The ECB & Fed have added $7 trillion to their combined balance sheets in just a year & a half. Between 2008 & 2017, in those 10 years they had added $6.5 trillion. This means they have bought more assets in 17 months than they did in the 10 years following the GFC. pic.twitter.com/aplJeLqOIr
— Sven Henrich (@NorthmanTrader) September 1, 2021
Continue reading “WILL IT EVER MATTER?”
“A variety of investors provided capital to financial companies, with which they made irresponsible loans and took excessive risks. These activities resulted in real losses, which have largely wiped out the shareholder equity of the companies. But behind that shareholder equity is bondholder money, and so much of it that neither depositors of the institution nor the public ever need to take a penny of losses. Citigroup, for example, has $2 trillion in assets, but also has $600 billion owed to its own bondholders. From an ethical perspective, the lenders who took the risk to finance the activities of these companies are the ones that should directly bear the cost of the losses.” – John Hussman – May 2009
This month marks the 10th anniversary of the Wall Street/Fed/Treasury created financial disaster of 2008/2009. What should have happened was an orderly liquidation of the criminal Wall Street banks who committed the greatest control fraud in world history and the disposition of their good assets to non-criminal banks who did not recklessly leverage their assets by 30 to 1, while fraudulently issuing worthless loans to deadbeats and criminals. But we know that did not happen.
You, the taxpayer, bailed the criminal bankers out and have been screwed for the last decade with negative real interest rates and stagnant real wages, while the Wall Street scum have raked in risk free billions in profits provided by their captured puppets at the Federal Reserve. The criminal CEOs and their executive teams of henchmen have rewarded themselves with billions in bonuses while risk averse grandmas “earn” .10% on their money market accounts while acquiring a taste for Fancy Feast savory salmon cat food.
“So the modern world may be increasing in technological knowledge, but, paradoxically, it is making things a lot more unpredictable.” – Nassim Nicholas Taleb, Antifragile: Things That Gain From Disorder
“Success brings an asymmetry: you now have a lot more to lose than to gain. You are hence fragile.” – Nassim Nicholas Taleb, Antifragile: Things That Gain From Disorder
I had read Nassim Taleb’s other best-selling tomes about risk, randomness and black swans – Fooled by Randomness & The Black Swan. They were not easy reads, but they were must reads. He is clearly a brilliant thinker, but I like him more because he is a prickly skeptic who scorns and ridicules academics, politicians, and Wall Street scumbags with gusto. There were many passages which baffled me, but so many nuggets of wisdom throughout each book, you couldn’t put them down.
When his Antifragile book was published in 2012, the name intimidated me. I figured it was too intellectual for my tastes. When I saw it on the shelf in my favorite used book store at the beach, I figured it was worth a read for $9. I’m plowing through it and I haven’t been disappointed.
His main themes are more pertinent today than they were in 2012. He published The Black Swan in 2007, just prior to one of the biggest black swans in world history – the 2008 Federal Reserve/Wall Street created financial collapse. His disdain for “experts” like Bernanke, Paulson, and Wall Street CEOs, and their inability to comprehend the consequences of their actions and in-actions as the financial system was blown sky high, was a bulls-eye.
[ed. note: this article was written shortly before the ECB decision was announced, so the deposit facility rate mentioned in it is still the old one; it has been reduced to – 30 bps in the meantime]
BALTIMORE – Thursday is the big day. Mario “whatever it takes” Draghi is expected to goose up stock markets with more stimulus measures. On the table is more QE… and further cuts to the key lending rate.
The good Lord adds jerks to the mix to keep things interesting … we’re happy to report the operation was a success. It may actually have been a tad too successful.
Cartoon by Gary Larson
The Chinese feds are also supposed to come forward with another gift to asset holders. According to the Wall Street Journal, the expectation is for something targeting property purchases and another interest rate cut (which would make it cut No. 7 since last November).
China’s central bank administered one-year benchmark lending rate – click to enlarge.
And yesterday, Fed chair Janet Yellen told the Economic Club of Washington:
“Were the FOMC [the Fed’s policy setting committee] to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession.”
Continue reading “Central Bankers Are Upsetting God’s Applecart”
The central banks are simply trapped. They have bought in bonds under the theory that this will stimulate the economy by injecting cash. But there are several problems with this entire concept. This is an elitist view to say the least for the money injected does not stimulate the economy for it never reaches the consumer. This attempt to stimulate by increasing the money supply assumes that it does not matter who has the money. If we are looking only at the institutional level, then this will not contribute to DEMAND inflation only ASSET inflation by causing share markets to rise in proportion to the decline in currency value.
