Global financial system implosion begins

[not-bono-ever]

The mining companies have had a good run, making $ hand over fist during the commodities supercycle. fuck 'em

Unfortunately, they will just cut the jobs at the face- more exploited local labour dispensed with with no compo or support.The management in Zug or whatever canton they have taken as their tax efficent base, will be OK

The interesting ones to watch are the yank based shale companies- they are fucked @ $50 a barrel- many have played fast and loose with their risk management and are unhedged, gambling on a continiuning upward moving oil price. Surely anyoen can see the error in that ?

many are burning through their cash reserves and goodwill to stay afloat, give their production price of more than market rates at the minute

 

[teqniq]

The mining companies have had a good run, making $ hand over fist during the commodities supercycle. fuck 'em...

I was thinking more in terms of the mining stuff going on in Australia and it's subsequent environmental impact that has been feeding the Chinese economy, but after a quick google it turns out that it's been all ending in tears since March this year.

Thanks for the extra info though.

 

[not-bono-ever]

Yup. I have been following the levels of Harley Davidson sales in WA for the past couple of years, as a quick indicator of how well the ore producers are doing - things ave been a bit unhealthy in WA for around 18 months- no one buying HD any more, everyone selling. Pretty sure at the last check, I noticied earlier in the year , there was 1M tonnes of Oz iron ore sitting in Shangahai , with no one to buy it. FE ore topped 100$ a tonne FOB China ,a handful of years go. now the Chinese buyers phones ring off the hook or just get disconnected as an invalid number.

WB estimates even further IO falls- by 40+%

http://www.businessinsider.com.au/world-bank-expect-more-big-falls-in-iron-ore-prices-2015-7

 

[gosub]

A lot of mine vehicles now remote operated by a London based server these days. so harleys may not be such a good indicator these days

 

[yield]

Chinese regulator vows share support after markets tumble 8.5 percent in a day
reuters Mon Jul 27, 2015

China said on Monday it was prepared to buy shares to stabilize the stock market and avert "systemic risks", after major indices plunged more than 8 percent in the biggest one-day fall since 2007.

The securities regulator also said market authorities would deal severely with anyone engaged in the "malicious shorting of stocks", in Beijing's latest attempt to stave off a full-blown market crash.

The "malicious shorting of stocks"? I wonder how far they'll fall?

 

[not-bono-ever]

more significant than the malicious shorting is the mention of systematic risk.

systematic risk. now theres a couple of words that send shivers down central bankers spines.

luckily Fitch are kewl about this. they dont reckon this is likely, the PRC have it all under control

"http://www.fxstreet.com/news/forex-news/article.aspx?storyid=c8536e37-41a5-4c09-a60e-063622f67783"

and the rating houses are never wrong...

 

[not-bono-ever]

Chinese regulator vows share support after markets tumble 8.5 percent in a day
reuters Mon Jul 27, 2015

The "malicious shorting of stocks"? I wonder how far they'll fall?

all
the
fuckin
way


we have no idea really - the opacity of the Chinese setup makes any kind of worthwhile analysis unlikley.

 

[gosub]

http://www.telegraph.co.uk/finance/...-stocks-crash-despite-emergency-measures.html

$1.2 trillion of stock holdings are being carried on margin debt. This is 34pc of the free float of the Shanghai and Shenzhen stock markets.

brokers and trusts have barely 1.6 trillion yuan ($260bn) to absorb losses and may be overrun. “Given the particularly thin front line of the financial institutions, we suspect that it’s a matter of time before banks may have to face the music,” he said.
This in turn risks setting off a “bank run” on the shadow banking system as investors lose trust in wealth management funds, fearing that their deposits in the $2.1 trillion industry no longer have an implicit guarantee.

authorities still have a nuclear trump card up their sleeve. They could cut the reserve requirement ratio (RRR) from 18.5pc all the way down to 5pc ...This would allow the big state banks crank up lending, injecting $2 trillion to $3 trillion into the economy.

 

[yield]

we have no idea really - the opacity of the Chinese setup makes any kind of worthwhile analysis unlikley.

Looks like Chinese GDP figures have been a dream for a while. Thought they were more substantial for ages but I was wrong.

