Wall Street Journal Lays It Down: "Merkel And Sarkozy Have Lost Credibility"

Tyler Durden's picture

The WSJ becomes the first mainstream media publication to say what is obvious to all. Thank you Simon Nixon for the honesty.

"Six weeks to save the euro," European leaders promised the world in September. That deadline passed at last week's Cannes G-20 summit with the goal looking further away then ever. Nothing of substance was agreed on the French Riviera to aid the cause of euro survival, but one giant decision was taken that could hasten its demise. Angela Merkel and Nicolas Sarkozy's announcement that Greece is free to leave the euro has transformed the nature of the euro.

The United States fought a bloody civil war in the nineteenth century to stop states seceding from the union. Yet the German and French leaders have decided the euro zone will be a voluntary union, not because of an attachment to the principle of national self-determination but to protect the principle that euro-zone countries should not become liable for each other's debts.

The significance of Ms. Merkel and Mr. Sarkozy's Cannes declaration is immense. At a stroke, they have introduced foreign-exchange risk into a sovereign-debt market still grappling with the realization that euro-zone government bonds contain unexpected credit risk. Worse, throughout the crisis, the two leaders said they will do whatever it takes to save the euro. Yet the assurances they've given haven't been worth the paper they were written on: First, there were to be no sovereign defaults; then the first Greek haircut was a "unique situation;" the second Greek haircut followed 12 weeks later; now euro-zone exits are possible. No wonder the markets won't lend and China won't invest in Europe's bailout funds. Nothing these leaders say any longer carries any credibility.

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Sudden Debt's picture

Against who? Obama?


paarsons's picture

For the sake of grammar, you should have typed "Against whom."

But what the fuck do I know?

I'm a stupid cunt.


Global Hunter's picture

paarsons...fuck off you silly little twit.

jeff montanye's picture

and i thought you were going to go for "twat".   the 50% haircut is the absolute last one.  that's why the greek one year yielded 140% last monday and 210% friday.

Life of Illusion's picture



That’s what happens to leadership when you’re told by lenders to give up real assets (gold) collateralizing bailout loans.

i-dog's picture

Except it's not Germany that's borrowing!

It doesn't get any more bizarre than the spendthrift southern European states needing to borrow more ... and asking Germany to put up its gold as collateral for their loans. It's like me asking the bank to put up the collateral if I wanted to borrow a large sum for spending on coke and hookers!!

The sole objective of the bankstas is to get Germany's gold stash - by any means, fair or foul. I first mentioned this here more than a year ago.

Paul Bogdanich's picture

Not being able to speak nor read German the thing that I don't understand is why save the Euro at all costs?  An irrational fear of resergent nationalism is the only thing I can think of.    I think it's pretty clear that unless you are fighting a big foreign war or running an empire where you needed the population base that the American civil war was a mistake and not worth fighting.     

Ghordius's picture

"why save the Euro at all costs?"

it's political rethoric - nobody "wants to save the Euro at all costs" here in the EMU

- there is a very practical reason why Merkel and Sarkozy put it this way: it catches the imagination of the voters. 

- The hard truth of the EUR: speculative pressure is harder when you have several smaller currencies, we had decades of speculation "à la hausse" on the DM and "ä la baisse" on all the other currencies

- the EUR is not what has to be saved, it's the current setup of sovereigns with their own Treasuries and debt - even if the ECB monetizes much more

- I see with delight that the WSJ is practically endorsing a military solution!

I'd say we definitely need some idiot-journalists from NY to come over here and show us how to run things so that Wall Street is satisfied.

WSJ, this is the same as this call for a EuroBond and EuroTaxes: it might be your preferred solution, but no thanks.

Sheeh, the sheer gall of requiring that EU and EMU should be enforcing membership is galactic!

No, thanks, nobody is going to be thrown out and nobody is going to be forced out, not Greece, not the UK, no, no, no.

candyman's picture

"why save the Euro at all costs?"

it's political rethoric - nobody "wants to save the Euro at all costs" here in the EMU.

I'll agree with this point as Obummer used the same tactic on the American people, which was bought hook line and sinker by the general population. Obummer never defined what he ment by "Hope and Change" so every voting person pulled the lever based on their own personal interpretation of the phrase. The general American public is now living the nightmare of this political rhetoric. Just like Pelosi said. "We will find out whats in the healthcare bill after it is signed". This political rhetoric is the signature foundation of the current Democratic party.

eureka's picture

Since when did the Wall Street Journal have any credibility?

I guess it takes one to know one. Non-credible entity, that is.

MillionDollarBonus_'s picture

 The WSJ has nailed this one. Merkel and Sarkozy have FAILED to set up a firewall to ring-fence banks from sovereign default risk. Their pathetic pandering to voters in their respective nation states is simply sickening, and has lead to a serious delay in the EFSF expansion, the effects of which have been far-reaching and will be felt by financial equity investors across the globe. Their indecisiveness and political wrangling has been completely unprofessional at a time when the markets are CRYING out for some strong leadership and economic guidance.

oogs66's picture

the EFSF CAN'T expand because there isn't enough money!!!  its not a lack of leadership, there just isn't enough money!!!

