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Posts tagged ‘Swiss National Bank’

The Problem with the Spailout

By: Money_Morning

First off, last weekend’s 100 billion euro ($126 billion) Spanish bailout has staved off the inevitable for now.

What most people don’t realize, though, is that it actually spells disaster for the euro — there simply isn’t enough liquidity in the system and never has been. 100 billion euros is chump change.

A trillion euros is more like it. Probably more, to be quite candid.

Let me lay out the math that European politicians, whose skill set apparently consists of saying “present,” rather than developing real solutions, can’t be bothered to do.

According to the latest data, the European Stability Mechanism (ESM) and the European Financial Stability Fund (EFSF) have a combined lending capacity of 700 billion euros. If Spain requests the full 100 billion euros it approved last Saturday, this leaves 386.7 billion euros in excess capacity. The EFSF has already committed 213.3 billion euros.(700b euros minus 213.3b euros minus 100b euros equals 386.7 billion euros).

The problem is that Spain and Italy have combined total needs of 620 billion euros in the next two years alone.If you’re doing this math in your head, you’ll quickly realize that’s 233 billion euros more than the total bailout mechanisms now in existence.

Oops.

Call me crazy, but under the circumstances I don’t understand how European leaders can pursue the same course of sorry-assed lending in Spain that they did in Greece and expect different results. It’s simply irrational.

Don’t get me wrong, I understand why they are trying to pull the wool over everyone’s eyes. But in reality, who’s kidding who?!

The markets know the politicos can do nothing to stem the tide of money flowing out of Spain any more than they could stop money from leaving Ireland, Italy and Greece.

The only practical consideration is preventing an all-out bank run through the front door – never mind that it’s already well underway out the back door.

Frankly, I think they’ve failed on both counts. Deposits in German banks are up 4.4% year over year to 2.17 trillion euros as of April 30th, while deposits in Greece, Ireland and Spain fell 6.5% over the same time frame.

Swiss bank sight deposits have reached five-month highs of 252 billion francs as of June 1, according to the Swiss National Bank. CNBC is reporting that up to 800 million euros ($1 billion) a day is being pulled out of Greek banks alone. Data from Spanish banks related to withdrawals is being closely guarded, but I can’t imagine it’s that much different.

full article at source:http://www.marketoracle.co.uk/Article35152.html

Germany profited in boom so must deal with the bust!

By David Mc Williams

It is now down to Germany. Does it want to save the euro or not? If it does, it will have to underwrite the Irish along with the Italians, Spaniards and a few others besides, not to mention the Greeks.

If it doesn’t want to save the euro, it will have to deal with a rapidly rising new deutschemark, which will soar in value against every currency — not just in Europe but against every currency in the world. In fact, the blueprint for Germany is Switzerland, and last week the Swiss National Bank responded to the rising Swiss franc by capping its rapid appreciation because it is hurting Swiss industry. A post-euro Germany with the new deutschemark would be like the Swiss Franc on steroids. It would be like a massive Switzerland in the heart of Europe with a hugely overvalued currency.

full article at source: http://www.davidmcwilliams.ie/2011/09/14/germany-profited-in-boom-so-must-deal-with-the-bust?utm_source=WebsiteSubscribers&utm_campaign=02a50fdec3-Weekly_Roundup_10_August_2011&utm_medium=email

 

Comment:

Germany :Should I stay or should I go???

Swiss Government Ruins Franc

by Staff Report at the Daily bell

The Swiss franc tumbled against the euro and dollar on Tuesday after the Swiss National Bank   set a minimum exchange rate target of 1.20 francs per euro to combat the strength of the   currency, which it says poses a risk to the economy.  – UK Telegraph

Dominant Social Theme: The Swiss, gallantly, will do whatever they need to in order to defend the euro, even if it means debasing their own currency.

Free-Market Analysis: Switzerland is one of those rare European countries that are doing relatively well in a time of international economic crisis. But doing well is not something that can be tolerated in the “new” Europe. The Swiss have come under enormous pressure on a variety of fronts to make their sociopolitical environment conform to the larger dysfunction of the EU – and now they’re ruining their currency at the behest of Brussels.

full article at source:http://www.thedailybell.com/2888/Swiss-Government-Ruins-Franc

The response to Europe’s banking crisis

Dan O’Brien Economics Editor with the Irish times writes in to-days Irish Times the following

ANALYSIS : The response to Europe’s banking crisis raises issues over its ability to deal with the threat

WHEN CENTRAL banks start lending money to each other, things are usually grim. The last time it happened in large amounts was in October 2008. Then, the West’s financial system went into cardiac arrest following the collapse of Lehman Brothers.

It was revived in the nick of time but now is suffering the sort of chest pains that could be an indication of a second full-scale arrest in the offing.

The US central bank has lent its Swiss counterpart €200 million so the latter could lend it on to its banks. Separately, one euro area bank has tapped the European Central Bank’s (ECB’s) dollar stash to the tune of $500 million (€347.5 million). All this shows some European banks can’t borrow dollars in the normal way – on the markets – because their peer institutions fear they won’t get their money back.

full article at source:http://www.irishtimes.com/newspaper/finance/2011/0820/1224302758446.html

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