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Deutsche Bank, 60 times Over-Leveraged and a $72 trillion Derivative Exposure

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paddle_storeWhoa, how close is Deutsche Bank to causing ABSOLUTE HAVOC in the eurozone? At a capital ratio of just under 1.68%, DB is leveraged up to 60x and with a derivative exposure of over $72.8 Trillion, I think the technical term is “they’re f**ked”.

 

Finally, if anyone is still confused where the pain is headed next, here is a list from Morgan Stanley of all Euro banks with a Core Tier 1 ratio that is so low, that the banks will soon regret not raising more capital in the period of calm that the ECB’s LTRO bought them.

Also, one bank is missing from the list above: Deutsche Bank. CT1/TA: 1.68%. Oops.

That’s right – Deutsche Bank was so bad that it wasn’t even allowed to appear on a screen of Europe’s most undercapitalized banks – and we helpfully pointed out its true capital ratio of just under 2%, and an implied leverage of 60x!

According to FDIC Vice Chairman Tom Hoenig, Deutsche Bank is horribly undercaptialized.

A top U.S. banking regulator called Deutsche Bank’s capital levels “horrible” and said it is the worst on a list of global banks based on one measurement of leverage ratios. “It’s horrible, I mean they’re horribly undercapitalized,” said Federal Deposit Insurance Corp Vice Chairman Thomas Hoenig in an interview. “They have no margin of error.”  Deutsche’s leverage ratio stood at 1.63 percent, according to Hoenig’s numbers, which are based on European IFRS accounting rules as of the end of 2012.

In other words, the slighest systemic shock in Europe and Deustche Bank gets it. And as Deutsche Bank goes, so does Germany, so does Europe, so does the world.

Immediately confirming Hoenig’s (and Zero Hedge’s) observations, was Deutsche’s prompt repeat that “all is well” and that “these numbers” are not like “those numbers.”

“To say that we are undercapitalized is inaccurate because if you look at the Basel framework, we’re now one of the best capitalized banks in the world after our capital raise,” Deutsche Bank’s Chief Financial Officer Stefan Krause told Reuters in an interview, when asked about Hoenig’s comments. “To suggest that leverage puts us in a position to be a risk to the system is incorrect,” Krause said, calling the gauge a “misleading measure” when used on its own.

Of course, DB’s lies are perfectly expected – after all it is a question of faith. So let’s go back to Hoenig who continues to be one of the few voices of reason among the “very serious people”:

Still, equity analysts said that while Deutsche Bank likely will meet regulatory capital requirements, its ratios look weak.

Hoenig pointed to the gain in Deutsche Bank shares in January on the same day it posted a big quarterly loss, because it had improved its Basel III capital ratios by cutting risk-weighted assets.”My other example with poor Deutsche Bank is that they lose $2 billion and raise their capital ratio. It’s – I don’t want to say insane, but it’s ridiculous,” Hoenig said.

A leverage ratio is a better method to show a firm’s ability to absorb sudden losses, Hoenig says, and he has floated a plan to raise the ratio to 10 percent. He said the 3 percent leverage hurdle under Basel was a “pretend number.”

Opponents of using such a ratio say that it ignores the risk in a bank’s loan books, and can make a bank with only healthy borrowers look equally risky as a bank whose clients are less likely to pay back their loans. It also fails to take into account how easily a bank can sell its assets – so-called liquidity – or whether it is hedged against risk.

Still, equity analysts said that while Deutsche Bank likely will meet regulatory capital requirements, its ratios look weak.

But is there anything to really worry about? Well, as ZeroHedge put it….;-)

But just as we were about a year ahead with our warning of DB’s “off the charts” leverage, so we wish to remind readers that some time around June 2014, the topic of Deutsche Bank’s

$72.8 trillion in derivatives, or about 21 times more than the GDP of Germany

, will be the recurring news headline du jour.

Recall from April: “At $72.8 Trillion, Presenting The Bank With The Biggest Derivative Exposure In The World (Hint: Not JPMorgan)” which for those who missed it, we urge rereading:

Source: ZeroHedge

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German Court Case Has Potential To Force Euro Exit

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Last summer to avert the euro crisis, Mario Draghi announced Outright Monetary Transactions (OMT) to support the Spanish and Italian bonds. Now finally the German constitutional court is to hold hearings this week on the legality of the ECB using OMT as a tool to finance deficits in bankrupt states. Already Bundesbank’s Jens Weidmann has submitted a report to the court objecting to OMT but the panel looks split and the ruling could go either way. This has the potential to possibly force a German euro exit or at very least throw the eurozone back into a full blown crisis.

