Falling through the ice

Eurobankers rush to grab money from the ECB as outside money pulls out of French Central Bank

I did say right from the start of this week that events may yet catch up with, overtake and then drown every level of arcane madness being thrown at the Merkozy dilemma. Two sets of numbers made available over the last twelve hours record the symptoms of one major potential bomb – bank liquidity – getting beyond even emergency help.

The news circulating widely among professionals (and confirmed here last week) that Credit Agricole was the main reason for the six-central-banks rescue mission has helped to start a stampede of money out of the Bank of France. So great has it been – chiefly to the US and Asia – that French sovereign debt alone has jumped tenfold. What AEP in today’s Telegraph calls ‘the triple-trigger’ comprised a sudden drop in Club Med manufacturing orders, an ECB rate rise, and the EU’s July summit – which ‘led to haircuts on Greek bondholders and battered faith in EMU sovereign debt’. It hasn’t actually led to any haircuts as yet, but we can see here that even the threat of a visit to the barber’s is enough to give the Banking Samsons an attack of the vapours.

The fascinating thing missed by much of the MSM (although not AEP) is that these figures are old – from September. But sources in Wealth Management and credit supply contacted by The Slog after reading the piece suggest strongly that the situation now must be far worse.

“It certainly couldn’t be better,” said one, “The Italian panic was barely off the ground by then, and there was little sign of an immediate French downgrade. In any case, we know the money is still leaving…everyone knows it is, Sarkozy knows it is, and the markets know it.”

Last week, the Slog quoted the Bankfurt Mole as saying that debt fears had “turned the eurozone into a plague village“. These figures and corroborations bear him out. Last Monday, I warned everyone to watch out for money being siphoned from somewhere into the French banking system. Are there other signs of this out there?

One very clear sign of the Europlague Village syndrome just out is that EU banks have rushed to take advantage of newly freed-up dollar supplies as a result of the six-CBs intervention. In just five hours so far, $50.1bn has been borrowed on 84-day bases, and an eye-popping $1.6trillion shot out of the Central Banks vaults for 1-week borrowing purposes.

The fifty billion in 84-day is five times what the markets expected, but it’s the seven-day Adventists that worry me: this above all suggests a system so desperate, it is prepared to buy the Loan of Shame….walking-around money. That will in turn help the sharks to identify where the wrigglings legs in the water are. (Yes folks, bankers hack computers too.)

The negotiators in Paris are driving a truck over very thin ice. I hope they know what they’re doing.


  1. Alternatively, they can borrow it at a far lower rate than they can lend it at. I’m no financial whizz but if a Bankster can borrow from the ECB at one rate and then lend it to Italy – with some form of guarantee from the ECB – at a higher rate, why wouldn’t said Bankster?


  2. Apocalyptic as all this is, I do enjoy the way you write it John. Makes it all seem a little less terrible to know when it has a healthy dose of sarcasm and irony with it.

    “The loan of shame” still has me laughing as I picture it!


  3.,the same thing applies in the UK.5 banks can borrow ‘at the window’at 0.5 percent,and then buy gilts yielding 2 percent(Treasury 8 2021),and bingo ,shed loads of profit,bonuses galore),never mind that the market is entirely rigged,the Bank of England actually buys 40 percent of the debt instruments it creates,10 year UK government bond yields are creeping up.inflation is rampant,not 5.6 percent,this game can last so long,sterling a safe haven,when were you born,when the Mayfair boys have sorted out the Euro weaklings, it will be sterling next, I am sure Nic Clegg is a well meaning person,fighting for ..


  4. 1.6 Trillion over 7 days… umm if that is the case it seems the sharks are going to be very well fed.

    When I read it the first time I thought it said 1.6 billion… rofl

    Unfortunately they don’t know what they are doing, if they did this crisis would have been over long ago.

    It is bot looking good for the summit on Friday… that’s assuming the Eurozone banking system makes it to friday of course.


