Europeans are defaulting on everything!

[jrtheoriginal]

Well all the talk about Greece has been a bait and switch. Looks like the big deal is Dexia. The bank went the nationalization route this weekend.

www.zerohedge.com/news/latest-dexia-news-nothing-set-yet-despite-4-billion-proposed-purchase-good-bank-government

Now the best part is two other banks went into national receivership.

www.zerohedge.com/news/two-more-european-banks-nationalized-following-dexias-example

And all the while the boys at the top are making millions!

And the best part is enough of this stuff is being traced back to the good old USof A to bring the dollar lower!

So now it looks like we have a one world financial system after all. This dollar trade is getting to be nerve racking to watch. I just keep thinking that there will be a Monday morning that is gonna be very bad very soon.

I agree that there is gonna be deflation I just can't figure out how they are gonna do it with all this printing of fiat currencies and the huge moves of private debt to the public sector.

The interesting thing is that Because of some land dealings I have in another state that have gone horribly wrong I know what it is to deal with a bank in the FDIC crosshairs. Let me tell you it is very bad!

Int the end I will be OK but paying the leachy lawyers and the PIA tax guru's is gonna drain all the profit. Not to mention the property tax BS that goes on right now.

And the worst part is the bankers who made the bad loans have no skin in the game.

Just like this Dexia deal, The senior mgt. team just rides into the sunset. No tar and feather. No go to Jail. Just collect your big bonus and go to another country for some surf and turf so you can get rejuvenated. What a bunch of BS.

We need a good old fashioned bank run!

[pldairy]

Oct 10, 2011 7:02:28 GMT -5 jrtheoriginal said:

Well all the talk about Greece has been a bait and switch. Looks like the big deal is Dexia. The bank went the nationalization route this weekend.

www.zerohedge.com/news/latest-dexia-news-nothing-set-yet-despite-4-billion-proposed-purchase-good-bank-government

Now the best part is two other banks went into national receivership.

www.zerohedge.com/news/two-more-european-banks-nationalized-following-dexias-example

And all the while the boys at the top are making millions!

And the best part is enough of this stuff is being traced back to the good old USof A to bring the dollar lower!

So now it looks like we have a one world financial system after all. This dollar trade is getting to be nerve racking to watch. I just keep thinking that there will be a Monday morning that is gonna be very bad very soon.

I agree that there is gonna be deflation I just can't figure out how they are gonna do it with all this printing of fiat currencies and the huge moves of private debt to the public sector.

The interesting thing is that Because of some land dealings I have in another state that have gone horribly wrong I know what it is to deal with a bank in the FDIC crosshairs. Let me tell you it is very bad!

Int the end I will be OK but paying the leachy lawyers and the PIA tax guru's is gonna drain all the profit. Not to mention the property tax BS that goes on right now.

And the worst part is the bankers who made the bad loans have no skin in the game.

Just like this Dexia deal, The senior mgt. team just rides into the sunset. No tar and feather. No go to Jail. Just collect your big bonus and go to another country for some surf and turf so you can get rejuvenated. What a bunch of BS.

We need a good old fashioned bank run!

been wondering about that too?? we are screwed as ole Db51 would say

Jr the bank giveing ya the run around?,wondering if the end is close?seeing they dont eaven want to hold land paper?

BIL found this out friday afternoon, wants to buy the farn across the road,they told him 50% down, he said he just might sell all his ready steers and pay cash for it.................and borrow some money to pay his operating bills, at least they will do this for a year

[ses]

I was talking to a guy a year ago that worked in finance. He claimed the FDIC of course, will back deposits to $250,000. But if they have to step in and take over a bank they can string out paying that back over twenty years and don't have to pay interest. He said the reason they don't do it is people feel safe having their money in a bank thinking if the bank fails they will immediately get their money back and life goes on. If the FDIC delayed payments just once that would cause a run on any bank not deemed healthy. That in turn would cause a run on most all banks. With the FDIC in it's current position and banks failing and eating up the FDIC reserves this might not end very well. The FDIC already made banks pay three years worth of premiums to stay afloat.

If you look at the bank health website there are banks in southern California that have hundereds of billions of dollars in loans on the books, some even over a trillion. This in an area that has an enormous number of houses in foreclosure not to mention the commercial real estate problems.

