[Russ Winter]

‘Ponzi’ finance units must increase its outstanding debt in order to meet its financial obligations.” - Hyman Minsky

UniCredit came to market with €7.5 billion of new stock issue priced at a whopping 43% discount to market price. This is a good test of the private real market versus the government propped fictitious capital market. Unicredit you will recall is one of the banks where the ECB accepted so-so collateral to provide a large low interest 3 year loan.

Speaking of tangled web Ponzi schemes, the Spanish region of Valencia makes a week-overdue €123M loan payment to Deutsche Bank. The government denies a report in El Pais that the Spanish Treasury assisted by giving a verbal guarantee to another lender in order that it would loan the region money to make good on its Deutsche loan.

The ECB is on the line for 2. 736 trillion euro, or over US$3.5 trillion in securities holdings.  The UK research firm Open House estimated in early December that so far 706 billion euros, or over $900 billion is exposed to the PIGGS, with the majority in bank lending. With the arrival if LTRO that number is well over a trillion. And the banksters are lobbying.



Source; ECB, in euros

http://sdw.ecb.europ...2.C.T000.Z5.Z01



About half of Ireland’s 2011 budget deficit of €24.9B comes from “non-voted capital expenditures,” which rose from €2B to €11.9B. This is taxpayer money used to keep the banking system afloat. Interestingly Spain may be moving towards the novel concept of having banks eat losses. Moving away from a “bad bank” plan that was floated a few weeks ago, Spain is going to require its banks set aside their own money - €50B (4% of GDP) – as provision against bad property assets.

US pension funds continued to be blooded by punk interest rates, as 2011 funded status for corporate plans plunges from 84.3% to 72.4%, and that with a flat stock market. Would be hard to imagine what happens here when the bond bubble blows up, and equity decline.

To me the market’s action looks absolutely scary, listless, extreme low volume, extreme correlation drift.  At this point maintaining this benign climate requires tangled web Ponzi schemes around the clock. This one has black swan written all over it.

On the Strait of Hormuz black swan watch, Iran’s economy is in serious disarray from sanctions. Meanwhile the leading GOP candidates are falling all over themselves to threaten Iran.  Are we to assume that Iran just quietly rolls over?  Regime change? Strike back?   Really all Iran has to do is create a dangerous enough atmosphere to ratchet up tanker insurance costs, without necessary blocking traffic.  In Santorium’s case:

Santorum has played up his time on the Senate Armed Services Committee and warned of the persistent dangers of terrorism. Santorum has called fighting “tyrannical and fanatical Islamic regimes” — Iran and Syria were his examples — “my purpose, and our national calling.” In the Senate, he sponsored a bill providing cash to dissidents looking to overthrow the Iranian regime.

That would carry over into his presidency, he says. “Degrading [nuclear] facilities through airstrikes” would just be the beginning. “I will say to any foreign scientist that’s going into Iran to help on their [nuclear] program, you will be treated like an enemy combatant, like an al-Qaida member,” Santorum said on Meet the Press this week.

Romney is on the record as pushing for more aggressive action towards Iran than Obama, but mostly it is about threats.

Writing in the Wall Street Journal, the inevitable Republican nominee (let’s be honest) offered a glimpse at his own strategy for stopping what looks more and more like an Iranian nuclear weapons effort. Romney vows to “restore the regular presence of aircraft carrier groups in the Mediterranean and the Persian Gulf region.” He says he will increase military aid to Israel, throw in his lot with Iranian dissidents, put new sanctions on Iran, all to “send an unequivocal signal” that the U.S. won’t permit Iran to go nuclear.

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