Why German Tempers Are Finally Boiling

Tyler Durden's picture




 

Back in July of last year, before it was even remotely acknowledged (and in fact it was roundly denied) that Greece would set a debt haircut precedent, which despite all the rhetoric has merely given all the other PIIGS ideas about debt haircuts of their own (and how to achieve these as fast as possible), Zero Hedge was the first media outlet to cut to the truth, with "The Fatal Flaw In Europe's Second "Bazooka" Bailout: 82 Million Soon To Be Very Angry Germans, Or How Euro Bailout #2 Could Cost Up To 56% Of German GDP." Note we said "soon to be" because it was obvious that the modestly complicated math of Germany bearing the cost of keeping the Eurozone alive would take quite a while to trickle down to the common German man. We did, however, underestimate the Bundesbank's mathematically helping hand in the form of one chart, most recently observed here, which makes the math far clearer than anything we could ever do to explain: namely the exponentially grown Bundesbank TARGET 2 balance, which is essentially Germany's way to fund, via the ECB, account imbalances across the Eurozone (explained in gory detail here), and put the national economy on the hook in ever greater amounts to a sudden and disastrous collapse of the Eurozone, because should a fat tail even occur, a solid 25% of German GDP would be Corzined. Today, The Telegraph's AEP does a bring down on the current status of this one biggest wildcard for Europe's future: namely, German anger, or as he puts it "tempers" which it appears have finally begun to boil.

From the Telegraph:

Controversy is raging in Germany over soaring "payments" by the Bundesbank to shore up Europe's monetary system and cope with a tidal wave of capital flight from southern Europe.

 

Professor Hans-Werner Sinn, head of Germany's IFO Institute, said German taxpayers are facing a dangerous rise in credit risk from a plethora of bail-out schemes. "The euro-system is near explosion," he told Austria's Economics Academy on Thursday.

 

Dr Sinn said Germany is on the hook for much of the €2.1 trillion (£1.72 trillion) in rescue measures for EMU debtors - often by the back-door - that will saddle Germans with ruinous losses one day.

 

"It is a horror scenario," he said, warning that the euro system is splitting friendly countries into blocs of mutually hostile creditors and debtors, exactly the opposite of what was hoped.

 

Earlier this week, the Foundation for Family Business in Munich filed a criminal lawsuit against the Bundesbank, accusing the board of disguising the true scale of risk born by German citizens.

 

The furore follows a sharp jump in the Bundesbank's "Target2" claims within the European Central Bank's internal payment network from €547bn in February to €616bn in March. Bundesbank claims have risen sixfold since 2008, a rise mirrored in Holland and Luxembourg.

To paraphrase Hans Gruber loosely, "You asked for miracles, Theo, I give you the Bundesbank"


Ironically, that one chart achieved more than we could ever hope to do in conveying the seriousness of the situation.

There has been a dramatic rise in outflows from Spain, despite the ECB's €1 trillion blast of three-year liquidity. The exodus indicates that the ECB action has so far failed to restore basic trust in Spain's banks.

 

Critics say Target2 allows the vast sums to pile up for ever, unlike the US "FEDwire" that mandates the settlement of regional imbalances within months.

 

The Target2 saga has become a daily theme in the German press, with Dr Sinn emerging as a television superstar. The coverage is eroding confidence in the euro. The latest poll shows that 56pc of Germans want a return to the D-Mark.

 

Bundesbank chief Jens Weidmann has fanned the flames by demanding collateral from weaker states for Target2 transfers. The imbalances are not a problem "as long as the eurozone stays together", he said.

Of course, there are those who still think that debt gets repaid at par even when collateralized with doubly reused condom wrappers:

Professor Karl Whelan from University College Dublin said the debate is absurd, whipped up by populists and the German media. "If the euro breaks up, there are still assets to go along with the liabilities. The likely outcome would be a 'Bretton Woods weekend' with a gentleman's agreement to carve up the losses."

 

"Even if countries told each other to go to Hell, the euro would simply cease to exist and the Bundesbank could write a cheque to itself. There would be no inflation and no loss to the German taxpayer," he said.

 

"We live in a world of fiat currencies, not the Gold Standard. People making these claims don't understand how a central bank works," he said. His views are shared by ECB experts.

