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The Spanish Bank Bailout: A Complete Walk Thru From Deutsche Bank

Tyler Durden's picture


Over the past 24 hours, Zero Hedge covered the various key provisions, and open questions, of the Spanish bank bailout. There is, however, much more when one digs into the details. Below, courtesy of Deutsche Bank's Gilles Moec is a far more nuanced analysis of what just happened, as well as a model looking at the future of the pro forma Spanish debt load with the now-priming ESM debt, which may very well hit 100% quite soon as we predicted earlier. Furthermore, since the following comprehensive walk-thru appeared in the DB literature on Friday, before the formal announcement, it is quite clear that none other than Deutsche Bank, whose "walk-thru" has been adhered to by the Spanish government and Europe to the dot, was instrumental in defining a "rescue" of Spain's banks, which had it contaged, would have impacted the biggest banking edifice in Europe by orders of magnitude: Deutsche Bank itself.

From DB: Spain: the mechanics of “recap only” loans

The guidelines for an EFSF bank recap are quite precise. There will be no conditionality on fiscal policy or structural reforms. The loan will also sit on Spain's balance sheet, meaning the volume of recapitalisation – to be established after a new, independent stress test – will be crucial: it needs to be big enough to convince the market that Spain's banking issue, which has been festering for three years, is addressed in a credible manner, while not being so large as to jeopardize Spain's public debt sustainability. We model possible trajectories for Spanish public debt for various recapitalisation volumes. In an intermediate recap scenario of EUR80bn, Spain could realistically, in our view, keep public debt below 95% of GDP at peak and bring it back below 90% by 2020.

What would Spain need to do to access the "recap only" EU loan?

The "recapitalisation tool" created in July 2011 is normally open to countries "when the origin of the financial distress is strongly anchored in the financial sector and not directly fiscal or structural". In addition, "a beneficiary country will have to demonstrate that it has a sound policy record, such as the respect of its SGP commitments". The first condition would normally be met by Spain: while in-built issues, such as poor fiscal coordination between the regions and the central government, or the extreme rigidities of the labour market, have been revealed and magnified by the current crisis, the point of origin of Spain's difficulties clearly stem from the need to absorb the property boom of the early 2000s and the subsequent need to de-leverage. The second condition may seem more difficult to meet, but the EFSF guidelines make it plain that "countries under excessive deficit procedure would still be eligible (...) provided they fully abide by the various Council decisions and recommendations", which is still the case for Spain after the Council agreed to relax the fiscal targets for 2012. EC Commissioner Olli Rehn's mention of the possibility to give Spain an extra year to reduce its deficit to 3.0% of GDP is another sign that, at least at this stage, there is no open conflict between Madrid and its European peers on fiscal policy.

As a first step, a country triggering a "recap only" loan will submit to the EU a list of "institutions in distress". In principle, the only eligible institutions should be "systematically relevant or posing a threat to financial stability". This may be a problem since Spain would probably include in such a list a number of smaller Cajas. However, a movement of concentration has already started last year and the government can argue that "interconnectedness", one of the criteria for the assessment of the "systemic dimension" mentioned by the guidelines, could justify a sweeping recapitalisation.

Once the request has been formally made, Spain would lose control over much of the process.

First, a joint assessment of the country's eligibility will be conducted by the European Commission, in liaison with the ECB and where appropriate with the relevant banking supervisory bodies such as the EBA. They will in particular decide whether or not the "recapitalisation pecking order" has been respected. Indeed, the guidelines specify that the private sector should be first to bear the costs of a recapitalisation, followed by the national government and only in last resort the EFSF/ESM. As far as private sector participation is concerned, only "shareholders", and not bondholders, are mentioned. The text refers to "special crisis management and resolution intervention powers for national supervisors which could expand the possibilities for the private contributions via mechanisms such as bailing-in bondholders IN THE FUTURE". As it stands today, the "recap-only" loan does not trigger bailing in. Note that under the EC's proposal on crisis prevention, management and resolution, released on 6 June, unsecured debt would not be bailed in as part of the "default" bank restructuring before 2018.

The Europeans would probably consider that Bankia's flotation last summer, which did not raise enough capital to deal with the company's shortfall, allows Spain to tick the first box. For the second box, they will have to consider that the current market conditions would make it impossible for the Spanish sovereign to issue enough debt to recapitalise banks in a credible manner.

Second, the amount of capital needed would be determined by a stress-testing exercise, which will be conducted by the national supervisor (i.e. the Bank of Spain), but also involving the EBA and "national experts from supervisory authorities from other member states". This means that once the process is underway Spain will lose control over the final loan amount. Note however that the guidelines offer the possibility of a twostep procedure, with a first estimate being confirmed by a more comprehensive analysis "at a later stage". The assessments provided by Oliver Wyman and Roland Berger, which are more a valuation exercise than a proper “stress test”, and more particularly by the IMF, could provide a first basis. The IMF's FSAP (Financial Sector Assessment Program) is due for publication on 11 June.

The conditionality attached to the loan would be limited to the recapitalised institutions themselves and financial system reforms in the beneficiary country. No conditionality on fiscal policy or structural reforms pertaining to non-financial system issues is needed - apart from continued compliance with the European Council's recommendations already enforced under the Excessive Debt Procedure framework. The "institutionspecific" conditionality will pertain to EU's state-aid rule, as well as the obligation for every recapitalised bank to be restructured. So-called "horizontal" conditionality pertains to financial supervision, corporate governance and domestic laws on crisis prevention, management and resolution.

The final decision will be made by the Eurogroup under the EFSF, or by the ESM board if, by the time the full procedure is completed, the change-over has taken place. The IMF’s involvement in the process – always a touchy political issue – would be minimal. The guidelines only point to an “additional assessment of the quality of national supervisory practices by the IMF”, which needs to be “actively sought” by the beneficiary member state while the package is being implemented. The Fund is not supposed to be involved in the approval of the package itself, even if the FSAP will probably be an important input in the EU’s assessment of the recapitalisation need.

The monitoring of Spain's compliance with the conditionality to such a package would be the responsibility of the European Commission, the ECB and the EBA. The guidelines specify that "these institutions must be granted the right to conduct on-site inspections in any beneficiary financial institutions". They will have the possibility to involve other relevant experts, "such as external auditors or monitoring trustees". Note however that, in practice, the recapitalization funds are provided upfront. Therefore the effectiveness of the monitoring may be somewhat diminished.

What would be the consequences for Spain?

The current rules are unambiguous: “The beneficiary member state will remain the ultimate liable counterparty”. In our opinion, ideally such a provision should be changed, to help stopping the “sovereign/banks loop”. Still, the probability to change the ESM terms in order to allow direct recapitalisation, i.e. without raising the receiving country’s public debt, is low for now in our view. Note that a “federalization” of bank recapitalisation would always come with tricky moral hazard issues. At the very least, the receiving country would have had to offer a “first-loss guarantee” to the EFSF/ESM to protect the European peers from the financial consequence of failing recapitalisation/restructuring. This means that in any case the receiving country would still have to stomach an increase in its contingent liabilities.

