Uncle Sam To The Rescue: IMF Creates New European Bail Out Facility, The "Precautionary And Flexible Credit Lines"

Tyler Durden's picture

And here comes Uncle Sam:


And here is the math: Italy's quota is 7,882.3SDR; Spain is 4,023.4 SDR. Multiply by 5 and you get 40 Billion and 20 billion SDRs respectively, which  translates to $61 billion and $31 billion. A total of $91 billion in additional capacity? And that's it: enough to fund Italy and Spain for... two months. This is the best the regime can come up with? 

Good thing America can get its own house in order so it can go out and fix the world next, not with one, but two credit lines. Incidentally, absent the US ratifying these two credit lines they are as good as useless because with 17.7% of the total allocation, the US is the defacto lender of only resort (since this is used to bail out Europe, which effectively means Europe will not be lending into these credit lines). And good luck passing a global bail out vehicle through the Frankenstein monster that is the US legislative body.

And the final nail why this move is completely irrelevant:

The IMF board of governors agreed December to roughly double quotas from around $375 billion to around $750 billion. But out of the 187 member countries, only 17 have legally accepted the increase, including Japan, the U.K. and Korea. Most of the countries with the biggest quotas, such as the U.S., China and Germany, haven't yet gone through the legal process, such as parliamentary or congressional approval, need to hand over their promised dues.


The precautionary Credit Line:

Precautionary Credit Line     The Precautionary Credit Line (PCL) has been established to provide effective crisis prevention to members with sound fundamentals, policies, and institutional policy frameworks that have no actual balance of payments need at the time of approval of the PCL, but moderate vulnerabilities that would not meet the FCL’s qualification standard. Members may request an arrangement with duration of between one and two years. Access under an arrangement with one-year duration shall not exceed 500 percent of quota, with the entire amount being made available upon approval of such arrangement and remaining available throughout the arrangement period subject to an interim six-monthly review. Access under an arrangement with a duration of more than one year shall not exceed 1000 percent of quota, with an initial amount not in excess of 500 percent being made available upon approval of the arrangement and the remaining amount being made available at the beginning of the second year of the arrangement subject to completion of the relevant six-monthly review. Purchases under PCL arrangements are repayable in 8 quarterly installments 3¼ - 5 years after disbursement.

And the Flexible Credit Line:

Flexible Credit Line     The Flexible Credit Line (FCL) has been established to allow members with very strong track records to access IMF resources based on pre-set qualification criteria to deal with all types of balance of payments problems. The FCL could be used both on a precautionary (crisis prevention) and nonprecautionary (crisis resolution) basis. Members may request either a one-year arrangement with no interim reviews, or a two-year arrangement with an interim review of qualification required after twelve months. Upon expiration, the Fund may approve additional FCL arrangements for the member. Access is determined based on individual country financing needs and is not subject to a pre-set cap. Purchases under FCL arrangements are repayable in 8 quarterly installments 3¼ - 5 years after disbursement.

Source: IMF

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Mongo's picture

Wow, the size of that toilet paper roll...

slaughterer's picture

Size matters--how big is this IMF credit line?  

tmosley's picture

Hope there's someone willing to change this tarbaby's diapers.

eureka's picture

One baby wiping the other; US fiat print to save US EU-exposure.

redpill's picture

End the FED, End the IMF.  Fuck 'em.


Ahmeexnal's picture

Strauss Khan was about to hold press conferences blowing the lid out of the euroscam, but he was suddenly stopped dead in his tracks by a very damaging investigation:


Now we know why Berlusconi resigned.

Sudden Debt's picture

Nothing about the fact that they will SAVE CHRISTMAS?!
2 months is just enough for santa claus to make us sing happy happy songs!!

fourchan's picture

zombie banks backstopping zombie countrys creating a zombie earth, the feds job complete.

smlbizman's picture

fuckin santa is easier to beleive in.....this fucking hocus pocus.......honestly are there a bunch of educated fucking morons sitting around table saying..yeah thats the ticket...how does one convince ones self that any of this bullshit will work...or is it a matter of..."ya know the shows over....lets just take the general lee out  for one final mega leap and print till it lands.....

TeamDepends's picture

So what do we do with the guilty?  It's simple really:  Chum!  Who wouldn't jump at the chance to watch Nancy Pelosi try to outswim a 25' Great White?

redpill's picture

Tell her there's a juicy stock tip on shore and the shark won't stand a chance.

TeamDepends's picture

The MMA AND MSNBC crowd will lap it up.  Any entrepreneurs out there?

TheAkashicRecord's picture

Drop them off at the Great Pacific Garbage Patch 

CPL's picture

The IMF has to raise captial to do that, to do that they have to sell bonds, considering that no one is remotely interesting if the IMF, ECB, ESEF or whatever lettered acronym spins this.  It doesn't change one thing.


