Soros bets against Euro

[Jan Klimkowski]

The elite attempts to play Magician Sleight of Hand with global financial markets have reached a new low, as documented by this excerpt from Zero Hedge:

Europe's Ponzi Takes A Twist For The Wacky: Greek Bank Equity To Be Used As Loan Collateral

(snip)

So let's see if we can make sense out of this:

Greek banks exist only due to the National Bank of Greece funding their operations by providing cash in exchange for Greek bonds as collateral; Greek bonds are trading at or around 50 cents on the dollar, which however results in nearly par cash; the NBG goes and pledges the same Treasuries to the ECB, in another collateralization operation. However, even that has failed to satisfy the full Greek bank system capital shortfall (remember that whole bank run and collapse in bank deposits?), and a €20 billion gap has opened up, which is where Bailout #2 is happening. The issue is that Greek banks can not offset selling interest and the SMP is forced to buy up eligible collateral which means there is a liquidity crisis. The only thing that could help this would be a greater deficit, which would be funded with more issuance, yet the IMF is forcing Greece to slash its budget deficit, thus substantially reducing future bond issuance, and repoability by local banks with the ECB, as final NBG-intermediated, counterparty. So instead the country's banks need direct foreign capital. However, this capital needs hard collateral pledged. Collateral which would have value in a worst case scenario, i.e., liquidation. Instead, what the EFSF has offered as "collateral" is the equity of the very same firms which will be immediately insolvent once this house of cards collapses, sending the bank equity collateral worthless, and buried under billions of debt liabilities, and in turn impairing the ECB which suddenly finds itself with hundreds of billions in worthless Greek paper, making additional funding for Finland, once it finds itself in a liquidity crisis, next to impossible.

That pretty much sums it up?

We have just one question: why will Finland agree to this again?

All joking aside, we are confident that this being the first bid in a compromise negotiation, Finland will likely end up with Greek bonds as collateral... which however are collateralized with even more worthless assets, and trade at 30-40 cents on the dollar, and as a result of this claim dilution, trade even lower, which in turn will force Finland to demand an 80% collateral haircut on Greek bonds, which kills the whole process as it makes a mockery of the ECB holding Greek debt at par. But fear not: Trichet said the ECB is not a bad bank and holds highly valuable assets.

Whoever said watching massive ponzi scheme unwind is not entertaining obviously had no idea what they are talking about.

[Jan Klimkowski]

Market Ticker's Karl Denninger believes it's game over for Greece and Italy:

Time's Up (Greece)

As I've said.... here it comes!

The suspension of the talks in Athens between the government and a group of officials representing the providers of Greece's bailout cash came, officials said, amid a dispute about how to address new gaps opening up in the government budget deficit.

"The Greek side insisted the missed targets are the result of the recession. The troika said recession played a part, but Greece basically didn't keep up with its commitments, so more measures will be needed to make up for the lost ground," said a person with direct knowledge of the talks.

The answer, of course, is quite simple - there and here:

That which your people will not pay for with current tax revenues your government cannot provide in services.

The willful and intentional refusal to deal with this fact as it stands is why we're in this mess on a global basis. We're in it as people, as companies, as states and as nations. We continue to look for the Unicorn that craps out little colored candies but in fact no such animal exists as the fact remains that this animal is a myth.

Instead of facing the truth we not only lie to ourselves but permit our politicians to lie to us, claiming that we can have "free" medical care, "free" retirement income, "free" roads, "free" security services of various sorts and "free" food stamps.

There is no such thing as "free"; the government can only take production from one person by force and give it to another. That's all the government can ever do.

I have gotten downright intolerant on the forum of people claiming otherwise. Every time someone runs this line of crap I demand they put up numbers. They weasel and prevaricate -- this is all the evidence I need that they know damn well they're lying -- and this essentially always ends with me pushing the button when my patience expires with those who claim we can do something but never tell us how it's going to be accomplished on a durable basis because they're damn well aware that it can't happen.

Oh, and if you think it's just Greece? It's not. Italy is next:

"The ECB and euro system as a whole consider the measures announced by the government…extremely important in order to rapidly diminish the public deficit of Italy and improve the flexibility of the Italian economy," Mr. Trichet told a conference of bankers, business leaders gathered on the shores of Lake Como.