Udo di Fabio, the constitutional court’s euro expert until last year, said the explosive case on the legality of the European Monetary Union rescue machinery could provoke a showdown between Germany and the European Central Bank (ECB) and ultimately cause the collapse of monetary union.

“In so far as the ECB is acting ‘ultra vires’, and these violations are deemed prolonged and serious, the court must decide whether Germany can remain a member of monetary union on constitutional grounds,” he wrote in a report for the German Foundation for Family Businesses.

“His arguments are dynamite,” said Mats Persson from Open Europe, which is issuing its own legal survey on the case on Monday.

Dr Di Fabio wrote the court’s provisional ruling last year on the European Stability Mechanism (ESM), the €500bn (£425bn) bail-out fund. His comments offer a rare window into thinking on the eight-strong panel in Karlsruhe, loosely split 4:4 on European Union issues.

The court is holding two days of hearings, though it may not issue a ruling for several weeks. The key bone of contention is the ECB’s back-stop support for the Spanish and Italian bond markets or Outright Monetary Transactions (OMT), the “game-changer” plan that stopped the Spanish debt crisis spiralling out of control last July and vastly reduced the risk of a euro break-up.

germanThe case stems from legal complaints by 37,000 citizens, including the Left Party, the More Democracy movement, and a core of eurosceptic professors, most arguing that the ECB has overstepped its mandate by financing the deficits of bankrupt states.

Berenberg Bank said the case was now “the most important event risk” looming over the eurozone, with concerns mounting over an “awkward verdict” that may constrain or even block ECB action.

Dr Di Fabio said the court, or Verfassungsgericht, does not have “procedural leverage” to force the ECB to change policy but it can issue a “declaratory” ultimatum. If the ECB carries on with bond purchases regardless, the court can and should then prohibit the Bundesbank from taking part.

The Bundesbank’s Jens Weidmann needs no encouragement, say experts. He submitted a report to the court in December attacking the ECB head Mario Draghi’s pledge on debt as highly risky, a breach of both ECB independence and fundamental principles. The ECB does not have a legal mandate to uphold the “current composition of monetary union”, he wrote.

Dr Di Fabio said it was hard to imagine that an “integration-friendly court” would push the EMU “exit button”, but it can force a halt to bond purchases. This may amount to the same thing, reviving the eurozone crisis instantly.

“It would pull the rug from under the whole project. It is the OMT alone that has calmed markets and saved the periphery,” said Andrew Roberts from Royal Bank of Scotland. Mr Draghi said last week that the OMT was the “most successful monetary policy in recent times”.

The court dates back to the Reichskammergericht of the Holy Roman Empire created in 1490, but it was revived after the Second World War along the lines of the US Supreme Court.

It has emerged as the chief defender of the sovereign nation state in the EU system, asserting the supremacy of the German Grundgesetz over EU law, hence the German term “Verfassungspatriotismus”, or constitution patriotism.

The court backed the Lisbon Treaty but also ruled that Europe’s states are “Masters of the Treaties” and not the other way round, and reminded Europe that national parliaments are the only legitimate form of democracy. It said Germany must “refuse further participation in the EU” if it ever threatens the powers of the elected Bundestag.

It issued another “yes, but” ruling last September. It threw out an injunction intended to freeze the ESM, but it also tied Berlin’s hands by capping Germany’s ESM share at €190bn, and blocked an ESM bank licence. It killed off hope of eurobonds, debt-pooling, or fiscal union by prohibiting the Bundestag from “accepting liability for decisions by other states”.

Crucially, the court said the Bundestag may not lawfully alienate its tax and spending powers to EU bodies, even if it wants to, for this would undermine German democracy.

Chief Justice Andreas Vosskuhle said at the time that Germany had reached the limits of EU integration. Any further steps would require a “new constitution”, and that in turn would require a referendum.

