http://www.zerohedge.com/news/2013-04-21/ben-bernanke-miss-jackson-hole-symposium-due-scheduling-conflict

Ben Bernanke To Miss Jackson Hole Symposium Due To "Scheduling Conflict"

Submitted by Tyler Durden on 04/21/2013 10:34 -0400

Alan Greenspan

Ben Bernanke

Bond

The Fed's Jackson Hole, Wyoming symposium is one of the most sacred of annual Fed meetings: it is here that the Fed has historically hinted at any and all upcoming episodes of major monetary experimentation. As such, presence by the high priests of global monetarism is not only compulsory, it is a circular stamp of approval of the Fed's ongoing status quo-preservation capabilities. Which is why the fact that the man at the top himself, Ben Bernanke, whose term is due to expire just five months after this year's Jackson Hole gathering, will be absent "due to a scheduling conflict", is set to spark a fire of questions, first and foremost of which: is this the sign Bernanke is handing over the suitcase with the printer launch codes to some yet unspecified, second in command? Or, even worse for those addicted to monetary heroin, will Bernanke simply try to put as much distance as possible between himself and the place where (and when) the Fed announces the grand "open-ended" QE experiment is set to begin tapering?

From Reuters:

Federal Reserve Chairman Ben Bernanke will miss the annual Jackson Hole monetary policy symposium this year due to a scheduling conflict, skipping the prestigious event for the first time since taking the helm of the central bank in 2006.

The conference, held in late August in the splendor of the Grand Teton National Park in Wyoming, draws top central bankers from around the world. Bernanke's absence would mark the first time in 25 years that a Fed chairman has not attended.

A Fed spokeswoman, responding to a Reuters enquiry, said the chairman was currently not planning to attend because of a personal scheduling conflict.

Bernanke, and former Fed chair Alan Greenspan, whom he succeeded in 2006, have periodically used the setting to preview important U.S. central bank actions. For instance, Bernanke hinted at the impending launch of a third round of massive bond purchases by the Fed - dubbed QE3 - at the conference last August.

In 2008, the conference effectively became the site of an economic war room as top policymakers huddled to figure out how to tamp down a virulent financial crisis as investment bank Lehman Brothers hurtled toward collapse.

This year's meeting would have been viewed as an excellent opportunity for Bernanke to signal that the central bank might be leaning toward tapering bond purchases, if the economy continues to recover as officials hope.

An unmovable personal conflict four months in advance, to avoid beautiful sights such as this?

Or the perpetually glass case-enshrined bear?

Somehow we doubt it.

http://www.telegraph.co.uk/finance/economics/10008938/Bernanke-to-miss-Jackson-Hole.html

Bernanke to miss Jackson Hole

Ben Bernanke will be the first Federal Reserve chairman not to attend Jackson Hole in 25 years

Ben Bernanke will be the first Federal Reserve chairman not to attend Jackson Hole in 25 years Photo: AP

By Garry White

6:51PM BST 21 Apr 2013

Comment

Federal Reserve chairman Ben Bernanke will not attend the central bank’s flagship conference in Jackson Hole, Wyoming, this year because of a a personal scheduling conflict.

This is the first time Mr Bernanke has not given the keynote address at the symposium since he took up the role in 2006. His tenure at head of the US central bank ends in January.

The conference, which is held in August at the Grand Teton National Park in Wyoming, draws top central bankers from around the world. Mr Bernanke's absence would mark the first time in 25 years that a Federal Reserve chairman has not attended the meeting.

At previous speeches, Mr Bernanke has used the speech to give hints on the Federal Reserve’s policy intentions.

