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There Is No Bailout Spoon: The Math Behind The €2 Trillion EFSF Reveals A "Pea Shooter" Not A "Bazooka"

Tyler Durden's picture


The latest and greatest plan to bail out Europe revolves around using the recently expanded and ratified €440 billion EFSF, and converting it into a "first loss" insurance policy (proposed by Pimco parent Allianz which itself may be in some serious need of shorting - the full analysis via Credit Sights shortly) in which the CDO would use its unfunded portion (net of already subscribed commitments) which amount to roughly €310 billion, and use this capital as a 20% "first-loss" off-balance sheet, contingent liability guarantee to co-invest alongside new capital in new Italian and Spanish bond issuance (where the problem is supposedly one of "liquidity" not "solvency"). In the process, the ECB remains as an arm-length entity which satisfies the Germans, as it purportedly means that the possibility of rampant runaway inflation is eliminated as no actual bad debt would encumber the asset side of the ECB. A 20% first loss piece implies the total notional of the €310 billion in free capital can be leveraged to a total of €1.55 trillion. So far so good: after all, as noted Euro-supporter Willem Buiter points out in a just released piece titled "Can Sovereign Debt Insurance by the EFSF be the "Big Bazooka" that Saves the Euro?" there is only €900 billion in financing needs for the two countries until Q2 2013. As such the EFSF would take care of Europe's issues for at least 2 years, or so the thinking goes. There are two major problems with this math however, and Buiter makes them all too clear.

One: rating downgrades and ongoing deterioration - should the financing needs of not only Spain and Italy, but also Belgium and France, post its inevitable AAA-downgrade, need to be funded the total insurable amount rises to €2,371.6 billion through Q2 2014. And since there needs to be headroom, and since a number of €3 trillion has been thrown around, there is just no practicable math of how one gets from the current committed funding to the €726 billion that would be required for the full funding amount, especially with a AAA-rating still retained by the CDO. Second, and just as important, is taht the 20% first loss ratio "may well be far too optimistic." Simply said, a far more realistic recovery rate would be one of 50-60% meaning a first loss guarantee of 40-50% will be required, which collapses the total insurable "pot" to about €600 billion. Buiter's unpleasant, for Allianz, Merkel and Sarkozy conclusion is that "that would likely not fund the Spanish and Italian sovereigns until the end of 2012. It would not be a big bazooka but a small pea shooter."

So just like we proclaimed the second Greek bailout DOA when it was announced, so we proceed to say that, once the market has had the time to digest what is really happening and proceeds to go after the weakest links in the plan one by one, that the EFSF is also dead on arrival. But in the meantime, it will buy the Eurozone a little more time to pretend that all is well, and provide skeptics with very attractive short-term EURUSD shorting abilities.

Here are some of the key observations from Buiter. First, he estimates what the pure unencumbered capital of the EFSF could be in an ideal case, starting with the flawed number, previously cited by Aliazn, of the full €780 billion in Guarantee Committment which can allegedly be used and leveraged 5-fold to get to the critical €3+ trillion number.

Total guarantee commitments from the 17 EA member states are just short of €780bn (see Figure 1).

From that number, we here subtract i) guarantees by the current set of countries with ‘stepping-out’ status (all of which are out of the primary sovereign debt markets for the time being), ii) guarantees provided by Italy and Spain, as these two countries are not credible guarantors because they are highly likely to default themselves (on their own sovereign debt and on the guarantees they provide to the EFSF) whenever there is a call on the guarantees provided by EFSF to any of the non-stepping out sovereigns, iii) other countries that, like Spain and Italy today, could potentially benefit in the future from EFSF guarantees of their sovereign debt, or are likely to ask for ‘stepping-out’ status, iv) existing and likely imminent EFSF commitments.

Next, he removes the "step out" guarantors sequentially:

Greece (€29.1bn of notional EFSF guarantee commitments), Ireland (€12.4bn) and Portugal (€19.5bn) have become “stepping-out guarantors”, that is, their guarantees cannot be called upon as long as they remain Troika programme countries receiving funding from the EFSF. Portugal remains liable as guarantor in respect of notes issued prior to the time it became a stepping-out guarantor. Estonia (€2.0bn) is only a guarantor in respect of notes issued after the effective date of the Amendments to the EFSF Framework. This means that, as of today, the aggregate of the active guarantee commitments for the guarantors which are not stepping-out guarantors is € 726bn

Then, Italy and Spain:

But, in addition to the guarantors belonging formally to the stepping-out guarantors category, there are the de-facto stepping-out guarantors which currently need the assistance of the ECB, through its Securities Markets Programme of outright purchases of sovereign debt in the secondary markets, to secure funding on affordable terms. Spain (€92.5bn of EFSF notional guarantees) and Italy (€139.3bn) are in that category since the ECB resumed its SMP purchases at the beginning of August 2011. Indeed, the insurance programmes proposed by Achleitner and Kapoor are mainly aimed at ring-fencing the Spanish and Italian sovereigns – and, lurking behind them, the sovereigns of Belgium and France - and ensuring continued access to the funding markets for them. Again, Spain and Italy cannot insure themselves when they are both at clear and present risk of being cut off from market funding at affordable interest rates and are therefore unlikely to make good on any notional guarantees they have offered to the EFSF, should the EFSF have to call on these guarantees. Taking Spain and Italy out of the €726bn guarantee pot would reduce it to €494bn

Next, remove pre-existing commitments.

Under the Troika programme for Portugal, the EFSF has committed €26bn, of which €5.8bn has been disbursed thus far. The commitment of the EFSF to the Irish Troika programme is €17.7bn, of which €3.3bn has been disbursed thus far. Subtracting the commitments of the EFSF to the Portuguese and Irish Troika programmes leaves €445.5bn uncommitted.


Under the proposed €109bn second Greek programme, the EU/EA contribution is likely to be at least two thirds, or €72.6bn, if the ‘two thirds for the EU/EU, one third for the IMF’ division of costs for the Greek Loan Facility and for the other Troika programmes is maintained. The European contribution could be higher because, as of now, the IMF has not given any formal commitment that it will make a financial contribution to the second Greek programme. The European contribution could be lower if the IMF continues to take on one third of the total official funding commitment and if the revision of the terms of the 2nd Greek bailout facility results in a smaller total official funding contribution than the €109bn announced on July 21.


Assuming, for the moment, that the two potential sources of variation cancel out, the EFSF commitment would be two thirds of the original agreement or €72.6bn. Of this €72.6bn, at most €11.5 billion could be funded by the European Financial Stabilisation Mechanism (EFSM), the supranational source of funding backed by the EU budget. This is because only €11.5bn remains uncommitted of the €60bn EFSM facility. So €61.1bn has to be subtracted from the total available for sovereign debt insurance, leaving €384.4bn uncommitted. If, as seems likely, the EFSM does not contribute to the second Greek programme, the sovereign debt insurance pot would go down to €373.9bn.2 If the IMF decides not to co-fund the second Greek programme, it goes down to €337.1bn. In addition, roughly €27bn of the European contribution to the Greek Loan Facility that has funded the first Greek bailout programme is still to be disbursed. Given the difficulties and funding rates that some of the EA creditors face in raising funding for the Greek Loan Facility (which is funded, unlike the EFSF, on a bilateral basis), it is at least plausible that the remaining tranches of the first Greek programme (i.e. €27bn) will be paid out of the EFSF pot. This reduces the EFSF resources to either €346.9bn or €310.1bn, depending on whether the IMF co-funds the second Greek programme.


Sovereign debt insurance is not the only remaining claim on these resources. The revised EFSF framework agreement mentions explicitly the possibility that the EFSF offers support for recapitalising euro area banks, including those in non-programme countries, though any such assistance would still need to be routed through the respective sovereigns.


The EFSF has already contributed to the recapitalisation of banks in programme countries (Ireland and Portugal) through loans to their governments. Sovereign debt insurance is not even mentioned explicitly under the intended uses of EFSF resources. No doubt, however, it could be shoehorned in under “precautionary facilities”. A very conservative estimate for the amount the EFSF ought to set aside for the recapitalisation of financial institutions in non-programme countries (in the first instance Spain and Italy, and beyond them possibly Belgium, France and other core EA member states) would be at least €50bn, leaving at most €296.9bn and possibly just €260.1bn for sovereign debt insurance. Clearly, banking sector recapitalisation outlays could be much larger. For instance, Citi’s equity research Banks team estimates that banks from EA countries alone that have difficulty to access private capital markets (Greece, Italy, Ireland, Portugal and Spain) currently would need €104bn to bring their Core Tier 1 capital ratio to 9%.