  5. I’m not buying the whole “summit isn’t looking good” stuff coming out of germany.

    This always happens and it always seems that they are only feeding the info they want. More market turbulence makes central bank intervention look more correct. Never mind where that turbulence came from…

    The entire notion of this being the last chance saloon is laughable, the can will be kicked again on Friday and I’ll see everyone back here in a month for more of the same.


  6. John
    this will not make a blind bit of difference to ‘The Plan’.
    Merkozy are determined to dominate Europe and nothing, but nothing, will stop them.
    When the people do finally wake up it will be too late.


  7. I would love to be a fly on the wall in the Elysee palace…

    It also explains why he looked like he had been bent over a table after yesterdays meeting with Merkel.

    It is essentially a run on the French banking system as a whole.


  8. Its only if your over 60,you realise that the ship is sinking,the younger ones,are still dancing,and drinking,oblivious to the water gushing in. Why only the over 60s you ask? Because we have been here before,many times,and recognise the signs.Johns postings over the last few weeks,have been accurate,and succinct,giving us the information to act,in our own best interests,which I am sure most of you have done. You can only kick the can down the road,so many times,before you miss,and the sh– hits the fan. Methinks someone missed the can,this time,and hell is about to break loose. Man overboard.


  9. The Eurozone has run out of both time and road Chris.

    1.6 Trillion of loans over 7 days… No wonder Sarkozy looked like someone had cancelled Christmas the other day after his meeting with Merkel.

    It is the equivalent of someone having to go to a cash converters or a pawn shop to raise enough cash to tide them over until they get their next paycheck, it is balls to the wall time and deeply embarassing for anyone that has to do it… when that someone is the Eurozone banking system you know the game is nearly up.

    It is the final indicator before a crunch, I am not convinced that Merkozy have the will or the means to stop it.

    Contrary to what many believe this crisis may have gone too far to be stopped… even if the ECB does start printing and issuing eurobonds.

    As has already been said elsewhere the markets don’t give a crap about Treaty changes, they only care about who is going to be left holding the debt when the music stops.

    I see Italian and Spanish bond yields have started rising again.


  10. It will do more than hold them up KFC…

    If Germany blocks the ECB from bailing France out they will leave the Euro, if the pressure to print money becomes too much for the Germans they could leave.


  11. @MG

    On any test based in common sense I’m sure your analysis is correct Mark, but we are not dealing with that here, are we?

    Essentially as has been said many times and thus far proved correct, the two main players, Merkozy, will do anything, assisted by the EU ‘cracy to keep the staus quo. Regardless of the cost in the future.

    Now I know the markets are the final decider, allegedly, but the markets don’t control the action, they only influence the reaction. Thus I don’t see that what should happen will happen.

    None of that is very scientific of course but show me something that has been in any of this mess.

    Needless to say, should you be proved right I shall be pleased that the measures I have taken were necessary and correct.


  12. In case Mr.Camaron you think the UK can’t go it alone,Icelands GDP grew by 4.7% in the 3rd quarter. Italian bonds over 6% again. Are you sure you are backing the right horse?


  13. I know that I often sound like a Dansette with the needle stuck in the groove of a Leonard Cohen record, but forgive me if I post this again.
    I think the “hundreth monkey” syndrome mentioned in the post below has become full-blown contagion. I was at my local bank branch earlier this week and when I used the ATM, a message popped up saying…”please contact your local branch”. Which I did. The teller asked me, very politely, why I wanted to draw out what was a modest sum. I declined her kind offer and instead asked her why the question had arisen. She told me that it was a security measure, triggered by a couple of consecutive withdrawals, to ensure that my card had not been compromised. Her story may well be true, but it’s the first time this has happened to me. I wonder whether our UK banks are getting panicky about solvency. (or solvency abuse, as I now call it). My guess is that it is not only the international bankers that are pulling money out of European banks….I’d not be surprised if ordinary people are doing the same.
    Anyway, here’s the story I posted to the Slog about 6 weeks ago………

    “”””””””””Today, a friend of mine popped round for a chat and it didn’t take long for him to voice his views on the pace (or his perceived lack of it) of progress towards the long-awaited banking crash. He’s more of a “let’s start afresh” type rather than a reformist when it comes to the UK banking system and he bluntly told me that he was going to take the lead in precipitating the collapse of the banking system.
    “And just how are you going to do that?” I asked him.
    “Simple” he replied…”I’m going to withdraw all my money from my bank accounts!”

