Submitted by Reggie Middleton on 06/29/2012 09:55 -0400
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Bloomberg EU Eases Spain Debt Rules as Merkel Retreats and Euro Rises After EU Leaders Renounce Spain Loan Seniority
Euro-area leaders agreed to relax conditions on emergency loans for Spanish banks and possible help for Italy as an outflanked German Chancellor Angela Merkel gave in on expanded steps to stem the debt crisis.
After 13 1/2 hours of talks ending at 4:30 a.m. in Brussels today, chiefs of the 17 euro countries dropped the requirement that taxpayers get preferred creditor status on aid to Spain’s blighted banks and opened the way to recapitalizing lenders directly with bailout funds once Europe sets up a single banking supervisor. Stocks and bonds in Spain and Italy rallied and the euro posted its biggest gain this year.
Oh yeah, that's a damn good idea. Take a murky pool of depreciating, hard to value, illiquid assets and make them even murkier, harder to value, yet easier to pledge since it's now acceptable to look in the other direction as you receive said "trash assets". To make matters even worse, the Europeans are now attempting to perfect their method of throwing good money after bad by denying preferential status to the only money that can save (or at least buoy) these zombie banks. Of course, no lender will want to go in knowing that they can be instantly subordinated, but then again when the only lender that can realy make a difference goes in, why should it take a bow to anyone else. Trust me on this one... Taxpayers will offer loans and see that money disappear... Poooffff!!! Don't believe me? Reference CNBC Asks, "So Why Are Spanish Bond Yields Falling?" I Ask The Better Question, "Why Are Spanish Banks Considered Solvent?"
Bloomberg also reports Spain Gets Relief as Europe Leaders Outflank Merkel in Bid to Blunt Crisis. Listen, pressuring Germany, the one remaining relatively stable/robust large economy in the union is a recipe for disaster. There's no wonder why 16 or so failing economies are in opposition to the wants and desires of the 1 or so successful economies. See any common threads here? Germany is far from bulletproof, as the same MSM page sports this headline...
German Retail Sales Unexpectedly Fell for a Second Month in May on Crisis
German retail sales unexpectedly fell for a second month in May as the sovereign debt crisis worsened, damping the economic outlook.
Germany is a net export nation whose primary trading partners range from extremely hard landing to recessionary to outright depression. Exactly where is all of the economic growth going to come from to fund the world, or at least the European version of the world. I have written extensively on this... Sophisticated Ignorance Part 2: Pressuring Germany To Do The Wrong Thing Is A Short Seller's Dream
Things are so predictably dead beat that I don't even have to write new material anymore. Seriously! Let's just cut and paste from the BoomBustBlog archives: Dead Bank Deja Vu? How The Sovereigns Killed Their Banks & Why Nobody Realizes They're Dead
I have broached the argument in the past that the ECB is not god, or even close to it, and that it can only play the bond buying ponzi for but so long before negative consequences occur. Reference:
ECB As European Lender Of Last Resort = Institutional Purveryor Of A Pan-European Ponzi Scheme
Over A Year After Being Dismissed As Sensationalist For Questioning the ECB's Continued Solvency After Sovereign Debt Buying Binge, Guess What!
How much damage is being inflicted upon the ECB
http://www.zerohedge.com/contributed/2012-06-29/beware-day-when-bulging-bunds-go-bust-bullshit-or-doesnt-anyone-use-math-anym?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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