Big Slick's picture

European leaders are finally figuring out that the people shouting "eat the rich" actually mean 'eat the rich'

SheepDog-One's picture

Yea, they cant expand the bailout funds, because theyre all bankrupt. And dont look now, but German production just came in -2.7%.

MillionDollarBonus_'s picture

This is simply false. The ECB has a RANGE OF TOOLS for combating deflationary pressures and peripheral default risk. In any case, I've long been an advocate of stronger integration between central banks, and have even floated the idea of creating a WORLD central bank to fund larger liquidity injections on a global scale. This would provide a serious boost to confidence in the global economy, helping to foster prosperity, peace and equality throughout the world.

Think for yourself's picture

Dripping sarcasm, as always. Either that, or you really mean it; nobody can ever tell. Kudos!

NotApplicable's picture

MDB is swinging for the fences today (or an anchor job on CNBS).

Quite a catch he's gotten, so far.

centipede's picture

I think you are totaly wrong. The only "tool" CBs have is to counterfeit money - legalized fraud. How can centralized power to do that globaly provide any "serious boost to confidence in the global economy, helping to foster prosperity, peace and equality throughout the world"? Your blind faith in central bankers and their honesty really baffles me. Is inflation by fraud better than deflation? What caused deflation, anyway? Wasn't it fractional reserve banking and as a result of it the rising debt bubble? Just another legalized fraud.

Pegasus Muse's picture

"The only "tool" CBs have is to counterfeit money - legalized fraud."

Precisely.  It's time to re-educate the masses.  The Money Masters.  Share it.  Talk about it.  


History records that the Money Changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.

 – James Madison, Founding Father,

Principle Author of the Constitution of the United States of America

Snidley Whipsnae's picture

MDBonus... "the markets are CRYING out for some strong leadership and economic guidance."


We know you're worried about your portfolio and you seem to have the oratory/writing skills to fix the problems in European Finance... Are you going to volunteer your services?

SheepDog-One's picture

I dont feel sorry for the 'leaderless markets' Snidely, for 3 years theyve LOVED non-leadership and irresponsible promises of free money and guarantees the corruption wont stop.

This is all 'cry me a river' to me.

Snidley Whipsnae's picture

I don't feel sorry for 'leaderless mkts' either. I was simply pointing out a job opportunity for Million Dollar Bonus.

Not that the US has leadership that is worth a plug nickle.

The Germans have not forgotten their experience of Weimar hyper inflation and are more reluctant to trash the Euro than the US is to trash the dollar.

BTW, my long term WAG is that we will have both deflationary depression and hyper inflation. We will need lots of pop corn.

earleflorida's picture

yep,... just like the rating agencies

He_Who Carried The Sun's picture

This only proves that the guys at WSJ have the brains and wit of 5-year olds.

Please calculate Greek GDP over the last 15 years vs. France and Germany combined and all you will find is "insignificance". What is significant is this message to Greace: Stop trying to grease us immediately else you're out. 12 Years of lies and betrayal are enough!

I find this stark message rather bullish for the Euro - even if markets would be rather "shocked" (for 5 minutes) - so would be placing Greace on the ejector seat.

Now that is a contrarian position! Enjoy making money!

orangedrinkandchips's picture

Princ. Skinner: Ralph you are failing english

Ralph: that's unpossible!!!



ArkansasAngie's picture

With whom have they lost credibility?  1%'ers?

What needs to be challenged is this idea that the saving of the 1%'ers from insolvency is better than foreclosing on them.

It's what has kept the masses calmed.  The fear of the unknown is scarier than the known.

paarsons's picture

Brother!  You've displayed wonderful grammar.

By Jupiter's cock!  That's how you send a dog into the after-life.

Just saying.


jeff montanye's picture

sister?  than that of the known.

Raskolnikoff's picture

Barbecued pork, yummy. the Cantonese call it Cha siu but those statist snobs will laugh at you unless you pronounce it 'cha shao', nonetheless, it's delicious.

Snidley Whipsnae's picture

"Nothing these leaders say any longer carries any credibility."


Other than the Keynesian Klowns, who thought 'they' had credibility from jump street?

We know it's getting down right nasty when they start eyeballing each other's gold.

This shit is coming to a country near you soon... so don't be smug about a European monetary collapse... the shock waves will be tsunamis.

Got Physical?

SWRichmond's picture

Other than the Keynesian Klowns, who thought 'they' had credibility from jump street?


We know it's getting down right nasty when they start eyeballing each other's gold.

Yes, isn't that revealing, how in a crisis they covet each other's barbarous relic?

This shit is coming to a country near you soon... so don't be smug about a European monetary collapse... the shock waves will be tsunamis.

+ another 1,000,000

Got Physical?

Damned skippy.

Big Slick's picture

Anyone hear Obama's post -G20 comments?  Made milk come out my nose.

Admitted nothing has been resolved.  Out loud he actually said the fact that they are working hard on this should be sufficient to calm the markets. 

navy62802's picture

Looks like WSJ just went all-in.

