Monday, December 5, 2011

It's Long past Time For Europe To Give American Banks The Finger

1:30PM est

EUR Tumbles: S&P About To Put Europe's AAA Club (Including Germany, France And Austria) On "Creditwatch Negative"
From ZeroHedge

Here it comes. From the FT: "Standard and Poor’s has warned Germany and the five other triple A members of the eurozone that they risk having their top-notch ratings downgraded as a result of deepening economic and political turmoil in the single currency bloc. The US ratings agency is poised to announce later on Monday that it is putting Germany, France, the Netherlands, Austria, Finland, and Luxembourg on “creditwatch negative”, meaning there is a one-in-two chance of a downgrade within 90 days. It warned all six governments that their ratings could be lowered to AA+ if the creditwatch review failed to convince its experts. Markets have been braced for a potential downgrade of France but few expected Germany’s top rating to be called into question. With regard to Germany, S&P said it was worried about “the potential impact (...) of what we view as deepening political, financial, and monetary problems with the European economic and monetary union.” Standard and Poor’s has warned Germany and the five other triple A members of the eurozone that they risk having their top-notch ratings downgraded as a result of deepening economic and political turmoil in the single currency bloc." How this critical news was leaked, we have no idea. However, what is important is that now may be a good time to panic, unless Allianz has another CDO Quadratic plan up its sleeve...

The result: the EURUSD promptly forgets the bullshit it was being fed all morning by the Eurocrats.

The S&P, the bogus credit ratings entity that assured millions of global investors that American mortgage backed securities were AAA rated when they were actually junk, has come forth with the revelatory release that the countries of Europe may "Not" be worthy of a AAA rating.  This is F***ing brilliant!  Ray Charles could have seen these European counties had some debt issues...MONTHS AGO!

But here we are in the critical throws of survival for the Euro, and this US bank pandering credit agency comes out with a statement that they might have to lower the credit ratings of the entire Eurozone.

This is PATHETIC!  What purpose does this serve but to help thier US banking masters that are short European banks and holding BILLIONS of Dollars in fraudulent Credit Default swaps on the sovereign nations of Europe.  If the Eurozone must be threatened with a downgrade, so should the class clown of global debt...the USA.

Of course this "leaked" statement causes a freefall in the Euro and Commodity prices as the ass-wipe paper we know as the US Dollar is stupidly bid up by those intoxicated by the idea that the US Dollar is a "safe-haven"...and will somehow benefit from the collapse of the Euro.

Folks, if the Euro goes under ALL of the fiat currencies will follow it down the drain.

Of course, you should absolutely sell all your Gold and Silver as it is of no value whatsoever in a global currency crisis as the global bedrock of sovereign debt collapses around it. NOT!

Does Nobody get it?

If the world's fiat currencies are based on debt, and the debt collapses, there is no more fiat currency.  Gold and Silver owe nobody anything.  They are the purest form of bedrock solid currency the world has ever known.  BUY BUY BUY the Precious Metals!  These prices are gifts from Santa's Elves.

4:30PM est

S & P has now made their credit review of the Eurozone official, and it would seem that the timing of their announcement is aimed at pressuring the Euro nations leaders at their summit later this week.  By what right does this pandering US credit agency have the "authority" to interject itself, and it's dubious at best credit ratings into the Eurozone sovereign debt negotiations?

Here Comes The S&P Downgrade Barrage - Full Statement, In Which S&P Says France May Get Two Notch Downgrade
From ZeroHedge

Standard & Poor's Ratings Services today placed its long-term sovereign ratings on 15 members of the European  Economic and Monetary Union (EMU or eurozone) on CreditWatch with negative implications. 

We have also maintained the CreditWatch negative status of our long-term  rating on Cyprus and placed its short-term ratings on CreditWatch with negative implications. The ratings on Greece have not been placed on  CreditWatch. The ratings on the eurozone sovereigns are listed below.
Today's CreditWatch placements are prompted by our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole.
We believe that these systemic stresses stem from five interrelated factors:
  1. Tightening credit conditions across the eurozone;
  2. Markedly higher risk premiums on a growing number of eurozone sovereigns, including some that are currently rated 'AAA';
  3. Continuing disagreements among European policy makers on how to tackle the immediate market confidence crisis and, longer term, how to ensure greater
  4. economic, financial, and fiscal convergence among eurozone members;(4) High levels of government and household indebtedness across a large area of the eurozone; and
  5. The rising risk of economic recession in the eurozone as a whole in 2012. Currently, we expect output to decline next year in countries such as Spain, Portugal and Greece, but we now assign a 40% probability of a fall in output for the eurozone as a whole.
Our CreditWatch review of eurozone sovereign ratings will focus on three of the five key factors that form the core of our sovereign ratings methodology:
the "political," "external," and "monetary" scores we assign to the governments in the eurozone (see "Sovereign Government Rating Methodology And Assumptions", published June 30, 2011). Our analysis of "political dynamics" will focus on both country-specific and eurozone-wide issues that appear to us to be limiting the effectiveness of efforts to resolve the market confidence crisis. Our analysis of "external liquidity" will focus on the borrowing requirements of both eurozone governments and banks. Our analysis of "monetary flexibility" will focus on ECB policy settings to address the economic and financial stresses the countries in the eurozone are increasingly facing.  

