Thread: A note of caution for those with deposits in US Banks

A reminder from an Icelander:

"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.

But Butterfly, 8000 miles away, thought this:

Originally Posted by Butterfly

not, they are not. Only a UK branch got fucked, that's hardly EVERY bank in Iceland !!! again making up claims. Another of your extrapolation.

Asian markets were down. Nouriel Roubini is saying this week is going to be a bad one. I'm waiting for the US markets to open.

Mon., Oct. 27, 2008

HONG KONG - Asian stock markets resumed their downward slide Monday, led by a 12 percent plunge in the Philippines, as government rescue measures failed to ease fears that a global recession would be even worse than expected.

Investors were hesitant to wade back into equities, worried a stream of economic data from the U.S. this week could bring more bearish news about the world's largest economy and trigger another round of selling, analysts said.

Link & Entire: Asian stocks renew slide - World business - MSNBC.com

Iceland moved one step closer to the edge of the cliff today, its biggest Kaupthing hf (which was recently nationalised) defaulted on its final chance to pay interest on Samurai bonds in Japan.
The original story broke on the 21st October here and today, the 27th was the last day payment could be made before default. That fact has been curiously hidden in the middle of this page on Bloombergs website here Maybe they dont see it as an important development

^Although it was rejected by the Icelandic Government, many believe that the prevention of withdrawels by account-holders of Nationalised banks 10-days ago constsituted default.

Whatever the semantics, it is true that, as the collapse spreads deeper and wider (today sees Ukeraine get $16BN IMF loan and Hungary next in line), stories that in normal times would be on the front pages the world over now get buried...

Russia begins to refuse credit cards in worsening global financial crisis

Russian businesses have begun to refuse credit cards as the global financial crisis worsens.


Several Moscow city centre restaurants are now refusing to accept cards in a move not seen since Russia's last financial crisis almost a decade ago.

Some automated teller machines at Sberbank, the country's biggest state-owned bank, have also stopped accepting cards from other banks.

Several electronics and mobile phone stores said they no longer accepted credit card purchases.

Over the weekend, Aeroflot, the biggest Russian airline, announced it had stopped taking credit cards payments for flights except from a handful of banks

Continued here:

Russia begins to refuse credit cards in worsening global financial crisis - Telegraph

Ho, hum, I'm getting a bit too good at this predicting thingy...

Austria cancels its bond offering

By David Oakley
Published: October 27 2008 19:21 | Last updated: October 27 2008 19:21


Austria, one of Europe’s stronger economies, cancelled a bond auction on Monday in the latest sign that European governments are facing increasing problems raising debt in the deepening credit crisis.

The difficulties of Austria, which has a triple A credit rating, highlights the extent of the deterioration, which saw benchmark indicators of credit risk such as the iTraxx index hit fresh record wides yesterday.



Austria is the third European country to cancel a bond offering in recent weeks amid growing worries over its exposure to beleaguered eastern European economies such as Hungary.

Hungary, which has been forced to turn to the International Monetary Fund to shore up its crisis-hit economy, also scrapped an auction for short-term government bills after only attracting Ft5bn ($22.5m) in a Ft40bn offering.

From:

FT.com / Capital markets - Austria cancels its bond offering

Personally, I think that Austria is more credit worthy that the USA. Oh, hang on a bit...

From:

Bank of England|Publications|News|2008|Rebuilding Confidence in the Financial System, 28 October 2008

GM today announced a third-quarter loss of $4.2 billion (adjusted, $2.5 billion reported) on revenues of $37 billion while spending $6.9 billion of their lifeblood-like cash on hand. Although initially we thought the big news here was a cash spend of $2.3 billion per month, compared to around $1.1 billion a month in the previous quarter, but the real story is that GM basically acknowledged what we said first last month that bankruptcy is imminent (and we might add, were laughed at by some members of the auto intelligentsia for it) — as close as the end of the year if GM doesn't receive help.

