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Another Bailout Part 2


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If you had read about “Another Bailout?”, this is its part 2. There are many things to talk about this topic and I think the information is valuable for to learn to trade Don’t let you wait for long, now just be back with Larry Levin!

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Another Bailout Part 2

  1. 1. Another Bailout? Part 2 If you had read about “Another Bailout?”, this is its part 2. There are many things to talk about this topic and I think the information is valuable for to learn to trade Don’t let you wait for long, now just be back with Larry Levin!
  2. 2. <ul><li>Yesterday I wrote “European officials promised something big to happen this weekend. Some expected the announcement of the Greek default, while others expected another (mega) slush fund…another bailout of broke sovereigns. </li></ul>
  3. 3. <ul><li>I am looking for the answer early Sunday morning and I have found this, which would suggest the latter: another bailout.” </li></ul>
  4. 4. <ul><li>European officials are working on a grand plan to restore confidence in the single currency area that would involve a massive bank recapitalisation, giving the bail-out fund several trillion euros of firepower, and a possible Greek default. </li></ul>
  5. 5. <ul><li>German and French authorities have begun work on a three-pronged strategy behind the scenes amid escalating fears that the eurozone’s sovereign debt crisis is spiralling out of control. </li></ul>
  6. 6. <ul><li>Their aim is to build a “firebreak” around Greece, Portugal and Ireland to prevent the crisis spreading to Italy and Spain, countries considered “too big to bail.” </li></ul>
  7. 7. <ul><li>That article was longer and went on to describe almost exactly what caused today’s rally: more debt, more leverage, and more hopium. If the Eurozone central planners get their way, they will somehow use 8 to 1 LEVERAGE to continue bailing out the insolvent nations of Europe. </li></ul>
  8. 8. <ul><li>They will buy the debt of these bankrupt counties, repackage them as debt instruments and sell them, which sounds an awful lot to me like a CDO – squared. Maybe it will be different, but those CDOs and CDO squared “securities” were a disaster in the US banking system…but “this time will be different – promise!” </li></ul>
  9. 9. <ul><li>“ Not so fast” says a German judge! </li></ul>
  10. 10. <ul><li>Germany’s top judge has issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new constitution and a popular referendum, vastly complicating plans to boost the EU’s rescue machinery to €2 trillion (£1.7 trillion). </li></ul>
  11. 11. <ul><li>Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent. </li></ul>
  12. 12. <ul><li>“ The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution),” he said. </li></ul>
  13. 13. <ul><li>“ There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. </li></ul>
  14. 14. <ul><li>This cannot be done without the people,” he told newspaper Frankfurter Allgemeine. </li></ul><ul><li>The extraordinary interview comes just days before the Bundestag votes on a bill to revamp the EU’s €440bn bail-out fund (EFSF), enabling it to purchase EMU bonds pre-emptively and recapitalise banks. </li></ul>
  15. 15. <ul><li>Tensions are running high after it emerged over the weekend that officials are working on plans sketched by the US Treasury and the European Commission to “leverage” the firepower of the EFSF to €2 trillion, in conjunction with lending from the European Central Bank. </li></ul>
  16. 16. <ul><li>Carsten Schneider, finance spokesman for the Social Democrats, demanded that Chancellor Angela Merkel and finance minister Wolfgang Schäuble clarify their “true intentions” before the vote on Thursday. </li></ul>
  17. 17. <ul><li>“ A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable,” he said. </li></ul>
  18. 18. <ul><li>Prince Hermann Otto zu Solms-Hohensolms-Lich, the Bundestag’s deputy president and finance chief for the Free Democrats (FDP) in the ruling coalition, expressed outrage over the secret plans. </li></ul>
  19. 19. <ul><li>“ Unless the German finance minister can give an immediate assurance that there will be no leveraged formula, I will not vote for this law. We might as well dispense with months of negotiations if all this means is that the Bundestag will be circumvented and served cold left-overs,” he said. </li></ul>
  20. 20. <ul><li>The accusation that German leaders are conspiring with EU officials to emasculate the Bundestag is highly sensitive, going to the core of the raging debate in recent months over EU encroachments on German democracy. </li></ul>
  21. 21. <ul><li>… Her task has become that much harder after Standard & Poor’s hinted Germany itself might loose its AAA rating if the rescue machinery is greatly expanded. </li></ul>
  22. 22. <ul><li>“ There is no cheap, risk-free leveraging option for the EFSF any more,” said David Beers, S&P’s head of sovereign ratings. “We’re getting to a point where the guarantee approach .. is running out of road,” he said, adding the various options under discussion could have “potential credit implications”…. </li></ul><ul><li>This isn’t over by a long shot. </li></ul>
  23. 23. <ul><li>Trade well and follow the trend, not the so-called “experts.” </li></ul><ul><li>Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters. </li></ul>