90 seconds at 9 am: China risk jumps

China braces for extreme financial test, officials rush in emergency support; Greeks vote 'No', Grexit more likely; yields fall; oil and gold lower; NZ$1 = 66.9 US¢, TWI-5 = 71.1

6th Jul 15, 7:06am by David Chaston

Here's my summary of the key issues from over the weekend that affect New Zealand, with news of a crisis brewing in China and a mess in Greece.

China's stock markets face a make-or-break week after their government rolled out a major set of measures over the weekend to prevent an all-out stock market crash. They have frozen new share offers, and brokers there have set up a US$20 bln market-stabilisation fund. These events have shaken China’s aura of invincibility as more than US$2.8 tln in value has been wiped off Chinese share market values in the past twenty days.

Their central bank was also reported to be ready to pump in funds for what is needed to stabilise these financial markets.

It is a very dangerous situation, although Chinese stock markets are not as central to their economy as, say, Wall Street and London are to the economies of the US and Europe.

On top of that, the Greek 'threat' to markets just crystalised. The first official projection of their referendum outcome said more than 60% of Greeks voted “no” to creditors’ demands yesterday, an outcome that would set the country on a collision course with the rest of the euro zone.

One thing is likely though; a 'no' vote won't end or resolve anything. 'Negotiations' are likely to drag on over what it all means. But it does greatly raise the chance there will be a 'Grexit' at some point. A lot will depend on market reactions when they open in New York tonight after their long holiday weekend.

In New York at the end of last week, the UST 10yr benchmark yield fell a little and will open at 2.39%. Local swap rates sank at the short end with the two year rate now below 3% for the first time in two years. The 2-10 curve is approaching 100 bps, something we haven't seen since March 2014.

US oil markets will start the week very much lower with the US benchmark price now just over US$55/barrel, and Brent crude just over US$60/barrel.

The gold price is also slightly lower at US$1,167/oz.

The Kiwi dollar opens today at 66.9 US¢, and that is almost a six year low, at 89.2 AU¢ which is up almost 1c from Friday as the Aussie dollar is taking the full brunt of the Chinese drama, and 60.3 euro cents. The TWI-5 is now at 71.1, itself a three year low.

If you want to catch up with all the local changes on Friday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here »

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42 Comments

by muntijaqi | 6th Jul 15, 7:25am 1436124331

Greece votes dignity.
After cutting 40% pensions and after having to get indebted to pay creditors for loans that a corrupted government signed, the fact that the miserable Troika demands further sacrifices shows what the EU is: a tool to buy peace between Germany and France, a tool to take advantage of once low indebted countries to make them importers of BMW, Mercedes, Porsche, Siemens technology and sofisticated french weapons while destroying industry in South (Greece had a powerful navy industry and so it did Spain, cloths, steel..). A tool to pay german reunification at the expenses of everyone else, a tool to export with a low currency despite having a brutal surplus.

There is no fear, just future.
Well done Greece. I hope Spain, Portugal and Italy are next.

by skudiv | 6th Jul 15, 7:27am 1436124451

It took 60% of Greek voters long enough to realise you can't solve a debt crisis, by adding more debt. The IMF has finally admitted it, though you don't need to be the IMF to work it out either. It does turn out that there was a conspiracy to keep the Greeks in a position that could only make things worse. The troika had been pushing deals upon the Greek government since 2010 that were not designed to help the Greek economy, but designed to extract as much as possible from the Greeks before they defaulted. Naturally the MSM has been onside with the troika, and rubbishing the common sense argument, that adding debt onto debt cant help. The sheer scale of the lying, is sickening. It's taken them a while, but the Greeks worked it out in the end. I thought we would be at this point 4-5 years ago.

by Caleb | 6th Jul 15, 7:51am 1436125897

Always two sides to the coin though.
If the Greeks are going to do it on their own, they will need to change.
Look at the debt the Nz gov has piled on, to keep us happy, will the next govs keep on borrowing..

by muntijaqi | 6th Jul 15, 9:08am 1436130529

"No matter how many times you slap the barman on the corner, he will not create a technology factory"

Greece will need many years to transform their poor economy (they barely export anything) into something with more added value. It always takes time.

