Global financial system implosion begins

[A Dashing Blade]

Also - you fuckers heard of the REITS performance ?
check out the retuens on soemone like armour (AAR ) - pumping out 20% returns in the US at the minute.

ARMOUR Residential REIT Inc. invests primarily in hybrid adjustable-rate, adjustable-rate and fixed-rate residential mortgage-backed securities issued or guaranteed by a U.S. Government-chartered entity.

ARR is the BBG ticker, +16.67% total return YTD, forward looking yield 19.05%

My immediate thought is "high reward = high risk" tbh.

 

[rover07]

The Mayan prediction looks better with each passing month

 

[teqniq]

Seeing mention of Goldman Sachs, from the Indy this is worth a read:

What price the new democracy? Goldman Sachs conquers Europe

 

[yield]

China fears lasting worldwide recession.
Financial Times. November 20, 2011

Wang Qishan, the Chinese vice-premier responsible for overseeing the financial sector, has predicted the global economy will slump into long-term recession and warned that China will need to deepen financial reforms to cope with the fallout.
“Right now the global economic situation is extremely serious and in a time of uncertainty the only thing we can be certain of is that the world economic recession caused by the international crisis will last a long time,” state media reported Mr Wang as saying over the weekend.

(problems hotlinking to FT. Cut and paste the title into google it should be in the first search of news.)
There will be big problems if the world powers start using widespread protectionism.

 

[ohmyliver]

Doesn't matter that it was Goldmans. Anyone could have fiddled it.

you're right, and in fact it was a number of people including Goldmans... but the point still stands that financial giants not being prosecuted for various dodgy things, including this, sadly shows how much political influence they have.

 

[yield]

Risks emerging from shadows look worryingly like 2008
Financial Times. November 22 2011

The risk managers who contribute to the Bank of England’s regular systemic risk survey are twitchy. The probability of a future high impact event in the UK financial system has, they believe, increased sharply in the second half of 2011 to stand at the highest level since the survey began in July 2008.

No doubt in common with their counterparts in continental Europe and North America, these market practitioners see sovereign risk and the risk of an economic downturn as the most worrying threats to the financial system. The one change in the top five risks identified in the survey since the first half of the year is that the risk of financial institution failure has put in an appearance.

All this feels uncomfortably like 2008 when fear triumphed mightily over greed. The implicit risk in all these perceived risks is that they become self-fulfilling prophesies. Nobody will spend and invest if they think we are back in a financial hurricane. Lower economic growth could then make the sovereign debt crisis even harder to resolve. The sense of déjà vu is reinforced by the insouciance of bankers who set absurdly ambitious targets for return on equity and continue to pay out big bonuses. Another less noticed, but worrying, throw back to pre-crisis days concerns the structure of the financial system – namely that the shadow banking system is in great shape.

(problems hotlinking to FT. Cut and paste the title into google it should be in the first search of news.)
The whole article is worth a read. Is the "risk of financial institution failure" another Lehman Brothers?

 

[Dr Jon]

UK's debts 'biggest in the world'

As it happens, how we became so indebted and what to do about it, is what I am examining in a two-part documentary, called The Party's Over, that will be broadcast on BBC Two at 1900 on 4 and 11 December

Will have to watch that.

Also see:
Probability of ‘high-impact’ event at 2008 levels, BoE says

 

[elbows]

Ooh!

Meanwhile, on Wednesday Germany placed just 3.6bn euros (£3bn) worth of 10-year bonds, from 6bn euros on offer.
Analysts worried that the eurozone debt crisis was beginning to slip into the German economy, usually seen as a powerhouse, as the euro dropped sharply on the foreign exchange markets after the auction.
"There's been a lot of talk lately that perhaps Germany isn't the safe-haven that many people thought it was," said UBS currency strategist Chris Walker.
Danske Bank chief analyst Jens Peter Sorensen said the auction "reflects the deep mistrust to the euro project rather than a mistrust to German government bonds."

From this story about 'stability' eurobonds. http://www.bbc.co.uk/news/business-15854116

 

[Nylock]

UK's debts 'biggest in the world'

Will have to watch that.

Also see:
Probability of ‘high-impact’ event at 2008 levels, BoE says

...If we do get another 'high impact' event, what does everyone reckon will happen? Will the govt come up with some other wheeze to keep things spluttering along? or will it be (properly this time) armageddon time?