Last year, Mario Draghi, president of the European Central Bank was forced to pull out of the symposium to address the unfolding euro crisis.

http://rt.com/usa/bernanke-hints-he-will-quit-610/

( Did Ben already give Obama the word he is leaving ? )

Bernanke hints that he's tired of being Fed chairman

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Published time: March 21, 2013 17:13

Ben Bernanke (Alex Wong / Getty Images / AFP)

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An Unprecedented $660 Billion In Excess Debt Demand, And What It Means For Bond Yields

Submitted by Tyler Durden on 04/21/2013 16:07 -0400

European Central Bank

When the BOJ announced two weeks ago the full details of its expanded easing program, which amounts to monetizing a whopping $720 billion in government bonds over the next year (a move which makes even the Fed's own open-ended QE appear like child's play in perspective), one thing it did was lay to rest any hope of a rotation, great or non-great, out of bonds and into equities. The reason is simple: while the Fed is en route to monetize $1,080 billion in UST and MBS debt in the current year,when there is just $760 billion in net US issuance, what the BOJ has done is add a bid for another $720 billion when Japanese net supply of debt is just $320 billion in the next 12 months. In other words, between Japan and the US, there is now some $660 billion in secondary market debt that the two banks will have to purchase over and above what their respective treasury departments will issue.

This means that the two biggest central banks are about to be perfectly price ambivalent as to what cost the monetize nearly two thirds of a trillion in debt: their mandate is to expand their assets at any cost, which means buying up debt from the secondary market at any price. The immediate consequence is that the best performing trade of 2011 and 2012 - frontrunning the Fed's purchase of the long end - is about to come back with a vengeance, as speculators buy up every piece of duration debt that is not nailed down, knowing full well they will be able to sell it right back to Bernanke and Kuroda in the future at whatever price they so desire.

The chart summarizing the massive disconnect between the monetization mandate and the net treasury issuance in the US and Japan, and showing the $660 billion delta, is below:

This is how JPM explains how much further yields will likely fall as a result:

We mentioned last week the displacement caused by BoJ purchases this year. The offset that central bank purchases provide to government debt issuance, represent the so called Demand or Flow Effect of QE. In fact, central bank purchases more than offset government bond supply this year. The BoJ is going to surpass government debt supply this year by buying $720bn of government debt vs. government net supply of $320bn, resulting in a net withdrawal of $400bn of government debt securities from bond markets. Assuming $85bn per month purchases for the whole year the Fed looks set to buy $1020bn of USTs and MBS securities this year vs. net issuance of $760bn, so a net withdrawal of $260bn from bond markets.

But there is another impact caused by BoJ purchases. The stock of excess reserves is likely set to rise sharply this year roughly in line with the amount of BoJ purchases, i.e. by $720bn, at the same time as the stock of government debt held outside the BoJ shrinks by $400bn. Similarly, the Fed looks set to inject close to $1000bn of excess reserves into the banking system at the same time as it withdraws $260bn of government securities.

This additional effect caused by the rise in central bank reserves, represents the Liquidity or Stock Effect of QE. We discussed this stock effect in a previous F&L on Dec 14th. The idea is that QE creates scarcity by making one form of collateral (government bonds) more expensive relative to another (zero yielding reserves). Given that the banking system cannot get rid of reserves, these zero yielding reserves, become the “hot potato” that banks and other investors try to pass to each other until the relative pricing is adjusted enough to remove the incentive for banks or investors to get rid of these reserves.

And because the relative scarcity of these two forms of collateral depends on relative stocks rather than flows, the price effect would remain even in an environment where flows disappear. That is, even if central banks were to stop purchasing bonds, making the flow or demand effect of QE to go away, the liquidity or stock effect would continue to affect the relative pricing of government bonds vs. zero yielding reserves.

By how much is this Liquidity or Stock effect of QE affected by the BoJ policy? The change in the relative stocks of these two forms of collateral, excess reserves vs. the government debt held outside the central banks, in the case of BoJ at ($720bn - (-$400bn)) = $1120bn, comparable to that caused by the Fed ($1020bn - (-260bn))=$1280bn.

As a result, the liquidity or stock effect looks set to intensify this year. To quantify this liquidity effect across the G4 we use the ratio of excess reserves at the Fed/BoJ/ECB/BoE, divided by the stock of government securities held outside these central banks. Factoring additional QE by the Fed, BoJ, and BoE (we expect an extra £50bn of Gilt purchases by the BoE this year) and another reduction of around €200bn of excess reserves in the Euro area banking system due to further LTRO repayments, we project that this liquidity ratio will rise from 10% at the end of March to around 14% by year end. Again, under the assumption that bond buying by the Fed will continue at $85bn per month until the end of the year.

