Eurozone bailout scheme: Spend infinite money without democratic approval

 

 

Lehman Weekend Redux?

 

 

IMF Releases Steering Commttee Communique On Greece - Full Text

The global economy has entered a dangerous phase, calling for exceptional vigilance, coordination and readiness to take bold action from members and the IMF alike. We are encouraged by the determination of our euro-area colleagues to do what is needed to resolve the euro-area crisis. We welcome that the IMF stands ready to strongly support this effort as part of its global role...Today we agreed to act decisively to tackle the dangers confronting the global economy. These include sovereign debt risks, financial system fragility, weakening economic growth and high unemployment. Our circumstances vary, but our economies and financial systems are closely interlinked. We will therefore act collectively to restore confidence and financial stability, and rekindle global growth....

There Will Never Be A “Good” Time For Greece To Default

It doesn’t take a rocket scientist to see that the banks squandered a year to improve their capital base. BAC wasn’t selling cheap options to Warren Buffett when their stock was at 13. The SocGen CEO wasn’t on TV trying to convince investors that they had no funding or capital problems when his stock was at 42. The banks are even worse off than most of the countries, but why should anyone assume that waiting will make it easier for them to digest a Greek default... It seems that a lot has already been priced in and that the contagion is occurring whether we want it to or not, so we may as well let Greece default now and figure out how much has already been priced in and how to really stop the contagion from spreading to Italy and Spain and to banks that deserve to be saved. Let’s just admit it is gangrene and that it has already spread farther than is safe, but it is still better to cut off an arm to save the body. If we keep waiting it may not be possible to save the patient. The patient is getting weaker by the day, and being blind to that is just as big and just as dangerous as letting Greece default now.




Germany Demands "Managed" Greek Default And 50% Bond Haircuts In Exchange For Expanding EFSF, Peripheral "Firewall" Back on July 21, the same day as the Greek bailout redux hit the tape, we speculated that the biggest weakness in the Second Greek Bailout is that the EFSF would have to be expanded to well over the current E440 billion (which even at its current size has not been fully ratified in Europe, and based on recent events may not be implemented until 2012 thanks to Slovenia and Finland), or about E1.5 trillion (and possibly as much as E3.5 trillion). The reason this is a "problem" is that it would have to come exclusively at the expense of Germany which would have to pledge anywhere between 50% and 133% of its GDP (as France would have long since been downgraded and hence unable to participate in the EFSF at a AAA rating). We also assumed that the debt rollover with a 21% haircut would not be an issue as it should have been a formality: on this we were fataly wrong - the debt rollover plan has imploded and means that the entire Greek bailout has collapsed as some had expected. And now that it is clear that contagion is threatening to sweep through the core, it is back to Germany to prevent the gangrene, no longer contagion, from advancing beyond the PIIGS. However, in order to prevent a full out revolution, Germany's economic elite has said it would agree to an EFSF expansion and hence installation of European firewall, but at a price: a "controlled" default by Greece and 50% haircuts for private bondholders (as German banks have long since offloaded their Greek bonds).





Harvey Organ, Saturday September 24, 2011
To all:

I would rather write the weekend commentary when I return tomorrow night. I will have it ready for you early Sunday morning reading for trading on Monday.

Please do not fear today as it was capitulation day as we probably lost of few of our weak hands today.

I have a lot to tell you so it is better that I take my time writing this.


Harvey

Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb?

The latest quarterly report from the Office Of the Currency Comptroller is out and as usual it presents in a crisp, clear and very much glaring format the fact that the top 4 banks in the US now account for a massively disproportionate amount of the derivative risk in the financial system. Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively. And that's your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all time high and up $5.3 trillion from Q1 as they have to risk ever more in the derivatives market to generate that incremental penny of return.