 

Source: The Telegraph

Bundesbank’s Report To German Court Could Torpedo Draghi’s OMT

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Draghi’s great plan to buy bonds of struggling eurozone countries through Outright Monetary Transactions (OMT) has taken a massive knock. A report issued by the Bundesbank on friday, to the German court which has yet to give its consent to OMT,  is damning to say the least.  The following line from the report says it best “It is not the duty of the ECB to rescue states in crisis”.

The hardline central bank – known as the temple of monetary orthodoxy – told Germany’s top court that the ECB’s pledge to shore up Italian and Spanish debt entails huge risks and violates fundamental principles. “It is not the duty of the ECB to rescue states in crisis,” it wrote in a 29-page document leaked to Handelsblatt.

  The Bundesbank unleashed a point by point assault on every claim made by ECB chief Mario Draghi to justify emergency rescue policies – or Outright Monetary Transactions (OMT) – unveiled last summer to stop Spain’s debt crisis spiralling out of control.

The Draghi plan mobilized the ECB as lender of last resort and led to a spectacular fall in borrowing costs across the EMU periphery, buying nine months of financial calm. The credibility of the pledge rests entirely on German consent. Analysts say the crisis could erupt again at any moment if that is called into question.

“The report borders on economic warfare,” said Harvinder Sian from RBS. “We think there is going to be fear and dread in the market that the court will reject OMT.”

The document said OMT entails the purchase of “bad bonds”, violates ECB independence and entails a high risk of heavy losses in the “not unlikely” event that debtor states are forced out of EMU.

 

It said Greek debacle had shown that conditions cannot be enforced, and, in any case, is “very questionable” whether it is desirable to drive down the borrowing costs of profligate states.

To cap it all, the Bundesbank said the ECB has no mandate to uphold the “current composition of monetary union”. Its task is to uphold price stability and let the chips fall where they may.

While the Bundesbank’s president, Jens Weidmann, has openly criticised the Draghi plan before, the aggressive language in the report shocked economists. The document was submitted in December but was not revealed until Friday.

Germany’s constitutional court will rule on the legality of the bond rescue plan on June 12. It gave a provisional go-ahead last September for other parts of the EMU rescue machinery, but limited Germany’s bail-out share to €190bn (£160bn). Crucially, it warned that the Bundestag may not alienate its tax and spending powers to any supra-national body or be exposed to “unlimited” liabilities.

“If the court rules against OMT, it means the end of the euro. The stakes are so high that I don’t see how they could just pull the trigger,” said Mats Persson from Open Europe.

He said the Draghi plan is a legal hot potato because it is, by definition, unlimited. “The previous rulings by the court have all been predicated on this point.”

German historian Michael Stürmer said the tough report is a bid by the Bundesbank to “reassert its primacy”. “They have told the ECB in no uncertain terms that it is exceeding its mandate. Angela Merkel may be smiling because this helps her set limits in Europe.”

Prof Sturmer said the forthcoming ruling – wider than just the Draghi plan – is “much more serious” than last September’s judgment, limited to an injunction brought by eurosceptic groups. “This is about issues of sovereignty. I don’t think the Court will dare to issue a ruling before the elections in September. They will procrastinate,” he said.

The court has some jurisdiction over ECB policy because it intrudes on the German Grundgesetz, or Basic Law. “Once the ECB starts bailing out states it is moving into dangerous waters,” he said.

The court made a glancing reference to OMT in September, stating that ECB bond purchases “aimed at financing the members budgets is prohibited, as it would circumvent the ban on monetary financing”.

The bond markets ignored the leaked report on Friday, confident that the court will once again find some formula to avert a crisis. It could cite a clause in the Lisbon Treaty stating that the ECB has a duty to “support the general economic policies in the Union”, which would include saving the euro.

“They might refer the case to the European Court but that would leave the Sword of Damocles hanging over the market for another two years,” said David Marsh, author of books on the Bundesbank and EMU. “I think use of OMT is practically impossible until this is resolved.”

Sovereign bond strategist Nicholas Spiro said markets are “sick and tired” of the eurozone debt crisis and have stopped paying attention to the detail. “There is this ravenous hunt for yield and they think there is all this money coming from Japan. But it has long been unclear whether OMT is real or just a myth, and the eurozone’s underlying economic crisis is still getting worse. The window of opportunity created by Draghi has been wasted.

“If the court sides with the Bundesbank in any way the whole house of cards could come crashing down.”