Oh they understand all right: they understand that the biggest problem in Europe - namely that it has run out of money good assets - is now the problem. And now even the common people get it.

However, the issue has taken on a life of its own in German politics. There is deep concern among German officials that ECB monetary stimulus will leak into inflationary credit within Germany, which has the lowest unemployment in 20 years and an incipient housing boom.

As we pointed out last week, now even Soros is involved.

Mr Soros said EU politicians are "leading Europe to its ruin" by trying to enforce misguided contraction on the EMU weaker states, adding that he would "bet against the euro" if he were still an active investor. His Quantum Fund famously made €1bn betting against sterling and the lira in 1992, a gamble triggered by Bundesbank comments at the time.

 

Even defenders of Target2 admit that such vast transfers need proper scrutiny. The International Monetary Fund said the system is a back-door means of financing the trade deficits of Italy, Spain, Ireland and Portugal.

 

Dr Sinn's IFO Institute has refused to back down. Its latest report said Target2 violates democracy. "Who are the losers from this process? The savers in those remaining European countries that still have sound economies," it said. They have been pledged their assets "without their knowledge or consent".

 

"This enormous international credit should have been subjected to the parliaments of Europe," it said.

In the meantime, and as also suggested here first, the best way to bring the current flawed system to a crushing collapse is ironically to do nothing. Courtesy of exponential charts like the one above, which by definition are unsustainable, two things will happen: 1) what is unsustainable will not be sustained, and will crash and burn, and 2) the more the common people look at charts that go vertical, and guarantee massive net worth losses in the future, the more tempers will boil, until finally the anger takes to the streets.

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Fri, 04/20/2012 - 08:15 | 2360628 HedgeAccordingly
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Germany reported higher confidence this morning lolz..

all positive data spin this morning - weee - http://hedge.ly/IsN5gu

Fri, 04/20/2012 - 08:30 | 2360654 GetZeeGold
GetZeeGold's picture

 

 

Umm.....when did the Germans mind funding 50 somethings Greek retirements? Seems like the least they could do.

 

Fri, 04/20/2012 - 08:34 | 2360670 Harlequin001
Harlequin001's picture

I'm telling ya, you have to watch these buggers, they'll invade someone...

Fri, 04/20/2012 - 08:46 | 2360704 Bicycle Repairman
Bicycle Repairman's picture

There was plenty of furor in the US as well.  So what?

Fri, 04/20/2012 - 08:54 | 2360726 SWRichmond
SWRichmond's picture

Statements like this one are just un-fuckingbelieveable:

"Professor Karl Whelan from University College Dublin said the debate is absurd, whipped up by populists and the German media. "If the euro breaks up, there are still assets to go along with the liabilities. The likely outcome would be a 'Bretton Woods weekend' with a gentleman's agreement to carve up the losses.

"Even if countries told each other to go to Hell, the euro would simply cease to exist and the Bundesbank could write a cheque to itself. There would be no inflation and no loss to the German taxpayer," he said.

"We live in a world of fiat currencies, not the Gold Standard. People making these claims don't understand how a central bank works," he said. His views are shared by ECB experts.

If losses can be covered simply by one writing a check to onesself, then we should all just print up a million or so (or perhaps Sheila Bair's 10 million interest free loans for everyone), and then we can all stop workling and spend the rest of eternity traveling.  We all understand exactly how central banking works, you stupid loon.  All of the assets this jackwad refers to now carry false prices, owing precisely to central bank interventions.  What are they really worth?  No one knows.

Is it true, for some reason, that the stupider one is, the higher one rises in academia and government?  Or, is all that is required a willingness to publicly give blowjobs to the status quo upon demand?

Fri, 04/20/2012 - 09:00 | 2360748 AUD
AUD's picture

You just don't understand how a central bank works, do you? You are not allowed to write a cheque to yourself, that would cheque kiting. When the central bank does it though, its prudent monetary policy.

Get with it man.

Fri, 04/20/2012 - 09:02 | 2360756 economics9698
economics9698's picture

SWR that was pretty good dude.