These estimates don’t allow for the possibility that Belgium, now on negative outlook for all three rating agencies (see Figure 1) and with historically high sovereign 5-years CDS spreads and spreads over 10-years Bunds, might join the ranks of countries needing sovereign bond insurance rather than contributing to the resources needed to provide such insurance. This would reduce the sovereign debt insurance pot to €269.9bn or €233.1bn. Having France move from the insurer to the insured category would deplete the resources available to €111.4bn or €74.6bn.

Naturally an insurance fund working with just €74.6 billion, regardless of the amount of first loss assumption is a joke. So for all intents and purposes, Buiter has used the €310 billion number bolded above.

What does this mean for total maximum notional insurable?

[There is] €310bn if France remains among the insured and no banking sector support is provided by the EFSF, around €260bn with a €50bn provision for banking sector support, and less than half that if France were to join the insured.


With a potential first loss guarantee of just 10%, the resulting maximum amount of new debt issuance that could benefit from a guarantee could be up to €3.1trn without EFSF support for bank recapitalisation or, in the more likely case of a €50bn bank recapitalisation contribution, up to €2.6trn. A 20% first loss guarantee (a figure that seems to be in the air quite a bit) would imply maximum issuance amounts of around €1.55trn or €1.3trn, respectively, and a 40% first loss guarantee would result in maximum issuance amounts of around €777bn or €650bn.

So what is the fundamental reasoning for a bailout mechanism? Why to make sure that the trillions in European debt that has to be refinance and rolled over the next 3 years, are, respecitvely, either refinance or rolled. Let's take a look at what amount we are talking about here. First the stock amount, which means insuring existing debt.

With the insurance approach, the EFSF can target flows of new sovereign debt issuance in the primary markets while leaving the outstanding stocks of sovereign debt uninsured. Under current circumstances, the EFSF could focus fully on guaranteeing new debt issues by Spain and Italy, the two sovereigns that are still in the markets but at risk of being frozen out of the markets through a fear-driven denial of market funding by the private sector. Greece, Ireland and Portugal have been taken out of the market and are being funded (in part also through the EFSF) through loans.


The ability to insure just the new flows rather than both the new flows and the outstanding stocks is valuable, as (see Figure 2) the outstanding stocks would swamp the capacity of the insurance facility.



Italy and Spain together have just under €2.5 trillion worth of general government debt outstanding. Tradable Spanish and Italian sovereign debt alone amounts to €2.1 trillion. Adding Greece, Ireland and Portugal raises general government debt to €3.1 trillion and tradable government debt to €2.6 trillion. Adding Belgium would raise these totals to €3.5 trillion and €2.9 trillion. In the perhaps unlikely case that France would need sovereign debt insurance, targeting the stocks rather than the flows would require taking care of €5.1 trillion of gross sovereign debt or €4.3 trillion of tradable government debt.


These numbers are beyond the size of even the most optimistic estimates of the most audacious of rescue umbrellas. Fortunately, to avert a funding disaster for the vulnerable sovereigns, only the flows of new funding need to be insured. As Figure 3 makes clear, these flows, while large, are more manageable than the stocks.

Flows simply means focusing on new issuance, to guarantee there is a natural market bid from the private sector, combined with a helping hand from the EFSF. How much debt would have to be insured? Well, depend on which of three scenarios we are looking at: i) just Spain+Italy; ii) Spain+Italy+recently imploding Beligum; or iii) Spain+Italy+recently imploding Beligum and most recently collapsing France (take one look at the OAT-Bund spread to see what we are talking about). The numbers are not any prettier.

Focusing on the flows that matter, the total financing needs of Spain and Italy, Figure 3 gives us €153bn for 2011 Q4, €557bn for 2012, €348bn for 2013 and €295bn for 2014. For the seven quarters from 2011 Q4 to 2013 Q2 (the last quarter before the start of the European Stabilisation Mechanism, the successor of the EFSF) the total financing needs of Spain and Italy are €881bn.5 For the 11 quarters from 2011 Q4 to 2014 Q2, they amount to €1,196bn. Adding Belgium raises the seven-quarter funding total to €1,006bn and the 11-quarter total to €1,377bn. This would be manageable if the markets were willing to fund these amounts with a 20 percent first loss guarantee, assuming the triple-A insurance capacity of the EFSF is around €300bn and the market provides new funding to the sovereigns at acceptable rates with a 20 percent first-loss guarantee. If, however, France were to join the ranks of the countries needing external official guarantees to fund themselves, the seven-quarter total funding need would go up to €1,684bn and the 11-quarter total to €2,372bn. Neither would be manageable with the existing size of the EFSF resources.

Here Buiter makes a great point: the EFSF would effectively create two markets in each nation's sovereign securities: existing, or ex-guarantee, and post EFSF, including the guarantee:

Of course, focusing the insurance on the flows of new funding alone leaves the prices of the outstanding stocks of sovereign debt to be determined in the secondary markets, with the ECB most likely absent from the secondary markets if the insurance option is implemented. We see no point in supporting an orderly secondary market through outright purchases of sovereign debt under the Securities Markets Programme, even if the price in the (uninsured) secondary market is significantly below that in the (insured) primary market. Banks and other systemically important financial institutions that have to mark their holdings of sovereign debt to market will of course be adversely affected by any wedge between the primary and secondary market prices, and may even have to raise additional capital to deal with any mark-to-market losses, but that is the way of markets and market economies.

But wait there is more. The biggest weakness of the EFSF is the embedded assumption for how much first-loss a potential investor will be ok with. According to Allianz and the Europeans 20% should be sufficient. It won't be.

Even in the absence of a panic, the (average) 20 percent first-loss ratio assumed in much of the calculations in this note may well be far too optimistic.


The historical recovery rate for sovereign defaults from 1983 up to 2010 reported in Moody’s (2010) is only 53 percent (issuer weighted) and as little as 31 percent value-weighted. Sturzenegger and Zettelmeyer (2005) find, in a study covering sovereign defaults between 1998 and 2005, haircuts ranging from 13 percent to 73 percent. Clearly, the cost of default to the defaulting sovereign has an element of fixed cost in it. The reputational loss associated with a breach of contract does not double if the recovery rate falls from 80 percent to 60 percent. Even if sovereign defaults are unlikely and infrequent, the size of the NPV loss for the investors conditional on a default having occurred is therefore likely to be large: if the sovereign is going to default at all, she might as well be hung for a sheep as for a lamb.

And any incremental rise in the first loss guarantee threshold implicitly removes the leveragability of the underlying notional. Said otherwise, a €310 billion pot which insures 50% of losses, means a mere €620 billion in notional can be guaranteed: a failure off the bat which the market will stampede over.

Which brings us to Buiter's less than glowing conclusion:

The partial/first loss sovereign debt insurance proposal has merits. Its principal value is that it permits the decoupling of the essential flow funding aspect of the Euro Area sovereign debt crisis from the much less important stock valuation aspect. Insurance can be offered for new issuance of sovereign debt in the primary markets without extending the offer to the outstanding stock of debt – the debt traded in the secondary markets. The further option of using the partial insurance route to enhance sovereign debt issued as part of a sovereign debt restructuring, e.g. through a ‘voluntary’ exchange along the lines of the Greek PSI proposal, is also valuable.


There are three problems with the specific proposal made by Achleitner and Allianz. First, we believe the arithmetic materially overstates the total amount of debt issuance that could be insured with the existing resources of the EFSF. To get to the €3 trillion worth of debt touted in some of the proposals, we estimate the EFSF would, with an average first-loss guarantee of 20 percent, have to make available for its insurance activities nearly all of its notional €726bn worth of non-stepping-out member state guarantees, and these resources would have to be viewed by  wouldbe insurance purchasers as being of triple-A quality. This would mean (1) that the EFSF would have to renege on all its outstanding and pending commitments other than insurance, (2) that Spain and Italy would effectively be insuring themselves, and (3) that a triple-A guarantee capacity of €440bn is miraculously transformed into one of €726bn.