Political opposition in some core countries, lack of time and daunting legal complexities are the main reasons why Spain will probably have to trigger the system as it is today. Indeed, to allow direct recapitalisation, awkward questions on the relationship between bailed-out banks and the ESM would need to be sorted out very quickly. The current guidelines state that the “capital injected… is expected to be of the highest possible quality”. Under Basel III, common equity will be the highest form of capital. Hybrid debt would not qualify. The choice for the ESM would be difficult: either inject common equity and get involved in the banks’ governance – which would entail very rapidly the creation of a federal agency with the relevant staff and expertise – or take shares stripped of their voting power, but then the ESM could neither control the banks’ management nor hold a claim on the assets. This would put the European rescue mechanism in a fragile position In any case, the possibility to change the ESM’s rules of engagement without renegotiating the entire ESM treaty – with the subsequent parliamentary ratification process in all member states – is not clearly established.

True, Article 19 of the treaty allows the ESM board to “review the list of financial instruments provided for (...) and make changes to it”. On the face of it, another instrument, specifically allowing for a “recapitalisation only loan” which would bypass the sovereigns could be added. However, this could be seen as too blatant a contradiction with the initial spirit of the treaty as well as to letter of its article 3, which describes the ESM’s purpose as “mobilise funding and provide stability support to the benefit of ESM members”.

The ESM members are the contracting parties, i.e. the governments. It is a very gray area, but that a full revision of the treaty would be needed seems to the position of the German government, as well as the ECB’s interpretation, as stated by Mario Draghi this week “the ESM forbids direct recapitalisation”.

Spain therefore has, in our view, a high probability of triggering a “recap only” loan under the current system. Discussions reported in the Sueddeutsche Zeitung and the Financial Times about the possibility to channel the funding via the FROB, Spain’s recapitalisation vehicle, would not change the fact that the loan would appear on the government’s balance sheet. It would simply help the Spanish government to “sell” the deal to its public opinion, by highlighting the fact that the EU loan would be strictly earmarked to recapitalise banks, contrasting with the “full program” approach, covering the government’s “ordinary” funding needs in Greece, Ireland and Portugal.

The size of the “recapitalisation loan” is going to be crucial to Spain. It has to be large enough to convince the markets that it will address the country’s banking issue in a credible manner, while not being large enough as to jeopardize debt sustainability.

Some estimates are already available. Fitch for instance considers in a base case that a recapitalisation effort of EUR50bn would be needed, EUR 100bn in an adverse scenario. Since the announcement that Bankia alone – c.13% of all real-estate related assets - needed an additional EUR 19bn, out of which EUR 15bn for credit impairment, the market is probably expecting large numbers, even if it would be wrong to extrapolate from Bankia, which tends to concentrate the worst risks.

According to El Pais on Thursday, quoting “parliamentary sources”, the Bank of Spain considers that two other nationalised banks, CatalunyaCaixa and Novagalicia need additional capital to the tune of EUR 9bn. The Spanish press on Thursday (El Pais, ABC) was mentioning a range of EUR40-80bn for the IMF’s assessment, to be published on Monday.

We calculate here different trajectories for Spanish public debt for three different recapitalisation scenarios: EUR 50bn, EUR 80bn and EUR 120bn. See box next page for the details of the calculations.

Under the EUR 120bn scenario (see Figure 1 in the last page of this article), Spanish public debt would remain at peak marginally below 100% of GDP (97.2% in 2014 and 2015). That would still be significantly below Italy, but Spain would be unable, in our model, to bring back by 2020 its debt below the 90% of GDP threshold which Rogoff suggests is associated with adverse macroeconomic consequences.

A figure above EUR 120bn for the recapitalisation need could become an issue for the “recap only” approach, since the guidelines make it clear that the size of the loan should remain consistent with a “sound fiscal position” for the receiving country. The risk then is that the country would be pushed in a “full program”. Another risk would also be to see Spain pushed below investment grade status by rating agencies. Fitch’s “top range” for the state-funded recapitalisation stands at EUR 100bn as they downgraded on 7 June the sovereign by 3 notches to BBB with “negative outlook”.

In the other two scenarios, however, Spain would be in the same “club” as France.

Naturally, this type of models does not take into account the risk of “market over-reaction”, where interest rates climb further so that the sustainability conditions can no longer be met. We note incidentally that it may make sense for Spain to trigger the support under the EFSF scheme, before the ESM takes over in July. Indeed, EFSF loans are pari passu, while ESM loans – except for the countries currently under program – are senior.

Since ordinary investors could be spooked by the “subordination risk” post-ESM funded recap, it would make sense for Madrid to hurry. Also it would be reasonable to expect the ECB to be more aggressive in its support of Spanish banks and sovereign following a recapitalization effort that it has consistently called for.

Still, as we stated in Focus Europe last week, we think that resorting to the euro rescue mechanism is the only option for Spain to ultimately regain credibility in the market, by giving the banks the financial strength which will allow them to precipitate the fire sales (accompanied by a further significant fall in prices) which will start clearing the housing overhang. In the meantime, Spain will have to convince on its capacity to reduce its deficit. The latest data – completely ignored by the market in the midst of the “recap drama” – are somewhat encouraging. Correcting for the acceleration in transfers to the regions to help them cope with their refinancing issues (0.7% of GDP) as well as the anticipation in the VAT paybacks (0.1%) of GDP, among others, the central government deficit for the first four months of 2012 stood at 1.4% of GDP against 1.5% in the same period of 2011. This makes the official target of 3.5% for the whole year not out of reach. The regions, also correcting for the acceleration in transfers from the central government, have reduced their deficit to 0.45% of GDP in Q1 2012 from 0.75% in Q1 2011, before some of the most important measures (50% increase in university tuition fees, cuts in healthcare) actually kicked in.

Another crucial issue, in terms of market perceptions of the fiscal adjustment’s feasibility, will be the growth outlook. The effort is obviously daunting, but we think that our assumptions there are reasonable. The impact on GDP growth of the fiscal retrenchment would peak at 1.8 pp in 2012, using the Bank of Spain’s multiplier, which takes into account the lagged impact over three years of the fiscal stance. Our headline GDP growth forecast for this year is - 1.5%. In other words, our assumption for “underlying growth”, i.e. the pace of activity, stands at +0.3%, which in our view reflects the very negative impact of construction. However, after 3 years the impact of the fiscal retrenchment would fade significantly. The scenario we describe here does not sentence Spain to “eternal austerity”. The effort would be concentrated on three years. We note as well that the unlocking of arrears accumulated by the regions worth 3.1% of GDP this year, under a syndicated loan with the main Spanish banks, should have a mitigating impact on the recession.

