Europe & the Global Crisis

A few weeks ago we started reading and hearing reports of big problems in Europe. After Iceland, and the UK, had their problems months back, now Eastern Europe is having trouble paying back loans it took from Western Europe because of currency fluctuations and other reasons.

All things related to Eastern and Western Europe & the Global Crisis that be put here.

Here's an article on Germany's HRE bank and what may or may not happen.

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Berlin - The head of Germany's bank rescue fund warned of catastrophic consequences if ailing Hypo Real Estate (HRE) bank were allowed to collapse, in a newspaper interview published Sunday.

'I'd go so far as to say, if this bank were not rescued it could have worse consequences than the bankruptcy of Lehman Brothers,' Hannes Rehm, the head of the German government's bank bailout agency (SoFFin) told the Frankfurter Allgemeine Sonntagszeitung.

Meanwhile, the third in a series of inconclusive meetings took place Sunday between German government officials and Christopher Flowers, the majority private shareholder of Hypo Real Estate.

A SoFFin spokeswoman told Deutsche Presse-Agentur dpa that no agreement had been reached on the main point of contention - how much control of the ailing mortgage lender the government should get in return for its financial rescue package.

The German government insists on taking complete control of HRE, which has so far benefited from 87 billion euros (112.5 billion dollars) of state guarantees to stay afloat.

Flowers, on the other hand, maintains that a majority of 75 per cent plus one share should give the state all the power it needs to ensure its funds are wisely allocated.

Maintaining a portion of the shares would give Flowers, and the other investors making up 24 per cent of the holdings, the hope of recouping a fraction of their investment in HRE if share prices recover.

Sources involved in the negotiations suggest, however, that Flowers could be convinced to part with his shares for the right price.

Speaking ahead of Sunday's meeting, German Chancellor Angela Merkel repeated her insistence that the government would pay no more than the going market rate for HRE shares.

At close of business Friday, that would have meant 0.87 euros per share.

When Flowers bought his HRE shares, at the start of the global financial crisis, he paid what was then considered to be a paltry 22.5 euros per share.

German Finance Minister Peer Steinbrueck has said he has little sympathy for the New York-based investor, arguing that the taxpayer shouldn't have to pay for risks Flowers had taken. Steinbrueck has turned down Flowers' offer to sell at 3 euros per share.

The mortgage lender urgently needs up to 10 billion euros of additional funding, but the government is dragging its heels over the ratification of plans to grant
further state aid.

HRE is anticipating a huge financial hole in its 2008 balance sheet, while its capital ratio looks set to fall below the 4-per-cent minimum considered viable by Germany's financial regulator (BaFin).

If the balance sheet shows the losses expected, BaFin could give HRE some extra time to sort out its finances while it awaits the outcome of the legislative process, which would free up extra funding.

The government is thought to not have ruled out forcibly expropriating the remaining 24 per cent of shares.

Read more: "German rescue fund head: HRE collapse could be worse than Lehman"

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- http://www.monstersandcritics.com/ne...#ixzz09zZeRMQI

Here is an article on Britain. I'm putting it here.

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Britain showing signs of heading towards 1930s-style depression, says Bank

Britain is showing signs of sliding towards a 1930s-style depression, the Bank of England says today for the first time.

By Edmund Conway, Economics Editor

16 Mar 2009

The country is displaying early symptoms of being trapped in a so-called “debt deflation trap” where families find themselves pushed further and further into the red every month, according to a Bank report published today.

The stark warning will cause serious concerns, since it was this combination of falling prices and soaring debt burdens that plagued the US in the 1930s.

The Bank is using its Quarterly Bulletin to highlight the threat posed to the economy by deflation – where prices fall each year rather than rise.

Although inflation is currently in positive territory, it is expected to become negative in the coming months.

The Bank is worried that this may combine with high levels of indebtedness to squeeze families further.

It says that families with high debts could fall prey to the debt deflation trap. This means that the cost of their debts, which are fixed, would rise compared to average prices throughout the economy. While inflation erodes debts, deflation makes them relatively higher.

The Bank’s paper suggests that Britain is particularly at risk because there is a high proportion of families with significant levels of debt, and many of them are on fixed mortgage rate, which means they will not benefit from rate cuts.

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Link & Entire: Britain showing signs of heading towards 1930s-style depression, says Bank - Telegraph

Paris (France) has always seemed to have more protests, and vandals breaking windows is a small incident.

However.....with the times we are in, is this just media hyperbole, or a sign of things to come in Western and Eastern Europe?

