Wondering How Big Greek Deposits Outflows Are? Just Follow The EURCHF 

Submitted by Tyler Durden on 06/17/2011 09:18 -0400

In the past we have repeatedly observed that in order to get an instantaneous appreciation of which direction all too critical Greek bank deposits held by the public are headed (hint: out), instead of waiting for delayed NBG data, one needs to only look at the EURCHF. As the chart below shows, the correlation between the two is essentially one. Which means that should this pair continue dropping to parity, in addition to making life for Swiss exporters a living hell and for Hungarian mortgage holders unbearable, that Greek banks will literally become hollow shells whose only lifeblood - depositor cash - is no longer there. And the more severe the lack of confidence in the outcome, the greater the outflow, the higher the likelihood of a disastrous bank run that wipes out the Greek banking system. Welcome to Catch 22 for the centrally planned, monetary union generation.

 

Fort Knox U.S. Gold Reserves to be Independently Audited and Assayed? Congressman Ron Paul Pressures U.S. Treasury 

Submitted by Tyler Durden on 06/17/2011 08:03 -0400

Congressman Ron Paul, the Republican presidential candidate who is chairman of the U.S. House Financial Services subcommittee and chairs the House's Subcommittee on Domestic Monetary Policy plans to question U.S. Treasury officials next Thursday (June 23) about the U.S. gold reserves and get them to testify regarding the authenticity of the nation’s gold reserves. This is an important question given the increasingly precarious state of the U.S.’ finances and is important to the gold market as the unaudited U.S. gold reserves are the largest holdings of gold bullion in the world. Paul has introduced legislation that would require an independent audit of the 5,000 plus tons of gold bullion that is believed to stored in the Fort Knox, Kentucky vault. The audit would include other U.S. gold reserves held in government facilities in Denver, West Point and the New York Federal Reserve Bank in lower Manhattan. Paul is also calling for some of the bars to be assayed and tested by a laboratory in order to prove that it is investment grade gold bullion as the U.S. Treasury Department says. There have been unconfirmed reports that the Chinese received a shipment of large gold bullion bars from the U.S. that contained tungsten. Last August Paul said that "if there was no question about the gold being there, you think they would be anxious to prove gold is there." He has been pressing the point since the early 1980s, when he was a member of the U.S. Gold Commission. 

Frontrunning: June 17 

Submitted by Tyler Durden on 06/17/2011 08:30 -0400

• And the truth keeps coming out: Evacuation urged for radioactive hot spots in Japan beyond 20km zone (Japan Times)
• Germany's Merkel: Europe and Euro Tightly Bound Together (WSJ)
• Hardline IMF forced Germany to guarantee Greek bailout (Guardian)
• Hunt for ‘Holy Grail’ Hunt Pits ECB Against Naked Banks (Bloomberg)
• Default by Greece ‘Almost Certain’: Greenspan (Bloomberg)
• SEC could file Civil Fraud charges against some Raters (Reuters)
• Merkel’s Greek Bondholder Gambit Tested as Sarkozy Visits Berlin (Bloomberg)
• Biggest banks face capital clampdown (FT)
• Too Big to Fail Ends With Wave of a Magic Wand (Bloomberg)
• Biden Talks Aimed at $4 Trillion in Cuts Over 10 Years (WSJ)
• California's Brown vetoes fellow Democrats' budget (Reuters)
• U.S. Confidence Out of Sync With Stock Gains (Bloomberg)

Guest Post: The Turning Point 

Submitted by Tyler Durden on 06/17/2011 08:34 -0400

It is rare to find a market where the technical evidence is so compelling for a strong rally yet the fundamental basis for such a rally so lacking. Exactly where do Bulls think the growth and rising profits are going to come from? The answer for the past few years has been massive Federal Reserve/Federal intervention and stimulus, and a weakening U.S. dollar that boosted overseas profits via the legerdemaine of currency devaluation. But three years of these policies have accomplished nothing but load the taxpayer with staggering amounts of debt: none of the causes of the 2008 implosion have been fixed or even addressed. As Armstrong notes, the massive interventions did not shorten the crisis, they have prolonged it. This reality has filtered down to the political swamp, and now the politicos are hesitant to bet their own futures on additional trillions in stimulus and quantitative easing. For the first time in memory, the Federal Reserve is on the defensive. Simply put, its policies have failed to accomplish anything except prop up a rotten, insolvent banking sector that needs to be declared bankrupt and swept into the dustbin of history. 

