European Banks Now Feverishly Betting Against Euro, As Bailout Fails, Gold Surges

ZeroHedge ^ | 5/11/2010 | Tyler Durden

[mojito]

Thought experiment: You are the head FX trader at French megabank....For the past 5 years, your bonus has been getting paid primarily in company stock. In the last two weeks you have seen the stock of your firm plunge as the markets have finally realized that those idiots in the Fixed Income desk have loaded up to the gills with PIIGS debt which is now worth 60 cents on the dollar at best....So what do you do? Well, you short the living daylights out of the EUR, knowing full well that the EU, the IMF and the ECB will not let Europe crash. You sell, you sell on margin and then you sell some more, trying to get EURUSD all they way down to 1.20, to 1.10, even to parity if possible.... And, lo and behold, on May 9 your plan succeeds: Europe agrees to bail your bonus out, by flushing $1 trillion under the pretext the money will be used to stabilize the periphery and the euro. Immediately the stock of CMC, and thus the value of your accrued bonus (several million worth), surges by a record 20% in one day. So you think: "How can I get an even greater bonus appreciation? Why - I will short the euro again.

[....]

Zero Hedge has received confirmation that several of the largest French banks are now actively shorting the euro to take advantage of globalized moral hazard, which with every ensuing bailout does nothing but make the bonuses of French FX traders surge. In other words, the very banks that Europe is bailing out are betting more and more aggressively with each passing day against Europe's own survival!

[mojito]

This latest Euro-bailout is just an open invitation to short the Euro...and Voila! It seems everyone is doing it.

[KarlInOhio]

This is usually where Soros jumps in, when a government is fighting unsucessfully to keep its currency above the market level. Will he come in and give the Euro its final push?

[sten]

gold spike...

[Shermy]

JPMorgan-Citi-Goldman secret agents in the White House tricked Europe into doing the bail out..

http://www.nytimes.com/2010/05/11/business/global/11reconstruct.html

It has worked so well in America!

[Proud_USA_Republican]

Short the american lira as well. The US, at 17% total, is by far the the biggest donator to the IMF fund.

Also one of the worst kept secrets of the credit meltdown was that, through the AIG bailout blackhole, we also bailed out european financials like UBS and Societe Generale. But that was just the warmup round for the US lira printing presses.

So as this plays out, the US tax payer is going to end up financing a big portion of the bailout of the EU socialist utopia as well. All so they can go back to bragging about having the “highest standard of living” in the world, claiming 6 weeks of paid vacation a year is a “human right”, and bashing america as a country of uncultured, fat, capitalist warmongers.

I’m sure their press is already rolling out all the “blame USA” articles on why this happened to them. That’s just a given.
Whoo-hoo!!!

[Notary Sojac]

I guess a trillion dollar guarantee was not enough.

So as soon as Goldman Soros' friends get their orders in, it'll be time to announce the Gazillon, Skadillion Dollar Guarantee!!!

[Proud_USA_Republican]

He could. But he has a bias when it comes to his attacks and they involve the politics of said countries. He likes to go after the more “anglo-saxon” countries like UK and USA when it comes to currency and cordinated attacks upon their financials. That’s what gets his rocks off. Turning the knife in the Euro might cause too much blowback to the socialist utopias he has an affection for.