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Wednesday, October 10, 2012


NOV 17, 2010

The Most Absurd War

Lindsey Williams: The Final Countdown

Europe Riots

Almost 40 Earthquakes Hit Near Reykjavík

Close to 40 minor earthquakes were picked up by sensors in the vicinity of Bláfjöll, where the capital’s ski resort lies, between 2:30 and 3:30 yesterday afternoon. The largest of these had a magnitude of more than two.

Bláfjöll. Photo by Páll Stefánsson.

The epicenter of the earthquake swarm lies to the southeast of Bláfjöll. On Friday, the area was hit by a stronger earthquake of a magnitude of 3.8, ruv.is reports.

However, according to the Icelandic Meteorological Office, the seismic activity originates in different fissure systems. Further activity cannot be ruled out, yet there are no indications of an upcoming volcanic eruption in the area, the Met Office concluded.

On August 30, an earthquake of the magnitude 4.6 hit in the same area but further to the north, closer to Bláfjöll. The earthquake could clearly be felt in Reykjavík.

Iceland review

Europe edges closer to banking union

LUXEMBOURG/FRANKFURT – European Union ministers examined a proposal on Tuesday to limit planned new powers for the European Central Bank to supervise lenders, in a bid to allay the concerns of countries outside the eurozone over a new banking union.

The diplomatic drive came as the President of the ECB and Germany’s markets regulator cautioned that setting up a new system of supervision would take up to the end of next year, later than many expected and a potential setback to efforts to help distressed eurozone countries and their banks.

Brussels proposed earlier this month that the ECB take charge of supervising all banks in the euro currency zone in stages from January, as a first step towards creating a banking union under which chiefly eurozone countries would eventually jointly back their lenders.

Winning broad support for a prompt introduction of the new supervision framework is important because it should allow the eurozone’s rescue fund, the European Stability Mechanism (ESM), to directly inject much-needed capital into banks, such as those in Spain.

However, the plan has sparked concerns among the 10 EU countries which do not use the euro that they will be indirectly affected by the ECB’s new supervisory powers and put at a competitive disadvantage, whether they join the scheme or not.