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https://teakdoor.com/images/imported/2009/03/877.jpg Hurt by Economy, Europeans Vent Their Anger

https://teakdoor.com/images/imported/2009/03/880.jpg Jacques Brinon/Associated Press
French employees of the German tire maker Continental burned tires at a demonstration in Paris on Wednesday.


By JULIA WERDIGIER and MATTHEW SALTMARSH
Published: March 25, 2009
LONDON — Tempers are flaring across Europe as the economic pain deepens and more people lose their jobs.
Skip to next paragraph Related

Michel Euler/Associated Press

Just ask Fred Goodwin, the former chief executive of the ailing Royal Bank of Scotland, whose house and car were vandalized early Wednesday. Or Luc Rousselet, the manager of a 3M factory in France, who was barricaded in an office for a second day by workers demanding better severance packages for 110 employees who are being laid off.

While such instances are scattered so far, the angry mood threatens to overshadow the Group of 20 summit meeting next week in London, where world leaders hope to find approaches to the financial crisis.

Several protests are planned in London’s financial district, and the police are warning financial institutions to bolster security, cancel unnecessary meetings and keep employees inside. Bankers are being advised to wear “casual clothing” so they do not attract attention.

“A recession has all sorts of knock-on effects,” said Christopher Husbands, a professor of sociology at the London School of Economics. “Crimes go up, relationships break down and there are instances of civil disturbance.”

A nationwide strike in France last week, which drew at least 1.2 million people, was peaceful. But the government remains worried about an outbreak of violence similar to that last month in Guadeloupe, a French overseas territory, and in Greece in December.

The sense of frustration among those who lost their jobs or savings or a large part of their pension funds is fueled by reports of executives continuing to reap large rewards, as demonstrated by the outrage in the United States over bonuses paid at the American International Group. Europeans have long pointed out that pay packages of top executives in the United States are simply out of whack with the rest of the world, but their hopes of avoiding a public outcry were doused by the latest reports of inflamed local passions.

In Scotland, vandals smashed at least three windows on the ground floor of Mr. Goodwin’s house in an affluent suburb of Edinburgh and damaged a black Mercedes S600 parked in the driveway. Mr. Goodwin was not in the house at the time and no one was hurt, but the incident alarmed Britain’s business community.

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Link & Entire: http://www.nytimes.com/2009/03/26/bu...r.html?_r=1&hp

I wouldn't make too much of the French - going on strike and setting fire to cars is a national pastime.

Britain, on the other hand, is seriously in the shit. On a per capita basis, the bailouts have been bigger than anywhere else in the OECD. To make matters worse, governments - both Labour and Conservative - have allowed/encouraged the complete hollowing out of industry so the country has become ludicrously dependent on the City and on consumer spending. Also, total debt - private, government, and corporate - is now running at something like 500% of GDP. I don't think the future's looking too good there.

This is a steep drop. Declining industrial production and the Eastern European banking issue may mean a tough road ahead.

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June 12 (Bloomberg)

-- European industrial production dropped by the most on record in April as the worldwide recession ravaged demand for goods.

Production in the euro region plunged 21.6 percent from a year earlier, the most since the data series started in 1986, the European Union’s statistics office in Luxembourg said today. Economists expected a 19.8 percent decline, according to the median of 14 estimates in a Bloomberg News survey. From March, output declined 1.9 percent.

The global economy will contract for the first time since World War II this year as the fallout from the financial crisis leads companies to scale back production and run down stocks, the World Bank predicts. The European Central Bank this month kept its benchmark interest rate at a record-low 1 percent and will soon buy bonds in a bid to improve the flow of credit.

“The region has simply been hammered by the downturn in global demand and hampered by the run-up in the euro,” said Peter Dixon, an economist at Commerzbank AG in London. “We see interest rates on hold right through next year. The euro zone has been especially badly hit compared to the more service- oriented economies of the U.K. and the U.S.”

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Link & Entire:
http://www.bloomberg.com/apps/news?p...d=aik2bxsFFvWM[/quote

Good info, MM. BKKAndrew wasn't wrong, was he?

Iceland says goodbye to the Big Mac. 3 stores. No big deal, but it's a small pieces, among many different pieces - symbolic pieces - of the global economic slowodn puzzle.

Link: Iceland says goodbye to the Big Mac - Yahoo! News

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By GUDJON HELGASON and JANE WARDELL, Associated Press Writers Gudjon Helgason And Jane Wardell, Associated Press Writers

REYKJAVIK, Iceland – The Big Mac, long a symbol of globalization, has become the latest victim of this tiny island nation's overexposure to the world financial crisis.

Iceland's three McDonald's restaurants — all in the capital Reykjavik — will close next weekend, as the franchise owner gives in to falling profits caused by the collapse in the Icelandic krona.

