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Archive for the ‘EUR’ Category

Are we running out of time?  For the last several years, we have been living in a false bubble of hope that has been fueled by massive amounts of debt and bailout money.  This illusion of economic stability has convinced most people that the great economic crisis of 2008 was just an “aberration” and that now things are back to normal.  Unfortunately, that is not the case at all.  The truth is that the financial crash of 2008 was just the first wave of our economic troubles.  We have not even come close to recovering from that wave, and the next wave of the economic collapse is rapidly approaching.  Our economy is like a giant sand castle that has been built on a foundation of debt and toilet paper currency.  As each wave of the crisis hits us, the solutions that our leaders will present to us will involve even more debt and even more money printing.  And each time, those “solutions” will only make our problems even worse.  Right now, events are unfolding in Europe and in the United States that are pushing us toward the next major crisis moment.  I sincerely hope that we have some more time before the next crisis overwhelms us, but as you will see, time is rapidly running out.

The following are 12 things that just happened that show the next wave of the economic collapse is almost here…

#1 According to TrimTab’s CEO Charles Biderman, corporate insider purchases of stock have hit an all-time low, and the ratio of corporate insider selling to corporate insider buying has now reached an astounding50 to 1….

While retail is being told to buy-buy-buy, Biderman exclaims that “insiders at U.S. companies have bought the least amount of shares in any one month,” and that the ratio of insider selling to buying is now 50-to-1 – a monthly record.

#2 On Friday we learned that personal income in the United States experienced its largest one month decline in 20 years…

Personal income decreased by $505.5 billion in January, or 3.6%, compared to December (on a seasonally adjusted and annualized basis). That’s the most dramatic decline since January 1993, according to the Commerce Department.

#3 In a stunning move, Michigan Governor Rick Snyder says that he will appoint an emergency financial manager to take care of Detroit’s financial affairs…

Snyder, 54, took a step he avoided a year ago, empowering an emergency financial manager who can sweep aside union contracts, sell municipal assets, restructure services and reorder finances. He announced the move yesterday at a public meeting in Detroit.

If this does not work, Detroit will almost certainly have to declare bankruptcy.  If that happens, it will be the largest municipal bankruptcy in U.S. history.

#4 On Friday it was announced that the unemployment rate in Italy had risen to 11.7 percent.  That was a huge jump from 11.3 percent the previous month, and Italy now has the highest unemployment rate that it has experienced in 21 years.

#5 The youth unemployment rate in Italy has risen to a new all-time record high of 38.7 percent.

#6 On Friday it was announced that the unemployment rate in the eurozone as a whole had just hit a brand new record high of 11.9 percent.

#7 On Friday it was announced that the unemployment rate in Greece has now reached 27 percent, and it is being projected that it will reach30 percent by the end of the year.

#8 The youth unemployment rate in Greece is now an almost unbelievable 59.4 percent.

#9 On Saturday, hundreds of thousands of protesters filled the streets of Lisbon and other Portuguese cities to protest the austerity measures that are being imposed upon them.  It was reportedly the largest protest in the history of Portugal.

#10 According to Goldman Sachs, bank deposits declined all over Europe during the month of January.

#11 Over the weekend, the deputy governor of China’s central bank declared that China is prepared for a “currency war“…

A top Chinese banker said Beijing is “fully prepared” for a currency war as he urged the world to abide by a consensus reached by the G20 to avert confrontation, state media reported on Saturday.

Yi Gang, deputy governor of China’s central bank, issued the call after G20 finance ministers last month moved to calm fears of a looming war on the currency markets at a meeting in Moscow.

Those fears have largely been fuelled by the recent steep decline in the Japanese yen, which critics have accused Tokyo of manipulating to give its manufacturers a competitive edge in key export markets over Asian rivals.

#12 Italy is an economic basket case at this point, and the political gridlock in Italy is certainly not helping matters.  Former comedian Beppe Grillo’s party could potentially tip the balance of power one way or the other in Italy, and over the weekend he made some comments that are really shaking things up over in Europe.  For one thing, he is suggesting that Italy should hold a referendum on the euro…

“I am a strong advocate of Europe. I am in favor of an online referendum on the euro,” Beppe Grillo told Bild am Sonntag.

