Posted: Tue May 18, 2010 7:47 am Post subject: Euro pantomine
Is there is bailout?
YES, there is!
OH NO there isn't!
seems the bailout has unwound already....
Congress blocks indiscriminate IMF aid for Europe
Europe may have to clean up its own mess after all. The US Senate has voted 94:0 to block use of taxpayers’ money for IMF rescues that make no economic sense or bail-outs for countries like Greece that far are beyond the point of no return.
“This amendment will help prevent American taxpayer dollars from underwriting dysfunctional governments abroad,” said Texas Senator John Cornyn, the chief sponsor. “American taxpayers have seen more bailouts than they can stomach, and the last thing they should have to worry about are their hard-earned tax dollars being used to rescue a foreign government. Greece is not by any stretch of the imagination too big to fail.”
Co-sponsor David Vitter from Louisiana said America had run out of money. “Our country already owes trillions of dollars in debt. We simply can’t afford to take on other countries’ debt in addition to our own.”
It is unclear where this leaves the EU’s $1 trillion “shock and uh” package. Urlich Leuchtmann from Commerzbank said the IMF share of $320bn was the only genuine money on the table, the rest being largely euro smoke and mirrors, or plain bluff.
The measure is an amendment to the US financial overhaul law. Backed by both parties, it can hardly be ignored by the Obama administration whatever Tim Geithner may or may not want to do. The bill has to go to Conference for reconciliation with the House, but the point is made.
It instructs the US representative at the IMF to determine whether a country with a public debt above 100 per cent of GDP can be expected to repay IMF loans. If this cannot be certified, the US must oppose the rescue package.
This is obviously aimed at Greece, which will have a debt of 130 per cent by the end of this year. The debt will rise to 150 per cent by the end of its the rescue/death package, leaving Greece in a worse position than before.
The IMF share of the Greek bail-out is 30 times quota, more than double any other rescue in the history of the Fund. There is a very strong suspicion in Washington that the IMF is being misused by French chief Dominique Strauss-Kahn – French presidential candidate in waiting – to support ideological purposes regardless of economic logic or sanity. This can (and in my view most likely will) destroy the credibility of the Fund itself unless the US and Asians can wrench the institution back from the Europeans.
The US is the IMF’s biggest shareholder and can veto aid packages, though it has never done so because the Fund has never been so stupid as to defy the world’s dominant financial and strategic power.
In this case it fair to assume that China shares many of the Senate’s concerns. The latest US Treasury Tics data shows that China is rotating is vast reserves back into dollars, and presumably away from euro bonds. If we treat this as Chimerica – the US/Chinese single currency or condominium – we have a force in the world that cannot be pushed around.
Personally, I have changed my mind on Greece. My initial reaction earlier this year was that it had to be saved to avoid a sovereign Lehman. Many posters on this blog cried “shame”, saying it was just another moral hazard rescue for bankers. They were right. I flagellate myself and wear a dunce’s hat.
The correct policy would have been – and still is – to help Greece out of its debt-deflation death spiral through an orderly “pre-emptive debt restructuring” along the lines of the IMF package for Uruguay. In Greece’s case it would require a haircut of 50 per cent or so for foolhardy creditors, ie your bank and mine, your pension fund and mine. This would not do much good unless Greece also devalued by 30 per cent to 40 per cent to retrieve competitiveness and put the whole fixed-exchange nightmare behind it.
This would be the normal IMF policy in these circumstances as countless ex-IMF officials have stated. I suspect that many in the Bundesbank and the Bundestag finance committee would have liked this policy too – making an example of a country that was so far gone, and had so flagrantly broken the rules.
The IMF-EU should instead have drawn up its defences in Iberia, along the Lines of Torres Vedras – to borrow from Wellington. Portugal and Spain are at least defensible – arguably – and more deserving.
The solution is being blocked because Brussels views any step back in the EMU Project as intolerable. So the IMF is squandering its scarce resources on an unworkable plan in Greece.
