See, The Gun Is Loaded! in [Market-Ticker]

Posted 2010-05-11 08:34
by Karl Denninger
in International

See, The Gun Is Loaded!

No, no, not the ECB's.

The "currency speculators" - cough - BANKS that were shorting the hell out of the Euro.

Let's see if I can figure out what's happened here.

Banks shorted the Euro, (correctly) surmising that Greece, Portugal, Spain and others can't possibly cover their debts.
The ECB freaks out as the Euro heads toward PAR and calls "emergency meetings" (forgetting, I might add, that the Euro traded under PAR not that long ago.)
The ECB and Eurozone decides to "defend" the Euro with €1t in "defensive measures", including buying bonds of bankrupt sovereigns (gee, that's nice - monetization by another name.) Since the ECB and EuroZone cognescenti is of course connected to the large banks in Europe (including France, where Sarkozy is located) these banks know to back off on Friday (notice the nice little uptick?) to lock in their bonuses from these insanely-profitable trades against their own currency.
The very same banks, including the ones in Sarkozy's back yard, see the very nice spike and short the Euro even harder, (correctly) surmising that they have successfully stuck the gun up the nose of the ECB!

Rinse and repeat until you have all the money.

Naw, it wouldn't be that simple, would it? Why of course it would.

See, lending someone money when they're bankrupt can't possibly make them not-bankrupt. It can only make them more-bankrupt. As a consequence the ECB's action is self-destructive and doomed to fail, and as a consequence there is no reason for these banks to back off at all! Indeed, quite to the contrary - they have (correctly) deduced that they can make billion in bonuses by shorting their own currency to destruction, forcing ever-larger "interventions" by the ECB!

If you've ever seen a meth addict goose himself with his drug of choice to the point where his teeth literally fall out, you know how this story ends.

The only winning play is to refuse to play at all, and force the bankrupt to recognize their insolvency and reorganize their debts. That's it. Attempting to paper over insolvency never works, and the market has now deduced this, as I expected - although I didn't think it would happen quite this quickly.

"All in" by the ECB drew not a "ok, ok your pot!" response, but rather one loud voice in response: CALL!

Bonne chance Nicolas.