At least now they can be free to do so, They just need the will. Until now they have been sacrificing any future to pay past's mistakes while creditors didn't assume any responsibility.

It's not about the level of debt, it's about the capacity to generate wealth. Today Greece has none, tomorrow let's hope they do, for their own sake.

by KH | 6th Jul 15, 9:30am 1436131831

They have had 4000 years to get productive and haven't. And you areshrieking it's Angela's fault .

by Anarkist | 6th Jul 15, 11:07am 1436137668

It depends upon how you choose to define productive. How different is Greece compared to the composition of the New Zealand economy? We export mainly primary products, rely heavily on tourism, and depend upon foreign creditors to lend us money to speculate on housing and build infrastructure to provide amenities for our communities, which adds value to residential property.

"The only businesses thriving in Perama these days are the cafés across from docked vessels in a port that, despite the region’s economic troubles, remains the fifth-largest maritime hub in the world. Greek shipowners enjoy a special tax-exempt status, though last year, after several months of talks with the government, the owners agreed to voluntarily pay increased taxes to aid in the nation’s economic recovery. But the blue-collar workers who once worked in the industry, and who have largely been replaced by overseas workers due to the outsourcing of shipbuilding by Greek companies, have received no assistance from the government due to cuts in public expenditures, including severance pay and unemployment assistance.

Most shipbuilding, the main specialty of Perama’s workers, is now being outsourced to shipyards in China, Korea and Turkey, where labor costs are much lower and minimally regulated. To find jobs, local workers must therefore become migrant workers themselves."
http://www.ibtimes.com/greek-economy-mend-shipbuilding-one-its-oldest-i…

by sadr001 | 6th Jul 15, 7:56am 1436126201

Kinda makes me wish that I could just vote away my mortgage while retaining the asset / benefit that it purchased.

by bw | 6th Jul 15, 8:18am 1436127500

You can! And even better....you will! That is exactly what Greeks did for decades - voted for the good bits and ignored the bad bits. It's what all representative 'democracies' do. Politicians bribe their people with their own money. In fact. No, that's wrong. They bribe their people with other peoples' borrowed money. That's what New Zealand does, anyway. Thats' why we are adding to our mountain of debt as each day passes, as the Greeks did. Lower and lower interest rates and higher and higher national debt. Until....Kaboom....
So keep voting for what suits you ( second person plural, there!) and we, sure as eggs, will end up like Greece. It won't happen overnight....but it will happen....

by sadr001 | 6th Jul 15, 8:26am 1436127969

Excellent food for thought, better leverage up and buy more property in order to maximize the benefit from this voting away debt business.

by bw | 6th Jul 15, 8:48am 1436129311

Ah, yes. The trouble is, debt only gets 'inflated away' if productivity rises ( and so wages) and that is the missing piece of the dream - productivity is falling across the World - even China! The secret of buying assets and leveraging up is....selling them before waking from the dream. Over the last 45 years,many of us have done just that. The trick, is not to be the bunny left with the assets AND the debt when things turn. (NB: That's what all successful dealers do! Buy what they don't need, and sell what they don't have) In effect, that's where Greece is, regardless of today's vote, they have the assets and more debt against them than they are worth. Perhaps that's where New Zealand property is today? - Worth more on a wages basis than the debt that can be sustained for too much longer? As with Greece, time will tell....

