"...Not deciding to simply take what they want?"

I strongly suspect that's next. Tell me they are not already considering it.

certain logic

that's funny

So..... Wtf happened in Spain and DO we find out the details?

Ireland - WHERE are your BALLS?!

The flaw in their model of a perfect bureaucracy has been exposed.

So what else is next if outright threats are not on the agenda of the EU technocrats?

I think I can now see the body of the train in the tunnel not just the light. This crisis is about to shift into warp speed and you'll not be given any chances to prepare from here out IMHO.

Yeah, 86 I agree


The Spain bs was an instant fail.

I think we are really back at defcon 1.

Their bull **** games are not working like they were in the past.

This didn't take long either - http://translate.google.com/translate?sl....

I think bailout fatigue is setting in. That is ultra bearish. When markets laugh and sell off at QE, ESM etc. it is a sign that the powers that be are running out of bullets.

The initial knee jerk reactions are to be expected. Gen's right about the bondholders waking up to the fact that they were just forcibly demoted down the seniority chain (bondholders for the *banks* that will request aid). Would anyone have it any other way in a forced restructuring?

As for the Spanish government's bonds, well, as I laid out in another post earlier today, that's probably more due to the fact that Spain has laid its cards face up and everyone knows exactly what's in play - until the deal is signed, there's still the possibility that they'll need to go elsewhere for financing, and that would obviously entail slightly higher interest rates along with some not so happy contingency plans for others involved. http://market-ticker.org/akcs-www?single....

BTW: Can't anyone imagine foreign buyers of minority interests in the troubled Spanish banks, what with their established franchises and loyal customer bases and all? Only a small part of their loan portfolios are adversely affected, and that's being written down thanks to new regulations that require mark-to-market and higher loan loss reserve ratios (the highest in the world I would venture to say) as I posted a few days ago. http://market-ticker.org/akcs-www?single....

When a system based on fictional book keeping starts coming apart, it keeps coming apart. Chris Martenson did an interview with Steve Keen. Keen is part of a group of economists that understands debt and understands what goes on when debt has to delever. He espouses some ideas that I have thought of myself, like producing money to pay down debt that is distributed to everyone. He also makes plain that banks don't lend deposits, but must attract them in order to keep their books balanced. The marginal money in the bank only changes hands when it is taken out in cash or changes banks.

http://www.chrismartenson.com/blog/steve....

Why is it that bankers are the only people that don't pay for their mistakes. Keen puts the blame on them, because they are supposed to no better than to create money that can't be paid back. Kids that drive stupid lose their cars in accidents and maybe injure themselves. They generally quit driving stupid (driving stupid and not knowing how to drive and watch what you are doing are 2 different things)when the costs hit home. As we have seen with JPM, MF Global and others, banks haven't changed a thing and the politicians are begging them to keep on, as they need the mal-investment to make the economy look good now.

This action doesn't create any more money. What it more likely does is create more money that can't be paid back. This money can't be withdrawn or the banks will collapse, so it is basically frozen in place. I don't believe banks lend reserves in the first place, but instead leverage their net worth. How do you leverage zero? This is a debt, not an equity position. It will merely be more Euro resources frozen in a broken banking system.

The nature of banking is being preserved by the authorities and it really needs to change. The strung together fraud that makes up reserve or credit banking always comes apart, once the speculative spirit hits, bad debt is sure to follow. The money supply of the world can't be left to such idiots. The new talk is deposit insurance, which is another way of saying, the woman is so gorgeous, I can't resist the fact she has AIDS, herpes and many other diseases. Money and debt need to be separated, rather than the existance of credits on balance sheets being the risk of the creditor. All of us are creditors to banks and the only money to bail out the money is in the accounts that don't exist.

Mayor, we are merely catching on to the fact that bankrupts are guaranteeing more debt to bail themselves out and pass more bad checks.

Quote:

The nature of banking is being preserved by the authorities and it really needs to change.

I have given this more thought than I care to admit. In the end, Karl's suggestion that we back 'lending' fully is the only solution that makes sense to me. And I can count on one finger the number of figures supporting that model so I wouldn't expect banking to change anytime soon unfortunately.