The European Central Bank (ECB) then pushes interest rates negative to punish savers and consumers for not spending money that never reaches their pocket. Negative rates promotes hoarding cash outside of banks which in turn then inspires the brilliant idea of eliminating cash to force the objective and end hoarding. But negative rates have been simply a tax on money. The attempt to “manage” the economy from a macro level without considering the capital flow within the system is leading to disaster.
It seems things are falling apart across Europe. I guess this means the little people aren’t all that happy with the ECB solution of saving bankers and billionaires while throwing them under the bus. The barbed wire is a nice touch by the German security forces. I understand they are very good at using barbed wire to control the population. Europe will burn. War is inevitable. The debt house of cards is crumbling. The people are angry. Revolution is in the air. Burn it to the ground. Aren’t Fourth Turnings fun?
Submitted by Tyler Durden on 03/18/2015 06:44 -0400
It’s not just Greece which is protesting the utter lack of reforms enabled by the ECB known as “austerity” – as of today so is Germany itself with the so-called #Blockupy movement. According to local media reports, the start of anti-austerity rallies in Frankfurt coincided with the European Central Bank opening its new headquarters, whose occupants are now besieged by tens of thousands of protesters, so perhaps #OccupyQ€ would have been more appropriate. Police said they expect around 10,000 anti-capitalist protesters, marching under the banner of leftist alliance Blockupy, to attend the rally, with a march through the city planned for later in the evening. The result is what according to a police spokesman “is one of the biggest deployments ever in the city.”
As the photos below shows, several police cars have been set on fire, with windows being smashed and demonstrators throwing stones at police ahead of the massive demonstration on Wednesday, and as riots break out across Frankfurt even as thousands of police respond with water cannon, pepper spray and mass arrests.
In Part One of this three part article I laid out the groundwork of how the Federal Reserve is responsible for the excessive level of debt in our society and how it has warped the thinking of the American people, while creating a tremendous level of mal-investment. In Part Two I focused on the Federal Reserve/Federal Government scheme to artificially boost the economy through the issuance of subprime debt to create a false auto boom. In this final episode, I’ll address the disastrous student loan debacle and the dreadful global implications of $200 trillion of debt destroying the lives of citizens around the world.
“When easy money stopped, buyers couldn’t sell. They couldn’t refinance. First sales slowed, then prices started falling and then the housing bubble burst. Housing prices crashed. We know the rest of the story. We are still mired in the consequences. Can someone please explain to me how what is happening in higher education is any different?This bubble is going to burst.” – Mark Cuban
Now we get to the subprimiest of subprime debt – student loans. Student loans are not officially classified as subprime debt, but let’s compare borrowers. A subprime borrower has a FICO score of 660 or below, has defaulted on previous obligations, and has limited ability to meet monthly living expenses. A student loan borrower doesn’t have a credit score because they have no credit, have no job with which to pay back the loan, and have no ability other than the loan proceeds to meet their monthly living expenses. And in today’s job environment, they are more likely to land a waiter job at TGI Fridays than a job in their major. These loans are nothing more than deep subprime loans made to young people who have little chance of every paying them off, with hundreds of billions in losses being borne by the ever shrinking number of working taxpaying Americans.
Student loan debt stood at $660 billion when Obama was sworn into office in 2009. The official reported default rate was 7.9%. Obama and his administration took complete control of the student loan market shortly after his inauguration. They have since handed out a staggering $500 billion of new loans (a 76% increase), and the official reported default rate has soared by 43% to 11.3%. Of course, the true default rate is much higher. The level of mal-investment and utter stupidity is astounding, even for the Federal government. Just some basic unequivocal facts can prove my case.
There were 1.67 million Class of 2014 students who took the SAT. Only 42.6% of those students met the minimum threshold of predicted success in college (a B minus average). That amounts to 711,000 high school seniors intellectually capable of succeeding in college. This level has been consistent for years. So over the last five years only 3.5 million high school seniors should have entered college based on their intellectual ability to succeed. Instead, undergraduate college enrollment stands at 19.5 million. Colleges in the U.S. are admitting approximately 4.5 million more students per year than are capable of earning a degree. This waste of time and money can be laid at the feet of the Federal government. Obama and his minions believe everyone deserves a college degree, even if they aren’t intellectually capable of earning it, because it’s only fair. No teenager left behind, without un-payable debt.