Second, the insurance mechanism is not fool-proof or disaster-proof. There is no guarantee that, in a panic, the most generous terms on which the insurance could be offered (say, for free) would be attractive enough to bring in sufficient private buyers of the insured sovereign debt. Failed auctions and sovereign default are not ruled out. A standby purchaser of last resort for sovereign debt is required. This standby purchaser of last resort would have to be either an official entity or a private entity created, funded and directed by the official sector.


It could be the ECB through the SMP along the lines of its interventions buying Greek, Irish and Portuguese sovereign debt since May 2010 and Spanish and Italian sovereign debt since August 2011. However, because of the Treaty prohibition on the central bank funding sovereigns directly, the ECB can purchase sovereign debt only in the secondary markets, which would be an inefficient use of public resources. The ECB could end up owning much of the outstanding stock of periphery EA debt to achieve a relatively limited amount of new funding by the periphery sovereigns. 


It could be the EFSF, which can operate in the primary issue market, even without the EFSF being granted eligible counterparty or ‘bank’ status allowing it to borrow from the Eurosystem against collateral. That would, however, restrict the volume of such purchases to the uncommitted part  of the EFSF’s own resources. To have a bigger standby bazooka, either the EFSF, or some special purpose vehicle created by the EFSF (possibly in conjunction with the European Investment Bank, which has eligible counterparty status with the Eurosystem) would have to be granted eligible counterparty status for collateralised borrowing from the Eurosystem. The remaining resources of the EFSF could be used to provide capital for this ‘Bazooka Bank’, and/or to guarantee the loans from the ECB to the Bazooka Bank, which would in any case be secured with the sovereign debt purchased in the primary market by the Bazooka Bank.

Third, and last, is the abovementioned shortfall in the first-loss tranche, which will need to be substantially increased, potentially doubled, to provide bidder with a safety of mind that even in a worst case, read 60% recovery scenario, they will not suffer catastrophic losses.

We therefore are sceptical that, if there is a reasonable expectation that the recovery rate following a sovereign default in the Euro Area could be as little as 60 percent or 50 percent, that the markets would be happy to fund these sovereigns at sustainable interest rates to the sovereigns, with just a 20 percent first-loss rate, even if this insurance were granted free of charge. A 40 or even 50 percent first-loss rate might well be required. And that would reduce the amount of new issuance that could be funded with an EFSF insurance pot of, say, €300 bn at most to just €750bn or even €600bn. That would likely not fund the Spanish and Italian sovereigns until the end of 2012. It would not be a big bazooka but a small pea shooter.

As we said: once the market (forget the polticiians: they would want nothing more than for nobody to see this analysis) is made comfortable with this actual math, it will realize that the EFSF as an Allianz rescue facility, pardon, insurance fund, is Dead on Arrival. After all, and logically, if this formulation was the best and safest one, it would have been proposed months, if not years earlier, not been used as the last ditch Deus Ex Machina, with just 5 days until the European Summit.

We can't wait until this latest episode of cognitive bias (EFSF will work) clashes with the hard reality of math and numbers.


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Tue, 10/18/2011 - 13:56 | 1785976 TumblingDice
TumblingDice's picture

Math always ultimately prevails upon psychology.

Tue, 10/18/2011 - 14:03 | 1786013 GeneMarchbanks
GeneMarchbanks's picture

Not always, as a day like today, demonstrates.

Tue, 10/18/2011 - 14:26 | 1786085 iDealMeat
iDealMeat's picture

You both may be proven right before the close.


Tue, 10/18/2011 - 15:15 | 1786246 Irish66
Irish66's picture

They (FRANCE AND GERMANY) agreed on 2 tr euro

Tue, 10/18/2011 - 15:57 | 1786446 The Limerick King
The Limerick King's picture



A Eurozone crises averted?

New leverage will soon be inserted

So simple and sweet

Just wash, rinse, repeat

This Kleptocrat game is perverted!


Tue, 10/18/2011 - 15:53 | 1786440 Mactheknife
Mactheknife's picture

France will QUICKLY lose their AAA rating...wait till you see what that brings.  LMAO

Tue, 10/18/2011 - 16:03 | 1786499 Mactheknife
Mactheknife's picture

Amidst all the conniving to make the EFSF bazooka credible, the bond market has cast its vote already.

Tue, 10/18/2011 - 15:27 | 1786317 Sudden Debt
Sudden Debt's picture



ehe... I wouldn't put money on that. I did once and it made perfect sence and I lost my shirt.

the psychology of the state guarantees is keeping these curtains up. The math says there simply isn't enough money to back up all those guarantees.

and yet... the market is still way above the 2008 bottom... go figure...

logic and math won't cut it my friend.

Insanity and hangovers rule the markets and the world these last few decades.

Tue, 10/18/2011 - 15:43 | 1786396 DoChenRollingBearing
DoChenRollingBearing's picture

Pea shooter be shootin' blanks!

I do not have a bazooka, but I do have a 9 mm and AK to keep me feeling safe...

Shootin' blanks bitchez!

Tue, 10/18/2011 - 16:05 | 1786520 dkd
dkd's picture

better to pea shoot than not shoot at all!


Tue, 10/18/2011 - 16:15 | 1786591 myne
myne's picture

It looks like the Euro's only option is to gift each and every citizen and pension account of each and every nation a giant cash bonus.

It will: inflate away nearly all debts while retaining the relative value of each pension.

Yes, all prices will rise massively in a very short timeframe, but with the euro denominated debts gone, the system will effectively reset. With each nation essentially on the same footing - just with very little debt.

Bail out the people and the banks will be bailed out by default.

It's the monetarists version of a debt jubilee.


Tue, 10/18/2011 - 16:33 | 1786654 Ghordius
Ghordius's picture

The EuroZone wants to keep options open.

Is part of the village still intact? Is a part already burnt down?
Wait, don't send the Tsunami in yet...
Damage Control.

Tue, 10/18/2011 - 16:38 | 1786701 Little John
Little John's picture

No it doesn't. The human mind is greater than the sum of it's parts and does not lend itself to mathematical modeling - see Kurt Godel’s incompleteness theorems.  

Tue, 10/18/2011 - 16:39 | 1786708 Little John
Little John's picture


No it doesn't. The human mind is greater than the sum of it's parts and does not lend itself to mathematical modeling - see Kurt Godel’s incompleteness theorems.  


Wed, 10/19/2011 - 01:10 | 1787518 beartoe
beartoe's picture


How many zeros?
Long scale is the English translation of the French term échelle longue. It refers to a system of large-number names in which every new term greater than millionis 1,000,000 times the previous term: billion means a million millions (1012), trillion means a million billions (1018), and so on.[1][2]
Short scale is the English translation of the French term échelle courte. It refers to a system of large-number names in which every new term greater than million is 1,000 times the previous term: billion means a thousand millions (109), trillion means a thousand billions (1012), and so on.[1][2]


Tue, 10/18/2011 - 13:56 | 1785977 TooBearish
TooBearish's picture

Awesome work ....or give me $2 and i will give u 1$ back.....

Tue, 10/18/2011 - 14:13 | 1786046 I think I need ...
I think I need to buy a gun's picture

i'm so sick of all of this shit.....the garble on cnbc is at a peak....WTF is goig on just collapse this bitch or revalue gold or give me 1 dollar back for every 100 i have so I know where we are going this is getting old all this bullshit i'm trying to run a business here..........

Tue, 10/18/2011 - 15:44 | 1786400 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

Great comment

Tue, 10/18/2011 - 15:55 | 1786451 Mugatu
Mugatu's picture

So if I owe someone $1000 dollars and I only have $200, I can guaranty the first $200 of loss and everyone is happy?  Can I do this with my mortgage?  Hey Obama, lets roll out this plan for all these people with negative equity and $500,000 in home equity loans!


Tue, 10/18/2011 - 13:56 | 1785978 schoolsout
schoolsout's picture

Incidentally, Paulson's bazooka was the same thing, too...

Tue, 10/18/2011 - 13:58 | 1785983 Lazane
Lazane's picture

no amount of math is going to fix these financials 

Tue, 10/18/2011 - 13:58 | 1785988 redpill
redpill's picture

Will a pea shooter help us eat our peas?

Tue, 10/18/2011 - 14:04 | 1786011 EL INDIO
EL INDIO's picture

Let me guess...It'll go in favor of the manipulators.

Tue, 10/18/2011 - 14:18 | 1786061 LawsofPhysics
LawsofPhysics's picture

Ah yes, because capital controls always lead to a favorable outcome.

