Global financial system implosion begins

[brogdale]

S&P doing its best to rip the aces out of Yanis' hand...

21m ago15:43

S&P: Greek exit would have limited contagion risk
Ratings agency Standard & Poor’s says a Greek exit from the euro would have limited direct contagion frisks for other sovereigns.

S&P credit analyst Moritz Kraemer:

All things considered, we believe that a Grexit would not lead to a degree of direct contagion that would drive other sovereigns out of the euro, not least because the eurozone rescue architecture is more robust than during the last Grexit scare in 2012.

We believe that the financial burden of a Grexit on the remaining 18 eurozone sovereigns would be moderate and absorbed over decades, and we therefore do not expect that a Grexit, by itself, would have significant rating implications for these sovereign.

S&P says there are a number of reasons why the situation is less risky than it would have been in 2012. Reasons include:

• The eurozone now has the European Stability Mechanism (ESM), which can financially support eurozone sovereigns under market pressure following a hypothetical Grexit.

• Greece’s links with financial markets have been sufficiently reduced to make such a direct contagion less likely.

• The disparity between Greek sovereign bond yields and those of other eurozone sovereigns also suggests that investors consider that redenomination risk of other eurozone sovereigns is currently low. Whereas Greek sovereign debt yields have risen in recent months along with uncertainty about Greece’s relationship with its lenders, bond yields of other so-called “periphery” sovereigns (Italy, Ireland, Portugal, and Spain) have fallen to all-time lows.

 

[J Ed]

S&P doing its best to rip the aces out of Yanis' hand...

Surely this is already known and that the real threat of Grexit is that the country might serve as a model to other countries?

 

[yield]

Euro Is One of the Worst Designed Currencies: video
Bloomberg. February 20, 2015

Cobden Partners Co-Founder Gordon Kerr discusses Greece’s debt negotiations and why he says Greece should leave the euro

"They [Greece] don’t have systemically important financial institutions dragging down their economy .. "

"The Central Banks simply don't know the exposures of these big financial institutions."

Good arguments for leaving euro as far as I can tell.

Italy's state will not be an active investor in Monte Paschi - chairman
Reuters Sat Feb 14, 2015

A government stake in Banca Monte dei Paschi di Siena (BMPS.MI) does not mean a bailout of the Italian lender and the state is not expected to become an active shareholder, the bank's chairman said.

The Treasury will take a stake in Italy's third-biggest bank because the coupon on state loans the bank received in 2013 has to be repaid in new shares if it does not report a profit. The Siena-based lender posted a 2014 net loss of 5.34 billion euros (3.95 billion pounds).

Still trying to sort out the mess from 2008

 

[gosub]

http://www.telegraph.co.uk/finance/...s-debt-debacle-stalks-Austrias-Carinthia.html

 

[laptop]

http://www.telegraph.co.uk/finance/...s-debt-debacle-stalks-Austrias-Carinthia.html

The Hypo bonds were underwritten in the boom years before the Lehman crisis by Austria’s populist leader Jorg Haider, then governor of Carinthia, leaving it to a subsequent social democrat team in Klagenfurt to sort out the mess.

That'd be neo-Nazi coke-fiend Jörg Haider who bankrupted Carinthia. Surprise!

 

[yield]

Only mass default will end the world's addiction to debt
As global debt rises off the scale, creditors stand to take a huge hit in a threatened tsunami of defaults
Telegraph. 03 Mar 2015

You might have thought that a financial crisis as serious as that of the past seven years would have ended the world economy’s addiction to debt once and for all. It has not. If anything, the position has grown even worse since the collapse of Lehman Brothers.

According to recent analysis by McKinsey Global Institute, global debt has increased to the tune of $57 trillion, or 17pc, since 2007, with little sign of a slowdown in sight. Much of this growth has been in emerging markets, which were comparatively unaffected by the financial crisis.

Yet even in the developed West, private sector deleveraging has been limited and, in any case, more than outweighed by growing public indebtedness. The combined public sector debt of the G7 economies has grown by 40pc to around 120pc of GDP since the crisis began. There has been no overall deleveraging to speak of.

Then he goes onto China

 

[not-bono-ever]

and speaking of China

http://www.telegraph.co.uk/finance/...vaporates-in-China-as-fiscal-cliff-nears.html

how long can China prolong the credit bubble? its looking like Ireland x 1billion by the look of the article.

 

[yield]

and speaking of China

http://www.telegraph.co.uk/finance/...vaporates-in-China-as-fiscal-cliff-nears.html

how long can China prolong the credit bubble? its looking like Ireland x 1billion by the look of the article.

Chinese exports are getting expensive due to their currency peg to the U$ dollar.

Do they abandon the peg and let all those U$ Treasury bills devalue? Or stick to it and watch their trade surplus decline?

