Bernard Hickey details the key news over the weekend in 90 seconds at 9 am in association with Bank of New Zealand, including growing fear the European financial system is approaching a moment of crisis as Greece nears default.
The IMF, the World Bank and various financial leaders all warned of dire financial consequences over the weekend if Europe cannot stop its financial crisis spreading from a Greek default into the core of the Eurozone.
The Telegraph reported that European officials worked frantically over the weekend to formulate a three pronged 'grand plan' to stabilise the European financial system, including a new bigger 2 trillion euro bailout fund, help from the European Central Bank to expand the size of the fund and recapitalisations worth tens of billion euros of struggling European banks, including France's banks.
In theory, Greece would be allowed to default but would stay inside the Euro. This grand plan would then be enacted to create a 'firewall' around the PIGS (Portugal, Ireland, Greece and Spain).
The crisis worsened over the weekend as the IMF and the World Bank warned the European financial system and the world's major economies were entering a "danger zone." Britain and America warned that Europe needed to solve the crisis within 6 weeks or the consequences wouldn't bear thinking about.
"The threat of cascading default, bank runs, and catastrophic risk must be taken off the table," said US Treasury Secretary Timothy Geithner. See more here at Reuters.
Credit Default Swap spreads have worsened to the levels last seen at the time of the Lehman Brothers collapse in 2008 and the copper price, one indicator of industrial activity, has fallen 17% in 10 days, which is a steeper fall than seen during the Lehman crisis. See our interactive chart here of Credit Default Swap spreads for Australasian corporates, a proxy for Australian and New Zealand bank funding costs for longer term bond issues.
Unlike in 2008 when government could still ramp up deficit spending and central banks could cut interest rates, markets are concerned that authorities have either run out of ammunition or don't have the political cohesion to solve the crisis.
Also, this time around, China is not in the same position to drag the world out of the mire with its own spending spree. The Chinese government has been trying to slow its economy over the last year to stop inflation from getting out of control.
It also faces significant problems inside its local governments with non-performing loans made immediately after the Lehman crisis. China spent wildly on infrastructure to keep its economy going after exports to America slumped. It may not be able to perform the same pump priming role again.
The New Zealand dollar was down at 77.4 USc this morning and has slumped in line with lower expectations for global growth and commodity prices.
No chart with that title exists.
58 Comments
Crikey Bernard, that is dark.
AEP on the Greek solution
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/87881…
and the most recommended comment" ... Mr Noyer encapsulates the mixture of stubborness and amour propre now threatening the world with disaster ..."
Now just wait a minute. Disaster for whom exactly?
Who, for Christ's sake, in all of this unmitigated madness being designed to save the necks of the world's financial elites and their politician puppets, is looking out for me and my kids? Ambrose, what the hell are you doing? Who the hell's side are you on?
It's me, my tax-paying citizen peers and my hapless bloody children who are now facing years, nay a decade or two at least, of penury to keep bankers, financiers, politicians and bureaucrats in the style to which they've become accustomed this past 20 or 30 years. This is what is really meant by saving the bloody euro, or saving Greece or saving the banking system.
I couldn't give a stuff if the whole chuffing global banking system collapses overnight and we re-run The Great Depression with bells, whistles and nobs on. At least that way we really are all in it together.
The alternative ... magicking trillions of euros/dollars/sterling whatever-you-name-it-fiat-money out of thin air to keep the bankers and politicos in champagne and limousines ... will result in a Europe-wide revolution, sooner or later.
How else are we supposed to react to being robbed blind for the next 30 years to defend the indefensible? To prop up a ludicrous debt merry-go-round which is spinning in ever-decreasing circles towards it's own reeking arseh*le?
Give me a break. Yes, this has the potential for catastrophe; we know that. But please, Daily Telegraph, don't stand up and argue for the necks of the world's politico-banking mafia and expect me and my kids to pay for it. Don't keep telling me there's going to be a "disaster" if I and my kids don't accept crippling levels of personal taxation to bail out the world's politico-banking mafia. Are you mad?
