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May 10 (Bloomberg) -- European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to stop a sovereign-debt crisis that threatened to shatter confidence in the euro. Stocks surged around the world, the euro strengthened and commodities rallied.
Jolted by last week’s slide in the currency and soaring bond yields in Portugal and Spain, European Union finance chiefs met in a 14-hour session in Brussels overnight. The 16 euro nations agreed in a statement to offer as much as 750 billion euros ($962 billion), including International Monetary Fund backing, to countries facing instability and the European Central Bank said it will buy government and private debt.
The rescue package for Europe’s sovereign debtors comes little more than a year after the waning of the last crisis, caused by the U.S. mortgage-market collapse, which wreaked $1.8 trillion of global credit losses and writedowns. Under U.S. and Asian pressure to stabilize markets, Europe’s governments bet their show of force would prevent a sovereign-debt collapse and muffle speculation the 11-year-old euro might break apart.
“Europe wants to give the impression that they are not dealing with the crisis on a piecemeal basis and are addressing it in a comprehensive fashion,” Venkatraman Anantha-Nageswaran, who helps manage about $140 billion in assets as global chief investment officer at Bank Julius Baer & Co. in Singapore, said.
The Latest US Taxpayer Bill To Save Europe: $57 Billion
Europe has now followed the Fed in its all in move to prevent the disintegration of the euro and of Europe. As we expected, the EU was leaking various rumors to gauge market interest, and as speculated earlier, the final cost ended up being just short of one trillion. Here are the key summaries:
* EU Crafts $962 billion show of force to halt crisis
* Full blown monetization: ECB will buy public and private bonds
* Fed reactivates swap lines with Bank of Canada, BOE, ECB, BOJ, and the SNB
In other words, total and unprecedented monetary lunacy, as every cental bank, under the orchestration of the Federal Reserve, will throw money at the problem until it goes away, which it won't. As we have long expected, Bernanke is now willing to sacrifice the dollar at any cost to prevent the euro unwind. This is nothing than a very short-term fix, whose half life will be shorter still than all previous ones.
The race to the currency devaluation bottom is now in its final lap. And gold is the only alternative to the now imminent collapse of the fiat system: the world had a chance to take writedowns on losses, punish those who took risk and failed, and refused to do so. There is now no risk left, but it only means that eventually all the risk will come back and lead all capital markets to zero. The result will be the end of Keynesian economics as we know it. Do not trade in this broken market, do not hold your money in a bank as they are all now one hour away from a terminal bank run - buy and hold real, FASB mark-to-myth independent assets.
Here is Goldman's take on the reaction:
The IMF's piece of this thing is allegedly €220 billion, or about $286 billion as I type this.
Since the US is "required" to contribute 17% of the IMF's funding, this means you, the taxpayer, have just been hit for $48.6 billion to cover the debts of nations who spend more than they make - and no, they're not the United States (or the states IN The United States.)
It gets better. The Fed's "swaplines" that have been reopened this evening could conceivably pay for part or all of the ECB's foreign bond buying. Remember when Bernanke was asked about this in testimony and he said he had the authority to do this in unlimited amounts? This is no longer a hypothetical.
At the same time this blatant act of financial rape served upon you has come with a 4.18% increase in the price of oil (so far today), which I'm sure you will appreciate at the pump along with the ramp job that gasoline has taken in the last two weeks. At roughly $3 a gallon already, this should add another 12 cents or so to that in the coming days.
Oh, and uh, there's supposed to be this little matter of an appropriation bill in the House of Representatives to fund that IMF "obligation" - before it's incurred. There's this quaint document called "The Constitution" that mandates this.
It, of course, is irrelevant to both Ben Bernanke and, it appears President Obama, who if stories are to be believed prodded the IMF and ECB into spending money he didn't actually have the right to commit (for want of said appropriation bill.)
No matter America.
You're good for it, right? After all, it's not just our banks you have to bail out - we're also required to bail out all the profligate spenders over in Europe too who also can't manage to balance their budgets and, in fact, don't even bother collecting taxes from 70% of the population (in Greece anyway.)
Oh, and there's the matter of the ECB being legally unable to issue credit on its own, to bail anyone out or to directly help one another. To get around that inconvenient part of the founding documents of the ECB they defined a self-imposed fiscal problem caused by their own lies as an "act of God" similar to a hurricane or flood. In short they simply ignored that law too, just like The Fed has for the last two+ years and like Congress does when its members trade on inside information - an act that is legal for them and leads to jailtime for you.