Source: The Telegraph

Your Banks Mess Up, But Its Your Fault

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Wolfgang Schauble, Germany’s Finance Minister is not one for holding back when it comes to pointing out the ills of other countries. Schauble has clearly laid the blame for Ireland’s bank collapse at the hands of the Irish. While partly this is true, he neglects the enormous part played by the ECB. It was the ECB’s interest rate decisions which Schauble’s Germany benefited from, that caused credit bingeing countries all their problems. He also neglects the ECB’s decision to force the Irish taxpayer to pay back gambling bondholders and help keep German banks afloat.
If that’s the best analysis Schauble can do regarding Ireland then God help the German taxpayers because I wouldn’t trust this lawyer to run my finances. When it comes to German banks exploding, Schauble’s attitude is, it’s never the banks fault. I woudn’t fancy been forced to bail out German banks along with bailing out the rest of Europe.
Wolfgang Schauble, Germany’s powerful federal minister for finance, has said it is all Ireland’s fault its banks collapsed, plunging the economy into a deep recession, and absolves reckless European bondholders of all blame.

In a frank interview for a new documentary called State Secrets and Bank Bailouts, Schauble dismisses claims that European bondholders should be made share in the responsibility for unsustainably pumping up Ireland’s banking system with billions.

“The cause in Ireland is something Ireland itself created – not Luxembourg, not France, not Germany, but Ireland – and it benefited from it for some time,” Schauble claims.

“Then everyone has to bear the consequences of a wrong-headed policy.”

In the documentary, presenter Harald Schumann, a former editor of Der Spiegel, asks Schauble to publish a list of the bondholders who cashed in from the German-backed decision by the European Central Bank not to make them bear the cost of banking recklessness but instead to shift this bill on to the citizens of peripheral European states like Ireland.

“Why don’t you publish a list of creditors so we can have an informed debate about it?” he asks. Schauble dismisses this view as being “naive.”

“[Banks are] very intermingled. And if one bank is not solvent anymore, then it will immediately trigger doubts about the solvency of the next bank because it may have credit at the other,” Schauble states.

“Everyone should solve their own problems. If everyone swept in front of their own door, the whole neighbourhood would be clean,” the German politician added.

“The Irish were very aware that their banks were less stringently supervised then the German banks,” he said.

Most economic common sense in Ireland unfortunately comes from independent politicians (the mainstream politicians are the best money can buy). In this case Stephen Donnelly easily dismisses Schauble’s argument.

In this major documentary, independent TD Stephen Donnelly disputes Schauble’s views of the Irish crisis, which are widely accepted in Germany.

“The gun was held by the European Central Bank,” Donnelly states, “The suspicion is that the European Central Bank said you will continue to pay these bondholders to whom you owe nothing or we will pull the emergency funding out of your banking system. Thereby collapsing your banking system, thereby collapsing your economy. To me, that is gunboat diplomacy.”

Former finance minister Brian Linehan backed up Donnellys claim before he died stating that Trichet made him bail out the bondholders. Even current finance minister Michael Noonan claims to have the letter from the ECB forcing Ireland to bailout the banks at the taxpayers expense, otherwise emergency liquidity would be withdrawn.

Source: Irish Independent

Germany On Verge Of Bailing Out Cyprus

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This euro crisis just gets better and better. Cyprus is locked out of the bonds markets for over a year now and is being kept alive by a loan from Russia but badly needs a bailout. Thats where the dilemma lies for Germany which will bear the brunt of any bailout. A lot of the depositors in Cypriot banks are Russian black money and with an election later this year, it would be very embarrassing for Merkel to be seen to supporting handing over German taxpayers money to pay back dodgy Russians.

When German officials said they would save the euro zone at all costs, the prospect of bailing out Russian oligarchs was not what they had in mind.

But eight months before a crucial election in Germany, Chancellor Angela Merkel is facing charges that Europe is doing just that as the tiny island of Cyprus, a haven for Russian cash, threatens to become the next point of contention in the euro crisis.

In recent days, Germany has signaled that it is reluctantly edging toward a bailout for Cyprus, after lifelines have been extended to Greece, Ireland and Portugal to prevent potentially calamitous defaults. While Cyprus makes up just a sliver of the euro zone economy, it is proving to be a first-rate political headache.