However, credibility has been dented in Spain. We therefore think it is going to take time for the non-residents to flock back to the sovereign bond market. Regional finances, for instance, looked fine according to the figures published in the first three quarters of 2011 before revealing a massive slippage when the annual data came up. In the meantime, local banks will need to take the slack.

Reassurance on the capital position could encourage them to support the sovereign market further, but as we suggested several times in Focus Europe these last few weeks, another round of long term liquidity by the ECB would be welcome. A credible recapitalisation of Spanish banks was probably one of the conditions for the central bank to contemplate further quantitative action, but Draghi’s press conference this week suggested that a third LTRO was not yet a possibility. It may take a few more months of sluggish credit origination to prompt the central bank into more action.


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Sun, 06/10/2012 - 15:07 | 2512543 markmotive
markmotive's picture

Spain --> Italy --> EU --> China --> Japan --> US

The whole motherf@cker is coming down

Sun, 06/10/2012 - 15:18 | 2512583 stocktivity
stocktivity's picture

German workers retire at 67...Spainish workers at 60. So Germany bails out Spain so Spainish workers can continue to retire 7 years earlier than they can. German population is stupid.

Sun, 06/10/2012 - 15:41 | 2512633 slewie the pi-rat
slewie the pi-rat's picture

perhaps everyone is slowly learing that "recap the banks" is not quite as innocent and necessarily worthwhile a financial and social project as the propagandists (the banksters) would have people believe?

Sun, 06/10/2012 - 18:17 | 2512834 Chief KnocAHoma
Chief KnocAHoma's picture

A Drudge headline is claiming that an Italian bank has declared a "Holiday". The story won't translate... anybody got info on that?

Sun, 06/10/2012 - 22:10 | 2513178 slewie the pi-rat
slewie the pi-rat's picture

can you imagine the grab-assing in a bank line in florence during a bank run?  they woulld just fuk themselves silly

Sun, 06/10/2012 - 23:06 | 2513274 andrewp111
andrewp111's picture

The Eurozone has never allowed a bank failure or a bank run. Depositors have always got paid.



Sun, 06/10/2012 - 16:13 | 2512689 Nussi34
Nussi34's picture

Anyone not starting a anti EU/EURO party is stupid.

Sun, 06/10/2012 - 17:16 | 2512765 jannewmx
jannewmx's picture

They aren't stupid. Germans are like the 'Borg' in Startrek series. They are basically saying,

" We are the Germans. Lower your shields and surrender your banks. We will add your assets and gold to our own. Your culture will adapt to service us. Resistance is futile."

Sun, 06/10/2012 - 22:33 | 2513215 dbomb12
dbomb12's picture

Just like the mural at the Denver airport, everyone surrendering their sovereignty to the cute little German boy

Sun, 06/10/2012 - 17:19 | 2512771 GtownSLV
GtownSLV's picture

Here's a shocker... a cool reception to this deal from the MSM. Shit's really bad if even the propagandist's aren't buyer:

Sun, 06/10/2012 - 18:24 | 2512851 cpzimmon
cpzimmon's picture

 If you follow Yahoo news closely you might notice that they've posted some pretty reasonable news articles lately (ring more truthful). I'm a hardcore ZH fan, so I'm sensitized to what passes the smell test. I'm not saying all their articles pass the test, but it seems to be a change for the real lately. Can't say the same for other MSM's however.

Sun, 06/10/2012 - 17:20 | 2512773 zebra
zebra's picture

yep... about as stupid as we Americans..


Sun, 06/10/2012 - 19:02 | 2512933 Wizard of Finance
Wizard of Finance's picture

Spain retirement age is @ 65 being increased to 67.

the french are the ones that believe they will retire at 60's. 

Sun, 06/10/2012 - 19:09 | 2512946 Stoploss
Stoploss's picture

French now at 60 also.

The Germans must be ate the fuck up with the dumbass, as there is no other conceivable reason apparently, other than just "wanting " to help out.

They sound like nice people, stupid, but nice.

Mon, 06/11/2012 - 15:40 | 2515766 Cadavre
Cadavre's picture

Germany wants gold for its stash of EURs - that's smart

Mon, 06/11/2012 - 05:03 | 2513682 Cadavre
Cadavre's picture

So Germany bails out Spain so Spainish workers can continue to retire 7 years earlier than they can.

If one was to do PR for ISDA board members that sold CDS coverage on Spanish Bank liabilities, the above statement would be `bout as textbook as any marketing PR.

Spanish workers are getting bailed out. The bail is to protect US CDS writers that sit on the ISDA board.

Blloomberg Nov 2011
“The ISDA ruling favors the big banks that sold the CDS because those banks sit on the ISDA board,” said Tavakoli, a former head of mortgage-backed-securities marketing at Merrill Lynch & Co. “Smaller banks or other institutions that might have bought the swaps to protect against a default like this don’t have as much influence.”

It's not about the bond holders, or Spanish workers (unemplument in Spain is about 25%), or small institutions. No one gives a fuck about anything except protecting (mostly and again) US dark pool CDS writers like Morgue and Sachs from another collateral call (again). THe bondholders already took a hair cut. The guys without reserves (other than accounts receivable)alwways seem to be seliing coverage they can't capitalize. Given the premiums charged for insuring Spanish debt, around half a million to cover a 10 Million IOU. business would be great it it weren't for those pesky bondholders always wanting to get their principal back!

Here's how the scam was set up (Reuters Apr 2012)
"They've actually tightened the relationship between the banks and the sovereign. So the banks have been buying sovereign debt and that has made their fortunes even more intertwined than they have previously," he said.

Love the way CNN played it''s roll in protecting the scammers (CNN Money Jan 2012)
America's banks have rightly pointed out that they are only minimally exposed to European government debt. But they have been buying and selling default protection on those bonds, doing deals mainly with investors in the eurozone. Exactly how much is not known, because CDS are held off-balance-sheet.

Spanish workers ain't getting bailed out. They ain't getting sh*t (if0en the art was read right(, They been Bain Capital-ed out of a job way before this shit hit.. Have to admit. It's beautiful. A classic set up. Same pattern everytime.

If not for anything elsem Youz gotz to luv the white shoe boyz for dere chutzpa!


Sun, 06/10/2012 - 15:29 | 2512601 krispkritter
krispkritter's picture

I theenk we're going to need a beegger bank Senor...

Sun, 06/10/2012 - 22:36 | 2513224 dbomb12
dbomb12's picture

And a longer siesta with a bigger sombrero

Sun, 06/10/2012 - 15:41 | 2512634 veyron
veyron's picture

Until that point, Bob 'off the lows' Pissani will be cheerleading the bounce ...

Sun, 06/10/2012 - 15:54 | 2512666 SheepRevolution
SheepRevolution's picture

You left out the last step: the entire World

Sun, 06/10/2012 - 17:45 | 2512803 ThaBigPerm
ThaBigPerm's picture

Italian bank appears to be the first to declare a "holiday" ...