We expect to conclude our review of eurozone sovereign ratings as soon as possible following the EU summit scheduled for Dec. 8 and 9, 2011. Depending on the score changes, if any, that our rating committees agree are appropriate for each sovereign, we believe that ratings could be lowered by up to one  notch for Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg, and by up to two notches for the other governments.  [THIS MEANS FRANCE]

Our ratings on Greece (Hellenic Republic; CC/Negative/C) are not affected by today's actions, as a 'CC' rating under our rating definitions connotes our belief that there is a relatively high near-term probability of default.

We are publishing separate media releases with the rationale for each rating action on the 16 CreditWatch actions. We are also publishing the following article: "Credit FAQ: Factors Behind Our Placement of Eurozone Governments on CreditWatch".

Following today's CreditWatch listings, Standard & Poor's will issue separate media releases concerning affected ratings on the funds, government-related entities, financial institutions, insurance companies, public finance, and structured finance sectors in due course.

Truly pathetic, and all the proof you need that the big US banks are behind the debt crisis in the Eurozone.  The S&P is a pawn of the US banks, everybody either knows or believes that..  There was absolutely no reason for this announcement to occur on the eve of a crucial Eurozone summit...unless of course your aim was to aid in the profit said announcement would afford those aligned against the nations the announcement affected.

Lets get it straight folks...everything that occurs in the global financial structure is all about the US banks.  By prodding S&P to make this debt downgrade statement of the Eurozone sovereign debt, the US banks hope to give themselves a leg up on the outcome of this weeks Euro summit.  The best thing the Europeans could do for the whole world is simply walk away from their debt the way Iceland did.  Screw the American banks.  It is long past time these treasonous entities were destroyed.

IT'S YOUR CHOICE, EUROPE: Rebel Against the Banks OR Accept Debt-Serfdom
By Charles Hugh Smith

The European debt Bubble has burst, and the repricing of risk and debt cannot be put back in the bottle.

It's really this simple, Europe: either rebel against the banks or accept decades of debt-serfdom. All the millions of words published about the European debt crisis can be distilled down a handful of simple dynamics. Once we understand those, then the choice between resistance and debt-serfdom is revealed as the only choice: the rest of the "options" are illusory.

1. The euro enabled a short-lived but extremely attractive fantasy: the more productive northern EU economies could mint profits in two ways: A) sell their goods and services to their less productive southern neighbors in quantity because these neighbors were now able to borrow vast sums of money at low (i.e. near-"German") rates of interest, and B) loan these consumer nations these vast sums of money with stupendous leverage, i.e. 1 euro in capital supports 26 euros of lending/debt.
The less productive nations also had a very attractive fantasy: that their present level of productivity (that is, the output of goods and services created by their economies) could be leveraged up via low-interest debt to support a much higher level of consumption and malinvestment in things like villas and luxury autos.

Northern Europe has fueled its growth through exports. It has run huge trade imbalances, the most extreme of which with these same Southern European countries now in peril. Productivity rose dramatically compared to the South, but the currency did not.
This explains at least part of the German export and manufacturing miracle of the last 12 years. In 1999, exports were 29% of German gross domestic product. By 2008, they were 47%—an increase vastly larger than in Italy, Spain and Greece, where the ratios increased modestly or even fell. Germany's net export contribution to GDP (exports minus imports as a share of the economy) rose by nearly a factor of eight. Unlike almost every other high-income country, where manufacturing's share of the economy fell significantly, in Germany it actually rose as the price of German goods grew more and more attractive compared to those of other countries. In a key sense, Germany's currency has been to Southern Europe what China's has been to the U.S.

Flush with profits from exports and loans, Germany and its mercantilist (exporting nations) also ramped up their own borrowing--why not, when growth was so strong?

But the whole set-up was a doomed financial fantasy. The euro seemed to be magic: it enabled importing nations to buy more and borrow more, while also enabling exporting nations to reap immense profits from rising exports and lending.

