Goldman's Take On TARGET2 And How The Bundesbank Will Suffer Massive Losses If The Eurozone Fails

Two weeks ago in "Has The Imploding European Shadow Banking System Forced The Bundesbank To Prepare For Plan B?" we suggested that according to recent fund flow data, "the Bundesbank wants slowly and quietly out." Out of what? Why the European intertwined monetary mechanism of course, where surplus nations' central bank continue to fund deficit countries' accounts via an ECB intermediary. We speculated that according to the recent ECB proposal, the primary beneficiary of direct ECB intermediation in fund flows, as Draghi has been pushing for past month, would be to disentangle solvent entities like the Bundesbank, allowing it to prepare for D-Day without the shackles of trillions of Euros in deficit capital by virtually all of its counterparties. Today it is the turn of Goldman's Dirk Schumacher to pick up where our argument left off, and to suggest that it is indeed a possibility that the Buba would suffer irreparable consequences as a result of Eurozone implosion, and thus, implicitly, it is Jens Wiedmann's role to accelerate the plan of extracting the Buba from the continent's rapidly unwinding monetary (and fiscal) system. Needless to say, the possibility that a European country can leave at will, as the European Nash Equilibrium finally fails, is something the Bundesbank not only knows all too well, but is actively preparing for: here is what we said on December 6: "we may be experiencing the attempt by the last safe European central bank - Buba - to disintermediate itself from the slow motion trainwreck that is the European shadow banking (first) and then traditional banking collapse (second and last). Because as Lehman showed, it took the lock up of money markets - that stalwart of shadow liabilities - to push the system over the edge, and require a multi-trillion bailout from the true lender of last resort. The same thing is happening now in Europe. And the Bundesbank increasingly appears to want none of it." After all, Germany has been sending the periphery enough messages to where only the most vacuous is not preparing to exit. The question is just how self-serving is Germany being, and whether once Buba is fully disintermediated, Germany will finally push the domino, letting the chips fall where they may?

Bob Janjuah Answers The Six Biggest Questions Heading Into 2012

As Bob Janjuah, of Nomura, notes in his final dissertation of the year, our in-boxes are stuffed with all the good cheer of sell-side research outlooks. However, the bearded bear manages to cut through all the nuance to get to the six questions that need to be addressed in order to see your way successfully in 2012. With the US two-thirds of the way through the post-crisis workout phase while Europe remains only half-way through, and China a mere one-third through the necessary adjustments to less global imbalance, he is not a global uber-bear on every asset class as the net effect is modest global underlying demand and plenty of savings sloshing around looking for a home. The market, though, will have to adjust further to an extended period of weakness in Europe, which will impact EM growth expectations and so the existential ursine strategist is skewing his macro expectations to the downside and with the market pricing a 'softish' global landing, there remains a considerable gap between downside risk potential and current expectations. Furthermore, Janjuah believes the upside is relatively self-limiting on the basis of commodity price pressures and the potential for property or asset bubble bursts - leaving upside limited and downside substantial.

Is Britain About To Scuttle The Last Ditch "Plan Z" European Bailout?

As is by now well known, it was the British refusal to budge and thus agree to the fiscal compact from the December 9th summit, that led to the realization that the European bailout is now further away than ever before. And as reported earlier, tomorrow European finance ministers will sit down to finalize the terms of a €200 billion IMF injection, funded by various European governments, which is the last ditch rescue effort now that the EFSF and ESM have both failed to convince the market of a long-term solution. Enter Britain. Again. Because as the Telegraph reports, it will be up to Britain to fund not just any portion of the upcoming €200 billion payment, but the second largest one, a commitment which David Cameron and the majority of Britain will likely balk at. "Figures suggest European Union officials expect British taxpayers to be the second largest contributor. The Prime Minister has repeatedly promised not to provide any extra funding for the IMF for the specific purpose of saving the euro and Britain is already liable for £12 billion of loans and guarantees to Ireland, Greece and Portugal...An EU official said Britain was still expected to contribute €30.9 billion (£25.9 billion), leaving the country as the second biggest contributor to the new IMF fund behind Germany and equal with France." So ten days after British obstinacy to "on the fly" European bailout plans led to the EURUSD dropping to 2011 lows, will it be the Albion that once again leads to another step down in the European currency, as it now becomes clear that the last ditch Plan Z "IMF Bailout" plan is now worthless? We will find out shortly, although we are confident that anyone hoping that Britain will do an about face and revert on its controversial position, will be disappointed.




Fitch says comprehensive solution to eurozone crisis is 'beyond reach' - statement in full.



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Massive Downward Revisions Imminent:  National Association Of Realtors Miscounted Millions Of Home Sales Over Last Five Years.



Europe's Crisis:  Goldman Warns of Big Risk to US



Australian Banks Given One Week to Prepare (Stress Test) For European "Meltdown"



50 Economic Numbers From 2011 that are Almost Too Crazy to Believe



Good intent but lousy security consciousness: Stocking up for Doomsday: As economists predict meltdown, meet the families ready for the worst. And where are the weapons and training that they'll need, in order to keep what they've acquired? 






China trims holdings of US Treasury debt.



For Europe, the Only Way Out is to Break Up



The Coming Collapse Might Be Your Final Chance to Legally Buy Physical Gold this Decade



Existing Home Sales Debacle, as Larry Yun Confirms Overstatement



Child Poverty in America is Absolutely Exploding--16 Statistics that Will Break Your Heart

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