Such a vote would not be legally binding in Italy, where referendums can only be used to repeal laws or parts of laws, but would carry political weight. Grillo has said in the past that membership of the euro should be up to the Italian people.

In addition, Grillo is also suggesting that Italy’s debt has gotten so large that renegotiation is the only option…

The 64-year-old comic-turned-political activist also said Italy needs to renegotiate its €2 trillion debt.

At 127 per cent of gross domestic product (GDP), it is the highest in the euro zone after Greece.

The lack of enthusiasm for the latest effort to centralize all banking and monitory regulation within the European Central Bank suggests that the surreal struggle for continental unanimity still resides in the minds of banksters. Elites still seek to perfect the class distinguish of century old traditions, into a modern version of feudal serfdom. Globalism is the brainchild of the cabal of international banking. As long as a financial monopoly dominates political institutions, the end result will be more consolidation of the rule of the House of Rothschild.

The European Commission recently announces and lays ground for banking union.

“A new proposal would see the European Central Bank (ECB) gaining new powers to monitor the performance of the 6 000 or so banks in the eurozone. The arrangement would be known as the single supervisory mechanism.

The ECB would take over tasks such as authorizing banks and other credit institutions, ensuring they have enough (liquid) capital to continue operating even when sustaining losses and monitoring the activities of financial conglomerates.

If a bank breaches – or is at risk of breaching – capital requirements, the ECB would be able to ask the bank to take corrective action. National supervisors would meanwhile continue to carry out day-to-day checks.

A single rulebook on capital requirements, standardized deposit protection schemes and new recovery and resolution provisions – all proposed earlier in the year – would complete the ‘banking union’.”

A champion for the proposal, Michel Barnier: European banking union is “necessary and possible”, explains the scheme further.

“It is also understood the ECB will have the power to wind up banks; remove bank licenses; and force recapitalization programs when it think it’s necessary, according to the documents.

The ECB will also be empowered to “enter into administrative arrangements” with regulators outside the eurozone – or act and negotiate on behalf of all members in talks on global financial regulation.” 

The City of London has never been a keen supporter of European governance. Britain opposes ECB as head of Banking Union illustrates push back.

“Britain is pushing for changes to a proposed euro zone banking union to dilute the power of the European Central Bank, EU officials said, potentially hampering efforts to build the infrastructure urgently needed to underpin the euro.

Britain intends to propose a system that would give countries outside the banking union the possibility of blocking those within the project from clubbing together to shape EU-wide regulations, said EU officials, speaking on condition of anonymity.

“The concern is that the Bank of England can find itself outvoted by the ECB on aspects of rule making,” said one official. Britain will not join the banking union.”

Another report in, Britain pushing to dilute powers of ECB in banking union, reveals the concerns about a diminished influence of the British financial houses.

“Britain’s finance minister, George Osborne, fears the ECB will use its authority to impose EU-wide regulation that would favor countries with the euro and put London’s financial centre, using sterling, at a disadvantage.

“It seems unlikely that the ECB would ride roughshod over the wishes of the Bank of England, but that is what the British Treasury is worried about,” said the first official. “They want safeguards to make sure that doesn’t happen.”

Britain and all other members of the European Union must give the green light to the banking union before it can go ahead, an approval that could be delayed or withheld if London’s concerns are not addressed.”

Empowering the European Central Bank regulatory authority over every country as part of the broad EU coalition requires surrender of even more national sovereignty. 

Now Bloomberg and everyone else get exercised?

Libor and its euro counterpart, the Euribor, are benchmark rates determined by bank estimates of how much it would cost them to borrow from one another, in different timeframes and currencies. The banks submit sheets of numbers every weekday morning, London time. An adjusted average of the rates determines the size of payments on mortgages and corporate loans worldwide. The rates also serve as an indicator of the health of the banking system. Because some submissions aren’t based on real trades, the potential exists for manipulation.

So the submissions aren’t required to be based on actual trades eh?  In other words the banks involved can just make it up!  And they did.

A Barclays banker responsible for reporting borrowing rates was told to make the bank look healthier by not revealing that borrowing costs had risen. An e-mail he wrote to a supervisor confirms that he complied: “I will reluctantly, gradually and artificially get my libors in line with the rest of the contributors as requested,” he wrote. “I will be contributing rates which are nowhere near the clearing rates for unsecured cash and therefore will not be posting honest prices,” he continued, referring to rates in the overnight money market.