I was talking to a guy a few days ago and he said he tried to get a loan at a Sunflower Bank. They told him his credit score had to be 700 or better before they would even consider it. Sunflower is part of Bank of America I believe. IMO they have so damn much bad paper they can't afford to have any more so are raelly tightening up the credit.

[linsal]

JR---This whole European "thing" is going to have ramifications we can't even imagine...here is an excerpt from The Automatic Earth...



During and after the implosion of the "tech bubble" and the brief financial recession of the late 1990s, major banks and corporations around the world realized they needed a new "asset" which could be leveraged by consumers and businesses to support aggregate demand and, therefore, their revenues and profits.

With the help of aggressive fiscal policy, new government statutes (i.e. "Community Reinvestment Act"), the repeal of pesky "firewalls" ("Gramm-Leach-Bliley Act" repealing the "Glass-Steagall Act") and accommodating (low-interest) monetary policy, private banks pushed unfathomable amounts of debts onto people and businesses who could not afford them by any stretch of the collective imagination.

These same banks were also allowed to securitize many of the underlying loans, sell them off to various institutional investors and market derivative instruments to those clients who wished to gain exposure to the global sub-prime mortgage bonanza. When the greatest financial ponzi scheme known to man eventually collapsed in 2007-08 and it was clear that the global economy faced an imminent depression, governments worldwide decided to "respond".

What this response amounted to was an attempt to maintain economic and financial complexity by adding on layer after layer of ever-more complex structures, and suspending/manipulating any measure of reality that was in the least bit accurate.

Those layers, in part, took the form of unprecedented fiscal and monetary policy, which funneled trillions worth of taxpayer-guaranteed funds to banks that were deemed too complex too fail. So how did this big dose of complexity fare after the flames died down and the smoke cleared? Focusing on the U.S., here's what I wrote last year about Obama's $820B "American Reinvestment Recovery Act" (ARRA):


The Limits to Complexity

"The [ARRA] allocated about $820 billion to various local governments and companies in an effort to create jobs. What they don’t tell you about the ARRA is how much of that money, as a matter of necessity, is wasted in bureaucratic institutions that distribute and keep track of the money as it is funneled down to economic actors. Much of the money also goes to funding extremely misguided projects, such as tax credits for homebuyers that incentivized the construction of new homes when there is already a year’s worth of excess supply.

Sometimes the money goes to fund the repair of roads that don’t even need any repair, as I have personally witnessed in my own community. New estimates have made clear that it is unlikely more than 1 million jobs were created by the ARRA stimulus, which amounts to $820,000 per job, some of which were not even productive for the general economy."


Despite the [misleading] BLS unemployment rate falling to 9.1% in 2011 (signifying more people who have given up looking for work), the employment situation has significantly deteriorated since last year. On Friday, the non-farm payroll numbers came in at +103K for the month of September, with about 40K of that coming from Verizon workers who ended their strike. The more accurate U-6 unemployment measure increased to 16.5%, its highest since December of 2010. Zero Hedge has calculated that at least ~261K jobs must be created every single month for the next five years for the unemployment rate to return to pre-2008 levels, and this number has been consistently increasing every time it performs the calculation. [1]

The number for August was revised upwards from ZERO jobs created to 54K, which is still an overall dismal print. Manufacturing jobs declined by 13K in the month of September, while average duration of unemployment hit an all time high of 40.5 weeks. [2]. Initial claims have continued to hover around 400k per week for at least the last six months (and have been consistently revised upwards), which essentially implies no jobs are being created. [3].

According to the non-farm payroll report for August 20111, ZERO jobs were created in that month, with the employment numbers for June and July both being revised downwards for a total reduction of about -60,000. An additional 600,000 people from last year were working part-time "for economic reasons" and were "marginally attached" to the labor force. [1]. Initial claims are still hovering around 400k per week for at least the last six months (consistently revised upwards), which essentially means no jobs are being created. [2].

It is quite clear, then, that Obama's stimulus did very little to spur job growth, and now he is facing an even bigger limit to complexity - a dearth of political capital to pass any new "jobs bills" through Congress. On the monetary front, policy mainly took the form of slashing the federal funds rate to near zero and launching asset purchase programs which targeted more than $2 trillion in mortgage-backed securities and Treasury notes/bonds over the last two years. As the principal on the MBS was paid down, that money was reinvested back into Treasuries (and now more MBS) to maintain the value of securities on the Fed's balance sheet.


