Ireland

As a reminder today is the day when Europeans are supposed to withdraw money from their bank, not necessarily in a beneficial manner. And maybe the action is already having an impact with the Bank of Ireland apparently the first casualty. BBC reports: "Customers of one of Ireland's largest banks have been unable to access their cash accounts through ATMs or online. The Bank of Ireland said it became aware at 1000 GMT on
Tuesday that ATMs were not working and customers were unable to make
online transactions. A spokesperson said the fault lay with the bank's internal system and engineers were working to restore normal services." And by bank's internal system presumably one meant lack of money...Perhaps Eric Cantona will have the last laugh after all.

And predicts banks could face another trillion in housing-related losses ...

You don’t need a “wikileaks.org” site to reveal much of the BS that is going on in the world today. A lot of revelation can be made simply by having motivated, knowledgeable experts scour through publicly available records. I’m about to make said point by showing that the proclamations of the ECB, IMF, the Portuguese government and all of those other governments that claim that Portugal will not default on their loans is simple nonsense.

Once again, Ireland finds itself with the rare opportunity to strike a blow against the EU and end the dream of a corporate superstate. And all they need to do is vote "No".

The Communist Party learned from Tienanmen in 1989 how surging prices can seed dissent. "Inflation is a redistributive mechanism in favour of the few that can protect living standards, against the large majority who cannot. The political leadership cannot, will not, take risks in that regard," said Mr Ash.

Update: Second Independent Irish lawmaker Healy-Rae to back budget, essentially guaranteeing budget passage.

Reuters reports that the Irish Independent MP Lowry says he will support the 2011 budget. Presumably this means that the Irish budget tomorrow should pass, which is likely good news for the euro as it means the eurozone has bought itself a few more months of breathing room. Or not. Who cares anymore. At this point just one more independent vote is needed to pass the Irish budget vote.

John Taylor appeared earlier on the 2011 Reuters Investment Outlook Summit, and among various interesting things (namely another call for EUR-USD parity, and that he would "love to be owning gold right here"), he said that the US is imminently headed for another recession, a development that will boost the USD and weigh on commodities. Yet what is more interesting is that in his latest "Chairman's View", Taylor put down a specific date for the end of the recent recovery in European currencies: the date is tomorrow, the day of the Irish Budget decision, and also the day when Europe may see a coordinated effort for a bank run. Taylor also notes that "the narrowing of credit spreads between these countries and Germany is unlikely to persist for very long without further action by the European leaders." Hopefully the Eurozone meeting taking place right now will result in something more than just more hot air. For those who trade FX, Euro sov bonds, or are just generally interested in the views of the manager of the world's biggest FX hedge fund, we recreate his latest thoughts below.

The European / IMF bail-out package for Ireland – announced one week ago – was somewhat smaller than expected at €85 bn and failed to calm market jitters spreading to other Euro zone periphery countries early in the week, most alarmingly to Spain and Italy. It was only with the ECB’s announcement that full allotment liquidity operations would continue through Q1 2011 and with a jump in ECB purchases of Portuguese government bonds on Thursday that stress in the Euro zone periphery abated somewhat...Following last week’s turbulence on the periphery, this week’s key event will be the Irish parliament vote on the 2011 budget, which is scheduled for Dec 7. A failure to pass the budget could quickly exacerbate tensions across the Euro zone periphery, by highlighting the political costs of needed budget cuts.

What major macro themes will impact financial markets and the global economy as we head into 2011 and beyond?

