Frau Merkel Continues Her "I'm Unpopular With All Humans" European Tour..

After Starting Riots In Greece, Merkel Booed In Germany Next.  If Merkel had a heart (or soul, for that matter..), she might be upset.  No worries there, though!  Zero Hedge.  Excerpts:


What does an iron chancellor have to do to be loved these days? After scrambling 7,000 members of the Greek police force out of an early prepaid retirement for her brief, still inexplicable 6 hour visit to Athens last Tuesday, which caused the now usual Syntagma square rioting, Merkel next took the stage in a rainy Stuttgart, in a show of support for the local mayor candidate Sebastian Turner, which promptly devolved into 14 minutes of continuous booing.  (Video at the link.  It's awesome if you like your videos full of boos.  Boo!  Boo!  Chant!  Priceless..  )
And:
The truth is that a vast majority of Europe's people now want the grand experiment, which merely enriches a small subset of participants while impoverishing everyone else, over and done with: it is this endless pursuit of power and money at all costs that starts wars - not whether Germany and France share a fake currency, that is the cause of the endless bloodshed in Europe. The only reason why wars not only in Europe, but in the world, were avoided for the past several decades, is due to the incursion of globalization which merely allowed the encumbrance of every global assets with layers upon layers of additional debt, creating money in the process and keeping the oligarchy happy. But it is this oligarchic 'subset' that calls the shots, and the same subset is now realizing the ability to create debt out of thin air in Europe has now ended. And it will gladly take Europe to the edge of war if it means, well, "avoiding war", at least in the Nobel committee's naive version of the world, in the future.


Frau Frau needs a diversion:  Where the hell is Techno Viking when you need him?

Guest Post: The End Of The Euro: When Will It Happen?

This time, it's Italy.  Zero Hedge:

In Rome, the main post office is in a majestic old building with imposing architecture. It was a procession just to buy a few stamps. Stand here, stand there. Take this ticket, fill out this form, print that form. What should have taken 10 seconds took 10 minutes; the process it took to get there was a real eye opener. They have all these fancy IT systems, but we get the sense that this ‘technology’ just gives the post office a veneer of modernity and sophistication without actually being necessary or adding any value. This is typical of bureaucracy: take a simple task, make it unnecessarily complicated, then spend a bunch of money on technology that makes it even more complicated. Given this experience, Italy has clearly mastered the art of unnecessarily complicating the simple. It’s no wonder they have serious problems paying the bills. Moreover, the country’s demographic challenges indicate the country’s fiscal situation cannot improve. Robust economies are productive… and productivity is typically not associated with the elderly. Italy has one of the world’s oldest populations concurrent with one of the lowest birth rates. This trend drives an unsustainable fiscal quandary: bloated public sector bills with lots of old people to pay pensions to, coupled with a rapidly shrinking population devoid of young workers to pay taxes.

At this point, there can be little doubt that Italy will exit the eurozone... most likely voluntarily. A return to the lira means the Italian government (probably to be headed by Berlusconi once again)(ugh) would be free to print currency at will. This is the only reasonable solution remaining. When will it happen? Probably sooner than we think.

Guest Post: When the Weakest Critical Part Fails, the Machine Breaks Down

Zero Hedge.  Excerpts:

Consumer spending is the bedrock of the global economy, and consumer spending depends on expanding debt and leverage. Once that subsystem fails, consumerism and the global economy grind to a halt.


The failure of any critical subsystem in an organism triggers a catastrophic, fatal decline. It doesn't matter if the rest of the critical subsystems are functioning at optimum levels; the failure of even one essential "part" leads to death.

The metaphor is easily extended to machines, where a perfectly sound engine will fail once the oil pump ceases functioning.

The cliche is that a chain is only as strong as its weakest link. The conventional wisdom is that the U.S. economy is so large and diverse that the failure of any one part will have only limited consequences on the economy as a whole.

But this belief was undermined by the financial crisis of 2008, in which the apparently "limited" implosion of subprime mortgage debt dominoed into a full-blown global financial crisis.
..
When financialization fails, the consumerist economy dies. This is what is happening in Greece, and is starting to happen in Spain and Italy.


The central banks and Central States are attempting resuscitation by issuing credit that is freed from the constraints of collateral. The basic idea here is that if credit based on collateral has failed, then let's replace it with credit backed by phantom assets, i.e. illusory collateral.