Tue, 10/18/2011 - 14:00 | 1785994 nobusiness
nobusiness's picture

The author misses one important point - NO ONE EVER DEFAULTS IN THIS BIZZARRO WORLD.

Tue, 10/18/2011 - 15:16 | 1786245 macholatte
macholatte's picture


and there you have it.

Clearly, obviously and openly the governments around the world are busting their respective asses to maintain the status quo. Every day for months they throw shit at the wall in the hope that something, anything will stick. Some guy writes a report, proposes a plan, throw it at the wall. Did it stick? No? Go make up something else. In the mean time, manipulating the markets is what they must do in order to maintain control so that is what they do. Their goal is clearly to keep the Euro alive and kick the can so they can buy time. Problems surfacing in 2012 sounds good to them. Delay until 2013 is even better. Kick it out to 2015 is almost orgasmic. Facts don't matter. Perception is everything. 

Tue, 10/18/2011 - 18:03 | 1787074 MarkTwain00
MarkTwain00's picture

I think busting their asses is giving them too much credit....more like pick a ball from the bullshit lottery ball machine to feed to public

Hard work is not something these people understand 

Tue, 10/18/2011 - 14:00 | 1785997 Josh Randall
Josh Randall's picture

A deal is worked out - the math behind the deal isn't important right now..

Tue, 10/18/2011 - 14:12 | 1786041 jdelano
jdelano's picture

MMmmm....I smell more meat for the grinder.

Tue, 10/18/2011 - 14:00 | 1785998 AbelCatalyst
AbelCatalyst's picture
German Exit Strategy... Here's a possible way for Germany to get out of this mess: Drop out of the Euro and go back to the Mark.  The Mark will appreciate significantly against the Euro, and becasue all of their debt is in Euros, this means they could easily pay back the debt using Marks.  It's like hyperinflating away debt, and having your neighbors suffer the consequences.  Of course, this would lead to war, but the Germans would be fine (until someone drops some bombs on major cities).   The Euro would spiral into the abyss and their main trading partners would not be able to buy anything from Germany, but with virtually no debt they would be just fine, thank you very much!  After all, it is better than working with 17 other countires to solve thier debt issues...   A few weeks ago a very credible source said that Germany was in the process of printing Marks...  hmmm, could this be the Black Swan that will take down the world economy...  Something is about to give in Europe and this very well could be the triggering event.  Thoughts?
Tue, 10/18/2011 - 14:21 | 1786067 Deadpool
Deadpool's picture

Euro was Germany's idea. they can't "drop out". It's their baby.

Tue, 10/18/2011 - 14:26 | 1786086 john39
john39's picture

who says that Germany has to play fair...  they have been screwed in the past, so why not?

Tue, 10/18/2011 - 14:29 | 1786103 Instant Wealth
Instant Wealth's picture

Euro was France´s idea. It was the prize, Germany had to pay for reunification.

Quote Francois Mitterand. "Versailles without shooting *giggle*."

Tue, 10/18/2011 - 14:29 | 1786107 Steroid
Steroid's picture

As I remember, the Euro was the price for German reunification. Any member could have used it to its advantage but only the best did though they become the host to the parasites.

Tue, 10/18/2011 - 14:43 | 1786153 Deadpool
Deadpool's picture

The earliest date was in Germany, where the mark officially ceased to be legal tender on 31 December 2001, though the exchange period lasted for two months more.

Tue, 10/18/2011 - 15:00 | 1786194 PY-129-20
PY-129-20's picture

According to Austrian Economist Bagus, who is a university professor in Spain, the Euro was a French idea and the whole EU project turned into a socialist experiment, an empire.


In direct opposition to the classical liberal vision [of Adenauer(Germany), Schuman(France) and Alcide de Gasperi (Italy)] is the socialist or Empire vision of Europe, defended by politicians such as Jacques Delors or Francois Mitterand."

"It wants to see the European Union as an empire or a fortress: protectionist to the outside and interventionist on the inside."

"The socialist vision for Europe is the ideal of the political class, the bureaucrats, the interest groups, the privileged, and the subsidized sectors who want to create a powerful central state for their own enrichment Along the socialist path, the European central state would one day become so powerful that the sovereign states would become subservient to them. (We can already see first indicators of such subservience in the case of Greece. Greece behaves like a protectorate of Brussels, who tells its government how to handle its deficit.)"

"Before the introduction of the Euro, the Deutschmark was a standard that laid bare the monetary mismanagement of irresponsible governments. While the Bundesbank inflated the money supply, it produced new money at a slower rate than the high inflation of—especially southern European—countries, who used their central banks most generously to finance deficits"

"If the Euro means so many disadvantages for Germany, how is it possible that Germany agreed to its introduction? The fact is, the majority of the population wanted to keep the Deutschmark (some polls say up to seventy percent of Germans wanted to keep the Deutschmark). Why did politicians not listen to majority opinion? The most feasible explanation is that the German government sacrificed the Deutschmark in order to make way for reunification in. When the Wall came down, unification negotiations began 1990."

"Former translator for Mitterand, Brigitte Sauzay, writes in her memoirs that Mitterand would only agree to the German reunification “if the German chancellor sacrificed the Mark for the Euro.”

"Jacques Attali, adviser to Mitterand, made similar remarks in a TV interview in 1998"

"Another confirmation of these events is provided by Hubert Védrine, also a long time adviser to Mitterand, and later his minister for foreign affairs"
Read more about it: THE TRAGEDY OF THE EURO By Philipp Bagus; Ludwig von Mises Institute)

Tue, 10/18/2011 - 15:37 | 1786373 Deadpool
Deadpool's picture

Bagus is lame. I only listen to Krugman.

Tue, 10/18/2011 - 16:09 | 1786551 lookma
lookma's picture

Its hard to imagine a more utterly ignorant book about the Euro than the garbage Baggus published.

The most feasible explanation is that the German government sacrificed the Deutschmark in order to make way for reunification in.

Seriously, take the made up LvMI propoganda and go elswhere please.  LOL at LvMI, who much like the US lives by consuming the capital of its forbearers in lieu of any insightful production of ideas.  Mises would hate you poser conservatard.

Tue, 10/18/2011 - 14:29 | 1786106 JohnG
JohnG's picture

Not only the world economy, but the entire WORLD.  WW3 quick.  NATO breaks up and it's every man for himself.  Bad option any way you look at it.  Looks like were all fucked.  On a long enough timeline......

Tue, 10/18/2011 - 14:41 | 1786149 Belarus
Belarus's picture

You know, it's funny. Everyone, including guys like Gonzola Lira, assume that Germany is this huge creditor. But lest they forget, they are a debtor nation. They won' worry about their sovering holdings being paid back in depreciated EUR's agains the Mark. They'll at worst get partity between what they owe and what they recieve + gold holdings. 

Kyle Bass is right, ultimately, Germany leaves the EU. How does one short the EUR/USD?

Tue, 10/18/2011 - 16:38 | 1786698 Ghordius
Ghordius's picture

How many WW2 movies fuel this thought?

Tue, 10/18/2011 - 14:06 | 1786002 Snakeeyes
Snakeeyes's picture

BRUSSELS (Reuters) – Calls are growing for euro zone states to consider issuing bonds jointly underwritten by all 17 countries in the bloc — so-called euro zone bonds. European Commission President Jose Manuel Barroso promised on Wednesday to present options soon.

Some economic analysts, senior European Union officials, members of the European Parliament and financial market participants believe such a step could help resolve the region’s debt crisis, but little flesh has so far been put on the bones of the idea.

Talk about heaping European woes on the shoulders of Germany! Weaker and financially stressed governments want to pool with the strongest economy to free-ride off their superior credit rating. I will be surprised if Germany agrees.

And that is the problem with all the European solutions — there is too much free-riding off of Germany. Let’s see if the IMF (and the U.S.) step into the breech and guarantee European debt.

As Shakespeare wrote in Henry V, Act III, Scene I. The eve of another big battle against the French…

“Once more unto the breach, dear friends, once more;
Or close the wall up with our German dead.”

Tue, 10/18/2011 - 14:11 | 1786034 Deadpool
Deadpool's picture

Germany (aka Huns) have to agree. the Euro was their devil spawn brain child. It will happen with them kicking and screaming. Call it War Reparations 2.0.

Tue, 10/18/2011 - 14:33 | 1786117 PivotalTrades
PivotalTrades's picture

Now in for a penny in for a pound. If they are not ideologically against a bailout, they will be all in eventually.

