Euro Area

[Vladimir]

One major canary in the coal mine is the continual parking of funds with the ECB overnight by banks, in effect the interbank lending market in the Eurozone has stopped.

Last time we had something like that we got a new breakfast cereal called credit crunch and it killed Lehmans

Banks' deposits at ECB hit another record high

Not to take away from what you said but when I read your post I thought of leprechauns (Lehmans) Lucky Charms.

I'm sorry, that's horrible.

[gaelic cowboy]

Not to take away from what you said but when I read your post I thought of leprechauns (Lehmans) Lucky Charms.

I'm sorry, that's horrible.

We could do with a pot of gold round here

[a completely inoffensive name]

We could do with a pot of gold round here

Maybe you should write in for Ron Paul your next election......

[gaelic cowboy]

There’s a Hole in my Euro

There’s a hole in my euro, dear Angie, dear Angie,
There’s a hole in my euro, dear Angie, a hole.
Then fix it, dear Nicky, dear Nicky, dear Nicky,
Then fix it, dear Nicky, dear Nicky, fix it.
With what shall I fix it, dear Angie, dear Angie?
With what shall I fix it, dear Angie, with what?
With EFSF, dear Nicky, dear Nicky, dear Nicky,
With EFSF, dear Nicky, dear Nicky, EFSF.
EFSF is too small, dear Angie, dear Angie,
EFSF is too small, dear Angie, too small.
Then lever it, dear Nicky, dear Nicky, dear Nicky,
Then lever it, dear Nicky, dear Nicky, lever.
Will ECB help lever, dear Angie, dear Angie?
Will ECB help lever, dear Angie, will it?
Nein nein shall it lever, dear Nicky, dear Nicky,
Nein nein shall it lever, dear Nicky, nein nein.
Then how shall we lever, dear Angie, dear Angie?
Then how shall we lever, dear Angie, just how?
Sell insurance, dear Nicky, dear Nicky, dear Nicky,
Sell insurance, dear Nicky, dear Nicky, insurance.
Investors won’t buy it, dear Angie, dear Angie,
Investors won’t buy it, dear Angie, won’t buy.
Then call IMF, dear Nicky, dear Nicky, dear Nicky,
Call IMF, dear Nicky, dear Nicky, IMF.
But Chrissy’ll need funding, dear Angie, dear Angie,
Chrissy’ll need funding, dear Angie, funding.
Try G20, dear Nicky, dear Nicky, dear Nicky,
Try G20, dear Nicky, dear Nicky, G20.
EU must give first, dear Angie, dear Angie,
EU must give first, dear Angie, EU.
E200bn tops, dear Nicky, dear Nicky, dear Nicky,
E200bn tops, dear Nicky, dear Nicky, E200bn.
We’ll still need more, dear Angie, dear Angie,
Still need more, dear Angie, need more.
ESM so, dear Nicky, dear Nicky, dear Nicky,
ESM so, dear Nicky, dear Nicky, ESM.
With EFSF alongside, dear Angie, dear Angie?
EFSF alongside, dear Angie, alongside?
The same cash ceiling, dear Nicky, dear Nicky,
Same cash ceiling, dear Nicky, the same.
Then kill PSI, dear Angie, dear Angie,
Then kill PSI, dear Angie, kill it!
Need fiscal compact, dear Nicky, dear Nicky,
Need fiscal compact, dear Nicky, then yes!
Can’t lose my sovereignty, dear Angie, dear Angie,
Just can’t lose my sovereignty, dear Angie, I can’t!
Will save you the allusion, dear Nicky, dear Nicky,
Will save you the allusion, dear Nicky, allusion.
Johnny Bull won’t wear it, dear Angie, dear Angie,
Johnny Bull won’t wear it, dear Angie, won’t wear.
Don’t need him, dear Nicky, dear Nicky, dear Nicky,
Don’t need him, dear Nicky, dear Nicky, just don’t.
Will “other elements follow”, dear Angie, dear Angie?
Will “other elements follow”, dear Angie, will they?
May Draghi their feet, dear Nicky, dear Nicky,
May Draghi their feet, dear Nicky, Draghi.
Then still a hole in my euro, dear Angie, dear Angie,
Still a hole in my euro, dear Angie, a hole.

[Furunculus]

french 10 year debt starting to lose its shine:

http://www.telegraph.co.uk/finance/f...d-auction.html

[Vladimir]

There’s a Hole in my Euro

I'm using this as my next marching cadence. "There's a hole, there's a hole...There's a hole in the bottom of my Euro."