Smiddywesson's picture

Now that's an interesting idea.  We've discussed here on ZH the process where politicians, sensing a crash, jump ship to salvage some political capital.  Grandstanding against gold transfers as collateral for deals they themselves brokered is one example.  Perhaps, as they see the end coming, we will start to get some truth out of a limited number of the MSM as they attempt to decouple themselves from the Ponzi game they have been so important in supporting. 

I see this as another canary in the coal mine

the not so mighty maximiza's picture

Merkozy are the best money can buy

GoldBricker's picture

Agreed, but with the proviso that money doesn't buy much these days.

paarsons's picture

Tyler, no offense, buddy.

But we've been waiting for the crash for the last three years.

It ain't gonna happen.

They're too smart.  Fuck them in their asses.

But they just might be smart enough to beat us.

They can keep the balls up in the air for a long long time.  The power is on their side.

Don't underestimate them.

They ain't as stupid as you think.

How do you defeat them?

Tune in, turn on, and drop out.  It's the only way.


Ethics Gradient's picture

The balls are still in the air, but the jugglers are stumbling (which is a recent development).

paarsons's picture

Brother, the jugglers stumble and stumble.

But they've got the power, the money, and the guns.

So what's a boy to do?


Bad Lieutenant's picture

Predicting 'when' things truly go nuts is like predicting which snowflake causes the avalanche.  It's a game of deeply interconnected chaos with the certainty that as it the snow builds, the avalanche will only become more fierce and all-encompassing once it starts.  Sadly, as of 2008, we are well past an avalanche scale that can be controlled or at least contained and are on borrowed time.  The three years you speak of is just more snow that's been piled on that will come down with all the rest.  People being impatient at this point is like someone in early 2007 saying that it's been too many years of real-estate boom for it to possibly be wrong.

I believe that people are going to look back at the 2008-2011 time period and regard sovereign debt like we now regard MBSs during 2003-7.  Once sovereign debt repricing starts to really occur, people will kick themselves why they thought lending ANY of the western governments money for *10* years for 3-5 percent (let alone lending it countries like Greece, Spain, or Italy o rlending it more than 10 years). 

The world is about to rediscover what happens when a nation's financial affairs go unsupervised in government for decades.

Big Slick's picture

Is "never bet against the EMU" the new "never bet against the FED?"

Paarsons makes a good point.  Can anyone shed light on timeline here? (with historic precident?... "or some varm milk perhaps?") 

Smiddywesson's picture

Can anyone shed light on timeline here? (with historic precident?...

Read This Time Is Different, for over 800 years of precident as to what happens when societies overspend.  Unfortunately, economies were not always tied together in the process of global finance and globalization of their economies.  It used to be that a country would enter a recession with some countries yet to enter their own recession and others already emerging from their own, so that each economy served as a buffer to others in the overall world economy.  Back in the day, there were even large economies that were spared from widespread recessions.  Not so today.  All economies are tied together.  So look to the history books and multiply the misery by ten.

When?  We are either kicking the can with no reason, or we are stalling with some goal in mind.  Inasmuch as all the central banks are stacking gold, I would have to say that there is a target gold level they are attempting to reach.  The Euro is over 70% backed by gold.  The US is close to that point too.  When foreign currency reserves are removed from the assest side of the central banks balance sheets, and only gold remains, I would believe they can make their move and announce a new monetary system.  With less than 30% to go for the big nations of the West, some big brain should be able to take their rate of gold acquisition and come up with a date that most nations reach 100%. 

The wild card is China.  If you can believe their figures (you can't), China only has about 1.2% of their assets in the form of gold.  So the real question is, if the West can continue (and that's a big if) to kick the can after reaching high enough gold levels to announce a new monetary system referrenced to gold, will it still have to wait for one of its biggest trading partners to get up to speed?  Will we wait for China to go to a gold referrenced standard or will we screw them?   

Big Slick's picture

?? I understand how that is possible for US, but how for EUR?  Who holds the gold?  Or at least how can it be considered pooled to support (when multiple parties w varying interests own it)?  

Nonetheless, it seems to me that given a 70% backing of gold for US (even EUR if possible), that we should be able to extrapolate a ballpark value per ounce once the gold standard returns (either by choice or by mkt insistance/force).  Is an accurate calculation like this possible?

Brodsky on Chris Matrenson interview estimated just north of $10,000/oz (for US money/US gold).

tmosley's picture

When the king can't command the tide, call an emperor? 

Smiddywesson's picture

no offense, buddy.

But we've been waiting for the crash for the last three years.

It ain't gonna happen.

They're too smart.

I more want to understand this than to defeat it.  Everytime we have a population boon, prosperity, deregulation, and finally, financial innovation, we have a crash.  The only difference today is we globalized our economy and financial systems so the crash will be global.  It's our nature to behave in this manner as we are lemmings.

  So how are you going to fight human nature and history?  You are not.  As for TPTB, no matter how intelligent or powerful they are, they are not either.  That is why they are kicking the can and stacking gold.  They know they cannot prevent the crash and are making the necessary arrangements, so that when it all comes crashing down, they sit atop the steaming pile of wreakage. 

bdc63's picture

They've been treading water and kicking cans since July.  It was obvious to most of us that they had no credibility back then.