by sharetrader | 6th Jul 15, 8:49am 1436129369

The problem we have is we have weak opposition parties so we have ended yup with a weak government. Until that reverses no tough decessions will be made

by tim12 | 6th Jul 15, 9:00am 1436130019

We have a government that is only protecting it's own arse, not looking after the interests of NZ. Selling up NZ assets to China, I'm not sure it's a great idea, here's what Hillary Clinton thinks of them.http://www.bbc.com/news/world-us-canada-33399711

by sadr001 | 6th Jul 15, 9:16am 1436131017

Given that national seems to have wandered over to left wing politics, maybe it is time for a new right wing party. We can use the conservative party as a proxy until a truly right wing party gets set up.

by steven | 6th Jul 15, 10:08am 1436134136

Not a given on National, just an extremist right wing opinion. So what's happened to ACT? Act has what 0.4% of the vote? and that is the best it can do, so its extinct except for a voter base prepared to spned their one vote in a questionable democratic manner. So since the far right has no viable voter base, finances or street cred, lets go and use another party whos main financial backer looks like a fundie Christian but can get 4% of NZers to back them. So the far right's main "user pays" dogma has it seemed utterly failed to produce a political party with even adequate finances let alone healthy, has a policy base virtually no one will vote for, so lets go steal someone else's efforts and $s.

by notaneconomist | 6th Jul 15, 11:32am 1436139125

Lot of selfish people in NZ all sitting on the left bank.....the thing is they stupidly think they can go on spending other people's money without a day of retribution.......and when they find themselves living under Communist rule in the People's Republic of New Zealand they will be the same people who encourage State attacks upon anyone who owned a business or property!!

by bender | 6th Jul 15, 3:48pm 1436154504

Given the revolution by stealth via the top secret TiSA and TPPA, more likely to be the Neocon Subsidiary of the South Pacific.

by Anarkist | 6th Jul 15, 2:30pm 1436149825

Yes well at least the Greeks have Syriza who have refused to bow to German demands to sell off their public assets, unlike our own government who are unabashedly prostrating themselves like good little puppies who want their belly scratched, though apparently they can't quite decide who's fingers to lick. They will eventually learn that one can't have two masters.

Steve Joyce, John Key, are effectively begging for foreigners to buy the Nations assets and to repatriate their profits offshore.

"Economic Development Minister Steven Joyce will present a new foreign investment strategy to the cabinet on Monday that involves partnering with Australia to create “a pipeline of private sector investment opportunities to international investors” aimed at the regions....Gower: So where does this investor come from? What country does this investor come from?

Joyce: We don't have a strong view at all. They can come from America, they can come from Europe, they can come from South East Asia, China, wherever.

Sure. Part of this… Is this about getting China to invest as well, because we know with the QDII2 [Qualified Individual Investor programme to allow individual Chinese citizens to invest offshore], which people won't know about...

Joyce: Not even sure if I do, Paddy.

Gower: Well, this is the unleashing of China's investment; allowing more Chinese to invest offshore. Is that the kind of money that you're looking at rather than go into the housing market.

Joyce: I think you've got to be careful not to be over-focused on China, because they have made some significant investments, and they've been good for New Zealand so far."
http://www.nbr.co.nz/article/joyce-new-push-attract-foreign-investors-1…

by muntijaqi | 6th Jul 15, 9:47am 1436132828

Your comment does not seem to show an understanding of the situation.

You can "vote" away your mortgage any time. But your asset/benefit will go away as well because it was never yours until you pay it all plus interests. Feel free to do so, you'll understand who really owns your home now. Even better, you would wonder how licit/ethic is for a bank to lend you money that they don't own so you can generate wealth through work and pay them interests for such a generous favour.

Greece situation is slightly different as its loan is not for assets, it's to pay old debt. In other words it's to KEEP LENDER's ASSETS.

Greece is in a CLUB called the European Union where all the club members should ensure that nobody is left behind. Otherwise the union must disappear

The problem is that Greece, like Spain, Italy or Portugal have been used and now we start to see the reality of a fraud dressed as European feeling (there is no such a thing).