Tue, 10/18/2011 - 14:26 | 1786072 Bob
Bob's picture



Thus far, with rough and all-unable pen,
Our bending author hath pursued the story,
In little room confining mighty men,
Mangling by starts the full course of their glory.
Small time, but in that small most greatly lived
This star of England: Fortune made his sword;
By which the world's best garden be achieved,
And of it left his son imperial lord.
Henry the Sixth, in infant bands crown'd King
Of France and England, did this king succeed;
Whose state so many had the managing,  
That they lost France and made his England bleed:
Which oft our stage hath shown; and, for their sake,
In your fair minds let this acceptance take.


Tue, 10/18/2011 - 14:03 | 1786016 catacl1sm
catacl1sm's picture

You know what this means, don't you?



Tue, 10/18/2011 - 15:56 | 1786454 Ruffcut
Ruffcut's picture

All the greens shoots, I see,  are always covered in feces.

Tue, 10/18/2011 - 14:04 | 1786021 kito
kito's picture

shirley this plan will fix everything. after all, markets are up today, and we all know that the "free market" is the most effective gauge of the truth. right? right?

Tue, 10/18/2011 - 14:26 | 1786087 Deadpool
Deadpool's picture

right, and don't call me Shirley.

Tue, 10/18/2011 - 14:05 | 1786025 HedgeAccordingly
HedgeAccordingly's picture

the alligator pattern in the ES will eat you alive -

Tue, 10/18/2011 - 14:13 | 1786048 LawsofPhysics
LawsofPhysics's picture

Yeah, nothing manipulated about that pattern.  All is well.

Tue, 10/18/2011 - 14:07 | 1786030 Deadpool
Deadpool's picture

save us Estonia!

Tue, 10/18/2011 - 14:10 | 1786033 wandstrasse
wandstrasse's picture

I will not feel safe until they do a stress test with the EFSF.

Tue, 10/18/2011 - 14:13 | 1786039 jarboejl
jarboejl's picture

Can you believe this horseshit?!?!  Now the Bernank says that monetary policy will be used to "pop" bubbles??  This guy is no longer (officially speaking) fit for the office he holds, as he is schizophrenic!

Tue, 10/18/2011 - 14:14 | 1786042 Deadpool
Deadpool's picture

Sallie Krawcheck is getting paid over $5 million soon… for getting fired.

Joe Price is also making millions… for getting fired.

Sallie and Joe are executives who just got fired from Bank of America. They are set to collect over $10 million as part of their severance packages. Meanwhile, Bank of America is going to charge customers $5 a month to use their debit cards. It's also laying off thousands upon thousands of workers.

It's a crazy situation. The big banks took billions in taxpayer-funded bailouts… And now, they're paying fired employees millions and millions of dollars.

Sallie and Joe are two of the latest targets of the "Occupy Wall Street" protesters. But you don't have to go to Wall Street to protest Bank of America and its paid-for friends in Washington D.C. You can opt out of the system with a simple move I've been telling people to make for years now…

Move your money to a credit union.

You've probably heard of a credit union. But if you're like most folks I've talked with, you figure there's no real difference between them and a big, name-brand bank… at least not to you, the small, private account holder. But they are different. And at times like this, the benefits of joining a credit union are important.

Very simply, credit unions are nonprofit companies that act as local community banks. And guess what? The rates credit unions offer are spectacular. I get 1.25% on my simple checking account and 1.25% on my basic savings account.

And the nice part is, Wall Street doesn't have access to my money anymore. You see, the credit union turns around and loans my money to other members. Rather than investing in insider shell games, like mortgage-backed securities, the credit union's bread and butter is car, boat, and housing loans that charge 5%-8%.

That's how they make money to pay their employees and rent. They borrow from depositors at 2% and get 5%-8% from their lending. Unlike Wall Street, the board members meet locally in a credit union conference room, not on some island resort, spending the shareholders money. Even better, the board members are usually volunteers. Is this sounding good or what?

Are there any risks? Not really. Your money is as safe as – if not safer than – it is in the larger commercial banks. Just like the Federal Deposit Insurance Corporation (FDIC), which is supposed to insure your deposits in a commercial bank, credit unions have the National Credit Union Share Insurance Fund (NCUSIF). This fund is backed by the "full faith and credit of the United States government," too. Just like commercial banks, each individual is insured up to $250,000.

The only catch is, to join a credit union you have to – by law – have some sort of affiliation with the group that sponsors it. For some credit unions, you have to work for particular employers. But in other cases, you need only be a resident of a particular state. For example, if you live in Florida or California, you can join any number of credit unions. And several pay more than seven times as much as the big banks for your checking and savings business.

My dad was a state employee in North Carolina, which qualified me to join. To find out more about joining a credit union and research if you're eligible to join one, go to

The way I see it, by banking with a local credit union, I'm giving my capital to local people and businesses, instead of the huge Wall Street firms that steal my taxes, pay their cronies big fat bonuses and severance packages.

Wall Street bailouts were supposed to revive the economy by producing money in the form of loans to all sectors and industries. Of course, we know that was a load of bull. Instead, the big money-center banks hoarded those dollars and used them to plug holes in their balance sheets.

But putting your money with local credit unions will help stimulate your local economy in the way banks should operate. These institutions don't keep plush offices or send their board members on luxury vacations. They exist solely to turn deposits into small business loans, home mortgages, and car loans.

If you take your money away from Wall Street and keep it local, you'll support small business ventures near you. I don't know about you, but I don't want to pay for any more golf trips, big bonuses, or million-dollar office decorations.

Together, let's stop the fraud of Wall Street and support our local community banks and credit unions.

Here's to our health, wealth, and a great retirement,

Doc Eifrig

Tue, 10/18/2011 - 14:25 | 1786083 uranian
uranian's picture
Federal Reserve Now Backstopping $75 Trillion Of Bank Of America's Derivatives Trades


This story from Bloomberg just hit the wires this morning.  Bank of America is shifting derivatives in its Merrill investment banking unit to its depository arm, which has access to the Fed discount window and is protected by the FDIC.

This means that the investment bank's European derivatives exposure is now backstopped by U.S. taxpayers.  Bank of America didn't get regulatory approval to do this, they just did it at the request of frightened counterparties.  Now the Fed and the FDIC are fighting as to whether this was sound.  The Fed wants to "give relief" to the bank holding company, which is under heavy pressure.

This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input.  You will also read below that JP Morgan is apparently doing the same thing with $79 trillion of notional derivatives guaranteed by the FDIC and Federal Reserve.


more at the link.

Tue, 10/18/2011 - 14:13 | 1786044 catacl1sm
catacl1sm's picture

Bitches be trippin'.

Tue, 10/18/2011 - 14:13 | 1786045 adr
adr's picture

Well the f'd up stair step algo plateau trading pattern is there for all to see. Also what the F is going on with the dollar index today. The moves up and down are so pronounced and so fast the tape almost looks like a wide white straight line across my monitor.

The pile of shit that moves this market up has already reached the moon. I think they are going galactic now.

Tue, 10/18/2011 - 14:17 | 1786050 FinalCollapse
FinalCollapse's picture

Math sucks, bitchez!

From today on, math is suspended in EU. Verboten!

Tue, 10/18/2011 - 16:50 | 1786779 falak pema
falak pema's picture

not math but speculative math expressed in naked derivative products. The financial bubble economy, voodoo maths for spin doctors in HFT mode. Death for the economy. Good riddance.

Tue, 10/18/2011 - 14:16 | 1786053 Belarus
Belarus's picture

The writings on the wall....AAPL blow-out their low ball guidance for the 31st time, stocks rally to the fucking moon the rest of the week. Next week, sell all the news. 

Tue, 10/18/2011 - 14:19 | 1786062 Deadpool
Deadpool's picture

aka: options expiration week.

Tue, 10/18/2011 - 14:20 | 1786066 kito
kito's picture

as the great bond bubble grows and grows, bernanke says the feds mandate should be to burst them.....



bernanke, hes a funny one. such a zirp twerp!!!!!!!! haha ahahaha

Tue, 10/18/2011 - 14:22 | 1786068 Steroid
Steroid's picture

And this is just a static calculation.  

These numbers don't even consider the possibility of what these financials will do under the false safety umbrellas.


Cancer is cancer. First are cells then the whole organism. It is never about the welfare of the host.