[Fragony]

olol little Napoleon screams that PEACE is in DANGER if we don't have the euro. What is it with europhiles, how many times is DEATH going to KILL us? Reminds me of the Lissabon-treaty which was NECESSARY because PEACE is in DANGER if we don't let post-democratic Brussels decide just about everything

[Kagemusha]

I am actually starting to grow very suspicious about the current "crisis". Half an year has passed and Greece is still standing. Italy and Spain have not fallen and the the debt reserves have not been used.
I am starting to think this whole crisis is nothing but an attack from the market against a currency that is very hard to unbalance, thus is problematic for them.
Still i am not in any way saying that everything is fine and dandy. Southern Europe must have their public spending inside some sensible limits. EU needs some serious amount of democracy added or it will not live long and the policy of EU cannot be run by Germany and France alone.
And most of all the economical system needs an overhaul, when the most profitable business is FX market dealing only with speculative investments. Something is seriously broken with the system.

[Furunculus]

kaga, it is time for you to don your tin foil hat.

that the euro persists in surviving is no more than an expression of the extreme political will that it should survive, regardless of the impact on the various electorates.

still, we may see the end game shortly given that there is about $1t in sovereign and bank debt in need of rolling over before the end of march.

[Kagemusha]

kaga, it is time for you to don your tin foil hat.

that the euro persists in surviving is no more than an expression of the extreme political will that it should survive, regardless of the impact on the various electorates.

still, we may see the end game shortly given that there is about $1t in sovereign and bank debt in need of rolling over before the end of march.

Il comment that further in March.

[Furunculus]

by end game i mean the new stable state: the principle of an optional eurozone once greece creates precedent by leaving, rather than a disorderly collapse.

[Antioch]

I can't understand why you find a part of funny things in the European money union troubles . The occidental civilisation is in danger because every thing is connected (economy , religion , philosophy .. etc..) If one of us is weak the chain could break !
Your own lifes will be inpacted if we fall ! Anyways

P.S. Excuse my french

[Tellos Athenaios]

A told you so moment. Even if the long promised Armageddon never quite materialised so far.

P.S. Excuse my french

NP. A little heads up: in English the expression “Excuse my French” (or more commonly “Pardon my French”) probably doesn't mean what you intended there.

[Papewaio]

I think it is more telling that the economy is more sta le when the markets and politicians are on holidays...

[Antioch]

I'm sorry Tellos Athenaios , but i know exactly what "excuse my french" means , that's why i add a smiley !
About Armaggedon , I don't think the end of the human population will ended by economic troubles and when i said "we fall" it's to show how we are dependent from each others countries .
I read in some post a touch of irony about the difficulties of the european union ; and i would like if you can think "Global" before to write , the subject is too complex and the impact for the poor people is dramatically wrong if we can't find a positive issue . I'm 64 y.o. and i ran around the world , i seen the real life and i can tell to you :learn and learn again and think before to post an advice .
One example : the China is the major owner of the US bonds , imagine if they ask for moneyback ....................
That's all folk ! (I know what it means too)

[InsaneApache]

The Euro debacle is what you get when politicians govern for politicians and not the people.

[gaelic cowboy]

Yes indeed the world is safe when Big Endians and Little Endians argue over the topping of an egg

[rory_20_uk]

The Euro debacle is what you get when politicians govern for politicians and not the people.

The unions are even worse. Stating that Labour's backing of a freeze on salary increases disenfranchises voters... I thought politicians were there to do what was right for the country!

[Furunculus]

I can't understand why you find a part of funny things in the European money union troubles .

P.S. Excuse my french

not through any malice I assure you, merely that some stupid ideas are in fact dangerous, and that the best way to mitigate that danger is to mock the proponents of such ideas when their flaws are exposed, doing so in the hope that these ideas die as possibilities for public policy before that danger comes to pass.

excused. :)

-------------------

greece has forty six days to escape default:

http://blogs.wsj.com/brussels/2012/0...greek-default/

[gaelic cowboy]

The banks sense weakness on the part of the EU they are probably confident that the politicians will cave in the end instead of going for a good size default.