Financial Times


NEW YORK – As a student at Harvard Law School, then-bachelor Barack Obama’s practice of wearing a gold band on his wedding-ring finger puzzled his colleagues.
Now, newly published photographs of Obama from the 1980s show that the ring Obama wore on his wedding-ring finger as an unmarried student is the same ring Michelle Robinson put on his finger at the couple’s wedding ceremony in 1992.
Moreover, according to Arabic-language and Islamic experts, the ring Obama has been wearing for more than 30 years is adorned with the first part of the Islamic declaration of faith, the Shahada: “There is no God except Allah.”
Inscription on Obama's ring
The Shahada is the first of the Five Pillars of Islam, expressing the two fundamental beliefs that make a person a Muslim: There is no god but Allah, and Muhammad is Allah’s prophet.
Sincere recitation of the Shahada is the sole requirement for becoming a Muslim, as it expresses a person’s rejection of all other gods
Egyptian-born Islamic scholar Mark A. Gabriel, Ph.D., examined photographs of Obama’s ring at WND’s request and concluded that the first half of the Shahada is inscribed on it.
“There can be no doubt that someone wearing the inscription ‘There is no god except Allah’ has a very close connection to Islamic beliefs, the Islamic religion and Islamic society to which this statement is so strongly attached,” Gabriel told WND.
Jerome Corsi’s “Where’s the REAL Birth Certificate?” carefully documents the story the establishment media still refuses to tell
“Dreams from My Real Father” producer Joel Gilbert, an Arabic speaker and an expert on the Middle East, was the first to conclude that Obama’s ring, reportedly from Indonesia, bore an Islamic inscription.
Photographs published last week by the New Yorker from Obama’s time at Occidental College, taken by fellows students, indicate that the ring Obama wore three decades ago is the one he is wearing in the White House.
Barack Obama
As WND reported in July, previously published photos have shown Obama wearing a gold band on his wedding-ring finger continuously from 1981 at Occidental, through graduation at Columbia in 1983, in a visit to Africa in 1988 and during his time at Harvard from 1988 to 1991. But none, until now, have displayed the ring with enough detail to identify it as the one he currently is wearing.
WND reported a satirical edition of the Harvard Law Review published by students in 1990 contains a mock Dewers Scotch profile advertisement poking fun at Obama. Among a list of Obama’s “Latest Accomplishments” is: “Deflecting Persistent Questioning About Ring On Left Hand.”
The comment suggests the ring was a subject of student curiosity at the time and that Obama was not forthcoming with an explanation.
He still has not explained why he wore the band on his wedding-ring finger before he married Michelle.
Gabriel, born to Muslim parents in Upper Egypt, grew up immersed in Islamic culture. He memorized the Quran at age of 12 and graduated in 1990 with a Masters degree from the prestigious Al-Azhar University in Cairo, the preeminent Sunni Muslim institution of learning.
He explained that on Obama’s ring, the declaration “There is no god except Allah” (La Ilaha Illallah) is inscribed in two sections, one above the other.
On the upper section, “There is no god” is written in Arabic letters, from right to left: Lam, Alif, Alif, Lam, Ha.
On the lower section is “except god,” written in Arabic letters from right to left: Alif, Lam, Alif, Alif, Lam, Lam, Ha.
In the lower section, the word “Allah” is written partially on top of the word “except,” noted Gabriel, the author of “Islam and Terrorism” and “Journey Inside the Mind of an Islamic Terrorist.”
It is common in Islamic art and Arabic calligraphy, especially when expressing Quranic messages on jewelry, to artfully place letters on top of each other to fit them into the allotted space.
The exhibit below shows how the Arabic inscription fits over the two parts of the Obama ring.
“There is no God except Allah” overlaid on Obama ring
‘First-rate accent’
In an interview during the 2008 presidential campaign, New York Times columnist Nicholas Kristof questioned Obama about his Islamic education in Indonesia, where he lived from 1967 to 1971.
After acknowledging that he once got in trouble for making faces during Quran study classes in his elementary school, Obama recited for Kristoff the opening lines of the Arabic call to prayer, the Adhan.
The prayer incorporates the Shahada, the expression of Islamic faith, with each line repeated twice:
Allah is supreme! Allah is supreme!
I witness that there is no god but Allah
I witness that Muhammad is his prophet
Kristof noted Obama recited the prayer in Arabic “with a first-rate accent.”
“In a remark that seemed delightfully uncalculated (it’ll give Alabama voters heart attacks), Mr. Obama described the call to prayer as ‘one of the prettiest sounds on Earth at sunset,’” Kristoff wrote.