“I don’t think that Germany has ever in the history of the euro zone crisis left itself so little wiggle room,” said Nicholas Spiro, the managing director of Spiro Sovereign Strategy in London. “But Germany wants the euro to succeed and survive, and they are saying we can’t afford a Cyprus bankruptcy.”

But giving a bailout to Cyprus is trickier than it seems. Cyprus’s politicians would prefer not to take European money, which comes with the harsh austerity conditions that have spread misery in Greece. And they can argue that Cyprus was doing relatively well until Greece’s second bailout, when Greek government bonds — of which Cypriot banks held piles — lost considerable value.

The question of keeping the euro together had seemed to be conveniently fading for Ms. Merkel, who in the fall put her full backing behind the euro zone, quieting fears of a breakup. But Berlin seems to have been caught off guard by the political tempest stirred up by Cyprus, which has been shut out of international bond markets for a year but has been kept afloat by a $3.5 billion loan from the Russian government.

Here, is where it get hilariously funny 😉

With that money running out, Germany and its European partners have been locked in a fierce debate over whether and how to throw Cyprus a lifeline. The problem is, most of the money lost by Cypriot banks was Russian, and the worry is that most of the bailout money could wind up in the hands of Russian oligarchs and gangsters. That fear, backed by a recent report by German intelligence, has stoked a furor even among some of Ms. Merkel’s political partners. “I do not want to vouch for black Russian money,” Volker Kauder, a prominent member of her conservative bloc, said recently.

The Russian presence is thick on Cyprus, a picturesque Mediterranean island and a onetime British colony. The bustling, large city of Limassol has an enclave of restaurants, shops and fur boutiques so packed with Russians that locals call it “Limassolgrad.”

You know when something is true, when you get an official denial.

Officials in Cyprus say there is no proof that the Russian cash in its banks is of dubious origin, and they insist that they cracked down on money laundering before joining the European Union. The officials point to an evaluation by the Organization for Economic Cooperation and Development showing that Cyprus is compliant with more than 40 directives against money laundering.

With a population of slightly over 1 million, Cyprus is looking for about €22 billion for its banks.And  I thought Ireland messed up its banks bigtime.

While any lifeline for Cyprus would be small — about $22 billion compared with about $327 billion for Greece — the quandary has reverberated in Europe’s halls of power, and especially in Berlin, which appears to have been backed into a corner by Ms. Merkel’s commitment to keep the euro zone together no matter what.

The outspoken German finance minister, Wolfgang Schäuble, recently cast doubt on whether Cyprus should even be considered for a bailout, given its small size and the stark reality that it is not nearly as vital to the euro’s existence as the larger economies of Spain or Italy. His blunt assessment reportedly drew an admonishment from Mario Draghi, the president of the European Central Bank, which has spent hundreds of billions of euros on a program intended to discourage financial market speculators from attacking euro zone countries.

Already Cyprus is implementing austerity measures and they are having predictable consequences.

With Russia refusing to provide any further financing unless the so-called troika of creditors — the European Central Bank, the International Monetary Fund and the European Commission — provides most of the bailout, the Cypriot government has few options. It signed a memorandum of understanding in November with the troika, setting off a wave of austerity measures that are already starting to hit the enfeebled Cypriot economy.

The salaries of public sector workers have since been slashed by up to 15 percent, state pensions are to be cut by up to 10 percent and the value-added tax is set to rise. “The island has been hard hit, and there is an atmosphere of fear,” Mr. Faustmann said. “People are not sure if they will keep their jobs, and if they do, how long they will have them.”

Mr. Faustmann estimated that it would take at least a half-decade for the Cypriot economy to recover — assuming that the conditions required by Germany and the troika do not send Russian money fleeing from the banks. “If that happens,” he said, “then Cyprus is dead.”

Source: NY Times

Draghi Silences German Finance Minister Over Cyprus “let them default” Comments

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There is one word within the EUSSR that’s never to be uttered and thats DEFAULT. No matter what, bank debt must be honoured, God forbid they loose one cent and that is at the heart of the matter in Germany. Just before the German parlimentary elections, nobody wants to be seen bailing out Cyprus or more importantly shady Russia money via the back door since the majority of Cyprus’s debt is owned to Russia.