What does this mean for government bond yields? One simple way is to look at the changes in this liquidity ratio vs. changes in government bond yields. This is shown in Figure 1. Figure 1 shows there were two major episodes in the evolution of the liquidity ratio in recent years. The first major episode was in H2 2008, immediately after the Lehman crisis, when the liquidity ratio jumped from 0.5% to 5.0%. The second major episode was during 2011 and the first half of 2012. During these 6 quarters, the liquidity ratio rose from 5.5% to 11.0%.

Figure 1 shows these two episodes saw the biggest declines in bond yields over the past five years. During the first episode the government bond yield of our GBI Global index declined by 120bp. During the second episode the GBI Global index bond yield declined by 70bp. Given that the two episodes were accompanied by a similar 5% increase in the liquidity ratio, this suggests there are diminishing effects to QE, i.e. each further 5% increase in the liquidity ratio exerts smaller downward pressure on bond yields. It would be thus reasonable to assume that another episode of a 5% rise in the liquidity ratio for example should lower bonds yields by less than 70bp, perhaps by around 40bp or so.

With the caveat that it is difficult to separate the flow, stock or signaling effects of QE, mechanically this simplistic exercise suggests that a 4% increase in the liquidity ratio over the next three quarters could push bond yields lower by around 30bp (from March end levels of 1.75% for the GBI Global index yield).

To summarize: in the coming months, bond yields will continue to slide as more speculators realize that they can extract any price from not one but two central banks, now desperate to buy not only all net primary issuance but a massive $660 billion in secondary market UST and JGB demand. This means that with central bank balance sheets becoming ever moreridiculously large, a phenomenon which even the most clueless textbook economists will admit will ultimately result in runaway inflation, the yields on the primary instrument which in normal times reflects the threat of runaway inflation, the long bond, will continue declining, and signaling to an ever dumber and more centrally-planned market that there is not one iota of inflation on the horizon. Taking the thought experiment to its ludicrous end, we can visualize the Fed and the BOJ's balance sheets hitting infinity as nominal yields become negative.

Thought experiments aside, unless of course the Fed and the BOJ are determined on becoming the only bidders in both the primary and secondary market, this means that the weak hands will likely continue to puke their gold holdings. However, and much to the chagrin of SocGen, gold is and has always been an inflation hedge, and we, for one, are delighted to take every opportunity to rotate out of ever more diluted fiat paper into hard currencies (and assets). The reason is that inevitably the moment when the central bank wheels hit the road will come, and it will be not so much a question of imminent price reaction, but what the long-bond, which will suddenly find itself without central bank bidders, and thus ostensibly bidless, does. What it will do is collapse, sending long-yields exploding, and making up for years of faulty inflationary signalling. Ironically this may come at a time when the central bank balance sheets are indeed contracting. However, without them present as bidders of last resort, watch out below if one is long the 30 year.

It is at that point that all those long bond to gold algos will wake up, and finally see the event horizon which for four years had been hidden by the global central banks' coordinated attempt at centrally-planning all asset levels.

and....

http://www.zerohedge.com/news/2013-04-21/guest-post-shirakawa-kuroda-regime-change-explained

Guest Post: From Shirakawa To Kuroda: The Regime Change Explained

Submitted by Tyler Durden on 04/21/2013 14:13 -0400

European Central Bank

Submitted by Martin Sibileau of A View From The Trenches blog,

The main take away from events in Japan is that the BOJ shifted from a tactic of interventions (under former Governor Masaaki Shirakawa) to one of monetary policy (under current Governor Haruhiko Kuroda) . What strikes us is that the monetary policy is precisely to... well, destroy their money and in the process any chance of having a monetary policy.

