Euro Area

     

 

 

Panic Pause

The sudden panic about a potentially imminent Italian banking sector collapse back in July has somewhat subsided for now, but sooner or later the issue will inevitably rear its ugly head again.

 

monte-dei-paschi-hq, photo by Stefano Rellandini / Reuters The impressive headquarters of the world’s oldest surviving bank, Monte dei Paschi di Siena, Piazza Salimbeni

Photo credit: Stefano Rellandini / Reuters

 

Read the rest of this entry »

     

 

 

Landfall of a “Told You So” Moment…

Late last year and early this year, we wrote extensively about the problems we thought were coming down the pike for European banks. Very little attention was paid to the topic at the time, but we felt it was a typical example of a “gray swan” – a problem everybody knows about on some level, but naively thinks won’t erupt if only it is studiously ignored. This actually worked for a while, but as Clouseau would say: “Not anymeure!

 

FIRENZE, 12/11/2011 EVENTO "TED X FIRENZE: INNOVAZIONE E OTTIMISMO", IDEATA DALL'ORGANIZZAZIONE NO-PROFIT AMERICANA TED. - NELLA FOTO: IL SINDACO DI FIRENZE MATTEO RENZI.Italy’s prime minister Matteo Renzi, indicating how much capital is left in Italian banks…

Photo credit: Giacomo Morini / INFOPHOTO

 

Read the rest of this entry »

     

 

 

A Whiff of Panic

Ahead of Thursday’s ECB meeting, there was a widespread consensus that Europe’s chief printing press supervisor would make up for the alleged “mistake” of under-delivering on monetary lunacy last time around. Therefore, a sizable dose of fresh absurdities had to be expected, with only small disagreements on the details. It is fair to say the man didn’t disappoint.

 

Draghobert the TerribleDraghobert the Terrible, trying to assault the euro again

Photo credit: Michael Probst / AP Photo

 

Read the rest of this entry »

     

 

 

Greece vs. Austria: Non-Friendly Acts

Two days ago we came across a headline at Reuters, informing us that Greece rages at neighbors as fears migrants could be halted”. Say what? What the hell is this supposed to mean? Is this even English? Possibly Reuters employs the same headline editor as Bloomberg….he or she is definitely equally bad.

 

Kotzias, enragedNikos Kotzias (νίκοσ κοτζιάσ), a former member of the Central Committee of the Greek Communist Party. Nowadays, oddly enough, he is Greece’s foreign minister. Here seen enraged.

Photo credit: Simela Pantzartzi

 

Read the rest of this entry »

     

 

 

A Curious Collapse

 

wizard bank 2

 

Ever since the ECB has begun to implement its assorted money printing programs in recent years – lately culminating in an outright QE program involving government bonds, agency bonds, ABS and covered bonds – bank reserves and the euro area money supply have soared. Bank reserves deposited with the central bank can be seen as equivalent to the cash assets of banks. The greater the proportion of such reserves (plus vault cash) relative to their outstanding deposit liabilities, the more of the outstanding deposit money is in fact represented by “covered” money substitutes as opposed to fiduciary media.

 

Read the rest of this entry »

     

 

 

Dovish Cooing from the Desolation of Draghi

As Reuters informs us, on the heels of Mr. Draghi’s somewhat “disappointing” attempt to assassinate the euro on occasion of the previous ECB meeting, the chief European printing press supervisor and certified monetary crank has decided to assure everyone of his ultra-dovish stance again on Thursday, by announcing that even more monetary insanity must be expected soon:

 

Fading growth and inflation prospects will force the European Central Bank to review its policy stance in March, President Mario Draghi said on Thursday, a strong signal that more easing could be coming within months.”

 

bruning_euro_08.25.2014_largeThe economy isn’t doing well? Let us set fire to the currency then, maybe that will help.

 

Read the rest of this entry »

     

 

 

Portugal’s Rickety Banking System

After the unseemly bankruptcy of the Espirito Santo Group and the associated bank, then Portugal’s second biggest (likely a result of not praying enough, see: “Big Portuguese Bank Gets Into Trouble” and “Fears Over Banco Espirito Santo Escalate” for the gory details), Portugal’s state-run deposit insurance fund basically ran out of money.

It turns out that Europe’s new Bank Recovery and Resolution Directive (BRRD for short) came just in time for Portugal. At the end of 2015, another Portuguese bank bit the dust, the country’s seventh largest lender by assets, Banif. Portugal’s government once again decided to bail the bank out, but with strings attached. Subordinated bondholders and shareholders were essentially wiped out, which is as it should be.

