News & Analysis
ECB Blows Up Europe? Creates 'Super-Immune' Elite Bonds ... Throws Credit Market into Disarray
Investors call on ECB to play fair in sovereign credit ... Resentment at the European Central Bank's immunity from losses on Greek debt has left fund firms wondering about the strength of their creditor rights and whether they should blacklist bonds purchased during emergency sprees by the lender of last resort. By sidestepping markdowns on Greek bonds, the ECB has effectively robbed fellow senior creditors of their top rank status, investors say, forcing each to forgive a greater proportion of the debt than they might otherwise have needed to. "I think many investors believed that as they were holding the same bond as the ECB, they should therefore be considered in the same boat as the ECB," said Michael Krautzberger, head of the Euro fixed income business at BlackRock. – Reuters
Dominant Social Theme: What central banks do is "legal." What YOU do is something else again.
Free-Market Analysis: We have often written the goal of the Anglosphere power elite is to create a worldwide depression on the way to one-world government. They are seemingly well on their way to doing that using the power of monopoly central banking, which they certainly seem to control.
The Anglosphere elites (as we have often indicated) – are made up of Jewish, Catholic/Vatican, religious, corporate and military elites. They wield enormous, world-spanning power. Thus, the evolution of the ECB's immunity was surely predictable. Around the world, those who secretively run these banks are getting bolder and more obvious about their hold on power.
In fact, this is manifested in the high-handed manner in which European Central banks are refusing to mark down the face value of its bonds, no matter the provocation. In the event of an extreme financial "event" (disaster) the ECB shall remain "whole" – theoretically anyway – while others shall not.
This means (as we can see in the article excerpted above) that others shall have to accept LARGER writedowns of their bonds because the ECB is refusing to do so. This is how monopoly fiat money distorts a marketplace.
Monopoly (mercantilist) central banks are ruinous in part because in the modern era those running them simply assert private benefits to a coterie of insiders and then declare these benefits legal via the force of law.
This is why those who argue that central banks are "private" miss the point. Central banks are mercantilist entities, assuming power via the force of law. If central banks WERE fully privatized, we'd have no trouble with them. Let them play on a level playing field with other financial entities. And other monies as well.
But the Anglosphere elite families apparently control central banks and the trillions they throw off. This control has allowed them to campaign covertly for world government. It also gives them control of governments and the opportunity to "make the rules." Here's some more from the article:
"We've now learned that the ECB in a really stressed scenario or default will be senior to you ... so there's still a lot of nervousness in the market," he added. When borrowers issue bonds the bond is structured so that so-called senior bondholders rank first for repayment, but in cases where borrowers cannot repay they may be forced to write off some or all of the loan.
The Institute of International Finance, the body that represents most private holders of Greek debt, is pushing its members to accept a 53.5 percent loss on the face value of their bonds to help Greece avoid a disorderly default.
The ECB, though, was made exempt and is due to be repaid in full. The ECB argued it had no choice but to buy Greek debt to help calm markets, unlike other senior bondholders who had a choice over whether to invest - even if they did so before the extent of the Greek crisis was clear.
And there are now fears that the central bank might one day insist on special treatment for bonds issued by other beneficiaries of its Securities Markets Programme - Portugal, Ireland, Spain and Italy - if those economies continue to falter.
Yields on 10 year Portuguese debt are currently nudging 14 percent after a short-lived relief rally during February having peaked at 17.4 percent at the end of January in the wake of a ratings agency downgrade. The rise shows that Portugal is having to pay out bigger sums to encourage investors to buy their bonds, hiking their funding costs over the long-term.
We can see from this excerpt that the current ECB position is not a hypothetical one. It is already having severe ramifications.
Why is the ECB insisting on this regnant power nonetheless? We repeat: The ECB, rather than trying to stabilize the European situation, is likely actively trying to undermine it. Almost everything the top elites put into practice works in reverse to stated intentions. That's our view anyway.
This is the outgrowth of the mercantilist strategy in the modern era. Those who run the banks and those who stand behind them (and evidently and obviously control them) can wrap themselves in the governmental immunity they have purchased.
Additionally, the bought-and-paid-for Western media will treat the abuses of central banking as a legislative necessity. In other words, the justifications the bankers themselves offer shall be reported with authority by the mainstream media and thus their credibility is reinforced.
It is for this reason that central banks have been able to release something like US$50 TRILLION into the marketplace to shore up failed and failing financial entities. These entities inevitably have close ties to the ruling elite.
We are on record as pointing out numerous times that what worked in the 20th century does NOT work in the 21st – mostly due to what we call the Internet Reformation. Everything that central bankers did to enrich their cronies in the 20th century has been exposed on the Internet in the 21st.
For this reason, we've maintained that the dollar reserve system is likely finished. People who are losing their job, houses and families are well aware that central bankers have propped up the system and enriched their cronies at the behest of the top elites. There is likely too much rage. And it is growing.
The elites, in our view, have created a growing depression in America and Europe. With the demise of China's economy – whenever that occurs – the final leg of the stool shall shatter. A full-scale depression may ensue.
This alongside of a regional (Middle Eastern) or global war shall provide the overwhelming crisis to announce global government, or so the elites seem to hope. While we're not sure they will get that far thanks to the Internet Reformation, we are equally sure they will continue to try.
