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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.
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.
He's not wrong. Businessinsider:
News that that a swarm of termites deep inside the British banking system have been fiddling the interbank interest rates (LIBOR) for years in order to systematically vacuum a few billion pence off the exchange floors for themselves is the latest blow to the credibility of the global money system - and probably a fine overture to a looming climactic implosion of the gigantic, creaking, smoldering, reeking, duck-taped edifice of broken promises, booby-trapped hedge obligations, counterparty follies, central bank euchres, sovereign flim-flams, and countless chicanes too various, dark, and deep to smoke out.
Next, we'll probably hear that Lloyd Blankfein over at Goldman Sachs has been tinkering with the rotation of the earth in order to gain a few micro-milliseconds of advantage in his firm's high frequency trading rackets. After all, back in 2008 Lloyd himself claimed to be "doing God's work."
In short, world banking is now hopelessly pranged, and I am not at all sure the project of civilization (modern edition) can continue by other means. The impairments of capital formation are now so profound that no one and nothing can be trusted.
Not only are all bets off, but nobody will want to make any new bets - and by that I mean venture to invest accumulated wealth (capital) in some useful project designed to sustain human well-being. What remains is just the desperate hoarding of whatever remains in assets uncontaminated by the pledges of others to pony up.
All this points to a dangerous new period of political history, a deadly Hobbesian scramble to evade the falling timber in a burning house as the rudiments of a worldwide social contract go up in flames. Such is the importance of legitimacy: the basic condition for governance, especially among supposedly free people.
You can meddle in a lot of distributory issues - who gets what - but when you mess with the most basic operations of money to the extent that no one is sure what it's really worth, or what it represents, then you are deeply undermining society. This is now the condition that is set to blow up republics.
Reality dislikes fraud and accounting tricks. Reality is serious about settling scores. Reality eventually intervenes and puts an end to monkey business. What will it be this time?
Europe and America have been buying a month here, a month there (of a fragile, continuing status quo) on the installment plan. That's what QE, TARPs, LTRO, EFSF, Operation Twist, et cetera, are all about. Think of them as multi-billion dollar (euro) fire extinguishers bought on credit cards. Europe is now completely out of credit to buy more fire fighting equipment.
For months now it has been down to whether Germany intends to keep supporting Spain, Italy, Greece, Portugal, Ireland, the French banks (and a few stray forgotten places between the backwaters of the Danube and the Gulf of Finland) without any say in how they manage their allowance. Much as Germany enjoyed the Ponzi heyday of the Euro zone, a big "tilt" sign now flashes ominously over the continent, signaling game over. All fall down.
Everybody gets real poor real fast. M. Hollandaise over in Paris has already sealed his fate with his stupid plan to return to "go" on the Ponzi game-board. Merkel's tattered scarecrow of a coalition will blow away in the next national election. The Club Med countries will soon boil up in street-fighting, Holland and Finland will drink themselves to death, and across the channel outsider Britain will fizzle away to a burnt bowl of mulligatawny. That's what the end of the summer looks like to me.
Over here, in this sorry-ass edition of America, the election will look more and more like a World Wrestling Federation staged dumb-show between two catamite hostages of a foul corporate oligarchy. Imagine that horse's ass Mitt Romney spending the next four months denouncing Obama-care, modeled on his own health care reform in Massachusetts, while Obama pretends he has a grip on an economy where the rule of law is absent due to Obama's own omissions and negligence.
And if you can't stand that spectacle, just look around at America itself: a wasteland of futile motoring and discount shopping populated by depressed, overfed clowns bedizened with sinister tattoos, pretending to be Star Warriors. No nation ever seen in human history ever laid such a disappointing egg. Only to have it fry on the sidewalk.____________________________________
You ever get that sneaking suspicion 2013's gonna be real different than 2012?
Also: I'm in the mood to type like hillbillies talk, that's why.
Because of the huge news day we had yesterday, Spain asking for bailout got lost amongst the chaos. Make no mistake: This is a big story. CNN Money via The Extinction Protocol. Post:
June 25, 2012 – SPAIN - The Spanish government made a formal request to the Eurogroup on Monday for up to €62 billion ($77 billion) in financial aid for its troubled banking sector. “I have the honor to write to you, in the name of the Spanish government, to formally request financial assistance for the recapitalization of the Spanish banks that require it,” wrote Economy Minister Luis de Guindos, in a letter to Eurogroup president Jean-Claude Juncker. In a worst case scenario, Wyman found that Spanish banks would need between €51 billion and €62 billion in additional capital. Berger estimated the banks would need €51.8 billion. The auditors used stress tests similar to those conducted by the International Monetary Fund, which said last month that banks need to raise €40 billion. The Spanish government did not specify the exact amount it would need. The uncertainty around Spanish banks has raised speculation that Spain will need a bailout similar to those given to Greece, Ireland and Portugal. Investors are also worried about how Spain’s problems will impact Italy. The fear is that bailing out Spain would drain the euro area’s crisis resources and leave Italy without a safety net. The leaders of the four biggest eurozone economies agreed Friday on a plan to boost economic growth in the troubled currency union. Without going into detail, the leaders said they agreed on a set of growth-enhancing policies equal to about €125 billion, or 1% of eurozone gross domestic product.