Google translation:

Credit - NO LEVIES - PAYMENTS OF BNI for account holders

BNI depositors unable to make withdrawals / payments, payments of utility bills, mortgage payments, taxes

... Peter Giordano, Adiconsum: "Grave of the Bank of Italy's attitude that takes action without considering the impact on depositors, and especially on single-income families and pensioners"

Adiconsum Bank of Italy asks for an urgent meeting and the lifting of the

The Bank of Italy authorized the suspension of payments by Bank Network Investments SpA (BNI) without communicating anything to the depositors.

Very serious and unacceptable - says Peter Jordan, Secretary General Adiconsum - the attitude of the Bank of Italy SpA in each BNI, because highly prejudicial to the interests of customers.

Sun, 06/10/2012 - 18:25 | 2512852 Fail2Deliver
Fail2Deliver's picture

This is obviously bullish...

Sun, 06/10/2012 - 17:48 | 2512808 TheGardener
TheGardener's picture

"which had it contaged, would have impacted the biggest banking edifice in Europe by orders of magnitude: Deutsche Bank itself."

Yak, broke they orders of magnitude. DB aint no zombie on new accounting rules ,key banking order...

Sun, 06/10/2012 - 22:10 | 2513177 Chopes
Chopes's picture

I agree! Where's does the UK fit in the order of chaos?

Sun, 06/10/2012 - 15:21 | 2512549 falak pema
falak pema's picture

good summary, thanks.

Reposted :


BTW : this post contradicts the previous post on ZH where it was stated that Spain capitulated WITHOUT CONDITIONS its banking bailout to supranational Europe. It turns out its the OTHER way round, no conditions, no further austerity and the 100 B loan by EFSF is NOT to the Spanish Banks but to Spanish government. Which means "officially" Rajoy does not lose face to the rest of the world. "We are still in charge of our banking destiny", he can proudly say to his own people...

But if we go down this road, its another way of saying Germany is being pushed by EVENTS to go "joint and several" and next in line will be Ireland, Portugal, then Greece (if the xtreme left win), then Italy. They will ALL be wanting the better loan/capital reboot terms via EFSF/ESM for their banking sectors. 

I know it makes no sense as Germany and others cannot back it up. This is just can kicking, but it means to all intents and purposes, that Hollande as agent of "back door" Eurobonding has won and Merkel as hardliner "limited" bail out proponent has lost. The momentum is now to defacto "joint and several" to save the Banking Union, via State side involvement in each nation sate; for which the ultimate lender of last resort is : Germany!!!!

Sun, 06/10/2012 - 15:43 | 2512639 Al Gorerhythm
Al Gorerhythm's picture

A bailout is no more than debt forgiveness. Not 100% forgiveness but a renegotiated compomise. Germany has become the surrogate mother. My post from yesterday: Germans capitulate...... unconditionally. Bailouts for everyone! Debt jubilee. Here, I give you my baby's milk. Suck on my Bavarian tit. 

Sun, 06/10/2012 - 15:10 | 2512553 strongband
strongband's picture

100bil. That's a lot of spiderman towels.

Sun, 06/10/2012 - 17:22 | 2512776 Peter Pan
Peter Pan's picture

They all know that the rescue of Spain will be in the order of 400 billion euros plus plus plus.

But you can't spook the market with the truth.

Therefore make a 100 billion euro deposit and start writing out another cheque.

How any fool thinks they can reverse massive over investment in housing, recreate the illusory capital gains brought on by the mania, restore employment, curb government spending and service debt all at the same time, is either a mark of incompetence or a sign that the real agenda lies elsewhere.

Sun, 06/10/2012 - 15:12 | 2512564 Sudden Debt
Sudden Debt's picture

it needs to be big enough to convince the market that Spain's banking issue = it needs to be a good smokescreen that lasts another 12 months... Whatever the costs...

Sun, 06/10/2012 - 15:21 | 2512589 PontifexMaximus
PontifexMaximus's picture

......another 12 months

Sun, 06/10/2012 - 16:16 | 2512692 Sudden Debt
Sudden Debt's picture

Okay... 6? Meet me in the middle here man!

Sun, 06/10/2012 - 15:16 | 2512571 BlueStreet
BlueStreet's picture

That's a lot to read on a Sunday.  Thanks though Tyler for the yeoman's work, this story on a weekend is a perfect example of why ZH is both respected and appreciated to such a degree.  

Sun, 06/10/2012 - 17:33 | 2512788 BlackholeDivestment
BlackholeDivestment's picture

...road to perdition, oh no, we are not ''on'' it. Really, honest. Lol. 

P.S. ...don't tell anyone, but, nice link, and, ZH rocks. Shhh. Now please resume kicking your own ass. Thank you very much. 

Beelzebub (AKA Mr. Strong Delusion)


Sun, 06/10/2012 - 15:15 | 2512572 francis_sawyer
francis_sawyer's picture

Feckless grasping at economic straws...

Sun, 06/10/2012 - 15:15 | 2512574 Vegetius
Vegetius's picture

- credibility has been dented in Spain -

 Do you mean all the lies and bullshit by the EU and Spain have had an effect on things. Well lets wait and see how the credibility is as the amount needed climbs and climbs ever upwards.

Time for a quote -

“The second vice is lying, the first is running in debt.”
-Benjamin Franklin

lets have another -

Hudson : Oh dear Lord Jesus, this ain't happening, man... This can't be happening, man! This isn't happening!

Sun, 06/10/2012 - 16:20 | 2512699 Sudden Debt
Sudden Debt's picture

All I've seen this weekend is lies, bullshit and 3 popups on financial sites that my IP has been blocked and I can't post anymore for missappropriat conduct... Go figure...
And I just had a new Ipad and a new email adress to bypass that bullshit... I guess I'll stick arround here for another few years... :)

Sun, 06/10/2012 - 15:18 | 2512581 AssFire
AssFire's picture

Forget the "Sick man of Europe"...

Europe is sick, man.

Sun, 06/10/2012 - 16:21 | 2512704 Sudden Debt
Sudden Debt's picture

Europe is the fugitive! The crooks are staying and the innocent on the run!

Sun, 06/10/2012 - 22:46 | 2513233 dbomb12
dbomb12's picture

Watch out for the Frito bandito

Sun, 06/10/2012 - 15:26 | 2512598 RoadKill
RoadKill's picture

“The beneficiary member state will remain the ultimate liable counterparty”. In our opinion, ideally such a provision should be changed, to help stopping the “sovereign/banks loop”.

