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Italy has now joined the “bail-in” crowd.

Monte dei Paschi di Siena is to be rescued by the Italian state using a new €20bn bailout package, as a last-gasp private sector rescue plan for the world’s oldest bank looked set to fail, forcing losses on bondholders.

The government rescue, which had long been resisted in Rome, is designed to draw a line under the slow-burn crisis in Italian banking that has alarmed investors and become the main source of concern for European financial regulators.

            Source: Financial Times

In this particular case, the bail-in will use bondholders’ money. But depositors will be on the hook in future cases in Europe.

Those who are shocked by this development are not paying attention. The template for this manner of dealing with financial issues was first laid out in Cyprus in 2012-2013.

Anyone who wants to understand how the next global banking crisis will unfold should take heed.

The quick timeline for what happened in Cyprus is as follows:

·      June 25, 2012: Cyprus formally requests a bailout from the EU.

·      November 24, 2012: Cyprus announces it has reached an agreement with the EU the bailout process once Cyprus banks are examined by EU officials (ballpark estimate of capital needed is €17.5 billion).

·      February 25, 2013: Democratic Rally candidate Nicos Anastasiades wins Cypriot election defeating his opponent, an anti-austerity Communist.

·      March 16 2013: Cyprus announces the terms of its bail-in: a 6.75% confiscation of accounts under €100,000 and 9.9% for accounts larger than €100,000… a bank holiday is announced.

·      March 17 2013: emergency session of Parliament to vote on bailout/bail-in is postponed.

·      March 18 2013: Bank holiday extended until March 21 2013.

·      March 19 2013: Cyprus parliament rejects bail-in bill.

·      March 20 2013: Bank holiday extended until March 26 2013.

·      March 24 2013: Cash limits of €100 in withdrawals begin for largest banks in Cyprus.

·      March 25 2013: Bail-in deal agreed upon. Those depositors with over €100,000 either lose 40% of their money (Bank of Cyprus) or lose 60% (Laiki).

The most important thing I want you to focus on is the speed of these events.

Cypriot banks formally requested a bailout back in June 2012. The bailout talks took months to perform. And then the entire system came unhinged in one weekend.

One weekend. The process was not gradual. It was sudden and it was total: once it began in earnest, the banks were closed and you couldn’t get your money out (more on this in a moment).

There were no warnings that this was coming because everyone at the top of the financial food chain are highly incentivized to keep quiet about this. Central Banks, Bank CEOs, politicians… all of these people are focused primarily on maintaining CONFIDENCE in the system, NOT on fixing the system’s problems.

Indeed, they cannot even openly discuss the system’s problems because it would quickly reveal that they are a primary cause of them.

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Chief Market Strategist

Phoenix Capital Research

 

 

via http://ift.tt/2hdmdui Phoenix Capital Research

Submitted by Michael Shedlock via MishTalk.com,

German media is solidly behind Angela Merkel as the US media was behind Hillary Clinton. German reporting of the recent terrorist truck incident was in a single word “pathetic”.

Thanks to chancellor Merkel, it’s politically incorrect to presume refugees are a problem. Worse yet, the media cooperates.

Culture of Denial

The following via email from Eurointelligence.

The discussion about the terror attack in Berlin has turned political very quickly, with some commentators now wondering openly whether this might cost Angela Merkel the elections.

 

This is at its most fundamental a story about denial. The German establishment, and their friends in the media, are in denial that Merkel’s government catastrophically mishandled the refugee crisis, in a way that this is now becoming increasingly apparent with a terrorist still at large in the streets of Berlin. And the German police and security services are in denial that they are facing an elevated threat during an election year.

 

The German media have been absolutely awful in their coverage of the attacks. You found more useful information in Corriere della Sera and other European media. However, there were two perceptive commentaries in Frankfurter Allgemeine Zeitung, both of which go to the core what is happening in Germany. Berthold Kohler, the paper’s political editor, says this terror attack is to some extent self-inflicted. By opening the borders without checks, the German government brought about a generalised loss of control which is now felt among the core electorate of both coalition parties. The New Year’s Eve attacks by North African immigrants on women outside Cologne train station – with the police refusing to get involved for political reasons – was a warning shot. The attacks in Berlin are much more serious. The following is our translation:

 

“The policy establishment and the churches are reacting now as they did then with the usual reflex that says: One should never subject refugees or Muslims to a general suspicion. But who is doing this? The progressive polarisation of society and the radicalisation of the debate will only be contained if you stop euphemisms and denials at a point when you can no longer credibly distort the facts. This is what drives people who are themselves not radical extremists to the populists.”