Everyone knows the ECB will be announcing their own QE plan to save Europe. I guess they’ve seen how fantastic QE has done in reviving the Japanese and U.S. economies. One problem. The ECB doesn’t have the ability to execute their QE plan without the central banks of the various European countries doing the actual buying of debt. As John Hussman points out, the announcement will be met with great fanfare and the usual reaction of a stock market surge (because that is the only real purpose of QE). But Germany is the only party that matters. Their debt currently carries a negative yield out through 5 years. Buying that debt will guarantee massive future losses. Therefore, they will not buy it. The European QE is the last dying gasp. When Greece exits the EU, humungous losses will be experienced by banks across the world. The end is in sight.
Last week, the Swiss National Bank abandoned its attempt to tie the Swiss franc to the euro. For the past three years, the SNB has been trying to keep the franc from appreciating relative to the rest of Europe by accumulating euros and issuing francs. As the size of Switzerland’s foreign exchange holdings began to spiral out of control, Switzerland finally pulled the plug. The Swiss franc immediately soared by 49% (from 0.83 euros/franc to 1.24 euros/franc), but later stabilized to about 1 euro/franc. While numerous motives have been attributed to the Swiss National Bank, the SNB made its reasons clear: “The euro has depreciated considerably against the US dollar and this, in turn, has caused the Swiss franc to weaken against the US dollar. In these circumstances, the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified.” In effect, the SNB simply did what the German Bundesbank wishes it could do: abandon the policies of European Central Bank president Mario Draghi, and the euro printing inclinations he embraces.
A quick update on what we call our “joint parity” estimates of currency valuation (see our recent discussion of the Japanese Yen in Iceberg at the Starboard Bow). Considering long-term purchasing power parity (which certainly does not hold in the short-run) jointly with interest rate parity (see Valuing Foreign Currencies), we presently estimate reasonable valuations of about $1.35 for the euro, and about $1.13 for the Swiss Franc – so after the wild currency moves of last week, we suddenly view the Swissie to be almost precisely where we think it should be relative to the dollar. At least one hedge fund and a number of FX brokerages were wiped out last week as their customers were caught with leveraged short positions against the franc. Data from the CME shows asset managers and leveraged money heavily short the euro (with commercial dealers on the other side), and by our estimates, the decline in the euro is overextended. That’s a high-risk combination for euro shorts.
The chart below may offer some insight into what the SNB was thinking last week, from the perspective of our own joint-parity estimates of currency valuation. The chart reflects data just before the SNB abandoned its peg to the euro (data for the euro reflects the German DM prior to 1999, appropriately scaled). Back in August 2011, the Swiss franc surged to significant overvaluation relative to the euro. That’s when the SNB instituted the peg, attempting to hold the exchange rate at 1.20 francs per euro (just under 0.84 euros per franc). Prior to last week’s move, the overvaluation of the franc – relative to the euro – was no longer evident, and the franc had become substantially undervalued relative to the dollar. Having abandoned that peg, the franc has surged to what we view as fair value relative to the U.S. dollar.
Continue reading “QE and the ECB: “Authorize” is a Slippery Word”
Heavy use of narcotics is the only reasonable explanation for what happened this morning. The Spanish 10 year bond now has a lower yield than the U.S. 10 year bond. Do you really think an investment in 10 year Spanish government debt at 2.60% is a good idea? Their rates exceeded 7% in 2012. Interest rates on government debt are supposed to reflect the risk of that country’s debt, based upon their economic policies, debt to GDP levels, economic growth, and health of their job market. Of course, that is what is supposed to happen in the real world where markets are not rigged, central bankers don’t conduct debt Ponzi schemes, and the citizens are not at the mercy of a banking cabal and billionaire oligarchs.
Spain is an absolute basket case. Their GDP growth has been below 0% for 95% of the last five years and lingers below 1% today. And this “growth” is artificially created by government spending as annual deficits have been 10% of GDP. This country has been in freefall since 2009, with GDP still 15% below levels in 2009. Home prices continue to crash. There is violence, riots, and unrest in the streets. I wonder if it has something to do with the 26% unemployment rate?
Spain is powderkeg that could explode at any moment. The percentage of people under the age of 25 who are unemployed exceeds 57%. Does that sound like a recipe for long term economic health? They are in the same position as Greece. These are the levels of unemployment that lead to revolution, bloodshed and politicians being hung from lampposts. So of course their government bonds should trade as if they are a safer bet than the U.S. Right?