Europe is a piece of shit to invest into and this mess is exactly what happen when you kick the can down the road.  Does anybody remember the crisis in the early 90's at all.  They printed then and this is the result.  Worse, uglier and madder than last time.


So let them announce what they want in the attempt to catch the falling knife of EU exposure.


Nobody seems to be discussing all that poison waiting in the US with the mark to market removal three years ago.  Currently there isn't a single big bank that could keep the lights on if the real estate bubble was included as part of reality.

Confused's picture

US tax increase (read as- whats left of the "middle class") in....3...2...1

The Big Ching-aso's picture



When ya try and squeeze blood out of a turnip you might get water.

LouisDega's picture

Shit, I have no fucking money. all that is left is my soul and my ass and my soul belongs to Jesus. 

redpill's picture

And what about Japan?  Talk about a nightmare.  We live in pretend world.

Comay Mierda's picture

Raising capital is so last century. The new trend is to print needed capital. in a couple years, the hot trend will be using the printed capital as toilet paper

Gief Gold Plox's picture

I heard the ink they use gives you an anus-rash. Useless, even as toilet paper.

CPL's picture

The latest in tutor style is fully furbished with a WorldCom styled den, a BreX papered kitchen and the rest of the house is done in US T-Bills, Civil servant pension release forms and US Dollars.


Beatscape's picture

Central bankers are up against the wall.  When cornered, their only ammunition is to fire pallets of $100 bills.  Their mantra is inflate or die.


NotApplicable's picture

And this is just the first baby-step in the direction of one IMF Consol to bind them all.


Beatscape's picture

QE3 has just begun.  Tyler, it may add up to only $60 billion, but in another 3 months, it will be another $80 billion.

narnia's picture

This facility is more like TARP.  The material flow will be in the swap lines.

The Treasury may have difficulty putting up the pennies, but the Fed will not think twice about the serious weight, which has probably already begun.

Mike2756's picture

Are they finally out of places to dump their toxic waste?

PaperBear's picture

The people need to kill these central banks with a silver bullet.

Hello global QE.

dwdollar's picture

Pure and simple. Your logic is flawless.

TheAkashicRecord's picture

Give me inflation, or give me death!

Or at least let me pepper spray some bitchez!

redpill's picture

Vampires - IMF


They'll gain the world but lose their souls
They'll gain the world but lose their souls

Don't believe politicians and thieves
They want our people on their bended knees
Pirates and robbers, liars and thieves
You come like the wolf
But dressed like the sheep

If you go to Lagos, what you find, vampires
If you go to Kinshasa, what you find, vampires
If you go to Darfur, what you find, vampires
If you go to Malabo, what you find, vampires

Lies and theft
Guns and debt
Life and death

TheAkashicRecord's picture

Thievery Corporation - Richest Man in Babylon (G-Corporation Remix) http://tiny.cc/x9pji This is a good song for the post 9-11 police state

wombats's picture

Did you really mean "Hope FOR Change?"

agent default's picture

The problem with banknotes is that they make for very poor toilet paper.  I suspect this is intentional.

Ahmeexnal's picture

and they are only "flexible" when they have a generous wipe on them

The Big Ching-aso's picture



If you soak them in aloe juice they do a much better job.

Eally Ucked's picture

Just try to use new canadian 100's, But for contents analysis they're excelent with that transparent window.

Beam Me Up Scotty's picture

Hence the reason I have converted some of my FRN's into toilet paper.  You gotta keep your wife happy after the SHTF.  She'll be happy for quite awhile.

Eally Ucked's picture

Hey, probably you hit the motherlode, just rent big warehouse and store it, this thing is about 4x inflation. You have to be vigilant though and see the inflection point when we switch to left hand washing our asses.

Stack Trace's picture



Phew, got that off my chest. Got stopped out on a few of my positions over that bull-shit rumor.

fockewulf190's picture

Man, can somebody just pull the trigger, light the fuse, yank the pin, or set the timer and blow this world economic bitch to hell so we can pick through the pieces and start over again? Please? This shit is getting really old.

GenX Investor's picture

Almost as big as GE's tax return for 2010.   Go long WY.

hedgeless_horseman's picture



Monetary is their middle name.

This will be the excuse for the Black Friday consumer confidence equities ramp?  A little early, unless Brian Sack has a party to get to with the interns.

el Gallinazo's picture

"Monetary is their middle name."


I thought it was motha.

ghostfaceinvestah's picture

Ah, the rumor du jour.

Mugatu's picture

And now the endless parade of rumors begins!  

There are funds with trillions fully invested, and they will be calling news outlets and writers across the globe to plant rumors that they will use to spike the electronic kool aid known as the equities market.  Add to that a few $10 - $20 million S&P futures contract orders and you get a nice 80-100 Dow point surge.  

Expect it to happen almost daily for the next week or two.  

They have too much to lose - but they are going down anyway.