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Thursday, September 6, 2012

The higher they reach, the more painful the drop

Hmm.. Making sense of today's market rally..

As of 1p the Dow is up a whopping 237pts based on an announcement by former Goldman Sachs employee and current European Central Bank (ECB) head Mario Draghi that the ECB is going to begin to conduct itself like the Fed, and establish an open-ended sovereign bond purchasing program, especially for economically decrepit nations like Spain and Italy.

It has been dubbed "Outright Monetary Transactions", or OMT.

Of course the ECB has no legal right to do this and in all likelihood the German High Court will vote it unconstitutional (Germany is basically Europe's piggy bank so what goes on in that nation matters).

** See how intentionally confusing it is to follow finance with all the anagrams and complex terms..  the OMT, and ECB and IMF and QE and etc..etc..

But powerful people and entities never give up their stronghold over the finances of a nation or continent without a fight.  So today the ECB announced that essentially they'd perform the task of underwriter for the failed economies of southern Europe, which in the most simplest terms, amounts to another can-kicking while making northern Europe continue to pay for keeping their budgets balanced.

Of course the roach Investors and traders on Wall St (Dearest Lord, is there a way to wish cancer upon a specific profession and have it come true??) take the news as a positive; a game-changer.
The ECB was previously the buyer of last resort for European bank bonds but now it is now extending that role to become the buyer of last resort for European government bonds.    Like the Fed does when no one else wants to buy US debt bonds...  To give perspective, the Fed holds more US debt presently than even China..

This is the role supposedly the ECB will now be playing.

And the market rises out of desperation.. the desperate need to make profit.  And understand that a market that rises about 250pts in one day, assuming there isn't a subsequent drop very soon after, can not possible justify the 'expected' QE3 announcement by Bernanke in another week.

Here's the best way we can explain what's going on and apologies for the crassness but its really the clearest example:  A man is horny; Very horny..  His beautiful sexy wife is coming home at dinner time and if he can wait, a night of passion and lust awaits him...

But he can't wait.. he's a very horny man; a horny Dog.  He wants that release Now!  So.. he goes on the internet... maybe pops on a movie... or looks through a lingerie catalogue..   Whatever it takes to get that immediate High.

And when the beautiful, sexy wife comes home ready to be intimate with her man, how can she possibly when he's nothing more than a Pathetic limp doodle.  So what can the wife do but promise tomorrow there will be some real intensity... IF her Loser spouse can contain himself.

The part of the "Loser" was played of course by Investors & Traders.
So back to the ECB and this non-starter...  Whoever is genuinely excited and optimistic over this move is either delusional, living solely in the moment of a market rally or haven't the foggiest clue about global finance or more specifically, how Europe works.

There is simply no way in hell that Europe succeeds in creating a united, Federal state, with one bond issuance authority. That will never happen!   Ever!!   17 European states will never hand over their sovereignty to a third party located in a centralized location i.e. Brussels, especially one which is backstopped by German cash.

And lets say it was successful (which it will never be), the ECB would have to take a page from the playbook of Alexander Hamilton back in the 1790s when he was the US' first Secretary of the Treasury.  To ensure a centralized economy,  all state debts of the former 13 colonies were purchased and rolled into one Federal debt which caused Hamilton to (happily in his eyes) borrow greatly from European banks to establish credit.

So in other words, the ECB would then have to suddenly acquire tens upon tens of Trillions of Euros of debt, which then of course they'd sweep under the rug, or borrow from other central banks; all of which in time would compile and compile until everything collapsed in one fell swoop.
Here's example 'A' why there will never, Ever be a centralized Europe:

Bulgaria which is the EU's poorest country and who said 'No' to a centralized EU on Monday, Sept 3rd..  this is what their Finance Minister said about the possibility:

"The momentum has shifted in our thinking and among the public…Right now, I don't see any benefits of entering the euro zone, only costs... The public rightly wants to know who would we have to bailout when we join? It's too risky for us and it's also not certain what the rules are and what are they likely to be in one year or two."

Enough said...

Germany may want power but they don't want to essentially finance the entire continent of Europe's survival while the enormous burden continues to drag down their economy which was still prospering only 2-3 years ago.
If you are a hater of Wall St like we are, we promise you dear readers, they will get their proper comeuppance.  We would love to say that on X date, the market will drop Y pts and the crash will begin.  Sincerely we would..

But we live in a world of financial manipulation-- no one accepting responsibility or culpability; no one in any government anywhere in the world with the courage to fix anything for fear of losing an election, their wealth or possibly their lives in the process.

Everyone dependent on Central Banks to keep their economies going.

We end this post with an interesting stat heard the other day... Of all the countries in the world, there are only three that are not financially beholden and indebted to the global banking cartels:

Cuba

Iran

North Korea

There was a fourth nation who owed absolutely nothing to the banks but their leader was murdered last year by US forces and taken over by rebels whom we supported under the guise of democracy.
That nation was Libya.

And once the rebels won, the IMF was there to immediately secure them loans to run their new nation (into the ground of eternal indebtedness).

Such a Rotten system-- and we tolerate it because we fear any alternative