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Monday, May 3, 2010

Greece crisis – another pigeon – ECB/EZB got trapped: accepts Junk as collateral in reverse repurchase agreement – ECB on the wrong track

Author Thomas Ramseyer

According to the press ECB is elected Greece Paper collateral starting from now on
Thus banks can get money against discounted short term bonds maturing by the end of 2010.
Also they can borrow money against Greece poison paper used as a collateral in repurchase agreement transaction (nowadays often mentioned Repo) on a rolling bases (low short term rates applied) 

All what has been said, the whole set of the famous discipline rules invented at ancient times before the EUR to emerge are being kicked at rump. Who started it in the time? The complains from the warden of the currency caused but a simper, was even ridiculed. Maybe the idol’s bad behaviour even provoked the mess the southerners are in.
The European Central Bank ECB/EZB as well as the whole European Union do not want to accept that the EUR has left its zenit well behind. Europe has chosen to spoil the wine by spilling it with water not even pure. That wine is fake and will cause a great deal of headache and biting stomach ache as well.
Politicians and bankers prove to not being creative nor inventive. Also they wrongly fear to loose power by appearing weak in the eyes of the Americans and they simply walk the broadway like some blind old injun while being too conservative and progressively sclerotic. 

The real risk takers
of course are mainstream people . . . American breadwinners, fathers of the future
Not the particular countries but the lender of the last resort ECB/EZB the European Central Bank is takeing full load at any rate and any cost. They easily can do this; the souvereigns of all those EU-countries will bear the risk and losses. 

Party takeing place at Frankfurt
Sleepless in Frankfurt; the German leaders wheresoever starve under one umbrella. At least they will fully understand each other while going down the drain. Suffering from the hot financial industry’s weather the Germs will rave and they can see clearly then their big white elephant. 

Fake bailing out Greece – how German gimmik will work
1) Germany passed the matter on to the ECB/EZB. Germany seems to be clean. It’s face being saved.
2) Countries are stepping in to roll over and take over the maturing Greek dept FROM the Banks. (Greece is as bankrupt as before)
3) The individual investors represented by professional investors such as funds, pension funds, insurance companies, special purpose vehicles and the sort, are going to keep the risk thus getting a neat haircut of some 30 to 50% in due course of time.
4) Maybe the banks in a later stage are ostensibly forced to take Greek risk on the primary market but for soothing the public’s wrath, they criptically are backed by the blowzy repurchase agreement policy. Hedgefunds and other banks will sell their greek junk to big banks accessing the ECB/EZB liquidity by the means of the repo market.
For the sake of a maybe stable EUR this time the banks’ junk investments are going to be refinanced by the ECB through repurchase agreements collateralized with OVERVALUED Greek debt. Most welcome side-effect; the banks will profit from the wide interest rate spread. It is evident; ECB has learned the lesson from the FED by giving the banking industry the opportunity to bolster its reserves with the gain out of the interest differencial. [receive long term yield pay short term interest; sovereign bearing the spread]
(Greece is still bankrupt, nothing has changed, the problem simply being juggled) 

By arrogantly sticking to a phantastic looming, ECB/EZB zeroes in the European Union. The downing just has started. 

1) Terminate Greece’s membership of EUR and EU.
2) Change European Union to a genuine confederation such as Switzerland or the United States. [highly recommended]
Those which do not yet have joined, don’t ever join for the sake of independence and democracy.

copyright Thomas Ramseyer