Spain's GDP is bigger than Greece, Ireland, and Portugal together. Spain very well could be the Eurozone's Tipping Point into collapse.
Impending Systemic Collapse has an ominous ring to it. Zero Hedge has the bad news.. Excerpts:
Europe is heading into a full-scale disaster.
You see, the debt problems in Europe are not simply related to Greece. They are SYSTEMIC. The below chart shows the official Debt to GDP ratios for the major players in Europe.
As you can see, even the more “solvent” countries like Germany and France are sporting Debt to GDP ratios of 75% and 84% respectively.
These numbers, while bad, don’t account for unfunded liabilities. And Europe is nothing if not steeped in unfunded liabilities.
Let’s consider Germany. According to Axel Weber, the head of Germany’s Central Bank, Germany is in fact sitting on a REAL Debt to GDP ratio of over 200%. This is Germany… with unfunded liabilities equal to over TWO times its current GDP.
To put the insanity of this into perspective, Weber’s claim is akin to Ben Bernanke going on national TV and saying that the US actually owes more than $30 trillion and that the debt ceiling is in fact a joke.
What’s truly frightening about this is that Weber is most likely being conservative here. Jagadeesh Gokhale of the Cato Institute published a paper for EuroStat in 2009 claiming Germany’s unfunded liabilities are in fact closer to 418%.
And of course, Germany has yet to recapitalize its banks.
Indeed, by the German Institute for Economic Research’s OWN admission, German banks need 147 billion Euros’ worth of new capital.
To put this number into perspective TOTAL EQUITY at the top three banks in Germany is less than 100 billion Euros.
And this is GERMANY we’re talking about: the supposed rock-solid balance sheet of Europe. How bad do you think the other, less fiscally conservative EU members are?
Think BAD. As in systemic collapse bad.
Tickticktick..
The prediction has been made. Will Dr. Burry continue his roll? Zero Hedge(Video at the link) Whole post:
Infamous for his prediction of the great recession, Europe's demise, and the collapse of the US financial system (as well as profiting extremely handsomely from said predictions), so well captured in Michael Lewis' book "The Big Short", UCLA's Dr. Michael Burry undertakes UCLA's Economics Department's commencement speech with much aplomb. In this "age of infinite distraction", the astounding truthiness of this 15 minute speech is stunning from single-sentence summation of Europe's convulsions that "when the entitled elect themselves, the party accelerates, and the brutal hangover is inevitable" he reminds us that Californians, and indeed all Americans, should take note. A quarter-of-an-hour well spent from a self-described 'chicken-little' who was "just trying to figure it all out".
Another clear-eyed warning to be ignored, yeah? It's not like this collapse is already in motion or anything..
Starving Greeks queue for food in their thousands as debt-wracked country finally forms a coalition government... but how long will it last? Samaras will be hurtling into a massive political shitstorm, no matter what he tries or ultimately does. No action will please a majority of Greeks. And there already quite a few who are super pissed off and riot-y. There will be no honeymoon period. Congratulations again, Mr. Prime Minister, on your "victory." Daily Mail. Excerpts:
Starving Greeks queued around the block for free food handouts yesterday as the country's politicians managed to end a crippling stalemate to form a coalition government.
Young children as well as the elderly waited in line in Athens to collect the parcels of fruit and vegetables donated by farmers from Crete to help ease the devastating austerity faced by many Greeks.
But as hungry people collected food, a few miles away a new conservative-led alliance was formed, vowing to renegotiate the country's strict European bailout in a bid to breath economic life back into the debt-stricken country.
Don't forget, Merkel has already stated she Will Not Re-Negotiate any terms of Greece's bailout. It's all theater on Samaras' part; Greece's harsh realization in three.. Two..
Conservative Antonis Samaras was sworn in as prime minister and head of a three-party coalition that will uphold the country's international bailout commitments.