 

We noted that a reader complained yesterday that we criticised the German press for failing to call the terror attack a terror attack – and for pretending that this may have just been an accident. We stick by these criticisms because it is not the job of journalists to wait until they get official confirmation but to find out what is happening. The fact that this was a terror attack was established very quickly. If one had listened to eyewitness accounts in foreign media on the night of the attacks – which were not broadcast in the German mainstream media – there would have been no doubt. Just as there was no doubt in Nice after the attacks on July 14. This is what Kohler is talking about – a culture of denial. German journalists are afraid of reporting a terror attack, fearing that the act of the reporting might get people to draw the wrong conclusions and form racial or religious prejudice.

 

FAZ had another perceptive commentary this morning by Michael Hanfeld, who writes about the “accident that turned out to be an attack”. He said the silence of the German media was so penetrating that night that it made your head shake. He noted that CNN, Al Jazeera, and a couple of German private stations, got the news out pretty quickly with the correct interpretation, while the German public broadcasters reacted with an absurd degree of calm. The attitude was one of wait-and-see. They were talking endlessly about speculation, admonishing viewers that it was wrong to speculate, as it would only produce disinformation. Even worse, Berlin’s mayor thanked the media the next day for having interpreted the facts correctly. Probably the single most absurd case of denial is a Twitter hashtag #katzenstattspekulationen where readers exchange pictures of their cats so they don’t have to occupy their minds with needless speculation about what might have happened in Berlin.

 

We are focusing on these aspects of the story because they tell us that German society is emotionally not equipped to deal with what is happening. And this constitutes a massive factor of uncertainty that will dominate Germany politics during the election year. Merkel is right in one respect: the elections will be no cakewalk for her.

Merkel No Longer In Control

Earlier this year I doubted whether Merkel could win. That notion was challenged by a couple of readers that I have high respect for. Their rationale was that no one was strong enough to challenge her.

But no one knows. In the back of my mind was always the notion of another terrorist attack. Unfortunately, so it was.

That does not necessarily mean Merkel will lose. But it does mean that she is no longer in control of much of anything.

1. The CDU’s (Merkel’s Party) voted to limit immigrants’ rights to dual citizenship in defiance of Merkel at the CDU’s annual conference this month.
2. Horst Seehofer, leader of the CSU, the Bavarian sister party of her Christian Democrats, declared a need to “rethink and readjust our entire immigration and security policy”.
3. Klaus Bouillon, the CDU interior minister of Saarland, declared a “state or war”

Finally, Merkel has an inane refugee platform, in which she is in bed with with the oppressive regime of Recep Tayyip Erdo?an, dictator of Turkey.

If Merkel survives, it may not be surprising. But it will be surprising if she retains control over much of anything.

— Mike Mish Shedlock (@MishGEA) December 21, 2016

via http://ift.tt/2ifbdyj Tyler Durden

As confidence and sentiment measures soar to record highs post-Trump, the real economy is just not living up to expectations. The Fed’s own “National Activity Index” tumbled to -0.27 in November – the lowest in 3 months (and 4th consecutive economic contraction).

CFNAI dropped to -0.27 in November as two of the four broad categories of the 85 indicators in the index decreasing in November…

Production-related and consumption-and-housing-related indicators both decreased. Employment-related indicators and sales, orders, and inventory indicators increased.

41 indicators improved from October to November as 44 declined.

A weighted basket of 85 indicators measuring four broad categories of the economy, the index is meant to provide a snapshot of national economic activity and inflation pressures. Readings at zero suggest the U.S. economy is growing at its long-run trend level while negative prints indicate below-average growth.

via http://ift.tt/2i5iyxh Tyler Durden

GQ’s Drew Magary has just published his list of “Least Influential People of 2016” and apparently he’s still troubled by Trump’s victory as the entire list is dedicated to the “boobs, liars, and hapless idiots” who “added their own little secret ingredient to the hearty gumbo of American vapidity that gave us President Trump.”

First, even though Magary admits that he “hates” adding her to the list, you know since she won the popular vote despite all the Russian hacking, he laments that “when you lose an election to Donald Trump, you belong on this list. How do you fuck that up??”  But, after blaming Russia, at least Magary admits that Hillary is somewhat responsible for her own loss, asking “would it have killed you to visit Wisconsin, Hillary?”

 

Of course, the entire “Bush Family” was added to the list for their inability to stop Trump during the Republican Primary.

 

Anthony Weiner, the “breathtaking, unbelievable idiot,” appeared first on the list for being so “destructively horny.”

 

Matt Lauer took heat as one of the “useless talking bobbleheads who smoothed the way for Donald Trump to take over both the White House and 80 percent of all TV channels” after he apparently let Trump “skate” through his Town Hall “like the captain of a high school football team cheating on a Home Ec exam.”  But perhaps the funniest part of the Lauer commentary is Magary’s suggestion that NBC intentionally helped Trump win, you know because of the obvious conservative bias of the mainstream media.

