Market Watch

Annnnnnnnd Back to Europe

With all the impending financial doom coming from the Asia Pacific recently it can be easy to forget the European Union and the fiscal “challenges” it faces. Here is some recent news to remind us what the definition of “fubar”  is….

Italy is likely to need an EU rescue within six months as the country slides into deeper economic crisis and a credit crunch spreads to large companies, a top Italian bank has warned privately.

The report warned that Italy will “inevitably end up in an EU bail-out request” over the next six months, unless it can count on low borrowing costs and a broader recovery.

Emphasizing the gravity of the situation, it compared the crisis with when the country was blown out of the Exchange Rate Mechanism in 1992 despite drastic austerity measures.

Italy’s €2.1 trillion (£1.8 trillion) debt is the world’s third largest after the US and Japan. Any serious stress in its debt markets threatens to reignite the Eurozone crisis. This may already have begun after the US Federal Reserve signaled last week that it will begin to drain dollar liquidity from the global system.

The ECB has already backed away from earlier plans to steer credit to small businesses in the Club Med bloc. The Italian banking association said it was bitterly disappointed by the latest break down in eurozone talks on a banking union, warning that it leaves Italy’s lenders at the mercy of a confidence crisis.

Andrew Roberts from RBS said the world has become “a dangerous place” as Fed tightening marks an inflection point in global liquidity.

It also looks as if the same game is being played by Europe with the help of central bankers around the world, driving capital away from savings and into equities.

Julian Callow from Barclays said the Fed, the Bank of Japan, China’s central bank and others have bought almost the entire $2 trillion issuance of AAA bonds over the past year. The effect of this has been to drive banks, insurers, and pension funds into riskier assets such as the eurozone periphery. This has helped prop up the eurozone, and camouflaged festering problems. “The Fed’s shift towards tightening is highly significant, and it is causing a very dramatic rise in real yields,” he said.

Well isn’t that sweet. Printers are going to save the planet. Its a lot like saying microwaves can be used to solve food shortages (Heating the food can make it more edible and desirable for a short time but turned on to long it burns to a crisp and generally just makes a mess of things). Monetizing is a tool designed to help, not solve. And we will all eventually burn for it.

Was there anyway to avoid this mess. Sure. But, considering who is behind the scenes I highly doubt it. Below is a small example of who is “helping” fix this issue. Caught on audio tape of senor managers from Anglo Irish Bank (where this whole thing began unraveling). I hope the Irish continue having luck. They are going to need it with people like this in charge…..

The astonishing tapes show senior manager John Bowe, who had been involved in negotiations with the Central Bank, laughing and joking as he tells another senior manager, Peter Fitzgerald, how Anglo was luring the State into giving it billions of euro.

If they (Central Bank) saw the enormity of it up front, they might decide they have a choice. You know what I mean? They might say the cost to the taxpayer is too high . . . if it doesn’t look too big at the outset… if it looks big, big enough to be important, but not too big that it kind of spoils everything, then, then I think you have a chance. So I think it can creep up… [once] they have skin in the game.”

The audio recordings are from the bank’s own internal telephone system and date from the heart of the financial crisis that brought the State to its knees in September 2008. Full story HERE.

 

 

Ah yes. The old hook em in then force em to comply via threat of complete doom gag. Well at least they got the doom part right. In a Ironic twist however at least China has learned something from the 2008 crisis. Sad day when a communist country is more capitalist than we are…

 Hedge via The Peoples Daily..
“A bailout of the stock market is not beneficial to the development of a sound capital market, although some analysts are suggesting the China Securities Regulatory Commission and the People’s Bank of China should intervene.”

Now if we could only get them to not fudge every single significant financial stat we will be ok. Fubared

Fubar – FUBAR (fucked up beyond all recognition/any repair/all reason), like SNAFU and SUSFU, dates from World War II. The Oxford English Dictionary lists Yank, the Army Weekly magazine (1944, 7 Jan. p. 8) as its earliest citation: “The FUBAR squadron. ‥ FUBAR? It means ‘Fouled Up Beyond All Recognition.”