Gabriel told WND that a person wearing a ring with “There is no God except Allah” demonstrates the significance of Islam in his life.
“Christians never use the statement,” he pointed out. “By wearing the Shahada on jewelry, a person communicates that Allah is in control of all circumstances. Allah controls you; Allah is the one and only one.”
Obama, who attended Rev. Jeremiah Wright’s Trinity United Church of Christ in Chicago for two decades, has repeatedly insisted he is a Christian.
Obama's hand in a White House photo
‘Blessed statement in Islam’
Gabriel emphasized the importance of the Shahada in the profession of faith in Islam.
“Muslims recite the Shahada when they wake up in the morning and before they go to sleep at night,” he said. “It is repeated five times every day in the call to prayer in every mosque. A single honest recitation of the Shahada in Arabic is all that is required for a person to convert to Islam.”
Gabriel believes it would be impossible for Obama not to be aware of what is written on the ring, calling it a “blessed statement in Islam.”
“By wearing this religious statement on one’s hand, it connects the person to Islam,” he said. “It is worn in hopes that Allah’s protections would be with the person, in hopes of gaining favor with Allah.”
He affirmed that Muslim men do wear gold rings, despite prohibitions in Islamic law.
“Though Islamic law prohibits the wearing of gold jewelry by men, it is a widely accepted custom, even in strictly Muslim countries,” he said. “The wearing of gold rings is even more acceptable when it contains a religious message, such as ‘There is no god except Allah.’”
He noted there is also widespread acceptance of men wearing gold jewelry in non-Arab Islamic societies such as Indonesia, Bangladesh, Malaysia and Pakistan, where Muslims generally understand that Muslims are subject to strong influences of local non-Arab cultures.
“Therefore, even though technically prohibited, a Muslim man wearing a gold ring is not looked down upon, especially if the jewelry reflects a love of Islam and a connection to Islamic society,” he said. “An even greater level of acceptance is for businessmen who deal with infidels, because such a person would be regarded as a person of influence.”
Obama signing legislation (White House photo)
‘I have known Islam on three continents’
Filmmaker Joel Gilbert, an expert on Islamic history, noted Obama wore the ring during his high-profile speech in Cairo on June 4, 2009, in the first months of his presidency.
“Now we have a new context for what Obama meant when he told the Islamic audience in Cairo that he has ‘known Islam on three continents,” Gilbert said. “He also told the Cairo audience that he considered it part of his responsibility as president of the United States ‘to fight against negative stereotypes of Islam wherever they appear.’ All religious Muslims are by definition required to defend Islam.”
Gilbert’s most recent documentary films on the Middle East are “Farewell Israel: Bush, Iran and The Revolt of Islam” and “Atomic Jihad: Ahmadinejad’s Coming War and Obama’s Politics of Defeat”
Obama in Cairo, Egypt, June 4, 2009
Obama in Cairo, Egypt, June 4, 2009, close-up
The Occidental ring
The photographs published last week by New Yorker magazine indicate Obama was wearing the ring at Occidental College.
One photo shows Obama sitting alongside Occidental roommate Hasan Chandoo in 1981, apparently waiting for a meal to be served.
Barack Obama and roommate Hasan Chandoo at Occidental College in 1981
Obama’s extended left hand clearly shows the ring, as seen below.
The second of the recently released photos shows Obama reaching for a book from an Occidental College library shelf.
Barack Obama in Occidental College library in 1981
A close-up of the library photo can be seen below.
Detail of Barack Obama ring in Occidental College library in 1981
In the above photo, the ring’s design can be seen, including a series of parallel bars that distinguish its outer circumference.
The Obama wedding ring
In the story, Jodi Kantor described its “intricate gold design,” noting it came from Barack Obama’s boyhood home of Indonesia and was not traditional, like Michelle’s.
Kantor wrote:
Just before the Rev. Jeremiah A. Wright Jr. pronounced Barack Obama and Michelle Robinson man and wife on the evening of Oct. 3, 1992, he held their wedding rings – signifying their new, enduring bonds – before the guests at Trinity United Church of Christ. Michelle’s was traditional, but Barack’s was an intricate gold design from Indonesia, where he had lived as a boy.
There was no mention in the article that Obama already had been wearing the ring for more than a decade.
The photos of the ring from the 1980s can be compared with more recent photos, such as the onespublished by the Huffington Post in 2010 in an article by Anya Strzemien, “Obama’s ‘Intricate’ Indonesian Wedding Band: A CLOSE-UP,” seen here.
Obama wedding ring, Huffington Post, March 18, 2010
Obama wedding ring, Huffington Post, March 18, 2010