German and French banks found a gold mine in the low indebted southern economies and they saw an opportunity to lend money. Money that, in case of Germany, didn't even come from German people's saving (they were poor as hell after war and reunification), it came out from thin air through monetary expansion.
East Germany's Mark suddenly went to be worth the same as West Germany's Mark and both were suddenly used as a reference for the Euro. The Euros created to hide a huge hole in Germany's economy were simply printed and used to buy REAL assets in south Europe. Have a look at Construction bubble in Spain, at weapons and technology imports in Greece..

In other words, Germany exported their problems and that helped them develop a powerful industry (can anybody seriously believe that a broken country that decides to reunite can create such an industry in just 10 years without "help" to patch their holes??). Not only that, they were also lending a vast amount of money (that didn't come from their ZERO savings) so other countries could buy their products..

In a game where you can print money and lend it to other countries where their governments are full of corruption and serve your own interests as a creditor I would think it twice before blaming the "lazy borrowers"..

Greece votes NO to any bail out. You know why? because they have finally realized the bail out was never meant to rescue Greeks who have lost their homes and jobs or new generations who have no future. It has always been meant to rescue LENDERS.

This is how deals work. Greece says no, Greece will suffer consequences and they are ready for it, with no fear. Now it's the turn for lenders to face consequences as well and we will see who had more at stake.

Greek government is smart, they rather get kicked out than exit the Euro by themselves because they know their weight in European market is not only equal to their percentage of GDP.

It is precisely Germany who is taking more advantage of the Euro. They export high technology, they erased any competition in southern Europe, they have a brutal surplus but still decide not to increase salaries (and German salaries are not very high and a lot of people suffer there too..) and not to increase imports from other European economies.

Russia, very "generously" has offered help to Greece. We will see what USA must say in all of this and we will see what Obama has to say to Merkel.

by frazz | 6th Jul 15, 9:45am 1436132743

Thanks you muntijaqi, a accurate summary of the Euro debacle. The Greece population have finally woken up to the fact the lenders (mainly Deutsche Bank) are desperate to get their money back, watch the fall out in the coming weeks.

by muntijaqi | 6th Jul 15, 9:58am 1436133514

thanks for reading it :D

by steven | 6th Jul 15, 10:22am 1436134924

Good post

by rastus1 | 6th Jul 15, 11:20am 1436138436

...thanks mate, i found this an interesting read/summary. I dont have the knowledge to consider how accurate it is, seems to make sesne - I'll follow the comments.

by muntijaqi | 6th Jul 15, 12:07pm 1436141276

Glad to read that.

One of the myths commonly used in north Europe and, as I can see overseas as well, is the "generosity" of Germany lending money that comes from German savings to the big southern spenders like Spain, Greece, Italy and Portugal. And that myth must end if we want to analyse the situation in depth.

To break this myth the best is to go to the origin of the debt. Greece has already performed a debt audit. But there is data available from the German economist Juergen Donges (if anybody is interested) that shows the monetary expansion that Germany generated prior the creation of the Euro.

Here there is a short 4 minutes video summary with English subtitles from a Spanish documentary about the Euro fraud.
In the minute 1:40 it talks about the myth that what Germany has lent (and now wants back with interests) didn't come from their savings (there are graphs).

https://www.youtube.com/watch?v=FnSvZKJrY34&index=1&list=PLhlqtV-t8Cbl8…

PS: Here the full documentary with English subtitles if anyone is interested, although it's mainly about the Spanish situation, similar to Greece but slightly different in the way that Greece found already the markets closed and had to look for European's aid while Spain is artificially maintained as a zombie economy enjoying ECB funds injections for banks to buy Spanish public debt, as it's too big to fail (without dragging Germany and France with them) and in order to maintain Spanish corrupt system alive (not good for Spaniards, but quite convenient for central European banks).

https://www.youtube.com/watch?v=09EmW0cxKnM&index=2&list=PLhlqtV-t8Cbl8…

About time some country in Europe puts people ahead markets.

by Roelof | 6th Jul 15, 1:53pm 1436147638

Are u blaming Germany for all this..???
As far as I can tell .... the Greed and dishonesty was/is pervasive...
the Greeks are just as culpable as the germans...
The Banking system itself are probably the worst of the lot.
One of the requirements of being a member of the EU was that a member Govt. had to spend within certain ratios of GDP.... I recall reading that the Greek Govt. .."cooked the books"...
The Greeks are just as much protagonists in their own demise..