If this sucker's going down with me in it, then I want the bankers and the politicos and the Brusssels machine coming down with the rest of us citizen serfs. If not - if the bankers and the politicos and the bureaucrats are seen to continue to live in gilded cages from here on in - there's going to be some very serious trouble in Europe over the next 5 - 10 years. Believe me.
Bring on the disaster, I say. Funding the mafia for the next 20 or 30 years will be disaster enough and I, for one, am just not prepared to accept a long, lingering economic death. We might as well get it over with in short order; clear out the system and start again. F**k the euro. F**k the bankers. F**k the politicos.
I am absolutely sick to the back teeth of this. The politicos have totally lost the plot. They deserve everything that's coming to them if my anger is anything to go by ... if half-a-billion citizens turn on the European political class then, thank God, it's going to be curtains for parliaments across the continent. Bring it on. I can't wait.
Rant ends.
A great rant that cuts close to home, and one that identifies the media as being part of the problem.
A cracker rant Colin...I wonder whether the pollies in the cross hairs will try to pay off their police protection in euro.....or gold coins. The summer riots in the UK were but a taste of things to come.
One of the comments following, and regards the journalist (Ambrose Evans Pritchard):
moraymint
"Ambrose, what the hell are you doing? Who the hell's side are you on?"
Ambrose, my good friend, is a wolf in sheep's clothing. His role is to keep the masses focused on his lies, damned lies (of omission - especially so), statistics and damned statistics, while his bankster comrades liquidate our nation-states one-by-one - a theme that I've tried to relate to my fellow commentators here, but seemingly, without much success.
I am somewhat surprised by your (justifiable) anger, as I had thought that you would have had long figured out A.E.P.'s motives by now.
Now ..that's a rant I like to see........when a mumble becomes a roar....dear oh dear some Banking elite may yet sense a Mussolini necktie coming on.
Spare a thought for the poor champagne makers
Brilliant post, to the point and exactly how I feel too.
This guy read my mind and I'm alone. Better get real people. Martial Law is coming if they don't do this right and you know damn well they won't do it right. Their goal is simple, protect the global elite at all costs, no matter who starves, who dies, who loses their job and pension.
You have been warned. H.R. 645
I note the British propaganda machine censored out this part of the rant:
Bring on the disaster, I say. Funding the mafia for the next 20 or 30 years will be disaster enough and I, for one, am just not prepared to accept a long, lingering economic death. We might as well get it over with in short order; clear out the system and start again. F**k the euro. F**k the bankers. F**k the politicos.
Presumably the part of the comment that garnered most of its 181 recommendations.
Useful detail here in BNZ's currencies report:
Measures of funding pressures in Europe widened further on Friday night, after Deutsche Bank warned European banks could face large-than-expected write-downs on Greek government debt. The 3-month EURIBOR-OIS spread (a measure of bank funding pressure) widened to 89bps, its widest levels since March 2009.
My old friend is in decline...poor dear...but the future depends on copper! I wonder how many hundreds of billions were borrowed by those betting on copper going higher....all positions being unwound faster than a neutrino can travel.
How to supplement the pension!..... http://news.tradingcharts.com/futures/6/9/165435296.html
Ah yes, the French sphere of influence (euphemistically called the European Union, but really an exercise in French bureaucracy as part of their Grand Strategy) is falling apart now that Germany is re-united. We live in interesting times.
The French Civil Service have been outwitting everyone but the Americans for a long time. They are so clever at this stuff, Look at any measure of world power and the French punch way above their weight. Look at important things like tonnes of gold reserves (in dark times you can only buy guns with gold, no paper is accepted.) and number of nuclear warheads.
Does New Zealand have a Grand Strategy? Do we know what one looks like?
Why do we have no gold reserves?
The French entrenched sense of colonialism will not aid them in the long game and indeed as more chickens come home to roost....the Cocks crow will weary.... from demand for service.......
Why do we have no gold reserves?.......A... I think Market Oracle cornered that market.
B.....Why we have no money with which to purchase such a risky item .Roger..... these are not times for such frivolity.....
We must as the good Doctor would say "'Wait n See... keep a careful eye on inflation...do nothing provocative...and keep sending the Birthday and Christmas cards to China."
And keep the SAS in Afganistan to get credits from Washington, probably a very sensible thing to do.