"The economic situation has just made it too expensive for us," Magnus Ogmundsson, the managing director of Lyst Hr., McDonald's franchise holder in Iceland, told the Associated Press by telephone on Monday.

Lyst was bound by McDonald's requirement that it import all the goods required for its restaurants — from packaging to meat and cheeses — from Germany.

Costs had doubled over the past year because of the fall in the krona and high import tariffs on imported goods, Ogmundsson said, making it impossible for the company to raise prices further and remain competitive with competitors that use locally sourced produce.

A Big Mac in Reykjavik already retails for 650 krona ($5.29). But the 20 percent increase needed to make a decent profit would have pushed that to 780 krona ($6.36), he said.

That would have made the Icelandic version of the burger the most expensive in the world, a title currently held jointly by Switzerland and Norway where it costs $5.75, according to The Economist magazine's 2009 Big Mac index.

The decision to shutter the Icelandic franchise was taken in agreement with McDonald's Inc., Ogmundsson said, after a review of several months.

McDonald's, the world's largest chain of hamburger fast food restaurants, arrived in Reykjavik in 1993 when the country was on an upward trajectory of wealth and expansion.

The first person to take a bite out of a Big Mac on the island was then Prime Minister David Oddsson. Oddsson went on to become governor of the country's central bank, Sedlabanki, a position that he was forced out of by lawmakers earlier this year after a public outcry about his inability to prevent the financial crisis.

Lyst plans to reopen the stores under a new brand name, Metro, using locally sourced materials and produce and retaining the franchise's current 90-strong staff.

Ogmundsson said it was unlikely that Lyst would ever seek to regain the McDonald's franchise with Iceland still struggling to get back on its feet after the credit crisis crippled its overweight banking system, damaging the rest of its economy, last October.

"I don't think anything will happen that will change the situation in any significant way in the next few years," Ogmundsson said.

It is not the first time that McDonald's, which currently operates in more than 119 countries on six continents, has exited a country. Its one and only restaurant in Barbados closed after just six months in 1996 because of slow sales. In 2002, the company pulled out of seven countries, including Bolivia, that had poor profit margins as part of an international cost-cutting exercise.


AP Business Writer Jane Wardell reported from London.
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I want to know what are the potential ramifications for the EU and/or the Euro, if any?

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Greece is disturbingly close to a debt compound spiral. It is the first developed country on either side of the Atlantic to push unfunded welfare largesse to the limits of market tolerance.

Euro membership blocks every plausible way out of the crisis, other than EU beggary. This is what happens when a facile political elite signs up to a currency union for reasons of prestige or to snatch windfall gains without understanding the terms of its Faustian contract.

When the European Central Bank's Jean-Claude Trichet said last week that certain sinners on the edges of the eurozone were "very close to losing their credibility", everybody knew he meant Greece.

The interest spread between 10-year Greek bonds and German bunds has jumped to 178 basis points. Greek debt has decoupled from Italian debt. Athens can no longer hide behind others in EMU's soft South.

"As far as the bond vigilantes are concerned, the Bat-Signal is up for Greece," said Francesco Garzarelli in a Goldman Sachs client note, Tremors at the EMU Periphery.

The newly-elected Hellenic Socialists (PASOK) of George Papandreou confess that the budget deficit will be more than 12pc of GDP this year, four times the original claim of the last lot. After campaigning on extra spending, it will have to do the exact opposite. "We need to save the country from bankruptcy," he said.

Good luck. Communist-led shipyard workers have already clashed violently with police. Some 200 anarchists were arrested in Athens last week after they torched streets of cars in a tear gas battle.

Mr Papandreou has mooted a pay freeze for state workers earning more than €2,000 a month. This has already set off an internal party revolt. "There is enormous denial," said Lars Christensen, emerging markets chief at Danske Bank. "They don't seem to understand that very serious austerity measures are needed. It is a striking contrast with Ireland," he said.

Brussels says Greece's public debt will rise from 99pc of GDP in 2008 to 135pc by 2011, without drastic cuts. Athens has been shortening debt maturities to trim costs, storing up a roll-over crisis next year. Some €18bn comes due in the second quarter of 2010 (IMF).

Modern economies have reached such debt levels before, and survived, but never in the circumstances facing Greece. "They can't devalue: they can't print money," said Mr Christensen.

The tourist trade is withering, down 20pc last season by revenue. Turkey was up. It is hard to pin down how much is a currency effect, but clearly Greece has priced itself out of the Club Med market. Wages rose a staggering 12pc in the 2008-2009 pay-round alone (IMF data), suicidal in a Teutonic currency union. Greece has slipped to 71st in the competitiveness index of the World Economic Forum, behind Egypt and Botswana.