How the Shirakawa intervention worked

In Japan, the FX intervention is carried out by the Ministry of Finance, rather than the Bank of Japan. In order to sell Yen to the FX market to devalue, under Shirakawa, the Ministry of Finance issued Finance Bills, which were “bought” by the Bank of Japan, in Yen. Let’s call these first issues Finance Bills “1” and Yen “1”, which were issued by the Ministry of Finance and the Bank of Japan, respectively, as shown in the graph below (step 1). The Ministry of Finance was issuing “on credit”, because the issuance was going to later be repaid with funds obtained from the market:

Next, with the Yen1, the Ministry of Japan bought USDs in the FX market (step 2). The price of Yen in terms of USDs dropped as its supply increased. At this point, the amount of Yen circulating in the market was higher than before this intervention took place. This increase in supply is the amount I call Yen1.

To bring the supply of Yen back to the original amount in circulation, the Ministry of Finance issued Finance bills in the market. I will call this issuance Finance Bills 2, which are shown below (step 3). The amount of Finance Bills 2 equaled that of the first issuance, Finance Bills 1, and raises Yen2, so that Yen1=Yen2:

Of course, as the Ministry of Finance went to the market to place Finance Bills 2, with this new issuance, the supply of government debt in Yen increased. As in any other bond market, as supply grew, yields tended to rise (i.e. price tended to fall), to encourage market participants to buy the increased supply.

Once the amount Yen2 was in the balance sheet of the Ministry of Finance, the Ministry used it to repay its outstanding debt with the Bank of Japan, which I called Finance Bills 1. Therefore, once this payment was done (with a lag), the balance sheet of the Bank of Japan remained unchanged and Yen1 were taken out of circulation. The Ministry of Finance had US dollars on the asset side of its balance sheet, matched by Finance Bills 2 on the liabilities side, as shown in the graph below (step 4):

The graphs above show the balance sheets of all the participants in this intervention: The Ministry of Finance, the Bank of Japan, the FX market and the Yen Government debt market. But it is also be interesting to show the intervention in terms of cash flows. In the graph below, we can see that de facto, the Ministry of Finance ended up as intermediary between the Government debt market and the FX market. In essence, the intervention “moved” Yen from the Government debt market to the FX market, and this was a “fragile” movement, because it was simple arbitrage.

Whenever an asset has two different prices, arbitrage arises and fixes the “anomaly”. You may wonder why I imply that the Yen had two different prices. I want answer with another question: Why would the JGB market need a “middle-man” (see graph below) to provide Yen to the FX market? It didn’t!

The JGB market was “not willing” to buy US dollars (i.e. provide Yen) from the FX market at a loss (i.e. buying US dollars at above market prices). Who ended up taking the loss? Who ended up buying US dollars at above 80-82 Yen per dollar? The Ministry of Finance did, which meant the average Japanese tax payer! The Japanese taxpayer subsidized the big exporting conglomerates of Japan, so that these would provide “financing” to the American consumer who remains broke. The subsidy was significant because as we saw in the graphs above, two things take place simultaneously: a) Interest rates in Yen would tend to increase (i.e. price of Yen Finance Bills will tend to fall) and b) the holders of Yen (i.e. Japanese consumer) lost purchasing power. Given the demand for JGBs, the temporary nature of the interventions (which did not shape inflation expectations) and the short-term of the debt purchased, the marginal effect of issuing Finance bills 2 was not relevant (i.e. on interest rates).

In the long term, with these interventions, the Ministry of Finance had P&L risk (i.e. the risk of having a loss, if the USD depreciates further) which could only be addressed with higher debt (i.e. higher interest rates) or higher taxes. Under intervention, the Profit/Loss position of the Ministry of Finance was determined by:

P&L = D US dollars (in its Assets) / D t – D Finance Bills 2 / D t

Whenever the Fed undertook quantitative easing and the value of the US dollar fell, it generated a negative mark-to-market to the Ministry of Finance’s position (if they indeed mark themselves to market).

How the Kuroda policy works

Under Mr. Kuroda’s leadership, the BOJ will not be manipulating interest rates (i.e. price), but will target the monetary base (i.e. volume). The problem is that he pretends to be in control of both, when the fact is that this ancient truth holds: One can only control price or volume, but not both simultaneously.

The new policy consists of:

1.- Increasing the monetary base at an annual speed of JPY60-70 trillion (stock of JPY200 trillion by Dec/13 and JPY 270 trillion by Dec/14).

