Central Perk: 14 iun. 2012

joi, 14 iunie 2012

Mish's Global Economic Trend Analysis

Wells Fargo Closes Business Checking Account of "Mortgage Lender Implode-O-Meter" Citing "Credit Risk"
"It's Not the Situation Room" Says Spain After holding Emergency Cabinet Meeting
Bundesbank: Policymakers Should Refrain From "Wild Goose Chase" of Higher Firewalls; Merkel Warns "Limited German Resources"; Sensationalist Silliness
Spain Is Not Greece (And Other Such Anecdotes)
Any Rabbits Left in the Hat?
Spanish 10-Year Bond Yield Hits 6.96%, a New Euro-Era High; 2-Year Bond Yield Hits 5.19%

Wells Fargo Closes Business Checking Account of "Mortgage Lender Implode-O-Meter" Citing "Credit Risk"

Posted: 14 Jun 2012 07:53 PM PDT

I received an email yesterday from Aaron Krowne, founder of the Mortgage Lender Implode-O-Meter site stating that Wells Fargo had closed a business checking account for ML-Implode citing "credit risk".

I asked Krowne if the account had a line of credit and Krowne answered "No".

So, how can an simple checking account with no credit capabilities be considered a "credit risk"? Even if such a thing is possible, one would think Wells Fargo would discuss the situation with ML-Implode.

Well, think again.

Krowne believes the account closing is more likely related to a recent series of articles by ML-Implode blogger Martin Andelman who "pulled no punches in criticizing Wells Fargo over its foreclosure practices." One of those posts was about a man who allegedly committed suicide following a lost mortgage payment.

You can read about the suicide and the rest of Aaron Krowne's story in his post ML-Implode Gets "Wikileaks Treatment" As Wells Fargo Freezes, Closes Business Account

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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"It's Not the Situation Room" Says Spain After holding Emergency Cabinet Meeting

Posted: 14 Jun 2012 01:49 PM PDT

We now have an official denial of an amusing kind.

With clear reference to CNN's Situation Room with Wolf Blitzer, Spain calls for calm following an emergency cabinet meeting while declaring the meeting was "Not the Situation Room".

I pieced together the following synopsis with help from Google Translate:

Situation Room Synopsis

Following a regular cabinet meeting, Spain's prime minister Mariano Rajoy held an emergency meeting with deputy prime minister Soraya Saenz de Santamaria, Economy minister Luis de Guindos, and Treasury Minister Cristobal Montoro.

The Government says the meeting was not the "Situation Room".

Economy minister Luis de Guindos admits the situation of "tension" while stating "government is not in a cabinet crisis". De Guindos requested calm.

Recall that on June 1, de Guindos insisted Spanish banks were sound, not needing a rescue while begging the international community for a rescue.

Please see Edge of a Precipice; Doublethink Extraordinaire; Spain in Discussions With US Regarding Bank Aid; Gold Soars; Geithner to the Rescue? for an Orwellian discussion of conflicting statements from Spain.

Here is an unedited snip as translated by Google ...

The four members of the executive who held the unusual meeting refused to answer questions from journalists in the corridors of the House. "President, a message of calm about the situation in the markets?" Was the repeated question. There was no response.

Alarms jumped at the escalation of the Spanish bond, placing the country in a dramatic situation. After two hours and meeting room, which was also attended by director of the Economic Office of Moncloa, Alvaro Nadal, appeared Economy Minister Luis de Guindos, before the media in a speech where the word most often repeated -up on three occasions was the quiet.

"The bottom line is quiet. We have a route that the measures to be taken and we know that indeed there are circumstances that are affecting international volatility and market situation." The owner of the field argued that "the government is on top of issues and topics, is taking action and will continue to take action ... and it will do, not only by the state of today's risk premium, but according to the interests of Spain and the euro zone. "

Quick Translation

Spain held an emergency cabinet meeting of four top members in the "Situation Room".
The Bottom line is decidedly not quiet.
Government is not on top of the issues.

Word Cloud

I pasted the entire translated text into the Wordle Word Cloud Generator and came up with this.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Bundesbank: Policymakers Should Refrain From "Wild Goose Chase" of Higher Firewalls; Merkel Warns "Limited German Resources"; Sensationalist Silliness

Posted: 14 Jun 2012 09:49 AM PDT

Sensationalist Silliness

Several people asked me to comment on The Telegraph article Germany signals shift on €2.3 trillion redemption fund for Europe by Ambrose Evans-Pritchard.

OK. Here goes. The headline is nothing but sensationalist silliness. There is no shift, and even if there was a shift, it could not possibly come in time.

"It is conceivable so long as there is proper supervision of tax revenues," said a source in the Chancellor's office. The official warned that there would be no "master plan" or major break-through at the EU summit later this month.

Mrs Merkel rejected the Redemption Pact last November as "totally impossible", even though it was drafted by Germany's Council of Economic Experts or Five Wise Men and is widely-viewed as the only viable route out of the current impasse.

Fast-moving events may have forced her hand.