In essence, the financialization system has shifted to the realm of fantasy, where we (taxpayers, people who took out student loans, homeowners continuing to make payments on underwater mortgages, etc.) are paying very real interest on illusory debt backed by nothing.

Once this flimsy con unravels, the credibility of all institutions that participated in the con will be irrevocably destroyed. This includes the European Central Bank (ECB), the Federal Reserve, the E.U., "too big to fail" banks, and so on down the financialization line of dominoes.

Once credit ceases to expand, asset bubbles pop and consumerism grinds to a halt. And since ever-expanding consumption is the bedrock of the global economy, the global economy will also grind to a halt.

The "flimsy con" is almost fully exposed, and the entire process continues to accelerate.

Citi Presents 14 Global Hot Spots That Have The Potential To Explode

The headline is a bit misleading, as some cited countries may face upcoming crises or indeed implode, but the shock waves might be regional at best.  For example, France's chance of causing a critical global situation depends more on the conjunction of every other EU country imploding as well.  The usual suspects are included (N./S. Korea, Venezuela, Syria, Egypt..), but seriously, the Netherlands?  Is turmoil in the Netherlands really going to spark any kind of global conflagration?  C'mon..  Business Insider.  Excerpts:

The European economy is deteriorating and leaders across the continent are being booted from office in favor of a new generation of politicians. Rising tensions in the Middle East and uncertainty over leadership changes in emerging markets worldwide are adding to investor concerns.

Tina Fordham, Senior Global Political Analyst at Citi, is out with her mid-year outlook, presenting all of the bank's views on all of the biggest political risks emanating from the world's key hotspots over the remainder of this year and into 2013.

With key elections ahead, unresolved conflicts that continue to roil entire regions, and rising nationalist sentiment in major world economies, investors will want to stay abreast of developments on the international political scene.

Why Citi bothered to include Russia or China (Both fairly stable, at the moment)to the list, or formally recognize how America's potential economic meltdown might either blow up internally, or critically hobble most financial markets is puzzling.  Of real concern:  Israel/Iran/Syria/Turkey/Saudi Arabia/Egypt (Multiple scenarios involving each other, Russia/China and/or NATO), Greece/Italy/EU meltdown, and surprisingly not on the list, Japan's economic and radioactive death spiral.  Fukushima doesn't rate as a "global hotspot?"

I'm sure Ms. Fordham got paid a shitload of money for her analysis, and I'm glad I didn't have to actually pay money for said analysis.  I've got a friend whose rantings are more comprehensive, more pertinent, and much more interesting and/or entertaining than the USA Today version of geo-political current events Citi has offered up. 

I'm also sure that there are a lot of clueless rich people who will gladly pay for this "analysis," confident they're the ones with the valid information.  Good for them.  I'll take ______ insights anytime, whether he's sober or drunk.  His narrative is far more compelling than this dreck, slurred or not..  And it's free.

Italian PM warns of the break-up of the Eurozone and the European Union

The rumblings from officialdom begin, or continue..  The Guardian, via The Extinction Protocol:

August 6, 2012 – ROME - The big news this morning is coming from an interview Italy’s Mario Monti gave to German magazine Der Spiegel, in which he warned that growing Italian resentment against Germany risks the break-up of not just the eurozone but the European Union itself. He said the eurozone tensions “bear the traits of a psychological dissolution of Europe,” adding that Europe “must work hard to contain it.” Asked about a strengthening in resentment between the allegedly profligate southern European nations and the bloc’s thrifty northern members, Monti told Der Spiegel “it is very alarming, and we have to fight against it. Yes, there is a front line in this area between north and south, there are reciprocal prejudices,” according to AP’s report of the interview. In the meantime, tensions between Germany and Italy appear to be on the rise. The news comes after an Italian newspaper splashed its front page on a photo of Angela Merkel with her arm raised and the headline “Quarto Reich.”(Ouch!)  Meanwhile, in an op-ed in Germany’s Bild Romano Prodi, a former Italian prime minister and president of the EU Commission, urged Germany to show “true leadership” in steering the continent through the crisis, saying the bloc’s biggest economy has the duty “to lead Europe toward a better future.” If Germany fails to lead through the crisis, it “would be the political end, for Europe and for Germany,” he insisted, urging Berlin to present a “clear action plan to achieve a democratic, federally structured Europe.” It is important to note that il Giornale (Where the headline 4th Reich appeared)is owned by Berlusconi. –Guardian (Full article at this link)

