Credit Suisse says Greece must
raise €30bn (£26bn) in debt by mid-year, mostly in April and May. Greek
banks have been shut out of Europe’s inter-dealer markets, forcing them to
raise money at killer rates. They are suffering an erosion of deposits as
rich Greeks shift money abroad. This could come to a head long before April.
“Economically, we are in a very risky situation. Greece is close to
default. We face systemic risk like the Lehman collapse and unless there is
a bail-out for Greece, there will have to be a bail-out for the whole
European banking system within two or three months,” he said.
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Yet they are damned if they don’t, and damned if they do. “A Greek
bail-out increases the risk of EMU break-up, because monetary union can only
work if everybody sticks to the rules,” Mr Felsenheimer said.
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The Chinese government has been notoriously unsuccessful in its investment strategies. But the real danger comes when the Chinese need the money to shore up their own economy.
China has ordered managers of its vast currency reserves to withdraw from
risky dollar assets and retreat to core debt guaranteed by the US
government, a clear sign that Beijing is battening down the hatches for
fresh trouble on global markets.
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“When the world’s biggest investor turns risk-averse, that is something
you take notice of. We think this could become the new theme for the markets
in the medium-term,” he said.
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The exact motives for China’s shift of strategy are unclear. Analysts say the
authorities may fear that the end of quantitative easing by the US Federal
Reserve could cause risk spreads to widen sharply, triggering heavy losses.
The shift in policy appears unrelated to the US spat with China over Taiwan.
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The move by Beijing comes at a time when China’s current account surplus is
falling. This reduces reserve growth, reducing the supply of global
liquidity.
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Integration and standardisation, the watchword of the European Union project, could turn into disintegration, as local currencies will be found to better serve local needs. Long live the drachma (and the Ithaca Dollar). | Investors have concluded that the probability of a contagious default is rising. They are right. |
| advocates of an IMF-led bail-out conveniently ignore the disastrous signal that this would send to the financial markets about where the eurozone is heading |
| The problem is the lack of a credible endgame. |
| it does not go beyond its ultimate sanction – a fine. Yet what is the point of fining an insolvent state? The endgame is still default – and contagion. |
| And, lest we forget, other European countries might also be vulnerable. Austria could still be drowned by its banking crisis; Belgium has a much higher level of debt than either Spain or Portugal and a financial sector heavily shaken by the global crisis. As worries spread north, serious investors might be tempted to bet serious money on a eurozone break-up. Read more at www.ft.com |
Interest rates will have to go up increasing public debt costs even further, as the value of sterling falls on the currency markets.
The IMF singled out the UK as being at significant risk from the threat of
rising debt interest costs as it absorbs the effects of the financial and
economic crisis. It said that the proportion of UK taxes that will go
towards financing the national debt will, in five years’ time, be double
what it was just before the onset of the crisis.
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It said: “Just the increase in interest spending in the United Kingdom is
about twice annual outlays for environmental protection and is equivalent to
annual spending on public transportation.”
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The surprising bluntness of the warning, which was contained in a broader
document analysing the fiscal situation in a variety of countries, will be
seen as a direct rebuke to Gordon Brown, who repeatedly ignored IMF advice
in previous years to cut the deficit and leave the UK better-placed for
future downturns.
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| debt servicing costs should not surpass
levels seen in the 1980s, they are extremely sensitive to a sudden jump in
interest ratesRead more at www.telegraph.co.uk |
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. |
Secret meetings have already been held by finance ministers and central bank
governors in Russia, China, Japan and Brazil to work on the scheme, which
will mean that oil will no longer be priced in dollars.
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| Brazil has shown interest in collaborating in non-dollar oil payments, along
with India. |
| “The Brits are stuck in the middle and will come into the
euro. They have no choice because they won’t be able to use the US dollar.” |
| The plans, confirmed to The Independent |
| may help to explain the sudden rise in gold prices, |
The pound hit a five month low against the euro today after the Bank of
England raised the prospect of a prolonged fall in the value of sterling
against other currencies as a result of the credit crisis.
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“The financial crisis may have led overseas investors to reasses their
willingness or ability to purchase sterling assets and thereby finance the
UK trade deficit. As a result, the long-run sustainable real sterling
exchange rate … may have fallen.”