As we can now see, by misusing the IMF so cavalierly the euro-elites have provoked a reaction from Washington that will vastly complicate any future rescue for any eurozone state.
In fact, we are already living in a post-IMF world. There is no bailer-of-last-resort. Sobering, isn’t it?
.....the last thing they should have to worry about are their hard-earned
tax dollars being used to rescue a foreign government - Senator John Cornyn
Through the fog of Euro currency disinformation and political spin
it is barely possible to glimpse even a shred of truth or reality.
There's increasing factionalism and double-dealing in the NWO.
Including the freebooters who would like to pick off the Euro
countries one by one for naked profit. Meanwhile, volatility
is always profitable for some.
The Greek bailout is a bailout of French and German banks, JP Morgan
and many other NWO creditors and suckers who built this debt mountain.
That mountain is going Iceland right now.
A lot of jockeying for position is happening on the deck of the
Cartel Titanic. Who will be the currency debaser of last resort?
Surely our debt mountain can't just explode?
In Greece’s case it would require a haircut of 50 per cent or so
for foolhardy creditors, ie your bank and mine, your pension fund
Good luck guys. Heads steady.
'Cos here comes Haircut City.
50% Plus haircuts. And not just in Greece.
Haircuts for retiree's pension funds too.
Haircuts for Too-Bloated-To-Work governments.
Vaporware economics meets reality.
Snip, snip, snip! _________________ Minds are like parachutes.
They only function when open. http://NeemWell.com
Germany To Ban Short Selling At Midnight, Only Naked Shorts To Be Affected
Update 4: Merkel to formally announce naked short-selling ban on Wednesday.
Update 3: Hearing naked ban will also apply to credit derivatives, i.e. naked CDS.
Update 2: Bloomberg chimes in quoting Deutsche Presse which reports that the ban will only apply to naked shorting. We are looking for official confirmation on what the final proposal will look like as there is a lot of confusion currently and no formal announcement. Regardless, investors are wondering what has changed today to institute this now.
Update: short selling ban will apply to stocks and euro government bonds according to German N-TV station. This is an act of desperation and will force all those who are long German assets to sell asap (selling is still legal).
Reuters headline for now, that the German Finance Minister will institute a short-selling ban at midnight. If true, this is huge, as it means the market will become massively dislocated once again. We can show charts of how Thailand, US and Greek markets reacted when this was introduced (short jump followed by significant slide lower), but you get the image. One wonders just how horrible the news flow over the next 24 hours will be for this drastic measure to be introduced.
Full and most recent Reuters update below:
BERLIN, May 18 (Reuters) - Germany plans to ban naked short-selling on stocks and euro government bonds, German all-news network N-TV reported on Tuesday.
German coalition sources told Reuters earlier that Finance Minister Wolfgang Schaeuble plans to ban short-selling from midnight.
Economy Minister Rainer Bruederele told Reuters that it was possible the short-selling ban would be quickly enacted.
No other details were immediately available.
the comments are always fun
"Fuck it, the only legit trade left is to go long Circuit Breaker Futures."
Those Europeans are reluctant to allow market forces play out fairly.
But when you consider that those market forces are in fact a bunch of
roaming, slavering hyenas, their action is somewhat understandable,
though pretty futile.
Anyway.... further update on BFN Aggressive Growth Fund:
Sell Everything Liquid,
You Won't Recognize America
By The End Of The Year
Richard Russell, the famous writer of the Dow Theory Letters, has a chilling line in today's note:
Do your friends a favor. Tell them to "batten down the hatches" because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, "How the dickens does Russell know -- who told him?" Tell them the stock market told him.
That's pretty intense!
Update: By popular demand, here's more on what he sees in the market. The gist is that the markets recent gyrations are telling him that the economy is in trouble:
And I ask myself, "Am I seeing things? The April 26 high for the Dow
was 11205.03. The Dow is selling as write at 10557 down 648 points
from its April high. If business is even better than expected, then
why is the Dow down over 600 points? And why, if there were 674 new
highs on the NYSE on April 26, were there only 20 new highs on Friday,
May 14? And if my PTI was 6133 on April 26, why is it down 17 points
since its April high?
