Finger-Tapping As Even German Government Expects Greek Default

Wednesday, September 28, 2011

Gasping at the highest possible speed of standstill in Euro bailout negotiations, we have entered the finger-tapping phase.
Only political denial of the inevitable breakdown and official hopes for a breakthrough on the unsolvable question of a Eurozone bailout with Germany as the main contributor at the umpteenth emergency meeting will hold up markets another 2 days.
It can be safely expected that the Troika experts visit in Athens will not yield any news other than that EU, ECB and the IMF want to roll on with their plans of Eurobonds. This will not work as 80% of Germans are against a bailout.
Market expectations of the future of European banks reflect the futility of long dead-locked discussion on the political level best, this chart of 600 banks shows, which is back to levels last seen at the beginning of the biggest debt bubble in history in the early 1990s.

STOXX600Banks back to 18-year lows
Connect this with widespread layoffs in the financial industry where even Goldman Sachs cuts the bacon and this is a strong indicator that the coming system collapse is an accident waiting to happen, despite or because of zero interest rate policies.

Here is the latest daily digest on the non-progress of the Eurozone bailout from openeurope.
The FT reports that, according to senior European officials, splits are opening up between eurozone leaders over whether to revise the second Greek bailout package. Germany and the Netherlands, along with up to five other eurozone members, are leading the calls for bondholders to take bigger write downs on their holdings of Greek debt, while France and the ECB are fiercely resisting such a move. 
German government privately expects a Greek default by December

Eurozone Bailout Numbers Go Stratospheric From €440 billion to €4 Trillion

Monday, September 26, 2011

Yo-yoing markets mask the ongoing cluelessness in the Eurozone where guesstimates about the size of the European Financial Stability Fund (EFSF) have long gone stratospheric. While original plans set out at €440 billion, we have entered trillion territory by now, with the highest proposal coming from European think tank CEPS who wants to replace the EFSF framework with a European bad bank. Such a bad bank could leverage its original capital base roughly ten times to aforementioned €4 Trillion.
This record-setting figure shows that financial markets have long lost touch with the real world and would burden each Eurozone inhabitant with some €13,300 in debt.
There is only one obstacle: the EFSF has yet to come up with the first €440 billion and the list of balking Eurozone members just got a little bit longer. After initial protests by Austria, Germany and Finland it is now the Netherlands and Slovakia that voiced resentments against sinking more billions of debt into the rescue of the common currency that cannot work.

European Collapse

Sunday, September 25, 2011

This video was made a year ago and is more current than ever. The only fact that has changed are the numbers: debts have grown every day since it was posted. Enjoy a laugh amidst the biggest economic crisis in history.

Click here to go to the The Prudent Investor homepage for more interesting posts.

Countdown to the Eurozone Bank Run

Friday, September 23, 2011

A comatose interbank market and corporate and fund money fleeing Eurozone banks in droves have rung in the countdown to the Eurozone bank run that could become reality as early as next Monday.
The free fall in all major markets and commodities was only negatively outperformed by European banks whose shares fell to new 2011 lows.
Gossip about major institutions like Lloyds of London withdrawing all deposits from Eurozone banks and countless stories in German media about corporations that follow suit are the first indicators about a bank run that may come as soon as Monday when one major Eurozone bank may have to announce its insolvency.
A cascade of downgrades is only more fuel to the market fornication as we have never seen it before. As we are closer to the Endsieg, banks are resorting to a dog-eat-dog strategy, scrambling to save their own skin in a world where the only providers of liquidity are central banks letting their money printing presses spin 24/7.
Mounting rumors expect the announcement of a major bank closing its doors as soon as Monday and market speculation focuses on Unicredit and Societe Generale.
Unicredit shares dropping like a stone
The first bank to announce insolvency will not be the last one. It will be only the first domino piece that will destabilize the rest of the banking sector because interwovenness has reached the point where everybody owes everybody else.

It Takes Only a 4% Adverse Move and Austria's Banks Are Out of Business

Friday, September 16, 2011

Austria's banks sat on a derivative hoard valued at €1,786 Trillion at the end of June 2011. The volume of off balance derivative items is €99 billion more than at the end of 2010 but €800 billion less than a year earlier.
This dwarfs cumulative core capital of the banking sector, which stood at €75 billion or roughly 1/23rd of outstanding derivatives. It will take only a little more than a 4% adverse move against the desperate bets of the banks in the Alpenrepublik and they will be wiped out, can be read from figures released by Oesterreichische Nationalbank (OeNB) (German language only) on Wednesday and overlooked by all media so far.
The press release does not waste one word on the only trillion-figure that can be found in the economy of this 8-million small country. Austria's GDP rose 4.1% to €286 billion in 2010, according to official data.
Taking a clue from other affairs in Austria, where silence always means that something's boiling up, this figure serves well as a reminder that every Eurozone country has an explosive banking problem lingering in its backyard.

