GLOBAL LOOTING: The numbers that all point to imminent bank bailins

Unpaid Greek bank loans exceed total Greek bank recapitalisation budget.

€4 trillion hole in the EU banking system

US Fed ships €1.3 trillion of prop-up money into eurozone

French debt is 174% of gdp

ClubMed debt is now mathematically unrepayable

“Ignore what they tell you,” a famous Wall Street trader once told Mark J. Grant, “just look at the numbers”. This was always the advice I gave to trainee advertising strategists: most people are bored by tables…decide not to be bored by the tables, and you will rule the Kingdom of the Blind.

As you’ll have seen from yesterday’s comment thread here, the Chairwoman of the EU Parliament’s Economic & Monetary Affairs Committee wrote to The Slog yesterday and denied there was any law on the Statute to enable a legal bailin. She did, however, admit that some existing legal instruments “are an issue”. I pointed out that they had no legal right to subordinate Greek bondholders or rape Cyprus, but they did it anyway. As to the Rapid Response Mechanism(RRM), she had no answer. It was however a very polite letter: it had an air of concern to it, in that MEPs were having to “insist” on this, that and the other thing. The truth is, it’s already too late for concern; as my original source asserted, all the mechanisms are in place.
We must now turn to more  evidence supporting the proposition that speed is of the essence in the minds of Brussels-am-Berlin and the ECB….and even Washington/Wall Street. You see, the Americans have done the numbers too. The ‘unlikely eventuality’ always referred to in EC proposals is a racing certainty. So, here are some key facts….and a lot of numbers:
* A German opposition SPD spokesman said on Monday, “By disputing the need for additional aid for Greece, the Chancellor is lying to the People before the election.” Well, fair enough, he would say that…there’s an election on. But the numbers here are very clear: last month’s approval of a new loan to Athens of €5.8 billion is a pee in the Pacific compared to the shambolic situation there. Non-performing bank loans in Greece now total €88 billion. These loans exceed the total funds set aside for the recapitalization of the Greek banks, €80.5bn. People contacted in the US and Europe over the last week provided a median capital shortfall estimate in the European banking system (that includes the UK by the way, a not inconsiderable part of it) of around €3 to 5.5 trillion. US investment veteran John Embry offered an uncannily similar figure at the weekend – $4trillion.
* Probably because of this widely held view, in July this year alone the US Fed deposited some €1.3 trillion in unspecified “European banks”. That’s €48bn more than they have committed to U.S. banks.This isn’t the first time the Americans have refilled some of Mario Draghi’s insane pit of debt. But this is big money, pop pickers. It might also explain why Uncle Ben’s Mice are keen to taper off the free money aka QE to the US markets.
* Italy’s situation is rapidly spiralling down the plughole: government debt rose to a new record €3trillion earlier this week. But that’s no problem, because the economy grew 0.3%, so that’ll fix it, hmm? And 0.3% of not very much is…have to hurry you…
* Portugal is desperately close to default. Its deficit has narrowed considerably, but it’s way behind on the debt payments. The debt to GDP for this year is forecast to be 123%. More to the point, the country is almost out of cash. If Portugal goes, Spain goes.
* One suspects that all this maraca-rattling about Gibralter is, as with Argentina and the Falklands, a handy diversion. Spanish bankruptcies are up 45%. Its economy contracted again in Q2, unemployment remains at 26%, and debt to GDP is running at 92%….up from 85% last year.
* Greek debt will reach 175% of GDP by the end of this year, according to data in the Economist. Two years ago the idea was for it to be 118% by now. Just a fraction out there, Ms Lagarde. Situation normal.
* The disaster that still dare not be mentioned very much in the media is France. France is very big, right? What do you think its debt to GDP ratio is – 85%? 115%. Try 174%. And its economy is contracting….just at the time Francois Hollande decides to, um, put up personal and corporate taxes. Novel, you have to hand that to the bloke.

