FT, Liesman and now the IMF (aka US Taxpayer). Rinse repeat. The program for the spin cycle to keep the EUR afloat, and Europe bailed out on any given day ending in -day is now clear as day. After last night's FT rumor for yet another comprehensive bank bailout program was promptly digested and rejected by the market with the EURUSD recouping all losses, it is now the IMF's duty du jour to protect the doomed currency, naturally with other people's money, in this case America's middle class. And in a flurry of headlines, we find that the person tasked with destroying his credibility, after the market no longer trusts anything Lagarde says, is IMF European Department Director Antonio Borges who according to Reuters, said that Europe needs between 100 billion and 200 billion euros to recapitalize its banks to win back investor confidence and should carry out the plan across the continent, not in a staggered process. He also confirmed that other European bureaucrats lied yesterday when they said no recap plan was being considered after saying that, well, "EU officials are working on a European bank-recapitalization plan." Said otherwise, US taxpayers to the European rescue because the EUcrats can not get their imploding house in order. But, but, whatever happened to China?
Yet surely he is credible, when everyone else isn't. As to his imaginary number of just €200 billion needed to rescue Europe, here is what he had to say: "We are talking about figures of between 100 and 200 billion euros, which in our view is very, very small compared to the size of the European capital markets and compared to the resources of the new, enhanced EFSF," Borges also said the IMF would "definitely participate" in a second bailout package for Greece if the Washington-based lender was happy that the country showed it was willing to solve its debt problems. "If there is a second program for Greece, which is the expectation, I think the IMF will definitely participate on the condition that we remain convinced that Greece is on track and the right policies can be put in place, that debt can become sustainable," he added.
But the scariest news for US taxpayers, who are the primary funders of the IMF, which as we reported recently is planning on expanding its "bailout firepower" to $1.3 trillion, is that the IMF could "if needed" could create an SPV to buy bonds of Spain and Italy in both primary and secondary markets alongside the EFSF. In other words, the US taxpayer would become Europe's Bernanke, to avoid a German revolution protesting precisely such behavior from the ECB. WE can't wait to see what the domestic response is once the "99%" learn about this.
Oddly enough, this bottom scraping rumorflow is enough to send the EURUSD up 70 pips as can be seen below.
The problem with all this is that unless EUrocrats want a public rebellion both in the continent and in the US, they will have no choice but to stick with the only form of TARP available to them: the EFSF. And while EU may be only now thinking of recapitlaizing its banks, Nomura already did it for them and came to the conclusion that unless the EFSF is expanding to many trillions, it just can't be done. So unless Germany has diametrically changes its position in the last 24 hours and we are not aware of this, it is tie to once again fade all this total and utter BS.
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