Archive for the ‘Euro’ Category
A couple of points.
All lending to a sovereign is inherently unsecured. Contracts aside, there’s the problem of guns, and the government always seems to have more of them than the creditors do. Never mind that it’s relatively rare for lending to a sovereign to be backed by anything more than the “full faith and credit” of the government itself, which it can (of course) disavow. Remember that no Congress can bind the next one; this generally applies across the globe.
Alliances are always available should you find yourself in serious trouble. Cyprus, in particular, has suspected (but unproved) massive gas reserves and happens to have territorial waters through which people may wish to pass pipelines and similar things. Europe has a wee problem with this at present in terms of its energy infrastructure and requirements, and is largely dependent upon Russia. Cyprus has quite the whip hand, should it choose to exercise it following a departure from the EU.
Sovereigns have the privilege — and duty — of seigniorage. Duty? Why, yes. Privilege in that they have the right to issue into an expanding economy in order to balance output and keep the monetary unit stable, duty in that they have the responsibility to remove same during economic contractions so as to also keep the monetary unit stable. The EU is a failed system because it does not recognize this balance of right and responsibility and due to structural imbalances creates a forced subsidy model instead. This is an inherently unstable situation but neither Brussels or the periphery want to deal with it. The periphery has enjoyed quite a bit of these effects for years, but now the costs are biting hard.
IMHO the proper action is for Cyprus to tell the EU and ECB to bite it. Germany says:
“Cyprus has it in its own hands to prevent the state’s bankruptcy but time is running out,” said Hans Michelbach, a German lawmaker and ally of Chancellor Angela Merkel.
Germany has no right to dictate anything to Cyprus. Indeed, Germany and the ECB, along with the machinery at the EU, is at least as responsible for this problem as is the government of Cyprus, if not more so, as they have all failed in their supervision of these banking institutions for sufficient capital.
Let us not forget that these banks passed ”Stress Tests” from the ECB; they were thus claimed to be sound. The ECB should be told to suck it up and eat the consequence of their claimed “soundness”, in this case to the tune of the required €7 billion or so, for they did not flag the banks as unsound or demand they be closed before they exhausted their bondholder capital.
More to the point is that there is yet more gaming going on in this regard with the capital structure with the incessant reports that the real problem isn’t that the bondholder equity is exhausted — it is that with the deterioration that has occurred resolution of the institutions would cause the bondholders to take losses and that’s unacceptable. This, however, is at odds with the very capital structure and its definition.
In short this is the case of the ECB and certain EU members putting a gun to the head of a sovereign nation and demanding that they rob their people to protect those who invested knowing there was a risk of loss from the consequences of their bad investment.
Cyprus’ response to that ought to be exactly this:
And if the ECB and EU want to press the issue then do what Iceland did; tell the ECB and EU to stick it where the sun doesn’t shine, issueindictments against the Troika’s members for extortion and criminal fraud (prohibiting them from entering Cyprus — ever — unless they’d like to spend the rest of their lives in prison) and resolve the institutions forcing the losses on the bondholders but protecting the depositors.
Then trace all the criminal activity in these banks and where there is evidence of fraud or other criminal activity by other financial institutions interconnected with Cyprus issue criminal indictments against both the banks and the executives.
This has a decent shot at winding up with Cyprus leaving the EU. So what? Cyprus would get their national sovereignty back and given that they’re sitting on a bunch of natural gas deposits while the short-term pain would be considerable in the intermediate term they would wind up the winner, much as Iceland has.
The futures are open and down by 15, which doesn’t sound like much (about 1%)
The problem isn’t the magnitude of the drop. It’s the principle of the matter — Cyprus told its residents recently that there was no contemplation of taking bank deposits.
Bluntly, they lied.
Remember that Euro Zone depositors allegedly have bank account insurance just like we do with the FDIC in the United States. Their funds are supposed to be guaranteed by their respective governments.