Greece has long been skating on thin ice. The current account deficit hit 14.5pc of GDP in 2008. External debt has reached 144p (IMF). Eurozone creditors – German banks? – hold €200bn of Greek debt.

A warning from Bank of Greece that lenders must wean themselves off the ECB's emergency funding has brought matters to a head. Default insurance on Greek debt jumped 40 basis points last week.

Greek banks have borrowed €40bn from the ECB at 1pc, playing the "yield curve" by purchasing state bonds. This EU subsidy has made up for losses on property, shipping, and Balkan woes.

The banks insist that they are in rude good health. EFG Eurobank has halved reliance on ECB funding. "Greek banks are very liquid: we maintain billions in extra liquidity," it said. Yet markets are wary. Recession has come late to Greece, but will bite deep in 2010. It takes three years for defaults to peak once the cycle turns.

David Marsh, author of The Euro: The Politics of The New Global Currency, said the danger for EMU laggards is that the ECB will begin to tighten before they are out of trouble. It is German recovery that threatens to stretch the North-South divide towards breaking point.

Athens squandered its euro windfall. For a decade, EMU let Greece borrow at almost the same cost as Germany. It was a heaven-sent chance to whittle down debt. Instead, the country dug itself deeper into a hole by running budget deficits near 5pc of GDP at the top of the boom.

Like Labour under Brown, idiot leaders mistook a bubble for their own skill. But the consequences in EMU are more dreadful. Austerity may prove self-defeating, without the cure of devaluation. Greece risks grinding deeper into slump.

The EU can paper over this by transfering large sums of money to Greece. But will Berlin, Paris – and London, also on the hook – feel obliged to bail out a country that has so flagrantly violated the rules of the club, not least by holding Eastern Europe's EU entry to ransom over Cyprus? That is neither forgotten, nor forgiven.

During the panic last February, German finance minister Peer Steinbruck promised to rescue any eurozone state in dire trouble. He is no longer in office. The pledge was, in any case, a bounced political cheque even when he wrote it. Greece can assume nothing.

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http://www.telegraph.co.uk/finance/comme....

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Originally Posted by Milkman

Iceland's three McDonald's restaurants — all in the capital Reykjavik — will close next weekend

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Every cloud has a silver lining.

Greece has been in the news for some time b/c of this issue.

I've also read about the USA and the UK Aaa bond ratings today....

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Greece (FT) -- Greece saw its credit ratings downgraded to the lowest level in the eurozone on Tuesday as fears mounted over its deteriorating public finances.

Heavy selling of Greek stocks and bonds came amid fears that the country was heading for financial disaster unless politicians tackled dangerously high debt levels. Shares on the Athens stock exchange fell more than 6 per cent.
Fitch cut ratings on Greek debt to BBB plus with a negative outlook. It is the first time in 10 years a leading ratings agency has given Greece a rating of below A grade.


George Papaconstantinou, Greek finance minister, said the country would do "whatever is required" to reduce a record budget deficit and achieve its medium-term fiscal targets.


He said the downgrade reflected Greece's "mounting credibility gap in recent years and an exceptionally difficult fiscal situation" faced by the new Socialist government, which took over in October.


Fitch said the downgrade "reflects concerns over the medium-term outlook for public finances, given the weak credibility of fiscal institutions and the policy framework in Greece, exacerbated by uncertainty over the prospects for a balanced and sustained economic recovery".

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Link & Entire: Greece downgraded over high debt - CNN.com

Not looking too rosy in Greece is it?

Did anybody catch the latest term for grouping together the names of the Euro countries that are most in the shit?

Portugal, Ireland, Greece and Spain....

PIGS :rofl:

UK should be in that group by rights though :-(

Did Hedge funds conspire to devalue the Euro?

YouTube - Gerald Celente - Greece Hedge Fund Crisis Being Used to Deflect What is Really Going On

Jim Rogers on Greece and the EU.

Good clip.

https://www.youtube.com/watch?v=QjNzQlbLCM8

hum, quite an interesting take

so we should let Greece fail and default ? I have to admit, I wouldn't mind that :)

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Originally Posted by Butterfly

so we should let Greece fail and default ?

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Yes, lets get the bad debt out of the sytem and transfer power from those who were reckless with money they didn't have and replace them with people who are fit for the job.

Stop with the "extend and pretend" scenario of bailouts and bullshit that world central banks and governments seem addicted to.

What is the point of trying to keep Greece from defaulting?

It would be more waste of taxpyer EU money.