RW asks - "Why do we have no gold reserves?"
I would suggest that the NZ Treasury and RBNZ feel that US dollars are a better store of value. Let's see how that works out.
I guess the point I was trying to make was that there is an almighty power struggle going on within Euroland. Is it a French run Euroland or a German run Euroland? The reality is that the French are passing the baton to the Germans.
So far the Euroland has been run with French ideas and French bureaucrats with French interests primary. They have been very clever at concealing this beneath grand visions and other such verbiage. This has not necessarily been such a bad thing,
I'm not suggesting a dark conspiracy here, but the balance of power has shifted from France and French thinking to Germany and German thinking. This could well turn out to be a massive step forwad, with German pragmatism replacing French Imperialism and delusions of grandeur. Germany is a great and civilised nation and it will be interesting to see how things develop.
I would agree Roger that in view of the crisis the E.U. now is beset with, French idealism has given way to German Pragmatism with a little bit of the get thee away from me ringing out from the French silence of late ...in a vain hope that perhaps the Austerity laden will turn their anger more toward Germany at some point down the track.
For now the discontent is internalised....but it's only a matter of time...and I can't help but wonder who is advising Merkel on matters other than money.
The Latest from German Chancellor Angel Merkel via Reuters:
Allowing Greece to default on its debt now would destroy investor confidence in the euro zone and might spark contagion like that experienced after the bankruptcy of Lehman Brothers in 2008, German Chancellor Angela Merkel said on Sunday.
http://www.reuters.com/article/2011/09/25/us-eurozone-merkel-idUSTRE78O2PR20110925
cheers
Bernard
I don't believe there is any investor confidence left in the euro....!
My money is on the worst taking place....'contagion' bank runs...chaos...
Then, the BS from the pollies will lay the balme on the media for failing to get the message across.
Bottom line for Merkel is as long as the IMF sees the Greek debt as sustainable she will continue to support......?
Wow..! you'd think Merkel would be a bit more savy about the IMF's intentions here.....nothing they are involved in comes free or without ongoing Political influence or interferance depending on which side you see it from.
Maybe in the interests of Balance a phone call or two to Argentina or a few of their other revival recipie countries.
Geesus h..if she, along with France is going to seek a mandate to continue ..it should be from their own people ...not the IMF....these are multiple countries with their own political ideologys about to take dictation from....? The IMF.... in their own best interests ..?
Well it always is isn't it .....even Dictators say that.
Isn't that just normal politician speek saying "Trust me, I know what I'm doing" to the German people?
That may be Roger ...but she did not in effect say that..! She said in effect as long as the IMF sees the prescription as the Only course of action ..it is the one she will support.
So in fact she is saying.. Trust the IMF I think they know what their doing..or../ ...I think I know what their doing.
Sorry, you lost me somewhere, I think you are probably right but do I know what I'm doing? That is the real question.
Sorry If if I got away there a bit Roger....But what Merkel actually said is as long as the IMF support the bailout policy she will continue to support same....
Translation ...the IMF diagnosis and recommended tratment is paramount to her position on the matter.
My take on the matter is that Merkel may well be putting the interests of the IMF ahead of internal German interests.
So a Washington- Berlin alliance is in charge?
It would appear to go beyond the realms of infuence ....Roger....for her to defend the indefensible.....in fact it seems either downright loyal to IMF policy.....or she already knows the outcome of not continuing support....or both.
that's gotta tell you the importance of appearing to seek control of the situation....now outweighs any hope of actually getting it under control.
This is the sort of panic room rhetoric you will see when those needing to ..get out...need time to get their bags n valuables well packed.......before the servants can lay hand to their dues.
100% in cash and the shiny stuff.
60% of that cash immediately accessible, the rest in 1 or 3 month rolling accounts with the bank most likely to get a government bail out (as its owned by an SOE) ie Kiwibank.
I figured the sh*t would hit the fan late 2011/early 2012 so staggered fixed investments to all end by October 2011 at the latest.
Its the best I can come up with as this has the potential now to get incredibly nasty.
Actually andyh...the crystal ball has an image of English making public a govt guarantee on bank deposits up to $250,ooo.....just a question of time now.