%%%%%%%%%%%%%%%%%%%%

President Hollande’s reaction does raise a key issue in relation to debt repayment. It’s often ignored by the clever folks because it doesn’t use phrases like Open Bank Reconciliation via European Stability Something or Other Mechanism. It’s this: sod the debt, look at the revenues available to pay it off.
This is the Eurozone’s core problem: debts are rising, and revenues are falling.
Some of this is thanks to the Herman van Schäuble-Merkel Congolese school of econo-fiscal management, but the vast majority of it is down to the inability of debt holders, Sovereigns and banking firms to write off debt. This is turn is a function of the average very stupid person’s inability to extrapolate the effect of ever-more unmanageable debt. Oddly enough, the debt simply gets bigger. But to couple this with the Congolese approach to economic growth was a master stroke that doubled the rate at which debts got worse: because in this game, it’s all about the debt v revenue trends. Not rocket science, just the sort of mathematics accessible to most 12 year olds.
The simple truth is this:
1. The European banking system is nowhere near solvent.
2. The ECB is being propped up by the US Fed.
3. The Fed is tapering off support for the US economy, whose ‘recovery’ is a mirage, and still overshadowed by gigantic debt.
4. The entire ClubMed area is underwater with no hope of ever repaying debt based on the existing economic ‘model’ being applied to it. After Labor Day early next month, the Dow folks are back at their desks. I suspect their general view won’t be positive, about either the US or the EU. Shortly after that, Merkel will probably be re-elected. Always beware the politician who just got back in: that’s the very time they’re most likely to do something drastic.
5. In the next year or so, bank failures in both regions are a near-certainty. It is possible that the entire Spanish banking system could collapse.
6. The EC already has mechanisms in place that could railroad bailins through in the EU as a whole. In his Budget speech two months ago, Osborne directly referred to this as “the future model” for handling bank defaults. Either an emergency session of the E&MC or the invoking of the RRM in the eurozone could legalise a bailin in the eurozone tomorrow.
To suggest in this context that Sovereigns and central bankers won’t come after the cash in bank accounts and pension funds is to be like the Jew who decides to sit tight in Vienna as the Nazi troops march in. The idiotic thing is that there is nowhere near enough cash lying about among ordinary squeezed middle savers to pick up the tab for the mad banking and borrowing practices that have been allowed to become the norm over the last fifteen years.
The only sensible and logical conclusion would’ve been to write off that EU sovereign debt which was obviously unrepayable two years ago. But instead, the facade of sustainability has been maintained, and scorched-earth economics applied. Now we are going to be asked to pay for it.
We should not. Here in Britain the Co-operative rape has already begun. Next in line, I predict, will be RBS. The time to resist this was three months ago. So I suggest we start yesterday.
GLOBAL LOOTING: The numbers that all point to imminent bank bailins Unpaid Greek bank loans exceed total Greek bank recapitalisation budget. €4 trillion hole in the EU banking system US Fed ships €1.3 trillion of prop-up money into eurozone French debt is 174% of gdp ClubMed debt is now mathematically unrepayable “Ignore what they tell you,” a famous Wall Street trader once told Mark J. Grant, “just look at the numbers”. This was always the advice I gave to trainee advertising strategists: most people are bored by tables…decide not to be bored by the tables, and you will rule the Kingdom of the Blind. As you’ll have seen from yesterday’s comment thread here, the Chairwoman of the EU Parliament’s Economic & Monetary Affairs Committee wrote to The Slog yesterday and denied there was any law on the Statute to enable a legal bailin. She did, however, admit that some existing legal instruments “are an issue”. I pointed out that they had no legal right to subordinate Greek bondholders or rape Cyprus, but they did it anyway. As to the Rapid Response Mechanism(RRM), she had no answer. It was however a very polite letter: it had an air of concern to it, in that MEPs were having to “insist” on this, that and the other thing. The truth is, it’s already too late for concern; as my original source asserted, all the mechanisms are in place. We must now turn to more evidence supporting the proposition that speed is of the essence in the minds of Brussels-am-Berlin and the ECB….and even Washington/Wall Street. You see, the Americans have done the numbers too. The ‘unlikely eventuality’ always referred to in EC proposals is a racing certainty. So, here are some key facts….and a lot of numbers: * A German opposition SPD spokesman said on Monday, “By disputing the need for additional aid for Greece, the Chancellor is lying to the People before the election.” Well, fair enough, he would say that…there’s an election on. But the numbers here are very clear: last month’s approval of a new loan to Athens of €5.8 billion is a pee in the Pacific compared to the shambolic situation there. Non-performing bank loans in Greece now total €88 billion. These loans exceed the