UBS' CEO Booted

Things for UBS are just getting from bad to worse. The UBS "Rogue Trader" incident which was anything but rogue and certainly involved far more than just a trader, has struck at the very top and just claimed the scalp of the top man at the organization, forcing many to ask: just what is really going on behind the scenes at the embattled Swiss bank? Alas, this latest development means that life for the bank's other employees is about to become a (bonus free) living hell, as a complete overhaul of the employee base is imminent. From Reuters: "The board of UBS accepted on Saturday the resignation of Chief Executive Oswald Gruebel after the Swiss bank lost $2.3 billion in alleged rogue trading and said it had appointed Sergio Ermotti to replace him for now. Ermotti, a 51 year-old from Switzerland's Italian-speaking region of Ticino, joined UBS in April from UniCredit as head of Europe, Middle East and Africa. Before joining UniCredit in 2005, he worked at Merrill Lynch for 18 years. The board said in a statement it had asked management to accelerate an overhaul of the investment bank already under way "concentrating on advisory, capital markets, and client flow and solutions businesses". UBS's board meeting, one of four regular meetings per year, had originally been due to end on Friday ahead of the UBS-sponsored Singapore Formula One motor racing Grand Prix on Sunday, when executives will be trying to reassure big clients. But deliberations continued on Saturday by conference call after the board left Singapore on Friday with some members headed back to Switzerland, sources told Reuters. "

Gerald Celente Announces He's Buying Silver

This King World News blog was another item that I got from Eric earlier this morning...and the link is here.

Interview with Jim Rogers

Eric De Groot at Eric De Groot - 6 minutes ago

Trade wars expand and intensify as history seems destined repeat around a common theme. Interview with Jim Rogers [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

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Trader Dan on King World News Weekly Metals Wrap

Trader Dan at Trader Dan's Market Views - 47 minutes ago

Please click on the following link to listen to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap. *http://tinyurl.com/3ozndjn* 

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Gold Has Players And Stooges

Eric De Groot at Eric De Groot - 1 hour ago

Leveraged money flow through 9/20 which ignore the huge liquidation days on Thursday and Friday suggest the following: First, last week's panic sellers were nothing more than the "stooges" in the game. Commercial traders have been aggressively increasing their net long position (long less short) since early August 2011. Net long as a percentage of open interest has increased from -40% as of 8/2... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

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I Am Not Selling My Gold

Admin at Marc Faber Blog - 4 hours ago

I am not selling my gold because in the long run, the Federal Reserve will print money. As soon as markets in the world are down another 10-20%, as soon as asset prices go down and the economy is weak, everybody will applaud the Federal Reserve if they print money. - *in Economic Times* *Related: SPDR Gold ETF (GLD)* *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*

Asian Buying Will Overwhelm Manipulation in the Paper Gold & Silver Markets: Ben Davies

link to this King World News audio interview is here.

Sprott Money Temporarily Runs Out of Silver

With gold and silver prices plunging, King World News sources are reporting massive physical demand. One example is Sprott Money, which completely ran out of physical silver. Larisa Sprott, President of Sprott Money told KWN, “It’s been pretty wild, especially the last three or four days because of the price drop. People are trading in their paper money for gold and silver, but we are seeing more purchases of silver net. In fact the buying has been really skewed in favor of silver, there is tremendous demand.”

The link to this must read KWN blog is here.

CME raises gold, silver, copper margin requirements

 

The dust had barely settled after one of the biggest criminal take-downs in precious metals history, when the CME announced that they were raising margin rates for gold, silver and a couple of other commodities. This they did after the close of business on Friday...long after the damage had been done. Margin requirements are always raised in rapidly rising markets...not after the commodities in question lie bleeding on the trading floor.

This takes effect at the close of business on Monday...and is just one more way of beating the last leveraged longs out of their positions so that the bullion banks can cover more short positions. This is as criminal as it gets.

If there are that many leveraged long positions still left, this will negatively impact the prices of these commodities during the Monday trading day as these longs toss in the towel as well.

This short story, from The Wall Street Journal last night, is printed in the clear in this GATA release...and is a must read. The link is here. If you want to read the full text of the CME advisory, the link to that is here.

London Metal Exchange reveals it has received multiple takeover bids

A bidding war has broken out for the centuries-old London Metal Exchange, with the company disclosing that it has received several expressions of interest and that an auction process is under way.

The global commodities boom, although it has abated amid fears for the world economy, is the driving force behind the desire to acquire the LME, along with a growing trend for exchanges to merge to cut costs.

Founded in 1571, the LME is the biggest exchange of its kind and last year reported that its total value of trading had exceeded an astonishing $11.63 trillion as prices of base metals soared.

This story was posted in The Guardian on Friday evening... The link is here.

'We Won't Pay' - Greece's Middle Class Revolt against Austerity

Small business owners in Greece have long been the backbone of the economy and reliable taxpayers in a country where tax evasion is rampant. That, though, is now changing. Self-employed workers have had enough of rising taxes and have begun to revolt.

The link is here.