    It took me a while to take in what he was saying, along with the possible consequences.

    “So you’re going to start a one-man run on the banks, eh?” “Yes”, he smiled.
    “What are you going to do with the cash?”
    “Stash it somewhere….not under the mattress, of course”.
    “Pray tell me, how will this bring about collapse, and what about the loss of interest on your deposits?” I asked.
    “Haven’t you heard of the Hundredth Monkey Syndrome? And as for any loss of interest, the banks aren’t paying me anything anyway, so why should I allow them to create 10x the amount of my deposits by sleight-of-hand fiat currency fractional banking?”
    Astounded at this word combination, I asked him what exactly he knew about 100-monkeys and fractional reserves, as during all the years we’d known each other, he never showed the slightest propensity towards interest in knowledge of these topics. Without blinking, without consulting notes, without even asking to be temporarily excused while he went home to get a David Icke book, he rattled off a complete history of fractional banking (Usury…he called it) along with as clear a definition of the 100th Monkey Effect as I’d ever heard.
    “You do realise that even if you and your 99 other friends all withdraw their cash from the banks, the very nature of the banking system you hate so much will simply react by printing more cash to replace what you have withdrawn?” I asked him.
    “Not THIS time” he replied….”by their greed, they’ve brought us to this point and now, it’s time to kick their zimmer frames away and stamp them into the dust, once and for all” he smiled, physically acting out the scenario he’d described.
    “If all the banks crash, won’t you lose your money wherever you’ve stashed it?” I said.
    “It will be worth it”…he said with an icy cold smile.”””””””””””””””


  14. Hey I’m 33 and I know the ships sinking, I think many do. Not a lot to do about it though really, so dance and drink while we still can and fingers crossed the music will play a while longer.


  15. So B de F is bust , the ECB is sitting on about 80 bn in losses on Greece , Portugal , Spain and Italy , essentially printing before being allowed to do so . Add to that various losses incurred by other Central Banks who seem to have been acting in unison and that is alot of bad news . Uncle Tim round at the Fed has temporarily bailed the lot out , but will the Americans let him keep doing so? If not the plug will be pulled and it will be total darkness . Methinks the man in the street hears too much about Merkozy and not enough about Timmy .


  16. This is already in hand, the Banksters are on the case!! ar


  17. @ Kenny

    Now I’ve enjoyed all your contributions up to now Kennyboy but, that could all change if you are going to denigrate Leonard Cohen.

    Ok, I can’t work out what a lot of his stuff means either, but that might just prove how stupid I am. Hell who needs to understand it anyway, it is so off the wall it’s great.


  18. Not another! Timmy is NOT at the Fed. He is the equivalent of Osborne at the Treasury but with a half of his power. The bearded money printing genius at the Fed ( the equivalent of the Bank of England) is the incompetent, clueless, professor from Princeton who never had a real job in his life except when he worked at his parents convenience store in backwoods Georgia serving rednecks during his high school days.


  19. Gem/s/z. this is for you,from Frau Merkill. “Und wenn ich nicht mehr weiter weiss,
    dann gruende ich ‘nen Arbeitskreis”. Says this what they might do ,tomorrow.


  20. Just to reiterate what I have said before: ECB large scale money printing (ok QE if you must) is likely the next step (in January). What has been done so far by the ECB is small beer. BIG (German) beer is now required – barrels, bushels, flagons and wagons of it.

    It’s hard to imagine a run on the banks in France, however it is not beyond the bounds of possibility…………

    Still, at least France has some great farmers and plenty of land to become self-sufficient as hyperinflation and general chaos ensues (and the sun still comes up).