Spain’s debt-to-GDP has hit 93.4% – the highest level in more than a century. We are fed the propaganda about austerity in Europe being the cause of their prolonged depression. Again it is a false storyline. Debt is the drug habit that Spain and the rest of the EU cannot break. Even the government apparatchiks admit that Spain’s debt to GDP will surge well past 100% over the next two years. There is absolutely no way Spain can reverse the course they’ve chosen. Once you pass 90% the end is in sight. The whole house of cards will collapse and debt default will be the only choice. If this criminally corrupt country is destined to experience a national bankruptcy, how could their debt possibly be trading at a yield of 2.6%?
The answer is simple. Bankers control the levers of power in Europe, the U.S. and Asia. They want more for themselves and less for you. The sycophants at the ECB, led by a Goldman Sachs progeny, have created hundreds of billions out of thin air and pumped it into the veins of the insolvent European banks like heroine. These addicts then turn around and use the new debt to buy the old government debt, thereby driving the yields on the old debt down to record lows. There is no market clearing mechanism. This isn’t a free market. This is a rigged market, designed to enrich the oligarchs and bankers. The citizens who are huddled in back alleys scrounging for food in dumpsters are of no interest to the fat cats running the Ponzi scheme.
So if you’re feeling lucky and truly believe central bankers can permanently keep the Ponzi going with more and more debt, invest your life savings in Spanish 10 year debt. If I were a gambler, I’d put my money in guillotines.
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.”
Lord Acton
The 99.9% have all come to love the Bernanke/Yellen Zero Interest Rate Policy, affectionately known as ZIRP. This is the policy where you provide Too Big To Trust Wall Street banks with hundreds of billions in newly created fiat currency for free and allow them to invest it in risk free Treasuries, while paying senior citizens and other responsible savers 0% on their savings. This allows the oligarchs to further enrich themselves by gorging on free money, while widows are forced to choose between dinner and medicine. ZIRP was designed by bankers to benefit bankers – NO BANKER LEFT BEHIND.
ZIRP is slowly but surely impoverishing the majority of people in the country. It deters saving and investment. It deters job growth. It creates inflation in food, energy, housing, and the other necessities of daily life. Well get ready for NIRP – Negative Interest Rate Policy. The bankers will offer you the privilege of charging you for letting them keep your money. This is what happened today in Europe.
The mainstream media, the government bureaucrats, and the central bankers have all touted the huge success story of government actions in Europe. Interest rates have been manipulated to record low levels. Spain and Italy are supposedly as safe as the U.S. now. It’s all a cruel fucking joke. And the joke is on the people. These lying scumbags actually believe confiscating depositor’s funds through negative interest rates will spur an economic recovery in Europe. They have the balls to make statements like this with a straight face:
“It’s completely wrong to suggest we want to expropriate savers” – Mario Draghi
It seems he is following the advice of his predecessor:
“When it becomes serious, you have to lie.” – Jean Claude Juncker
The central bankers and politicians of the world have solved absolutely nothing. They have shifted bank debt onto the backs of the people and issued more debt to pay off the old debt. They will continue to use convoluted asinine “solutions” and “programs” to keep the Ponzi scheme going as long as possible to allow their oligarch masters to siphon off the remaining wealth of the people. In the final phase you will be Cyprused. They will seize your money if it is in their banks.
If you think NIRP is something that can only happen in Europe, think again. Read the words of your own esteemed Federal Reserve Goddess:
“Accommodative policy is appropriate, in my view, because the economy is operating well below its potential and inflation is undesirably low. If it were positive to take interest rates into negative territory I would be voting for that” – San Francisco Federal Reserve Bank President Janet Louis Yellen – February 2010
Remember who Janet really works for. The Wall Street banks are her bosses. Janet and her banker buddies are already taking advantage of the math challenged American Sheeple. Savings accounts are already paying .15% interest, while inflation in the real world is 5% or higher. The dollars you keep in a Wall Street bank today are worth 4.85% less every year. The goal of Janet and the Wall Street scumbags is to force you to spend your dollars before they waste away to nothing. They have failed so far, as retail sales collapse and the middle class runs out of money.
The banking cabal has made holding money market funds so distasteful, they force investors into the stock market. Based on this chart, that part of their plan has worked. Stock prices have reached new all-time heights and the ratio of money invested in equities to the amount invested in money market funds is now 20% to 30% higher than the peaks previously reached in 2000 and 2007. When you see the actions of bankers and their puppets, you better understand Lord Acton’s thoughts in the 1800’s:
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.”– Lord Acton
The time for this fight is approaching rapidly. Get your money out of the banks before it is too late. You get a better return under your mattress.