2.- To accomplish No. 1, the BOJ will purchase approx. JPY7 trillion in JGBs/month, on a gross basis. On a net basis (i.e. net of repayments), holdings of JGBs will rise by JPY50 trillion/year.

3.- JGBs purchased will include long-term issues (incl. 40-year, previously limited to 3-year maturities), raising the average remaining tenor of the BOJ holdings from 3 to about 7 years.

4.- Achieving a 2% inflation level as soon as possible

5.-Purchases will include also ETFs and REITs (Japanese)

With the Shirakawa intervention the market had to assume that the devaluing efforts were temporary, or at least not within a specific time frame, and consistent with a policy of keeping interest rates at zero. Challenging the BOJ was a frustrating experience. Under Mr. Kuroda however (and here is where I disagree with mainstream analysis), Japan is entering the uncharted waters of a Latin American-style inflationary spiral (very similar to the plan implemented by the late Martinez de Hoz, also called “La Tablita”).

The chart below shows the balance sheets of the involved economic agents:

As you can see, there is nothing fancy here. Given the magnitude of the monetary expansion, what is a big unknown is what will the net aggregate reallocation of JGB holdings be, outside the Ministry of Finance. Because the BOJ will not only buy issuance of the Ministry of Finance, but also existing stock of JGBs. For now, it is all speculation and the flows are monitored closely. The reader will find plenty of research material on where Japanese banks, pensions, insurers and households will reallocate the JGBs that they sell (if they sell them). I think they are and will be exponentially selling them, because the pace of the devaluation in the Yen will generate tangible profits to those doing so.

When one owns a fixed income asset with a negative interest rate, it is difficult to grasp that purchasing power is being destroyed. The asset is benchmarked against an arbitrary consumer price index. If at the same time there is a certain, known rate of devaluation in the currency of denomination of that asset, there is still difficulty in assessing whether if, in terms of other goods in the same currency (but not in terms of imports), value is being destroyed.

However, there is no doubt that under a known rate of devaluation, if that fixed income asset is swapped for another one denominated in the appreciating currency, there will be a profit. In the case of Kuroda’s policy, because the devaluation is not a one-and-for-all event but a certain, over-no-less-than-2-years process, the devaluation of the yen morphs into a “rate” of appreciation of foreign assets and prices of imported goods.

This rate of appreciation is therefore fungible into another magnitude: Yen-denominated yields. Therefore, a circularity ensues: Yen-denominated yields/spreads will incorporate devaluation expectations. As yields/spreads rise, the Bank of Japan will be forced to buy more JGBs, to keep yields within a level that it deems tolerable. As the BOJ buys more JGBs, the devaluation will likely accelerate.

It is important to understand that this circular, spiraling process can take place regardless of the RELATIVE reallocations done by the Japanese banks, pensions, insurers and households. What matters is that as more Yen is printed, more Yen is available and it devalues vs. the USD. The speed of devaluation will indeed be influenced by the relative reallocations above.

Additional observations on volatility and growth

Kuroda’s policy has and will continue to generate enormous volatility in the JGB market. That same volatility was likely a factor enhancing the effects of the manipulation in gold.

With regards to volatility in JGBs, I found interesting a suggestion made by Shuichi Ohsaki and Shogo Fujita, from Bank of America’s Pac Rim Rates Research team, dated April 11^th. According to the authors, the volatility could be diminished if the BOJ announced a schedule for buying operations, with the amounts that would be purchased in each maturity sector. In other words, it would help if the BOJ would improve its communications strategy. What I find of interest in this suggestion is that it is contrary to an increasing common belief regarding exit strategies available to the Fed. Indeed, when it comes to assessing the possible impact of balance sheet management by the Fed, analysts advise that we look at its US Treasury holdings in terms of 10-year duration equivalents. The actual distribution of maturities in the Fed’s holding is perhaps not so relevant. Ironically, this wisdom also comes from the Bank of America, although from a different team (i.e. Brian Smedley, Global Economics Rates & FX, “The consequences of a “no sales” Fed exit strategy”, April 10^th, 2013), as well as from BMO Capital Markets (Dimitri Delis, March 25^th, 2013). Personally, I side with the view of Ohsaki and Fujita: To me, distribution matters as much to the BOJ as it will to the Fed.