The Limits to Complexity

"The above policies serve to keep a floor on mortgage rates and finance our government’s deficits at low interest (what used to be stealth monetization is now just monetization), while also providing cash to banks with the alleged hope that they will lend it out into the economy, where consumers and businesses will spend/invest the loaned money. Out there in the real world, no such lending has happened, as the banks are sitting on $1+ trillion in cash and the Fed is caught in a liquidity trap.

[..] Private markets are currently saturated with debt and therefore very few people want to borrow money, and very few lenders want to make loans at affordable rates since debtors can barely pay back what they owe now. As mentioned before, interest rates have bottomed out and there is minimal economic activity to show for it. The velocity of money in the economy has collapsed, and the Fed’s policies merely transfer large sums of taxpayer money to major banks that use it to blow more speculative bubbles in stocks, bonds, commodities, and derivative bets on the price movements of those assets."







Since the time that was written, we have seen numerous destructive consequences derived from this monetary policy. The speculative bubbles mentioned above have led to soaring inflation in the Middle East, which, in turn, has been partly responsible for the ensuing sociopolitical unrest and violence. At the same time, global markets are largely back to the same valuations they were at a year ago when QE2 was implemented.

Banks are now sitting on at least $600 billion of additional cash (excess reserves deposited at the Fed). [3]. Back then, I also mentioned that "equity outflows from institutional investing firms have continued for months unabated and have totaled over $50 billion year-to-date". Well, let's go ahead and make that a four-fold increase to $200 billion in the last two years. [4].






And since the Fall of 2010 is so out of style and the Fed does not currently have enough credibility to launch a similar asset purchase program, it has decided to merely shift the duration of Treasuries on its portfolio (swapping $400 billion in short-term bills/notes for $400 billion in longer-term bonds).

This "twist" operation has done absolutely nothing to spark appetite for risk and is actually perceived as being net negative for financial markets, since long-term rates will compress and the yield curve will be flattened even further, thereby limiting the ability of banks to generate profits from interest spreads. Another limit to complexity, perhaps?

Ben Bernanke has consistently punted the responsibility for supporting "confidence" in markets and the economy to the Administration and Congress in recent months, and they consistently prove to us that they are both politically and financially unable and unwilling to do anything meaningful for neither one nor the other.

Central authorities in the West have exhausted almost all of their tools for supporting financial markets, except for increasingly short-term liquidity measures. In addition, the policies they have enacted in the comfort of 2010 are now coming back to haunt them, as the publicly-sponsored complexity has made the system even more inflexible than it was before.

This layered complexity also took the form of Western governments placing an item misleadingly known as "financial reform" on their political agendas. In the U.S., "financial reform" amounted to federal politicians attempting to somehow regulate systemic financial stability into existence by creating a few new government agencies or sub-agency departments, which possessed a few more monitoring and enforcement mechanisms, and A LOT more bureaucracy.

These agencies were essentially tasked with monitoring "systemic developments" in the financial sector whenever they felt up to the task. I wrote the following about this issue soon after the Dodd-Frank bill had been passed into law:


The Limits to Complexity

"[..] and the "finreg" bill failed to break up the TBTF banks, audit the Fed or create transparency for risky derivative products. More importantly, these new top-down regulations have the inherent feature of creating unintended consequences in our complex society, despite the alleged best intentions of their creators, and can even make the targeted problem worse.

The financial reform bill created new restrictions on "angel investors" which will inadvertently stymie the creation/expansion of small businesses, while the behemoth investment banks will continue to exploit financial markets by hiring teams of lawyers to easily bypass the new regulations that affect them (as they are currently doing with the "Volcker Rule") or by simply buying off the regulators."


Fast forward to today and we can clearly see that not a single soul on Earth, let alone those moving the markets, believe the Dodd-Frank Bill did anything to mitigate systemic risk or even make sure it could be adequately identified before developing into another full-blown crisis (which has already begun). And then, of course, we have the unintended consequences of complexity.