Submitted by Tyler Durden on 06/05/2014 07:57 -0400
Goodbye ZIRP, hello NIRP. Today’s decision by the ECB to officially lower the deposit facility rate to negative (as in you pay the bank to hold your deposits) is shocking, but not surprising: we previewed just this outcome precisely two years ago in “Europe’s “Monetary Twilight Zone” Neutron Bomb: NIRP”
Here is what we wrote in June 2012 about Europe’s unprecedented NIRP monetary experiment.
Just because ZIRP is so 2009 (and will be until the end of central planning as the Fed can not afford to hike rates ever again), the ECB is now contemplating something far more drastic: charging depositors for the privilege of holding money. Enter NIRP, aka Negative Interest Rate Policy.
Bloomberg reports that “European Central Bank President Mario Draghi is contemplating taking interest rates into a twilight zone shunned by the Federal Reserve. while cutting ECB rates may boost confidence, stimulate lending and foster growth, it could also involve reducing the bank’s deposit rate to zero or even lower. Once an obstacle for policy makers because it risks hurting the money markets they’re trying to revive, cutting the deposit rate from 0.25 percent is no longer a taboo, two euro-area central bank officials said on June 15… “The European recession is worsening, the ECB has to do more,” said Julian Callow, chief European economist at Barclays Capital in London, who forecasts rates will be cut at the ECB’s next policy meeting on July 5. “A negative deposit rate is something they need to consider but taking it to zero as a first step is more likely.” Should Draghi elect to cut the deposit rate to zero or lower, he’ll be entering territory few policy makers have dared to venture. Sweden’s Riksbank in July 2009 became the world’s first central bank to charge financial institutions for the money they deposited with it overnight.”
There is only one problem when comparing the Riksbank with the ECB: at €747 billion in deposits parked at the ECB as of yesterday, the ECB is currently paying out 0.25% on this balance, a move which may or may not be a reason for the depositor banks, primarily of North European extraction, to keep their money parked in Frankfurt. However, once this money has to pay to stay, it is certain that nearly $1 trillion in deposit cash, currently in electronic format, would flood the market. What happens next is unknown: the ECB hopes that this liquidity flood will be contained. The reality will be vastly different. One thing is certain: inflating the debt is the only way out for the status quo. The only question is what format it will take.
More from Bloomberg:
“It won’t help the prospect of a functioning money market because banks won’t be compensated for the risk they’re taking,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. It would make more sense to lower the benchmark rate, thus reducing the interest banks pay on ECB loans, and keep the deposit rate where it is, Green said.
The ECB has lent banks more than 1 trillion euros in three- year loans, with the interest determined by the average of the benchmark rate over that period. Societe Generale SA estimates that cutting the key rate by 50 basis points would save banks 5 billion euros a year.
The deposit rate traditionally moves in tandem with the benchmark, which policy makers kept at a record low of 1 percent on June 6. Draghi said “a few” officials called for a cut, fueling speculation the bank could act next month.
Sadly, because all this is merely operating in the confines of a broken system, just as the LTRO provides a brief respite only to commence crushing banks such as Monte Paschi, so any further intervention by the ECB will only lead to a faster unwind of an unstable system.
Other institutions have opted against such a move. The Fed started paying interest on deposits to help keep the federal funds rate near its target in October 2008 and has reimbursed banks with 0.25 percent on required and excess reserve balances since December that year.
Some Fed policy makers last August argued that reducing the rate could be helpful in easing financial conditions. While they discussed doing so in September, many expressed concern that such a move “risked costly disruptions to money markets and to the intermediation of credit,” the Fed said in minutes published on Oct. 12.
The Bank of Japan (8301) introduced a Complementary Deposit Facility in October 2008 to provide financial institutions with liquidity and stabilize markets, and has kept the interest it pays for the funds at 0.1 percent since then. Governor Masaaki Shirakawa told reporters on May 23 there would be “large demerits” to reducing the deposit rate because it could lead to a decline in money-market trading.
It gets worse: by trying to help banks, the ECB will actually be impairng them:
“If the ECB cut the deposit rate, it would take an important profit opportunity away from banks,” said Tobias Blattner, an economist at Daiwa Capital Markets Europe in London. By doing so, the ECB would also be “encouraging banks to lend to the real economy” even though “there’s hardly any demand for credit,” he said. Blattner predicts the ECB will cut its benchmark and leave the deposit rate at 0.25 percent.