Why is the cash burn rate so important? GM isn't exactly cash rich and needs to have at least $10 billion to operate and currently has around $15.8 billion on hand. This means that if the current trend continues the company will be unable to operate in approximately three months, meaning that they'll have to declare bankruptcy as we previously outlined. GM itself basically admits this themselves saying:

"Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business. Looking into the first two quarters of 2009, even with its planned actions, the company's estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve, it receives substantial proceeds from asset sales, takes more aggressive working capital initiatives, gains access to capital markets and other private sources of funding, receives government funding under one or more current or future programs, or some combination of the foregoing."

To summarize: give us some money or we're going to go bankrupt and the economy will have to grapple with the horror of hundreds of thousands of unemployed workers. Announcement from General Motors below.

From:

Gm: GM Declares Bankruptcy Imminent After $4.2 Billion Third Quarter Loss

AIG reportedly in talks over new bailout
By MarketWatch

Last update: 10:49 a.m. EST Nov. 8, 2008

SAN FRANCISCO (MarketWatch) -- American International Group Inc. reportedly is seeking a new bailout from the U.S. government less than two months after the Federal Reserve came to the insurance giant's rescue with an $85 billion loan, according to a published report.

The Financial Times reported on its Web site late Friday, citing people close to the situation, that AIG executives were in negotiations Friday night with authorities over a plan that could involve a debt-for-equity swap and the government's purchase of mortgage-backed securities from AIG.

The FT said talks might still collapse, but noted that the insurer was pressing for a decision before it posts third-quarter results on Monday.

American International Group Inc. is expected to report third-quarter loss of 90 cents a share, according to analysts surveyed by Thomson Reuters.

Leading industry analysts have said that turmoil in equity and credit markets has been hampering AIG's efforts to sell some of its businesses, a crucial part of the insurer's plan to repay billions of dollars in expensive government loans.

Rival insurers that may be considering bidding for AIG businesses are now facing their own problems as slumping stock prices and wider credit spreads cut into capital, Andrew Kligerman of UBS wrote to investors about a week ago.

That's slowing what investors hoped would be fast asset sales by AIG, possibly preventing the insurer from quickly repaying the Federal Reserve's loan, the analyst wrote.

Wider credit spreads may be triggering more demands for AIG to post collateral to support the credit default swaps it wrote. That likely increases the amount of money the insurer has to borrow from the Fed, which, in turn, means even more asset sales, the analyst explained.

Kligerman said he expected that AIG would take about $25 billion in write-downs on its credit default swap exposures when the insurer reports third-quarter results.

From:

http://www.marketwatch.com/news/stor...6DDE1BD2E55%7D

When will they see that it is simply a black hole, along with the rest of the banking system?

Originally Posted by bkkandrew

When will they see that it is simply a black hole, along with the rest of the banking system?

IMO that's the question surrounding these massive firms that no longer have access to the funds required to operate day to day operations....are US taxpayers just throwing good money after bad? and if (or as it is seeming ever more likely, when) AIG fails, look out below.

If these banks have to borrow money to lend out, what useful purpose do they serve to society? Seems like the whole system evolved to rely on credit in a continuous cycle of borrowing and lending. A bit like the pyramid selling system. The last one left holding the bag looses. Sure, these financial wizards will tell you that they are really smart people with economics degrees and they can make it work. But common sense tells you that its got to peak out sometime. Too bad these financial wizard CEOs are unavailable for comment since they have now retired on multi million dollar bonuses for their handy work.

Originally Posted by Panda

If these banks have to borrow money to lend out, what useful purpose do they serve to society? Seems like the whole system evolved to rely on credit in a continuous cycle of borrowing and lending. A bit like the pyramid selling system. The last one left holding the bag looses.

This is fractional banking.

It allowed the the rise in economic expansion.

A bank has 100,000 in deposits, for example, deposited by customer.

They can have 1/14 (I believe) available for reserves, which is actual cash in the bank.

They can give loans and loans and loans. It's seems to be on paper. Not real money but paper.

The bank gets X% return on $1 for making say, on each 10 separate loans from that $1 dollar in reserves.

Someone can correct me if I'm wrong.