One major unintended consequence of the Dodd-Frank Bill that has recently asserted itself stems from the "Durbin Amendment" (introduced by Congressman Dick Durbin-D-Ill). What analysts are now labeling the "Durbin Tax" provides us with the quintessential example of diminishing returns to complexity. Forbes Magazine reports:


Bank of America Debit Card Fees Slammed as "Durbin Tax"

The law applies to those big banks – the ones over $10 billion in assets – and was ostensibly passed as an effort to increase competition. It was supposed to be pro-consumer.

But here’s the kicker: the Amendment gave the Federal Reserve the power to regulate debit card interchange fees and other bits of banking admin, which they’ve done. Over the summer, the Fed released the final rule on the matter. The combination of fees, restrictions and caps is thought to cost banks subject to the amendment nearly $14 billion annually.

The banks could try to recoup this money from somewhere else – like merchants. But merchants now have the ability to shop around a bit more and of course, they could refuse to accept cards altogether. It was quicker, cheaper and easier for banks to go straight to the customer.


Forbes Magazine is simply a shill for the big banksters, but the underlying point remains true. When politicians attempt to regulate "financial consumer protection" into existence by layering on increasingly complex regulations, they are bound to create unintended situations such as this one. They are also bound to not even recognize that these consequences have occurred. That is why Congressman Durbin can create legislation that has forced banks to impose fees on their customers, and then stand on the floor of Congress a little over one year later and tell those same customers to "get the heck out of" Bank of America, because it had the nerve to impose a debit card usage fee!

It's not just Bank of America either, but Citigroup, Wells Fargo and JP Morgan who are also proposing to institute debit card usage fees on their customers. For the time being, people will put up with this extortion because they see no other convenient places to park their cash or ways to make their purchases and pay their bills.

Rest assured, though, that these measures are a sign of desperation by the major banks, and will eventually lead to much fewer commercial transactions by consumers, which will dampen economic growth and decimate the profit margins of banks even further. Of course, the limits to complexity are not only present in the U.S. financial system, but the entire global economy, as Europe, China, Japan, Canada, Australia and many other "emerging economies" can attest to.

Just last year, many of these regions were being hailed by mainstream analysts as survivors of the "Great Recession" and the future drivers of global economic growth. Now, their FIRE sectors are imploding and they are all following the U.S. and Europe down the swirling contours of the collective toilet bowl.

The financial topic du jour is, and has been for many months now, the critical situation in the EMU. At this point, there is very little need to even point out the limits to the EMU’s complexity. One clear example, though, is the most recent discussions about the size and nature of the European Financial Stability Fund (EFSF).

It was only a few weeks ago that the European leaders were discussing possibilities of expanding and/or "leveraging" the fund to adequately backstop the public financing needs of Italy and Spain, and prevent contagion from a Greek default. Today, some pundits and politicians are discussing whether the fund should instead be used to directly recapitalize Euro-area banks that are struggling to stay solvent. Stephen Castle reports for the New York Times:


Europe Calls for Infusion of Capital for Banks

If Europe did adopt a regionwide approach to recapitalizing the banks, the question is whether that money would come from the bailout fund agreed to in July, which must still be voted on by a handful of member nations. If adopted, as expected, that bailout fund — the European Financial Stability Facility — would gain an effective lending capacity of 440 billion euros ($595.4 billion).

That might be enough to provide the necessary capital cushion to the region’s banks. But it would leave little cash to lend to any national governments that might require aid to protect themselves from a Greek contagion. Spain and Italy are seen most vulnerable on that count.


Needless to say, there is bitter political disagreement on both of those issues and it is looking very unlikely that either will be done anytime soon, when the countries and banks need it the most to survive in their current form. [6]. Financially speaking, it is simply impossible for France and Germany to backstop the entire Euro periphery OR major Euro-area banks, let alone both of them.

That fact becomes even more poignant when we consider another brutal limit to complexity in the form of France being downgraded by ratings agencies if it decides to bail out all of these other institutions. That would place enormous pressures on its own sovereign financing situation and effectively make it a non-factor in the bailout mechanisms.

Stephen Castle once more:


"France’s caution over recapitalization illustrates how each potential solution to the euro zone crisis tends to become entangled in member nations’ domestic politics. A downgrade of France’s debt rating would be damaging to the French president, Nicolas Sarkozy, ahead of presidential elections next year.