In the hot seat: New Prime Minister Antonis Samaras vowed to rescue Greece's economy as he spoke for the first time after being sworn in to office at the presidential palace
The move ends a protracted political crisis that had cast grave doubt over the country's future in Europe's joint currency and threatened to plunge Europe deeper into a financial crisis with global repercussions.
Samaras, an American-educated 61-year-old economist, was sworn in three days after his party won the second national elections in six weeks but without enough votes to form a government on its own.
His New Democracy party will join forces with the socialist PASOK party, which came in third place, and the smaller Democratic Left led by Fotis Kouvelis.
Discussions on the lineup of ministers were expected to be completed by Wednesday night.
‘I will ask the new government that will be formed tomorrow to work hard so that we can offer tangible hope to our people,’ Samaras told reporters as he left the presidential mansion.
Greek stocks rose marginally in response to the news, with Athens shares closing up 0.5 percent, limiting earlier gains.
The new prime minister was to meet with outgoing Finance Minister Giorgos Zanias, PASOK head Evangelos Venizelos and Kouvelis on Wednesday evening.
All three parties broadly back Greece's pledges to bailout creditors for further austerity and reforms, although they have pledged to renegotiate some of the terms for the rescue loans.
Again, Merkel and the rest of Germany will not budge. The Greeks will only bring back bad news. How long will this coalition last?
Dark, yes; But Doomy? Yes, well; That too.. The Economic Collapse, via The Extinction Protocol. First and last paragraphs:
June 20, 2012 – ECONOMY – Yes, it is officially time to start freaking out about the global economy. The European financial system is falling apart and it is going to go down hard. If Europe was going to be saved, it would have happened by now. The big money insiders have already pulled their funds from vulnerable positions and they are ready to ride the coming chaos out. Over the next few months, the slow motion train-wrecks currently unfolding in Europe will continue to play out and things will likely really start really heating up in the fall, once summer vacations are over.
And: Restated for effect..
German Chancellor Angela Merkel has declared that Germany will not budge at all on the terms of the Greek bailout. If you are looking for some kind of a global financial miracle; you can stop watching. If European leaders had a master plan to save Europe, they would have shown it by now. The entire house of cards is starting to come down and things are going to get really messy. A lot of people both in the United States and in Europe are going to lose their jobs and their homes over the next few years. It is likely that the next recession will be even more painful than the last one was.
Our global financial inter-connected-ness will come as a big shock to many people. Also shocking will be the lack of preventative monetary firewalls that could have averted this looming crisis.
Hey! You live; You learn!; You know?
Ahh, the great PASOK flip-flop. Nice.. Sensible Greeks, you have every reason to believe the two parties that brought you to the brink of financial DOOM will find the way back to prosperity! Good for you; Here's a participation ribbon! Rest up, Riot Dog; You'll be busy soon enough! Zero Hedge. Excerpts:
One of the biggest caveats from yesterday's Greek election result was that Pasok announced it would only participate in a broad coalition government that includes Syriza. Obviously Syriza promptly turned down the offer, which has now put the ball back in the court of the Pasok leader - Venizeloz. Being a career politicians, and knowing quite well what the final outcome of the Greek fiasco would be, it was only a matter of time before the former minister of defense, finance, and yes, sport, would flip flop, and hint that a government of just ND and Pasok would also work, as the alternative is just too harsh to even consider. In other words, we may shortly get a repeat of the precisely same leadership that brought Greece to 23% unemployment and a completely destroyed financial and economic system, with Veni back in the role of finance minister once again.
And:
Does this mean a Greek government just may happen, evading a 3rd Greek election in as many months? We will know for sure by tomorrow night, when Pasok said is the deadline by which a new government has to be formed. As for bets on the longevity of the new cabinet, we have no idea what the spread is, but we take the under.
What's the definition of insanity? Happy fun times are just ahead with your "new" old leaders, Greece! Opa! When you take back to the streets, remember to hydrate? It's gonna be a long, hot summer!
Articulate and succinct. From Charles Hugh Smith from Of Two Minds. Zero Hedge. Excerpts:
The Tiresome Eurozone Soap Opera Has Entered Re-Runs
The Eurozone "drama" needs some fresh plot developments; it has become boring.
What's more tiresome than a hastily rehearsed soap opera that replays the same boring plots again and again? Re-Runs of that soap opera. The Eurozone "drama" is now in re-runs and I for one am switching channels. Nothing will change until some critical part of the worm-eaten, corrupt construct of artifice and denial collapses in a heap. Until then, all we have is replays of the same boring plot lines:
Put-upon Greece: We were just minding our business here in the sunny south, living happily on borrowed billions in a thoroughly corrupt Status Quo, and suddenly we're debt-serfs squeezed by rapacious Eurozone enforcers of the banking cartel. What did we do to deserve this? It's not fair.