It appears that one way or another, the IMF will provide a lot more American money to the European rescue. Reuters reports that according to the IMF the euro zone should have a bigger rescue fund and the European Central Bank should boost its bond buying to prevent the sovereign debt crisis from derailing economic recovery. "International Monetary Fund chief Dominique Strauss-Kahn
will present the report on the economy of the 16 countries using
the euro at a meeting of euro zone finance ministers and
European Central Bank President Jean-Claude Trichet on Monday." And presumably, and we are speculating here, if the Euro zone can not afford it, the IMF will be more than happy to step in. After all recall that on August 30, the IMF extended the duration of the Flexible Credit Line (FCL), "concurrently removing the borrowing cap on this facility, which previously stood at 1000 percent of a member’s IMF quota, in essence making the FCL a limitless credit facility, to be used to rescue whomever, at the sole discretion of the IMF's overlords." We would think that an infinite amount of money should be enough to rescue even Spain when the time comes. Which begs the question: with everyone expecting muni bonds to be the purchasing target of QE3, will Bernanke again fool everyone and instead opt for direct European bond monetization? After all, the destruction of dollar value is and always has been the Fed's primary imperative, and what better way to achieve this than to collateralize the greenback with Greek bonds?

Goldman's Erik Nielsen looks at the immediate European future, is flummoxed by all the end of world calls (bank runs, Ireland rejecting budget, austerity riots everywhere), and sees a future so bright he just has to wear the kind of shades that only a multi-million dollar bonus can buy (especially after Goldman upgrades all banks and its own bonuses by about 10%). After all his colleague Hatzius, despite all the facts and data, just upgraded US GDP. It now appears that just like Moody's 5 years ago, Goldman's excel spreadsheets crash when one input a negative growth assumption. Arguably these are the same spreadsheets that Tim Geithner used to prepare his taxes.

Technically it a joke to call what we are seeing day in and day out, at least in equities, a market, but for old time's sake, here is a recap of what happened today in stocks, rates, corporates, FX, and a focus on the two key events from late in the day: the bombs from Bernanke and Merkel.

Yet another datapoint that has been completely ignored by a market that not only does not discount future events, but is blind to current ones as well, is that, as the Guardian reported late in the day, Merkel threatened to abandon the euro during the EU summit in late October. Per the Guardian: "The German chancellor, Angela Merkel, has warned for the first time that her country could abandon the euro if she fails in her contested campaign to establish a new regime for the single currency." The paper goes on to further say that, "Merkel's central aim, which she achieved, was to win agreement on re-opening the Lisbon treaty so a permanent system of bailout funding and investor losses could be established to deal with debt crises that have laid Greece and Ireland low and are threatening Portugal and Spain. The Germans also called for bailed-out countries to lose voting rights in EU councils." And while this certainly means that Ireland will soon be left without a voice in any European discussions, much as we have expected, and under the thumb of one very corpulent and pathologically mendacious Olli Rehn, it also means the the Emerald Isle got the shortest end of the stick as it appears that future bailout will likely involve senior haircuts. But not so much in the Irish case, which may have been the last ditch effort by the multi-trillion impaired asset banking hydra in which as we showed first long ago, one's impaired assets, are another's leveraged extra-impaired liabilities.

[We] are back at 2007 highs. I find this truly amazing as it seems to me things aren’t quite as good in America as we THOUGHT they were in 2007, before we found out that Financial earnings were a scam and before our homes lost 1/3 of their value and when our neighbors used to all have jobs

Now that his relentless skepticism, following today's abysmal data release (orchestrated or not), has been fully validated, much to the chagrin of top ticking flippers such as Goldman and other sundry blog sites, Rosenberg comes out with a must read essay on the state of the economy now versus later, entitled very appropriately "Hope-Based Rally Now, Shock Therapy Later." This is certainly one Rosie's better pieces out there and a must read for those who refuse to be led by the propaganda machine into believing lies and manipulation: "This has become such a hope-based market that the Dow jumped over 100 points earlier this week on a Reuters news story in Brussels, which reported that the U.S.A. would back an even greater financial commitment to Europe! Quick — get Sarah Palin on the line." Incidentally, if there is any confusion where Zero Hedge stands, we suggest rereading our post from last night which made it all too clear that we still refuse to drink the hopium (and self-aggrandizement) that seems to have gotten straight to the head of such a broad (literally and metaphorically) cross-section of the financial punditry.