Wondering how much affect the casinos will have on the real economy

 

[not-bono-ever]

What we have to bear in mind us that we are looking at a tip of an iceberg (ish) situation - we can see the indices dropping and can see the attempts at intervention as part of the bubble theatre. What we do not see is the flip side, the massive amount of unregulated short term grey market cash lending that underpins the Chinese system - this should not be overlooked..There is a curious industry of platform based p2p fund matching that falls outside regulation that seems to have been key in amplifying this bubblem

 

[Falcon]

They've dropped the level of savers protection - the amount the government will underwrite in the event your bank collapses - from £85,000 to £75,000. Billed as a consequence of the strengthening pound, it's actually the consequence of the tanking Euro. The tectonic plates of the financial system are moving.

Ron Paul's video on what happens when the nations money system fails is interesting and worth watching all the way through - it's flogging research, and talks about the US economy, but the basics are the basics.

 

[yield]

Now you see it, now you don’t "the first Italian case of bail-in"
by Silvia Merler on 30th July 2015

On the 17th July, the Italian authorities began the liquidation of Banca Romagna Cooperativa (BRC), a small Italian mutual bank that had been in trouble since 2013. In the BRC resolution process, equity and junior debt have been bailed in. The case has passed largely unnoticed abroad, but this is effectively the first instance of a bail-in in Italy.

 

[J Ed]

Now you see it, now you don’t "the first Italian case of bail-in"
by Silvia Merler on 30th July 2015

For anyone else who had to google the term...

 

[gosub]

As a lloyds customer, especially one tied to a southern England account, that moved to Scotland, I am familiar with the term

 

[teqniq]

Whatever fiction will they come up with next?

 

[yield]

Italian youth unemployment rises to its highest level ever
July 31, 2015

Italy’s jobless rate unexpectedly rose in June as businesses continue to dimiss workers amid concerns that the country’s exit from recession may not be sustainable. Youth unemployment jumped to a record-high 44.2 percent.

Emerging market central bankers are getting nervous about their plunging currencies.
July 31, 2015

The biggest decline in emerging-market currencies since the global financial crisis is quickly turning from a welcome event for countries seeking to make their economies more competitive into something destructive.

The sell off has become so swift and so deep that officials are abandoning hands-off policies on concern the drop will fuel inflation, deter investment from foreigners and act as a drag on their economies at a time when global growth is already decelerating. To counter the declines, policy makers from Mexico to South Africa and Turkey have either stepped up intervention, increased interest rates or signalled an end to monetary easing.

 

[not-bono-ever]

That fuck pig Hayes has been found guilty of libor .14 years

The fucking cunt

 

[not-bono-ever]

Would have got 60 in the great satan

 

[laptop]

Would have got 60 in the great satan

Not with a plea bargain. Which he would have done.

 

[extra dry]

http://www.theguardian.com/business/2015/aug/04/rbs-sell-off-george-osborne-defends-1bn-loss

 

[yield]

The real message of plunging commodities
3 Aug 2015

The true message of plunging commodity markets is that the Chinese government wasted $20 trillion worth of credit digging holes to mollify the fallout from the Great Recession of 2007, primarily creating a huge fixed-asset bubble with little economic viability. And then it forced another $1.2 trillion in margin debt to engender a consumption-based economy, primarily by creating a stock-market bubble after the fixed-asset bubble strategy began to fail miserably.

So where does this leave the global economy now? US GDP grew at a meager 1.5 percent in the first half. The second half looks even worse as an organic U.S. slowdown meets cascading global trade. Adding to this malaise, it appears as though the handful of U.S. stocks that have led the rally are finally starting to join the hangover party. For instance, social-media stocks are now crashing harder than commodity prices, with Yelp recently falling 25 percent in one day. The stock is now down nearly 70 percent from a year earlier. Twitter is down 45 percent from its peak last October; and, Facebook shares recently fell 5 percent in after-hours trading after beating earning expectations but disappointing on the number of eyeballs staring at their cellphones checking the "like" box.

But here is the most important take: The arrogance that led the Fed to believe it could save the world in 2008 by manipulating markets is causing Ms. Yellen and Co. to promulgate the idea that it can now raise rates into a global slowdown without negative repercussions.