 

[A Dashing Blade]

Ooh!

From this story about 'stability' eurobonds. http://www.bbc.co.uk/news/business-15854116

There was a big inflation-linked Gilt auction that was more attractive this week. Just bad timing on Germany's part imo.

 

[Nylock]

On hardtalk (BBC news) now is the economist that predicet the '08 crash... he is advocating letting the banks go bust, wiping out the debts, renationalising financial institutions and such...

gonna watch and see what else comes out...

 

[love detective]

Ooh!

From this story about 'stability' eurobonds. http://www.bbc.co.uk/news/business-15854116

This story says more about financial journalism and analysis either unwittingly or wittingly operating within the dominant narratives that are being set by capital/the markets - rather than trying to present the true nature of what is going on

In addition to the point made by dashing blade above, what the story doesn't mention is that short term german bonds are actually trading at negative interest rates at the moment, which means investors are paying a fee for the privilege of lending money to Germany

Also what it doesn't mention is the unfounded panic that's been stirred up in the bond markets of southern europe has led to prices of german bonds being pushed up to historic highs (and yields to historic lows) and that this slight reversal in that process of increasingly lower german bond yields should be seen as something good and corrective, rather than something to feed into the false fear & panic that is being talked up by the markets

What it also doesn't mention is the technical process unique to German bond auctions that make it much more likely for the auction not to raise the intended amount. Which in turn leads in to the final and most important point that as a result of this, this means that a German bond auction 'failing' is not a unique event which justifies hysterical panic that plays into the hands of 'bond market vigilantism'. What the story should have pointed out that German bond auctions have failed many times over the last few years - this was the ninth such 'failure' alone in 2011, seven 'failed' in 2010 and nine in 2009

But instead of balancing our their reporting with any of these things - like useful idiots they play into the narrative that's most convenient for the markets to push

 

[laptop]

So what's the effect of Hungarian and Belgian bonds being downgraded?

 

[yield]

So what's the effect of Hungarian and Belgian bonds being downgraded?

Of the two Hungary is the more worrying. Belgium is still pretty strong and the powers that be are pushing for a stable government.
Moody's Downgrades Hungary
NYTimes November 25, 2011

While Hungarian bonds had been trading at levels suggesting investors already treated the debt as junk, Mr. Orban had said Nov. 18 that Hungary would seek “an insurance-type agreement” from the I.M.F. in a last-ditch effort to keep its investment grade.

The Economy Ministry, in a statement cited by Reuters, called the ratings agency’s move the latest in a string of “financial attacks against Hungary.”

The Hungarian downgrade was just one of several to European Union countries. On Friday, Standard & Poor’s cut its rating for Belgium to AA from AA+, still investment grade, but said the outlook was negative. And Fitch Ratings on Thursday cut its rating on Portugal to junk, citing similar concerns about the trajectory of government finances.

Mr. Orban has enacted tough measures, widely described as “unconventional,” to keep the economy afloat. He has nationalized pension funds, imposed new taxes on services and decreed that Hungarians, many of whom borrowed in other currencies to finance their homes during the credit boom, can pay off their foreign-currency-denominated mortgages at artificially favorable rates — at the expense of mortgage lenders.

But those measures, many of which are one-time events, have run afoul of the I.M.F. and European Union, and some of them will probably have to be dismantled as the price of any new deal.

Tathagata Ghose, an economist with Commerzbank, wrote in a research note that the credit downgrade was not unexpected, as the Economy Ministry had itself suggested the action was imminent. “The negative connotation in terms of dwindling foreign capital participation is obvious,” Mr. Ghose said. “But, there could also be a positive outcome: We think that a much needed reversal to the present policy framework may finally be in prospect.”

Things don't look that promising for Hungary.

 

[dennisr]

So what's the effect of Hungarian and Belgian bonds being downgraded?

Saw this posted elsewhere: "Former BBC journalist, David Malone, who blogs as Golem XIV has been saying for a long time that Hungary will be the trigger for a full-scale Euro default, because Austrian banks are stuffed full of toxic Hungarian debt."

His site: http://www.golemxiv.co.uk

 

[Bernie Gunther]

Saw this posted elsewhere: "Former BBC journalist, David Malone, who blogs as Golem XIV has been saying for a long time that Hungary will be the trigger for a full-scale Euro default, because Austrian banks are stuffed full of toxic Hungarian debt."