Put-upon Germany: We were just minding the store here, racking up 40% of our GDP in exports and raking in bank profits loaning money to our Eurozone compatriots, when suddenly everyone who's lived beyond their means demands that we refinance their debts because we're rich. Excuse us, but did anyone look at how we got rich? Hard work, cuts in spending, high taxes and a tight lid on wages. What did we do to deserve this? It's not fair.
Married couple in counseling: France and Germany: It's all his/her fault. They never bothered to understand me, etc.
The lit-fuse terrorist: Either refinance our debt and bail out our Status Quo, or we're gonna blow up the Eurozone!
Is anyone else tired of the entire cast and threadbare plotlines?
Pasok Throws A Monkey Wrench Into Coalition Discussions Zero Hedge. Full post.
As reported in the previous post, the Greek PASOK party of former PM G-Pap may have thrown a grenade into coalition discussion, following an announcement by Katerina Diamantopoulou that Pasok will not join into a coalition government with ND unless Syriza also joins said coalition. Which Syriza stated moments ago it would not do. The question then comes whether ND can form a government (150+ seats) with any of the other remaining parties (up to and including neo-nazi New Dawn or the communists... why is there no Pirate party in Greece?). The answer is most likely not, but not before some serious horse trading shows that the second Greek elections has achieved nothing, and the world now has to look forward to a 3rd Greek election round, some time in August, and then another, and then another, until no more assets are left to be plundered from the state which will have no head for a long time. Incidentally, just as we predicted on May 3 in "Previewing The First Of Many Greek Elections"
As summarized by Keep Talking Greece:
Next Question: What government?
•PASOK official Anna Diamantopoulou said that PASOK would not join a coalition government without SYRIZA.
•PASOK considers citizens have down voted the party’s policies therefore it can not join a pure ND-PASOK government.
Short answer? The whole thing meant nothing, really. No one is any safer in their current position, and the volatility will continue.
Greece's economic fate hangs in the balance, and will be decided shortly. A sampling of the calm before the potential beginning of the Global Financial Super Storm.. Selections from Der Spiegel(via The Extinction Protocol) and Zero Hedge. Excerpts:
Greeks empty bank accounts ahead of historic election (Der Spiegel)
Many Greeks are emptying their bank accounts out of fear that the country may return to the drachma. But most of the money is not going abroad. Instead, individuals are storing cash in safe deposit boxes or at home — leading to an increase in burglaries. Joanna Stavropoulos is not proud of what she has done. “I had a guilty conscience when I withdrew my money from Greece,” says the 43-year-old. Of course she knew what would happen if everybody does the same: Greece’s banks would be threatened with collapse. But she says she had to think of her two-month-old daughter, Josephina, who is currently asleep on Joanna’s shoulder. Increasing numbers of Greeks are following Joanna Stavropoulos’ example and emptying their accounts. They are afraid that Greece may leave the euro zone and return to the drachma. Stavropoulos is one of the few people who know very well what this scenario would look like in concrete terms. As a journalist and NGO worker, she has traveled all over the world, most recently in Haiti and Iraq. “I have been to countries where banks closed,” she says. She was in Argentina, for example, when the government declared a national default. She has also lived in Zimbabwe, where three-digit inflation destroyed the currency. Joanna is sure that Greece could face the same thing if it returns to the drachma. “My country is going downhill,” she says. There is still little sign of panic in Greece, and there has not been a stampede to the banks. Nevertheless, people are withdrawing hundreds of millions of euros from the banks every day. In May alone, outflows totaled €5 billion. According to official figures, €80 billion has been withdrawn since the start of the crisis. Rich Greeks have long been moving billions to countries such as Italy or Switzerland, or buying luxury properties in London. But overall, according to estimates by the Greek central bank, only about one-fifth of the total money withdrawn has gone abroad. Many customers have left their money in the bank itself, Christiana says — but in a safe deposit box rather than in their accounts.
As Greek Banks Run Out Of Safe Deposit Boxes, An Eerie Calm Takes Over The Country 24 Hours Before D-Day (Zero Hedge.)
Oddly enough, despite the all too real dangers of a complete lock out by and of the local banks, Greeks refuse to believe that the worst case scenario could realistically happen:
There is still little sign of panic in Greece, and there has not been a stampede to the banks. Nevertheless, people are withdrawing hundreds of millions of euros from the banks every day. In May alone, outflows totaled €5 billion. According to official figures, €80 billion has been withdrawn since the start of the crisis.