EFSF loans are pari passu, while ESM loans – except for the countries currently under program – are senior.  Since ordinary investors could be spooked by the “subordination risk” post-ESM funded recap, it would make sense for Madrid to hurry

I really don't see any good news in this.  The size of the bailout announced (E100bbn) is at the high-end of expectations.  Using DB's charts a E100bbn bailout results in debt peaking at 95.5% of GDP in 2015 and remaining above 90% in 2020.  And that's assuming a mild recession in 2012/2013 and a return to growth in 2014 that accelerates going forward.  Since the bank bailout is above expectations its only fair to assume that the regional bailout will be above expectations.  And the debt is recourse to Spain's national accounts AND SENIOR to market debt.  So worst of all world's?

If DB's analysis reflects expectations going into Friday - MONDAY SHOULD BE RISK-OFF.  Of course I'm assuming at least through the 1st hour of US trading it will be up, up and away!

Sun, 06/10/2012 - 15:26 | 2512599 junkyardjack
junkyardjack's picture

It'll be interesting to see what markets think.  We were already pushing towards a weak bullish move maybe this will push it over the 1330 resistance

Sun, 06/10/2012 - 16:44 | 2512733 valley chick
valley chick's picture

they only read headlines not the details.

Sun, 06/10/2012 - 15:28 | 2512603 guiriduro
guiriduro's picture

I don't doubt that these banks need recapitalization, but can someone in the know explain why the state, beyond stating the simple fact the banks need recap and leaving them to the market (that won't touch them with a barge pole), why on earth this needs to be on the public purse at all? They screwed up and lent too much, their stupid boards and silent shareholders appointed a pyramid of fools who blew up their balance sheet with risk and rewarded those fools with bonuses, now all that equity gets wiped out. Tough, but fair. Bond holders lent without understanding the risk, wipe out. Depositors are called such because they are not risk taking, and it's fair that the state should support them on bank failure, but that's about it. On that basis, a lot of banks would fail, but the state wouldn't get burdened much and would open up space for new startups. Am I really missing something or is there some huge imperative I haven't accounted for?

Sun, 06/10/2012 - 23:12 | 2513286 andrewp111
andrewp111's picture

The  Eurozone NEVER allows banks to fail. Depositors and bondholders always get paid. I guess the EZ banking system is so overleveraged that TPTB have no choice. No bank runs can be tolerated.



Sun, 06/10/2012 - 15:28 | 2512604 Atomizer
Atomizer's picture

No Sir/dear, the children running the asylum will be caught in the end. The population can be controlled once DNA sequencing is complete. Watch the end of movie


Lord Of The Flies ending


Good luck to your evasion tactics, you will be found in the end.. ;>p

This is not a joke ZH viewers. They know & so do I...

Sun, 06/10/2012 - 15:29 | 2512607 LeBalance
LeBalance's picture

Get these guys and gals to AA pronto, they are driving the BUS!

Sun, 06/10/2012 - 21:55 | 2513163 dracos_ghost
dracos_ghost's picture

A short bus.

Seems like a lot of words just to say "Kick the Can a little longer".

Sun, 06/10/2012 - 15:29 | 2512609 kdervin
kdervin's picture

Reminds me of a line from Thomas Pakenham's "Scramble for Africa" - he's describing Portugal in the late 19th century but it applies to Europe - nay worldwide:

"Half-senile and three-quarters bankrupt."

(Of course, being three-quarters bankrupt is like being three-quarters pregnant - you are or you aren't.)


Sun, 06/10/2012 - 15:30 | 2512613 doomandbloom
doomandbloom's picture

its NOT a bailout....


thats what i heard

Sun, 06/10/2012 - 15:46 | 2512648 Al Gorerhythm
Al Gorerhythm's picture

It's a "re-capitalization" using: spare cash?

Sun, 06/10/2012 - 15:31 | 2512615 larry david
larry david's picture

I see eurusd trading up over a cent from friday.  1.2650

Sun, 06/10/2012 - 15:37 | 2512627 ghostzapper
ghostzapper's picture

of course it is.  everything is fine.  just listen to Andrew and Becky in the morning.  All is well.  nothing to see here move along sheeple. 

Sun, 06/10/2012 - 16:08 | 2512684 stocktivity
stocktivity's picture

even worse - Pisani and Cramer.....Santelli may rant though

Sun, 06/10/2012 - 21:23 | 2512732 withnmeans
withnmeans's picture

Yes, Santelli will rant (he is the only one with a brain on that network).

Let us all be real here, this will go on for a couple more months. Can we fix this, NO...  Can you call your Congressman or Senator, Yes... Will it do any good, No...  

It will Reset, this is a given. This is not a bad thing, we all may not make as much money as we previously did, however with a reset our cost of living goes down as well.

Do not panic, this is a natural thing for the markets to readjust. As with you all, I too hope the Evil Do'ers get their time in the CAN.


Oh, as for Boob Piss-any, don't give him the time of day "he is a puppet for a paycheck". I'm sure he has been a patsy all his life...

Sun, 06/10/2012 - 22:43 | 2513235 CrashisOptimistic
CrashisOptimistic's picture

You're just wrong, for the worst of reasons.

You're absolutely right if the rules aren't changed, but they will be changed.  Money is an abstract concept.  It does not exist in nature.

Something abstract can be changed by decree, and if it threatens the system, it WILL be changed by decree.

Only oil can take all this down.  Physics can't be changed by decree.

Sun, 06/10/2012 - 15:38 | 2512629 Arnold Ziffel
Arnold Ziffel's picture

"recapitalisation tool"....euphemistically speaking, of course.....

Sun, 06/10/2012 - 15:44 | 2512641 FL_Conservative
FL_Conservative's picture

Nice to see that DB is looking out for its own interests first and foremost.  I bet they're even getting a fee to put this all together.  MFr's.  And you want to know WHY this system needs to go down hard?  Because the greedy bankers and politicians want their cake and eat it too.

Sun, 06/10/2012 - 15:48 | 2512642 SDRII
SDRII's picture

so what happens to all the debt the banks have been scarfing down at the auctions? Presumably this should mean the ushering in of outside investors  - corzine comeback? - now that all is a go. If bonds go to 10% would securities portfolios take a loss - rhetorical. But Spanish banking NIMs will improve at least....Do the banks double down at the auctions now that they are "well capitalized?"

Sun, 06/10/2012 - 15:47 | 2512653 SDRII
SDRII's picture

Here are th IMF conclusions from their latest 2011 review - a rehash of the Washington consensus.

Spain's IIP, in both gross and net terms<>, creates the potential for large negative outward spillovers, as country specific shocks may be transmitted through both negative valuation effects and international deleveraging. From the perspective of Spain's liabilities, the composition of external debt highlights banks as the key channel. International bank exposures to Spain (based on BIS consolidated foreign claims data) point to the prevalence of German and French banks' claims (representing respectively a quarter and a fifth of foreign claims at end 2010); other exposures (including derivatives) from U.S. banks are also significant. Portfolio holdings estimates show the continued predominance of France and Germany in foreign portfolio investment in Spain, with France the largest non-resident holder of Spanish government debt in particular.