Fri, 04/20/2012 - 09:26 | 2360814 SWRichmond
SWRichmond's picture

Ty.  The phony asset prices support the unbacked buying power of the phony currency, and additional phony currency is produced and used to support the asset prices; each is used as evidence of the strength of the other, when in fact the need to manipulate both is the best evidence available for the weakness of both.

Fri, 04/20/2012 - 09:55 | 2360909 The Big Ching-aso
The Big Ching-aso's picture

 

 

If Merkel suddenly grows about a 1 inch square 'stache things could get hairy.

Fri, 04/20/2012 - 10:06 | 2360965 Calmyourself
Calmyourself's picture

SWR, your absolutely right of course but until a critical mass of folks understand that nothing changes.  The PTB will do anything to maintai nthe fiction and have been using our  education and propaganda organs to deny that knowledge to the masses.  Only the stark reality of hunger can change things at this late point the sheep are too brainwashed and compliant.

Fri, 04/20/2012 - 10:10 | 2360978 LowProfile
LowProfile's picture

 

All of the assets this jackwad refers to now carry false prices, owing precisely to central bank interventions.  What are they really worth?  No one knows.

True, but I think we can at least hazard a guess at direction...

Fri, 04/20/2012 - 09:02 | 2360751 economics9698
economics9698's picture

The best quality the German people have is they like to kill French people periodically.  It must be getting about that time for the games to resume.

Fri, 04/20/2012 - 09:12 | 2360767 GetZeeGold
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Stop teasing us.

 

Fri, 04/20/2012 - 09:41 | 2360866 Thomas
Thomas's picture

"Give a German a gun and he heads to France"

Bill Bonner

Fri, 04/20/2012 - 13:13 | 2361592 LongBalls
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FOR SALE: WW Era French rifles. Never Shot! Dropped twice.

Fri, 04/20/2012 - 09:37 | 2360855 Winston Smith 2009
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"Is it true, for some reason, that the stupider one is, the higher one rises in academia and government?"

According to the evidence and statements on that topic by William K. Black, the answer would be "yes."

"Or, is all that is required a willingness to publicly give blowjobs to the status quo upon demand?"

That is requirement "B", a supplement to the above incompetence requirement that greatly increases your chances of floating to the top and remaining there.

Fri, 04/20/2012 - 08:57 | 2360734 Nussi34
Nussi34's picture

Why would anyone invade shitholes like Greece? There is nothing to loot and the gold is already owned by the Germans!

Fri, 04/20/2012 - 09:03 | 2360753 Harlequin001
Harlequin001's picture

Who said anything about invading Greece?

Mind you, Greece just happens to have some good things going for it, rather nice looking women, cool beaches, shit loads of ouzo and some soon to be excruciatingly cheap labour...

and I believe the Parthenon will soon be up for sale, for a very small amount of gold...

Fri, 04/20/2012 - 10:29 | 2361062 Nussi34
Nussi34's picture

You must like fat women!

Fri, 04/20/2012 - 11:03 | 2361205 Harlequin001
Harlequin001's picture

I like a da all women...

It's just that some are just nice to talk to that's all.

and others are good for cleaning the house...

Fri, 04/20/2012 - 09:33 | 2360845 Marc_W
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The U.S. military has twice the troops in Germany than Germany has in its entire military.  They're an occupied slave race and have been for 70 years.

Fri, 04/20/2012 - 09:45 | 2360877 Harlequin001
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Except German soldiers are quite proficient, which is more than can be said for large unwieldy and untrainable armies that hide their faults behind long distance missiles and predator drones, which the US can't afford for much longer. The US military has twice the troops in Germany as you say, but Germany isn't paying for them is it?

When they've had enough they, just like everyone else will tell the US to go and the US will leave, just like everywhere else. But why do that when the US is paying for everything? Perhaps not so stupid after all eh, on the part of the Germans...

Fri, 04/20/2012 - 09:51 | 2360903 Marc_W
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Germans are the fattest people in Europe and their troops the fattest on Earth.  Nobody is afraid of sie Germans anymore Tommy.  You've got your head stuck in History Channel reruns.

Fri, 04/20/2012 - 10:26 | 2361057 Harlequin001
Harlequin001's picture

You just keep telling yourself that...