The EU/ECB along with Merkozy should be trying to force the banks to accept haircuts, against the wishes of the IMF they have decided to let Greece try to get the cut on its own.(the politicians will cave as this is naturally the way of all political classes)

Probably cos they would be effectively asking there own countries banks to accept a default on Greeces debt, wouldnt do to be seen causing a few jobs losses in there own banking industry.



Article from David MCWilliams on what we all should be doing but wont.

Irish banks will shrink and shrink
January 16, 2012

Posted in Articles | Debt | Irish Economy | Sunday Business Post by David McWilliams

The European debt crisis is moving swiftly to the next phase following the downgrade of France and the collapse of the Greek negotiations with its creditors last Friday night.

It is becoming increasingly obvious that there will be no deal in Greece. This is good news because it means the end of the pass-the-parcel-ponzi-scheme, whereby the bill for more and more institutional debt was passed on to more and more innocent people who had nothing to do with the debt in the first place.

Spoiler Alert, click show to read: 

Greece will default – as it should. The bondholders will get roasted – as they should – for making bad investments. The laws of capitalism will be allowed to do their thing. Debtors and creditors will pay – as they both should – with both parties sharing the cost.

Whether this leads to Greece being pushed out of the euro remains to be seen. An opportunistic play by a desperate Greek government might be a total default, followed by the reintroduction of a new currency and then the restart button is hit. Initially, it would be an international pariah, but over time it would recover.

You might think it sounds radical, but it is straight from the IMF’s own adjustment handbook. In fact, the favoured IMF remedy to debt crises is partial/agreed default, followed by a rapid devaluation of the currency, which is then fixed at a new, much lower level.

The more aggressive approach is simply an amplified version of what is likely to happen anyway. The present policy calls for an internal devaluation plus some default. Why not an explicit external devaluation with total default, which gets you to the same place but a lot more quickly?

One of the reasons why there will be huge opposition in Europe to the Greeks going down this road is because it means the banks that lent money to Greece would get nothing or very little.

On the other hand, internal devaluation would mean that they would take a haircut and then slowly bleed Greece dry for the rest of the money. But when you think about Greece’s position, this makes no sense. Greece has a current account deficit of ten per cent of GDP. This means it must borrow an amount equal to nearly ten per cent of its GDP to pay for its current level of imports. If yet more money goes abroad to feed interest payments for foreign banks, it will have to borrow yet more just to make its current account balance. This is why getting the biggest default now must look attractive from Athens.

The realisation of this Greek position has led to the downgrading of France because the French banks are more exposed to Greece than any other foreign banks. All this news is simply the latest phase in Europe’s ongoing debt crisis. It is clear that, however it ends, the credit/banking industry will never be the same again.

We are moving from the great age of borrowing to the great age of saving. The great age of borrowing from 1990-2008 saw people, firms and countries borrow and borrow as much as they could to buy goodies today which they could only pay for tomorrow. Now the opposite is the case. We are in the great era of saving and this will mean, among other things, that the established banks in Ireland will shrink and shrink and shrink. They will sell everything and lay off staff.

In terms of job opportunities, the age of deleveraging means that the notion of safe jobs in the banking industry is over. Thinking back to only a few years ago, it was so different. When I got a job as an economist in the European economics section of the Central Bank, my mother rejoiced at the fact that the young lad had finally secured a “good” job in the bank. Second only to a “big” job in the bank, a “good” job in the bank was good because you couldn’t get fired. No one lost a job in the bank. Like the civil service, the bank had “P and P’ – permanent and pensionable – written all over it.

That age is over for good. Ulster Bank’s announcement that it is to cut jobs is only the first. Indeed, what tends to happen in these cases when there are layoffs of such magnitude, which can’t be avoided, is that the banks have been watching each other, waiting for one of them to move on redundancies first. The announcement from one is like a starter gun being fired. It gives ‘permission’ for the others to announce similar layoffs.

Up to now, bank officials have fared rather better than the people they financed in the construction sector. Relative to the building industry, the banking industry has fared reasonably well in the downturn. Layoffs in the building industry were swift and ruthless – while, in the banks, things have been much less dramatic. However, now this will change and what happened in building will happen in banking. The two industries are inextricably linked.

The Ulster Bank layoffs amount to just 0.9 per cent of the total number of people working in bank and finance. In terms of the total number of people working in Ulster Bank, the redundancies amount to close to 10 per cent of the workforce. If that were to be repeated across the industry – even exempting the growing IFSC – the impact would be devastating. We are talking about huge numbers of formerly “good” jobs gone.