IMF Proposed Solutions

*         Collective bargaining needs to be effectively decentralized to the firm level to allow wages to adjust to firm-specific conditions and foster employment and the reallocation of labor.

*         Social partners should move away from inflation indexation, which is endemic compared with other countries. It is inconsistent with the functioning of a currency union and especially damaging during times of high unemployment, structural shocks, and cost-push inflation. Instead, reference could be made to guidelines based on productivity and regaining competitiveness with main trading partner countries. 

*         Severance payments should be further lowered to at least EU average levels and should be better designed to make permanent hires more attractive.

*         low efficiency linked to the preponderance of SMEs that are unable to exploit fully economies of scale (e.g. similarly to Italy, only 24 percent of businesses have more than 250 employees versus 57 percent in Germany and 46 percent in France, and productivity is lower), 

*         The recovery is likely to be modest and export-led over the medium term. Export growth is projected to remain strong, in line with partner country demand, while domestic demand is expected to improve gradually.

Sun, 06/10/2012 - 17:25 | 2512781 I am Jobe
I am Jobe's picture

whoo hoo. I guess this will soon come to Amerika. Bend Over Bitchezzz. Matter of time. Keep putting that fucking lipstick.

Sun, 06/10/2012 - 15:47 | 2512654 RobotTrader
RobotTrader's picture

Taking advice from a PigMan firm again?


What does Goldman have to say?

How about Morgan Stanley?



Might as well round up all the "Experts".

None of whom saw this coming.


Sun, 06/10/2012 - 16:24 | 2512708 Sudden Debt
Sudden Debt's picture

MS is leaving europe. That's a sign.
Citybank sold it's european branches. That's a sign.
JPM is blowing up at home
And goldman sachs... Well they have a new job cooking the books again for spain like they did last time.

Yep... I think they'll do good on monday...

Sun, 06/10/2012 - 18:18 | 2512839 BlueCollaredOne
BlueCollaredOne's picture

MS is not only leaving Europe, but pretty soon the earth.

Sun, 06/10/2012 - 16:07 | 2512683 Angel Face
Angel Face's picture

Anyone for a nice game of 3 card monte?

Sun, 06/10/2012 - 16:30 | 2512709 Sudden Debt
Sudden Debt's picture

Right after my solo game of russian roulette!

Sun, 06/10/2012 - 16:16 | 2512694 davenpuerto
davenpuerto's picture

"the amount of capital needed would be determined by a stress-testing exercise, "


Stress tests - ah yes they work well...when was the last one, remind me


Sun, 06/10/2012 - 16:27 | 2512712 Sudden Debt
Sudden Debt's picture

= as much money as they can get their hands on.

Sun, 06/10/2012 - 16:16 | 2512695 I am Jobe
I am Jobe's picture

Wow wee. Soon this will be in Amerika. I wonder if Vaseline will be provided?

Sun, 06/10/2012 - 16:28 | 2512714 Sudden Debt
Sudden Debt's picture

Yep, we've even got the vanilla flavored and the mokka taste for the hard working man!

Sun, 06/10/2012 - 17:37 | 2512793 I am Jobe
I am Jobe's picture

where where. I am sure the sheeples will line up for the crap.

Sun, 06/10/2012 - 16:23 | 2512706 Sandmann
Sandmann's picture

Now you see why Dr Paul Achleitner of Allianz SE was made Chairman of the Aufsichtsrat of Deutsche Bank a week ago. He is the one who had large input on the EFSF and ESM so it is natural the Spain Corporate Welfare Rescue will be in the interersts of Deutsche Bank, which will be the last surviving institution in Germany just as it was in 1945 under Hermann Josef Abs having had a direct hand in seizing control of foreign businesses throughout Europe and choosing which ones should be seized

Sun, 06/10/2012 - 18:27 | 2512859 JR
JR's picture

+ a billion, Sandmann.  (Well, that’s inflation.)

They are the players and we are the payers in this plot to unite sovereign nations into one-world governance by and for the financial elites. We’re getting a taste of the tribute we'll  be paying under their monetary “system" should they succeed.

It's only been a year since Jean-Claude Trichet as president of the ECB proposed his international financial coup d’état over Europe based on financial asset stripping, outlined while accepting the “Charlemagne” prize at Aachen, Germany:  “In this Union of tomorrow, or of the day after tomorrow, would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the Union?”

Mon, 06/11/2012 - 07:32 | 2513816 Ghordius
Ghordius's picture

+ a trillion, Sandmann. (this comment has been made a bit later)

I heard that speech. At that time, the "day after tomorrow" was meant to be let's say somewhere around 2050.

And the "Ministry of Finance of the Union" was a brainchild that was to promote the now forgotten goal of Tax Harmonisation, meaning that the EU countries would take stock of their existing taxes and somehow make them similar.

A concept that was meant to help companies and individuals, by making the tax environment transparent, comparable and somehow a bit more logical... eh, happy days...

Sun, 06/10/2012 - 16:28 | 2512713 valkir
valkir's picture

Put your pink glases on,wear you spiderman towel,and get some popcorn bitchez.

Sun, 06/10/2012 - 16:38 | 2512726 carbonmutant
carbonmutant's picture

This plan has so many weasel clauses that it hard to imagine that it has anything to do with bailing out Spanish banks.

It certainly will do nothing for the solvency of the Spanish economy.

Sun, 06/10/2012 - 16:39 | 2512727 Black Forest
Black Forest's picture


Sun, 06/10/2012 - 16:42 | 2512730 green888
green888's picture

Stress testing exercise-- Banker, on your big head bounce

UP ...... DOWN

UP ...... DOWN

UP...... and hold it

and DOWN

Sun, 06/10/2012 - 16:44 | 2512735 foxenburg
foxenburg's picture

yada yada. btw i live in spain. as a self confessed idiot, the only way forward i see is for the banks to be forced to sell by auction or tender immediately and only for cash every single fucking one of the million plus homes, apartments, whanot that are on the banks' books. that would reduce the issue to quantifiable numbers otherwise we will be carrying forward unlikely and absurd assets for generations to come.

Sun, 06/10/2012 - 16:54 | 2512746 JR
JR's picture

Deutsche Bank, a global banking company and the largest German bank and largest private bank in the Eurozone whose profit fell 34 percent in the first quarter, turns out to be the bankruptcy judge. And now, they are the journalist reporter of what’s going on.

Not only are they the judge, the jury (acting for the cartel), the defendant (creditor), and the prosecutor (defining the terms to be enforced), they probably fired the shot in the ECB crime. The only thing they are not is the victim – that turns out to be the people.

If this weekend scenario is right, then similar scenarios for other bailout countries would have fixed the European crisis long ago. But they can’t get the people to agree. Every one of the populations of countries involved is resisting.

Every weekend we go through a fix, and then it unravels.