  21. Kennyboy – ‘solvency abuse’ – loved it and have shamelessly stolen it for future deployment!

    Also, I have been steadily draining my accounts and ‘stashing the cash’ securely over the last few weeks. The lady at my branch did raise an eyebrow when I requested a 4fig sum in £20s and asked me if I needed any help (it’s my look of artless simplicity, you see). Ice formed on her upper slopes and her mouth snapped shut like a gin trap when I said, “…Dear Lady, I am, like your bank, beyond all help…”, and our transaction was completed in companionable silence… :-)


  22. “As dear old Spike Milligan used to say ” We’ve made no plans…. so nothing can go wrong!”

    Pure genius. well genius, anyway. It reminds me of what bizarrely is often (or before PC used to be ) presented as a joke. A couple in a car stop to ask an Irishman the way, his reply was that if he was going there he wouldn’t be leaving from here. So simple but true it is also genius.

    It also sums up pretty much where we are today. before we can go forward we have to first go back and start from the right place.


  23. @cronshd

    “Still, at least France has some great farmers and plenty of land to become self-sufficient as hyperinflation and general chaos ensues..”

    Don’t fight it cronshd, just let it wash over you. you know it makes sense. Yes the sun will continue to come up and that is important but just think of the c**p our young people are going to have to put up with. Isn’t the whole point of bringing young into the world that we can pass onto them something better than we had ourselves. well that isn’t going to happen so let’s be a little angry about that whilst also being grateful that the sun will shine.


  24. The tax policy would apply initially to the 17-member eurozone. France has long complained about Ireland’s low corporation tax rate of 12.5%.

    Perfidious France


  25. @Nerdman
    Is that sensible? After all, some people we know go kicking cans around. If one of them met a can, who knows where it would end up.


  26. @Caratacus

    It would seem that the UK is experiencing something of a bank run too, given all that has been said here? Is this not something that should be discussed more in the media?

    Sorry, silly idea.


  27. “Ok – so what is this “c**p” that young people are going to have to put up with?”

    Come on cronshd you can put on what ever sort of hat you like but even you can’t have missed the lack of opportunities that are available and will be available for the present young and future young. Sunshine is great if all you want to do is get a tan. Self sufficiency is great if (as I do) you have a little land but I don’t need my sons to work it. So they need their own land to work and from where do they get that?

    Of course I can help them eat but I had higher hopes as a legacy, so I’ll stick with being a pit peeved even if I get tanned whilst doing it.


  28. @IATL: “Ireland’s low corporation tax rate of 12.5%…”

    Compared to what’s coming their way, could Ireland be better off rejoining the Sterling area pronto?


  29. It has been mentioned before and it is a possibility, but I doubt those who fouhgt for the split will take it lying down.

    The Euro is not far off parity with Sterling at the moment which would help, it would be a terrible blow to the Euro and the EU.

    Once one left others would follow.


  30. Ireland will leave before it allows its corporate tax rate to be touched as many large corporates would leave, personally i think we should set the UK’s corp tax rate to be the same.

    The 12.5% rate in Ireland has been the main target of the other Eurozone members for a while now.

    Same goes for the UK’s Financial Sector, the Eurozone leaders love to borrow cheaply but get upset when their credit is cut off when questions over repayment are asked.


  31. This is step one in the breakdown of any agreement. No way in hell will Ireland just bow to this, the corporation tax rate is one if the cornerstones of the (admittedly hammered) economy here.

    German and french (particularly French) table-thumping is going to get very old, very fast for the other 15 nations involved in this pathetic hoedown. Sovereigns looking after their own interests will become an insurmountable roadbolck an means the whole thing cannot succeed.

    Sarko is rapidly becoming the politician I despise the most…


  32. And as good Europeans, we will moan and groan, but in the end we will go along with it.
    Common Taxation and Common Fiscal Policy.
    Balanced budgets for ALL EU members within 5 years
    Common Debt and average out the interest rate on
    If the lenders refuse to cooperate, the EU, collectively threatens to default.
    Any objections?