"About time some Country in Europe puts people ahead of mkts"
Not sure what u mean by that.... It would be lovely if everybody could simply walk away from their debts.... saying...."hey..I have to put my kids first"...

by puketepapa | 6th Jul 15, 2:17pm 1436149027

cooking the books

Greece cooked the books to get in, and kept cooking the books 2001-2010

by OnwardsUpwards | 6th Jul 15, 2:58pm 1436151539

Yes Greece cooked the books, but who helped them? There in is the root of all the financial problems we face today. And no it wasn't the Nigerians.

by pouggey | 6th Jul 15, 3:38pm 1436153884

Greece didn't actually want to join then - they knew they weren't ready yet and were pretty much forced to join.

by muntijaqi | 6th Jul 15, 5:16pm 1436159768

No..
The first responsible is Greece (and southern European countries) for having such a corrupt systems and for not having kicked them out already like Greece has recently done fortunately for them.

You are right, the previous Greek government cooked the books. In fact they were generously helped by Goldman Sachs:
http://www.spiegel.de/international/europe/greek-debt-crisis-how-goldma…

It was obvious Greece should had never joined EU, but there were many many interests dragging Spain, Italy, Portugal and Greece into the Euro.

But Germany and France have continuously violated European agreements:
http://www.dw.com/en/eu-ready-to-punish-germany-over-deficit/a-1722226
http://www.telegraph.co.uk/news/worldnews/europe/eu/11207721/Why-do-Fra…

European Union is a joke clearly made to benefit economic interests of a few multinationals and especially German and French banks.

Another myth we should talk about is the one that says that "debts have to be always paid". Unless you're a Lannister, if you have studied history you will know that defaulting has been something common always.
So common that even the first sumerian texts were about accounts and forgiven debts.

A debt can be paid or not paid, that's why it carries a risk and that's why it carries a profit for those willing to take the risk.

Greece borrowed and cannot pay. They refuse to accept "conditions" to be able to pay. They rather face the consequences. What is the problem?

Ah yes, the problem is that creditors are not happy. They were happier when lending invented money.

by MortgageBelt | 6th Jul 15, 7:59am 1436126392

Will Tsipras become the new leader of the EU?

by Mike B | 6th Jul 15, 9:09am 1436130548

Politics
Poli is the latin name for "Many"
Ticks are "Bloodsucking Creatures"

by Stephen Hulme | 6th Jul 15, 9:55am 1436133300

The Kiwi dollar opens today at 66.9 US¢, and that is almost a six year low, at 89.2 AU¢ which is up almost 1c from Friday as the Aussie dollar is taking the full brunt of the Chinese drama,..

It will take more than that for the aussies and to some extent ourselves to maintain the trust of the significant trade partner.

Sabre rattling tactics with China's mortal enemy, when it comes to contested Asian waters, are not a recipe for trade reciprocity.

The US and Australia are marking the start of their joint biennial military exercises on Sunday, with Japan joining in for the first time. The drills are being held amid growing tensions over the disputed South China Sea region.

The ‘Talisman Saber’ exercises will last two weeks, with 30,000 US and Australian troops taking part.

There will also be 40 Japanese officers and soldiers taking part, as well as 500 troops from New Zealand. The exercises are taking place in the Northern Territory and Queensland.