"This is absolutely decisive to consolidating and reinforcing the quality and the credibility of Italy's strategy and credit-worthiness," he added.

It's the same debate folks - in Italy, in Greece and in the United States.

We must stop playing political games now and face reality.

[Jan Klimkowski]

Germany is preparing a plan to attempt to save its banks when Greece defaults.

Greek default may occur as early as this weekend.

See, for example, Market Ticker and Zero Hedge.

Excerpts:

To add to the "liar liar pants on fire" calls Germany is now reported to be working a plan to recapitalize their banks if Greece defaults. This in turn means three things:

A Greek default is considered credible by Germany and they are taking official actions related to that possibility. So much for the denials.

German banks (and presumably French banks and all the other big banks too) are insolvent as they are carrying these bonds at well above their actual value in the marketplace. If the bonds were carried at the claimed "loss" values, which is quoted as 50%, then there would be no need to recapitalize them would there? This is an official statement of proof that the banks are lying about asset values and are in fact insolvent.

Remember that we were just told days ago that these banks were fine and needed no capital and in fact calls for more capital by the IMF were officially refused. The same claim has been made about our banks. You were just told officially by Germany that their claim of adequate capital just days ago was a lie as they are now planning to recapitalize the banks. Do you believe our banks are not similarly exposed and also insolvent? YOU'RE BETTING YOUR FUTURE ON THE BELIEF THAT THEY ARE, SO THIS QUESTION IS QUITE GERMANE AND TIMELY: ARE YOU SURE YOU'RE NOT BEING LIED TO EXACTLY AS WE WERE ABOUT GERMAN BANKS?

Coincident with this hitting the wires there was a massive flow of money into the Japanese Yen - and out of the Euro. A monstrous safety trade - people fleeing the European common currency for what they perceive as a "safe haven." At the same time our markets are down 300 DOW points, the S&P is down 2.5% on the day and more than forty points off the early-morning top -- and there's no sign that things are stabilizing at all.

Literally seconds after the Greek finance ministry announce that any rumors of a Greek default over the weekend are absolute rubbish (we wonder who would admit such rumors?), we get the following from Bloomberg: "Chancellor Angela Merkel's government is preparing plans to shore up German banks in the event that Greece fails to meet the terms of its aid package and defaults, three coalition officials said. The emergency plan involves measures to help banks and insurers that face a possible 50 percent loss on their Greek bonds if the next tranche of Greece's bailout is withheld, said the people, who spoke on condition of anonymity because the deliberations are being held in private. The successor to the German government's bank-rescue fund introduced in 2008 might be enrolled to help recapitalize the banks, one of the people said. The existence of a "Plan B" underscores German concerns that Greece's failure to stick to budget-cutting targets threatens European efforts to tame the debt crisis rattling the euro. German lawmakers stepped up their criticism of Greece this week, threatening to withhold aid unless it meets the terms of its austerity package, after an international mission to Athens suspended its report on the country's progress." Looks like at least one very "naive" government is not buying the latest batch of lies from Greece.

Then, there's this:

Markets plunge following resignation of German ECB official Jürgen Stark

Decision to quit fuels speculation that central bank policymakers are split amid fears that Greece could default

Phillip Inman and Helena Smith in Athens guardian.co.uk, Friday 9 September 2011 20.11 BST


The dramatic resignation of a senior European central banker sent stock markets plunging, amid fears that Greece is on the brink of default and the fragile consensus in Berlin over support for the ailing Italian and Spanish economies was close to disintegration.

Bank stocks, down more than 5% in some cases, were the worst affected as the Dow Jones dropped almost 3% to below 11,000. European exchanges joined the panic with the FTSE falling more than 100 points to 5230. Speculation that several French and German banks would soon embark on massive capital raising schemes to offset write-offs on holdings of Greek debt, added to the febrile atmosphere.

Greece issued a statement to say it remained solvent and would not need to seek funds beyond the sums already agreed with the EU and International Monetary Fund. Deputy prime minister Evangelos Venizelos said: "It is not the first time we see an organised wave of "rumours" about an upcoming Greek default. This is a game of a very bad taste."