I'm sure one day someone else will believe it too...

Fri, 04/20/2012 - 10:59 | 2361190 LarryDavis
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Europe for the most part (Germany included) does not have the type of belligerent homicidal videogame playing maniacs required to fuck with the US. While our military might not have the subtlety, it has unmatched brute force and funding. I'm no expert but that continent doesn't breed ignorance, frustration, and desperation sufficiently well to make great killing machines. Although, this generation of Europeans growing up in what will be dark times could be quite capable. Just look at the some of the fighting in Albania, Yugoslavia, Bosnia, etc as examples. As I see it, no first world nation other than the US (and possibly Israel) is capable of sending young people uncaring enough to really fuck shit up. 

Fri, 04/20/2012 - 11:02 | 2361198 Harlequin001
Harlequin001's picture

Rubbish.

Fri, 04/20/2012 - 11:26 | 2361288 LarryDavis
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Go live in Germany or Spain as I have and then come back to the US. What differences do you see? Whether you know it or not, we live in a first world country with a decidedly paramilitary edge. Everyone has arms, loves all forms of pseudoviolent competition (football, mma, etc), and we are not averse to VIOLENT CRIME here in the US. Smuggling? Human Traffciking? Gun Running? Large prisons full of disenfranchised felons? Check. How about Iran Contra? Do you know of many government's selling kilos to buy guns? Everyone has a hustle here. JFK's father was a bootlegger and his son became the FUCKING PRESIDENT. America is wild, fucking crazy, and LAWLESS when compared to many places. Our society is different and, accordingly, so is our approach to martial conflicts. Europe doesn't have that and I won't hear otherwise. 

Fri, 04/20/2012 - 11:51 | 2361353 Harlequin001
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There is nothing going on in America that wasn't imported from Europe. Nothing.

Fri, 04/20/2012 - 15:55 | 2362179 Bicycle Repairman
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Sushi?

Fri, 04/20/2012 - 19:22 | 2362709 mick_richfield
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I wasn't imported.

Fri, 04/20/2012 - 12:49 | 2361514 Rynak
Rynak's picture

 

Umm.....when did the Germans mind funding 60 somethings Greek retirements? Seems like the least they could do.

There, corrected it for you, propaganda whore.

Fri, 04/20/2012 - 08:50 | 2360715 jus_lite_reading
jus_lite_reading's picture

Germany wants to hang on to the EU because it is benefiting greatly from the poor EURO FX rate... we all know that if Germany was on its own the DM to USD would be 2.40+ but right now is 1.30

And secondly, Zero Hedge is the only real news source that matters. Despite having access to Thomson Analytics I don't even bother. And no need to even mention the other fake financial news sites like The Street and CNBS. Zero Hedge, you have my full attention and admiration.

Fri, 04/20/2012 - 09:09 | 2360762 economics9698
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Are you dating Tyler?

Fri, 04/20/2012 - 09:36 | 2360850 Marc_W
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ZH is great but think for yourself.  I find the contrarian view to many of the ZH group think based memes to be more represenative of reality.

 

You were all screaming to buy gold when it was over 1900 an ounce too.  And to short the Euro, which would have been an awful move.

Fri, 04/20/2012 - 09:44 | 2360876 jus_lite_reading
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I don't believe in group think. I pave my own roads and follow them so as far buying gold at $1900, that was your own choice. (Anyone want to calculate the price of gas in gold, the price of computer memory in gold, the DOW in gold or the price of milk in silver? Don't complain.

That said, ZH is still the only site that gives you the news straight and raw and I really hand it to them for coming up out of nowhere so quickly... 

Fri, 04/20/2012 - 09:58 | 2360930 Zero Debt
Zero Debt's picture

You are suggesting that ZH is making trade recommendations? Be reasonable.

Fri, 04/20/2012 - 10:21 | 2361026 Marc_W
Marc_W's picture

No, but the Zero Hedge community sure does via these comments sections.  The group think here is that gold should be purchased at any price, all government will disappear, and we'll be bartering our teenage daughters for 2 chickens and a silver coin within a matter of months.  That along with the break up of the E.U.

 

I don't buy into any of these notions.