Meaningless Political Statements

The statement, not even from chancellor Merkel, warned there would be "no master plan", only that the idea was "conceivable". That alone proves such a shift, even if it was real, could not possibly come on time.

This is what happened: "Fast-moving events" forced a meaningless statement out of an unnamed source in the Chancellor's office, hoping to calm the market.

Simply put: There is no meaningful shift.

Chancellor Merkel Warns of 'Limited German Resources'

Those seeking a dose of reality should consider Merkel Warns of 'Limited German Resources'

June 14, 2012 12:21 pm

"Germany's resources are not unlimited," she told the German parliament in a declaration of her government's stance before next week's G20 summit in Mexico.

In a forceful restatement of the limits to German action, she reeled off a list of other countries' demands for "big bang" solutions from Germany to solve the crisis, such as jointly-guaranteed eurozone bonds, a bank deposit insurance scheme, and most recently, a French-inspired financial stability package.

"Germany is strong, Germany is the economic engine and Germany is the anchor of stability in Europe. I say that Germany is putting its strength and its power to use for the well-being of people, not just in Germany, but also to help European unity and the global economy," she said. "But Germany's strength is not infinite."

Bundesbank: Policymakers Should Refrain From "Wild Goose Chase" of Higher Firewalls

Inquiring minds seeking a dose of reality should also pay attention to an interesting speech on the The present state of the euro-area sovereign debt crisis by Dr Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank, regarding the cause and solutions to the eurozone monetary union crisis.

Dombret does not speak for the entire Bundesbank, but I have no doubt his position is a representative viewpoint.

Please consider the following snips on increasing firewalls and entering into monetary unions.

Policymakers should refrain from a wild goose chase in pursuit of ever higher firewalls. Making the firewalls higher and higher will not resolve the crisis. Instead, policymakers should care that firewalls do not fall into a credibility trap owing to unavoidable political or financial constraints.

Generally speaking, a firewall cannot extinguish a fire. It only buys time until sustainable measures become effective. Therefore, the fire has to be extinguished by other means.

A disintegration of the currency union would be linked to extremely high costs and risks. That's why such a scenario cannot be anyone's goal. Yet this does not imply that Germany becomes open to blackmail and promises guarantees without control. This would indeed erode the stability basis of the currency union.

European authorities are not equipped with a supranational right to intervene in national budgets when member states do not apply the rules properly. Therefore, the fiscal compact – which has not been ratified by all member states yet – does not justify calls for monetary policymakers to further extend central banks' balance sheets. Nor does it substantiate any extensive joint liability.

Against this background the recent proposals of a so called banking union appear to be premature. Such a banking union, potentially comprising a euro area deposit-guarantee system, a euro area resolution fund and common euro area supervision for the largest and systemically important banking groups could very well represent a sensible step forward. Yet it has to follow a deeper fiscal union as it would imply significantly increased risk sharing amongst countries.

Introducing a banking union without having established a genuine, democratically legitimated fiscal union would risk undermining the no bail-out clause and the disciplining effects of financial markets on fiscal policy. From a formal perspective it necessitates amending the EU Treaty – meaning it is very unlikely to be a short-term fix to the current challenges mainly related to recapitalisation needs in some banking systems, to political risks and to contagion effects within the euro area.

Dead Before Arrival

The Bundesbank and Chancellor Merkel are both against "big bang" solutions including joint eurobonds, a bank deposit insurance scheme, a French-inspired financial stability package, the ECB printing money, and every other nonsensical proposal put forth by nannycrats and mindless economists everywhere.

Please mark all such non-solutions dead-before-arrival as noted in Dead Before Arrival, Eight Lessons the EU Needs to Learn .

Deadlock Over What Comes First

Germany insists that a fiscal union must come firsts while Spain, France, and Greece want a banking union of any kind first.

A fiscal union requires massive treaty changes and ratification by German citizens. So would a banking union. The deadlock ensures more delays, but time is up.

Neither a fiscal union nor a banking union is going to happen, nor should they happen and the European monetary union cannot possibly survive in this deadlocked state.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Spain Is Not Greece (And Other Such Anecdotes)

Posted: 14 Jun 2012 08:48 AM PDT

Here is a bit of humor from reader "MF" who writes about who is not whom. Interestingly, all of the following quotes are from 2010. I bet there are far more to add to the list.

"Spain is not Greece."
Elena Salgado, Spanish Finance minister, Feb. 2010

"Portugal is not Greece."
The Economist, 22nd April 2010.

"Ireland is not in 'Greek Territory."
Irish Finance Minister Brian Lenihan.

"Greece is not Ireland."
George Papaconstantinou, Greek Finance minister, 8th November, 2010.

"Spain is neither Ireland nor Portugal."
Elena Salgado, Spanish Finance minister, 16 November 2010.

"Neither Spain nor Portugal is Ireland."
Angel Gurria, Secretary-general OECD, 18th November, 2010.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Any Rabbits Left in the Hat?

Posted: 14 Jun 2012 01:34 AM PDT

Inquiring minds are poring over the ESM Treaty to see how it is supposed to work in theory, assuming it will be ratified by counties with the required 90% of EMU voting rights.

