - 15:43 | 2519157 Citxmech
Citxmech's picture

I'd like to lock-in that homeloan for 30 years!

JFC

Tue, 06/12/2012 - 15:46 | 2519170 FreedomGuy
FreedomGuy's picture

Germany, Italy and all other governments do not borrow, per se. The debt accrues to the citizens. Per the article, if I am a thinking citizen in Italy and someone just told me I have to borrow at 6% to give it to Spain at 3% I would be livid. Italy is as crippled as Spain. Germany is giving and pledging its citizens' money to everyone in Europe.

I argue that if you cannot control your money, which is to say your productivity then you really do not control your life. You are in fact a serf or economic slave. When your/our governments give away all our labor and money to anyone they wish after a meeting of "ministers" oiled with expensive bourbons, then you cannot argue you have much say in your own future.

All collectivists welfare states will fail. It is just a matter of how long and how much it will cost.

Tue, 06/12/2012 - 15:49 | 2519186 FreedomGuy
FreedomGuy's picture

Germany, Italy and all other governments do not borrow, per se. The debt accrues to the citizens. Per the article, if I am a thinking citizen in Italy and someone just told me I have to borrow at 6% to give it to Spain at 3% I would be livid. Italy is as crippled as Spain. Germany is giving and pledging its citizens' money to everyone in Europe.

I argue that if you cannot control your money, which is to say your productivity then you really do not control your life. You are in fact a serf or economic slave. When your/our governments give away all our labor and money to anyone they wish after a meeting of "ministers" oiled with expensive bourbons, then you cannot argue you have much say in your own future.

All collectivists welfare states will fail. It is just a matter of how long and how much it will cost.

Tue, 06/12/2012 - 14:36 | 2518878 carbonmutant
carbonmutant's picture

If Debt can be used as money, more is better... right?

Hold on a minute I need another hit...

Tue, 06/12/2012 - 14:54 | 2518971 CCanuck
CCanuck's picture

Puff, puff, Pass...BITCHEZ!

Tue, 06/12/2012 - 16:32 | 2519421 Satan
Satan's picture

Down the left hand side buddy...

Tue, 06/12/2012 - 14:37 | 2518883 spastic_colon
spastic_colon's picture

I wish everyone would please stop using the word "government" and use the more accurate "taxpayer" since they are the same thing...."government" makes stories sound like someone else is paying the tab.

Tue, 06/12/2012 - 16:17 | 2519360 AlaricBalth
AlaricBalth's picture

I agree. And while they're at it, I wish they would stop saying "national security" when they really mean "government security".
As in, " We are deploying predator drones domestically for government security. "

Tue, 06/12/2012 - 14:38 | 2518887 It is a bargin ...
It is a bargin my friend's picture

Watch the Poles and Russians going toe to toe today ..thats Europe for you, great innit

Tue, 06/12/2012 - 14:51 | 2518949 Joe A
Joe A's picture

Watch Obama "droning" whole villages to pieces in Afghanistan. That's America for you, great init. NOT.

Tue, 06/12/2012 - 14:39 | 2518896 Zero Govt
Zero Govt's picture

"Gluskin Sheff's David Rosenberg is back to his bearish roots as he remind us that 'throwing more debt after bad debts ends up meaning more debt'."

Not many economists know that

Well done Rosey, you're holding up your entire delapidated profession by a thin thread called basic maths ...not many of your profession can do that, just ask Paul Krugman

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