Li(e)bor: The Cartel Emerges

Huge.  Zero Hedge.  Excerpts:

Just when you thought the Li(e)bor scandal had jumped the shark, Germany's Spiegel brings it back front-and-center with a detailed and critical insight into the 'organized fraud' and emergence of the cartel of 'bottom of the food chain' money market traders. "The trick is that you can't do it alone" one of the 'chosen' pointed out, but regulators have now spoken "mechanisms are now taking effect that I only knew of from mafia films." RICO anyone? "This is a real zinger," says an insider. In the past, bank manager lapses resulted from their stupidity for having bought securities without understanding them. "Now that was bad enough. But manipulating a market rate is criminal." A portion of the industry, adds the insider, apparently doesn't realize that the writing is on the wall.



There have been plenty of banking scandals, but none quite like this: Investigators and political leaders believe that the manipulation of the Libor benchmark interest rate was the result of organized fraud. Institutions that participated could face billions in fines and penalties.
And:

What the Banks Could Now Face



German banks must have pricked up their ears when BaFin President Elke König recently spoke about the Libor scandal. "Basically, banks must establish suitable reserves for possible losses," König concluded.


Investors, like Vienna hedge fund FTC Capital, have made it clear that they do not intend to let up. They feel obligated to their customers to file claims for damages, explains FTC executive Majcen...


There are already 20 lawsuits in the United States, some of which have been combined into class action suits. The plaintiffs range from the City of Baltimore to police and firefighter's pension funds, the City of Dania Beach, Florida, and Russian oligarch Vladimir Gusinsky.


They feel encouraged by the actions of regulators. "Both the American CFTC and the FSA have done excellent investigative work," says Majcen. Bank analysts expect that other institutions could face fines similar to the one imposed on Barclays. In fact, it ought to be in the banks' best interest to quickly settle their cases. "But they're afraid, because since Barclays, they know that it isn't just about money, but also about making heads roll," says a major shareholder of Deutsche Bank.


German attorneys are also lining up to represent potential clients. "A few institutional investors have already contacted us," says Marc Schiefer of the law firm TILP in the southern German city of Tübingen.


Years could go by before damage suits are ruled on...


Possible Libor-related liabilities would cause serious problems at WestLB, or its successor company Portigon. The once-proud state-owned bank is in the process of being liquidated, at a cost of billions to its former owners, the western German state of North Rhine-Westphalia and savings banks. The Libor scandal could further increase the burden on taxpayers.
...
The call for stricter regulation is also getting louder in politics once again... "cheap populism."


"This is a real zinger," says an insider. In the past, bank manager lapses resulted from their stupidity for having bought securities without understanding them. "Now that was bad enough. But manipulating a market rate is criminal." A portion of the industry, adds the insider, apparently doesn't realize that the writing is on the wall.


The parties involved, including Deutsche Bank and its new co-CEO Jain, cannot expect leniency when charges are investigated. "We can't make any allowances for high-profile names," say officials in the capital.

The vast inter-connectedness of these institutions presents a huge problem for regulators and investigators(Think thousands of strings of Christmas lights tangled together), but the main players are known, and those players have got to be freaking out.  Who will be branded "The First Example?"

Couple thoughts:  The public will never understand this scandal until the media finds a way to explain it clearly and succinctly.  But the media first must start actually covering this scandal.

What a glorious time to be an honest, independent Auditor!  Welcome to your Golden Age, nerds!

Greek Deposit Plunge Continues As Tax Inspection Finds Every Business On Zakynthos Broke The Law

Greece is boned, but Mario Draghi says "Everything's gonna be allllll right.."  Zero Hedge.  Excerpts:

On one hand we have Mario Draghi promising he has a magic wand (not a printer - remember the keys to that are now held by Angela Merkel who is on vacation) and to "believe him" that the EUR will survive. On the other we have Greece which is a poster child of everything that is wrong in Europe. And that we summarize as follows: i) an epic and now relentless deposit outflow from Greek banks which continues as all trust in the local banking system is now gone, as €7 billion in deposits or the second biggest amount ever, is pulled and 20% of the entire corporate and household deposit base has vaporized in the past year, and ii) an economy in which it is every man for himself and where nobody pays any taxes any more, period. Best of luck in preserving that EUR Super Mario.