Which however is not to say that most people have not already commenced preparations:
Christiana (not her real name) can see the capital flight every day with her own eyes. The 46-year-old, who wishes to remain anonymous, works as an asset manager at a large Greek bank. "It's not just that it is increasing," she says of the withdrawals. It's not only major customers who have been taking out money in recent months, she explains, but all kinds of clients, from account holders with a few hundred euros to the bank's most important private customers. "Naturally, the wealthy ask particularly often what they should do with their money," she says.
Yet the most ironic moment in the Greek denouement will come when fractional reserve lending collapses onto itself:
Stavropoulos and her friends have a new strategy to deal with their daily expenses. "We charge everything to our credit cards," she says. If the Greek banks fail, they won't be able to collect the outstanding debts, she argues. "If they want to mess me around, I will do the same to them."
In other words, Greece is now America, where the vast majority of people also live on credit alone, and have taken up the following motto when dealing with banks: "you pretend to be solvent, we pretend to have money."
At the end of the day, it is all just one big global monetary circle jerk, only this time in reverse, as the snake of fractional reserve banking has finally started to eat its own tail. With people spending money they don't have, and in debt to their eyeballs to a banking system that itself is just as insolvent, is there any wonder that nobody really panics any more over daily threats the grand reset is finally coming?
But in the end, it probably won't even matter..
Citi's Buiter: Greece will be forced out of the euro regardless of who wins the Sunday elections. (Zero Hedge)
New Democracy. Syriza. Doesn't matter. According to Citi's senior political analyst Tina Fordham, chief economist Willem Buiter, and global economist Ebrahim Rahbari, "any new Greek government, regardless of its composition, will struggle with implementation challenges related to the imposition of further austerity measures demanded by the Troika in exchange for further assistance," and as a result, they "consider it likely that a new troika deal would ultimately fall apart and lead to Grexit."
Citi notes that there is growing sense among European leaders that "promotion of economic growth can no longer be subordinated completely, even in fiscally unsustainable euro area member states, to the requirements of fiscal austerity," but no one has any idea what that means.
We will find out soon. Riots will probably be forthcoming. Cue Riot Dog, stage left..
Interesting theory as to how the Eurozone may spin down/spin out of control and implode/explode.. The Extinction Protocol. Excerpts:
Here’s how the Eurozone crisis might come to a head over the summer: a “Spanic,” followed by a “Quitaly,” followed by a “Fixit.” A fresh panic in Spain might be followed by rising demands for Italy to quit if it doesn’t get the same terms its fellow Mediterranean country has been offered, followed by a Finnish departure from the euro that might finally bring the whole saga to a climax. It would be a rough ride — and you wouldn’t want to be holding many assets other than dollars or gold or possibly Swiss francs while it was playing itself out. But at least it might bring a resolution to the crisis. Almost a quarter of the euro’s 17 members have now needed outside help, and Cyprus will probably join the list soon. It is hardly a great record for a monetary experiment, which, let us remember, was meant to bring greater stability — not less. So how could this play out over the summer. Here’s how the sequence might work: First, the Spanic (for a panic in Spain). We’ve just seen one rescue package for the troubled Spanish banks. But who says 100 billion euros is enough? This is a country that is sliding into deep recession, and where the government is cutting spending fast — which is only going to deepen the recession.
..
Imagine how that is going to feel to the Italians. The Spanish get borrow money at half what it costs them — and this at a time when very high borrowing cost are pushing your country into the fifth recession since the nation joined the single currency. Worse, Italy has to stump up around 22% of the Spanish rescue — borrowing money at 6% to give to its neighbors at 3%. That isn’t going to go down well. Finally a Fixit (for a Finnish exit). The crisis will finally come to a head when one country decides to get out. Finland is the most likely. Why? Because it is a small nation with a strong economy. It is easy to head for the door. Finland would be better off on the first day, just as Estonia was when it decided to leave the ill-fated ruble zone created after the collapse of the old Soviet Union. It doesn’t particularly have to worry about the impact on the European Union, in the way that Germany would if it opted out. If a country such as that leaves, it is effectively game over, but no one can really say that of a tiny place such as Finland. And it has a strong anti-euro political grouping; the True Finns scored well in the last election and may well improve their position in the polls. Finland is already demanding collateral for its portion of the Spanish loan. That could well turn into a deal-breaker — no collateral, so we’re out of here. Once one country leaves, it is much easier for the next to leave, in much the same way as it is easier to be the second person to leave a really bad party than the first.