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User Info	See, The Gun Is Loaded! in forum [Market-Ticker]
Dji Posts: 1245 Incept: 2009-04-21 Ponzi world 3rd rock from the sun	See, lending someone money when they're bankrupt can't possibly make them not-bankrupt. It can only make them more-bankrupt. DING DING DING What part of this sentence does the ponzi world not get? ---------- Don't be a bag holder-Me What goes up Must come Down- Alan Parsons Project 2010-05-11 08:40:13 Permalink
Xanares Posts: 2595 Incept: 2008-11-10 Between Sicily and Tunisia	The Emperor is pleased. 2010-05-11 08:41:46 Permalink
Mikeit83 Posts: 963 Incept: 2009-06-19 East Coast	so I take it we have not seen ANYTHING yet? Something tells me that Drudgereport.com will have the market graphs up on the top of the page for quite a few more days. Glad I got some popcorn at the grocery store the other day. How fast is this all going to fall apart? 2010-05-11 08:48:13 Permalink
Rvacha Posts: 8295 Incept: 2008-10-03 Cleveland	Right on Gen! It should be noted that the EU has not displayed a bazooka yet, it has only spread out various pieces parts on a table, claiming that once assembled it will be a bazooka ---------- "I suggest you panic." - Hugh Hendry 2010-05-11 08:48:51 Permalink
Bluebird Posts: 1380 Incept: 2008-05-02	Who pulls the trigger? Greece? Wall Street? Katla volcano? Other??? 2010-05-11 08:53:32 Permalink
Nirvan45 Posts: 4036 Incept: 2007-10-31 florida	Here is zh article regarding this topic with a lot more sarcasm then your ticker. http://www.zerohedge.com/article/europea.... Oh the humanity, what have this world come to As long as they don't have the balls to line them up and do multiple rounds at once, Taking everyone to cleaners by banksters will continue Last modified: 2010-05-11 08:57:57 by nirvan45 2010-05-11 08:56:59 Permalink
Alex Posts: 2439 Incept: 2007-08-03	Could the shorting not be hedging by overseas investors who hold euro denominated debt? There's gotta be plenty of dumb money out there, after all, who do you think was buying all that Lehman crap up to the eleventh hour. ---------- "The soft patch does not occur in year 2. This is a completely abnormal economic condition — all the more so in the context of the massive and ongoing fiscal and monetary stimulus." —Rosenberg 2010-05-11 08:57:42 Permalink
Uwe Posts: 6428 Incept: 2009-01-03 19446	Now there's talk that Germany and France may be endangering their AAA credit rating by backing this bailout: http://www.bloomberg.com/apps/news?pid=2.... -Uwe- ---------- “Whenever the legislators endeavor to take away and destroy the property of the people, or to reduce them to slavery under arbitrary power, they put themselves into a state of war with the people, who are thereupon absolved from any further obedience.” - John Locke 2010-05-11 08:58:15 Permalink
Lucky1 Posts: 2019 Incept: 2009-08-05 Pittsburgh	Ridiculous. Their May 9 gambit didn't even last until May 11. Oops. All they really did is set up a nice re-entry point for Euro shorts to re-make the same money a second time. I could think of a better way to blow a trillion Euro... ---------- "Crime is contagious. If the government becomes a law-breaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy." -USSC Justice Louis D. Brandeis: Dissenting Opinion in "Olmstead v. United States" (1928) 2010-05-11 08:58:21 Permalink
Ruffcut Posts: 2903 Incept: 2007-07-07 Mushagain	Are you saying the same banks, they are trying to save are stabbing the ECB in the back at the same time? ---------- Support locally, and **** off globally! 2010-05-11 08:58:27 Permalink
Icanhasbailout Posts: 9939 Incept: 2009-03-10 Imaginationland	Are the same banks both being bailed out by the ECB and speculating against the Euro? ---------- 2010-05-11 08:58:51 Permalink
Genesis Posts: 130678 Incept: 2007-06-26	Yep ---------- I don't care* if it makes sense -- only if it makes money. -- Me* Bank (n): See scam, fraud and theft. *Eat a bankster -- they're low-carb.* *What part of "shall not be infringed" was unclear?* 2010-05-11 09:01:25 Permalink
Tnben Posts: 627 Incept: 2008-10-14 Memphis	I talked to a Fortune 500 CFO last night. Early yesterday his banker--JP Morgan--requested an immediate listing of all European obligors to assess their exposure to this travesty. 2010-05-11 09:02:28 Permalink
Lucky1 Posts: 2019 Incept: 2009-08-05 Pittsburgh	Ican: We can only speculate; but I can't see how there wouldn't be... Only the Euro TBTF's would be out there speculating in the FX markets... (?) ---------- "Crime is contagious. If the government becomes a law-breaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy." -USSC Justice Louis D. Brandeis: Dissenting Opinion in "Olmstead v. United States" (1928) 2010-05-11 09:03:26 Permalink
Alex Posts: 2439 Incept: 2007-08-03	An early indication on how this going to play out. Quote: Italy paid a high price for the sale of debt on Tuesday in the first test of investor appetite for new eurozone debt since the unveiling of a €750bn rescue package for the region. Although the €5.5bn auction of 12-month loans was twice covered, Italy had to pay the highest yield on 12-month loans for a year to attract investors. Analysts said Italy had to pay a premium of 15 basis points, which is the extra amount they had to pay above existing comparable debt already trading in the market. ---------- "The soft patch does not occur in year 2. This is a completely abnormal economic condition — all the more so in the context of the massive and ongoing fiscal and monetary stimulus." —Rosenberg 2010-05-11 09:04:35 Permalink