NATO invasion of Syria: coming soon

The stage is set, the NATO forces are in position and authorization has been given, now all it will take is a little spark to ignite the powder keg that is the Middle East. The West needs a middle-man, a reason to invade Syria, and Turkey is that tool. Statements by both NATO Secretary General Anders Fogh Rasmussen and the Turkish Parliament come as a proof.

Remember about a month ago when US President Barack Obama phoned Turkish Prime Minister Recep Erdogan and they spoke about Syria and Obama was photographed sitting behind his desk holding a baseball bat? Well it was a sign, and from sign to action takes time, after all we are talking about invading a sovereign nation to eradicate its leader. Well time is coming, all the signs are there.

One of them is the recent authorization by the Turkish Parliament granting Erdogan the power to send Turkish troops into “foreign” countries, meaning Syria. Another is the now open bombing by Turkey of its Syrian neighbor and yet another are statements and preparations by NATO and the West.

Rick Rozoff at Stop NATO cites one such statement by NATO Secretary General Anders Fogh Rasmussen who stated: “I can assure you we have all necessary plans in place to defend and protect Turkey, our ally.” This came after an unprecedented late-night meeting after Turkey began its cross border bombing of Syria, after which NATO stated: "In view of the Syrian regime’s recent aggressive acts at NATO’s southeastern border, which are a flagrant breach of international law and a clear and present danger to the security of one of its Allies, the North Atlantic Council met today, within the framework of Article 4 of the Washington Treaty..."

According to Rick Rozoff at Stop NATO “A week ago the top military commander of NATO, Admiral James Stavridis, paid an unannounced visit to the Turkish capital to meet with Chief of General Staff General Necdet Özel and Defense Minister İsmet Yılmaz.” All of this and the mobilization of what is becoming an invasion size force along the Syrian border leaves little doubt what is soon to come.

Iranian media is filled with reports of NATO’s intentions, with the FARS News Agency reporting that Ali Akbar Velayati, a senior advisor to Iran's Supreme Leader stated that: “NATO is preparing the ground for military intervention in Syria under the pretext that the security of Turkey, which is a NATO member, has been threatened.”

The Trend News website quotes Ali Akbar Velayati as saying: “Certain Western countries are seeking to drag NATO into regional issues. The West is digging a hole so that Turkey, Syria, and the entire region will become stuck in it and the Islamic Awakening will be overshadowed. Regional countries, including Syria, Turkey, and Iraq, should remain vigilant because the United States and its allies have plots for regional countries."

In an interview for the Voice of Russia Rick Rozoff also made it point to underline the fact that: “…only hours before the shelling incident that has provided Turkey the occasion for authorizing ongoing military attacks inside Syria, Russian Deputy Foreign Minister Gennady Gatilov told reporters in Moscow that Russia had warned NATO and its allies in the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) against conspiring to manufacture pretexts for military intervention inside Syria such as demanding so-called humanitarian corridors or buffer zones inside the latter nation and launching armed provocations on the Turkish-Syrian border.”

The fact that NATO and the West are known to openly wish to invade a country under any pretext should set off alarm bells and cause an international uproar, but after they got away with it in Afhgnaistan, Iraq and Libya, it seems that the world has become calloused and accustomed to such crimes against humanity.

Why does the United States and its surrogate want to invade Syria and take control of countries like Iran, Iraq, Libya, Antarctica and even Venezuela? It has nothing to do with democracy or human rights or removing despotic dictators it has to do with oil.As Michael Collins at OpEdNews said despite the situation being a complex one, the US and the NATO countries are the world’s biggest oil addicts and they will do anything to keep their dealers happy and ensure that they get their fix.
Voice of Russia

Moody's nearly 30 Calif. cities go for downgrades

One of the nation's top credit rating agencies will review dozens of California cities for possible credit downgrades amid mounting concern over municipal bankruptcies and bond defaults.

Moody's Investors Service announced Tuesday that it would scrutinize nearly 30 California cities for possible downgrades.

The announcement follows an August report in which Moody's predicted more municipal bankruptcies and defaults in California, the nation's largest issuer of municipal bonds. Moody's warned that some cities are turning to bankruptcy as a new strategy to tackle budget deficits and abandon obligations to bondholders.

Three California cities Stockton, San Bernardino and Mammoth Lakes filed for bankruptcy over the summer, although Mammoth's filing was the result of losing a lawsuit.