Got it?

No, you probably don’t.

Libor and Euribor are benchmarks that are used as a base to set rates for damned near all lending in the economy in one form or another — directly or indirectly.

You, personally, got screwed.  Everyone who borrowed money got screwed.  You might have been screwed by a few pennies a day, but you still got screwed.

This sort of rigging was absolutely standard, it appears:

Here’s an e-mail about the three-month rate from a senior Barclays trader in New Yorkto the London banker who submitted the rates: “Hi Guys, We got a big position in 3m libor for the next 3 days. Can we please keep the lib or fixing at 5.39 for the next few days. It would really help. We do not want it to fix any higher than that. Tks a lot.”

Bankers submitting rates responded to such requests as if they were routine: “For you, anything,” and “done … for you big boy,” according to the e-mails. Not that the efforts went unappreciated: “Dude. I owe you big time!” one trader wrote to a Libor submitter. “Come over one day after work and I’m opening a bottle of Bollinger.”

Yeah.  An outright scam and the guy who did it was rewarded too.

Heads should roll at other banks, too. Regulators and criminal prosecutors, including the U.S. Justice Department, are investigating at least a dozen other firms to determine whether they colluded to rig the rate. Among them: Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc and UBS AG.

Heads should roll all right.  But until the Just-US Department along with other alleged regulators and “law enforcement”, which have proved to be nothing other than lapdogs for the banksters, ignoring outright criminal conduct as a matter of business and refusing to bring criminal charges against both people and institutions, change their stripes and start enforcing the law I will not be expecting anything other than “more of the same.”

The simple fact of the matter is that until we, the people, rise and demand that this crap stop and the people involved go to prison, and back up our demand with our willingness to act, this will not change.

Showing up at some protest and waving a sign may feel good, but if you go home at the end of the day and then vote for the same jackasses who are in office now, or one who doesn’t insist on and demand prosecution of this activity you’ve told the politicians that you have and will consent to this lawless behavior.

I will not vote for, support, endorse or otherwise give legitimacy to any politician who fails or refuses to demand and make as one of his first and foremost priorities the return of the Rule of Law and criminal prosecution for this, and all other myriad economic frauds. 

Those who argue that I should do so, irrespective of why, have in the past and will continue to get my middle finger in response — both publicly and privately.

Period.

Discussion (registration required to post)

Mr. Bill Still, former Libertarian candidate for President of the United States,  comments on EU Parliamentarian Nigel Farage’s appearance on Fox News, speaking on the people of the EU being under the thumb of the EU Parliament. This is an 8 minute video, and it is worth every second of your time:

Steen Jakobsen, chief economist of Saxo Bank in Denmark, asks via email: “Is Merkel Misinterpreted? Will the FOMC Move Decisively?”

 The misunderstood Chancellor.

The market clearly believes Ms. Merkel will, ultimately, not withstand the pressure – and she will end up collateralizing rising debt. I remain extremely skeptical. I even dusted off my school German to read Der Spiegel and Focus, two major German weeklies, which give you a very different perspective.

As a generalization, the Anglo-Saxon driven investment banks and media tend to rely on poorly translated English versions of domestic financial papers, hence they lose the subtle difference on what Merkel is REALLY saying. This is what I believe Ms. Merkel, and Germany, think.

• When countries join the euro, they also directly and indirectly accept the Stability-and-Growth Pact, hence anything that moves Germany and Europe closer to Stability-and-Growth will be supported by Germany.
• Germany knows it will take time – more time than the market wants it to take. But Germany also realizes it will probably mean more crisis before the whole of Europe moves in the same direction.
• The big loser if Germany “caves in” is Germany. Bund yields will rise and all of Europe will have to finance itself at higher rates – the exact same reason the Alexander Hamilton sinking fund will not work – why should Germans pay more for issuing debt and the high debtors pay less?
• Germany has a game-theory upside in Greece failing to comply – only through more crisis will Club Med (Italy, France and Spain) move to more Europe. (The only thing Club Med wants for now is more German money, not more Europe…)
• Merkel needs to reach across to SPD, the opposition, to get her 2/3 majority for the Fiscal Compact. Watch closely what “concessions” she is willing to give SPD. That will give us clear indication on where she stands vis-a-vis the Club Med call for the easy solution of Euro-bonds and Banking Union.
• Merkel and Germany are pro-European. They want the EU to succeed and they will never leave the euro. But they are also aware that collateralizing debt without the Stability-and-Growth pact will end in tears as it will be extend-and-pretend squared. Throwing liquidity at a solvency issue avoids any real reforms and will be the fastest way to Japanisation.