Put another way: risk and debt were both massively mispriced by the illusion that the endless growth of debt-based consumption could continue forever. The euro was in a sense a scam that served the interests of everyone involved: with risk considered near-zero, interest rates were near-zero, too, and more debt could be leveraged from a small base of productivity and capital.

But now reality has repriced risk and debt, and the clueless leadership of the EU is attempting to put the genie back in the bottle. Alas, the debt loads are too crushing, and the productivity too weak, to support the fantasy of zero risk and low rates of return.

The Credit Bubble Bulletin's Doug Nolan summarized the reality succinctly: "The European debt Bubble has burst." Nolan explains the basic mechanisms thusly: The Mythical "Great Moderation":

For years, European debt was being mispriced in the (over-liquefied, over-leveraged and over-speculated global) marketplace. Countries such as Greece, Portugal, Ireland, Spain and Italy benefitted immeasurably from the market perception that European monetary integration ensured debt, economic and policy making stability.
Similar to the U.S. mortgage/Wall Street finance Bubble, the marketplace was for years content to ignore Credit excesses and festering system fragilities, choosing instead to price debt obligations based on the expectation for zero defaults, abundant liquidity, readily available hedging instruments, and a policymaking regime that would ensure market stability.
Importantly, this backdrop created the perfect market environment for financial leveraging and rampant speculation in a global financial backdrop unsurpassed for its capacity for excess. The arbitrage of European bond yields was likely one of history’s most lucrative speculative endeavors. (link via U. Doran)

In simple terms, this is the stark reality: now that debt and risk have been repriced, Europe's debts are completely, totally unpayable. There is no way to keep adding to the Matterhorn of debt at the old cheap rate of interest, and there is no way to roll over the trillions of euros in debt that are coming due at the old near-zero rates.
Never mind actually paying down debt, sovereign, corporate and private--the repricing of risk and debt mean even the interest payments are unpayable. Consider this chart of one tiny slice of total EU debt:


There is no way to push the repricing genie back in the bottle, and so there is no way to roll over this debt and add to it--and to support the high-cost structure of Euroland's welfare-state governments and their astounding debt, then debt must be added, and in staggering quantities.

Austerity won't put the repricing/bubble burst genie back in the bottle. A funny thing happens when more of the national income is diverted to debt service (making interest payments and rolling over existing debt into new higher-interest debt): there is less surplus available for investment and consumption, which means that both productivity based on investment and consumption based on debt will plummet.

This leaves the nation with lower productivity and lower GDP, which means there is also less tax revenues being collected and more bankruptcies as companies and individuals accept the reality that their debts cannot be paid.

The repricing genie responds to this decline in national income, surplus and taxes by repricing risk of default even higher, and so the interest rate is also repriced higher. This makes servicing the mountain of existing debt even more costly, and so even less national income is available for consumption, investment and taxes.

This is called a positive feedback loop: each action reinforces the other, i.e. a self-reinforcing feedback loop. Debt and risk are repriced higher, the burden of debt service reduces national income available for investment, consumption and taxes, which further reprices risk higher, and so on.
So you see, Europe, there is only one choice: either accept the endless debt serfdom of ever-rising interest payments and lower income and productivity, or rebel against your pathetic lackey leadership and renounce the entire mountain of unpayable debt. Grasp the nettle and renounce the euro as the fundamental cause of your fantasy and collapse, and revert to national currencies which enable the market to discover the price of your underlying productivity and ability to borrow money.
Renouncing the euro does not mean renouncing the freedoms of the European Union: the two are only bound at the hip in the minds of your enfeebled leadership, who are in thrall to the leveraged-26-to-1 banks that are poised on the edge of insolvency.

Let the banks implode in bankruptcy, clear the worthless "assets" of debt from the books, and let the market price currencies and everything else. The only other choice is debt-serfdom.
All the other schemes and proposals are simply variations of one single fantasy: that the feckless leadership can fool the repricing genie with parlor tricks. They can't. Everybody with any understanding of the situation knows that the debt bubble has already burst, and risk and debt cannot be repriced back to fantasy levels.

That repricing has already occurred, and cannot be revoked or shoved back in the bottle. The Great European Debt Bubble has already burst, and so now it boils down to a simple choice: debt serfdom or open rebellion against the banks that profited so handsomely from the euro-fantasy.

There is no middle ground, as the debt cannot be repaid, not now and not in the future. It cannot be reshuffled, masked, or hidden; it can only be renounced.

It's your choice, Europe; choose wisely. If you want a model for sanity and growth, look to Iceland. They renounced their unpayable debts and debt-serfdom, and let the market reprice their currency, debt and risk. The nightmare is past for them; they chose wisely. Now it's your turn to choose.
The debt-serfdom will fall to you, not the banks or your Elites.

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