However, the Western financial consensus is breaking down as the elites continue their assault against modern civil society (what's left of it). People, even top, monied professionals, are well aware of elite manipulations. Read here, from the same article as excerpted above:
But talk is cheap, said Jerome Booth, head of research at blue chip debt investment specialist Ashmore, one of a growing number of managers who feel Europe will pay a high price for changing the rules on which healthy credit markets rely. "What they do not understand is the word precedent. Saying it won't apply in the future is rubbish. Absolute nonsense. They have no credibility when they say that. Zero," he said.
What Booth is saying is that the ECB is "taking down" the European sovereign fixed income system as it has existed for decades. This can't be coincidence, can it? Does the ECB really need the money? They claim to be protecting the financial system but they are really only protecting certain top-level, monied interests.
The ironic thing is that these interests in our view CONTROL central banking. Anything under a couple of trillion is pocket change. Here's more from Booth:
"Did you spot the clause in your bond documents that said that you were buying the subordinate tranche of the government bond market?" M&G Fund Manager Jim Leaviss said. "Of course it never existed...the law is torn up and rewritten."
See? The ECB has "made sovereign bonds almost impossible to price. That is preventing a fall in yields to more sustainable levels ... 'There is more comfort in investing in corporate credit and high yield bonds, than in sovereign debt credit,' Chris Iggo, head of fixed income at AXA Investment Managers argued."
And here is a statement toward the end of the article: "Restoring the trust of creditors is just as important as pushing forward with the structural reforms Greece needs to grow its way out of bankruptcy, managers said."
For these top financiers, hope springs eternal. They still do not understand the system in which they have chosen to work has not been created to generate "trust" but to foment world government via various destabilizing regimes.
For decades, bright and numerically adept men (and women) have made (in aggregate) trillions "playing by the rules" of modern central banking systems. But the top elites are moving aggressively ahead and part of the new plans – as the world depression is apparently consolidated – includes attacking the monied classes themselves.
This is part of the fundamental wrongheadedness of operations like Occupy Wall Street (probably controlled opposition). Those running OWS do not make a distinction between the monied classes and the very tip-top elites running central banks. The former are disposable. The latter DO the disposing.
Revolutions eat their children. Soon, very soon, the monied classes that have considered themselves immune from blowback shall likely find out just how wrong they were. This happened in the 1930s as well. We shall see if their eventual disaffection contribute to the current disabuse that has overtaken the impoverished and middle classes.
We shall also see if the Internet itself acts as a vast echoing chamber. If so, then the strategies that the elites have counted on perhaps for centuries may prove ineffective this time around. The de-stabilizing may finally destabilize them as well.
Conclusion: Perhaps they shall have to take a step BACK rather than forward ...
Posted by alexsemen on 03/05/12 06:30 PM
Dan Denning wrote:
But you and I don't get to decide what constitutes a credit default. That honour belongs to the International Swaps Derivatives Association (ISDA). The important thing to keep in mind here is that the ISDA is a trade group made up of banks and financial firms. Those are the firms that have the most to lose if Greek bonds default. It's in the interest of the members of the ISDA that a non-voluntary credit event in Greece NOT be called a default.
It gets even murkier here. The ISDA essentially represents the global banking system. In Europe, the banking system is full of government bonds. Those bonds are nominally assets. If Greece defaults, it sets a precedent for how other countries might deal with unsustainable debt levels. This imperils the collateral of Europe's entire banking system.
If you want to put it in simpler terms, let's say that Europe's banking system is full of rotting meat. Some investors bought that meat thinking they were going to get prime rib. But they can smell the stink of the meat from a mile away. They want to be compensated for the bad meat. The ISDA, which owns the freezer in which the meat went bad, says, 'Well, we've decided the meat isn't bad after all. And you have less of it than you thought anyway, as of now.'
This is a crude analogy. But this is exactly what happened last week. A 'determinations committee' of the ISDA ruled that Greece's default is not a default. The committee determined that 'no credit event has yet occurred' for holders of credit default protection on Greece.
You can see the basic problem: everyone else knows that if Greece defaults (officially), the value of other government bonds in Spain and Italy and Portugal will plummet too. A Greek default wouldn't be important because of the size of the default (although French and German banks would stand to lose a fair bit). It would be important because it would begin the process of blowing up bank balance sheets all over Europe.
When you realize that the ISDA and the ECB and the EU are in league to save their financial skins, you realize that the Greek rescue plans is about preventing other countries from realizing that default is an option. In fact, it's not even about preventing the realization. It's about making it impossible for a country to default on its obligations... even if it means erasing the word 'default' from the English language.
Posted by Jeanna on 03/05/12 06:14 PM
The Fed balance sheet has added about $2T since 2008. I am not sure how much the ECB has added in total during the last 3 years. As I had hoped, they are swimming in their own debt creation. But, they are bailing frantically and swamping all other boats first. I still hope that they will drown in their fiat money someday soon.
Posted by josejoe on 03/05/12 05:46 PM
read Click to view linkiffin's 'the creature from jekyll island'. that will answer many questions. i don't know what to recommend for the answer to this centuries long problem,however.
Posted by kkhinton on 03/05/12 05:17 PM
"This is why those who argue that central banks are "private" miss the point. Central banks are mercantilist entities, assuming power via the force of law. If central banks WERE fully privatized, we'd have no trouble with them. Let them play on a level playing field with other financial entities."
Thank you - once again my naivete and lack of education in financial matters is exposed. What ever made me think that the banks, the fed, the reserve, the Potentates... were private?
Reply from The Daily Bell
Here, educate yourself.
Click to view link