Given that Spain is supposed to get €100 billion from the ESM, some might be surprised to learn ESM Still Not Ratified by Germany, Austria, Belgium, Estonia, Slovakia, Netherlands

Finland is missing from the above group. Finland has signed but not yet ratified the treaty and May Ask for Collateral for Spanish Banking Bailout

Political football is holding up treaty ratification in Germany, with the opposition demanding a Financial Transaction Tax in return for passage.

Assuming the treaty passes, please turn your attention to Article 41.

ARTICLE 41 ... payment of paid-in shares of the amount initially subscribed by each ESM Member shall be made in five annual instalments of 20 % each of the total amount. The first instalment shall be paid by each ESM Member within fifteen days of the date of entry into force of this Treaty. The remaining four instalments shall each be payable on the first, second, third and fourth anniversary of the payment date of the first instalment.

Reader Brett who pointed out that provision writes ...

The ESM total budget for 5 years is 700 billion euros. That means for 2012 the ESM will be able to contribute 140 billion euros. I have shown the breakdown by country (listed in Annex II) and amended another column to show their first contribution.

Spain is clearly in no position to assist their own banks so we can forget about their contribution. We can also forget about contributions from Greece for obvious reasons, and Portugal whose sovereign debt is rated as junk status by S&P.

Capital Contribution Analysis

ESM Member	Capital subscription (EUR)	2012 Contribution (20%)
Kingdom of Belgium	€ 24,339,700,000.00	€ 4,867,940,000
Federal Republic of Germany	€ 190,024,800,000.00	€ 38,004,960,000
Republic of Estonia	€ 1,302,000,000.00	€ 260,400,000
Ireland	€ 11,145,400,000.00	€ 2,229,080,000
Hellenic Republic	€ 19,716,900,000.00	€ 3,943,380,000
Kingdom of Spain	€ 83,325,900,000.00	€ 16,665,180,000
French Republic	€ 142,701,300,000.00	€ 28,540,260,000
Italian Republic	€ 125,395,900,000.00	€ 25,079,180,000
Republic of Cyprus	€ 1,373,400,000.00	€ 274,680,000
Grand Duchy of Luxembourg	€ 1,752,800,000.00	€ 350,560,000
Malta	€ 511,700,000.00	€ 102,340,000
Kingdom of the Netherlands	€ 40,019,000,000.00	€ 8,003,800,000
Republic of Austria	€ 19,483,800,000.00	€ 3,896,760,000
Portuguese Republic	€ 17,564,400,000.00	€ 3,512,880,000
Republic of Slovenia	€ 2,993,200,000.00	€ 598,640,000
Slovak Republic	€ 5,768,000,000.00	€ 1,153,600,000
Republic of Finland	€ 12,581,800,000.00	€ 2,516,360,000
Total	€ 700,000,000,000.00	€ 140,000,000,000
Less Spain		-16,665,180,000
Total Less Spain		€ 123,334,820,000
Less Greece		-3,943,380,000
Total Less Spain + Greece		€ 119,391,440,000
Less Portugal		-3,512,880,000
Total Less Spain + Greece + Portugal		€ 115,878,560,000

Subtract Italy crippled with a 120% debt to GDP ratio and Borrowing money at 4-5% to Lend to Spain at 3% and you are under the €100 billion mark.

Even including Italy, the fund for 2012 is nearly all spent.

What happens if Spain needs €350 billion as per analysis from JPMorgan?
What Happens if Italy needs a bailout?

Are there any rabbits left in the hat?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Spanish 10-Year Bond Yield Hits 6.96%, a New Euro-Era High; 2-Year Bond Yield Hits 5.19%

Posted: 14 Jun 2012 01:22 AM PDT

A big selloff in Spanish government bonds is underway this morning at 3:15AM central. Conditions can change by the US equity market open, but the results are currently very ugly.

At the time of this writing, the yield on 2-Year Spanish Bonds is 5.12% (up 20 basis points) having soared as high as 5.19% (at that time up a whopping 27 basis points).

The yield on 10-Year Spanish Bonds is 6.96% (up 20 basis points), having hit a euro-era high of 6.90%.

The European bond market is coming unglued fast. It will be interesting to see if ECB president Mario Draghi steps in, and with how much "firepower".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Houses of Romanian Gypsies

Posted: 14 Jun 2012 01:32 PM PDT

These interesting photos show the houses of the richest gypsies of Romania and Moldova. The interior of these mini-palaces displays the accumulated wealth of their owners in a gaudy mixture of expensive china, marble, numerous tapestries and antique furniture.

Nifty Father’s Day Facts [Infographic]

Posted: 14 Jun 2012 01:09 PM PDT

With Father's Day just around the corner, we are reminded that Dads play a huge role in our lives. In this infographic published by OverStock.com, learn some interesting statistics about Dads as well as Father's Day itself.

Click to Enlarge.

Your Weight in Space

Posted: 14 Jun 2012 01:02 PM PDT

The next time you are suffering from a fat day, just call it a Jupiter day and impress all your space geek friends. Chart only goes up to 205 pounds, sorry.