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Global financial system implosion begins

Nigerian fraudster spin-off.
Nigerian fintech chief fined $250mn after holdings described as a ‘fiction’ (in FT)
Decision against Dozy Mmobuosi by US court comes after civil complaint by SEC against his Nasdaq-listed companies

Funnily enough Dozy's company Tingo Group Inc has as its president Chris Cleverly - cousin of James Cleverly.
Chris was also accused 3 years ago of a West Ham football club heist involving erstwhile porn supplier to the nation David Sullivan

EXPOSED: Chris Cleverly – the serial fraudster trying to buy West Ham

It has been widely reported that lawyer Chris Cleverly is the key London player in PAI, the company that wishes to buy West Ham and that Cleverly, cousin of Tory high flier James, is colourful. As a diehard hammer I put this article outside paywalls so that supporters of the club, the Ferdinand...
shareprophets.com shareprophets.com

Probably this will be a big boost for James in his Tory leadership bid - his relatives clearly move in the right circles!
 
yield said:
Private Equity Investors Plead for More Clarity on NAV Loans
Bloomberg July 25, 2024. https://archive.ph/e3PIG



There's also a paywalled FT article, that is broken when I try to read it through archive. Subscribe to the Financial Times
Click to expand...
Private Equity’s Favorite Borrowing Tool Sparks Fresh Scrutiny
Bloomberg. September 5, 2024 https://archive.ph/pSbvh
The Bank of England has already warned that it believes NAV financing could hinder financial stability in the UK because of how risky it is for banks. In its June financial stability review, it said such “leverage on leverage” could “expose lenders to risks at the portfolio company level, at the fund level, and at end-investor level.”
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‘Double Whammy’
With its latest inquiry, the BOE is primarily worried that many private equity funds began buying up assets in the heyday of the post-Covid era, when low interest rates pushed up prices. The funds are now using those assets to secure the NAV loans, but private valuations are notoriously opaque and hard to value.
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One note of concern for the PRA is that if the value of these assets in the underlying portfolio has fallen significantly, banks might not know until it’s too late.
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World economy faces pressures similar to 1920s, warns Christine Lagarde
ECB president highlights parallels between two eras but says modern central bankers have tools to manage structural change
FT. September 20 2024 https://archive.is/saaPI
The global economy is facing rifts comparable to the pressures that resulted in “economic nationalism” and a collapse in global trade in the 1920s and ultimately the Great Depression, the president of the European Central Bank has warned.
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“We have faced the worst pandemic since the 1920s, the worst conflict in Europe since the 1940s and the worst energy shock since the 1970s,” said Christine Lagarde on Friday, adding that these disruptions combined with factors such as supply chain problems had permanently changed global economic activity.
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In a speech at the IMF in Washington two days after the Federal Reserve cut interest rates by 50 basis points, pushing US equity markets to record highs, the ECB president argued that several parallels “between the “two twenties — the 1920s and 2020s — stand out”, pointing to “setbacks in global trade integration” and technological advances in both eras.
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The cure is more of the same neo-liberal monetary policies
 
The QE theory of everything
New Statesman. Feb 2024 https://archive.ph/z7HwI
How the $30 trillion quantitative easing experiment reshaped our world – from Brexit to the dominance of Big Tech.

The principle behind QE is that in a crisis, even if interest rates are already at zero, there is another authority capable of setting interest rates: the bond market.
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We may talk about “the stock market”, but most of what’s traded on the world’s financial markets is not shares but debt. Around $130trn in debt is currently being traded. Much of this is bonds, which are agreements to borrow money, pay it back on a certain date, and to pay a regular “coupon” until that date. Bonds are how institutions borrow from financial markets. They’re also traded, and as they’re sold on from investor to investor, their prices and “yield” – the return on owning a bond – change. This yield dictates what prices new bonds can command; the market for old debt sets the price of new borrowing.
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Because governments are the biggest and most reliable borrowers, the most fundamental debt that is traded – and by which the price of everything else is reckoned – is government bonds. If you can manipulate the price of government debt, you can change the price of everything from corporate bonds to stocks to houses and cars.
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QE proposes that because a central bank such as the BoE (owned by the government, but separate from it) can “print” as much money as it likes, it can buy so many government bonds that their prices will go up, which pushes down the yield on that debt: the cost of borrowing for everyone in the market will fall. This is what the Bank of Japan did in March 2001, and the BoE in March 2009.
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This also has another, very significant effect: normally, big investors such as pension funds would pour money into government bonds because they’re safe. But QE lowered the returns on government debt, pushing investment towards other things, such as stocks. “You just have to increase the price of safer assets,” Frances Coppola, who worked in banking for 17 years before writing a book about QE, The Case for People’s Quantitative Easing, explained to me, “and investors will diversify into riskier things.” This combination of cheaper borrowing and more attractive risk, central bankers thought, would increase business investment and stimulate the economy back to growth.
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They were wrong. Not only did QE fail to stimulate growth, but it created inequality of a kind not seen for generations, a polarised politics – and another huge asset bubble.
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$130trillion
 