Planned operations are being held in the sea, in the air and on land. Read more

by steven | 6th Jul 15, 10:15am 1436134552

Greece, Figures published by the interior ministry showed nearly 62% of those whose ballots had been counted voting "No", against 38% voting "Yes".

http://www.bbc.com/news/world-europe-33403665

http://www.wsj.com/articles/polls-close-in-greek-referendum-1436113280

by antonymouse | 6th Jul 15, 12:08pm 1436141303

This Is Why The Euro Is Finished

http://www.theautomaticearth.com/2015/07/this-is-why-the-euro-is-finish…

by murray86 | 6th Jul 15, 12:29pm 1436142579

The Greek situation is a salient lesson to all. The discussion above talks all around it but doesn't say it directly - the Greeks have got exactly what they asked for, successive corrupt and weak Governments that were open to exploitation by European banks and corporations. Essentially more evidence that the current populist economic model appled by western countries is actually failing the common people.

by puketepapa | 6th Jul 15, 12:41pm 1436143312

Greece. $350 billion is a lot of money.

Yes, some of it is accumulated interest on the original debt.
But, have you ever seen any details of where the original money went and who got it?
Who benefited?

by scarfie | 6th Jul 15, 12:46pm 1436143605

Sorry this is a long one, but I thought it worth posting. I won't mention the source, some if you will undoubtedly know though, for the source is guilty of being alarmist. But I post this because it concurs with the thoughts of economist Richard Duncan, who also talks about liquidity drying up.

Often times I like to write about an event or someone else's article because of the importance to the overall picture. Today I will do something a little different. Below is an e-mail I received last Thursday from a friend. I have the utmost respect for his thought process and his knowledge. The writer is "plugged in" if you will, he has very high and powerful contacts in both China and London while he operates out of North America. The following is chilling to say the least because it comes from someone who "knows", it is not a speculation on his part because he is seeing it real time! I will add my comments afterward.

"I have been pounding the drum for some time about shrinking liquidity and what the impact will be. Well, I can tell you that we are almost there and a real crisis is developing far faster than what I envisioned that is impacting the 75 Trillion Shadow Banking sector which is on the verge of implosion. Focus on Europe as the real crunch will spread like a wildfire from there seizing up all credit markets.

We will ignore China and the BRIC for the time being as to impact and focus on the European Ponzi that the bankers have brought to the table.

The specific area we should keep an eye on is the U.S./bund 10yr yield spread, currently quoted at 155bp. This spread will start taking its lead from the euro, so when that starts to lose favor keep sharp eye out for the next shoe to drop.

Asian shares were very volatile today, Shanghai in particular, trading with a 10% variation (daily low to high) today as PBOC were active again. In Europe we did see small gains intraday in DAX and CAC but neither could hold on and actually closed well into negative territory both down over 1%. UK FTSE never got into the green all day and closed -1.5%. Even seasoned Traders are scared now about intra day swings and being caught in a downdraft at closing. Banks are tightening the leash on trading lines to reduce exposure which is sure to castrate liquidity of bonds.

Credit markets are almost closed, I am being told! I REPEAT again the CREDIT markets are almost closed! Trades are happening by appointment and to even move 1MM EM bonds (at an opening price) is almost impossible. It is not uncommon to hear an indication only to trade and a 2% trade away from from opening, assuming you are able to trade, and desire to trade is no guarantee of a sale. NO ONE is standing up to market prices and to liquidate even a small portfolio can take weeks. It is important that you cannot any longer trade the basis as value is dropping and there no point to partially selling specific bonds unless you can clear a given position! Because once there is a traded price ALL holders of same or similar will have to remark the book. That is unless you are a bank where the Balance Sheet is not a Mark-to-Market approach on a daily basis for the book being held. Think holding government debt at par for the likes of Italy or Spain knowing they can never clear the debt, and knowing that no one will buy at market. So what is the true value of a large portfolio? Do you hang on getting interest while it is still being paid or do you attempt to go to cash? And if you do who is going to step into your shoes ? Especially since the banks are all trying to save cash and want no exposure of any kind. We maybe approaching the point where central banks are losing credibility and their ability to contain the fallout, when governments are so badly in debt they are powerless and rudderless in a sea of chaos.