But the statement from Athens failed to rally markets, which have remained wary of assurances by EU leaders that they will do everything necessary to keep peripheral eurozone countries afloat.

Nick Bennenbroek, head of currency strategy at Wells Fargo Bank, said investors globally were concerned at the potential collapse of a European sovereign. "The European troubles are permeating across global financial markets"

The decision to quit by Jürgen Stark, a member of the European Central Bank's (ECB) rate-setting governing council, was quickly seen as a signal that policymakers remained at loggerheads.

Stark, a German hardliner and former member of the Bundesbank board, has lobbied for the ECB to impose stricter austerity measures on Greece and Portugal and to reject using its funds to purchase Italian and Spanish bonds until Rome and Madrid have made further efforts to reduce their debts and institute reforms.

At a press conference on Thursday ECB boss Jean-Claude Trichet appeared visibly rattled by questioning from German journalists who asked if the eurozone's largest economy should quit rather than keep subsidising indebted countries.

Trichet said, in a clear warning to colleagues, including Stark, that Germany had prospered from the euro and should maintain its commitment during the worst crisis since the second world war.

However, the clear disagreements at the most senior levels of eurozone policymaking have fuelled concerns that the euro is now beyond rescue and will fall apart.

Stark has been a consistent critic of the ECB's programme of purchasing government bonds of debt-ridden European nations in the markets. He has said eurobonds, which many economists believe are the only way to save the euro, would create false incentives for indebted countries. The cost of borrowing for the German government has increased as investors price in the risk of it absorbing the debts of all eurozone members through the creation of eurobonds.

Greek borrowing rates have hit stratospheric highs this week; 62% for two-year money, while a three-year bond maturing next year hit 129%.

But officials in Athens hinted that the deadline for private-sector involvement in a second €109bn bailout programme had finally been met. The programme includes private financial groups agreeing to a €135bn debt-swap scheme.

The debt-swap is an integral part of the deal agreed by EU leaders at an emergency summit in July. However, many economists say the swap is not big enough and last night it was understood that as few as 70% of bondholders would agree to take part. The socialist government had said previously it would not go ahead with the deal if participation fell below 90 percent.

EU Commissioner Olli Rehn, who is responsible for economic and monetary affairs, has argued the opposite, claiming the introduction of euro securities would "strengthen fiscal discipline and increase stability in the euro area through markets".

Some analysts said Stark's departure signals a victory for Angela Merkel and French prime minister Nicolas Sarkozy, who have lent on the ECB to relax its rules on lending to Greece, Italy and Spain.

The arrival of Italian central bank boss Mario Draghi as head of the ECB is also expected to cement control over the ECB by a more doveish majority keen to preserve the current membership of the euro.

[Jan Klimkowski]

The bankers demand blood: the jobs of ordinary workers to pay for their reckless looting of the global financial system. The Greek government offers up 10,000 public sector jobs, immediately.

Greek workers will strike, and doubtless be beaten by police and portrayed by the world's media as anarchists and dinosaurs who fail to face up to the need for "austerity".

The electrodes of Economic Shock Therapy, usually applied only to developing countries by the IMF and World Bank, are now being attached to the skulls of the European proletariat.

Greece braced for mass protests as austerity cuts bite

Thousands of police have been mobilised amid fears of unrest over mass public sector job cuts and other measures

Lisa O'Carroll guardian.co.uk, Saturday 10 September 2011 11.23 BST

More than 5,000 police have been mobilised in Athens amid government fears of a repetition of last June's violent riots in the capital.

Another 5,000 are being deployed in Thessaloniki where the Green prime minister George Papandreou is due to give a speech defending the harsh fiscal cuts pledged by his government.

He is expected to face mass protests after he announced 10,000 immediate public sector job cuts as he comes under mounting pressure to save Greece's position in the eurozone.

Thessaloniki is preparing for huge unrest police have erected metal barricades to prevent protesters from storming the grounds of the International Trade Fair, where Papandreou will deliver his speech.