 

[yield]

http://www.theguardian.com/business/2015/aug/04/rbs-sell-off-george-osborne-defends-1bn-loss

I don't get it? Selling part of the stake in RBS at a loss to boost market confidence? "If not now when" or a fire sale?

Timing seems off to me.

 

[teqniq]

I don't get it? Selling part of the stake in RBS at a loss to boost market confidence? "If not now when" or a fire sale?

Timing seems off to me.

not if you're one of the hedge funds who are the primary buyers

 

[teqniq]

China stuns financial markets by devaluing yuan for second day running

Paul Mason: Capitalism is failing, and it's time to panic – video

 

[yield]

China stuns financial markets by devaluing yuan for second day running

Paul Mason: Capitalism is failing, and it's time to panic – video

The gloves are off.

The competitive currency devaluation or beggar thy neighbour policies.

 

[yield]

Months old article well worth a read.

Central bank prophet fears QE warfare pushing world financial system out of control
Former BIS chief economist warns that QE in Europe is doomed to failure and may draw the region into deeper difficulties
20 Jan 2015

"We are in a world that is dangerously unanchored," said William White, the Swiss-based chairman of the OECD's Review Committee. "We're seeing true currency wars and everybody is doing it, and I have no idea where this is going to end."

He deplores the rush to QE as an "unthinking fashion". Those who argue that the US and the UK are growing faster than Europe because they carried out QE early are confusing "correlation with causality". The Anglo-Saxon pioneers have yet to pay the price. "It ain't over until the fat lady sings. There are serious side-effects building up and we don't know what will happen when they try to reverse what they have done."

The painful irony is that central banks may have brought about exactly what they most feared by trying to keep growth buoyant at all costs, he argues, and not allowing productivity gains to drive down prices gently as occurred in episodes of the 19th century. "They have created so much debt that they may have turned a good deflation into a bad deflation after all."

 

[frogwoman]

The move sent fresh shockwaves through global markets, pushing shares sharply lower and sending commodity prices further into reverse as traders feared the move could also ignite a currency war that would destabilise the world economy.

Um...

 

[teqniq]

Blimey

China devalues yuan for third straight day, adding to fears of currency war

 

[yield]

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

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

There's a new twist in the Austrian bad bank saga.
Forbes 12/08/15

Austria’s province of Carinthia is in trouble again. Followers of the Hypo Alpe Adria (HAA) saga will know that under its erstwhile leader Joerg Haider (who conveniently died in a car crash in 2008) Carinthia’s government guaranteed HAA’s loans, bonds and subordinated debt to the value of about 11bn euros, which is more than 5 times its annual income. These are “deficiency guarantees”, which means they only kick in if the borrower actually defaults.

No date has yet been set for the Austrian constitutional court to deliver its judgment on BaSAG, though it must be delivered before the debt moratorium expires at the end of May 2016. If it overturns it, the EBRRD is in big trouble. Such a decision would make it all but impossible to bail in the creditors of failed banks whose assets are subject to public sector guarantees. And large parts of the European banking system are protected by sovereign and sub-sovereign guarantees.

Unfortunately, though, this might not be sufficient to reinstate the Heta bail-in, which is specifically Austria’s interpretation of the EBRRD. So Austria’s federal government must be fervently praying that the Vienna Commercial Court’s action fails. If it does not, Austria will walk the path previously trodden by Ireland, Spain, Portugal and Greece.

Austria next then? Then who Finland?

 

[Falcon]

Typical trenchant stuff from Kunstler, but a useful restatement of what is obvious to some and less so to others (my emphasis):

Some additional uncomfortable truths should temper the manic fantasies of hypsters like Mauldin. One is that we are no longer in the cheap oil age. All the new oil available now is expensive oil — whether it’s Bakken shale or deep water or arctic oil — and it costs too much for our techno-industrial society to run on. That is why the world financial system is imploding: we can’t borrow enough money from the future to keep this game going, and we can’t pay back the money we’ve already borrowed. We have to get another game going, one consistent with contraction and with much lower energy use. But that is not an acceptable option to the people running things. They are determined to keep the current matrix of rackets going at all costs, and the certain result will be very messy collapse of economies and governments.

"True Believers", Kunstler, 17 August 2015 (link)