So the bank borrows from another bank who borrows from another bank who borrows from another bank. And none of it, except for a small proportion in the first bank is real money but rather just money represented on paper by some numbers with a $ sign in front of it. They then lend this imaginary money to people who they know cant pay it back. They then package up the bad mortgages and sell them off to other banks as investments. The architects of these deals then retire on multi-million dollar bonuses when the house of cards falls down and the taxpayers are then required to pay for the excesses of those who have siphoned off the cash into their own pockets.

The government believes house prices should remain so high that the sub-prime borrowers cant afford the repayments, so they fund the banks losses and take over the debt by borrowing more money from other countries and lowering interest rates so that people will be encouraged to borrow more money from the banks who don't have any real money left to loan out.

With such "smart, and educated" people in charge we should all be preparing for a real economic meltdown.

^Correct. We have had 15-years of magic money creation by debt leveraging. The next 15-years will be distinguishable by monetary destruction caused by debt deleveraging.

Most people in developed countries will find out they are endebted to a far greater extent than their main (real estate) asset. As Mervyn King said:

House prices are a matter of opinion. The debt is real.

^China have been diversifing their USD reserves quietly for nearly two years now. It is a stated aim of the Chinese State Investment Fund to do exactly that.

Investments have spanned the globe, including the ones that made headlines in Zimbabwe and Burma.

Originally Posted by bkkandrew

^China have been diversifing their USD reserves quietly for nearly two years now. It is a stated aim of the Chinese State Investment Fund to do exactly that.

Investments have spanned the globe, including the ones that made headlines in Zimbabwe and Burma.

Yes China is wise to divest itself of $USs now. I guess they saw it coming.
But the thing is that as one of the USAs main debt holders they dont want to spook the international market and create a stampede. Still, China is going to take a big hit when the $US crunch comes. China is in really deep owning a very large chunk of US debt through trade imbalances and US government bonds aside from business investment.

There is no way China can get rid of all its US debt before he $US collapses so they are going to get skinned. Since all US debt is written in $USs, China will get paid back in the numerical value of $USs at the time of maturity rather than the actual tradable value of goods and services then. It means USA will be paying back the rest of the world and China only about half what they owe them in terms of tradable value of real goods and services. Not a bad scam if you can pull it off. But thats the way the $US hegemony works. And the rest of the world has been silly enough to swallow it for decades. Now its nearly time to pay.

Now its nearly time to pay.

Indeed so and in a manner that not many can imagine.

When Peter Schiff predicted the past two year's events with startling accuracy in 2006 here:



I feel confident in my (much derided) prediction of the imminent coming failure of the banking system (specifically ATM and credit cards) when he states as such in his radio talk show last night.

One article he referred to is available here:

Bloomberg.com

Now then. No CC bond sales = no funds for CC issuing banks = 'computer says no' at the checkout.

I am sure that after my warnings, no member of this site is actually relying on credit card use over the next 2-3 years are they?

^ yeah I predict the banking collapse in the coming century

give it up, bkkandrew, this is just another of your failed predictions. A banking crisis is not a collapse, and you keep claiming the same thing saying tomorrow for the last 3 weeks !!! OwNED !!!

go back to reading your doom newsletter and betting websites, thank you

oh and I almost forgot, you are a fraud

^As I have been proven right every step of the way since before this crisis became mainstream news and you have disagreed at every point, I think the board has made its own mind up on the respecive validities of your opinion and mine.

Total collapse was postponed by the multinational bailouts, NOT cancelled. All the world's Governments have done by bailing has ensure their own severe endebtedness for years to come and in the case of some, such as the USA (and probably the UK), ensured sovereign debt defaults too.

Originally Posted by bkkandrew

think the board has made its own mind up on the respecive validities

yeah everyone pretty much see you as a fraud and a silly doom sayer,

Originally Posted by bkkandrew

I have been proven right every step of the way

Only in your dreams,

Perhaps this is time again for a reminder of facts verses Butterflyworld...

The facts:

Originally Posted by bkkandrew

"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.

While in your world you thought this:

Originally Posted by Butterfly

not, they are not. Only a UK branch got fucked, that's hardly EVERY bank in Iceland !!! again making up claims. Another of your extrapolation.

https://teakdoor.com/us-domestic-issu...tml#post794335

^ yeah, one witness account vs. reality indeed