(Emphasis from the article)European Banks will be wiped out: Few large eurozone banks would be left standing and the banking sector could face a €370bn (£298bn) loss if the euro crisis results in the single currency bloc breaking apart, according to one of the first in depth analyses of what might happen if the eurozone disintegrates. The analysis by Credit Suisse estimates that up to 58% of the value of Europe’s banks could be wiped out by the departure of the “peripheral” countries – Greece, Ireland, Italy, Portugal and Spain – from the eurozone. Even if the single currency remains intact some €1.3tn of credit could be sucked out of the system as banks retrench to their home markets, unwinding years of financial integration, the Credit Suisse analysis warns his represents as much as 10% of the credit in the financial system. “We find that a Greek exit could be manageable … but in a peripheral exit, few of the large listed eurozone banks would be left standing,” the Credit Suisse report said. The banking sector could need capital injections of as much as €470bn if the three scenarios considered by the Credit Suisse analysts – a Greek exit, an exit of the periphery countries and a situation where banks retrench domestically – happen at once.
And:(My emphasis)
The Credit Suisse analysts insist they are not expecting the euro area to break up – or for Greece to leave – but they believe it is likely there will be a dramatic reduction in cross-border business – leading to less loans for businesses and individuals. The International Monetary Fund has estimated that some €2tn of credit could be lost through a euro zone break up and the Credit Suisse analysts point out they have only analysed the impact on banks they research.
Remember the good old days of say, January, when any mention of Greek, Spanish, or Italian bailouts, defaults, or anyone at all leaving the European Union was so far fetched it wasn't even discussed? Wow, six months later, and here we are.. So what does that say about the real magnitude and urgency of Credit Suisse's analysis? Is this close to an accurate assessment, or a vastly under-estimated threat?
This is what will kill our economy. Global economy. So we've got that going for us.. The Extinction Protocol. Excerpts:
..
Gross Credit Exposure has returned to 2008 levels, something the world might want to pay attention to. Once the lessons of the mistakes of the past are ignored, the risk factor increases proportionally and with Europe teetering on the edge of a Lehman event, the increase in interest rate derivatives might well indicate a new risk that has not been accounted for: A sudden collapse of the Euro currency below the 1.20 or even parity level. Such an event would make Lehman look like a picnic but there is more bad news beyond that as it is not just interest rate derivatives that have increased past 2008 levels as the chart above demonstrates, but some idiots placed bets on the currency markets which means that a collapse of the Euro creates an irreversible game of dominoes and destruction: Unfortunately for us common folk, no one has taken the time to explain the implications of a 10, 20, or even 30% decline in the value of the Euro versus the US Dollar in a compressed time period.
Credit goes where credit is due.. Lifetime Achievement Award!
From The Extinction Protocol. Excerpts:
Spain in emergency crisis: “We’re in a situation of total emergency, the worst crisis we have ever lived through” said ex-premier Felipe Gonzalez, the country’s elder statesman. The warning came as the yields on Spanish 10-year bonds spiked to 6.7pc, pushing the “risk premium” over German Bunds to a post-euro high of 540 basis points. The IBEX index of stocks in Madrid fell 2.6pc, the lowest since the dotcom bust in 2003. Chaos over the €23.5bn rescue of crippled lender Bankia has led to the abrupt resignation of central bank governor Miguel Ángel Fernández Ordóñez, who testified to the senate that he had been muzzled to avoid enflaming events as confidence in the country drains away. Markets are on tenterhooks as Spanish yields test levels that forced the European Central Bank to respond last November with its €1 trillion liquidity blitz. “Nobody is short Spanish debt right now because they are expecting ECB intervention,” said Andrew Roberts, credit chief at RBS. “If it doesn’t come — if we take out 6.8pc — we’re going to see a hyberbolic sell-off,” he said.
And:
Mr Roberts said the collapse in Spanish tax revenues is replicating the pattern in Greece. Fiscal revenues have fallen 4.8pc over the last year, and VAT returns have slumped 14.6pc. Debt service costs have risen by 18pc. The country is caught in a classic deflationary vice: a rising debt burden on a shrinking economic base. “Once you get into such a negative feedback loop, you can move beyond the point of no return quickly,” he said.
It's not like one country's financial implosion stops or gets better--Greece, Italy, Portugal, and Ireland are still in bad shape--The focus just switches whenever new, horrible economic data is reported. In hindsight, the multiple paths to economic Armageddon will become clear when they all become critical simultaneously. Buckle up: Here we go!