Instead they are being stolen to bail out both outrageous speculation and rank malfeasance by government regulators who failed to shut these banks down before they invaded their depositor capital, an act that any reasonable person would consider grand larceny and an outrageous felony for which people should literally hang.
The problem is that all the politicians lie. Obama lies. Boehner lies. Reid lies. Pelosi lies. Merkel lies.
They all lie and in fact all they do is lie!
As we saw last week in the Senate Subcommittee hearing the entire “London Whale” scheme was a litany of lies, obfuscations and regulators ducking their jobs, despite virtually everyone admitting that they knew there was something wrong.
Nobody who lies pays, you see; the common man is the only one who pays.
And he pays so those who lie can loot, cheat and steal — and get away with it.
Confidence is a funny thing. People will stand for just about anything for quite some time, but eventually they have had enough and confidence breaks. When it breaks it does so suddenly, without warning.
Is this “the event”?
Who the hell knows.
What I do know with certainly is this: Unless the liars, cheats and scammers start facing the music — indictments, prosecutions and prison sentences, instead of being given license by the government to loot the people in furtherance of their schemes, confidence will inevitably be lost.
We’re well past the point where we should have had heads on pikes through lawful process.
We haven’t gotten that and there’s no indication that it’s going to happen either, despite the claims of many in Government and elsewhere.
Time is quickly running out for the process to remain peaceful and lawful. What comes next is something nobody who is sane wants to see, but if there is no change in the immediate future in the behavior of our national governments it is, unfortunately, inevitable.
BOE Warns An Imminent Private Equity Crash, China Just Sounded a Warning Bell For What’s Coming Our Way, Morgan Stanley: The Central-Bank-Inspired “Omnishambles” Is Closer Than Most Think, DEUTSCHE BANK: Only Jesus Can Save The Euro Area
Bank of England fears that larger private equity deals done in the boom years ‘pose a risk to the stability of the financial system’ as refinancing looms
The Bank of England warned on Thursday that the next phase of the UK’s six-year financial and economic crisis may be triggered by the collapse of debt-laden companies bought by private equity firms in the boom years before the crash.
In its latest quarterly bulletin, Threadneedle Street said the need over the next year to refinance firms subject to heavily leveraged buyouts posed a systemic threat.
The Bank added that it would use its new role as the watchdog of the City to monitor private equity deals in future “episodes of exuberance” to prevent a repeat of the debt-driven takeover boom in the run-up to the banking crisis.
“In the mid-2000s, there was a dramatic increase in acquisitions of UK companies by private equity funds,” the Bank said.
It seems more likely to Morgan Stanley’s Gerard Minack that central bankers may win the battle: sustaining recovery in developed economies with extraordinarily loose monetary policy. For a while this would go hand-in-hand with better equity performance. The battle is against a crisis caused by too loose monetary policy, elevated debt and mis-priced risk. Ironically, he notes, central bankers may overcome these problems by running even looser monetary policy, encouraging a new round of levering up, and fresh mis-pricing of risk. However, winning the battle isn’t winning the war. If central bankers do win this round, the next downturn could be, in Minack’s view, an omnishambles. In short, it seems more likely that central bankers may add another leg to the credit super-cycle. The key question for investors in this scenario is when (and how) this cycle may end, and Minack’s hunch is that this cycle is already closer to 2006 than 2003.
Let’s wind the clock back to 2008.
The world was thought to be ending. Lehman went bust. Markets were plunging. Everyone was scared that growth was over. It was as though the global economy was grinding to a halt.
But then China’s stock market bottomed. The Chinese Government announced a massive stimulus plan to turn its economy around. And sure enough the Chinese economy took off again.
A few months later, the US markets bottomed courtesy of extraordinary stimulus from the US Federal Reserve. Three months after that, the US economy was showing what everyone claimed were “green shoots.”
And the world began to gradually shift towards growth and increased confidence.
Why do I bring all of this up? Because it was China’s stimulus and China’s economy that supposedly lead the world back towards growth again. China is the proverbial canary in the coalmine, the economy that most quickly reveals what’s coming and where we’re all heading…
Well, China’s heading for inflation.
