Wednesday, October 19, 2011

Latest European (Fake?) News: EFSF Talks Have Stalled

We may have posted this already minutes ago, but at this point it is all one big blur, so we will go ahead and regurgitate. The latest counter-disinformation from Europe comes from Reuters: "Plans to tackle the euro zone debt crisis have stalled with Paris and Berlin at odds over how to increase the firepower of the region's bailout fund, French President Nicolas Sarkozy said on Wednesday. Sarkozy told French parliamentarians the dispute was holding up negotiations. He then flew to Frankfurt to talk with German Chancellor Angela Merkel in an attempt to break the deadlock ahead of a make-or-break European leaders' summit on Sunday. A French presidency source said the French and German leaders were meeting other euro zone policy chiefs and International Monetary Fund head Christine Lagarde on the sidelines of an event mark the end of Jean-Claude Trichet's presidency of the European Central Bank. France has argued the most effective way of leveraging the European Financial Stability Facility is to turn it into a bank which could then access funding from the ECB, but both the central bank and the German government have opposed this. "In Germany, the coalition is divided on this issue. It is not just Angela Merkel who we need to convince," Sarkozy told the parliamentarians at a lunch meeting, according to Charles de Courson, one of the legislators present. His comments fuelled doubts about whether euro zone leaders will be able to agree a clear and convincing plan when they meet on Sunday. " Judging by the reaction of the EURUSD, this IS news because it only made Bloomberg minute ago, even though it hit Reuters about 45 minutes earlier.

Latest Barrage Of Headlines From Europe

Time for European headlines. Because we haven't had any in about 3 minutes or so. Courtesy of Bloomberg, here is Angela Merkel doing her best channeling of Hank Paulson.
And most importantly...
True, many, many strokes will be needed. But what about the market which has already priced in not only the Magic Wand but the Quidditch match victory over Slitherin. What now?

How's This For Social Unrest?

In his seminal work The Rise and Fall of the Third Reich, William Shirer recounts how the struggling Weimar Republic printed its way out of reparation debt from World War I. Out-of-control printing caused the German mark to fall from 75 per dollar in 1921, to more than 4 billion just 3-years later. Talk about chaos. After a brief period of credit-fueled economic respite, the onset of the global depression in 1929 had people in the streets clamoring for change. Hitler's National Socialism promised the world... and under such economic distress, people believed him. There are two important lessons here. First is that hyperinflation comes very quickly. Confidence languishes for months, even years... until one day the currency begins to slide, slowly at first, then exponentially. The second is what followed. Economic disaster begets social unrest, the two are inextricably linked. Populist rebellions and roving gangs became a constant presence in the republic.

German Bund sale undersubscribed as risky assets rise

Eric De Groot at Eric De Groot - 1 hour ago

Centralized governments, also known as debt junkies, are having trouble getting their fix. Short term trend changes US Treasuries and US Dollar confirm it. U.S. Dollar ETF U.S. Treasury Bond ETF The wolfpack, already wreacking havoc in Europe, will turn on the world’s reserve currency when all the easy prey have been culled without drastic, preemptive monetary changes. Unfortunately, history... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

David Rosenberg On The Insanity Of Fixing Excess Leverage With More Leverage, And The Relentless Euro Rumormill

We though we were the only ones brought to the verge with the relentless lies out of a completely clueless Europe, which as we learned at last weekend's G20 meeting, has 3 more days to get is act together. Oh wait, they were lying too? Got it. Well, no, David Rosenberg has also had it pretty much up to here. More importantly, Rosenberg also, like us, but also like Citi's and RBS, to throw some more "credible" names, is convinced that this latest deux ex machina is D.O.A. To wit: "How cool is it that we live in a world where complicated financial engineering in a radically overleveraged system forms the cornerstone of the solution to these debt problems...Why are we so skeptical? Well, when you go back to the opening months of 2010, it was all about Greece and the prime goal was to prevent contagion to Portugal and Ireland. We know how that went. Then that fall, the risk was Greece, Ireland and Portugal and this was when the term PIG was coined. At that time, the goal was to protect Spain and Italy. And we know how that went. Then just this past July, the crisis moved beyond just Greece, Ireland and Portugal to include Italy and Spain (and this is where PUGS was coined). At this point it was about preventing contagion to the banks, but nothing has worked. The contagion has merely spread, and this is not the first time a late-day press release or policy announcement was leaked to juice the market. So, we are still living in a world were levering up is somehow deemed to be a solution to a world of excessive credit and all this will do, again, is just kick the can down the road." As we made it all too clear, far less diplomatically yesterday, "Are we the only ones dazed, confused, and tired beyond comprehension with this endless, ridiculous, pathetic, grovelling Groundhog Day bullshit? Stop risking civil and international war just to satisfy your bureaucratic vanity. THERE IS NO MONEY! YOU KNOW IT, WE KNOW IT, THE PEOPLE KNOW IT. ENOUGH!!!" So much for enough: 6 hours later we had the latest European rumormongering fiasco courtesy of The Guardian which has now devolved to the status of England's latest "paid for publication" tabloid.

With $30 Billion In Structuring Fees On The Table, Moody's Calls For Larger EFSF Even As WSJ Reports It May Be DOA

Even as the realization that the "EFSF as an insurance policy" is dead on arrival, just as Zero Hedge predicted following some simplistic math exercises yesterday, is spreading following a report just out by the WSJ that "EU lawyers have rejected direct EFSF guarantees", the multi-trillion CDO-insurance hybrid has received an endorsement from a most surprising source: Moody's which "called for increasing by as much as fivefold the firepower of the euro area’s temporary rescue fund, the European Financial Stability Facility. A 2 trillion-euro ($2.8 trillion) EFSF “is not an unfair figure. What is needed is that there are resources to cover the entire area including Spain and Italy." Well, when one considers that there are about $30 billion in structuring fees on the table, a lot of it payable to the rating agencies, and quite a bit due to the EU's financial advisor (which has remained very stealthy through this point: we wonder just who is advising the EU and Eurozone on the daily changes to the bailout proposals - is it Goldman Sachs? BNP? SocGen? Inquiring minds deserve to know), it is probably not that strange that Moody's will pull a 180 and now demand a far larger "rescue facility." After all, without one, not only will the rating agency make billions less in the current fiscal year, but it will have no excuses to not downgrade the countries in Europe's core whose fiscal situation is deteriorating with each passing day.

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