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Thursday, 12 July 2012

ECB 'We don't want your money'

There can be no clearer signal, no larger or brighter billboard sign that the ECB's decision to offer 0% interest on deposits. 

The thunder of imminent collapse is trumpeting more clearly with each passing day. Once the seals are released, Western Society as we know it will collapse.

The much beloved government in whom so many have placed so much of their trust, to whom so many have passed so much of their responsibility to, will finally teach the necessary lesson to those who would believe that their life, their future and their responsibilities are nothing that they need worry about.

The chart above shows the effect of the ECB's decision to cut their overnight deposit interest rate to 0% a fall of €484 Billion or around 50% of deposits. Where did all this money go, well the yield on Swiss bonds fell to a record low of MINUS 0.38%, yes people are willing to lose money to buy Swiss bonds, together with a multi-record breaking WTF? auction of US 10 year treasuries as reported by Zero Hedge. The Central Bank is telling you that your money is no good are you going to listen to them?

Money it seems is the one thing that no one wants to have, rather reminiscent of Weimar Germany in the early 20's or Zimbabwe to this day, so why are commodity prices not inflating? How much longer can these lies be maintained? Well it's only a few months till the US presidential elections.

There's a little bit of time left, spend every penny you have and buy 'things', any 'thing' that you can buy outright, but under no circumstances buy anything that requires a mortgage, before you get left holding the baby.


Who can we trust?

Italy's national statistics body ISTAT threatened on Thursday to cease issuing data on the economy, saying it had been crippled by government spending cuts aimed at reducing national debt and righting public finances. 
The euro zone's third biggest economy, whose statistics are closely watched as the country's huge state debts put it at the center of the bloc's financial crisis, would face stiff European Union fines if the flow of data is cut off, ISTAT President Enrico Giovannini was quoted as saying.
"Spending cuts are putting ISTAT at risk. From January onwards we will not issue any statistics," Giovannini told daily La Repubblica in an interview. 
Prime Minister Mario Monti's government has unveiled plans to cut public spending by 4.4 billion euros in 2012, 10.6 billion euros in 2013 and over 11 billion euros in 2014, to be mainly achieved through a planned 10 percent reduction of public administration staff. 
Planned government cuts would reduce financing to ISTAT to 150-160 million euros by 2013 from 176 million euros currently, Giovannini said. He said that was half what is set aside for national statistics in France and one-third of what available in Nordic countries.
Giovannini called the planned cuts "unsustainable". 
He said ISTAT produces 300 sets of data a year, up 25 percent from two years ago and 2,000 smaller reports. Seventy percent of ISTAT's output is aimed at meeting obligations with the EU. (Reuters)
So whilst the Italian government is unable to afford to pay its bills, Civil Servants have taken it upon themselves to blackmail the government into targeting cuts to other areas. It is good to see that Civil Servants are setting themselves ahead of the society they are supposed to serve.


The second Barclays announced its $450 million Libor settlement, it was all over - the lawyers smelt not only blood, but what may be the biggest plaintiff feeding frenzy of all time. 

Which is why it was only a matter of time before we saw stories like these in Reuters and the Financial Times
"State attorneys general are jumping into the widening scandal over whether banks tried to manipulate benchmark international lending rates, a move that could open a new front against the top global banks. A handful of state attorneys general said they are looking into whether they have jurisdiction over the banks, and are starting preliminary discussions to determine what kind of impact the conduct involving the Libor rate may have had in their states."
The lawyers will crawl out of the woodwork like worms after a torrential downpour, and will all be willing to work on contingency, telling potential clients they are owed thousands, nay, millions based on such and such analysis. All they need is to have held a mortgage, or a credit card, or any variable interest liability in the 4 years in question. And to sign the dotted line.

The resulting lawsuits, most of which in class action format, will be of gargantuan proportions, simply to encourage settlement, as ongoing litigation will easily destroy the financial system. The litigation reserves at the TBTF banks will explode and will cause years writedowns. But at least they will be one-time charges, so the stocks don't get crushed too much. That said, forget any growth out of the banking sector, and certainly the 16 BBA member banks, all of whom are about to be sued to smithereens in civil suits as more and more banks step up and settle to avoid criminal prosecution.

The biggest irony is that the torrent of upcoming suits will be in effect targeting none other than the Central Banks. Because while banks which all were massively levered to even a one basis point move in Libor were very sensitive to the smallest variations in 3 month USD libor, end-clients who did not have this leverage were far less impaired. But that doesn't matter: after all the same clients were impaired through gross borderline criminal negligence which is all that matters in a court of law.

The very chancers who will likely seek a lottery win through these actions will be the ones who end up paying for it in expenditure cuts and tax increases. The lawyers will do very nicely I'm sure.