A minute and a half update on Greece.

Painful measure to be taken in Greece. I expect more protests.

https://www.youtube.com/watch?v=BIf-d...layer_embedded

Any new insights from your board members in Europe?

Clarke and Dawe - European Debt Crisis - YouTube

On the recent ECB decision to launch this QE.

2015: The global economy's 'sink or swim' moment
By Alanna Petroff @AlannaPetroff January 24, 2015

2015: The global economy's 'sink or swim' moment - Jan. 24, 2015

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Both Carney and Coeure recognized that central bank stimulus measures tend to benefit people who already have investments and assets, while hurting everyday savers.

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The Old Boys Club looking after themselves.

https://teakdoor.com/images/imported/2015/01/2288.jpg

Guys like him abound..... follow the populist vote and just like a dog chasing a car, when the car stops , realises he cannot drive. Let’s see how he learns fast !

So, the Greece that cooked up a set of bullshit books to get into the Euro have now thrown the books out of the window and said bollocks.

Only a country could get away with that.:confused:

Nobody seems to be complaining about Iceland these days, although they reneged on debts and threw some of the bankers in jail. Could it be because they're doing ok?

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Originally Posted by Begbie

Nobody seems to be complaining about Iceland these days, although they reneged on debts and threw some of the bankers in jail. Could it be because they're doing ok?

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It's probably because they're too small to matter.

What global crisis?

Europe and the people without a history.

What happened to Barbara? Not been online since September?

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Originally Posted by Gerbil

What happened to Barbara? Not been online since September?

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...took off to Latin America somewhere - teaching.

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Originally Posted by Kurgen

So, the Greece that cooked up a set of bullshit books to get into the Euro have now thrown the books out of the window and said bollocks.

Only a country could get away with that.:confused:

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Old crooks are out

Greece opted for a new bunch of leaders

Let's see if they can rid the country of some of the corruption

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Originally Posted by Kurgen

So, the Greece that cooked up a set of bullshit books to get into the Euro have now thrown the books out of the window and said bollocks.

Only a country could get away with that.:confused:

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:)It's OK if Goldman-Sachs stands beside you

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Originally Posted by helge

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Originally Posted by Kurgen

So, the Greece that cooked up a set of bullshit books to get into the Euro have now thrown the books out of the window and said bollocks.

Only a country could get away with that.:confused:

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:)It's OK if Goldman-Sachs stands beside you

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...and they were bailed out buy a government that is broke.

:)

Only by textbook definition, did the last "Recession" end. It has not ended for most. The next world and European issue.....


World faces wave of epic debt defaults, fears central bank veteran

Exclusive: Situation worse than it was in 2007, says chairman of the OECD's review committee

The next task awaiting the global authorities is how to manage debt write-offs without setting off a political storm

Ambrose Evans-Pritchard By Ambrose Evans-Pritchard, in Davo

The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, a leading monetary theorist has warned.

"The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up," said William White, the Swiss-based chairman of the OECD's review committee and former chief economist of the Bank for International Settlements (BIS).

"Emerging markets were part of the solution after the Lehman crisis. Now they are part of the problem, too." William White, OECD

"Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief," he said.

"It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something," he told The Telegraph on the eve of the World Economic Forum in Davos.

"The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly. Debt jubilees have been going on for 5,000 years, as far back as the Sumerians."

The next task awaiting the global authorities is how to manage debt write-offs - and therefore a massive reordering of winners and losers in society - without setting off a political storm.

Mr White said Europe's creditors are likely to face some of the biggest haircuts. European banks have already admitted to $1 trillion of non-performing loans: they are heavily exposed to emerging markets and are almost certainly rolling over further bad debts that have never been disclosed.

The European banking system may have to be recapitalized on a scale yet unimagined, and new "bail-in" rules mean that any deposit holder above the guarantee of €100,000 will have to help pay for it.

The warnings have special resonance since Mr White was one of the very few voices in the central banking fraternity who stated loudly and clearly between 2005 and 2008 that Western finance was riding for a fall, and that the global economy was susceptible to a violent crisis.

Mr White said stimulus from quantitative easing and zero rates by the big central banks after the Lehman crisis leaked out across east Asia and emerging markets, stoking credit bubbles and a surge in dollar borrowing that was hard to control in a world of free capital flows.

The result is that these countries have now been drawn into the morass as well. Combined public and private debt has surged to all-time highs to 185pc of GDP in emerging markets and to 265pc of GDP in the OECD club, both up by 35 percentage points since the top of the last credit cycle in 2007.

"Emerging markets were part of the solution after the Lehman crisis. Now they are part of the problem too," Mr White said.

