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Full Retard as EFSF Found to Monetize... Itself
by Tyler Durden
at Zero Hedge
Washington, DC -- We have long mocked and ridiculed the
Federal Reserve for being the ultimate Ponzi instrument: after all, why
worry, when your central bank will buy up almost three trillion in US paper
in about 2 years (a very comforting fact for US politicians who never have
to fear that those trillions in new porkbills, pardon fiscal stimulus
programs, may end up without funding).
Well, as it turns out, those wily veteran bankers from
across the Atlantic have just one-upped America yet again.
According to the Telegraph, the abysmal, and barely
successful, 3 EUR billion issuance of EFSF bonds (which was originally
supposed to be 10 EUR billion, on its very very gradual climb to 1 EUR
trillion) had one more very curious feature to it, aside from confirming
that it is Dead On Arrival as expected. It turns out that in addition
to being the most convoluted and complex creation ever conceived by JP
Morgan which is advising Europe on coming up with structured finance
products that are so complex nobody will ask any questions
and will automatically assume someone else has done the
homework, it is also the quintessential Ponzi instrument.
The Telegraph reports that the already reduced 3 EUR
billion "target was only met after the EFSF resorted to buying up
several hundred million euros worth of the bonds." You read that
right: in its first bond issuance since its transformation to the
European Bank/Sovereign Bailout Swiss Army Knife, the EFSF not only failed
to raise a minimum token amount, but also had to...
buy its own bonds.
We can assume that the money the EFSF needed to fund said purchase came from
the money growing tree, as at last check the European Central Bank was still
not funding the EFSF with crisp, new zEURq.PK equivalent binary 1s and 0s.
But at least we all know what happens when the global Ponzi goes full
More on this surreal story
which will be promptly buried in the barrage of Monday headlines because
an international advisor to Goldman Sachs is now in
charge of Italy.
Sources said the EFSF had
spent more than 100 Million Euros buying up its own bonds to help it achieve
its funding target after the banks leading the deal were only able to find
about 2.7 Billion Euros of outside demand for the debt.
The revelation will be seen
as a major failure and a worrying sign of future buyers strike after EFSF
officials and their bankers had spent recent weeks traveling the world
attempting to persuade key investors, including China's national wealth fund
and Japanese government funds, to buy its bonds.
And just in case one
monetization vertical was not enough, Europe used, well, all the other ones
Other European Union
funds are also understood to have supported the EFSF's bond sale.
The failure of the EFSF will increase pressure on the European Central Bank
to effectively become the lender of last resort for the Eurozone, a move it
has strongly resisted.
At a private breakfast
organised by PI Capital last week, Mark Hoban, the Treasury minister, said:
"What it doesn't do is provide the next stage of the solution, which is how
do you stop this from happening again?" he said.
The move, by the European
Investment Bank, will cause more disquiet among non-Eurozone EU members who
have become concerned about their growing exposure to the cost of rescuing
the currency bloc.
explanation, for anyone whose brain just exploded, is that despite the
marionette rotation at the top, the math of Europe is still not only
absolutely hopeless, not to mention meaningless, but somehow just
got even worse, because take away the magical powers of modern
finance to be one with the ponzi, and Europe would have already imploded.
It also means that our
earlier observation that the EFSF is an AA+ equivalent credit instrument has
to be revised: pro forma-ing out the Ponzi, means it is at best AA if not A,
and most likely D if one takes away all the magic bells and Keynesian
whistles, unicorns and other end of the western financial world loopholes
that modern finance is forced to resort to every single day to mask the fact
that every country in the developed world is now
– FM Duck
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