"The protests this year seem likely to be much bigger than in any past year," said one police official in the city. "But the situation in Greece is very difficult, so there are more things to protest about."

Authorities from the IMF and the EU are demanding that Greece pushes ahead with its austerity cuts to secure its bailout money.

Papandreou has responded by saying the 10,000 jobs that are going immediately will be followed by another 10,000 within weeks the first ever mass dismissals of public sector workers.

The giant public-sector shrinkage as many as 120,000 public workers could lose their jobs threatens to upend decades of cosy ties between the ruling Socialist party and those workers, who have long formed a key constituency.

Taxi drivers, doctors and rubbish collectors have announced strike plans, signalling a new round of anti-austerity protests by unions and professional groups in the crisis-hit country.

Taxi drivers have called a 24-hour strike for Thursday, after the government refused to amend plans to open up their profession to more competition. The vehicles were on strike for nearly three weeks this summer, causing havoc to parts of the key tourism industry.

[Ed Jewett]

Germany and Greece Flirt with Mutual Assured Destruction

September 14th, 2011Via: Telegraph:
First we learn from planted leaks that Germany is activating "Plan B", telling banks and insurance companies to prepare for 50pc haircuts on Greek debt; then that Germany is "studying" options that include Greece's return to the drachma.
German finance minister Wolfgang Schauble has chosen to do this at a moment when the global economy is already flirting with double-dip recession, bank shares are crashing, and global credit strains are testing Lehman levels. The recklessness is breath-taking.
If it is a pressure tactic to force Greece to submit to EU-IMF demands of yet further austerity, it may instead bring mutual assured destruction.
"Whoever thinks that Greece is an easy scapegoat, will find that this eventually turns against them, against the hard core of the eurozone," said Greek finance minister Evangelos Venizelos.
Greece can, if provoked, pull the pin on the European banking system and inflict huge damage on Germany itself, and Greece has certainly been provoked.
Germany's EU commissioner Günther Oettinger said Europe should send blue helmets to take control of Greek tax collection and liquidate state assets. They had better be well armed. The headlines in the Greek press have been "Unconditional Capitulation", and "Terrorization of Greeks", and even "Fourth Reich".
Mr Schauble said there would be no more money for Athens under the EU-IMF rescue package until the Greeks "do what they agreed to do" and comply with every demand of `Troika' inspectors.
Yet to push Greece over the edge risks instant contagion to Portugal, which has higher levels of total debt, and an equally bad current account deficit near 9pc of GDP, and is just as unable to comply with Germany's austerity dictates in the long run. From there the chain-reaction into EMU's soft-core would be fast and furious.

[Jan Klimkowski]

Germany and Greece Flirt with Mutual Assured Destruction

September 14th, 2011Via: Telegraph:

This article is written by the odious and highly spooky Ambrose Evans-Pritchard.

Everyone - when posting articles, it's best practice to post the author or reporter's name. This is often very important information.

A little research will quickly reveal the, ahem, curious nature of Ambrose Evans-Pritchard's journalistic career. Anyone with a deep political interest in elite genealogy will also discover much of interest....

[Ed Jewett]

Germany and Greece Flirt with Mutual Assured Destruction

September 14th, 2011Via: Telegraph:

This article is written by the odious and highly spooky Ambrose Evans-Pritchard.

Everyone - when posting articles, it's best practice to post the author or reporter's name. This is often very important information.

A little research will quickly reveal the, ahem, curious nature of Ambrose Evans-Pritchard's journalistic career. Anyone with a deep political interest in elite genealogy will also discover much of interest....

Apologies... It came from a source (Cryptogon) I consider to be usually aware and alert to such things, and I did not look deeply at the authorship...

This goes to an idea I floated a long time ago about the construction of a template about such things, a database or spreadsheet about journalists and outlets that can be maintained for such. I don't here and now contend with your contention, but multiple inputs indicative of "odious" and "curious" natures would make it eminently clear for many readers, and there are surely many "journalists" which need to be tracked and monitored. Note that I do not suggest censorship or banishment but merely informed consumption. We are all at some point guilty of reading and passing on information, an action we would tend to refrain from if we were informed that a cluster of gravitas existed that had deep concerns and reservations about the author. Personally, I am all in favor of "tags" for sources. They don't prevent anyone else from consuming if that is their desire.