Beer Price at German Oktoberfest Jumps the €9 Mark

Seeing a lot of renewed interest in this 2010 post on surging inflation at Bavaria's Oktoberfest - a get together where millions of people get drunk and vomit on each other - here's a short update on 2011 prices.
One liter of beer will climb past the €9 mark with top prices announced at €9,20, according to the official Oktoberfest website. Compared to last year's highest price beer is now 3.4% more expensive. Such prices prove again the uselessness of official inflation figures, which stated latest German inflation at 2.4% in August.
You can still make a bargain by avoiding the Oktoberfest (and all the legal drug induced vomiting) by paying a visit to the now deserted watering holes downtown. Prices for a "Mass", the standard one liter mug used in Bavarian alcohol orgies, range from €6,60 to €8,80.

Germany to Delay ESM Vote Until 2012

German chancellor Angela Merkel becomes a loner, it appears. In a surprise move the German government will delay the parliament vote on the totalitarian European Stability Mechanism (ESM) until Q1 2012 as dissent in the rows of the junior coalition partner FDP endangers Merkel's costly plans that would put the Eurozone under the thumb of anonymous EUrocrats without the possibility of regress.
According to a report in German (language) daily FAZ on Friday, Merkel's cabinet had originally intended to push through Germany's one-way ticket back into corporatism/fascism by December 16. This plan got shattered by heavy resistance from the junior coalition partner, who does not find support for the EUro dictatorship called ESM among its rapidly dwindling liberal constituency. The FDP plunged from 8% to 2.9% in the latest regional elections in Mecklenburg-Vorpommern state.
Governance by Water Cannon
With 4 out 5 Germans being against a bailout of the PIIGS countries, Merkel's hardheaded course is destined to throw the country into turmoil. Drones hovering above public events and recent orders of higher pressure water cannons from Austrian supplier Rosenbauer AG, recently entangled in some cooking the books affair that led to the stepdown of its CEO, are a foretaste on Merkel's true intentions that have nothing to do with a democracy anymore.

It Will Become Very Tough: ECB Monetary Policy Kicked Off the Rail by Only One Lehman Event

Wednesday, September 14, 2011

One picture and a little memory of recent history is all you need. This is a current screenshot from the ECB website where the money printers in Frankfurt try to justify their existence with achieving the ECB's mandate to hold long-term inflation "close but not below 2%" according to its statutes.
This maybe a nice blue straight line keeping everybody well salaried at the ECB, but the long-term trend is most worrying.
Check this timetable against the chart:

First Anti-Euro Protest in Front of the ECB

Tuesday, September 13, 2011

Watching politicians and bankers bickering over a Euro rescue on the back of Eurozone taxpayers for more or less 2 years by now, a group of Germans has staged the first protest in front of the headquarters of the European Central Bank (ECB) on Tuesday.
Some 100 protesters, organized by the fringe Partei der Vernunft (Party of Reason) held up banners with two key demands: "Raus aus dem Euro" (Out of the Euro) and "Stoppt die Schuldenunion" (Stop the debt union), according to a report by German daily FAZ.

Raus aus dem Euro - Germans protest against the Euro and a European Union of debts in front of the ECB in Frankfurt.
This is a historic moment as it represents the first organized democratic resistance against the common currency that has led to the UDE aka United Debts of Europe.
Recent surveys show that 77% of Germans resist the creation of the European Financial Stability Fund (EFSF) and its highly undemocratic successor ESM (Euro Stability Mechanism). The German parliament will vote on the ESM on September 26 and due to heavy losses of the small liberal coalition partner in latest regional elections chancellor Angela Merkel must be less than certain to get a successful vote on an instrument that would put Germany into the  top position to pay for the long profligacy of the weaker Euro members. The strategy of paying thy neighbours debt has never worked in history.
It's now Down to 2 Choices
The growing bifurcation of opinions among Eurozone politicians and the general populations cannot be overlooked anymore. Europeans are taxed to the hilt, suffer from economic conditions where all the freshly digitized money reaches the financial industry but never the real economy and are fed up with an increasingly undemocratic EU apparatus where the few sane voices in the European Parliament (EP) like Nigel Farage are ignored by autocratic decisions in the unelected European Commission and the EU Council.
While politicians have busied themselves in the last 2 years with a string of weekly emergency meetings in 5-star locations - ironically preaching austerity - debts have seen only one way: up.
Either Germany Leaves - Or Greece Exits First
We are certainly very close to a major event that will mark the beginning of the disintegration of not only the Euro, but of the EU itself.

Why the Eurozone and the USA Deserve a CCC Rating

Sunday, September 11, 2011

I have always considered the alphabet soup of rating agencies as useful in determining the credit risk as a balance would be to find out the sweetness of a cookie bar.
As rating agencies have now come out in fear of litigation suits with the statement that their ratings are just an opinion and not a guideline, I think we can do away with opaque rating processes.
The Eurozone and the USA both deserve a
  • Corruption
  • Crisis
  • Chaos

Anybody disagree?

Click here to go to the The Prudent Investor homepage for more interesting posts.

The Silent Economic World War AKA Fiat Money

Saturday, September 10, 2011

Readers are urged to spend 2:44 minutes watching this video and help this go viral. It condenses everything the current unsustainable monetary system is all about. Fiat money is the silent economic war on the world.
Click here to go to the The Prudent Investor homepage for more interesting posts.

Wikinvest Wire