German Finance Minister Wolfgang Schäuble has publicly stated that he doesn’t think a Cyprus default would have much harm on the euro. Draghi’s response was of the line, “you are a lawyer so STFU”.

A debate has been raging in Germany about Cyprus. Not that the German parliament, which has a say in this, wouldn’t rubberstamp an eventual bailout, as it rubberstamped others before, but right now they’re not in the mood. Cyprus is too much of a mess. Bailing out uninsured depositors of Cypriot banks would set a costly precedent for other countries. And bailing out Russian “black money,” which makes up a large portion of the deposits, would be, well, distasteful in Germany, a few months before the federal elections.

For the tiny country whose economy is barely a rounding error in the Eurozone, it would be an enormous bailout. At €17.5 billion, it would amount to about 100% of GDP: €10 billion for the banks, €6 billion for holders of existing debt, and €1.5 billion to cover budget deficits through 2016. The new debt, a €2.5 billion loan that Russia extended in 2011, and other debt would amount to 150% of GDP, according to Moody’s. Unsustainable. So haircuts would be necessary. But whose hair would be cut?

As always, there is never an alternative to a bailout. “It’s essential that everybody realizes that a disorderly default of Cyprus could lead to an exit of Cyprus from the Eurozone,” said Olli Rehn, European Commissioner for Economic and Monetary Affairs. “It would be extremely stupid to take any risk of that nature.”

A risk German Finance Minister Wolfgang Schäuble would be willing to take. He’d been saying publicly that it wasn’t certain yet that a default would put the Eurozone at risk—”one of the requirements that any bailout money can flow at all,” he said. Cyprus simply wasn’t “systemically important.” In fact, there were alternatives.

Heretic words. He needed to be shut up, apparently. And that happened at the meeting of Eurozone finance ministers a week ago, details of which sources just leaked to the Spiegel.

The meeting was marked by the transfer of the Eurogroup presidency from Jean-Claude Juncker to the new guy, Dutch Finance Minister Jeroen Dijsselbloem. Cyprus was also on the agenda, but not much was accomplished, other than an agreement to delay the bailout decision until after the Cypriot general elections in February. The government has resisted certain bailout conditions, such as the privatization of state-owned enterprises and the elimination of cost-of-living adjustments for salaries. Now, everyone wanted to deal with the new government.

The put down.

But what didn’t make it into the press release was that ECB President Mario Draghi, bailout-fund tsar Klaus Regling, and Olli Rehn, all three unelected officials, had formed a triumvirate to gang up on Schäuble.

That Cyprus wasn’t “systemically important” was something he kept hearing everywhere from lawyers, Draghi told Schäuble at the meeting. But it wasn’t a question that can be answered by lawyers, he said. It was a topic for economists.

A resounding put-down: Schäuble, a lawyer by training—not an economist—wasn’t competent to speak on the issue and should therefore shut up!

The smoke and mirror argument the triumvirate used was that a Cypriot default would affect Greece, which is true, but for German taxpayers it would be extremely distasteful for the majority of this bailout to go to shady Russian depositors.

The two largest Cypriot banks had an extensive network of branches in Greece, the triumvirate argued. If deposits at these branches weren’t considered safe, Greek depositors would be plunged again into uncertainty, which could then infect Greek banks and cause a serious relapse in Greece.  

If Cyprus went bust, they contended, it would annihilate the flow of positive news that has been responsible recently for calming down the Eurozone.

For weeks, all signs have pointed towards an improvement, they argued. Risk premiums for Spanish and Italian government debt have dropped significantly, and balances between central banks, which had risen to dangerous levels, have been edging down. If the money spigot were turned off, this recovery could reverse, they argued. Contagion would spread and could jeopardize Ireland’s and Portugal’s return to the financial markets.

Further, Cyprus was carrying its portion of the bailout funds and therefore had a right to its own bailout—a legal argument even a mere lawyer should be able to grasp.

And so, letting tiny Cyprus default could tear up the rest of the Eurozone, they argued—saying essentially that bailouts were a delicate con game, and that Schäuble, by digging in his heels, was blowing it up.

Eurocrats bitch slap the German Finance Minister and tell the Germans to hand over the cash. If this show of force from the bankers doesn’t demonstrate who holds the balance of power in eurozone then I don’t know what will.

