While I was reading an article at Zerohedge this morning about EBC bond purchases last week, it hit me why they snuck in and bought over $1 billion in bonds when no one was around to need to sell them.
It’s like Christmas shopping, you can do it all at once, or you can spread it out, building up to the big event. The ECB has to clear the deck of the upcoming massive roll due in January.
In this case, the big event is that the PIIGs have to roll over $50 Billion in unloved sovereign debt in January, up from the zero in December or the 5 billion that was due in November.
If you were the ECB, and you know that you are going to have to step up and start sucking down tens of billion per week, it might just be time to get started now. My guess is that the ECB has already been picking up the bonds that are about to expire already, so the open market purchases in January won’t appear to be as large as they realistically will have needed to be.
What is known is that no one in their right mind would want to be a buyer of these bonds. The PIIGS are all in the loading shoot heading towards the butcher building at the slaughterhouse, and there is no one wanting to deal with them now. While they can all turn and talk to each other about how bad it is, they have no idea about how bad it is going to get, if the ECB does not buy the bonds.
If I was Trichet, I would be praying that I can hold it together in 2011. If he fails, the ECB and the EU as we know it will dissolve. A crisis in confidence is brewing and I expect it hits Europe by Spring.
Europe is balanced on a razers edge. Their largest trading partner is China, which is trying to slow down its own growth. That is not good news for Euro exports, which is the northern power house portion of their economy.
Europe could have a double whammy of a PIGGS crisis, with an exporting slow down to Asia. I expect this, personally speaking.
I would not be shocked if we have a true Sovereign bond crisis in Europe, with at least one of the PIIGS reissuing their own currency and pulling an Iceland. Debt slavery does not sell to the masses as well as it does at private dinners between bankers.
There is now a clear second approach, one that is not IMF Bankster certified to kill your future growth plans. How long will it take for a little piggys to come to market, and realize that “they” are the meal? How long until the EU is being chopped up?
No nation should accept slavery for its citizens, via long term high interest rates on debt that no one can repay, because it represents private capital losses being obsorbed by public balance sheets.
HT: Tyler Durden @ Zerohedge for the graphic