 

 

 

 

Daily US Opening News And Market Re-Cap: June 17 

Submitted by Tyler Durden on 06/17/2011 08:09 -0400

• Market talk that a new Greek aid package could be worth as much as EUR 150bln against a previous estimate of EUR 120bln
• German Chancellor Merkel and French President Sarkozy demonstrated a united front in their approach to tackle the Greek problem
• German chancellor Merkel said she wants involvement of private creditors on a voluntary basis, and wants to work with the ECB on investors’ role in Greece
• French President Sarkozy said that we have found an agreement on the private sector involvement on Greece, in line with the Vienna initiative

 

 

 

 

 

Ice-Nine Spreads To Shanghai: Chinese Interbank Liquidity Evaporates 

Submitted by Tyler Durden on 06/17/2011 07:32 -0400

Previously we disclosed that FRA-OIS spreads in both the US and Europe have been on a tear as a result of ongoing concerns that European liquidity may be frozen. Then following the previous post we decided to check in on Chinese liquidity. To our lack of surprise we find Chinese availability of unsecured interbank lending has quietly dropped to the second worst of 2011, now that the rate on 7 Day SHIBOR has hit 7.4%, the highest since the spike in early January, and a range that goes back all the way to the August 2007 quant market crash. Keep a close eye on this should Chinese vital interests become impaired and China is forced to dump trillions of money formerly reserved for US Treasurys (and currently held in US-denominated reserves, thus forcing a selling of USD and buying of EUR), to buy European debt, once the next two dominoes, Italy and Spain, fall.

China Discloses "Vital Self Interests" In European Bailout 

Submitted by Tyler Durden on 06/17/2011 07:19 -0400

The country which has so far been doubling down on its losses in European bond exposure, much to the amusement of cynical onlookers, has finally disclosed that Europe is the locus of Chinese vital self interests, and that should Europe go down, one very major domino would be the implosion of China itself. Per Reuters: "China's "vital" interests are at stake if Europe cannot resolve its debt crisis, the Chinese Foreign Ministry said on Friday as it voiced concern about the economic problems of its biggest trading partner. At a media briefing ahead of Chinese Premier Wen Jiabao's visit to Europe next week, Vice Foreign Minister Fu Ying made plain that China had tried to help Europe overcome its troubles by buying more European debt and encouraging bilateral trade..."Whether the European economy can recover and whether some European economies can overcome their hardships and escape crisis, is vitally important for us," Fu said. "China has consistently been quite concerned with the state of the European economy," she said." And just like every time before when China has tripled and quadrupled, and now quintupled, on Greek, Portuguese and other debt, so this time will be no different as merely loading up an insolvent entity with even more leverage does nothing but shorten the half life of each additional "bailout." When Greece blows up, forget the other European countries: keep a close eye on China.

Greek Cabinet Reshuffle Summary 

Submitted by Tyler Durden on 06/17/2011 07:00 -0400

In a completely irrelevant move, which will do nothing to help the government pass the much hated mid-term fiscal plan, or diffuse the social anger, this morning as expected George Papandreou picked outgoing Defence Minister Evangelos Venizelos as new finance minister, jettisoning George Papaconstantinou, architect of a belt-tightening programme that has stoked violent unrest and a revolt in his Socialist Party. Reuters correctly observes that the move seemed likely to buy time for the embattled prime minister but did little to dilute scepticism that Greece would be able to implement a new round of deeply painful reforms... Papaconstantinou becomes environment minister in the reshuffle.The new cabinet is expected to be sworn in later on Friday and a confidence vote is due by Tuesday night. Rather than giving new impetus to the reforms, analysts said, the reshuffle was aimed primarily at quelling dissent in the Socialist Party by moving the unpopular Papaconstantinou and appointing the prime minister's main party rival Venizelos." All this means is that instead of Sunday being the critical decision day when the vote of no confidence will be held, it will now be Tuesday, as Europe is now struggling to exist day to day, and push back the inevitable by 24 hours one day at a time. "The move failed to impress markets and the cost of insuring Greek debt against default hit a fresh record above 2,000 basis points on Friday."