China Weighs $142 Billion Capital Injection Into Top Banks
Bloomberg News. September 26, 2024 https://archive.is/rZyFa
China is considering injecting up to 1 trillion yuan ($142 billion) of capital into its biggest state banks to increase their capacity to support the struggling economy, according to people familiar with the matter.
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The funding will mainly come from the issuance of new special sovereign bonds, said the people, asking not to be identified discussing a private matter. The details have yet to be finalized and are subject to change, the people added. Such a move would be the first time since the global financial crisis in 2008 that Beijing has injected capital into its big banks.
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They make it up as they go along.............as long as the established economic system says "yea thats valid" its all good.
None of it is actually governed by the reality of producing anything of worth.
 
Markets vulnerable to a sell-off, Bank of England warns
thetimes. Thursday October 03 2024 https://archive.ph/7ivD7
While markets quickly stabilised in August, the warning from the committee, which is responsible for assessing financial stability risks to the UK, suggested investors should not take false comfort from the limited fallout from the sell-off, not least because asset prices still appeared to be detached from reality.
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“Valuations across several asset classes, particularly equities, quickly returned to stretched levels following the episode,” the committee said in its latest quarterly report.
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It cautioned that “measures of equity risk premia [were] close to historical lows in the US, EU, and UK” even after the August turmoil. It said that market contacts had “noted the apparent disconnect between stretched valuations and risks to global growth, as well as the degree of sensitivity to short-term news”. This meant that markets “remained susceptible to a sharp correction”.
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The warning came as intensifying conflict in the Middle East fuelled nervousness among investors, who are trying to second-guess the pace at which central bankers in the UK, the United States and elsewhere will cut interest rates.
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gosub said:

finance.yahoo.com

Stock market today: Wall Street rebounds after Hong Kong stocks fall to worst day since 2008

U.S. stocks rebounded Tuesday after falling oil prices released some of the pressure that built up on the market. The Dow Jones Industrial Average rose 126 points, or 0.3%, and likewise neared its record set last week, while the Nasdaq composite led the way with a 1.4% rally. Wall Street held...
finance.yahoo.com finance.yahoo.com
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Mind you, bit of context for that Chinese drop

1728467398604.png

1728467455737.png
 
pbsmooth said:
Familiar tale but interesting read nonetheless

www.theguardian.com

Slash and burn: is private equity out of control?

The long read: From football clubs to water companies, music catalogues to care homes, private equity has infiltrated almost every facet of modern life in its endless search to maximise profits
www.theguardian.com www.theguardian.com
Click to expand...
Freakonomics did a few good podcasts on that subject too

freakonomics.com

Should You Trust Private Equity to Take Care of Your Dog? - Freakonomics

Should You Trust Private Equity to Take Care of Your Dog? - Freakonomics
freakonomics.com

freakonomics.com

Are Private Equity Firms Plundering the U.S. Economy? - Freakonomics

Are Private Equity Firms Plundering the U.S. Economy? - Freakonomics
freakonomics.com
 
pbsmooth said:
Familiar tale but interesting read nonetheless

www.theguardian.com

Slash and burn: is private equity out of control?

The long read: From football clubs to water companies, music catalogues to care homes, private equity has infiltrated almost every facet of modern life in its endless search to maximise profits
www.theguardian.com www.theguardian.com
Click to expand...
The largest investor in private equity in the world as of 2023 was the Canadian public pension system, which had a private equity exposure of nearly $135bn. This was followed by two Singaporean state-owned investment companies, and two from Abu Dhabi. Rounding out the top 10 were public pension funds from Quebec, the Netherlands and California. “Teachers, firefighters, healthcare workers, and other employees who are part of retirement systems depend on private equity to make the math of their pensions work,” Khajuria asserts in Two and Twenty. The virus isn’t just consuming us – in a very real sense it is us.
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Good article, thanks. They could've gone further, it's not just Private Equity. There's some tipping point, too may extractive institutions.

I'm just finishing Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back by Oliver Bullough. Siegmund Warburg & bearer bonds.

Hope to get Brett Christophers' book 'Our Lives in their Portfolios; Why Asset Managers Own the World'.
 