Mr White, who also chief author of G30's recent report on the post-crisis future of central banking, said it is impossible know what the trigger will be for the next crisis since the global system has lost its anchor and is inherently prone to breakdown.

A Chinese devaluation clearly has the potential to metastasize. "Every major country is engaged in currency wars even though they insist that QE has nothing to do with competitive depreciation. They have all been playing the game except for China - so far - and it is a zero-sum game. China could really up the ante."

Mr White said QE and easy money policies by the US Federal Reserve and its peers have had the effect of bringing spending forward from the future in what is known as "inter-temporal smoothing". It becomes a toxic addiction over time and ultimately loses traction. In the end, the future catches up with you. "By definition, this means you cannot spend the money tomorrow," he said.

Federal Reserve

A reflex of "asymmetry" began when the Fed injected too much stimulus to prevent a purge after the 1987 crash. The authorities have since allowed each boom to run its course - thinking they could safely clean up later - while responding to each shock with alacrity. The BIS critique is that this has led to a perpetual easing bias, with interest rates falling ever further below their "Wicksellian natural rate" with each credit cycle.

"It was always dangerous to rely on central banks to sort out a solvency problem ... It is a recipe for disorder, and now we are hitting the limit."
William White, OECD

The error was compounded in the 1990s when China and eastern Europe suddenly joined the global economy, flooding the world with cheap exports in a "positive supply shock". Falling prices of manufactured goods masked the rampant asset inflation that was building up. "Policy makers were seduced into inaction by a set of comforting beliefs, all of which we now see were false. They believed that if inflation was under control, all was well," he said.

In retrospect, central banks should have let the benign deflation of this (temporary) phase of globalisation run its course. By stoking debt bubbles, they have instead incubated what may prove to be a more malign variant, a classic 1930s-style "Fisherite" debt-deflation.

Mr White said the Fed is now in a horrible quandary as it tries to extract itself from QE and right the ship again. "It is a debt trap. Things are so bad that there is no right answer. If they raise rates it'll be nasty. If they don't raise rates, it just makes matters worse," he said.

There is no easy way out of this tangle. But Mr White said it would be a good start for governments to stop depending on central banks to do their dirty work. They should return to fiscal primacy - call it Keynesian, if you wish - and launch an investment blitz on infrastructure that pays for itself through higher growth.
"It was always dangerous to rely on central banks to sort out a solvency problem when all they can do is tackle liquidity problems. It is a recipe for disorder, and now we are hitting the limit," he said.

World faces wave of epic debt defaults, fears central bank veteran - Telegraph

Yes but what does the pessimist barbaro/milkman/snaff/blackfart think?

Oh that's right, you can't can you?

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Originally Posted by chassamui

Yes but what does the pessimist barbaro/milkman/snaff/blackfart think?

Oh that's right, you can't can you?

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Members who are unable - unable - to have an opinion b/c of his/her lack of knowledge are encouraged to post elsewhere.

Fears over new financial crisis come back to haunt global markets as trading turmoil hits

Anxiety over negative central bank interest rates and new bail-in laws send banking stocks spiralling in a turbulent day of trading

By Mehreen Khan

08 Feb 2016

Global stocks were gripped by a fresh bout of panic selling on Monday, raising fears over the health of the world's banking system for the first time since the financial crisis.

European markets slumped to their lowest level in more than two years amid an unremittingly bleak outlook for the global economy and concerns over the resilience of the world's biggest lenders.

The Euro Stoxx 600 index of leading bank shares fell as much as 6pc in Monday's trading, closing down 5.6pc, plumbing depths not seen since August 2012. The continent's lenders have now lost 17.3pc of their value of the last 30 days.

Volatility forced shares in Barclays to be briefly suspended in late afternoon trading. Barclays, along with BNP Paribas and ING Santander all closed down more than

https://teakdoor.com/images/imported/2016/02/410.jpg

Deutsche Bank was world's biggest bank faller, with its shares down as much as 11.8pc. Germany's largest lender, which posted a record loss in 2015, closed down 9.5pc on the day, and has seen 40pc of its market capitalisation wiped off since the start of the year. Its shares are now down to their lowest ever level at €13.82 per share.

[​IMG]
Deutsche Bank headquarters in Frankfurt

The losses helped push down all Europe's major indices into the red. The FTSE 100 fell 2.7pc, closing below the 5700 mark for the first time since January 20. Germany's Dax and France's CAC Index both declined 3.3pc and 3.2pc respectively.

Greece's battered Athens Stock Exchange saw its market capitalisation collapse to levels last seen in 1990.