We are coming very close to complete chaos that will make 2008 look like a walk in the park! We will be fortunate if we make fall without a real financial disaster!

-------------------------------------------------------------------------------------------

Following up from yesterday let's ponder the upcoming Crisis that we are facing that specifically involves bonds, which are the bedrock of the financial system and what the fallout maybe.

Every asset class in the world trades based on the pricing of bonds. So the fact that bonds are in a bubble (perhaps the biggest bubble in financial history), means that EVERY asset class is in a bubble. Everything from real estate to stocks to the buying of cars. Ever wonder why car loans in America exceed the value of the cars in question.

Depending on who you speak with globally there are $75-$100 trillion in bonds in existence today.

A little over a third of this is in the US. About half comes from developed nations outside of the US. And finally, emerging markets make up the remaining 14%.

So whatever the real trillion it is, the size of the bond bubble alone should be enough to give pause. Even to the most aggressive or optimistic folks.

However, when you consider that these bonds are pledged as collateral for other securities (usually over-the-counter derivatives) the full impact of the bond bubble explodes higher to something like $500TRILLION. This affects both banks and the shadow banking industry. No wonder the Bank of England is perplexed as to the shrinking liquidity, it is a problem to which they have no solution.

To put this into perspective, the Credit Default Swap (CDS) market that nearly took down the financial system in 2008 was only a tenth of this ($50-$60 trillion).

And this was at a time when there was QE and other means to throw at the problem which are now spent. So what will be used this round?

This is why the shrinking liquidity in bond sales is even to give real pause and wonder what will come to be as confidence in government wanes, and the shrinking liquidity affects all markets at the same time in different degrees but with a universal discount of value and liquidity, egged on by collapsing derivative trades."

So there you have it. This is something I have been saying for quite some time, we are living in the greatest credit bubble of all time...and it is bursting. It is bursting because liquidity is drying up. The point made regarding the inability to offload bonds speaks to just how small the "exit door" really is in the most crowded trade in all of history! I hope you did not miss what was said about "marking to market". The sale of a measly $1 million worth of bonds at any discount affects the pricing of BILLIONS which then acts as a further liquidity restriction on bank balance sheets.

To this point we have not seen much weakness in U.S. markets BUT we are witnessing the "volume" dry up drastically. This lack of volume also speaks to the size of the exit door. Without volume, how does one sell if they want to? Better yet, without sufficient volume, how does one sell if they HAVE TO or are FORCED TO? In Asia, China's stock market has collapsed over 20% in just three weeks. They are living a real life margin call! What is most humorous to me is China has now instituted rules where stock market margin calls can be met by posting real estate as collateral! Meeting margin with an already margined asset is the recipe for disaster!

Please understand this, "policy" and central banks are doing whatever they can to keep investors away from the exit door because they know there isn't one. Central banks all over the world are "buyers" of nearly all things paper, do we really have "markets"? Anywhere? Let me finish with this, it is written in the Bible "and on the third day He rose again". Here on Earth I believe we will soon find out after credit breaks, "and on the third day ...nothing opened". I truly believe this is possible. I do not believe the Earth can spin more than twice after a true break in the credit markets before a COMPLETE SHUTDOWN will occur. Nothing "paper" will be spared!

by Mike B | 6th Jul 15, 3:51pm 1436154709

I Know what a bond is and i know what equity is.

What i have never understood is why is this

A number of people go broke every year when their businesses fail. The world carries on without noticing.

A number of people go broke because the sharemarket fell. We all must suffer

A number of people go broke because house prices fall. We all must suffer.

A number of people go broke because bonds collapse. We all must suffer.