With regards to the impact on real growth of the Kuroda’s policy, I cannot mince words: It will be disastrous. Whenever the medium of indirect exchange of a nation is destroyed, no growth can ever be expected. The coordination process needed to allocate resources is seriously impaired. And to explicitly have the central bank tell their people that the monetary base will be doubled within two years is nothing short of destroying their medium of indirect exchange.

For some reason (unknown to me), Robert Feldman (Morgan Stanley, April 4^th and April 17^th, 2013) is more optimistic. He believes that Japan still has a chance, if the country implements what he refers to a “third arrow” policy. Feldman’s third arrow policy is a list of actions that would promote growth, in agriculture, medical care, energy, employment and electoral system... I wonder whether Mr. Feldman seriously asked himself why any initiative in these fields would require that the monetary base of the country be doubled by the end of 2014…

Conclusions

With the interventions under Shirakawa, the Bank of Japan did not need to sterilize, as it is clear from the mechanism previously described. The BOJ’s balance sheet remained unchanged at the end of the intervention. This supposedly meant that the BOJ was independent. However, given the resulting long USD risk position by the Ministry of Finance (see step 4 above), in the long term, coordination with the Fed would have been required. In my view, it was exactly because the Fed’s (undisclosed) intention was to engage in never ending Quantitative Easing, that Japan was forced to implement the policy undertaken by Kuroda. Coordination with the Fed was impossible.

With Mr. Kuroda’s policy, we now have the BOJ with a balance sheet objective, the Fed with a labour market objective (or so they want us to believe), the European Central Bank with a financial system stability objective (or a Target 2 balance objective) and the People’s Bank of China (and the Bank of Canada) with soft-landing objective. It is clear that any global coordination in monetary policy is completely unfeasible. The only thing central banks are left to coordinate is the suppression of gold.

Apart from QE issues and no ability to exit , Japan's own QE program complicates his life - as noted above regarding debt issuance.... And then you still have Europe. Greece , Cyprus already in the Troika net , Italy and Spain desperately trying to pretend to be viable , Slovenia will need a bailout , Ireland and Portugal will need second bailouts . France is beginning to become quite sickly ....Add in the Netherlands and you can see how things could spiral out of control on otherwise bright sunny Spring / Summer or Fall day this year.....

http://silverdoctors.com/slovenia-pm-dont-panic-we-are-absolutely-no-cyprus/#more-25430

( Proving they are Cyprus - just without the Russian money.... )

SLOVENIA PM: DON’T PANIC, WE ARE ABSOLUTELY NO CYPRUS!

APRIL 21, 2013 BY THE DOC 6 COMMENTS

Are Slovenian depositors about to get Cyprus’d with a wealth/deposit confiscation? If the intensity of the denials by Slovenian officials are any indication, a bank crisis is imminent for the tiny balkan nation.
New Prime Minister Alenka Bratusek attempted to calm Slovenians over the weekend stating: We are absolutely no Cyprus. We don’t need help. All we need is time.If and when the 2nd bail-in episode in the EU is attempted, expect all hell to break loose across the European banking system as depositors in Greece, Italy, Spain, Portugal, and even France realize that as DISELBOOM openly admitted, Cyprus really was the template for bank failures going forward.

As the AP reports, the official denial is in:

Slovenian officials have a message for the world: Don’t panic — we won’t be the next to fall.

The tiny European Union member is trying to convince its people and foreign investors that it won’t be the next in line for a banking system collapse and a messy international bailout.

“We are absolutely no Cyprus,” says new Slovenian Prime Minister Alenka Bratusek. “We don’t need help. All we need is time.”

Contrary to PM Bratusek’s claims, a recent report by the Organization for Economic Cooperation claims that the equity in Slovenian state banks has been “virtually wiped out.”:

The Alpine country’s banks have been on a lending spree for years, loaning money to unprofitable state companies or privileged officials who used the cash to buy the firms they ran, using the state assets as collateral.