The problem is that if you recapitalize the banks, then you have a problem with sovereign debt," said one European official not authorized to speak publicly. "That is Paris’s big issue."


Sarkozy and Merkel are hashing it today (Sunday) to see if they can agree on just how badly the Western taxpayers will be shafted yet again. Paris has suggested to use the very recently expanded "stabilization fund", created to backstop sovereign bonds, and redirect much of it towards recapitalizing banks directly. Berlin has said so far that this is a ridiculous proposal and the fund is only to be used as a "last resort" for the banks. [7]. Although Dexia, the Belgian bank that scored highest on the EU "stress test" earlier in the year and was the first to implode, has once again reminded us that the banks' first resort is the same as their second resort and every other resort up until their last resort: taxpayer-funded bailouts.




The problem for the panhandling elites is that these bailouts are not as simple and as much of a given as they used to be, which was evident in the decision over whether to bail out Dexia and to what extent. The bailout issue was finally “resolved” today as France and Belgium agreed to nationalize 100% of Dexia’s operations, which is 100% against the interests of Belgian and French taxpayers. The plan must still be submitted to Dexia’s Board of Directors, who are sure to approve of any public bailout they can get their greedy hands on. Reuters reports:


France, Belgium, Luxembourg agree Dexia Rescue

"The burden of bailing out Dexia led ratings agency Moody's to warn Belgium late on Friday that its Aa1 government bond ratings may fall.

The negotiations to dismantle Dexia, which has global credit risk exposure of $700 billion -- more than twice Greece's GDP -- are being watched closely for signs that Europe might be capable of decisive action to resolve its banking crisis. "I am convinced that it is possible ... by tomorrow morning to have an agreement in which Belgium resolves the issue without pushing up the debt level of our country too high," Leterme told Belgian television before the talks began on Sunday.”


It’s not that Belgium may be downgraded, but that it will be downgraded if the deal goes through, and France’s ratings may come under some pressure as well. No matter what happens, Dexia is just the first of many European banks to pass the faux “stress tests” with flying colors and subsequently implode within months, including major French banks. When those banks reach the edge of bankruptcy and need a public bailout, there is no way France will come out of that with their AAA bond rating intact, and a French downgrade will feed into the need for even more bailouts. Since the implosion of Bear Stearns and Lehman Brothers nearly three years ago, nothing has changed. The limits to complexity have been stretched out a bit, but now they are well poised to snap back even harder.

It turns out that everyone who participated in the mainstream dialogue had bought into the narrative of a global economic "recovery" and had conditioned their policies and attitudes accordingly. Now, they are all left reeling from the strict, unflinching evolution of complex systems. The subject of "bailing out banks", which was too taboo to even discuss last year, is now priority #1 on the policy agenda in Europe (and will soon be in the U.S.), but there is simply not enough political or financial capital left to do the job.

Soon, the global financial system will be forced to revisit the limits to complexity, just as we have done today, and this time it will not be so easy for our leaders to avoid their implications.





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

[pldairy]

now the 64,000? is how long do we have befor the shit hits the fam?

[linsal]

When will the SHTF? My 2 cents worth (and you're getting what you're paying for) is that it won't be long now. Keep an eye on Greece...last I read, the interest rate on their one year gov't bonds is 135 percent...waaaay beyond junk status IMO. I suspect that within a couple of months, Germany is going to quit pumping money into Greece/EU...Merkel is loosing much needed political support at home....when that happens, the fat lady is gonna be singin'. Also, from what I can tell, there are rumors swirling that Germany has started printing marks in preparation/anticipation/expectation of either the Euro failing, or Germany pulling out of the EU. Either way, it will be ugly.

This might be the time for the "elitists" to create the one world currency...


Moody’s, instability and the world’s single currency
Maurizio d'Orlando
Contacted by AsiaNews, the authors of the report that downgraded Italy’s debt chose not to speak. Just a few months ago, Moody’s chief analyst had praised Italy, saying it was not a country at risk. The downgrade is part of a plan to set up a world currency, the ‘bancor’. Before this can be done, Italy, the euro, the dollar and the world’s economy must be destroyed.