 

Banif, weeklyBanif SA, weekly. Although this is hard to see on this linear chart, the stock rose by 40% today, to €0.002. Shareholders are allegedly planning to throw a wild party in Lisbon over the weekend (we were unable to confirm this rumor) – click to enlarge.

 

Read the rest of this entry »

     

 

 

A Historically Unique Event

We keep watching what is happening in Cyprus with morbid fascination. As a reminder, the unhappy island was the first major “haircut” victim in Europe. Its bankers, who had flagrantly over-traded their capital and won prizes for running “the best banks in Europe” along the way, erroneously believed the repeated promises of assorted EU commissars that Greece would never – never! – be allowed to go bankrupt. Consequently they stuffed their balance sheets to the gills with supposedly risk-free Greek government bonds, only to eventually see them get “haircut” twice in a row.

 

Laiki-Bank_People-smDesperate depositors queuing in front of Laiki Bank, the second largest Cypriot bank,

which was eventually wound up

 Photo credit: Yorgos Karahalis / Reuters

 

Read the rest of this entry »

     

 

 

A “Major Concern”

The European Banking Authority EBA, which (we guess) is fighting for its survival after the ECB has become the sole supervisor of Europe’s “systemically relevant” banks, has recently issued a comprehensive report on the European banking system (this included the unintended revelation that its employees have yet to master the intricacies of Exel).

As an aside, we have little doubt that this bureaucracy will survive. Has there ever been a case of an EU bureaucracy not surviving and thriving? We don’t recall one off the cuff, but perhaps we are mistaken. We’re sure some reason will be found to preserve this particular zombie sinecure as well.

 

eba_2Hey guys! We’re still issuing reports! See how important it is to keep us well-funded?

 

Read the rest of this entry »

     

 

 

Greece – Ground Zero in the War on Cash?

We believe it was our friend Claudio Grass of Global Gold in Switzerland who first mentioned that the eurocracy may possibly have plans to use the Greek crisis as an opportunity to expand the ongoing war on cash. It stands to reason: Greece is well known for its extremely large “shadow economy” (the name for economic activity that flies under the radar of the greedy grasp of the State). Greece’s citizens not unreasonably regard the State as akin to a mafia organization which they are trying to avoid as much as possible (unless it promises them free goodies to buy their votes – they do of course gladly accept those).

We vividly recall an interview with a Greek shipping magnate about the constitutional provision that has relieved the country’s shipping industry from income tax. The interviewer asked (we are paraphrasing) whether the magnate thought it “fair” that this was so, and if he wasn’t troubled by his conscience in light of the Greek government debt crisis. The shipping magnate replied (again paraphrasing) along the lines of: “Just look at the government in Athens. They’re nothing but a bunch of crooks. Would you hand over your money voluntarily to Al Capone? Surely not. Well, neither do I.”

 

al caponeNot someone you want to hand your money to…

Photo credit: Bettmann / Corbis

 

Read the rest of this entry »

     

 

 

A Sharp Turn in Swedish Politics

When we recently discussed Europe’s refugee crisis, we mentioned that a sizable political backlash was to be expected and that unfortunately, extreme nationalist parties were likely to be among the main beneficiaries. We also mentioned the situation of Sweden, where the mainstream political parties in an ongoing fit of political correctness bordering on lunacy have apparently decided to transform Sweden into a province of Mesopotamia.

 

Jimmie_+àkessonLeader of the nationalist Sweden Democrats, Jimmie Akesson

Photo credit: Frankie Fouganthin / CC

 

Read the rest of this entry »

     

 

 

The Walking Dead

Now that Europe’s fractionally reserved banking system has been regulated into complete inertia, it is a good time to assess the current bottom line, so to speak. We should mention here that there are essentially two ways of dealing with the banking system. One is to introduce an unhampered free market banking system based on strong property rights and nothing else. Such a system would work best if it were based on sound money, i.e., a market-chosen medium of exchange. The regulations governing such a system would fit on a napkin.