And a quick story on which Greece will never be fixed no matter what magic Draghi and Potter concoct between them:

The Financial Crimes Squad (SDOE) on Thursday reported that six in 10 businesses inspected at popular tourist resorts were not issuing sales receipts, and that of the 1,410 checks conducted in July, 57.1 percent found business owners to be in breach of the law.

..
In Zakynthos in the Ionian and Rethymno on Crete, every business inspected was breaking the law, while on the islands of Paros and Myconos, 70 percent were avoiding taxes.

No deposits, and no tax revenues: thank you Germany for continuing to fund this slow motion trainwreck thus providing everyone with hours of taxpayer-subsidized entertainment.



I think he's being sarcastic.  I don't think he thinks it's really entertainment.

Spain and Italy ban short-selling to calm volatile markets as debt crisis spawns global sell-off

Too little, too late, but God love 'em for tryin', right?  CNN, via The Extinction Protocol:

July 23, 2012 – ROME – Securities regulators in Spain and Italy both instituted short-selling bans Monday as financial markets tumbled. The move is designed to limit the downward pressure on markets by preventing investors from betting against shares of certain companies. The ban in Italy applies only to short positions in shares of banks and insurance companies, according to the Commissione Nazionale per le Società e le Borse, or CONSOB. Spain’s Comisión Nacional del Mercado de Valores (CNMV) banned short positions in shares of all companies under its purview. Both bans are temporary. In a statement, CNMV said European shares have been hit with “extreme volatility” that might cause the “disorderly functioning” of financial markets.(Artfully worded, no?) Regulators in Italy and Spain, as well as France and Belgium, imposed a temporary short-selling ban in August 2011, at the height of the last major flare-up in the eurozone debt crisis. Back in 2008, the Securities and Exchange Commission banned short selling for 799 companies in the wake of Lehman Brothers’ collapse. The move was aimed at restoring confidence and stemming a steep stock sell-off. The bans could limit the selling in the short-term, but longer-term, investors want concrete evidence that the global economy is turning around. Investors are currently concerned that Spain might be forced to seek a bailout similar to those taken by other troubled euro area economies, although Madrid reiterated Monday that it will not need additional aid.

At this stage of the endgame, today's actions are pointless.  Pointless.

Deep Into The Lieborgate Rabbit Hole: The Swiss Hedge Fund Link?

Just because 16 banks did the rigging, doesn't mean Almost Everyone Else didn't know about it, and use it to their advantage.  Derivatives are firmly involved now, and so is Geneva, Switzerland.  The derivatives Leviathan rises from the depths; The monster's size grows quickly to the horizon, then beyond.  We gasp at its size, unable to process..  Zero Hedge connects all the dots.  Excerpts:


That Lieborgate is about to spill over and take down many more banks is well known: as previously reported that the world's biggest bank Deutsche Bank, has become a rat for the Liebor prosecution having turned sides. The reason: "Under the leniency programs of the EU, companies may get total immunity from fines or a reduction of fines which the anti-trust authorities would have otherwise imposed on them if they hand over evidence on anti-competitive agreements or those involved in a concerted practice." However, just like in the case of Barclays (with Diamond), JPM (with Bruno Iksil), UBS (with Kweku) and Goldman (with Fabrice Tourre), there always is a scapegoat. Today we find just who that scapegoat is. From Bloomberg: "Regulators are investigating the possible roles of Michael Zrihen at Credit Agricole, Didier Sander at HSBC and Christian Bittar at Deutsche Bank, the person said on condition of anonymity because the investigation is ongoing. The names of the banks and traders were reported earlier today by the Financial Times."



Of course, as so very often happens, the link between the investigated firm, and the person in question no longer exists - after all what better brute way to tie up loose ends, than to fire the person in question at some point in the past: "Michael Golden, a spokesman for Deutsche Bank, confirmed that Bittar left the bank last year and declined to comment on the investigation." Not surprising. Yet this is where the story gets interesting, and provides a whole new twist on the Lieborgate scandal.