The fact is that I've been seeing deterioration in the stock market
ever since early-April, and this in the face of improving business
news. The D-J Industrial Average is composed of 30 internationally
known top-quality blue-chip stocks. These are 30 of "America's biggest
companies." If Barron's is so bullish on the future of America's
biggest companies, then why isn't the Dow advancing to new highs?
Clearly something is wrong. But what could it be? Much as I love
Barron's, I trust the stock market more. If I read the stock market
correctly, it's telling me that there is a surprise ahead. And that
surprise will be a reversal to the downside for the economy, plus a
collection of other troubles ahead.
About Dow Theory -- First, we saw the recent April highs in the
Averages. Then we saw a plunge in both Averages to their May 7 lows --
Industrials to 10380.43, Transports to 4298.12, next a short rally. If
ahead, the two Averages turn down and violate their May 7 lows, that
would be the clincher. Such action would signal the certain resumption
of the primary bear market.
Just as for years I asked, cajoled, insisted, threatened, demanded,
that my subscribers buy gold, I am now insisting, demanding, begging
my subscribers to get OUT of stocks (including C and BYD, but not
including golds) and get into cash or gold (bullion if possible). If
the two Averages violate their May 7 lows, I see a major crash as the
outcome. Pul - leeze, get out of stocks now, and I don't give a damn
whether you have paper losses or paper profits!
Nomura's Richard Koo is clearly one of the most important voices on this next stage of the economic cycle, as deeply indebted governments try to figure out what comes next.
To those that think austerity is the answer, he has an ominous warning: If your private sector is still deleveraging, your economy will crash and your deficit will grow.
Nouriel Roubini was on Bloomberg TV today discussing the sovereign debt situation in Europe and around the world. He remains unconvinced by the European bailout package and the likelihood governments will be able to combat the crisis.
[That Roubini clip is surreal; the clouds moving at hurricane speed; the giddy revolving London of badly montaged buildings; against the deadpan comedian himself; only his mouth moves and emits a strong turkish english.]
back to the pantomine....
the Greeks were biggest speculators in their own CDS
and you thought there was something funny going on behind the curtain
From the FT, and yes, you can't make this up. First we find out the biggest speculators in Greek CDS was Greek Post Bank, and now we discover that Greece itself made shorting of its cash bonds almost a requirement via a change in settlement from T+3 to T+10. Unreal.
A Greek former European Commissioner has accused the country’s central bank of encouraging naked short-selling of Greek bonds by altering the regulations on its electronic bond trading platform last year.
Vasso Papandreou, a senior deputy in the governing socialist party, made the charges on Wednesday in a written question to parliament.
“The Bank of Greece knew the country’s negative fiscal situation. Why did it facilitate the speculation?” asked Ms Papandreou, who is not related to George Papandreou, the Greek prime minister.
Her question, supported by another 10 deputies, reflects growing concern in the Socialist party over an apparent policy contradiction in the handling of Greece’s debt crisis.
The bank first extended the settlement period for transactions on HDAT, the bond trading platform, from Tplus3 (trading plus three days) to Tplus10.
The change was reportedly made in response to a request from the Association of Greek Banks, which represents market-makers in Greek bonds.
But it gave short sellers a longer window of opportunity to push down the price of a Greek bond before delivering it on the settlement date, Ms Papandreou said.
The central bank also abolished penalties for investors which did not deliver a bond on the settlement date in a move that allowed failed transactions to be continuously recycled.
“Effectively the central bank introduced regulations for bilateral selling that apply to an over-the-counter market – although HDAT’s bond trading platform is part a regulated European market,” she said.
Last month the Bank of Greece reversed both decisions after a Greek newspaper revealed details of much increased short-selling and large numbers of unsettled transactions.
Settlement of transactions in Greek bonds was set at trading plus one day – a move that effectively ended short-selling of Greek bonds, according to traders.
HDAT said the change was made because of “massive debit positions” in its transactions.
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