Congratulations America. You've sat on your butts for a sufficient period of time, and allowed enough abuses and usurpations to take place without putting a stop to it that now you've just been ripped for tens of billions of additional dollars and a gas price hike coming down the pipe with both going to feed an organization that is violating its own laws - and is in a foreign land.
PS: That gut-wrenching crash (and yes it was) Thursday? Yeah, you couldn't buy into the bottom of that - nobody except JP Morgan could. The NYSE was on "slow" and the only people routing 1 cent orders for Accenture were from the big banks - for the big banks. They made a fortune rigging the system - again The futures were being quoted at 10 handle spreads, making trading for ordinary humans impossible. Today, you're going to wake up and be unable to buy too, as the DOW futures as I write this are up over 400 points and the S&P is flirting with lock-limit up at +54.75.
You cannot invest or trade in markets that behave this way; it is impossible to go to sleep with a position, either bullish or bearish, and not wake up to find it ridiculously underwater. This isn't "stability" being demonstrated as the Euro folks and Bernanke claim, it is schizophrenia, it's destructive and it's impossible to be involved in a market that behaves this way without eventually waking up to all your money being gone.
It is time to give up folks and leave the machines to themselves.
LONDON, May 10 (Reuters) - European banking shares spiked on Monday, after slipping about 14 percent last week, boosted by a $1 trillion emergency rescue package agreed by global policy makers to protect debt-stricken countries in the euro zone.
The STOXX Europe 600 banking index .SX7P jumped more than 10 percent, while Allied Irish Banks (ALBK.I), Banck Santander (SAN.MC), Standard Chartered (STAN.L), HSBC (HSBA.L), Barclays (BARC.L), Lloyds (LLOY.L), Royal Bank of Scotland (RBS.L), BNP Paribas (BNPP.PA), Societe Generale (SOGN.PA) and Credit Agricole (CAGR.PA) surging 5.8 to 24.1 percent.
The rescue package, hammered out by European Union finance ministers, central bankers and the International Monetary Fund in marathon weekend talks to resolve the Greek debt crisis that threatened to sink the euro and unravel euro-zone unity, was the largest in more than two years since G20 leaders threw money at the global economy following the collapse of Lehman Brothers.
At 0740 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was up 4.8 percent at 1,013.63 points after hitting a seven-month closing low on Friday. It fell 8.9 percent during last week, its worst weekly performance since November 2008.
Not one bit embarrassed by their last witch hunt against speculators that led European politicians to discover that the biggest CDS "speculator" against Greece was in fact the Greek post bank (a fact that received very little publicity surprisingly), they are back at it again. It seems there might be a slight confusion though on their part between investors and speculators. By taking on the supposed speculators with an unprecedented galore of currency debasement, European countries are very unlikely to attract any foreign capital going forward. This is nothing else than capital markets fascism and a poorly disguised ponzi scheme. Fact is that fiscal finances are in poor order and not expected to get much better in the future. Rather than tighten the belt and address the gap as they should, governments around the world are lending themselves the money they need to spend. Throughout the financial crisis the only category of workers that has seen a pay rise are those working for the government. Yes there have been layoffs, but very little pay cuts. Talk about a collective effort! While capital markets seem happy to celebrate the madness this morning, also a by-product of a lot of shorts of risk being chased through the gates of hell, I expect that the markets will see through this mascarade in due time.
Here we go:
A refresh on Rule 48:
Rule 48 provides the Exchange with the ability to suspend the requirement to disseminate price indications and obtain Floor Official approval prior to the opening when extremely high market-wide volatility could cause Floor-wide delays in opening of securities on the Exchange.
Rule 48 is intended to be invoked only in those situations where the potential for extreme market volatility would likely impair Floor-wide operations at the Exchange by impeding the fair and orderly opening of securities. Accordingly, the rule sets forth a number of factors to be considered before declaring such a condition, including:
* Volatility during the previous day’s trading session;
* Trading in foreign markets before the open;
* Substantial activity in the futures market before the open;
* The volume of pre-opening indications of interest;
* Evidence of pre-opening significant order imbalances across the market;
* Government announcements;
* News and corporate events; and,
* Any such other market conditions that could impact Floor-wide trading conditions.
If even the NYSE is saying to expect record stock volatility, run for cover now.