Tue, 10/18/2011 - 14:22 | 1786074 Cone of Uncertainty
Cone of Uncertainty's picture

Holy shit my head hurts.

I didn't read any of that, all I know is EFSF stands for:

Everyones Fucking So Fucked

Tue, 10/18/2011 - 14:32 | 1786118 wandstrasse
wandstrasse's picture

do not be so negative! There are many positive things about the EFSF... it may soothe your itching ass, it darns tailgaters to hell, there will be more of your favourite music on the radio... just to name a few.

Tue, 10/18/2011 - 14:25 | 1786080 MobBarley
MobBarley's picture

Now do you understand how Apollo 11 missed the moon by 482,099 miles

and went out into deep space killing everyone aboard? That being the reason

the government had to hire Stanley Kubrick to fake the moon landings?

Because 'rounding errors' really are ERRORS.




Tue, 10/18/2011 - 14:38 | 1786135 JohnG
JohnG's picture

Please explain to me why this guy:

is still alive?????

Tue, 10/18/2011 - 15:00 | 1786192 tmosley
tmosley's picture

Conspiracy by Space Jews.

Tue, 10/18/2011 - 15:52 | 1786437 DoChenRollingBearing
DoChenRollingBearing's picture

Nice one!

Tue, 10/18/2011 - 15:03 | 1786198 uranian
uranian's picture

dude, doncha know anything? he's a hologram!


seriously, neil had some interesting stuff to say about the moon:


"Today we have with us a group of students, among America's best. To you we say we have only completed a beginning. We leave you much that is undone. There are great ideas undiscovered, breakthroughs available to those who can remove one of the truth's protective layers. There are places to go beyond belief..."

Tue, 10/18/2011 - 14:26 | 1786084 mberry8870
mberry8870's picture

Where is it written in stone the creditors can not take a hit?

Tue, 10/18/2011 - 14:31 | 1786113 Deadpool
Deadpool's picture

Blackrock. HAhahahahahahhahahahahaha

Tue, 10/18/2011 - 14:45 | 1786156 Bam_Man
Bam_Man's picture

The deadly combination of CDS and hyper-leveraged balance sheets means that no one can survive a sovereign debt 'credit event'. Even taking so much as a haircut on a f**king minnow like Greece would be enough to blow the entire financial system up.

Tue, 10/18/2011 - 16:35 | 1786682 HellBoy6
HellBoy6's picture

The banks can't survive it but that's no reason to kill everybody else.  Governments(those that can afford to do so)should ring fence depositors and just let this sucker tank.  As long as people know they can get their money at some point in the future(reasonable time frame)then I think a reset of the system works.

Once people clue into the fact that their money may be gone; good luck with that...  These guys are making a big mistake by not blowing up the bad banks NOW!

Tue, 10/18/2011 - 14:30 | 1786090 kaiten
kaiten's picture

Dont get why people are assuming that the whole borrowing has to go through EFSF. Both, Italy and Spain are able to finance their needs via market for roughly 6-7% yield. Most of economists think that they need 5% yield for long-term sustainability, thou. But to push yield down from 6-7% to 5% you dont need to buy up the whole issuance. You need to buy 10-20%, or perhaps 30% of issuance. Look, ECB is able to keep yields below 6% with just 2-3bn per week, that makes it some 100-150bn per year. And all eurozone countries agreed to push their budget deficits down to 3%(which is considered safe) by 2013. So no need for bailouts after that. I believe that this whole eurozone crisis is totally overblown and regardless of bailout fund size no more than some 300-400 bn will be used.

Tue, 10/18/2011 - 14:35 | 1786126 Deadpool
Deadpool's picture

you are making a poor assumption that 6-7% is true price/yield discovery. without support it could be 15-20% which is not small. 300-400 bn is too small when you factor in UK, France and Italy AND the Euro is not backed by a central bank so WHOM is doing to issue that money on debt that WILL NOT be paid back ensuring loss? I admire your optimism, but it's irrational.

Tue, 10/18/2011 - 14:40 | 1786144 Dick Darlington
Dick Darlington's picture

15-20% was THE NORM for the southern european countries like Greece, Spain and Italy before the europonzi. I think "investors" who are willing to give these countries money at these artificially low levels of interest rates are insane.

Tue, 10/18/2011 - 14:47 | 1786164 kaiten
kaiten's picture

- Both Italy and Spain were borrowing for 6% before the ECB started the bond purchasings, so 6-7% is indeed the true yield.

- UK doesnt have to be factored in as she´s not an eurozone member

- euro is not backed by a central bank? So what´s the ECB´s job? arranging press conferences?

- it´s not optimism, it´s pragmatism stripped off of irrational market panic we´re living through these days

Tue, 10/18/2011 - 15:47 | 1786418 Deadpool
Deadpool's picture

you're so wrong on the rates. Greece was borrowing below 6% too. for years Club Med lived off of Germany's low rates and if they held an auction today they'd be lucky to cover <10%. the euro is a who owes you nothing...there are trillions of dollars in notional value at risk here and all held at par on bank balance sheets. no banks= no loans = no businesses = no jobs. Real horrific stuff.

Tue, 10/18/2011 - 16:52 | 1786774 Ghordius
Ghordius's picture

Kaiten has a longer memory and is drawing from 400 years of sovereign debt history.

Banks? This is MegaBanksAgitProp. Give us 25 two trillions while the small banks drop like flies... Setting up new banks is NO PROB at all if you have a viable currency...

Tue, 10/18/2011 - 18:04 | 1787064 kaiten
kaiten's picture

I think you´re missing something. It doesnt really matter what is the true yield, whether it´s 6% or 25%, the point is that ECB can keep the yields below 6% with just 2-3bn per week, which makes it 100-150bn per year, and that´s the true cost of containing the crisis. And that you start overdoing things, it can indeed make you feel horrific, but it doesnt change the reality. Perhaps you need to go fishing or something to calm your nerves.

@ Ghordius

- No, it´s not my longer memory, it´s just common sense.

- euro is a valid currency, otherwise it couldnt gain 35-40% of value against main reserve currency in just one decade


Tue, 10/18/2011 - 14:39 | 1786141 FinalCollapse
FinalCollapse's picture

Check your math.

Tue, 10/18/2011 - 14:53 | 1786178 kaiten
kaiten's picture

I did. And I stand behind what I said. No more than 300-400bn will be used. (excluding the already approved bailouts)

Tue, 10/18/2011 - 14:27 | 1786096 adr
adr's picture

of course Apple wil blow out earnings again. They have the best fixers on earth working for them. Of course everyone is expecting a $100 billion quarter and Android has been eating Apple's lunch lately.

With conJobs gone Apple might have a harder time obtaining the talent they need to continue cooking the books the way they do.

It would be funny if Jobs faked his death so Apple could get long lines for iCrap to help blow out the quarter. Who knows maybe the guy died earlier this year and they kept the news hiden until they could release it for maximum profitable effect. 

You don't get a $400 billion market cap without being dirtier than a $2 hooker.

Tue, 10/18/2011 - 16:36 | 1786689 DoChenRollingBearing
DoChenRollingBearing's picture

"You don't get a $400 billion market cap without being dirtier than a $2 hooker."


+ 1

Line of the day!  Thank you for the laugh.

Tue, 10/18/2011 - 14:31 | 1786112 Dick Darlington
Dick Darlington's picture

Europonzi has gotten it's name for a reason. Just like the whole political utopia called eurozone itself, this latest iteration of irrational scrambling to create more debt (and break the Lisbon Treaty once again) to cover someone else's unpayable debt and let the one's who need help to guarantee a part of their own new debt is FUBAR! There's a lot of STUPID investors out there but to get lured in to buy insolvent country's debt with a promise that the insolvent country will offer u a first loss guarantee on their own debt is so ABSURD that i have to wonder will even the Japanese buy this latest twilightzone ponzi scheme.

Tue, 10/18/2011 - 16:57 | 1786804 Ghordius
Ghordius's picture

Ehmm... How long would the EuroZone have to exist for your opinion to change?

Tue, 10/18/2011 - 14:31 | 1786114 Piranhanoia
Piranhanoia's picture

I like the field of science I am in.  I work to find support for a theory with proof. 

I think I see a fundamental flaw in the speech and behaviour of those persons trying to resolve this.  They are not enamored of any type of theory that has to be supported by fact.  Since these inwardly brilliant buffoons are in charge,  things will go like this until they are no longer allowed out of the asylum on day leave.