Cities under review for possible downgrades include Sacramento, Santa Monica, Oakland and Berkeley.

Moody's, which rates 95 California cities, also will review San Francisco and Los Angeles for upgrades.


Turkey warns Syria of stronger response over shelling

Turkey's top military commander has warned Syria that it will respond with greater force if it continues its cross-border shelling.

Five Turkish civilians were killed by Syrian mortar fire last week, prompting Turkey to fire into Syria for the first time since the uprising began.

Meanwhile, the US has confirmed reports it has a military task force in Jordan helping with Syrian refugees there.

The first formal refugee camp within Syria is also reported to have opened.

Meanwhile, activists say that the Syrian government has sent extra troops to Idlib after rebels seized a strategic town there.Cameraman killed

Turkey's armed forces chief of staff, Gen Necdet Ozel, has been visiting the town of Akcakale where two women and three children were killed by Syrian shells last Wednesday.

After touring the town and meeting relatives of those killed, he told reporters: "We have retaliated [for Syrian shelling] and if it continues, we'll respond more strongly."

On Monday, UN Secretary-General Ban Ki-moon said the cross-border shelling between Turkey and Syria was "extremely dangerous". He has called on Damascus to declare a ceasefire.

Turkey's Prime Minister Recep Tayyip Erdogan has said Turkey has no intention of starting a war with Syria but that it will defend its territory.

Within Syria, there are reports of fighting along a main route into the biggest city, Aleppo.

UK-based activist group the Syrian Observatory for Human Rights says rebels have taken control of Maaret al-Numan in Idlib province, a town on the main highway that links Damascus with Aleppo.
Activists say rebels are now in control of the strategic town of Maaret al-Numan

The Observatory is one of the most prominent organisations documenting and reporting incidents and casualties in the Syrian conflict. The group says its reports are impartial, though its information cannot be independently verified.

Losing Maaret al-Numan would make it difficult for the Syrian army to send reinforcements to Aleppo itself, the organisation says, adding that Syrian army helicopters are now circling the area.

In other developments, a cameraman working for the pro-government TV station al-Ikhbariya has been killed in the eastern city of Deir Ezzor, according to his broadcaster.

Mohammed al-Ashram was "killed by terrorists", director Imad Sara told AFP news agency.

Journalists from the station have been targets in the past. In June, seven journalists and security guards working for the station were killed when gunmen attacked its headquarters south of Damascus.US in Jordan

Meanwhile, a landmark refugee camp within Syria, close to the Turkish border, has been opened amid mounting pressure from the international community for Syria to do more for those displaced by the fighting.

According to AFP, the first families arrived by bus from the nearby village of Atme, where they had been camping out.

The site has been set up with the help of foreign donors, including Libya, the agency reports.

Bordering countries have been struggling to deal with the number of people fleeing the country.

On Wednesday, US Defence Secretary Leon Panetta confirmed to the BBC that the US military had a team in Jordan helping it deal with the influx of more than 85,000 UN-registered Syrian refugees.
The international community has urged Syria to do more for those displaced by the fighting

Mr Panetta confirmed a report in the New York Times which said a team of more than 150 American specialists were in Jordan helping to provide humanitarian aid and with preparations for the possibility that the Syrian conflict could spread to the wider region.

Mr Panetta said the US had been working with the Jordanians for some time to help them develop their military and operational capabilities to respond to any eventualities.

He said the advisers would also help ensure the security of chemical and biological warfare sites in Syria.

US President Barack Obama has said the deployment or use of biological weapons would widen the conflict in the region and would represent a "red line" that would change his thinking.

There are also concerns that the Syrian government could lose control of the weapons.

US Acting Assistant Secretary of Defence George Little told the BBC the shelling into Turkey showed there were "various scenarios in which the Assad regime's reprehensible actions could affect our partners in the region".