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It also said that the Bank’s programme of asset purchases - quantitative
easing - may be having an effect. “Sterling will tend to depreciate if
this policy causes portfolios to be balanced away from UK assets.”
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Paulson elected to let Lehman Brothers — one of Goldman’s
last real competitors — collapse without intervention. |
| In order to qualify for bailout monies,
Goldman announced that it would convert from an investment bank to
a bank-holding company, a move that allows it access not only to
$10 billion in TARP funds, but to a whole galaxy of less
conspicuous, publicly backed funding |
| Converting to a bank-holding company has other benefits as well:
Goldman’s primary supervisor is now the New York Fed, whose
chairman at the time of its announcement was Stephen Friedman, a
former co-chairman of Goldman Sachs. |
| After the oil bubble collapsed last fall,
there was no new bubble to keep things humming — this time,
the money seems to be really gone, like worldwide-depression gone.
So the financial safari has moved elsewhere, and the big game in
the hunt has become the only remaining pool of dumb, unguarded
capital left to feed upon: taxpayer money.Read more at www.rollingstone.com |
| And instead of credit derivatives or oil futures or
mortgage-backed CDOs, the new game in town, the next bubble, is in
carbon credits — a booming trillion- dollar market that
barely even exists yet, but will if the Democratic Party that it
gave $4,452,585 to in the last election manages to push into
existence a groundbreaking new commodities bubble, disguised as an
“environmental plan,” called cap-and-trade. The new carbon-credit
market is a virtual repeat of the commodities-market casino that’s
been kind to Goldman, except it has one delicious new wrinkle: If
the plan goes forward as expected, the rise in prices will be
government-mandated. Goldman won’t even have to rig the game. It
will be rigged in advance.Read more at www.rollingstone.com |
| money has three distinctive features |
| to the extent that it can replace other forms of distribution and exchange, it draws all economic activity into its own ambit. |
| The second distinctive feature of a money economy is that it makes it harder, not easier, to value certain classes of goods. What E.F. Schumacher called primary goods – goods produced directly by nature without human intervention – are perhaps the best examples. Most traditional societies around the world, it bears noticing, have no trouble whatever recognizing the value of primary goods and finding ways to integrate that value into their own systems of exchange. |
| These societies have a gift economy |
| The third distinctive feature of money is subtler, and very often misunderstood. Unlike other systems of distributing goods and services, money functions as a good in its own right, and the right to use it functions as a service. |
| As anticipated by LEAP/E2020 as early as October 2008, on the eve of summer 2009, the question of the US and UK capacity to finance their unbridled public deficits has become the central question of international debates, thus paving the way for these two countries to default on their debt by the end of this summer.
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This evolution is likely to catch large numbers of economic and financial players on the wrong foot who decided to believe in today’s mainstream media operation of “euphorisation”.
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| LEAP/E2020 believes that, instead of « green shoots » |
| what will appear on the horizon is a group of three destructive waves |
1. Wave of massive unemployment: Three different dates of impact according to the countries in America, Europe, Asia, the Middle East and Africa
2. Wave of serial corporate bankruptcies: companies, banks, housing, states, counties, towns
3. Wave of terminal crisis for the US Dollar, US T-Bond and GBP, and the return of inflation
|
| “This is the next stage of the global crisis.” Simon Johnson, former
chief economist of the International Monetary Fund (IMF), is hardly renowned
for hyperbole |
| the mountain of debt that had poisoned the financial system had not
disappeared overnight. Instead, it has been shifted from the private sector
onto the public sector balance sheet. |
| If the first stage of the crisis was the financial implosion and the second
the economic crunch, the third stage – the one heralded by Johnson – is
where governments start to topple under the weight of this debt. |
| If 2008 was
a year of private sector bankruptcies, 2009 and 2010, it goes, will be the
years of government insolvency.
|
| capital markets are unpredictable. As emerging markets – which have
suffered sudden crises as international investors abandoned ship – know to
their cost, creditors can turn on a sixpence. |
| a cause for real concern
in Whitehall |
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Will markets call EU bluff on Greek rescue? - Without Bailout 2.0, it could be Lehman 2.0