The populist tsunami forms.. If these polls hold true, Greece is about to change history. Is this Greece's exit from the euro zone? Is this the beginning of the end for the entire European Union? Where's Riot Dog? Zero Hedge. Excerpts:
In one of the most fascinating psychological shifts, there has been a massive shift in the perspective of the Greek electorate since the election two weeks ago. Almost as if the size of the actual votes for Syriza, the far-left anti-bailout party, gave citizens 'permission' to be angry and vote angry. The latest opinion polls, as per Credit Suisse, show the center-right New Democracy party crashing from 108 seats to only 57 as Tsipras and his Syriza colleagues soar from 52 seats to a hugely dominant 128 seats. Is it any wonder the market is pricing GGBs at record lows and 'expecting' a Greek exit from the Euro as imminent given the rhetoric this party has vociferously discussed. On the bright side, the extreme right Golden Dawn party is seen losing some of its share.
The new election date for Greece is June 17th. Can the bankers prevent a bank run meltdown before then? Fun election fact: More than one half of Greek policemen voted for the Neo-Nazi New Dawn Party. That ought to be a great conversation starter and laugh riot during the upcoming real riots!
If Greece Exits, Here Is What Happens Zero Hedge thinks maybe/grain of salt. More importantly, will Greece follow Iceland or Germany? Greek skata hits fan in three.. Two..
An unprecedented financial crisis is lurking on the horizon as Market Oracle warns of Greece’s exit from the Eurozone The Extinction Protocol. Excerpts:
What may be lost in the noise that is the mainstream press is the fact that Greece has not been in a recession or even a depression, Greece has been in a state of slow motion economic collapse on the scale of past economic collapses such as that of Argentina but so far without the ability to default, devalue and inflate.
And:
Greek politicians traded insults and accusations Sunday following an effort by President Karolos Papoulias to broker a coalition government, increasing the possibility of new elections in the debt-stricken country. Papoulias called together the leaders of the three biggest parties on Sunday, a week after indecisive elections and three failed attempts to form a government. A default by Greece could drag down other troubled governments such as Spain and Portugal. Europe is keeping a nervous eye on Greece, fearing that the political chaos there could lead to defaults on debt that could threaten the future of the euro. Greek failure — or refusal — to make debt payments could hurt banks across Europe. The eurozone economy is fragile, and any financial shock could plunge the region into a deep recession, a development that would ripple across the globe. A default by Greece also could drag down other troubled governments such as Spain and Portugal.
Merkel's CDU Trounced In Most Populous State Elections Over Austerity; Pirates Strong Also from Zero Hedge. Excerpts:
Another weekend, another stunner in local European elections, this time as Merkel's CDU gets a record low vote in the state elections of Germany's most populous state North Rhein-Westphalia. According to a preliminary projections by ARD, the breakdown is as follows:
•SPD:39%
•CDU: 26%
•Greens:12%
•Pirates: 7.5%
•FDP: 8.5%
•Left:2.5%
And:
Chancellor Angela Merkel's conservatives suffered a crushing defeat on Sunday in an election in Germany's most populous state, exit polls showed, a result which could embolden the left opposition to step up attacks on her European austerity policies.
Merkel remains popular at home for her steady handling of the euro zone debt crisis, but the sheer scale of her party's defeat represents a heavy blow that could tilt the German political landscape and leave her more vulnerable to domestic critics.
According to an exit poll for public broadcaster ARD, the centre-left Social Democrats (SPD) won 39 percent of the vote and will have enough to form a stable majority with the Greens, who scored 12 percent.
The two left-leaning parties had run a fragile minority government for the past two years under popular SPD leader Hannelore Kraft, whose decisive victory on Sunday could propel her to national prominence.
Merkel's Christian Democrats (CDU) saw their support plunge to just 26 percent, down from nearly 35 percent in 2010, and the worst result in the state since World War Two.
Merkel's attention will now be divided between the financial crisis and domestic concerns, like keeping her job. I think Germany has begun to de-stabilize. Albeit a long way away, this vote was a pretty visible step in that direction..
Three JPMorgan executives expected to resign over $2 billion loss This is only the beginning. Of everything.. Raw Story. Excerpts:
Three top executives at JPMorgan are expected to resign this week in the wake of a $2 billion trading loss.
The Wall Street Journal reported on Sunday that the three include Ina R. Drew, the head of the risk-management division responsible for the loss, along with the top executive and a managing director at the London branch that placed the trades under her direction.
According to several JPMorgan executives, Drew had offered her resignation several times since the extent of the losses became known in late April, but CEO Jamie Dimon had previously refused to accept it.