His site: http://www.golemxiv.co.uk

So now we have almost every aspect of the original sub-prime credit crunch reproduced by the same people who did it the first time and were never punished or even rebuked but instead were allowed to reward themselves with millions in bonuses.

So to summarize, MF Global invested in sub prime. Only this time sub prime bonds not mortgages. It leveraged them hideously, pretended it had off-loaded the risk when it hadn’t and then got caught when the value of the bonds went down and counldn’t pay the debts it had taken on using the bonds as collateral. Sorry to belabour the point but I want you to see how this really is subrpime all over again.

And like the original sub prime it means when one bank goes down it leaves all those to whom it owes money, with their own losses.

source above

 

[Barking_Mad]

Saw this posted elsewhere: "Former BBC journalist, David Malone, who blogs as Golem XIV has been saying for a long time that Hungary will be the trigger for a full-scale Euro default, because Austrian banks are stuffed full of toxic Hungarian debt."

His site: http://www.golemxiv.co.uk

Been reading this blog for a while, seems good from a layman point of view.

 

[Barking_Mad]

*ahem*​

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates

[...]

$7.77 Trillion
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he "wasn’t aware of the magnitude." It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

"TARP at least had some strings attached," says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. "With the Fed programs, there was nothing."
Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed "one of the strongest and most stable major banks in the world." He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.

http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html

 

[Crispy]

source above

Good stuff. Depressing reading

 

[GEN.Eccentric]

*ahem*​

http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html

This info has been atround for a while. Probably on this thread somewhere.I have seen various versions of it elsewhere though. So nice of Bloomberg to 'force the details into the open'.

 

[GEN.Eccentric]

I dunno maybe I am wrong but it sounds familiar... whats the agenda with Bloomberg?

 

[laptop]

I dunno maybe I am wrong but it sounds familiar... whats the agenda with Bloomberg?

Someone there is shorting bank shares?

 

[teqniq]

Good stuff. Depressing reading

Indeed.

I just can't believe the fucked-up stupidity of it all sometimes.

 

[yield]

Excel Breakdown Of All Discount Window Users Between March 2008 - 2009
zerohedge blog. 04/02/2011
only the link to xls format seems to work.

$15,760,004,161,955 in loans.

$15.7 trillion to both US and other nations institutions. Belgian-French Dexia Group and German-Irish Depfa Bank received tens of billions.

I'd like to know how much was repaid? Allegedly most has been but I can't find any reliable information.

Also how many of the mortgages and financial instruments were sold on to Freddie Mac and Fannie Mae or other government agencies?

 

[love detective]

those total numbers are fairly meaningless though - looking through that spreadsheet most of the loans are overnight or day loans which are repeated each day over longish periods of times which gives meaningless total numbers as they don't reflect anything like the actual exposure of the loans made at any point in time

This graph probably shows a better indication of both the total amounts involved and when they peaked & troughed (It's obviously important to show/reveal the extent to which capital relied on state support when it's in trouble, but it's better to do this through a proper analysis that holds up to scrutiny, rather than with stuff that could easily be countered)

 

[Falcon]

American Airlines has filed for bankruptcy, citing "crushing debt caused by high fuel prices". It was the world's largest airline until 2008. (link)

AMR pension plans are $10 billion short of what the carrier owes, and any default could be the largest in U.S. history, government pension insurers estimated.

The slow motion crash unfolds.

 

[Giles]

Sooner or later they are going to have to just give up, cancel all these unpayable debts to each other and start again with simple money and simple rules that governments are not allowed to spend more than they take each year in taxes. Then people would have to either agree to pay more tax, or accept that "the government" can only spend what they give it to spend, and no more. The world would be a simpler and happier place, I think.

Giles..

 

[teqniq]

@ Giles You might do well to read stuff from the link kindly provided by dennisr upthread. In particular this blog post from there goes a great deal towards explaining what's actually going on atm.

 

[gosub]

but that would more likely than not reinforce his view.
Put in a road, bridge, port,dam , blah, blah generates say 5000% return on initial investment over time. Under Giles system, they don't get built.

 

[Crispy]

accept that "the government" can only spend what they give it to spend, and no more.

You wouldn't run a business on such lines. No long-term spending would ever happen.