Notice that up until now, the only firms that have been implicated in Lieborgate are, by definition, the BBA member banks which provided daily USD Libor fixings. However, nowhere is it said that this information never exited this close knit cabal of 16 manipulating banks. After all, there are $2 trillion in AUM (a number that is likely $5 trillion when accounting for all the rehypothecated assets at the Prime Brokers) out there run by unregulated hedge funds, and all of these entities would certainly find a way to make a pretty buck on even the tiniest 'manipulated', and leveraged Libor arbitrage. And would also pay a pretty penny to get that info. Which brings us back to Bittar. And LinkedIn.
And:

The original LinkedIn list continues (much to the likely chagrin of at least one SocGen trader and one more CA-CIB banker), but we have seen enough, and the pattern is forming: it appears that the bankers who were allegedly involved in Libor manipulation in some capacity in their previous lives working for banks, decided to quietly depart under mutually acceptable conditions and find new lives, still trading Libor and IR derivatives, in some of the best known, and even less regulated, Swiss hedge funds and private banks.




Our question then is the following: while much has been said about Lieborgate as being purely associated with the 16 BBA USD fixing member banks, just who else made money, and is the traditionally quiet and always under the radar Swiss financial community about to be exposed for having profits far more from Lieborgate than any of the BBA member banks?


Because if the stigmatized traders were accepted with open arms at various Swiss hedge funds, one would think there may, just may have been, some quid pro quo in the past (for those who have worked in the financial industry this needs no further explanation).


We eagerly await the answer, and perhaps the Swiss regulators to finally wake up to their own "pristine" financial industry.


So really..  Just about anyone remotely on the inside could pay for manipulated rate information, and now, it's possible that many, many, many people did, and they all profited from it;  A lot.  All on the backs of those who didn't.  Also known as "muppets," also referred to as "customers." 

LIBOR goes global in three..  Two..

Greek Finance Minister Resigns Just Days After Appointment; Cyprus Officially Requests Bailout

Bad Omen Monday..  Like, two-headed crow flying backwards, ten feet above your head shrieking "NOOOO!," bad..  Zero Hedge.  Whole Post:

This has to be a record:

•GREEK FINANCE MINISTER RAPANOS RESIGNS; PRIME MINISTER ACCEPTS


This is the same guy who was appointed last week, and who fainted after seeking the official Greek numbers. In fact we are not sure he ever got an official appointment. And elsewhere:


•CYPRUS REQUESTS EU AID


•CYPRUS SEEKS EXTERNAL FINANCIAL ASSISTANCE FROM EURO AREA: China just said NEIN


Prepare the bath salt firehose.


Repanos: we hardly knew thee. Courtesy of William Banzai:

Welcome, Cyprus!  If you haven't been paying attention, you're in for some "excitement!"

Moody's Downgrades Italy, Spain, Portugal And Others; Puts UK, France On Outlook Negative - Full Statement

Uh-oh.  All of Europe's gonna get Greece-d.  Zero Hedge's Tyler Durden has the details.  Excerpts:

As anticipated in November 2011, Moody's Investors Service has today adjusted the sovereign debt ratings of selected EU countries in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries' own specific challenges.
Moody's actions can be summarised as follows:

- Austria: outlook on Aaa rating changed to negative
- France: outlook on Aaa rating changed to negative
- Italy: downgraded to A3 from A2, negative outlook
- Malta: downgraded to A3 from A2, negative outlook
- Portugal: downgraded to Ba3 from Ba2, negative outlook
- Slovakia: downgraded to A2 from A1, negative outlook
- Slovenia: downgraded to A2 from A1, negative outlook
- Spain: downgraded to A3 from A1, negative outlook
- United Kingdom: outlook on Aaa rating changed to negative
..
The main drivers of today's actions are:



*The uncertainty over (i) the euro area's prospects for institutional reform of its fiscal and economic framework and (ii) the resources that will be made available to deal with the crisis.


*Europe's increasingly weak macroeconomic prospects, which threaten the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness.


*The impact that Moody's believes these factors will continue to have on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions for stressed sovereigns and banks.


To a varying degree, these factors are constraining the creditworthiness of all European sovereigns and exacerbating the susceptibility of a number of sovereigns to particular financial and macroeconomic exposures.


When everything collapses, don't forget to yell "Jenga!!"  And, as always, don't forget to stock up on canned goods and bottled water!  Happy Valentine's Day, yo!