Wolf Richter — The Putrid Smell Suddenly Emanating From European Banks

By now we should have gotten used to the odor emanating from banks—bailouts, money laundering, Libor rate-rigging, the other misdeeds. But in Europe over the last few days, it was particularly dense....

There is never an alternative to bailouts. A collapse “would have unacceptably large and undesirable consequences,” according to Finance Minister Jeroen Dijsselbloemsaid. As brand-spanking new President of the Eurogroup, he thus confirmed: bank bailouts will be the norm in the Eurozone.

They’re worried that letting even a smallish bank fail could take down the electron-thin confidence in the entire financial system—just when the debt crisis has been officially declared “over.” And so, based on the operative set of rules, the Dutch government shanghaied its strung-out taxpayers, whose belts are already being tightened by austerity, into paying, once again, for the misdeeds of the bankers.

Testosterone Pit
The Putrid Smell Suddenly Emanating From European Banks
Wolf Richter
(h/t Zero Hedge)

Switzerland's "stealth" fiscal stimulus to Europe

Ever wonder where Germany gets the endless money for bailouts?

This may answer that question.

In its ongoing efforts to peg the Swiss franc to the euro at 1.2, the Swiss National Bank has been buying billions of euro (around 150 billion since last September). These euro have been used by the SNB to buy European bonds (mostly German), which explains the collapse in German bond yields. The bond purchases are a form of de-facto “fiscal stimulus” to Germany and the rest of the Eurozone (when Germany extends credit or otherwise “lends” to other member states).

So the people of Spain should thank the Swiss for their largesse. The ECB should do the same, as it can sit back and do nothing thanks to the SNB’s currency operations.

Who gets hosed? The people of Switzerland, who see their currency weaker than it otherwise would be, which reduces their real terms of trade. In other words, Switzerland gets nothing in real terms out of this deal. Europe gets everything.