[Magda Hassan]

Billionaire investor George Soros said the disruption to global financial markets since 2008 has implications for Europe and the U.S. that remind him of the final years of the Soviet Union.
"Something similar is happening in the West," Soros, 81, said in an interview on Bloomberg Television's "Eye to Eye with Francine Lacqua," airing today. "You had a financial crisis where the market did actually collapse, but it was kept alive by the authorities. People don't realize that the system has actually collapsed."
The MSCI World (MXWO) Index has plunged 15 percent since July on concerns that the default of a European nation could lead to a contagion that spreads to banks throughout the region and in the U.S. Soros, whose $25 billion Quantum hedge fund gained about 20 percent a year on average since 1969, said he's not certain how to fix Europe's debt problems or how to navigate financial markets.
"That is not so easy," he said in the interview in London. "There is a lot of confusion, and I am also confused."
Soros, who was born in Hungary, promoted opposition to Russia's communist regime before it collapsed in 1991. In 1993, he founded the Open Society Institute to help formerly communist countries make the transition to democracy.
The biggest mistake governments made in responding to 2008 credit freeze was failing to approve rules that would regulate banks and other financial firms across the globe, Soros said. While markets have become integrated, individual nations continue to set their own rules, which has allowed "deregulation to spread like a virus," he said.

Returning Investors' Money

"Regulation is very difficult and we haven't solved it at all," he said. "We are very early in the process and we are not making much progress."
Soros's hedge fund decided in July to return money to outside investors, meaning it will only manage assets for him and his family. The move will end an investing career that spanned more than four decades and gained Soros international acclaim in 1992 after he made $1 billion betting that the Bank of England would be forced to devalue the pound.
Soros, in the interview, said he now spends all his time on philanthropy, describing it as a "full-time job."
By Jesse Westbrook - Oct 7, 2011
http://www.bloomberg.com/news/2011-10-06...lapse.html

[Jan Klimkowski]

Soros' words can never be taken at face value, but his comments about global financial markets having already collapsed are intriguing, and in my judgement highly astute.

However, even if Soros' words must be treated with extreme caution, his actions have always revealed his true beliefs.

So, here we have it:

Soros's hedge fund decided in July to return money to outside investors, meaning it will only manage assets for him and his family. The move will end an investing career that spanned more than four decades

[Magda Hassan]

Lloyd's of London ABANDONS European banks!

Without warning, Lloyd's the world's oldest insurance market announced that it has withdrawn its money from European banks. The reason? According to Lloyd's, the banks are in danger of failing as Europe's debt crisis continues to intensify. The company's Finance Director, Luke Savage, put it simply: "If you're worried the government itself might be at risk, then you're certainly worried the banks could be taken down with them."
Which European governments is Lloyd's talking about? They're not saying. But it IS interesting to note that Lloyd's didn't just withdraw its money from Greek banks; it withdrew its money from banks all over Europe!
One thing you can be sure of, though: When the world's oldest insurance company …A firm that for 323 years has made its living by accurately calculating the odds of future disasters …When that company suddenly takes its money and runs, it's a MASSIVE red flag for investors a clear sign that the beginning of the end is near!
Lloyd's has every reason to worry. In addition to the government debt crisis that's threatening to destroy European banks, a huge credit crisis is spreading across the Continent as well.
Spanish and Italian banks are rejecting massive numbers of loans and charging customers more as the sovereign debt crisis continues to drive their own borrowing cost higher.
Any way you look at it, this shrinking of European credit markets is the worst kind of downward spiral:
The government debt crisis is making it harder and more expensive for banks to borrow money; the banks are passing those higher costs along to borrowers.
Corporations have to pay more to borrow; their cost of doing business is rising.
Consumers can't or won't borrow at higher rates, so corporate earnings plunge.
As corporate earnings evaporate, the taxes they pay also plummet.
Falling tax revenues cause the government's deficits to explode higher, driving the banks' cost of borrowing even higher.
And so, the death spiral continues …
http://www.danielestulin.com/2011/12/12/...-eu-banks/