We have placed the future of our planet in the hands of cretins.  Time is running out.

Tue, 10/18/2011 - 14:34 | 1786123 MiningJunkie
MiningJunkie's picture

So the Euro goes to zero - how is that bearish for gold and silver producers or oil producers or Railroads or Multi-Nationals? It means that fiat currencies all crash. Crashing fiat means companies with assets are worth a lot more.

Just BTFD and get rid of cash because cash is trash with the bankers in full, Zimbabwe-esque, blast furnace, PRINT mode.


Tue, 10/18/2011 - 14:36 | 1786128 Coffin Dodger
Tue, 10/18/2011 - 14:53 | 1786179 JohnG
JohnG's picture

Made the news:

     But that doesn't neccesarirly make it true.  Can't find much on it, not even the text of the bill.

Tue, 10/18/2011 - 14:37 | 1786130 SilverDoctors
Tue, 10/18/2011 - 16:47 | 1786756 falak pema
falak pema's picture

good catch this was reported here in EUrope.

Tue, 10/18/2011 - 14:39 | 1786140 Cone of Uncertainty
Cone of Uncertainty's picture

I have just run these numbers through the Cone of Uncertainty algorithm and I have determined that there is a 100% chance of failure and 0% chance of success.

Please forward all payments for my research to my soft dollar account at BONY.

Tue, 10/18/2011 - 14:42 | 1786151 Dick Darlington
Dick Darlington's picture

that there is a 100% chance of failure and 0% chance of success.


Ah, so that explains the continued levitation in equities.

Tue, 10/18/2011 - 15:01 | 1786196 Cone of Uncertainty
Cone of Uncertainty's picture

Hahaha, do you think I give a rats ass about the fucking nominal fiat based price of stocks?




Tue, 10/18/2011 - 15:06 | 1786208 Dick Darlington
Dick Darlington's picture

Nope. At this point my guess is that the only one who cares is the central planning brigade headed by The Bernank. To them it's all abt perception.

Tue, 10/18/2011 - 14:56 | 1786183 Quinvarius
Quinvarius's picture

When rich people lose, they change the rules.

When the EFSF has to be 5 trillion dollars, it will be 5 trillion dollars.  It doesn't matter what the rules are now or what math you use.  What they are doing now was illegal a few years ago.  What is illegal now will be the law in a few more months/years.

Tue, 10/18/2011 - 15:07 | 1786209 uranian
uranian's picture

i'd not be so cosy if i were the global rich these days. the peasants really are revolting now, 1000 cities last weekend. i think that would be the biggest protest in human history. and i see no signs of it doing anything but growing.

Tue, 10/18/2011 - 15:12 | 1786232 Peter K
Peter K's picture

It took 70 years for the math to catch up with the Soviet Union. And only 12 years to catch up Soviet Europe. Now that's what I call progress:) BTW, socialism es muerte.

Tue, 10/18/2011 - 15:17 | 1786262 HellBoy6
HellBoy6's picture

Here we go they just ramped this fucker on the EFSF news I think, volume still seems non-existant for the distance we've travelled...

Tue, 10/18/2011 - 15:33 | 1786351 Deadpool
Deadpool's picture

how is this not gold positive?

Tue, 10/18/2011 - 15:36 | 1786364 carbonmutant
carbonmutant's picture

Using one credit card to pay off another...

Tue, 10/18/2011 - 16:29 | 1786365 kevinearick
kevinearick's picture

Fog, Anxiety, & Implosion

The majority cannot see beyond the current event horizon. Unsustainable resources delivered with “smart” infrastructure to eliminate thinking, backstopped by cradle to grave government promises is not the solution, again. Scarcity anxiety is designed to be paralyzing, to accelerate accounting income. Central control implements the social psychology.

For the majority, government is the answer to every question, benefits to themselves and responsibility to others. That government is an increasingly desperate hammer looking for a nail, a derivative representing the voters’ own least-common-denominator behavior, that reaping thing.

Individually, they are asses looking for a chair, waiting for someone else to build the event horizon, so they can tax it. When the producers exit to an outlying event horizon, the entire manufactured majority ends up working for the government, collecting a check for their anxiety as they participate in tyranny, until the fulcrum collapses.

Because God doesn’t call them on the phone, they wait for negative environmental demand to act and expect God to save them from increasingly negative consequences. God helps those who choose to learn.

When in doubt, add any adaptive skill. You may not use them all, but you will learn to effectively acquire and communicate them, beyond popular event horizons. You always have a circulation problem. Check the voltage with algebraic reduction.

Space is a web of event horizons, each with a lock and key ruling out the others, rotating, with toll bridges between them. The universe is a combination lock, a circuit breaker of circuit breakers setting the rates of implosion, ensuring the relativity circuit. Life is a meter effect. Don’t expect a static combination when life is present.

Anxiety ensures that only your own immediate desires are met by the end of your rope. To overcome procrastination, dc logic, make a productivity to-do list after exiting anxiety. Take care of yourself as efficiently as possible to effectively provide for others and your rope/circle/economy will flip from control to adaptation.

Those with experience in the fog can move faster, but speed to daylight is not the issue. A buck in the road could easily cause an interstate pile-up. Set your own rates and let central control try to keep up. Interest rates for popular event horizons will go up, but net interest is always 0.

The unified field equation depends on you, and you always have a choice. Without life, 0=0. The sides carry equal weight, with an increasingly effective fulcrum, but they exist in different dimensions, in a circle of circles, from the point of perception. A false assumption in the present rules out the future, imploding the past and creating the orbit, when properly balanced.

The nucleus is separating and fewer agents like Soros are charging increasing fees to move the money, which is exactly what you want. Reorganize to meet your event horizon orbit. Begin with education and work the pieces available into a unique, profitable surplus, with family as the building block to take advantage of all that gravity hitting the demographic wall.

Get rid of redundancy (Lowes,Home Depot) to balance control with community development. At some stage, you will be going through the fusion/fission reactor event horizon. Just don’t rule it out. Communities surviving the algebraic reduction will form the prototype portfolio. S&P replaces “losers” to maintain control in the short term, but intelligent investors decide the long run. At the point of perception, the fog clears and the future becomes the present.

If you choose D immediately and it’s wrong, you have time to recover and choose E. If you wait until the last second, accept the sunk cost and start over. Employ algebraic reduction to get the bipolar choice. With time left over, choose B or C as the path to E. A is where you are. Create time, transform threats into opportunities, by operating beyond the event horizons of others.

Employ your fight of flight anxiety constructively. Counter-productive anxiety, manufactured crises, produces make-work and nonperforming assets, crowding out real work and the real time required to perform it. The program is systematically rooting out and shorting the sources of manufactured crises.

As the global economic nucleus, the majority of Americans behave like a protected species bred in captivity. Naturally, they incrementally remodel their cage for export and bankrupt the global economy with corruption. When their cage is opened, the herd goes nuts and the bullies pee themselves. Surprise, surprise.

If that gravity isn’t employed soon, the sh** show on the rocks below is going to get ugly. What would you do if currency and credit cards were voided? Here we are, looking at IBM, again, watching the war between stupid. Have you examined the VIX algorithm for corruption?


“Boeing and Microsoft boom, but Washington State busts”

You don't want to be on the bottom of a collapsing inverted pyramid/bridge, built for the occassion, pea shooter or no.

Tue, 10/18/2011 - 15:37 | 1786371 JW n FL
JW n FL's picture



Are there any regions or sectors PIMCO is particularly interested in at the moment?

From an opportunistic standpoint, the U.S. residential and commercial mortgage markets continue to present opportunities due to their size, regulatory uncertainty and housing weakness. Also, the issues surrounding sovereign debt and financial institution balance sheets in Europe have the potential to create attractive investments for some time.

From a liquid markets standpoint, the continued deleveraging in the global financial sector should produce a steady supply of highly motivated sellers of risk assets for non-economic reasons, creating temporary pricing anomalies from a bottom-up perspective. From a macroeconomic perspective, the distortions created by policymakers globally as they try to curb inflation and control capital flows in the developing world, while trying to address large debt overhangs and spur aggregate demand in the developed world, should create opportunities in the currency and interest rate markets.


Europe is worth more to not only the Germans but Americans as well.. in a state of turmoil!