Wrote  Landon Thomas Jr. in the the NY Times today:  “For decades, the loans that European banks have made to individuals, corporations and their own governments have far exceeded the deposits they have been able to collect — the money that typically serves as a bank’s main source of ready funds. To plug this funding gap, which analysts estimate to be about €1.3 trillion currently, European banks have borrowed heavily from foreign banks and money market funds. That is why European banks have an average loan-to-deposit ratio exceeding 110 percent — meaning that on any given day, they owe more money than they have on hand.”

Without government money in 2009, Deutsche Bank AG could have become one of the biggest creditors in a bankruptcy filing by AIG, the world’s largest insurer, according to Bloomberg because of the creditors' billions in losses on subprime bonds and corporate debt.

Sun, 06/10/2012 - 16:55 | 2512747 carbonmutant
carbonmutant's picture

 Has anybody noticed the lack of bank failures in the EU?... in spite of the fact that the countries themselves are insolvent?

Sun, 06/10/2012 - 23:16 | 2513291 andrewp111
andrewp111's picture

BI noticed this. The Eurozone never allows bank failures.

Sun, 06/10/2012 - 17:02 | 2512754 Bastiat
Bastiat's picture

Europe:  ". . . as strong as a nutshell and as leaky as an unstanched wench"   (Shakespearre, The Tempest.)

Sun, 06/10/2012 - 17:18 | 2512769 Debugas
Debugas's picture

it is laughable "keep public debt below 95% of GDP at peak and bring it back below 90% by 2020"

Let's be serious - this debt can never be repaid

Sun, 06/10/2012 - 18:55 | 2512923 Amish Hacker
Amish Hacker's picture



Sun, 06/10/2012 - 17:23 | 2512779 I am Jobe
I am Jobe's picture

I guess this Christmas there will be no waffle iron fucking sale on Black Friday. Boo hoo, .

Sun, 06/10/2012 - 17:33 | 2512789 RoadKill
RoadKill's picture

Why so much noise and hubiris over the Spanish bailout, when the only real news is that the debt will be recourse to Spain and will subordinate all existing debt.  I have yet to see anything on China's numbers, even though its 10x the size of Spain.


As a refresher.


 China's factory output rose 9.6 percent in May from a year ago, missing expectations of 9.9% growth and further entrenching concerns that the world's second-largest economy may slip into its worst downturn in years.  Furthermore, retail sales underperformed expectations for a 14.3 percent annual growth, rising instead by 13.8%percent in May from a year earlier.  Saturday's data is the latest evidence that China's economy is fast losing steam, a scenario likely to scare global investors who are already unnerved by Europe's financial mayhem, and raises the pressure on Beijing to take bolder policy action to steady growth.


Sun, 06/10/2012 - 17:36 | 2512792 CrashisOptimistic
CrashisOptimistic's picture

I am seeing Euro up 1.30.  1% on the open.

Sun, 06/10/2012 - 17:38 | 2512794 carbonmutant
carbonmutant's picture

EURO/USD 1.2660 and climbing...

London will tell the tale...

Mon, 06/11/2012 - 06:24 | 2513732 falak pema
falak pema's picture

Choice between USD and Euro is no choice, as long as PMs have no real DIVA type poise as they are controlled by the TBTF boys; His Master's Voice in ETF rigged monopoly. London only has one tale to tell its the TAIL of the WS Haley comet, and its heading south in the "long" run. 

Sun, 06/10/2012 - 17:39 | 2512796 sudzee
sudzee's picture

Spaniards will continue to pull deposits. Another 10 billion out will require an additional 125 billion and so on. Spanish taxpayers are bailing out not Spain but all of the largest banks in the world.

Sun, 06/10/2012 - 17:38 | 2512797 CrashisOptimistic
CrashisOptimistic's picture

Actually I expected more, and Spanish bonds aren't open in that market.

Sun, 06/10/2012 - 17:59 | 2512819 The Count
The Count's picture

They have all lost their freakin minds! We need a 2nd French revolution, all else will be futile. Off with their heads!



Sun, 06/10/2012 - 18:09 | 2512829 Iconoclast
Iconoclast's picture

Spanish banks have circa 3 trl euro of real estate loans, suggestions that the market has another 20% correction to go and the default rate is peaking at 20%. ergo they must need minimum 600 bl just to prop up the loan book..

Sun, 06/10/2012 - 18:16 | 2512830 kill switch
kill switch's picture

Sunday night JAZZ,, GRP All Stars


Get the point counterpoint with these two sax players,, amazing @2:55

Sun, 06/10/2012 - 18:40 | 2512850 newengland
newengland's picture

Zero Hedge, simply the best financial journalism, a proper Fight Club.

Meanwhile, the silence from Germany's political class is deafening. ETA and the rich Catalan have yet to deliver their verdict in Spain.

This bail out of Spanish banks (instead of letting all failed banks in the world go into bankruptcy and prosecute any fraud  and let better banks survive as per honest capitalism) is far from a done deal.

See? I'm getting the hang of ZH parenthesis and clauses ;-D

Y Espagna no es Greece, Portugal, Eire.

Sun, 06/10/2012 - 18:41 | 2512888 Poor Grogman
Poor Grogman's picture

No politician in their right mind would consider holding a press conference and telling the sheeple that all their bank deposits were gone.

The bailouts will continue because they can.

The irony is that the "short term fix" which prevents the sheeple taking to the streets right now, will in the end bring the whole ponzi edifice down.

The sheeple believe that banks are "risk free" and that paradigm is one of the pillars that gives the ponzi scheme some superficial credibility.

Sun, 06/10/2012 - 18:46 | 2512896 newengland
newengland's picture

Perhaps true in some places. No en Espagna, the home of the companadas which spawned the weaker OWS movement of easily co-opted pretty politics.

There will be no bail out of banks in Spain until ETA and the Catalan agree. Still waiting....and I wonder whether Germany's own Bader Meinhoff legacy is too. Sinn Fein has seen its vote rise in Eire since 2008, for example.

It is time for the technocrats of the Trilateral Commission and Rockefeller/Rothschild corporatist psychopaths to realise that only genuine negotiation will spare them from their worst nightmares, and they ought to be grateful that honest business, capitalists and people are willing to negotiate rather than blow them to smithereens...for now.

Sun, 06/10/2012 - 18:49 | 2512907 Wizard of Finance
Wizard of Finance's picture

the biggest banking edifice in Europe by orders of magnitude: Deutsche Bank itself. 


where do you get this shit from? DB is far from being the biggest banking by either balance, mkt cap, or by any other standard, including the height of their headquarters. 


german banks do not exist. they are up to their limits in Spanish mortgages, that they bought with full appetite and knowledge. 


This is why Germany wants only to bail out the spanish Banks, because it is their banks the ultimate holders of the real estate toxic waste. 


Spanish government wants a central european banking agency, because they know that the extremely tough standards being imposed on spanish banks cannot be aplied on other european institutions.