Lucky1 Posts: 2019 Incept: 2009-08-05 Pittsburgh	Gen: Is there a way to find out which banks might be getting ECB bailouts (or FED swap line cash???) AND holding short positions against their own currency? ---------- "Crime is contagious. If the government becomes a law-breaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy." -USSC Justice Louis D. Brandeis: Dissenting Opinion in "Olmstead v. United States" (1928) 2010-05-11 09:09:25 Permalink
2banana Posts: 337 Incept: 2008-02-25	Reminds me of the movie "WarGames" (1983) Joshua: Shall we play a game? David Lightman: Oh! Jennifer: [giggles] I think it missed him. David Lightman: Yeah. Weird isn't it? Jennifer: Yeah. David Lightman: [typing] Love to. How about Global Thermonuclear War? Joshua: Wouldn't you prefer a nice game of chess? [Jennifer laughs] David Lightman: [typing] Later. Let's play Global Thermonuclear War. Joshua: Fine. ... McKittrick: General, the machine has locked us out. It's sending random numbers to the silos. Pat Healy: Codes. To launch the missiles. General Beringer: Just unplug the ****n thing! Jesus Christ! McKittrick: That won't work, General. It would interpret a shutdown as the destruction of NORAD. The computers in the silos would carry out their last instructions. They'd launch. General Beringer: Can't we disarm the missiles? Pat Healy: Over a thousand of them? There's no time. At this rate it will hit the launch codes in... 5.3 minutes. General Beringer: [smiles sarcastically at McKittrick] Mr. McKittrick, after very careful consideration, sir, I've come to the conclusion that your new defense system sucks. McKittrick: I don't have to take that, you pig-eyed sack of . General Beringer: Oh, I was hoping for something a little better than that from you, sir. A man of your education. Major Lem: [holding a telephone] General, it's the president. McKittrick: What are you... what are you going to tell him? General Beringer: I'm ordering our bombers back to fail-safe. We might have to go through this thing after all. ... David Lightman: [to Joshua] Come on. Learn, ***mit. ... [after playing out all possible outcomes for Global Thermonuclear War] Joshua: Greetings, Professor Falken. Stephen Falken: Hello, Joshua. Joshua: A strange game. The only winning move is not to play. How about a nice game of chess? 2010-05-11 09:10:51 Permalink*
Psquared Posts: 1876 Incept: 2008-10-11 SE USA	I love this: Quote: See, lending someone money when they're bankrupt can't possibly make them not-bankrupt. It can only make them more-bankrupt. Hussman said the other day, lend a guy who is in default by a dollar another dollar and what do you get? A guy in default by $2. (paraphrase - I'm not as eloquent) ---------- "Our Constitution is designed only for a moral and religious people. It is wholly inadequate for any other." ~ John Adams 2010-05-11 09:26:46 Permalink
Bagbalm Posts: 4249 Incept: 2009-03-19 Just North of Detroit	Do none of these supposedly brilliant people stop and ask - Do I want to live in this very different world I am creating even fabulously rich? 2010-05-11 09:38:52 Permalink
R2judge Posts: 573 Incept: 2008-04-13 Burbank CA	From Zero Hedge: Jim Rickards, who recently has gotten massive media exposure on everything from the JPM Silver manipulation scandal, to the Greek default, was back on CNBC earlier with one of the most fascinating insights we have yet heard from anyone, which demonstrates beyond a doubt why any attempt by Europe to print its way out of its current default is doomed: "Look at what Soros did to the Bank of England in 1992 - he went after them, they had a finite amount of dollars, he was selling sterling and taking the dollars, and they were buying the sterling and selling the dollars to defend the peg. All he had to do was sell more than they had and he wins. But he needed real money to do that. Today you can break a country, you don't need money you just need synthetic euroshorts or CDS. A trillion dollar bailout: Goldman can create 10 trillion of euroshorts. So it just dominates whatever governments can do. So basically Goldman can create shorts faster than Europe can create money." Just wait until Europe finally realizes that the CDS "speculators" had all the cards in the poker game all along. And we hope Europe listens to the man: being LTCM's GC he knows all about failed bail outs. 2010-05-11 09:43:40 Permalink
Themortgagedude Posts: 8843 Incept: 2007-12-17 saint louis	What next stupid ***ing decision will be made? I'm betting Ben is in the laboratory right now working on something. I'm guessing the next one will be just spectacular. ---------- I'm already visualizing you with duct tape over your mouth. Last modified: 2010-05-11 09:46:03 by themortgagedude 2010-05-11 09:45:37 Permalink*
Sharon Posts: 4352 Incept: 2008-02-10 Odessa, Missouri	Quote: Rinse and repeat until you have all the money. What puzzles me here is this: Isn't the point where "you have all the money" also the point at which the money is worthless? ---------- Semper ubi sub ubi. 2010-05-11 09:55:42 Permalink
Pondmaster Posts: 114 Incept: 2009-06-30	Do I want to live in the world I'd be creating...? - Jesse's Cafe Amaricain has a good story about this very thing .http://jessescrossroadscafe.blogspot.com.... I am really amazed . What we are seeing is economic warfare/ terrorism . When does it happen to the USA ? What will the weak sisters here do to stop it? I'd say lining up the offending banks and hedges and shooting them may work ...for a New York minute .... But, who is really orchestrating all this . Surely a power greater than the banks and hedges . You will be like "gods" 2010-05-11 09:58:53 Permalink
Genesis Posts: 130678 Incept: 2007-06-26	Sharon: Yes ---------- I don't care* if it makes sense -- only if it makes money. -- Me* Bank (n): See scam, fraud and theft. *Eat a bankster -- they're low-carb.* *What part of "shall not be infringed" was unclear?* 2010-05-11 10:01:22 Permalink

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