I dont doubt it Wolly - I have maintained for some time that it would make a re-appearance. The asinine thing is that it will have to be rushed back in as a result of a major crisis, rather than being carefully crafted.
It's the polly way andyh...always do things at a rush...that way you can blame others for having to do something that looks like managment and good govt...
The only issue here is how much?
My bet is $250,000
Failure to act will see a flight of capital to aus and into the tin cans under the beds. That will mean a bank crisis here in nz.
Which bank is at greatest risk?
Aussie banks still have $1mio per retail depositor; I read some discussions there last week that questions were being asked regarding that also currently applying to their subsidiaries ie: we have an implied guarantee of the same "A"$1m here in NZ? That could allay a run to the parents back in Syd or Melb, if that is the case.
Just wondering what a govt guarantee is worth when countries are all in debt/nearing bankruptcy. Where would they get the money from? Borrow it from the Chinese?!
Not all countries are in debt/nearing bankrupcy - this is an interesting chart;
http://en.wikipedia.org/wiki/File:Country_foreign_exchange_reserves_minus_external_debt.png
Hmm - I wonder. It seems that most of the major corporates are also adopting your strategy (i.e. hoarding cash on short term investments) as they lost faith in the banking sector some time ago. So yes, banks will go down, with their shareholders, but I wonder whether we'll see these cash ready corporates step in as the new financiers.
And then in NZ anyway, we have the natural monopolies - one of which is the local government sector. LG is in a great position to just keep raising rates - not tied to income as a tax metric - able to implement deductions from capital accrued in the event of default/non-payment and (in comparison to many international counterparts) not highly leveraged presently.
I think the point Kate is that cash has one key strength- its liquidity. It is the most liquid asset that is most valuable in a crisis as it gives you the most options.
have Germans paid Greeks for their WW2 damage yet ?
anyway this Euro situation is all about the resultsof living way beyond its means,years of socialism and subsidies, an EU Parliament out of control in its attempts to undermine individual nations sovereignty,and Green anti-progress influence
I think the Greeks are still hoping to get their gold back one day.
Germany has been going along with these flaky French socialist ideas (which put power in the hands of the members of the French bureaucracy, funny that) for a long time. They are now realising that they no longer need to do this.
Call it a German coming of age thing. Germany is now the leading European power and they have to figure out how to be that in a responsible manner. Power brings responsiblity and it is by its nature a difficult thing to manage.
Terry Serepisos declared bankrupt.
really Gareth...? honestly...absolutley...finally....no reunion tours...or one last outing.....?
TERRY....YOUR FRIED...!
Al other things aside. Welly is a better place for having the Phoenix
Given your track record in the beautiful game Vanderlei, we ought to listen to you - http://en.wikipedia.org/wiki/Vanderlei_Luxemburgo
one Greek crisis after another...
Allowing Greece to default on its debt now would destroy investor confidence in the euro zone
As though it has a lot of investor confidence now !!!
"Prevent a bank run" too, as if it hasn't been happening steadily for weeks.
"Oh, is that why gold and US$ have been going up and no one will buy Greek, Portuguese, Italian, Spanish or French bonds and the US Fed has had to lend the Eurobank loads of USD?"
The bank run is well underway, just don't tell anyone.
Why won't they allow Greece to leave the Euro? Would that be any worse than a Greek default?
Its interesting watching the sentiment change, the blame is now firmly being laid at the feet of the bankers and politicians. Its been a slow steady built up but look at Denninger and Mish this morning
http://market-ticker.org/akcs-www?post=194790
http://globaleconomicanalysis.blogspot.com/ We now need a good political alternative, than existing parties that support the status quo with taxpayers future earnings. Time our Media did its job too. If you click on the AEP article I posted above then go down to comments and click on highest rating you will see the support that comment got, times are changing our politicians are out of touch. Look what AMI paid its execs, what would they have got without the government backing? http://www.stuff.co.nz/business/5678653/AMI-breaches-bailout-deed There was another article in the telegraph over the weeend by Jeremy Warner http://www.telegraph.co.uk/finance/comment/jeremy-warner/8786949/Fear-s… best rated comment drjonathanwilson 1 day agoIt is Jeremy Warner sweeping moral hazard under the carpet again. No mention of it at all in this comment - moral hazard is for wimps at a time like this - not so Jeremy?