 

[Pickman's model]

and speaking of China

http://www.telegraph.co.uk/finance/...vaporates-in-China-as-fiscal-cliff-nears.html

how long can China prolong the credit bubble? its looking like Ireland x 1billion by the look of the article.

didn't they say that the chinese economy needs to grow by something like 7.5% per year to maintain social peace? and it's not doing that now. if china crashes the political instability we now see in e.g. the middle east and ukraine will seem like a tea party in comparison.

 

[not-bono-ever]

they do refer to social harmony alot in their statements- Premier Li did come out with a number , I think it was 7.25% growth, last year, that was a minimum base line to keep on top of unemployment.( ergo social harmony I spose)

 

[treelover]

http://www.telegraph.co.uk/finance/...s-debt-debacle-stalks-Austrias-Carinthia.html

This is getting bigger and bigger,” said Marc Ostwald from Monument. “They kept kicking the can down the road but it is finally catching up with them, and Heta won’t be the last. There is a whiff of the Irish situation in this story. Carinthia stood as guarantor for debts that it could not possibly cover,” he said. There are many regions that could slide into difficulties, including Belgium's Wallonia, or the Italian region of Sicily.

Sicily, not in a good state even without this new crisis.

 

[yield]

Wasn't sure where to put this maybe in a thread of it's own?

US anger at Britain joining Chinese-led investment bank AIIB
Guardian. Friday 13 March 2015

US statement says of UK membership that it is ‘worried about a trend of constant accommodation’ of China, in a rare public breach in the special relationship

 

[yield]

http://www.telegraph.co.uk/finance/...s-debt-debacle-stalks-Austrias-Carinthia.html

German rescue fund takes over Duesselhyp bank after Heta problems
Reuters Sun Mar 15, 2015

Germany's deposit protection fund is planning to take over the property lender Duesseldorfer Hypothekenbank AG (DuesselHyp), which has run into problems due to its exposure to Austrian lender Hypo Alpe Adria's "bad bank" Heta.

 

[yield]

Europeans defy US to join China-led development bank
FT Tuesday, 17 Mar 2015

France, Germany and Italy have all agreed to follow Britain's lead and join a China-led international development bank, according to European officials, delivering a blow to US efforts to keep leading western countries out of the new institution.

A new new world order. Just like the old old world order?

Debunking $1.4 Trillion Europe Debt Myth in Post-Heta Age
16/03/15

Austria’s decision to burn bondholders of a failed state bank may mean almost 1.3 trillion euros ($1.4 trillion) of euro-area debt once deemed risk-free now comes with a hazard warning.

Why can't Greece dump their odious debts?

 

[DownwardDog]

Why can't Greece dump their odious debts?

Because they want to borrow more money next week.

 

[yield]

Because they want to borrow more money next week.

For sure. Admittedly it's a lot less but while Austria's unwillingness to guarantee the debts, of the province of Carinthia, led to a credit downgrade, but their bond yields are still approaching zero

 

[laptop]

For sure. Admittedly it's a lot less but while Austria's unwillingness to guarantee the debts, of the province of Carinthia, led to a credit downgrade, but their bond yields are still approaching zero

Does that mean the markets think Vienna is lying?

 

[yield]

Does that mean the markets think Vienna is lying?

I don't know laptop. With central banks acting as hedge funds price discovery has become a dirty word.

24 central banks have cut rates in the last three months. Looks like everyone is scared but an alarm is sounding in a deserted room and everyone is ignoring it.

Low rates will trigger civil unrest as central banks lose control - BIS
Telegraph 18 Mar 2015

 

[treelover]

It hasn't in the U.K, unrest that is.

 

[yield]

It hasn't in the U.K, unrest that is.

I didn't expect the riots in 2011.

No risk too big as traders plot escape from negative yields.
Bloomberg. 22/03/15

The insatiable demand for higher-yielding assets from lower-rated issuers is leaving investors prone to sudden losses.

For MFS’s Weisman, the fact that yields for bonds of all types, from the most-creditworthy to the riskiest, are so historically low means that when the selloff finally does happen, it has the potential to be nasty.

The bond market worldwide is more vulnerable to losses than at any time on record, based a metric known as duration, index data compiled by Bank of America show. The risk has ballooned as issuers worldwide took advantage of the decline in borrowing costs to sell more and more longer-term bonds.

“This probably means we end up seeing all these reverse in a very unpleasant fashion,” Weisman said.

Pension funds shun bonds just as Southeast Asia needs them most.
Bloomberg. 23/03/15

“There has been frustration among domestic institutional investors about the falling returns on bonds,” Win Phromphaet, who manages 1.2 trillion baht ($37 billion) as Social Security Office’s head of investment in Bangkok, said in a March 19 interview. “Large investors including SSO must quickly expand our investments in other riskier assets.”

The world's next credit crunch could make 2008 look like a hiccup
Telegraph. 23 Mar 2015

But maybe it’s too quiet. Last week, Ray Dalio, the founder of the $165bn (£110bn) hedge fund Bridgewater Associates, wrote a widely-circulated note warning his clients that the US Federal Reserve risked setting off a 1937-style crash when it starts raising interest rates again.