People actually believe banks lend them something they already have (money). The term "lending" is not just partially, but entirely fraudulent itself once you create fiat backed by nothing.

Not many ways to solve this problem. Print or default. Either way is extremely painful. Just for different parties. It's time to take our medicine. Printing in an amount necessary to paper over problems would be hyper-inflationary. So let's just mark everything to market, sort the mess out and start over. Balance all budgets and make the tough decisions. It's time.

Agree completely, TMD.

This is what we've needed for YEARS now.

Too bad those with the power to make that happen are fellating the ones which would be destroyed by doing so, guaranteeing that not only will it NOT occur, but that we'll go through the most possible PAIN before the situation explodes on us all. Bankster Bukkake - courtesy of DC and The Bernank.

The bottom line is that -- notwithstanding all the good intentions and with all due deference to Mr. Beethoven's ode -- making Europe a single currency area was a boneheaded move, way premature, bound to fail.

Mann,

Love and respect your writings! But maybe a bit of a correction - unless I misunderstand your point.

When you say, "This action doesn't create any more money." I think that they actually DO 'create more money' - It's just that they DON'T create any more wealth.

Leng

Why back anything ? Regulators have been "captive" of their industry going back thousands of years...why does anyone think "this time is different" ?

The ONLY banking model that works is the one of buyer beware and private insurance...all the rest is just pretty talk. Let the bad/irresponsible banks fail. We don't need them, at all.

Eurosis For Dummies - A Timely Reminder (U.S. Taxpayers Are The Dummies)

http://www.zerohedge.com/news/eurosis-du....

Eurozone break-up could hit us in face, warns Basu

http://www.moneycontrol.com/news/economy....

Precisely, Tesla. The only real way out of this mess is the complete elimination of Moral Hazard. With that being said, I don't see the right steps being taken before it's too late.

The Subordination in Spain Will Cause Pain

http://brucekrasting.blogspot.com/2012/0....

Excerpt:

Spanish banks have already hocked any available assets that could be used to “secure” the debt that will be issued in the bailouts. Therefore, the only alternative is for the banks to issue new debt that is unsecured. This is a subtle difference, but an important one. It might end up blowing up the entire European banking sector.

There is a simple fact that must be considered. Any debt that a Spanish bank has outstanding to the Spanish government is Senior to all other classes of debt except depositors. It doesn’t matter what the language says in the creditor agreements. What matters is how the markets will perceive the transaction.

I know how the market will react. If one were a holder of a Senior Debt security of a Spanish bank on Friday, you would end up with a functionally subordinated debenture after the bailout transaction on Monday. Any publicly issued senior debt (including senior secured) of that bank issued after the government bailout debt was created, would be perceived as tainted. It would be unsalable swill. The existing bond debt would sink like a stone.

This discussion is somewhat irrelevant when it comes to Spain’s banking system in June of 2012. The capital structure of many Spanish banks is already toast. So the details of the bailout don’t really matter at this point. In all likelihood the market’s knee jerk reaction will be:

“Any bailout is a good bailout”.

But not too long after, the reality will set in. A precedent will have been set on what may/will happen to banks in other European countries. Should the bailout of Spanish banks be accomplished via the issuance of new debt (versus equity), then damn near every bank in the EU will have a run on the debt portion of its capital structure. It will happen first with the Italian banks, from there, it will head to Paris.

Brilliant plan: issue new unsecured debt!

What could possibly go wrong?

Quote:

Spanish banks have already hocked any available assets that could be used to “secure” the debt that will be issued in the bailouts.

Duh.

That's a good one.

That's why they need a "co-signer".

(The only thing wrong with that statement is its lack of qualifying clarity. It should read, "Spanish banks *that need help* have already . . .")

. . . and if you're selling one of the healthy Spanish banks based on misleading, biased information, would that be smart money at work, or dumb money?

Is that guy even familiar with the numbers?

No, the spanish banks still have some really nice chairs.
When they have the sale, I will kick in a few hundred.