What is it about "The Market" that one persons greed and foolishness hurts others?

That is what i cannot work out.

Imagine a group of trillionairs and there is a crash. Now they are only billionairs. So what? Why should we be made to suffer?

That i do not understand - Why it has to be this way

by Anarkist | 6th Jul 15, 5:38pm 1436161105

"A number of people go broke because the sharemarket fell. We all must suffer."

Because businesses are typically embedded in small networks with weak links into a wider social network, while the world's stock markets are large hubs in a globe spanning interconnected, economic network and failures in one hub have cascading effects across the network.

Credit allows humans to take advantage of the division of labour and the coordination of economic activity across different periods of time, both present and future. Credit instruments wouldn't work without codified bodies of law dealing with commercial contracts and enforcements mechanism available to sanction those who breach the contract's agreed terms. This inculcates an extra layer of "faith" between the two parties, with greater confidence that the other will abide by their promises.

"...These similarities are striking. An external event strikes. Fear grips the system which, in
consequence, seizes. The resulting collateral damage is wide and deep. Yet the triggering
event is, with hindsight, found to have been rather modest. The flap of a butterfly’s wing in
New York or Guangdong generates a hurricane for the world economy. The dynamics
appear chaotic, mathematically and metaphorically.

These similarities are no coincidence. Both events were manifestations of the behaviour
under stress of a complex, adaptive network. Complex because these networks were a cat’s-
cradle of interconnections, financial and non-financial. Adaptive because behaviour in these
networks was driven by interactions between optimising, but confused, agents. Seizures in
BIS Review 53/2009

the electricity grid, degradation of eco-systems, the spread of epidemics and the
disintegration of the financial system – each is essentially a different branch of the same
network family tree. "

http://www.bis.org/review/r090505e.pdf

by scarfie | 6th Jul 15, 6:09pm 1436162989

What is alarming is that you included house prices in that list, it says there is something very wrong with the house market. What does it say about this website and forum, which is pretty much dedicated to housing?

by waymad | 6th Jul 15, 12:55pm 1436144137

Long way to run in the Greek situation. A summary from an intriguing article from GolemXIV: http://www.golemxiv.co.uk/2015/07/greece-china-russia/

- Russia and China have yet to publicly declare their hands
- Russia and China have yuan convertibility all signed up
- China is gonna go QE big time to dig itself out of various bubbular heffalump traps
- QE needs a Receipient as well as a Printer
- China also has the AIIB and the new Silk Road: the former with money, the latter with an end-point in the Levant/Turkey/Greece??
- Russia has a signed-up gas pipeline deal with Greece that, whodathunk, bypasses Ukraine
- Russia has always viewed the southern outlet to the Med as highly strategic - read George Friedman 'Flashpoints' for a wider view on this. http://www.amazon.com/Flashpoints-Emerging-Crisis-George-Friedman/dp/03…

So we should be able to discern a threefer comin' along here:
- Greece welcomed into the Yuan World/Silk road terminus courtesy of China QE.. 'Just business, no politics'.
- Russia gaining a new gas terminus without having to brutalise anyone (much).
- A massive poke in the eye for the West, the EU, NATO and the balance of power in the Med.

Hey ho....

by murray86 | 6th Jul 15, 12:56pm 1436144176

thus speaketh the Doomsayer! Frightening really. How fares the common man in this? Will the banks still retain the power? Who will act to represent and defend the core of societies?

by Smalltown | 6th Jul 15, 12:58pm 1436144297

Greece situation reminds me of the scene in "Blazing Saddles" movie where the black sherrriff is about to be shot by the all racist townsfolk so he pulls a gun on himself and says "The next man that makes a move, the black guy gets it."

Leaked IMF report (that was tried to be hidden) shows that even with all the austerity, debts would never be paid so the only hope really is debt relief for Greece. http://www.businessinsider.com/eu-warns-of-armageddon-if-greek-voters-r…