 

Even God was called out for allowing a Trump victory…”We’re not gonna make it if You just stay up there in the clouds playing backgammon all day and what not. We need help.”

 

Meanwhile, Trump was apparently on Magary’s list back in 2013…what is that saying about “He who laughs last?”.

Dying @GQMagazine just named me to a list. Too bad GQ is no longer relevant—won’t be around long!

— Donald J. Trump (@realDonaldTrump) December 2, 2013

via http://ift.tt/2hL0tqx Tyler Durden

For the first time since May, initial jobless claims are now higher year-over-year (surging to 275k last week – the highest since June).

Notice the “odd” plunge in claims into the election… anything to maintain confidence…

 

While the trend is notably bad post election, we do note that this is the 94th consecutive week with claims below 300,000 – the longest streak since 1969…

 

Question is – what happens next? Recession?

via http://ift.tt/2i5aso8 Tyler Durden

In the third and final estimate of Q3 GDP, the BEA reported that real gross domestic product increased 3.5% in the third quarter of 2016, above the 3.3% expected . The growth rate was 0.3% higher than the “second” estimate released in November, when it printed 3.2%, and well above the first estimate of 2.9% from two months ago.

However, a quick read beneath the lines shows that, as shown prior, the bulk of the growth was driven by a surge in soybean exports, which contributed 1% of total GDP growth. Add spending on utilities (i.e. air condition bills) and inventories, which contributed 0.5% of the bottom line growth print, and that covers more than half of the 3.5% GDP print the quarter.

The revised growth estimate, the fastest in two years, reflected updated figures on research and development expenses from companies, spending by nonprofit institutions and use of financial services. The upward revision to third-quarter GDP growth reflected upward revisions to business investment, to consumer spending, and to state and local government spending. In the second quarter, real GDP rose 1.4%. However, the economy is unlikely to sustain such a pace in the final three months of the year, when it is expected to slow down to 2.2% SAAR, according to the median estimate.

On a year over year basis, GDP grew 1.7%.

The increase in real GDP partly reflected an increase in consumer spending on services, notably on housing and utilities. Consumer spending on durable goods also increased, notably on motor vehicles and parts. However, spending on nondurable goods declined. Overall, Personal Consumption Expenditures contributed 2.03% of the bottom line annualized GDP print, up from 1.9% last quarter.  As a result, spending, which account for almost 70 percent of the economy, grew at a 3% annualized rate, stronger than the 2.8% pace previously estimated, and was driven largely by increased spending on services..

While the spike in personal consumption will be a welcome sign, it begs the question how much was pulled forward from the Q4 GDP print, which is expected to slow down notably to around 2.0%

Exports of goods increased, notably in foods, feeds, and beverages and in consumer durable goods. Exports of services increased, mainly in travel. In addition, private inventory investment and federal government spending increased.

As a reminder, the biggest contributor to the Q3 jump was a surge in exports, mostly in the form of Soybeans, which contributed $50 billion of the annualized $144 billion Q3 increase.

Net trade contributed a total of 0.85% in the third quarter. Offsetting these contributions to growth, investment in equipment and in residential housing declined.

Fixed investment was revised just fractionally higher, printing at 0.02% thus ending the series of 3 consecutive quarters of negative prints. Corporate spending on equipment decreased at a 4.5% annualized pace in the third quarter, compared with the 4.8% drag previously estimated, and subtracted 0.3 percentage point from growth, the report showed.

Final sales to domestic purchasers increased at a 2.1% rate, compared with the prior estimate of a 1.7% pace.

Corporate profits increased 5.8% at a quarterly rate in the third quarter after decreasing 0.6% in the second quarter. Profits of domestic nonfinancial corporations increased 5.7 percent after decreasing 4.6
percent. The biggest contributor to the growh was profits of domestic financial corporations which soared 11.3 percent after rising 1.3 percent. 

Profits from the rest of the world were nearly unchanged after increasing 10.3 percent. Over the last 4 quarters, corporate profits increased 2.1 percent.

via http://ift.tt/2ijd5SN Tyler Durden

Despite exuberance in soft "survey" data post-Trump, as hope for change re-appears, "hard" data continues to disappoint with Industrial production weakness and now durable goods orders tumbling 4.6% MoM (slightly better than expected -4.8%) – the biggest drop since Aug 2014.

Aside from the reactive drop in 2014 after the big Boeing order, this is the biggest MoM drop since summer 2013…

 

Durable Goods New Orders decline YoY once again (-0.5%) as ex-defense orders crashed 6.6% MoM (-2% YoY).

 

via http://ift.tt/2ij6fMP Tyler Durden