"For this reason and many others, we are always working on our contingency planning, for which we consult with our friends," he said.

The AFP news agency quoted an unnamed US official as saying the team was based just 55km (35 miles) from the border, the closest US military presence to the Syrian conflict.

In the UK, two people have been arrested at London's Heathrow Airport as part of an investigation into travel to Syria for alleged terrorist activities.

They are said to have flown into the UK from Egypt.

Dozens of people are thought to have travelled from Britain to Syria to fight in the uprising against President Bashar al-Assad, which began 19 months ago.


Texas schools punish students who refuse to be tracked with microchips

A school district in Texas came under fire earlier this year when it announced that it would require students to wear microchip-embedded ID cards at all times. Now, students who refuse to be monitored say they are feeling the repercussions.

Since October 1, students at John Jay High School and Anson Jones Middle School in San Antonio, Texas, have been asked to attend class with photo ID cards equipped with radio-frequency identification (RFID) chips to track every pupil’s location. Educators insist that the endeavor is being rolled out in Texas to stem the rampant truancy devastating the school's funding. If the program is judged successful, the RFID chips could soon come to 112 schools in all and affect nearly 100,000 students.

Students who refuse to walk the school halls with the card in their pocket or around their neck claim they are being tormented by instructors, and are barred from participating in certain school functions. Some also said they were turned away from common areas like cafeterias and libraries.

Andrea Hernandez, a sophomore at John Jay, said educators have ignored her pleas to respect her privacy and told her she cannot participate in school elections if she refuses to comply with the tracking program.

Hernandez said in an interview with Salon that subjecting herself to constant monitoring through an RFID chip is like being branded with the “mark of the beast” – a reference to the Bible's apocalyptic Book of Revelations. When she reached out to WND with the school’s response, though, she said that she was threatened with not being allowed to vote for her school's homecoming king and queen for disobeying the student ID rule.

"I had a teacher tell me I would not be allowed to vote because I did not have the proper voter ID," Hernandez told WND. "I had my old student ID card which they originally told us would be good for the entire four years we were in school. He said I needed the new ID with the chip in order to vote."

After Hernandez refused to wear an RFID chip, WND reported that Deputy Superintendent Ray Galindo issued a statement to the girl's parents: “We are simply asking your daughter to wear an ID badge as every other student and adult on the Jay campus is asked to do.” If she is allowed to forego the tracking now, the repercussions will be harsher than just revoking voting rights for homecoming contests once the school makes location-monitoring mandatory, he argued.

“I urge you to accept this solution so that your child’s instructional program will not be affected. As we discussed, there will be consequences for refusal to wear an ID card as we begin to move forward with full implementation,” Galindo wrote.

The girl’s father, Steve Hernandez, told WND that the school was somewhat willing to work with his daughter, but said that the family is unwilling to “agree to stop criticizing the program” and publically endorse it.

“I told him that was unacceptable because it would imply an endorsement of the district’s policy and my daughter and I should not have to give up our constitutional rights to speak out against a program that we feel is wrong,” Mr. Hernandez responded.

The Northside Independent School District expects to collect upwards of $2 million in state funding by reversing its poor attendance figures, with the RFID program costing around one-quarter of that sum to initiate and another $136,005 in maintenance. The new funding may not offset the other damages that could arise: Heather Fazio of Texans for Accountable Government told WND that she filed a Freedom of Information Act request for $30 and received the names and addresses of every student in the school district.

“Using this information along with an RFID reader means a predator could use this information to determine if the student is at home and then track them wherever they go. These chips are always broadcasting so anyone with a reader can track them anywhere,” she said.


European Banks Need To Sell Up $4.5 Trillion In Assets In Next 14 Months

While yesterday it was the sovereigns who suffered the wrath of the IMF's wholesale growth outlook downgrade (unbeknownst to Christine Lagarde), today it is the turn of the financial sector (which is increasingly being blurred with the former in a world in which central banks are used to both backstop bank liabilities and fund endless public deficits, unafraid of the consequences in a closed loop fiat world in which defection is, so far, impossible) to be greeted by a cold dose of reality emanating from the IMF's "Global Financial Stability Report" especially as pertains to Europe's insolvent banking system. 