 

zombie bank2

Image credit: Warner Bros, processing fmh

 

Read the rest of this entry »

Most read in the last 20 days:

  • America Goes Full Imbecile
      Credit has a wicked way of magnifying a person’s defects.  Even the most cautious man, with unlimited credit, can make mistakes that in retrospect seem absurd.  But an average man, with unlimited credit, is preeminently disposed to going full imbecile.   Let us not forget about this important skill...  [PT]   Several weeks ago we came across a woeful tale of Mike Meru.  Somehow, this special fellow, while of apparent sound mine and worthy intent, racked up...
  • Retail Capitulation – Precious Metals Supply and Demand
      Small Crowds, Shrinking Premiums The prices of gold and silver rose five bucks and 37 cents respectively last week. Is this the blast off to da moon for the silver rocket of halcyon days, in other words 2010-2011?   Various gold bars. Coin and bar premiums have been shrinking steadily (as have coin sales of the US Mint by the way), a sign that retail investors have lost interest in gold. There are even more signs of this actually, and this loss of interest stands in stark...
  • Credit Spreads: Polly is Twitching Again - in Europe
      Junk Bond Spread Breakout The famous dead parrot is coming back to life... in an unexpected place. With its QE operations, which included inter alia corporate bonds, the ECB has managed to suppress credit spreads in Europe to truly ludicrous levels. From there, the effect propagated through arbitrage to other developed markets. And yes, this does “support the economy” - mainly by triggering an avalanche of capital malinvestment and creating the associated boom conditions, while...
  • Gold Divergences Emerge
      Bad Hair Day Produces Positive Divergences On Friday the ongoing trade dispute between the US and China was apparently escalated by a notch to the next level, at least verbally. The Trump administration announced a list of tariffs that are supposed to come into force in three week's time and China clicked back by announcing retaliatory action. In effect, the US government said: take that China, we will now really hurt our own consumers!  - and China's mandarins replied: just you wait, we...
  • Industrial Commodities vs. Gold - Precious Metals Supply and Demand
      Oil is Different Last week, we showed a graph of rising open interest in crude oil futures. From this, we inferred — incorrectly as it turns out — that the basis must be rising. Why else, we asked, would market makers carry more and more oil?   Crude oil acts differently from gold – and so do all other industrial commodities. What makes them different is that the supply of industrial commodities held in storage as a rule suffices to satisfy industrial demand only for a...
  • Chasing the Wind
      Futility with Purpose Plebeians generally ignore the tact of their economic central planners.  They care more that their meatloaf is hot and their suds are cold, than about any plans being hatched in the capital city.  Nonetheless, the central planners know an angry mob, with torches and pitchforks, are only a few empty bellies away.  Hence, they must always stay on point.   Watch for those pitchfork bearers – they can get real nasty and then heads often roll quite literally....
  • Lift-Off Not (Yet) - Precious Metals Supply and Demand
      Wrong-Way Event Last week we said something that turned out to be prescient:   This is not an environment for a Lift Off Event.   An unfortunate technical mishap interrupted the latest moon-flight of the gold rocket. Fear not true believers, a few positive tracks were left behind. [PT]   The price of gold didn’t move much Mon-Thu last week, though the price of silver did seem to be blasting off. Then on Friday, it reversed hard. We will provide a forensic...
  • Merger Mania and the Kings of Debt
      Another Early Warning Siren Goes Off Our friend Jonathan Tepper of research house Variant Perception (check out their blog to see some of their excellent work) recently pointed out to us that the volume of mergers and acquisitions has increased rather noticeably lately. Some color on this was provided in an article published by Reuters in late May, “Global M&A hits record $2 trillion in the year to date”, which inter alia contained the following chart illustrating the...
  • Cryptocurrency Technicals – Navigating the Bear Market
      A Purely Technical Market Long time readers may recall that we regard Bitcoin and other liquid big cap cryptocurrencies as secondary media of exchange from a monetary theory perspective for the time being. The wave of speculative demand that has propelled them to astonishing heights was triggered by market participants realizing that they have the potential to become money. The process of achieving more widespread adoption of these currencies as a means of payment and establishing...
  • The Fed's “Inflation Target” is Impoverishing American Workers
      Redefined Terms and Absurd Targets At one time, the Federal Reserve's sole mandate was to maintain stable prices and to “fight inflation.”  To the Fed, the financial press, and most everyone else “inflation” means rising prices instead of its original and true definition as an increase in the money supply.  Rising prices are a consequence – a very painful consequence – of money printing.   Fed Chair Jerome Powell apparently does not see the pernicious effects...

Support Acting Man

Item Guides

j9TJzzN

The Review Insider

Dog Blow

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com