Chartbook 327 From "anti-core" to "felt inflation": Or how I calmed my populist demons & resolved my cognitive dissonance on inflation, and how the Fed could do more to help.
Adam Tooze
Oct 16, 2024
As Authers explained it back in April on Bloomberg there really is a profound gap between the key measures of inflation which guide macroeconomic policy - headline and core inflation - and the prices that most of us use as our guide to “what things cost” in our everyday lives.
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The crux of the issue for many consumers (explained to Authers by Jean Ergas of Tigress Financial Partners) isn’t headline or core inflation, but food and fuel. As these are exactly the categories excluded from the usual definition of the core, let’s call an index of combined food and fuel the “anti-core.” There’s a reason why central bankers find them useful to exclude, and it’s not because they don’t care; rather, food and fuel tend to be highly variable, and are in many ways beyond the reach of monetary policy. There’s also a reason why people outside central banks tend to care about them a lot. These are things that they have to buy, generally at least once a week, and any change hurts quickly. As Ergas puts it, inflation in these essentials is experienced by many as a further disenfranchisement, as adding insult to injury.

This seems spot on. The price increases for daily necessities have felt insulting.

As Authers continues, “The Bureau of Labor Statistics doesn’t regularly publish a measure for just food and energy. However, they have indexes for both categories stretching back to the late 1950s.” So, the Bloomberg team set to work and compiled their own anti-core index.
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To do so, they focus on the bit of inflation that macroeconomics generally glosses over. Both food and energy have declined as a share of American budgets. But it seems fair to say that they still dominate our everyday perception of what things cost. If we combine them together on the basis not of their share in the overall index, but in terms of their weight relative to each other, this is what the latest release of the Authers anti-core index looks like.
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"beyond the reach of monetary policy."
 
Powell is no Volker and US inflation is not only higher than the massaged figures its going to bite them.

MPC you can get inflation even lower by keeping rates where they are and letting the dollar drop a bit.
 
gosub said:


Quite a good potted history of the Truss mini budget fiasco
Click to expand...
Interesting read, I don’t really understand economics but my two perhaps totally wrong takeaways were:

“Moron risk premium” a lol there but also a good way to explain how the UK was viewed

Whoever gets elected (and yes Truss wasn’t really elected except by a small group of people) is only in power as long as the markets permit, and the markets effectively restrict policy to within their own risk parameters
 
Elpenor said:
Whoever gets elected (and yes Truss wasn’t really elected except by a small group of people) is only in power as long as the markets permit, and the markets effectively restrict policy to within their own risk parameters
Click to expand...
Yet the British government bailed out the banks during the financial crisis in 2008, (RBS still state owned 16 years later) and paid the wages of furloughed workers during the lockdowns.

The state makes the markets or it wouldn't be the lender of last resort.
 
I came across this paper while researching something almost completely unrelated, but I ended up reading it anyway because it’s quite fascinating. Then I thought of this thread.

Couple of quotes from pp 5-6 to give a flavour (my holding)
The analysis of financialization by sociologists like Arrighi and Krippner complements research by Marxist and post-Keynesian economists, who empirically examine the centrality of the financial industry in the US economy. Not only do they confirm Krippner’s thesis that non-financial corporations increasingly derive profits from financial activities. They also suggest that a reverse process is taking place: non-financial firms have increased payments to the financial sector through interest payments, dividends payments and share-buy-backs (Crotty, 2005). This dual movement creates an interesting bind for non-financial corporations, as they end up with limited capital available for productive investment despite increased profits from financial activities (the ‘crowding out’ thesis). An important insight that follows is that financialization has led to ‘a slowdown of accumulation’, a reduced investment in tangible assets, although firm-level data suggest some variation depending on firm size (Orhangazi, 2008). While most scholarship has focused on the USA, research suggests that these processes are also at work in the European political economies (Stockhammer, 2004; Dume ́nil and Le ́vy, 2005; Akkemik and O ̈ zen, forthcoming).
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Accumulation scholars argue that the volatility of asset prices and the accumlation of debt have heightened systemic risk in financialized capitalism, making it prone to reoccurring crisis (Stockhammer, 2012). Drawing on Keynes and Minsky, accumulation scholars explain how increased financial fragility in combination with declining wages has created a growth regime that relies on debt-driven consumption and housing bubbles—‘an enormous superstructure of debt, critically undermining its own liquidity and solvency’ (Lapavitsas, 2009, p. 138). It is therefore not surprising that the subprime mortgage crisis of 2008 has been regarded by accumulation scholars as the culmination of the financialization process, thus rejecting alternative explanations of regulatory failure or investor irrationalities (Blackburn, 2008; Lapavitsas, 2009; Deutschmann, 2011). Internationally, these authors state, the liberalization of capital flows has created imbalances between states that maintain current account surpluses and those that maintain deficits. Particularly in the developing economies, this has led to boom-bust cycles and exchange rate volatility (cf. the essays collected in Epstein, 2005b; Becker et al., 2010; Kaltenbrunner, 2010). Financialization has thus increased the vulnerability of economies worldwide.
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kabbes said:
I came across this paper while researching something almost completely unrelated, but I ended up reading it anyway because it’s quite fascinating. Then I thought of this thread.

