-- Posted Tuesday, 4 October 2011 | | Disqus
While the financial world becomes euphoric based on an unsubstantiated rumor of yet another European bailout package cited from an unnamed source and reported by one of the least insightful financial commentators on the planet, the reality is that Europe is imploding.
Indeed, a mere two weeks ago FIVE central banks intervened to help the European banking system. The benefits of that intervention last one week.
Dollar Funding Costs Rise As Central Banks' Plan Seen Inadequate
European banks are finding dollars an expensive commodity once again, as the afterglow fades from a coordinated central bank plan to improve liquidity.
Swapping euros for dollars now costs about as much as it did before the European Central Bank said Thursday it would work with counterparts in the U.S., Europe and Japan to provide dollars for banks struggling to access U.S. currency.
Things are now so bad in Europe that corporations are now pulling their money from private banks and depositing directly with the ECB:
Siemens shelters up to €6bn at ECB
Siemens withdrew more than half-a-billion euros in cash deposits from a large French bank two weeks ago and transferred it to the European Central Bank, in a sign of how companies are seeking havens amid Europe’s sovereign debt crisis.
The German industrial group withdrew the money partly because of concerns about the future financial health of the bank and partly to benefit from higher interest rates paid by the ECB, a person with direct knowledge of the matter told the Financial Times.
Lloyd’s of London Pulls Euro Bank Deposits
Lloyd’s of London, concerned European governments may be unable to support lenders in a worsening debt crisis, has pulled deposits in some peripheral economies as the European Central Bank provided dollars to one euro-area institution.
“There are a lot of banks who, because of the uncertainty around Europe, the market has stopped using to place deposits with,” Luke Savage, finance director of the world’s oldest insurance market, said today in a phone interview. “If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them.”
This hardly suggests that corporations have confidence in the European banking system. And why should they? One of the key market props for the Euro, China, is pulling out.
China bank stops FX swaps, forwards with some European banks –sources
A big market-making state bank in China's onshore foreign exchange market has stopped foreign exchange forwards and swaps trading with several European banks due to the unfolding debt crisis in Europe, two sources told Reuters on Tuesday.
The European banks include French lenders Societe Generale , Credit Agricole and BNP Paribas .
"Apart from spot trading, all swaps and forwards trading (with the European banks) have been stopped," one source who is familiar with the matter told Reuters.
China to keep buying U.S. Treasuries: report
China, the largest foreign holder of U.S. government debt, will keep buying U.S. Treasuries, the official People's Daily, the ruling Communist Party's mouthpiece reported on Tuesday, citing government researchers.
In an article about the reasons for China's increased purchase of U.S. Treasuries, the newspaper cited Yan Xiaona, a researcher with the Chinese Academy of Social Sciences, as saying that the dollar "is relatively safer than the euro" because of the unfolding sovereign debt crisis in Europe.
Yan was quoted as saying that dollar-denominated assets remained attractive for investors around the globe.
Wang Chaocai, a Ministry of Finance researcher, was quoted as saying that "what else we can buy if not U.S. Treasuries? It's more risky to buy into equities."
I will be blunt here. Until an actual NAMED GERMAN official comes forward and says that an expanded EFSF plan is on the way, all rumors are complete and utter BS. Anything coming from a Greek official, Italian official, or an unnamed source is just garbage and means nothing.
No German support. NO more Bailouts. NO EU in its current form. End of story.
Indeed, while the lemmings pile into stocks believing in this nonsense, smart investors are already preparing for the next leg down in the markets. The reason is simple: last week’s sell off is JUST the beginning of what's coming.
This is no mere correction nor is it just a brief hiccup for the financial markets. This is the GREAT COLLAPSE and the markets will be going to new lows (below the March 2009 lows) in the coming months.
We're also going to be seeing major banks go under, market crashes, food shortages, government shutdowns, and SYSTEMIC FAILURE.
Yes, I believe that before this mess ends, the financial system as a whole will have collapsed. What's coming is going to make 2008 look like a joke.
If you have yet to prepare yourself for what’s coming, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.