Spanish banks have liquidity/funding problems, but not solvency.

german bank are swimming in liquidity these days, but their balance sheets are full of shit ( greek shit, italian, Spanish) . they can easily survive with this liquidity, but to survive in the long run, they need these rescue packages to apply to greece, ireland, spanish bank, and even italy. It is the shity german banks deposits what is ultimately at risk.  

Sun, 06/10/2012 - 18:58 | 2512929 newengland
newengland's picture


True. Let's see what the Spanish people have to say about this stitch up by the biggest banks and their political pets in Madrid, Berlin, Brussels, London and New York.

Interesting that the fat lady refuses to sing in public. This so-called 'historic deal' hears not one word from Frau Merkel.

Sun, 06/10/2012 - 20:28 | 2513055 JR
JR's picture

where do you get this shit from?

Josef “Ackermann, 63, emerged from the panic of 2008 as the most powerful banker in Europe and, depending on whom you ask, possibly the most dangerous one, too. As the chief executive of Europe’s largest bank (Deutsche) and a symbol of German financial might, he is at the center of more concentric circles of power than any other banker on the Continent.  --  from "Deutsche Bank’s Chief Casts Long Shadow in Europe,” the NY Times, June 11, 2011, by Jack Ewing and Liz Alderman FRANKFORT

Rob Berger in Banking listed The 10 Largest Banks in the World in June 2010 beginning with the following:

BNP Paribas (BNP) – This French bank comes in at No. 1 with $2.96 trillion in assets.  BNP is one of the largest global banking networks in the world with operations in 84 countries.  BNP has four domestic retail banking markets located in France, Italy, Belgium and Luxembourg.  In April 2009, as a result of BNP’s 75% purchase of Fortis Bank, the Belgian bank is now the largest Eurozone deposit holder.

Royal Bank of Scotland (RBS) Group – RBS Group ranks as the number two bank in terms of assets held. Currently, the British government is the largest owner of the bank…  As of May 2010, RBS Group had $2.75 trillion in assets.

Barclays PLC (Barclay’s) – Barclays, with $2.23 trillion in assets, is a British financial services firm operating worldwide. It is a holding company listed on the London and New York Stock exchanges, is a component of the FTSE 100 Index and until 2008 was also listed on the Tokyo Stock Exchange…

Deutsche Bank – Deutsche Bank, the largest German bank with $2.16 trillion in assets, has a strong presence throughout Germany and Europe and continues to grow in North America and Asia. As of March 31, 2010, Deutsche Bank had approximately 2,000 branches in 72 countries.

Sun, 06/10/2012 - 19:03 | 2512936 sudzee
sudzee's picture

History is repeating itself. Developed countries sold off all their gold to maintain confdence in paper. When the physical gold ran out TPTB created paper gold and flooded markets to maintain confidence in paper. The problem is that the giant pool of everything paper sprung a leak. Bad money gone to good. Those looking to presurve their wealth used the low price, created by TPTB, to withdraw from the con into the only available option left open to them. The fiat system can't work if it doesn't control every aspect of the system. As more and more real wealth is pulled from the con, leverage, in all things paper rises higher and higher
until all confidence in everything paper just dies a sudden death. Everyone trying at that time to get out will get a rude awakening when they realize they are locked into a system with no way out. When confidence in paper is finally lost those locked into the system will have to compete against the printing presses of developed coutries trying to buy back the gold that they were supposed to have. Can't let the people know that they were robbed years ago. The far east has now joined the leak of bad money to good so i think we are very close to the end of the confidence experiment started in the early 70's. Fiat systems always fail due to corruption. This time is no different.

Mon, 06/11/2012 - 03:41 | 2513626 Olympia
Olympia's picture

Imperialism and loansharking are perfectly identified ...identified, exactly as imperialism used to be identified with war conflicts. This is why we believe that the consequences of some “mistakes” easily reveal the “motives” of those who planned them.

In reality, there is a permanent “recycling” of the same tactics that lead to the mistake and then to disaster. The method used in the case of Greece is a version of the practice that started from the imperialistic centers to expand all over the world. Simply, in Greece, that is a “terminal”, banking illegal superprofits were produced so that loan sharks “spoil” the Greek public assets, while at the “center” of the planning banking superprofits were created so that loan sharks “spoil” the "Greeces”. Exactly the same illegal things were planned to bring profit to their loan sharking inspirators ...illegal profits.

More info about Global Debt Crisis here:


Sun, 06/10/2012 - 19:28 | 2512972 Coldfire
Coldfire's picture

It is interesting how no Spanish bank is claiming it doesn't need a bailout. If the banks will die without bailouts, how will adding more debt to their balance sheets improve their viability? But this is the wrong narrative, isn't it? Behind all the smoke what we are seeing is the ongoing socialization of bankster losses. It's a good thing for the power elite that the vast ballast of society does not understand that they and their families are being financially ass-raped. An epic crime openly perpetrated with impunity. For now.

Sun, 06/10/2012 - 19:51 | 2513004 disabledvet
disabledvet's picture

The sole purpose of the liquidity injection is to get the Spanish banks to buy the Spanish debt. Whatever the method the goal is the same as it was in the USA. Given how low rates are in "the center" there is a lot of firepower in theory. Reason for equity rally back in the States in my view is that it doesn't get any more unproductive as a use for capital...let alone what it does to risk taking in general. Of course you could argue European equities in the Zone have already priced this in. Generally speaking tho when equities slam lower they end up staying there when the response is all about Sovereigns.

Sun, 06/10/2012 - 21:30 | 2513131 Angel Face
Angel Face's picture

US banks didn't need bailouts either.  Hank Paulson MADE them take a handout.  Rotten bastard.

Sun, 06/10/2012 - 22:11 | 2513179 newengland
newengland's picture


Quite. That barsteward Paulson threatened BoA and others, all for the good of the globalist central bank cartel and its freakonomics; not for the good of sound banks in the USA or elsewhere.

Sun, 06/10/2012 - 23:50 | 2513359 Grand Supercycle
Grand Supercycle's picture

Rally Warning from last week:

'Daily chart now gives bullish warning and significant
SPX rally & USDX retracement should commence in a week or so'

Mon, 06/11/2012 - 02:40 | 2513533 elwu
elwu's picture

"The beneficiary member state will remain the ultimate liable counterparty"

Must be. Otherwise there is no incentive at all for this state to make the required structural changes.

To socialize banks problems by passing the bill to the eurozone's taxpayers is a rather perveted sort of 'capitalism' anyway.

Logically, the finance industry's profits must under such conditions be socialized in parallel, of course, none of the political 'elite' talks about this...

Mon, 06/11/2012 - 03:45 | 2513630 vh070
vh070's picture

Them numbers look like fantasy.

Mon, 06/11/2012 - 04:27 | 2513658 Element
Element's picture

The Greek bailout bought them two years ... what's this one going to manage?

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