Fri, 04/20/2012 - 10:30 | 2361067 Nussi34
Nussi34's picture

I have 6 chicken and 3 silver coins, please send your teenage daughters here!

Fri, 04/20/2012 - 10:30 | 2361074 jus_lite_reading
jus_lite_reading's picture

>>"The group think here is that gold should be purchased at any price,"<<

If you believe that the proverbial shit is about to hit the global economic fan blades, then yes, gold should be purchased at any price, for we are not looking for "gains" in fiat but surviving afterwards...

>>"all government will disappear"<<

No but there is far too much gov't intervention in our daily lives. what's the purpose of gov't again?

>>"and we'll be bartering our teenage daughters for 2 chickens and a silver coin within a matter of months"<<

In times of distress, you'll do whatever you have to do to survive. Let me say this: a hungry man is a dangerous man. You included.

BTW, if can't see what is coming shortly, then I have no pity for you. 

http://kaygranger.house.gov/weekly-enewsletter-executive-order-you-should-know-about

It's almost here...


Fri, 04/20/2012 - 16:41 | 2362319 Bunga Bunga
Bunga Bunga's picture

That is an elitist myth distributed by brainwash media.

Germany got even more competitive in times when the Deutsch-Mark was strong, because they had to compensate for lower sales revenue. But now, in times when their currency is "weak", their industry gets even more competitive. Why this? Of course, the export revenues grew tremendously over the last ten years, which lead to a strong trade surplus.

Compare it to Greece. Before the Euro and fixed exchange rates the Drachme was very weak. But they neither benefited from a weak currency then or were able to improve their productivity over the last 13 years, which a strong currency actually mandates.

We see that economic prosperity is a much more question of mentality and culture, much less a question of currency value.

In addition you have to differentiate what it means, if one says that Germany is benefitting greatly. Real wages for majority of Germans went down over the last 10 and 20 years. The only who are benefitting greatly are the German and international elitists who own all these companies.

 

 

Fri, 04/20/2012 - 08:15 | 2360629 cossack55
cossack55's picture

Angry kraut = quavering Frenchy

Fri, 04/20/2012 - 08:20 | 2360639 Seize Mars
Seize Mars's picture

They're not "krauts" and "Frenchys," they are human beings.

The Euro currency was invented by French banks. Read a book.

Fri, 04/20/2012 - 08:32 | 2360659 GetZeeGold
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Well if the French invented it....they shouldn't have to pay anything. They've already done the hard work.

 

Fri, 04/20/2012 - 12:30 | 2361456 Ghordius
Ghordius's picture

by inventing the French kiss?

Fri, 04/20/2012 - 08:41 | 2360690 cossack55
cossack55's picture

Which one, Mein Kampf or Les Miserables?

Actually don't need to. Lived there many years.  Oh, and fuck you.

Fri, 04/20/2012 - 09:31 | 2360840 Praetor
Praetor's picture

I think within a decade every European will be writting their Mein Miserables.

Fri, 04/20/2012 - 10:08 | 2360956 Seize Mars
Seize Mars's picture

People are angry, it's a good thing. But let's try to remember. The French people don't want to dominate anyone. The German people don't want to dominate anyone. They just don't. Talk to some friends over there. The Germans voted against Euro membership many different ways. Their politicians were liars and the people were sold out.

The problem is of course paper money. If you want to correctly assign blame, look at the banking system for what it is, a method to exploit people and set them against each other. Let's not be their victims. Think your way through this. Let's place the blame where it belongs - the criminal enterprise that is fiat money. Not each other, not some "others" like (insert ethnic slur here). It's not correct to do that.

Peace!

Fri, 04/20/2012 - 08:44 | 2360702 EscapeKey
EscapeKey's picture

No, it wasn't.

It was forced down Germany's neck by French socialists, led by Francois Mitterrand. Unless the Germans accepted the common currency, France would veto German reunification.

Fri, 04/20/2012 - 09:24 | 2360810 GetZeeGold
GetZeeGold's picture

 

 

Push the button Angela......just do it.

 

Fri, 04/20/2012 - 19:27 | 2362715 mick_richfield
mick_richfield's picture

We've got the missiles

Peace to determine

And one of the fingers on the button

Will be German.

 

 

 

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