China should be on “high alert” over inflation after February’s figures exceeded forecasts, central bank Governor Zhou Xiaochuan said, signaling a heightened focus on controlling prices.
Monetary policy is “no longer relaxed” and is “relatively neutral” as demonstrated by a 13 percent target for money-supply growth that’s tighter than expansion in the last two years, Zhou, head of the People’s Bank of China, said at a press conference today during the annual gathering of China’s National People’s Congress…
“The central bank has always attached great importance to consumer prices,” Zhou said. “Therefore we will use monetary policy and other measures to hopefully stabilize prices and inflation expectations.”
China’s new leaders including Li Keqiang, set to become premier this week, inherit the task of sustaining a recovery from the slowest growth in 13 years while reining in asset prices and credit. February inflation, distorted by the weeklong Lunar New Year holiday, accelerated to a 10-month-high of 3.2 percent.
The bank’s research department transcribed Hafeez’s speech and sent it out to clients in a note.
The speech focuses on the euro area’s economic woes and the need for the currency bloc to move forward with further integration in order to be economically successful.
Hafeez opens the speech with a reflection on parenting and a child’s years as a “terrible teen.”
The gist is that euro member states are behaving like infighting teens – which is preventing further integration – and they need a role model that everyone across Europe can respect.
“I can only think of one figure that is respected by most Europeans and has never sinned, Jesus!” said Hafeez.
Japan is falling on their sword for the good of the NY & London criminal banksters by purchasing their worthless derivatives.
The Japanese have decided to perform Hari-kari on themselves and disembowel their economy on a global stage. In what can only be described as willful suicide, the BOJ has decided to begin buying derivatives. The most volatile financial weapon of mass destruction will be purchased by the Japanese, the question is why?
As the US economy continues its death spiral, Japan has been ordered to jump on the grenade and keep the dollar charade going for just a little bit longer.
Japan is finished, energy and food prices are through the roof and they are moving from the lost decades to being the lost civilization.
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.
#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…
In an interview with a German magazine published on Saturday, Mr Grillo said that “if conditions do not change” Italy “will want” to leave the euro and return to its former national currency.
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.
“Right now we are being crushed, not by the euro, but by our debt. When the interest payments reach €100 billion a year, we’re dead. There’s no alternative,” he told Focus, a weekly news magazine.
He said Italy was in such dire economic straits that “in six months, we will no longer be able to pay pensions and the wages of public employees.”
And of course government debt has taken center stage in the United States as well.
The sequester cuts have now gone into effect, and they will definitely have an effect on the U.S. economy. Of course that effect will not be nearly as dramatic as many Democrats are suggesting, but without a doubt those cuts will cause the U.S. economy to slow down a bit.
And of course the U.S. economy has already been showing plenty of signs of slowing down lately. If you doubt this, please see my previous article entitled “Consumer Spending Drought: 16 Signs That The Middle Class Is Running Out Of Money“.
So what comes next?
Well, everyone should keep watching Europe very closely, and it will also be important to keep an eye on Wall Street. There are a whole bunch of indications that the stock market is at or near a peak. For example, just check out what one prominent stock market analyst recently had to say…
“Every reliable technical tool is warning of major peaking action,” said Walter Zimmerman, the senior technical analyst at United-ICAP. “This includes sentiment, momentum, classical chart patterns, and Elliott wave analysis.
“Most of the rally in the stock market since 2009 can be chalked up to the Federal Reserve’s attempt to create a ‘wealth effect’ through higher stock market prices. This only exacerbates the downside risk. Why? The stock market no is longer a lead indicator for the economy. It is instead reflecting Fed manipulation. Pushing the stock market higher while the real economy languishes has resulted in another bubble.
“The next leg down will not be a partial correction of the advance since the 2009 lows. It will be another major financial crisis. The worst is yet to come.”
Sadly, most people will continue to deny that anything is wrong until it is far too late.