Couple of quotes from pp 5-6 to give a flavour (my holding)
Click to expand...
I will read the article - but I always intuted that this word covered such things as privatised railways, buses, rubbish collection, cremation operation, care homes for the elderly and dementia sufferers, and also as we discovered (again) today universities (funded from tuition fees). Then you have student residences provided by private companies for a similar cost to the tuition fees.
This was of course also applicable to the money market funded mortgage system we have now which enocourages buy to let "investment" and has led to a tripling of relative house costs over the last 30 years (whilst housing costs were conveniently removed from the inflation index)

I fear that your article probably deals with a lot of technicalities like share buy backs rather than the day to day British nastiness causing my current grumpiness!
 
kabbes said:
I came across this paper while researching something almost completely unrelated, but I ended up reading it anyway because it’s quite fascinating. Then I thought of this thread.

Couple of quotes from pp 5-6 to give a flavour (my holding)
Click to expand...
Thanks!

The US economic boom is a mirage
Opinion. US presidential election 2024. Ruchir Sharma FT. 04/11/24 https://archive.ph/g6aWg
Discretionary spending is becoming a luxury for the wealthy, and so is optimism. Confidence collapsed during the pandemic and has since recovered much more strongly for the richest third of consumers than for the middle or bottom thirds. The impact of rising wealth on spending is also concentrated among rich consumers, who own most of the assets. This decade, booming financial markets added $51tn to US wealth and while millennials did especially well, virtually all their gains went to rich millennials. To a widening wealth gap between the young and old, add this new source of division and anger within the younger generation.
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Increasingly, America is a gilded economy, with a shiny but thin veneer. In the corporate sphere, the 10 largest companies account for 36 per cent of stock market cap — a peak since the data began in 1980. The most valuable US stock trades for 750 times more than any stock in the bottom quartile — up from just 200 times 10 years ago, and the widest gap since the early 1930s.
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Ken Griffith, bedposts, front running, pfof, short selling, hft, commercial real estate collapse, tech P/e for non tech companies. Pension dipping, rules changing, reporting a mess. Fed privately owned. Big six dragging the index up.
 
Afterburners on zooming sovereign debt supply
LONDON, Nov 8 (Reuters) - Far from soothing anxieties about mounting sovereign debt, the world's biggest economies appear to be doubling down - almost goading bond investors into ratcheting up the cost of the borrowing even as central banks pare back interest rates.

If these fiscal afterburners do spur economies as intended and elevate inflation rates into the bargain, it could well crimp central banks' willingness and ability to ease any debt market indigestion by lowering official rates much further.
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And if that market discomfort starts to look more like a heart attack than trapped wind, central banks may soon be forced to halt the runoff of debt from their bloated balance sheets to stabilize their sovereign patients.

While these may be considerations for next year rather than this, the scene is being set by new and old leaders alike.
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Quantitative tightening may be postponed.

The world faces its worst trade wars since the 1930s
Nov 7th 2024 https://archive.ph/Z2L3T
Donald Trump’s re-election accelerates a crisis for globalisation
Chinese leaders talk a good game about defending free trade, while pursuing resolutely self-interested trade and industrial policies. China could resolve tensions by letting its electric-car makers and other industrial champions open plants overseas and share advanced technologies with foreign partners—following the same model that China imposed on foreign firms as a price for access to Chinese markets.

To date, though, Chinese officials have discouraged such transfers. Your columnist asked a European diplomat in Beijing whether a trade war is inevitable. Coming months will show whether China understands that it must change its ways, was his reply. “Will we achieve that in time? I don’t know,” he admitted. Mr Trump’s victory speeds everything up.
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newme said:
Ken Griffith, bedposts, front running, pfof, short selling, hft, commercial real estate collapse, tech P/e for non tech companies. Pension dipping, rules changing, reporting a mess. Fed privately owned. Big six dragging the index up.
Click to expand...
... We didn't start the fire...
 
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