Milan (AsiaNews) – As AsiaNews had predicted[1], Moody’s downgraded Italian government bonds by three notches despite the lack of real bases for the move[2], i.e. the absence of new negative data on the country’s public debt. In fact, Moody’s report has something positive to say about recent trends in Italy[3], like the absence of major imbalances in the economy (for example, unemployment in Italy is not as high as in the United States and other countries), the lack of severe pressure on private financial and non-financial sector balance sheets[4] (in Italy, the government has not had to use taxpayers’ money to bail out banks or large companies like General Motors), or steps taken during the summer (like cutting the deficit by 10 per cent through lower public spending, something no country in the world of Italy’s size has had to do).

In order to explain their rationale behind the downgrade, Moody’s hapless analysts have had to go out on a limb to find any evidence to back their claims because there is no real substance to their decision, or if there is any, they will not say what it is even though we can imagine what they might have in mind. For the report’s authors, Alexander Kockerbeck and Bart Oosterveld, three factors underlie their arguments, but they all lack quantitative support and flow from the first point, namely some vague notion about “market sentiment”.

It would be easy to publish all the interviews and public statements made by Moody’s chief analyst Kockerbeck over the past few years. In them, he said Italy was among the countries least at risk. in fact, he praised the work of the Italian government. His last interview a few months ago, on 13 July[5], is a case in point, coming before Italy’s latest public spending cuts. In the absence of actual data, it would be easy to show how contradictory Moody’s claims are.

However, at AsiaNews we feel sorry for the great burdens Moody’s analysts must bear in personal and professional terms. Too often, they have come under unbearable pressures, as evinced in a complaint filed with the US Security and Exchange Commission by William J. Harrington, on 8 August 2011 [6]. Harrington quit Moody’s in 2010 after reaching the top analyst post, i.e. Senior Vice President. In his a submission, we understand why. In his view, there is a conflict of interest between the needs of stockholders and customers who pay for the agency’s services and the need for independent judgment in evaluating credit worthiness. Analysts who do not bend to meet the needs of customers and stakeholders are often transferred, subjected to disciplinary sanctions, abused or fired.[7]

For this reason, AsiaNews tried to reach the authors of Moody’s report to know what they meant by “market sentiments”. However, we were told they were not available for comments. This is quite understandable. Harrington does not say who Moody’s paymasters are but in a previous article[8], AsiaNews suggested that Moody’s (along with the other two dominant rating agencies, Standard & Poor’s and Fitch) owes its power to the International Swaps and Derivatives Association, a trade organisation of participants in the derivatives market with the power to issue ratings.

What we must do then is figure out ISDA participants’ goals on the basis of published documents. It is clear that the “market sentiment” ISDA participants have in mind is political in nature, and that their goal is to remove Silvio Berlusconi from power. A recent editorial article by the editor-in-chief of Corriere della Sera, Italy’s foremost newspaper, makes that clear. The paper is owned primarily by banks and financial interests.

All this could be dismissed as just another case of the usual, albeit undue interference exerted by financial interests in political affairs, as they try to impose a “new currency” on Italy and elsewhere at the expense of popular sovereignty. This would be bad, but nothing new.

However, there is more than meets the eye as suggested by an official paper by the International Monetary Fund, which does not deal with Italy alone, but rather touches the whole world, including Asia.

From the beginning, the paper makes it clear that the goal is to achieve a single world currency, named ‘bancor’ (in tribute to Keynes who first proposed it), to be issued by a world central bank. Section 50 (p. 27) of the report says, “Absent significant monetary instability or an injunction for the use of bancor for the making of an important set of payments (e.g. payment of taxes), surmounting the barriers to wide acceptance would be a key and perhaps prohibitive challenge.”

Putting aside the jargon, the meaning is clear. The goal of a single world currency cannot be achieved without messing up the world. Thus, the grounds for instability must be put in place. This confirms what was said previously, namely that the attack against Italy’s economy is not based on objective factors, but rather is a first step that would lead to the destabilisation of that country, followed by the dissolution of the dollar. The goal is to eliminate the last shred of popular sovereignty and independence, as shown by the recent indecent war in Libya and the lies spread by the world press[9].

In short, the goal is to force a single central bank upon the world’s nations, controlled by same world financial interests who monopolise the derivatives market. For the record, these are the same people responsible for the recent derivatives bubble.