The most notable finding of said report is the admission that the IMF was only kidding when it said six months ago, in April of this year, that the worst case outlook now has European banks deleveraging to the tune of $3.8 trillion through the end of 2013, or over the next 14 months: now this number is 18% higher, or a gargantuan $4.5 trillion (12% of bank assets). This is how much debt Eurobanks will need to shed in a "weak policies" case in which Europe continues to delay implementing fiscal reform, aka austerity, as per Figure 2.14. 

Even the baseline (and this being the IMF it means it has zero chance of happening) scenario is not much better, at a revised $2.8 (7.3%) trillion in deleveraging. The reason for the increase is due to "lower expected earnings, higher losses linked to worsened economic conditions, and greater funding pressures on banks."

Ironically as Figure 2.15 indicates, one of the primary drivers for deleveraging is none other than the central banks, whose "financial repression" regime is crushing not only savers, but banks as well, who are now forced to dump hundreds of billions in debt for which they get no economic benefit. The only real question left is: just who will buy all this debt. And the only real answer is, of course, the ECB, which is why all those devising 2013 EURUSD forecasts, model an ECB balance sheet that will be about 100% larger than it is currently (a move which the Fed will not idly stand by and watch without taking corresponding action).
Breakdown of IMF deleveraging forecasts for the three scenarios, of which the realistic one is highlighted:
How does the IMF define the three set of underlying policies:
  • Under baseline policies, foreign investors’ share of the total debt stock is assumed to continue to decline at the same pace as seen during 2009–11. For periphery countries, the share of foreign debt holdings is assumed to move halfway toward pre-euro era levels. The assumptions on sovereign spreads reflect positive market developments following the announcements by the European Central Bank on July 26 and September 6 launching the Outright Monetary Transactions program. Periphery sovereign spreads are assumed to stabilize and/or gradually decline by end-2013
  • Under complete policies, by contrast, confidence returns and foreign investors increase their share of the total debt stock as funds flow back to the periphery. Periphery spreads tighten by one to two standard deviations below the baseline.
  • Under weak policies, the withdrawal of foreign investors accelerates to twice the pace seen since 2009. Periphery spreads widen by about one standard deviation above the baseline.
One can easily see why with the situation in Europe deteriorating ever faster courtesy precisely to the ECB, which has now taken over all credit formation, leaving no reason for foreigners to suffer the same pain and suffering as Greek bondholders did initially, and as Spanish, and all other PIIGS private holders will go through soon.
Some further color from the IMF:
  • The deterioration in financial and economic conditions entails greater pressure on bank asset quality and capital. The scarcity and higher costs of bank funding, sovereign stress, and a weaker economy are adding to the pressure on bank profits, while weakening economic conditions have led to a deterioration in the quality of bank loans, as indicated by a rise in nonperforming loan (NPL) ratios. Among the four factors analyzed here—capital, funding, financial repression, and financial fragmentation— capital emerges as one of the key factors, particularly for weaker periphery banks (Figure 2.15). This means, for example, that even if funding gaps are closed, bank deleveraging pressures will remain.
  • The periphery bears the brunt of shrinking credit supply. The cutbacks in the supply of credit to the periphery countries are much larger than in the core euro area (Figure 2.16). The supply of total credit in the periphery (including cross-border lending) is expected to decline 9 percent under the baseline  policies scenario and almost 18 percent under the weak policies scenario.
  • EU banks cut back the supply of credit outside the euro area as well, notably in emerging Europe, Latin America, and the United States. In some cases, however, domestic banks and foreign banks operating in these three regions are expected to step in and offset the impact that the EU banks’ pullback will have on credit supply (Figure 2.17). For example, recent European asset sales in the United States and Latin America have so far been orderly.