Many such businesses have now collapsed or have huge debts. A recent report by the Organization for Economic Cooperation says that the equity of the state banks has been “virtually wiped out.” As much as 15 percent of all loans are now non-performing, the third-highest ratio in the eurozone, the Paris-based group said.

Which brings us to the important question: Exactly how much gold does Slovenia supposedly own as its reserves that are about to be confiscated by the ECB? 3.20 tons according to Slovenia’s latest report…all likely stored in London and already rehypothecated and leased to bullion banks 1,000 times over.

Cue the MSM reports that Slovenia’s 3.2 tons of gold will need to be liquidated.

http://globaleconomicanalysis.blogspot.com/2013/04/netherlands-on-edge-of-economic-crisis.html

( It would be worth the the price of Admission for the Troika to be called in while Diesel - Boom has the reins in his hand for Europe Group ! And look at the Labor troubles in Germany ! )

Sunday, April 21, 2013 2:05 PM

Netherlands on Edge of Economic Crisis; Unemployment Surges as Home Prices Collapse

Netherlands is underwater in more ways than one. Der Spiegel reports Underwater: The Netherlands Falls Prey to Economic Crisis

More than a decade ago, the Dutch central bank recognized the dangers of [the housing] euphoria, but its warnings went unheeded. Only last year did the new government, under conservative-liberal Prime Minister Mark Rutte, amend the generous tax loopholes, which gradually began to expire in January. But now it's almost too late. No nation in the euro zone is as deeply in debt as the Netherlands, where banks have a total of about €650 billion in mortgage loans on their books.

Consumer debt amounts to about 250 percent of available income. By comparison, in 2011 even the Spaniards only reached a debt ratio of 125 percent.

The Netherlands is still one of the most competitive countries in the European Union, but now that the real estate bubble has burst, it threatens to take down the entire economy with it. Unemployment is on the rise, consumption is down and growth has come to a standstill.

Even €46 billion in austerity measures are apparently not enough to remain within the EU debt limit. Although [Dutch Finance Minister and Euro Group Chief] Jeroen Dijsselbloem has announced another €4.3 billion in cuts in public service and healthcare, they will only take effect in 2014.

"Sticking the knife in even more deeply" would be "very, very unreasonable," Social Democrat Dijsselbloem told German daily Frankfurter Allgemeine Zeitung, in an attempt to justify the delay.
Dijsselbloem's Hypocrisy

Note how Dijsselbloem is ready and willing to stick austerity measures of any kind on every other eurozone economy but his own.

Unemployment Surges as Home Prices Collapse

The Australia Macro Business blog picks up the story in Dutch unemployment surges as house prices fall.

Earlier this month, I posted on how the Netherlands was facing a potential economic crisis on the back a severe housing correction, whereby house prices fell by -8% in the year to December 2012 to be down -18% since prices peaked in 2008, pulling many Dutch households into negative equity (see next chart).

The release of labour force data overnight suggested the Netherlands’ economy has deteriorated further, with Dutch unemployment increasing to 8.1%, a level not seen since the 1980s, with job losses most accute in the building industry (see next chart).

The jump in unemployment follows the contraction in the Dutch economy, whereby GDP has contracted by -1.2% over the past year (see next chart).

The sharp deterioration in the Dutch economy is placing pressure on the central government to abandon austerity measures, which it has pursued for the best part of two years and is partly responsible for the contraction in demand.
Best is Yet to Come

As noted, the hypocrites want austerity for everyone but themselves. Regardless, the Netherlands economy is headed for a much sharper contraction as is France.

Simply put, the entire eurozone is in deep trouble even as the nannycrats insist the worst is behind. Ironically, the best is indeed ahead, and the best is a breakup of the eurozone.

