Surge In European Bank Rush To Safety Brings ECB Deposit Facility Holdings To Fresh €384 Billion Record
Submitted by Tyler Durden on 06/14/2010 07:14 -0500
Even as Goldman is urgently forcing a EURUSD squeeze following its last week target revision lower to 1.15 (just as predicted on Zero Hedge), in an attempt to shake out the latest batch of weak hands (aka clients) in the second highest EURUSD net short position last week, forcing all correlation desks to bid up all risky assets and pretend all is good, Europe liquidity is now even more frozen than ever before. While earlier reports from the FAZ that Spain is next in line for the EU/IMF rescue facility may or may not be true (very likely the former, but no confirmation will be provided until after the fact), looking at the ECB's deposit facility usage paints a grim picture: usage increased by $18.4 billion through the weekend, and was at an all time high €384 billion: European banks have put aside nearly half a trillion dollars away due to concerns about counterparty risk. For those still confused why this data series indicates that the FV of the EURUSD is likely close to or at parity, the topic of the ECB's deposit facility usage was covered exhaustively by Bloomberg overnight in "Europe's Banks May Face Second Funding Squeeze Amid Sovereign-Debt Crisis."
...now, with all eyes on the PIIGS...
The cat is clearly out of the bag concerning the forthcoming bankruptcy of 33 states of the USA.
This moronic New York non-solution to borrow from state pension funds, which now cannot meet their pension requirements, screams bankruptcy. The Administration calling for $50 billion for states and cities would appear to be confirmation of this financial phenomenon. The sign that the financial problems of the states of the USA are going critical and will make the EU situation look like kindergarten, in market terms, will be a stronger euro and stronger gold, sort of like now (9:09 EST).
A shift in the recent relationship between gold and the euro would signal that recognition by markets.
State Plan Makes Fund Both Borrower and Lender
By DANNY HAKIM
Published: June 11, 2010
ALBANY - Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund.
And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund - from the same pension fund.
As word of the plan spread, some denounced it as a shell game and a blatant effort by state leaders to avoid making difficult decisions, like cutting government spending or reducing pension benefits.
"It's a classic Albany example of kicking the can down the road," said Harry Wilson, the Republican candidate for comptroller, who holds an M.B.A. from Harvard.
Pension costs for the state and municipalities are soaring, a result of enhanced retirement benefits for public employees and the decline in the stock market over the past two years. And, given declines in tax revenue and larger budget shortfalls, the governments are struggling to come up with the money to make the contributions.
Under the plan, the state and municipalities would borrow the money to reduce their pension contributions for the next three years, in exchange for higher payments over the following decade. They would begin repaying what they borrowed, with interest, in 2013.
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