The only light at the end of the tunnel would be for new banks to come in. One of the problems with the banks is that they are bust, they are carrying too much debt and they are not in a position to act as the engine for the recovery, lending to companies that are brave enough to invest.

But ultimately this recession will end. All recessions do. One of the ways to accelerate this is for new banking licences for banks with new capital to come in and start again.

Unless the state actively embraces and encourages new players – and there are some out there – the crisis will continue.

What we are seeing in Greece and France this weekend is only another phase in a banking crisis. Greece will default, taking some of the European banking industry with it.

We are witnessing the slow death of a certain form of the banking industry, but the need for banking remains. We are looking at the death of a certain type of banking – the type of banking which destroyed itself in the age of leverage. As night follows day, a new, very different banking industry will emerge. People will always want to save and others will always want to invest. The best hope for those who have lost their jobs is that the state embraces newcomers who could come in and we start again.

A Greek default would accelerate this process of creating a new banking all over Europe. Bring it on.

[Furunculus]

interesting article, cheers.

tend to agree it would benefit all for greece to default and depart.

[gaelic cowboy]

The so called new fiscal pact is a paper tiger lads apparently in order to avoid referendum in Ireland they will NOT write this deficit rule into our constitution.

Hmm now where did I hear of that before?????

[Furunculus]

Ireland in the firing line of the new draft treaty - behave or be damned:

http://www.telegraph.co.uk/finance/f...and-Spain.html

[gaelic cowboy]

Ireland in the firing line of the new draft treaty - behave or be damned:

http://www.telegraph.co.uk/finance/f...and-Spain.html

Good they should go do it so if there so confident it can work, fire away then throw us out.

I dont want bailout bailin knockout money for our banks at all at all.


They keep using the word "Sovereign Debt Crisis" and yet I keep seeing this cod money being used to help banks pay promissary notes.

Then in order to pay back the money that literally comes in the front door and goes out the back we have to strangle our domestic economy.

All the while this raises the debt to gdp as the economy gets smaller, there talking about a second bailout when the current one ends in 2013.

Naturally the EU/ECB keep raising shrill voices about how Ireland is the poster child for Austerity Confidence( while they know full well a second tranche will be required)


Also I have yet too read of or meet a person who invests because they believes the domestic economy will get smaller.

The Teutonic belief in an Austerity Confidence Fairy is becoming wearying hence the S & P downgrades.

[InsaneApache]

It looks like Greek democracy has gone kaput. With a little help from Germany.

Cripes!

[Furunculus]

I am constantly amazed at the determination to keep the ever-closer-union project alive, even to the point of instituting utterly undemocratic governance in member states, I thought they would have walked long since.

As Hannan terms it; the EU's "hideous strength".

Welcome to the Sanjaks 2.0.

Or should that be Satrapy 3.0.

Either way, it's just another word for a subservient possession of empire.

[Beskar]

I am sure it was on the Guardian but I cannot find it now which spoke about how the treaty was originally torn up by France and Germany which imposed the 3% limit, and it was one of those cases where the technocrats in Europe were overruled by the member states in punishing them, which lead to other countries simply not giving a care in the world and going over it.


I did find a similar one on the BBC though, saying about the new compact is the same as the one from 1997 along with a time-line of what occured.
http://www.bbc.co.uk/news/business-16290598

[Furunculus]

yeah, i read something similar on zee torygraph.

[gaelic cowboy]

It is the same useless treaty we had, and the big laugh is that it still mentions nothing about the interbank arena where this bloody problem came from and were it still resides.

We dont even have to put the debt brake in our constitution now cos there so afraid of Irish voters rejecting it.

We can be certain there storing up a new round of brittleness for the Euro.

[Furunculus]

It is the same useless treaty we had, and the big laugh is that it still mentions nothing about the interbank arena where this bloody problem came from and were it still resides.

We dont even have to put the debt brake in our constitution now cos there so afraid of Irish voters rejecting it.

We can be certain there storing up a new round of brittleness for the Euro.

agreed, if germany wants the euro to survive in order that its exchange rate value can be artificially depressed to boost exports then it needs to accept the principle of a transfer-union...................... in perpetuity, to assist those nations who are seeing their exchange rate artificially raised thus crushing their exports.

http://www.telegraph.co.uk/comment/c...s-Germans.html

-----------------------------------------

adrian, tell me more about this report:
http://www.businessinsider.com/the-r...urozone-2012-1