The situation changed however, when Dimon revealed the loss on Thursday and it led to a 10% drop in the firm’s stock price the next day. “We made a terrible, egregious mistake,” Dimon has since admitted. ‘There’s almost no excuse for it.”
The Jaime Dimon Countdown-To-Quitting clock begins!
Australia the most ‘obvious’ bubble in 30 years, says economist Financial Post. Excerpts:
As far as bubbles go, they don’t get more obvious than Australia, according to one economist and noted bear.
Albert Edwards, economist with Société Générale, put out a note on Thursday morning whose title says it all: “The biggest bubble in recent history is heading for the mother of all hard landings.”
Mr. Edwards cites Australia’s extreme reliance on the Chinese economy as the foundation for the current bubble. After all, Australia, a global heavyweight in mining, is dependent on the global commodity boom that China has largely helped fuel over the last decade.
“All we have in Australia, at its simplest, is a credit bubble built upon a commodity boom dependent for its sustenance on an even greater credit bubble in China,” he said.
And:
Mr. Edwards adds that the current bubble has been precipitated by the fact that Australia has not experienced a recession for more than 20 years — making investors complacent as a result.
“The absence of any recession since 1991 has led Australians to have an excessive appetite for debt in the belief the future will reflect the past,” he said.
And complacency, of course, is a big factor in bubble creation. That has led Mr. Edwards to conclude the following about Australia:
“Of all the bubbles I have seen over the last 30 years in this industry, this one is even more obvious than the rather prominent nose on my increasingly haggard face,” he said.
For Greece: Shit just got real. Without a bailout, Greece's economy implodes. Then what? Can a bunch of crazy Neo-Nazis and Leftists really find common ground opposing the E.U./German bailout, and maybe, even a little romance..? Zero Hedge. Excerpts:
As we expected, the previous unofficial poll forecasts were total rubbish, and according to exit polls from NET TV, the results are as follows:
•New Democracy: 17-20%
•Pasok: 14-17%
•In a stunner, Syrizia, or the coalition of the radical left - a vehement anti-Bailout party - gets more votes than the ruling PASOK party: 15.5%-18.5%
•Independent Greeks: 10-12%
•Finally, and not surprisingly in the aftermath of the French results, the ultra right Golden Dawn gets 6-8% of the vote and will make it into Parliament.
..
Tallied across, up to 60% of the new parliament will be anti-bailout (at least according to exit polls), and hence "Domino toppling." Good luck with that pro-bailout coalition government. Needless to say these results are very ugly and make any prospect of a pro-bailout coalition cabinet virtually impossible. Suddenly the fate of the European experiment is in the hands of the ultra right and the far left - yup, Neo-Nazis will determine the future of Europe. How quaint... again - congratulations Europe.
Meanwhile, in Germany..
And just to confirm that the world is losing it, in the Schleswig-Holstein election, according to ARD, after the CDU (with 30.5%), SPD with 29.5%, Green Party with 14%, and FDP with 8.5%, we get... the Pirate Party 8%.
So Neo-Nazis in Greece, Pirates in Germany: the world has officially lost it.
And in France?
French hope for change as ‘Mr. Normal’ defeats ‘President of the Rich’ Raw Story. Excerpts:
François Hollande has won the presidency of France, turning the tide on a rightwards and xenophobic lurch in European politics and vowing to transform Europe’s handling of the economic crisis by fighting back against German-led austerity measures.
The 57-year-old rural MP and self-styled Mr Normal, a moderate social democrat from the centre of the Socialist party, is France’s first left wing president for 17 years. Projections from early counts, released by French television, put him on 51.9% and Nicolas Sarkozy on 48.1%.
His emphatic victory is a boost to the left in a continent that has gradually swung right since the economic crisis broke four years ago.
And:
The defeat of the most unpopular French president ever to run for re-election was not simply the result of the global financial crisis or eurozone debt turmoil. It was also down to the intense public dislike of the man seen as “President of the Rich” who had swept to victory in 2007 with a huge mandate to change France. Most French people felt he had failed to deliver his promises, and he was criticised for his ostentatious display of wealth, favouring the rich and leaving behind him more than 2.8 million unemployed. Political analysts said anti-Sarkozyism had become a cultural phenomenon in France. The turnout was high, estimated at around 80%.
The world wide markets should be reacting shortly. Greece has killed their bailout. The French threw out bailout enabler Sarkozy. Like it or not, Change will follow shortly throughout Europe, that is for sure..
CBC resumes live coverage 3 a.m. Central. It's gonna be a "newsy" week..
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