From this old cynical trader’s point of view, the more likely Merkel and Germany give up and bow to the pressure, the sooner will we face a full-blown crisis and collapse of Europe.

European Crisis Summit Score 0-19

Rhetoric and non-plans cannot continue to dominate the agenda at the EU Summits. The meeting on the 28/29 June is, by my count, meeting number 19 without a real result. Zero from nineteen games – talk about a team going towards relegation!

FOMC – more of the same The US data is still getting weaker, but not weak enough to warrant a panic from the FOMC tomorrow. Bernanke failed to provide the juice in his speech last week, so now the consensus is it will have to happen tomorrow. Otherwise… you know the rest of the sentence. The Fed will lower growth; it will probably also extend Operation Twist, but I doubt it will go all in considering the banking system issues and the overall need for having reserves.

On the other hand, however, the Fed also realizes that “promising” has a real impact on the market. So, overall, expect some small adjustment from FOMC/FED, but not enough.

Strategy

We would be almost square into this meeting, but looking to be heavily bearish on equities post the FOMC and EU Summit.

We still see a summer of discontent as the misinterpretation of Germany and FOMC will lead the market to realize that, for once, central banks and the politicians can’t buy more time.

It is time to reflect not act, as their five-year experiment of doing the same thing expecting different results is leading them nowhere. Probably naive thinking by me… But I think we will all lose if I’m wrong, as extend-and-pretend squared is the road to the poor house.

Safe travels,
Steen Jakobsen

Market Won’t Wait

I believe Steen has this essentially correct and that Germany giving in would ultimately just make matters worse in spite of all the “mother hen calls” from nearly every other economist.

Yet,  the market cannot and will not wait long enough for Merkel to be proven correct. Interest rates in Italy and Spain are at disaster levels and will likely get worse.

My position is summed up in these three posts.

• It’s Just Impossible
• Six Reasons Why Italy May Exit the Euro Before Spain; Ultimate Occupy Movement
• Greek Election Sideshow; Socialists Win Absolute Majority in France

In the meantime, I offer another musical tribute, this one from The Animals.

Please Don’t Let Me Be Misunderstood

Mike “Mish” Shedlock
Global Economic Analysis

It ain’t over until the fat lady sings…..

Greek election winner Antonis Samaras begins his second bid in six weeks to form a coalition as euro-area finance chiefs pressured him to form a government that would keep bailout aid flowing.

European officials indicated a willingness to ease the terms of rescue loans as long as Greece, with just weeks of cash in the bank, re-commits to their austerity demands. The prospect that Samaras would lose to anti-bailout leader Alexis Tsipras rattled markets concerned that Greece may quit the 17-nation currency union. The result sent the euro higher.

Two problems immediately arise: PASOK hasn’t committed to forming a coalition government, and Syriza has said “absolutely not.”

“The Greek people expressed their will to stay anchored with the euro, remain an integral part of the euro zone and honor the country’s commitments,” Samaras told supporters in Athens yesterday after the election result. “There is no time for petty politics.”

The hell they did.  You didn’t get 50%+ of the vote.  What you have, in fact, is more of a shift toward anti-bailout parties than you had in the last round.

This sounds like our government that had 300:1 sentiment against TARP but passed it anyway.  Of course we were too stupid to eject everyone who voted for it a few weeks later, so I can hardly say I’m surprised that since then our legislature has acted like we never said “no” in the first place!

Nonetheless the real problem has not been addressed — the government cannot spend more than it takes in via taxation.  Nor can it in Spain, here, or anywhere else.

And yet not one of these governments has come to the people and told the truth in this regard.

Until they do there is no resolution and any attempt to claim that “the problem is resolved” (or at least “settled down”) is a lie.