  • A rapid move to the complete policies scenario would avoid additional economic damage to periphery economies due to the credit supply shock (Figures 2.18 and 2.19). The estimated impact on euro area credit supply under the baseline policies scenario is broadly in line with the WEO baseline. Under the weak policies scenario, the credit supply shock from the EU bank deleveraging would lower periphery euro area GDP by more than 4 percentage points relative to the WEO baseline in 2013. In the core euro area, GDP would contract much less, in line with the relatively moderate impact on credit, but still significantly—by 1.5 percentage points relative to the WEO baseline. In the complete policies scenario, GDP at end-2013 relative to the baseline policies scenario would be two-thirds of a percentage point higher in the core, and almost 2 percentage points higher in the periphery.
And while Greece is a goner, the jury is still (supposedly) out on Spain and Italy. What will not help them is that due to the unbreakable linkage between banks and sovereigns, absent massive deleveraging, the GDP of these two countries will continue to collapse.
It gets worse. As we have long discussed, one of the key topics that everyone loves to ignore when talking Europe is the trillions in contingent liabilities, which just because they are not directly held on the books, does not mean they do not exist. In Europe's case not only do they exist, but are rising, as the IMF warns.
The slow pace of crisis resolution has pushed up the size of contingent liabilities for economies in the core of the euro area. Contingent liabilities reflect the  size of potential ultimate fiscal transfers, or the costs of potential defaults in the periphery under a breakup scenario, should the crisis deepen. Under the assumption that the ECB provides unlimited support to fill in the funding gap left by capital flight from the periphery, one measure of the size of contingent liabilities is given by the estimated size of payment system (Target 2) balances, the commitments on bilateral loans, and support for domestic banks with exposure to the periphery. Under the assumption of unlimited support from the Eurosystem,Target 2 liabilities could be expected to continue to rise for the periphery (Figures 2.25 and 2.26). In the baseline policies scenario, capital flows from the periphery to the core would continue, marked by further financial fragmentation and consolidation of bank balance sheets within national borders. The weak policies scenario would result in stronger outflows from the periphery and net outflows from the euro area as investors seek to evade the impact of a potential breakup of the euro areaRoll-offs by foreign investors would climb, the pace of overall outflows would rise further still, and the euro would likely come under substantial depreciation pressure. Under the complete policies scenario, confidence returns and foreign investors increase their share of outstanding debt.
The biggest loser here, as in every other category: Germany, which will end up seeing €2 trillion in TARGET2 claims which in turn will never be satisfied as the system merely accelerates its collapse into a debt supernova.
The big picture, of course, is that even the IMF now concedes Europe is in a closed loop Catch 22: unless European countries manage to restore "foreign" confidence which in turn would mean putting their fiscal houses in order, something which has proven absolutely impossible in Europe absent such one-time gimmicks as LTROs and otherwise hollow confidence boosters as ECB warnings to not fight the ECB (which work until they are tested, but first need to be activated, ahem Mariano Rajoy), the banks will be forced to delever even more, which would mean the ECB would have to "onboard" even more of their debt as nobody else will, which means even more foreign creditor flight, which means greater deposit outflows, which means more ECB intervention, until finally, the ECB is the only player in town, a process which can be visualized (in progress) in the following capital flow image, especially Figure 1.7:
At the point when the ECB is the sole owner of all European financial debt (and sovereign debt via repo), the endgame for the fiat system will finally be here, as the only thing more dangerous than the ECB will be all other central banks which will have no choice but to follow suit and monetize everything in the global race to debase currencies, and monetize ever more budget deficits in a world in which the rich increasingly preserve their wealth, and refuse to pay taxes (converting financial assets into hard ones), having finally grasped the endgame.
As for the immediate task at hand: how European banks will deleverage to the tune of $4.5 trillion over the next 14 months, Europe has our blessings.

Zero Hedge