It made for another bitter Eurozone irony: the democratically elected finance minister of a country whose taxpayers have to pay more than any other for the bailouts got shut down by unelected Eurocrats who, in a continued power grab, postulated that Cypriot banks, their bondholders, their depositors, even their uninsured depositors, even Russian “black money” depositors had a “right” to the German money (and anyone else’s). And if Schäuble refused, it would blow up the entire Eurozone. Schäuble’s response hasn’t bubbled to the surface yet. And bailout queen Chancellor Merkel, who is trying to avoid tumult ahead of her elections, has a new headache. Read…  Russian “Black Money” Threatens To Boot Cyprus Out Of The Eurozone.

Source: Testosterone Pit

NY Fed Does Not Have Germany’s Gold

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According to the Bundesbank press release 16th Jan 2013, the Bundesbank is planning a phased relocation of 300 tonnes of gold from New York to Frankfurt as well as an additional 374 tonnes from Paris to Frankfurt by 2020. James Turk asks why take 7 years for Germany to get its gold back from New York when it should be able to get it back in 7 weeks, unless it was never there.

The Bundesbank made another suspicious statement when it claimed that it would leave its remaining gold reserves in New York untouched because it is a major trading centre, but this clearly in not true. Most of the trading is done through London and Zürich.

Today James Turk told King World News that the German gold is being held hostage by the Fed.  Turk also believes that one portion of the Bundesbank’s press release was particularly misleading.  Turk reveals the reality of what is taking place with Germany’s gold, and it’s not what the mainstream media and the Bundesbank are telling people.

 Here is what Turk had to say in this extraordinary interview:  “It’s quite clear that the German gold is being held hostage.  They are not getting what they want.  They are getting what the Federal Reserve is telling them they can have.  The fact that they are doing it over 7 years rather than 7 weeks, is just an indication that gold probably isn’t in the Federal Reserve, and the Federal Reserve doesn’t want to have to go out and buy it overnight to fulfill the German demand.  They are trying to stretch it out as long as possible in order to keep gold prices controlled.”

“I mean you can do 5 tons at a time on an airplane shipment.  A few hundred shipments and you can have that (1,536 tons of) gold back (in Germany) in a matter of weeks.  The only possible conclusion you can make is the gold isn’t there. 

You can do what France did back in the 1960s….

“You send over a couple of ships and bring the gold back to your country that way. 

When Charles de Gaulle asked for his gold out of the Federal Reserve, it didn’t take 7 years.  He got it right away.  But back then the gold was in the Federal Reserve because it wasn’t going out in the leasing and lending program that governments have been using in recent years in order to keep the gold price suppressed.

Recently, the Audit Committee of the Bundestag (their parliament),  has been requesting that the Bundesbank actually audit the gold because it has never been audited, and presumably is never going to be audited.  So the Bundesbank is in a tough spot.  The gold is not there, but they have the pressure to audit it and bring it back home. 

The fact that they (Fed) are not sending the gold back right away, to me is just a clear sign the German gold is being held hostage.  It’s potentially a powder keg here in terms of how the gold market is positioned at the moment because there is so much paper (claims on gold) out there, relative to so little physical, that a lot of paper gold is going to be defaulted upon.

 It will be interesting to see whether this leads to other central banks also asking for their physical gold.  And more importantly, since there are so many paper (claims on gold) in the various gold ETFs around the world, it will be interesting to see whether the institutional investors are starting to recognize what the central banks are doing, and take some of that GLD and all of the other ETF paper and start saying, ‘Look, I don’t want shares, I actually want ounces.  Deliver me the physical metal.’

There is another point here, Eric, that needs to be considered.  The Bundesbank made this announcement, but I think they were just trying to put it out in the best possible light.  I believe they were trying to stretch for reasons in order to explain why they are still leaving physical gold in New York.

They said, for example, that New York is a trading center for physical gold.  That’s not true.  It’s not been a trading center for physical gold ever since 1933, when the gold was confiscated by Roosevelt and all of the physical gold trading went to Europe.

That’s why in the physical market you talk about London or Zurich.  You never talk about New York because there is no physical gold trading in New York.  It’s just a bogus excuse you see in this announcement.  It’s just more evidence to me the gold isn’t there.  It’s been taken out of the vault and used surreptitiously in order to try to cap the gold price.”

Source: King World News

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