Then, as now, the central bank had spent years printing money in order to help the American economy recover from the 1929 crash. But the side effect was a stock market bubble, which promptly burst when the Fed prematurely increased rates. Mr Dalio is worried about a repeat performance: “We don’t know - nor does the Fed - exactly how much tightening will knock over the apple cart.”

all via automatic earth

 

[not-bono-ever]

economics= alchemy

Though alchemy has better success rate

 

[Pickman's model]

economics= alchemy

Though alchemy has better success rate

and is more fun for all the family

 

[yield]

Emerging world: Heading for contagious credit crisis?
CNBC 27/03/15

Major emerging markets (EMs) like Brazil and Russia could be at risk of a widespread credit crisis—that could impact the world's financial markets, experts warn.

ING Investment Management warned in March that banks and companies in some emerging markets could topple if their currencies remained under pressure and capital outflows continue.

"This pressure threatens to bring the fundamentally weakest countries into deep economic and political trouble," said M.J. Bakkum, senior emerging markets strategist at ING, in a research note.

"Brazil, Russia and Turkey are the most vulnerable. It is not impossible that serious corporate defaults happen or even that banks fall over in one of these countries. For the first time since 2002, we should consider the risk of contagion in the emerging world, with possibly implications for global financial markets."

I know I've confirmation bias but where is the good news? Bond/debt bubbles, asset bubbles, negative interest rates, overproduction and demand destruction the list goes on.

 

[gosub]

http://www.telegraph.co.uk/finance/...achma-plans-prepares-to-miss-IMF-payment.html

 

[Bernie Gunther]

http://www.telegraph.co.uk/finance/...achma-plans-prepares-to-miss-IMF-payment.html

Given the source (Evans-Prichard) is a PR guy for the most extreme forms of neo-liberalism, one has to wonder about the spin strategy implied in the appearance of these stories.

 

[yield]

Telegraph 14 Apr 2015

The IMF fears a "cascade of disruptive adjustments" as the US Federal Reserve finally pulls the trigger for the first time in eight years, ending an era of cheap and abundant dollar liquidity for the international system.

The atlanticist Ambrose Evans-Pritchard. The crisis is elsewhere never in the states.

Oil-Rich Nations Are Selling Off Their Petrodollar Assets at Record Pace
Bllomberg 13/04/15

“This is the first time in 20 years that OPEC nations will be sucking liquidity out of the market rather than adding to it through investments,” said David Spegel, head of emerging markets sovereign credit research at BNP Paribas SA in London.

Prudential Chief Echoes Dimon Saying Liquidity Is Top Worry
Bloomberg 14/04/15

Prudential Investment Management Chief Executive Officer David Hunt says the No. 1 concern among bond buyers globally is liquidity and its rapid disappearance.

“The biggest worry of the buy side around the world is that there has been a dramatic decline in liquidity from the sell side for many fixed income products,” said Hunt, 53, who heads Prudential Financial Inc.’s investment management unit, which had $934 billion in assets at the end of 2014. “I think it’s a big risk and is one of the unintended consequences” of regulators trying to prevent another financial crisis, he said.

Cant work out if they're just trying to delay the Federal Reserve interest rate hike or if they know something more?

 

[yield]

UK financial trader arrested over 2010 global markets ‘flash crash’
Guardian 22 April 2015
Navinder Singh Sarao, 37, faces extradition to US after allegedly ‘spoofing’ global financial markets by placing £134m of false trades from his Hounslow home

The flash crash happened at 2.45pm on 6 May 2010 – the date of the last general election. Wall Street was concerned about the looming debt crisis in Greece and the Dow Jones index was already down by about 300 points, only for markets to fall further – about 600 points in five minutes.

It was the biggest intra-day decline in Wall Street history, although most of the loss was regained within 20 minutes. There were several theories about its cause, from a single fat-finger trade, to the machinations of high-frequency traders and a computer glitch.

Why do I find it hard to believe that a small company working from a semi-detached house in Hounslow could cause this?

 

[gosub]

UK financial trader arrested over 2010 global markets ‘flash crash’
Guardian 22 April 2015
Navinder Singh Sarao, 37, faces extradition to US after allegedly ‘spoofing’ global financial markets by placing £134m of false trades from his Hounslow home

Why do I find it hard to believe that a small company working from a semi-detached house in Hounslow could cause this?

Who gives a bloke that that £134m credit?

 

[not-bono-ever]

Too much information. Edited

 

[jusali]

UK financial trader arrested over 2010 global markets ‘flash crash’
Guardian 22 April 2015
Navinder Singh Sarao, 37, faces extradition to US after allegedly ‘spoofing’ global financial markets by placing £134m of false trades from his Hounslow home

Why do I find it hard to believe that a small company working from a semi-detached house in Hounslow could cause this?

I know! It makes me wonder
A: about the security of their systems
or
B: it's some kinda stitch up?