Everyone is familiar with the iconic lone horseman who rides nameless into town in the movies and shoots up the bad guys before riding out again, presumably to do the same in all the other towns.

It’s hard to get good help these days, hard to get much outside of the proverbial kick in the pants. Hanging onto euros in June of 2012 is the fools game, at the end of the day, someone is going to be stuck with fistfuls of euros that won’t be worth anything.

The analytical mind hasn’t wrapped itself around this particular concept hoping against all hope that some sort of (theatrical) policy change can prevent the damage underway that does not at the same time actually change anything.

The latest suggestion is for more integration, the integration to-date has not been damaging enough:

EU, ECB working up eurozone ‘master plan’

BERLIN — The heads of four key European institutions are hammering out a “master plan” to lead the eurozone out of its crippling crisis, a German Sunday newspaper reported.

European Central Bank chief Mario Draghi, European Union president Herman Van Rompuy, EU Commission head Jose Manuel Barroso and Eurogroup chairman Jean-Claude Juncker were tasked last month with working up a reforms roadmap, Welt am Sonntag said.

The plan is to be presented at an EU summit in late June, the report said.

Gamblers conspire in the saloon as the gunman heads for the corral.

Euro Bonds, Growth Needed to End Crisis, Cazeneuve Tells Stampa

Andrew Davis (Bloomberg)

The 17 euro nations should jointly issue debt to cut borrowing costs and adopt more pro-growth policies to combat the region’s debt crisis, French European Union Affairs Minister Bernard Cazeneuve told newspaper La Stampa.

The disagreement between France and Germany over whether to jointly sell debt centers on when to introduce the securities and not whether to sell them, Cazeneuve told the Italian newspaper. France wants to begin the process now as a way to overcome the debt crisis, while Germany would back the bonds once conditions improve as a way to signal that Europe has overcome the crisis, he said in the interview.

There is a big jump from Euro-bonds to complete federation in Europe and subordination of national issues to a federal European variety. Euro-versions are ‘joint-and-several’ which would be little different from what is seen today: tomorrow’s issuers would be yesterday’s inept issuers. There is nothing to be gained by J&S bonds at this point.

The problem in the EU is credibility. At the beginning the bad loans were confined to Greece. Now it is past the PIIGS and beyond, even Netherlands is considered a questionable credit risk. The upshot is that all these euro-loans are bad: anything offered to replace them would also be bad.

The only way for the Europeans not to have bad loans is for Europeans not to lend, not to create more ‘false-lenders’: ECB-EFSF-EMS-LTRO-ELA-Target2-etc. who keep recycling the same crap over and over. Of course, no more lending means death to Euro-economies. One thing that is as sure as gravity is that industrial economies cannot exist at all without massive and continuing debt subsidy.

If Europe federates (they might want to read Al Hamilton’s ‘Federalist Papers’ to get an idea of what the process is about) they will buy some more time. What has Europe done with the time they’ve borrowed already? Stringent energy conservation? No. Debt- and finance restructuring? No. Military reform? No. Political restructuring? No. Forensic audit of existing Euro-debt? No. Re-balance internal EU trade (internal tariffs on core goods)? No. This is not a good sign as the Euro-enterprise rattles down the abandoned carriage-way toward oblivion.

If it makes Merkel feel better, it is really too late for joint and several bonds, The devil is in the details and the largest devil is the absence of a credible independent issuer of new bonds. The problem to a large degree in Europe is that Germany made €trillions of bad loans that they now want to be made good. You have the same imbeciles who made decades of bad loans to finance waste making the new, replacement loans. This cannot possibly work: you would have the ECB issuing its own bonds or some other form of idiocy. To succeed, there would have to be a Federal Republic of Europe — at least the form of it — a massive crude oil import fee — so that gasoline/diesel price is €15 per liter — and a wind-down of the energy wasting industries that so far have put the Continent at the edge of total ruination and collapse: starting with the automobile industry and all of its dependencies. The fee would be the instrument to retire the existing defunct European issues, not to keep the can kicking exercise in gear.

Meanwhile back at the ranch, the European version of rigor-mortis is radiating outward from the rotting Euro-center toward the frantic Euro-dependencies.

