The below article in this speculator's opinion is a fairly serious issue. As known by many maybe .01% of money managers on this planet or who have the where with all to understand what is happening from a Global Fiscal Policy point of view, these are the beginning warning signs of what it to come as a result of the Implamentation QE II and the coming of Basel III. Basel III requires banking reserves to increase by 50% for banks and has a longer time line for compliance 2014 last I checked but European banks were said to begin adopting this new capital requirement for banks at the start of 2011.
This is where the trouble will begin after quantitative easing ends (expected to be end of June or near). This is the setup that WILL bring down the entire global financial system including equities, real estate you name it save silver, gold and hard assets as almost all currencies will reach their race to zero almost over night. Some have put together scenarios that span a week or two and those articles will follow.
Again a reiteration this is an early shot accross the bow so to speak and confirmation of what is to come.
Acute Liquidity Crisis In Europe Confirmed As Borrowing Surge On Marginal Lending Facility Continues For Second DaySubmitted by Tyler Durden on 02/18/2011 07:26 -0500
European Central Bank
The one thing that nobody is conveniently talking about that has suddenly become a big flash red light, the surge in borrowing on the ECB's Marginal Lending Facility which we noted yesterday, continues for the second day in a row, removing all speculation of this being a technical or calendar glitch, and confirming that some financial entity in Europe has entered its death rattle. Today, the ECB announced that after borrowing €15.8 billion in overnight liquidity, the highest since the program's inception in 2009, we got another increase in borrowing, this time at €16 billion in overnight liquidity needs. With expectations that this borrowing surge at a last resort rate of 1.25% would normalize disappearing, we are surprised the reaction in the EUR is not far greater: the EURUSD did contract modestly overnight, but if this is indeed the proverbial first domino we would be very concerned about the long term prospects of the European currency. What is most concerning is that after revelations of check kiting at Irish banks yesterday, which confirms that banks are using a legalized ponzi scheme to literally print each other money, that some bank - any bank - will need to resort to such a high rate source of overnight capital. As European collateral has no quality thresholds, and as the ECB will accept anything, it makes no sense for any bank to pay incremental interest just to transfer borrowing to an overnight facility with a punitive rate - simple as that. If this continues for a third day on Monday, it may well be time to follow Hugh Hendry's advice, and panic.
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