Mike "Mish" Shedlock

Germany looking a little green around the gills and now there are labor issues to boot !

http://www.zerohedge.com/news/2013-04-21/german-airline-unions-are-revolting

German Airline Unions Are Revolting

Submitted by Tyler Durden on 04/21/2013 15:41 -0400

Germany

While 'the rest of Europe' appears to remain in beggars-can-be-choosers mode with handouts from the core (even if there is a new template), it appears the people of Germany are beginning to want their slice of the cake. Following Lufthansa's rejection of the flight crews' union demands for a 5.2% pay rise (which we should be assured is entirely non-inflationary), the airline faces massive flight cancellations on Monday. As The BBC reports, only 30 of its more than 1700 scheduled flights will take place as Lufthansa looks to cut costs in the face of stiff competition from low-cost carriers. With Frau Merkel facing the recent women's quota setback, and a workforce seemingly becoming increasingly uncomfortable with their status quo, the rise of the 'Alternative for Germany' party makes the elections far from a foregone conclusion despite current majorities.

Via The BBC,

German airline Lufthansa has cancelled the majority of its flights scheduled for Monday due to a strike.

The airline said about only about 30 of its flights would run as planned on Monday, out of more than 1,700 originally scheduled.

Ground staff have called a one-day strike in a pay dispute.

Last week Lufthansa rejected union demands for a 5.2% wage increase over the next 12 months.

Strikers are also looking for guarantees over job cuts.

Like many airlines, Lufthansa is looking to cut costs in the face of stiff competition from low-cost carriers and big Gulf airlines, as well as rising fuel prices.

Unions staged a similar one-day strike last month. Short "warning strikes" are a common tactic among German unions, designed to put pressure on wage negotiations.

In a statement on its website, Lufthansa said passengers should expect "massive" flight cancellations and delays that will start to affect long-haul flights from Sunday.

http://www.france24.com/en/20130418-france-imf-lagarde-court-corruption

( instability at the IMF by the Lagarde affair - might the BRICS finally get the Head job if Lagarde has to stand down under a cloud - that would be two Europeans , both French who would have left under negative circumstances ... )

IMF's Lagarde to face court grilling in corruption case

France’s Christine Lagarde, who took over as head of the IMF in 2011 after Dominique Strauss-Khan stepped down, was summoned to appear before a court investigating alleged corruption during her time as a finance minister, her lawyer said on Thursday.

By News Wires (text)

IMF chief Christine Lagarde is to be grilled by a special court investigating suspected corruption dating from her time as French finance minister, her lawyer said Thursday.
Lagarde, who took over at the International Monetary Fund in 2011 when the previous boss Dominique Strauss-Kahn stepped down over a sex scandal, has been ordered to appear before the court at the end of May.

CHRISTINE LAGARDE IN PROFILE

FRANCE

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She will have to answer allegations that she acted improperly in the handling of a financial dispute that resulted in around 400 million euros ($520m) being paid by the state to disgraced tycoon Bernard Tapie.
Prosecutors working for the Court of Justice of the Republic (CJR) - a body established to try cases of ministerial misconduct - suspect Tapie received favourable treatment in return for supporting Lagarde's then boss, Nicolas Sarkozy, in the 2007 and 2012 presidential elections.
They have described Lagarde's handling of the case as "questionable" and suggested she was partly responsible for "numerous anomalies and irregularities" which could lead to charges for complicity in fraud and misappropriation of public funds.
Lagarde's Paris home was raided by CJR officials last month but she has not yet been charged with any crime. The IMF has stood by her and her lawyer insisted she would be cleared of any wrongdoing.
"As has been expected for several months, the court wishes to question Madame Lagarde," her lawyer, Yves Repiquet, told AFP. "A hearing will be held at the end of May.
"Mme Lagarde will finally have the opportunity to provide the court with explanations and clarifications that will exonerate her of any criminal responsibility."
The investigation is centred on Lagarde's 2007 decision to ask a panel of judges to arbitrate in a dispute between Tapie and Credit Lyonnais - the collapsed, partly state-owned bank - over his 1993 sale of sports group Adidas.
The arbitration resulted in the payout to Tapie, a former politician and businessman who went to prison for match-fixing during his time as president of France's biggest football club, Olympique Marseille.

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IMF's Lagarde to face court grilling in corruption case

France’s Christine Lagarde, who took over as head of the IMF in 2011 after Dominique Strauss-Khan stepped down, was summoned to appear before a court investigating alleged corruption during her time as a finance minister, her lawyer said on Thursday.

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