Time is running out, and I hope that you are getting ready.
So what do you think?
How much time do you believe that we have left before the next wave of the economic collapse strikes?
Please feel free to post a comment with your thoughts below…
For all the groundless, starry-eyed optimism permeating Europe’s bureaucratic corridors of the fading oligarchy these days (because this time is not like every other time that, too, was different), there has always existed one sure, never-fail antidote: Germany, which without fail has managed to ground Europe any time its delusion of grandure hit escape velocity. Sure enough, while all the statist soothsayers who threatened with Armageddon if the outcome of the Italian elections happened to be precisely the one that transpired, were stuck in backpedal mode, and scrambling to calm nerves that all shall be well after all, one person who refuses to play by the script is Lars Feld, member of panel of economic advisers to German Chancellor Angela Merkel, who in an interview with the Frankfurter Allgemeine Zeitung tomorrow says the euro crisis is to return shortly and “with a vengeance” as capital loss will lead to higher risk premiums for Italy’s interest rates.
From Handelsblatt, previewing the FAZ Wednesday edition:
The Italian economy would not find their way out of the recession, according to the pessimistic assessment by Lars Feld: “The sustainability of Italian public finances is in jeopardy. The euro crisis will therefore return shortly with a vengeance.”
Apparently, the Italians were not ready to move on the path of reform that has been taken by Mr. Mario Monti, Field said.
“You can not expect that Italy’s European partners or the ECB will stabilize the Italian economy, when its people are not ready for reform.”
And making sure Feld is not alone, he was joined by Anton Boerner, head of Germany’s BGA exporters’ association, who in turn said Italy must reform tax, labor, judicial system or risk “irreparable damage” of euro. Finally, Boerner says if Italy not willing to reform, “we have to think about how to deal with a modified eurozone.”
What exactly a “modified” Eurozone means we don’t know. We will, however, surely find out soon enough.
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.
Since the initial pronouncement for a single supervisory mechanism, acceptance for a new European Central Bank Headquarters in Frankfurt Germany has shown caution.
In the article, Germany’s Merkel, Sweden’s Reinfeldt:Banking Union Must Be Done Right, even Angela Merkel told reporters, “Quality is more important than speed“.
“Mr. Reinfeldt said Sweden wasn’t fundamentally opposed to banking union, but added: “We don’t think suggestions on the table now are ready. It would be better to get it right than rush it through.”
He also said that although Sweden isn’t in the euro zone, Sweden must have influence over decisions taken that could have an impact on his country’s banks. “If we take part, we want to have influence. And we do not find in the current proposal that we have that,” Mr. Reinfeldt said.”
Germany having lost two military world wars, wants to win the financial conflict for dominance of Europe. However, is the relative prosperity of the German economy healthy enough to carry the burden of the bankrupt sister nations on the continent?
While the prospects of a single supervisory mechanism are profoundly disturbing, the forecast of globalized integration into a one-world economy is even worse. At stake is a total elimination of the national identity and home rule.
Essentially the will of the “people” demonstrated by numerous referendums, have sought to limit the centralization overreach of the European Commission. Now that the power grab of the European Central Bank is in motion, the communal interests of Europeans needs to reflect disgust for the administrative technocrats that seek to impose their will across national borders.
It seems the lessons of centuries are so soon forgotten, when the illusory and outlandish nightmare, that a centralized banking cartel is the best form for political government. Absent from the fiscal equation is that the Federal Reserve has been bailing out the failed ECB. MarketWatch reports in Fed bails out Europe while ECB dithers.
“On one level, it’s almost funny to call offering dollars at a cheaper rate to foreign banks “coordinated” action.
It’s only coordinated in the sense that the Federal Reserve is printing the dollars and the European Central Bank and other central banks put the greenbacks in the virtual vaults of mangled commercial banks that are drowning in European debt. See story on Fed action.”
The central banks are the problem, not the solution; and the only way to regain economic prosperity and political independence is to repudiate the illicit debt extortion.