total funds set aside for the recapitalization of the Greek banks, €80.5bn. People contacted in the US and Europe over the last week provided a median capital shortfall estimate in the European banking system (that includes the UK by the way, a not inconsiderable part of it) of around €3 to 5.5 trillion. US investment veteran John Embry offered an uncannily similar figure at the weekend – $4trillion. * Probably because of this widely held view, in July this year alone the US Fed deposited some €1.3 trillion in unspecified “European banks”. That’s €48bn more than they have committed to U.S. banks.This isn’t the first time the Americans have refilled some of Mario Draghi’s insane pit of debt. But this is big money, pop pickers. It might also explain why Uncle Ben’s Mice are keen to taper off the free money aka QE to the US markets. * Italy’s situation is rapidly spiralling down the plughole: government debt rose to a new record €3trillion earlier this week. But that’s no problem, because the economy grew 0.3%, so that’ll fix it, hmm? And 0.3% of not very much is…have to hurry you… * Portugal is desperately close to default. Its deficit has narrowed considerably, but it’s way behind on the debt payments. The debt to GDP for this year is forecast to be 123%. More to the point, the country is almost out of cash. If Portugal goes, Spain goes. * One suspects that all this maraca-rattling about Gibralter is, as with Argentina and the Falklands, a handy diversion. Spanish bankruptcies are up 45%. Its economy contracted again in Q2, unemployment remains at 26%, and debt to GDP is running at 92%….up from 85% last year. * Greek debt will reach 175% of GDP by the end of this year, according to data in the Economist. Two years ago the idea was for it to be 118% by now. Just a fraction out there, Ms Lagarde. Situation normal. * The disaster that still dare not be mentioned very much in the media is France. France is very big, right? What do you think its debt to GDP ratio is – 85%? 115%. Try 174%. And its economy is contracting….just at the time Francois Hollande decides to, um, put up personal and corporate taxes. Novel, you have to hand that to the bloke. %%%%%%%%%%%%%%%%%%%% President Hollande’s reaction does raise a key issue in relation to debt repayment. It’s often ignored by the clever folks because it doesn’t use phrases like Open Bank Reconciliation via European Stability Something or Other Mechanism. It’s this: sod the debt, look at the revenues available to pay it off. This is the Eurozone’s core problem: debts are rising, and revenues are falling. Some of this is thanks to the Herman van Schäuble-Merkel Congolese school of econo-fiscal management, but the vast majority of it is down to the inability of debt holders, Sovereigns and banking firms to write off debt. This is turn is a function of the average very stupid person’s inability to extrapolate the effect of ever-more unmanageable debt. Oddly enough, the debt simply gets bigger. But to couple this with the Congolese approach to economic growth was a master stroke that doubled the rate at which debts got worse: because in this game, it’s all about the debt v revenue trends. Not rocket science, just the sort of mathematics accessible to most 12 year olds. The simple truth is this: 1. The European banking system is nowhere near solvent. 2. The ECB is being propped up by the US Fed. 3. The Fed is tapering off support for the US economy, whose ‘recovery’ is a mirage, and still overshadowed by gigantic debt. 4. The entire ClubMed area is underwater with no hope of ever repaying debt based on the existing economic ‘model’ being applied to it. After Labor Day early next month, the Dow folks are back at their desks. I suspect their general view won’t be positive, about either the US or the EU. Shortly after that, Merkel will probably be re-elected. Always beware the politician who just got back in: that’s the very time they’re most likely to do something drastic. 5. In the next year or so, bank failures in both regions are a near-certainty. It is possible that the entire Spanish banking system could collapse. 6. The EC already has mechanisms in place that could railroad bailins through in the EU as a whole. In his Budget speech two months ago, Osborne directly referred to this as “the future model” for handling bank defaults. Either an emergency session of the E&MC or the invoking of the RRM in the eurozone could legalise a bailin in the eurozone tomorrow. To suggest in this context that Sovereigns and central bankers won’t come after the cash in bank accounts and pension funds is to be like the Jew who decides to sit tight in Vienna as the Nazi troops march in. The idiotic thing is that there is nowhere near enough cash lying about among ordinary squeezed middle savers to pick up the tab for the mad banking and borrowing practices that have been allowed to become the norm over the last fifteen years. The only sensible and logical conclusion would’ve been to write off that EU sovereign debt which was obviously unrepayable two years ago. But instead, the facade of sustainability has been maintained, and scorched-earth economics applied. Now we are going to be asked to pay for it. We should not. Here in Britain the Co-operative rape has already begun. Next in line, I predict, will be RBS. The time to resist this was three months ago. So I suggest we start yesterday.