ECB Executive Board member Benoit Coeure said on Feb. 19 that market interest rates of zero or lower “can result in a credit contraction.”
That’s because banks, trying to preserve their deposit bases by paying customers a reasonable interest rate, may reduce lending to companies and households because the return is too low and invest in higher-yielding assets instead.
Finally kiss money markets – which together with Repos are one of the core components of shadow banking – goodbye:
“A deposit rate at zero will be of particular support to banks in southern Europe because it could help encourage some flow of credit,” said Callow. “A negative deposit rate can be damaging for money markets.”
Negative rates would destroy the business model for money- market funds, which would face the prospect of paying to invest, said Societe Generale economist Klaus Baader.
“But the ECB doesn’t set policy to keep alive certain parts of the financial sector,” he said. “Policy makers want to show that they haven’t exhausted their options yet.”
Germany is coming to their senses. They have run their country the right way, while the PIIGS have lived far above their means for decades. The entire European Union rests on the back of Germany. They’ve bailed out Ireland. They’ve bailed out Greece. It looks like they are going to tell Italy to fuck off. Most people don’t realize how big Italy is. They have the 8th highest GDP in the world. Their GDP is $2 trillion. Germany’s is $3.3 trillion. Germany will bankrupt itself trying to save the Italians. Plus, Germany knows that Spain is in worse shape than Italy. They have the 12th largest economy in the world.
If Germany is balking, then European stocks will crater on Monday. Asian stocks will crater in anticipation that Europe and the US markets will collapse on Monday. The earliest indication we have is Saudi Arabia, whose market is down 5.5%.
You can bet that the phone lines are buzzing between Timmy Geithner, Bennie Bernanke and their friendly puppet master CEOs – Lloyd Blankfein, Jamie Dimon, Vikrim Pandit, Ken Lewis, John Mack. These are the people trying to retain their wealth and power. They DO NOT care about you, the country, or the long term best interests of our nation. They care about their billions. This is a game to them. They are agreeing on a plan of attack to manipulate the markets on Monday.
It is highly likely that the markets will plunge at the opening as a knee jerk reaction to the S&P downgrade. The criminal Wall Street banks will then instruct their computers to buy stocks and an unbelievable rally will commence. This is supposed to pump confidence back into the investing public. CNBC will do their part and tell you to buy the fucking dip. This is all a show.
The S&P downgrade should have happened two years ago. The US is a bad long term credit. We will default by printing money and paying interest to gullible foreigners in worthless pieces of paper. The US economy is in recession. Stocks fall 40% during recessions. The wheels are coming off this bus. It doesn’t matter whether stocks finish up or down on Monday. They will be at least 30% lower in the next year. You can Buy the Fucking Dip or you can focus on the facts and the truth.
Submitted by Tyler Durden on 08/06/2011 12:20 -0400
Remember when we said (yesterday) that Germany will soon balk over the fact that it is pledging its entire economy to bail out an insolvent Europe? Well, that moment has come.
Dow Jones just hitting the tape referencing Spiegel
As a reminder, yesterday’s stopgap announcement by the ECB to expand its SMP purchases of secondary market Italian and Spanish bonds was merely as a precursor to full EFSF monetization until its comes fully online in September (or sooner) in a vastly expanded format (between €1.5 and €3.5 trillion).
If Germany is now against this, which appears to be the case, it pretty much means, well, game over.
Add the uncerainty over the unwind of the Europe rescue “gamechanger” as one of the more naive CNBC anchors said yesterday, and Monday is now guaranteed to be a bloodbath.
As for those saying China will gladly step in and fund a $5 trillion EFSF shortfall, they may want to read the following article from Reuters:
Italian Economy Minister Giulio Tremonti said on Thursday that Asian investors are reluctant to buy Italian bonds because it sees they are not being bought by the European Central Bank.
Speaking at a news conference, Tremonti also said it would be desirable for the central bank to follow the lead of the Japanese and Swiss central banks in taking expansionary steps to tackly the euro zone’s crisis.
“I note that the Bank of Japan today launched quantitative easing and the Swiss cen bank cut rates to zero, we are waiting for decisions if possible, but desirable (from the ECB),” Tremonti said.
When you talk to Asia they say: “We don’t understand what Europe is,” he continued. “The second point is that they say ‘if your central bank doesn’t buy your bonds, why should we buy them”?
P.S. Time to unwind that Bund short we suggested yesterday. In fact, if true, it is time for a big rush to safety.