Banks bore the brunt of the sell-off as the "ugly spectre" of negative interests rates in two of the world's three largest central banks - Europe and Japan - was spooking investors, said Jasper Lawler at CMC Markets.

The Bank of Japan joined the negative interest rate club at the end of January. Japan, along with Denmark, Sweden, Switzerland and the eurozone are effectively penalising commercial banks for holding reserves at the central bank.

Negative rates, coupled with weak earnings growth in some of the world's largest lenders, and concerns over new EU "bail-in" laws designed to force investors to take the hit from bankruptcies, all weighed on bank shares.

"Investors have significantly reassessed the chance of an earnings turnaround after years of regulatory fines for past misdeeds", said Mr Lawler.

Risk-off sentiment dominated in a turbulent day of trading, as safe haven flows pushed yields on government bonds to fresh lows.

Germany's two-year bund fell to its lowest ever level at -0.506pc, while 10-year UK gilts declined 13 basis points to 1.43pc - their lowest level since February 2015.

Bearish sentiment was driven by perennial concerns over the health of the Chinese economy, a strong US dollar, and fears over insipid global growth in 2016.

[​IMG]

"We struggle to remember many occasions when investor sentiment was quite as bearish and widespread as it feels today", said Graham Secker at Morgan Stanley.

"Sure, 2008 was worse as the global financial crisis and fears of global depression created panic in markets, but today's cool disdain for risk assets still takes some beating."

The cost of insuring against default for investment grade bank debt rose to its highest level since 2013 to 119 basis points.

“Putting on a trade at the moment would feel like standing in front of an oncoming freight train,” said Juan Esteban Valencia at Societe Generale.

“There are too many issues to worry about, whether it’s oil, China’s slowdown, emerging markets or bank exposures to emerging markets and commodities.”


http://www.telegraph.co.uk/finance/....g-turmoil.html

Worth following:

Euro 'house of cards' to collapse, warns ECB prophet

16 October 2016 •
The European Central Bank is becoming dangerously over-extended and the whole euro project is unworkable in its current form, the founding architect of the monetary union has warned.

"One day, the house of cards will collapse,” said Professor Otmar Issing, the ECB's first chief economist and a towering figure in the construction of the single currency.

Prof Issing said the euro has been betrayed by politics, lamenting that the experiment went wrong from the beginning and has since degenerated into a fiscal free-for-all that once again masks the festering pathologies.

“Realistically, it will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly," he told the journal Central Banking in a remarkable deconstruction of the project.

Prof Issing has lambasted the European Commission Credit: francois lenoir
The comments are a reminder that the eurozone has not overcome its structural incoherence. A beguiling combination of cheap oil, a cheap euro, quantitative easing and less fiscal austerity have disguised this, but the short-term effects are already fading.

The regime is almost certain to be tested again in the next global downturn, this time starting with higher levels of debt and unemployment, and greater political fatigue.

Prof Issing lambasted the European Commission as a creature of political forces that has given up trying to enforce the rules in any meaningful way. "The moral hazard is overwhelming," he said.

The ECB is now buying corporate bonds that are close to junk, and the haircuts can barely deal with a one-notch credit downgrade
The European Central Bank is on a "slippery slope" and has in his view fatally compromised the system by bailing out bankrupt states in palpable violation of the treaties.

"The Stability and Growth Pact has more or less failed. Market discipline is done away with by ECB interventions. So there is no fiscal control mechanism from markets or politics. This has all the elements to bring disaster for monetary union.

"The no bailout clause is violated every day," he said, dismissing the European Court's approval for bailout measures as simple-minded and ideological.

The ECB has "crossed the Rubicon" and is now in an untenable position, trying to reconcile conflicting roles as banking regulator, Troika enforcer in rescue missions and agent of monetary policy. Its own financial integrity is increasingly in jeopardy.


Prof Issing slammed the first Greek rescue in 2010 Credit: Marko Djurica
The central bank already holds over €1 trillion of bonds bought at "artificially low" or negative yields, implying huge paper losses once interest rates rise again. "An exit from the QE policy is more and more difficult, as the consequences potentially could be disastrous," he said.

"The decline in the quality of eligible collateral is a grave problem. The ECB is now buying corporate bonds that are close to junk, and the haircuts can barely deal with a one-notch credit downgrade. The reputational risk of such actions by a central bank would have been unthinkable in the past," he said.

Cloaking it all is obfuscation, political mendacity and endemic denial. Leaders of the heavily indebted states have misled their voters with soothing bromides, falsely suggesting that some form of fiscal union or debt mutualisation is just around the corner.