Wake Up!! Sheep!!! Privatization is the NEW NORMAL! that they forgot to tell YOU! about!! LOL!!

Tue, 10/18/2011 - 16:29 | 1786646 JW n FL
JW n FL's picture

Uploaded by on Oct 18, 2011

This week Max Keiser and co-host, Stacy Herbert, talk about JP Morgan's bet against itself, a Florida legislator's plans to boost the economy with 'dwarf-tossing' and Tim Geithner flying economy. In the second half of the show, Max Keiser interviews Saifedean Ammous about Mubarak's odious debts and about whether or not Occupy Wall Street is an Arab Spring for the West.

Tue, 10/18/2011 - 16:47 | 1786761 JW n FL
JW n FL's picture



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Tue, 10/18/2011 - 15:44 | 1786404 oogs66
oogs66's picture

garbage plan

Tue, 10/18/2011 - 15:46 | 1786415 jmcadg
jmcadg's picture

Have I read this correctly. Nearly 38% of the guarantee to this EFSF fund is by the PIIGS!

Bullshit you can believe in.

Tue, 10/18/2011 - 15:46 | 1786416 AldoHux_IV
AldoHux_IV's picture

I actually hope they go through with this because it will accelerate the disintegration even faster and will finally pin these odious leaders with something even bigger to try them with against.

The euro is now officially doomed as this is the best they can do now to restore credibility-- it didn't work in the US-- citizens here are now realizing that and it sure as hell won't work in the EU.

Bring these assholes to justice!

Tue, 10/18/2011 - 15:58 | 1786460 Scalaris
Scalaris's picture

My oh my what a conundrum we find ourselves in.

I think you might be ascribing the market with too much reason, then again perhaps they might eventually become acquainted with the unfortunate math-based fact, evidently though, I don't think that it will happen until the main indices touch suborbital altitude.

'Cause apparently that's how sh*t works.

Tue, 10/18/2011 - 16:00 | 1786474 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

100pt swings in the DOW in minutes. These are the signs of the end, not a new beginning.

We're not returning to Kansas Toto, ever.

Tue, 10/18/2011 - 16:03 | 1786498 falak pema
falak pema's picture

BNP says they will offer RM a bottle of champagne for having saved their skins. Without RM, Sarkozy would never have fought so hard for EFSF to go to 2T . It's RM spiel that scared the shits out of Merkel and FORCED her to do the deal with Sarkozy. She was convinced that a EFSF leverage to 2T was not necessary as Deutcshe Bank didn't want it too. But Sarkozy relayed to Merkel what the Zulu sage of ZH had predicted of a INEVITABLE french bank meltdown if the EFSF and bank capitalisation were not in place this week end. AND SHE CAVED IN, DID MERKEL!


Over and out. 

Tue, 10/18/2011 - 16:07 | 1786544 downtownshuter
downtownshuter's picture

So if someone defaulted and the loss on their bonds was 40%, would this fund just cover half of the losses? Or would this fund cover the whole loss until all the money is exhausted, and the 20% is just a number they pulled out of the air so they can say that 5x the fund in notional value is covered?

Tue, 10/18/2011 - 16:29 | 1786632 papaswamp
papaswamp's picture

The Fed did a $15Tril artillery round worldwide (see ZH article) and this is where we are now. So is any euro citizens asking what happens if this doesn't work? ...and can we now pronounce capitalism dead since this type of intervention is full on oligarchy?

Tue, 10/18/2011 - 16:32 | 1786656 The_Euro_Sucks
The_Euro_Sucks's picture

MmmI have a bit of a problem taking Willem Buiter serious.


Here some assorted quotes from him

On gold;

- I don’t want to argue with a 6000-year old bubble. It may well be good for another 6000 years. Its value may go from $1,100 per fine ounce to $1,500 or $5,000 for all I know. But I would not invest more than a sliver of my wealth into something without intrinsic value, something whose positive value is based on nothing more than a set of self-confirming beliefs.


On fiat currency;

It need not derive its value from the government demanding it in payment of taxes or insisting it should be accepted within the national jurisdiction in settlement of debt. Instead the defining property of fiat money is that it has no intrinsic value and derives any value it has only from the shared belief by a sufficient number of economic actors that it has that value.

Tue, 10/18/2011 - 16:44 | 1786717 flyonmywall
flyonmywall's picture

Here's your new TARP for Wall Street right here. While all eyes are focused on Europe, the introduction of this bill went under the radar. And everybody is endorsing it. I'd cover your shorts before they get stolen away in the hoopla.


Tue, 10/18/2011 - 19:26 | 1787249 Cat On A Ledge
Cat On A Ledge's picture

Nice find! Very little media coverage so far, thanks for sharing. From your links, this bill was introduced on Oct 6th, and is now under review. Seems like US equities are indeed anticipating this, fits nicely with the 'mysterious rally'; FX impact will have to wait until it's actually passed. A trillion dollars moving home will have very visible effects, on just about everything USD-denominated.

But let's adopt a wait-and-see. Remember, not many months ago after the tsunami yen repatriation did not materialise as widely hoped. Also, this is net negative on emerging markets, where said foreign earnings reside.

Tue, 10/18/2011 - 22:29 | 1787615 lano1106
lano1106's picture

very interesting. taxpayers are giving a tax break to big corporations in exchange of a promise to reinvest into local economy.

The intent is noble but I doubt that it will work. Some big corps are full of cash in the bank (ie Apple) and they do not reinvest it. Why? IMO, it is because they currently see no potential in their respective markets due to the crappy economic context.

Sounds like another gift to the 1%. In top of that, we are not even considering negative side effects for foreign banks. If they see all their deposits fly back to the US, this will amplify their liquidity problem. (I have in mind all these downgraded european banks...)


Tue, 10/18/2011 - 16:59 | 1786815 zorba THE GREEK
zorba THE GREEK's picture

To paraphrase Johnny Cochrine/Jim Chanos:

If the math don't fit, the plan is shit.

Tue, 10/18/2011 - 17:01 | 1786824 ebworthen
ebworthen's picture

Great paragraph from Buiter's dialogue. 

"Even if sovereign defaults are unlikely and infrequent, the size of the NPV loss for the investors conditional on a default having occurred is therefore likely to be large: if the sovereign is going to default at all, she might as well be hung for a sheep as for a lamb."

Yes, and 434 billion of Euro backstop cotton candy cannot prevent the contagion of 7 Trillion of debt.

Who the hell is going to buy that crap?

No one.

Tue, 10/18/2011 - 18:17 | 1787123 howswave5workin...
howswave5workingforyou's picture

there is one problem with your analysis. you assume the only buyer of spanish and italian bonds going forward is the new stability fund. how do you arrive at that conclusion? a change of confidence would bring in bank and pension fund buyers. there is an ageing population that require the yield for underfunded pension schemes. bunds yield nothing. bunds are a massive overweight. if people diversified the flows would be significant. 

Tue, 10/18/2011 - 20:22 | 1787360 Escapeclaws
Escapeclaws's picture

Amazing that it's all come down to this. The work primarily of one man, Alan Greenspan. Aided and abetted by Clinton, Rubin, Gramm. Continued by Bush, Bernanke, Paulson, Geithner, and the feckless Obama. Reads like a history of the collapse of the Roman Republic. We should be so lucky to have an Octavian following upon the demise of Caesar.  These individuals, who don't deserve to be called "men," are the architects of the Greatest Depression, the worldwide economic collapse. Has there ever been more concentrated mediocrity than the leadership of the baby boom generation? The Desolation of the Obamanation.

Wed, 10/19/2011 - 14:11 | 1789697 P Rankmug
P Rankmug's picture

It never could have started without Nixon severing the gold/dollar link.  The rest is the inevitable empire collapse via currency devaluation.  There are no exceptions to history.  

Wed, 05/02/2012 - 05:35 | 2390482 ChrisChin
ChrisChin's picture

Now that Greece has been bailed out, I wonder how many of the predictions would come true about the sad fate of the europian Union. The insurance model would not work, apparently, but what other choices do they have to bail themselves out of this hole they have dug themselves into?Definitely, ploughing more bailout money into the EU would not solve all problems.

Tue, 05/08/2012 - 04:00 | 2405693 ChrisChin
ChrisChin's picture

In many ways, the weaker countries in the EU have realized that they can rely on the stronger countries as a form of insurance, and this might send the wrong message in the longer term, assuming that the EU makes it past this crisis in one piece.


Chris -

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