Switzerland pegged its currency to the euro, committing itself to buying billions of euros in an attempt to keep the franc from becoming too costly for its own credit customers as well as its exporters. Swiss believed the euro-problems were small/temporary and that money-managers would get them in hand, this would allow Swiss to go back to making cheese with holes in it and cuckoo clocks. Euro-problems turn out to be permanent. Swiss has a massive and growing euro position that it cannot close without undercutting its own market for euros: they cannot buy and sell euros at the same time. When Greece exits (or Germany), the Swiss will be stuck with hundreds of billions of worthless euros! So will China.

China has many more euros and much greater euro-debt on its books than do the Swiss. The euros make up a very large part of China’s multi-trillion forex reserves. Neither the Chinese nor the Swiss can afford to stop buying them, they cannot afford to get rid of them … at the same time, they cannot afford to be stuck with them, either.

The same uncertainty exists with the crude oil producers who also hold billions of euros. All of this is absent from the discussions about Greece and Spain, what the consequences will be outside of Europe when (if) the managers fail … or if they succeed!

The world is on shaky ground as the currency idea is pretty much the same in all the countries: money is the proxy for ‘unending progress and material comfort’. Bank runs and credit collapse were never part of the narrative, now it looks as if these things were baked into the cake. The euro wobbles and falls means the dollar wobbles and perhaps falls right along side. We are truly in uncharted territory.

Here is Bruce Krasting from a few days ago:

The move in the direction of exchange controls is not just a matter for the SNB. The entire (Swiss) government is behind the effort to ring-fence the country from its neighbor’s troubles. At the request of the Swiss Central bank, Switzerland’s National Bank Financial Market Authority (FINMA) has formed a “crisis committee”. The members include Federal Councillor Eveline Widmer-Schlumpf, SNB President Thomas Jordan, and FINMA President Anne Héritier Lachat.

This crisis group has the authority to do pretty much as it pleases. If it wanted to introduce exchange controls in Switzerland it could do it in an hour. I’m sure that a complete roadmap of policy actions has already been laid out. I’m also sure that benchmarks have been set that would trigger the introduction of exchange controls. Certainly one of those benchmarks would be if Greece establishes its own set of controls, or formally leaves the EU. We are very close on those triggers.

Once controls are introduced a primary purpose of the euro — to facilitate cross-border capital movements, the other being an energy hedge — is negated. Now the unintended movements are by themselves annihilating: Attempting to save the euro destroys it, to do nothing and the euro destroys itself by way of bank runs then flight out of the currency itself.

This is the dynamic taking form in Europe right now: comes very soon a time when nobody will accept euros anywhere ‘waiting to see’ who will use them tomorrow and who doesn’t. The outcome of that particular waiting dynamic becomes everyone spurning the euro. There is an instant ‘wealth gain’ of €2 trillion to be had by repudiating foreign holders of euros, by leaving these holders with fistfuls of worthless euros. This wealth is about what some of these countries need to ‘balance their books’.

Meanwhile back in town, the EU is revealed as a Ponzi scheme. The last one out the door is the bag-holder, the first ones out are survivors. Who leaves the EU first? Greece, followed by Germany. With Germany out who becomes the bag-holder? France … that’s who leaves the EU next. Who then becomes the bag-holder in France’s place? Netherlands … there is no way on God’s green Earth that Netherlands can satisfy the trillions in euro-denominated liabilities! With Netherlands out, who becomes the bag-holder? Belgium … this is how the game will be played, with the euro as radioactive, with countries dumping it as fast as possible, not wanting any part of it.

Everyone on Planet Earth stuck with euros will want them changed into d-marks. This is a laughable farce of an idea. If Germany repudiates all of its trans-Europe responsibilities denominated in euros, it will certainly not accept the same responsibilities denominated in d-marks.

Those with euros in German accounts won’t be entitled to d-marks, either. The Germans will convert non-citizen currency accounts to domicile states’ currencies. The euro itself might vanish with in a cloud of dust but all the EU instruments of finance repression will remain in place. A Greek with a German account you will be given drachmas. Spanish will be given pesetas, Irish given punts and the kick in the pants: they will like it. Everyone else in the ex-eurozone will be frantically bidding for dollars with whatever they have in their fists. Gold is good but nobody buys groceries with gold.

What will happen, next? Impossible to say, but the euro-denominated troubles illuminate the flaws within all the major currencies. All are latched to massive debt overloads with little managerial stomach to address the issues that the debt represents.