Yet there is no chance of political union or the creation of an EU treasury in the forseeable future, which would in any case require a sweeping change to the German constitution - an impossible proposition in the current political climate. The European project must therefore function as a union of sovereign states, or fail.

The Greeks should have been offered generous support, but only after it had restored exchange rate viability by returning to the drachma

Prof Issing slammed the first Greek rescue in 2010 as little more than a bailout for German and French banks, insisting that it would have been far better to eject Greece from the euro as a salutary lesson for all. The Greeks should have been offered generous support, but only after it had restored exchange rate viability by returning to the drachma.

His critique will exasperate those at the ECB and the International Monetary Fund who inherited the crisis, and had to deal with a fast-moving and terrifying situation.

The fear was a chain-reaction reaching Spain and Italy, detonating an uncontrollable financial collapse. This nearly happened on two occasions, and remained a risk until Berlin switched tack and agreed to let the ECB shore up the Spanish and Italian debt markets in 2012.

Many would say the crisis mushroomed precisely because the ECB was unable to act as a lender-of-last resort. Prof Issing and others from the Bundesbank were chiefly responsible for this design flaw.


Jacques Delors' foundation calls for a supranational economic government Credit: Paul Grover
Jacques Delors, the euro's "political" founding father, issued his own candid post-mortem last month on the failings of EMU but disagrees starkly with Prof Issing about the nature of the problem.

His foundation calls for a supranational economic government with debt pooling and an EU treasury, as well as expansionary policies to break out of the "vicious circle" and prevent a second Lost Decade.

"It is essential and urgent: at some point in the future, Europe will be hit by a new economic crisis. We do not know whether this will be in six weeks, six months or six years. But in its current set-up the euro is unlikely to survive that coming crisis," said the Delors report.

Prof Issing is not a German nationalist. He is open to the idea of a genuine United States of Europe built on proper foundations, but has warned repeatedly against trying to force the pace of integration, or to achieve federalism "by the back door".

Such a system would erode the budgetary sovereignty of the member states and violate the principle of no taxation without representation

He decries the latest EU plan for a "fiscal entity" in the Five Presidents' Report, fearing that such move would lead to a rogue plenipotentiary with unbridled powers over sensitive issues of national life, beyond democratic accountability.

Such a system would erode the budgetary sovereignty of the member states and violate the principle of no taxation without representation, forgetting the lessons of the English Civil War and the American Revolution.

Prof Issing said the venture began to go off the rails immediately, though the structural damage was disguised by the financial boom. "There was no speed-up of convergence after 1999 – rather, the opposite. From day one, quite a number of countries started working in the wrong direction."

A string of states let rip with wage rises, brushing aside warnings that this would prove fatal in an irrevocable currency union. "During the first eight years, unit labour costs in Portugal rose by 30pc versus Germany. In the past, the escudo would have devalued by 30pc, and things more or less would be back to where they were."

"Quite a few countries – including Ireland, Italy and Greece – behaved as though they could still devalue their currencies," he said.

The elemental problem is that once a high-debt state has lost 30pc in competitiveness within a fixed exchange system, it is almost impossible to claw back the ground in the sort of deflationary world we face today.

It has become a trap. The whole eurozone structure has acquired a contractionary bias. The deflation is now self-fulling. Prof Issing's purist German ideology has no compelling answer to this.


Euro 'house of cards' to collapse, warns ECB prophet

Digging up dead bodies is illegal.

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Originally Posted by TheDukeofNewcastle

Digging up dead bodies is illegal.

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The c u n t does it all the time.

He's a bit of a thicko.

Easiest just to ignore him.

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Originally Posted by Cold Pizza

The European Central Bank is becoming dangerously over-extended and the whole euro project is unworkable in its current form, the founding architect of the monetary union has warned.

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First RED STAR poster, not even the uopdate was fresh , I thought I'd read it earlier and yes

Euro 'house of cards' to collapse, warns ECB prophet - The Telegraph
The Telegraph - Telegraph Online, Daily Telegraph, Sunday Telegraph - Telegraph › Business
4 days ago - The European Central Bank is becoming dangerously over-extended and the whole euro project is unworkable in its current form, the founding architect of the monetary union has warned. "One day, the house of cards will collapse,” said Professor Otmar Issing, the ECB's first chief ...

Surely A red Star should be a one way ticket through the doors to North Korea

Quote:

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Originally Posted by david44

Surely A red Star should be a one way ticket through the doors to North Korea

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Quote:

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Originally Posted by Cold Pizza

Quote:

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Originally Posted by david44

Surely A red Star should be a one way ticket through the doors to North Korea

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Well david44,

I'll apply for a visa for NK. Let's see what happens.

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