  33. @Gemz – I suspect that no self-respecting (?) MSM editor would like to be known forever more as ‘The Man Who Started The 2011 Bank Run’… but I’m willing to bet a pound to a piece of the smelly stuff that they will have been busily engaged in their own forms of damage limitation these last few weeks.


  34. The other 15 members of the Eurozone never signed up for this crap and they have already had two democratically elected leaders removed by the EU.

    Not a good start at all and it is only going to get worse.


  35. Yesterday I passed a sewage treatment tanker.The slogan on the side read
    “Fluent in Effluent”. Maybe the EU could adopt this as their next mission statement.


  36. Hmm. I took out £4,000.00 yesterday in 50 quid notes, from HSBC, to pay my law-abiding VAT registered builder. All they asked me was “would you like an envelope, sir?”

    Suggestions of a run may be somewhat exaggerated, I fear.


  37. Ireland will do what they’re damn well told. The politicians sold their souls to the ECB long ago. Brussels has the advantage of not being English, so they’re going to get away with it.


  38. @Sebastian
    may I ask why you had to pay the firm in cash, when they gave you an invoice?

    It is one of the easiest tricks: run up an invoice with VAT, say £4,000.00, and then when you bank £2,500.00 with the invoice seasonally adjusted afterwards to the tune of £1,500.00. That goes to the Christmas fund.


  39. @Mark Gamble – Germany will exit before France exits – they’re much better at planning & orderly implementation than the French ever were – Boney being the exception.


  40. If they have any brains then.they’ll standardise around 19-20% which is the rate in Poland, Czech Repub, Slovakia, Slovenia etc. The Yankee IT & Pharma firms would then stay Ireland because of sentiment and language, and the Irish gov’t would have a bit more cash in their kitty.

    However, the mere fact that Merkozy are even talking about taxes when they’ve got a liquidity problem to solve makes me wonder if they have any brains.

    My guess, is that Sarkozy wanted to get his bitch about Irish corporate taxes on the table because the French like to here him bitching about it, so Merkel said OK, but only if I can put FITT on the table, because the Germans like to hear about that. Then they had a chuckle because they knew it would get up CallMe’s nose. And it gives Barossoc Lint something to do – have you noticed he’s absence from the stage.


  41. @Gemz – for some reason can’t seem to leave my reply in line…

    Did I say law abiding & VAT registered? I certainly wouldn’t employ a chap for cash & avoid VAT. That would be terrible. That would be sticking it to the man. We wouldn’t want to do that, but there are always exciting discounts and faster deadlines for cash payment. Can’t think why…


  42. This is completely off-topic, but shows what can be achieved by responsible politicians.

    This is from the English-speaking online newspaper Dutch news:

    Please do not get too cynical about this, the Dutch MPs really do their job. It has been proved beyond anyone’s expectations when the Telegraaf did their sting. In short the PvdA had a good idea and the leading conservatives took it on board. Not a day too soon either.

    Can you imagine such a thing happening in the UK?


  43. @Sebastian the brekkie

    Somehow, I think there will be accounting done as far as is necessary to justify the books. My ex used to do that. When I took over the office, the kind of people who suggested a cash price were dismissed (politely of course) because they would only want a cheap job. If they wanted the thorough Taylor treatment, they would have to agree to our contracts and the “hidden extras” that are so often “added” were all explained up front so that there were no shocking bills. The bills might be higher, but the extra work would have been justified and agreed.

    Our profits went up by 30% and my ex spent 30% less time on site. It was worth doing if only to see more of him ;-)


  44. BTW if you press the reply button at the top of the column of replies, your reply will automatically fall to the bottom on posting; so always make it clear to whom you are responding. I hope this helps. I learned this the hard way, and it worked!


  45. Interesting isn’t it, when the chips are really thrown into the pot you can see who controls them; Timmo is in Europe to speak for the IMF, evidently Lagarde is not up to the job.


  46. You got it! can, road, bit further, bit more time…. They’ll hang on to this corpse long after it’s dead and stinking. Too many vested interests and big yummy pension pots to let go :-)


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