Funny thing though Jeremy is that moral hazard has brought us to this place and more moral hazard will not take us out of it.
You see Jeremy moral hazard is the in-built condition of socialism - consumption of redistributed wealth by those who have not earned the right to consume.
Socialist inspired moral hazard leads to fiscal deficits, which lead to insolvent countries that cannot repay their IOUs, which in turn causes bank balance sheets to implode taking financial systems and whole countries with them.
Do you actually realize what you are supporting here Jeremy (for you certainly support the issuing of Eurobonds)? You are not only supporting moral hazard on a vast scale but you actively support the requisite establishment of a dictatorial Brussels Reichstag.
Jeremy you cannot possibly deny that the inherent insolvency of the periphery will doom even Eurobonds to failure - sooner rather than later - with consequences that will make today's travails look like sunny uplands.
No, Jeremy your constant burying of moral hazard is a sad reflection of your own character and values. The spirit of Ted Heath is alive and well in Jeremy Warner.
Jonathan
The renewal of the 2008 banking collapse showed that politicians were too weak to deal with the obscenities of the banker boys and they were too scared to tackle wasteful spending in their countries. Between the 2 of them we are waste. mrs_trellis: Recommended by 19 people Witness Blair and JP Morgan, Mandelson and Rothschild - there is no separation whatever between the political ruling class and the bankers. You're either in this little club or you're not.
I am starting to understand the sort of dynamics that drove the French Revolution and many other uprisings that saw governments overthrown and greedy 'leaders' summarily tried and executed. It didn't make much sense when it was printed in a history book at school - it does now.
I agree the trouble is when finaly a correction comes..the inertia of it will cause severe unrest.,If the Russian ruling classes were more moderate we wouldnt have had 70 years of Comunism.The probem with having 1 in 5 homes under foreclosure in the States,and good people becoming homeless, due to the idiots that have been running things, the portents seem very bad.I have a feeling that the powers that be will sudenly come up with corrective measures before they find their wealth is at risk.
Yes it's called , Problem , Reaction. Solution, followed by consolidation , civil inrest , martial law , & FEMA camps. The situation is now out of control , so in order to protect those who created & supported it all from the serfs , the authoritarian crack down must be the "go to play". Who will end up on the block , time will tell !
Already - in 2012 the world will be and looks so much different.
While negative financial head lines dominate the news today, there is something much more dangers occurring - sable rattling, especially in the Middle East. The world power is certainly shifting, but without its difficulties. Next to turmoil on economic/ financial fronts leading to internal problems of most western countries - political tension is growing and as a consequence military expenses will increase sharply – but where does the money come from to pay – the West the losers - end of societies as we know it ?
http://news.yahoo.com/pentagon-reports-disturbing-chinese-military-buildup-235800218.html
Question for Bernard.
Is there a relationship between the Australasian CDS levels and residential mortgage rates? If so how close are the two?
What crap was it that somebody named Pagani posted a wee while ago....oh yeah that's right...crap about why NZ should look to the French to learn how to run an economy...yurk.
"Christian Noyer, the Bank of France's governor, denied on Sunday that French officials were mulling a capital injection of up to €15bn to beef up banks.
"There is no plan, and we don't need one. The banks are very solid. None of them is hiding any toxic assets," he said.
What is the point of uttering such rubbish? The markets know this is untrue, and so does the IMF. It is an almost surreal refusal to recognize that investors are - for good reasons - terrified about French bank exposure to Italian sovereign debt. Mr Noyer encapsulates the mixture of stubborness and amour propre now threatening the world with disaster, and which is so like the French reflex as everything collapsed in mid-1931. Funny how they never change."
IMF , independent elected outfit are they? Represent who exactly? Benefit who exactly ? Whatever the collective debt (fraud) liability is of Europe & indeed the world , it can be conservatively multiplied by a factor between 10 - 200 or possibly more I doubt anyone knows , someoone explain how exactly that is going to get sorted out without derivatives being frozen as a minimum or outlawed all together as they were until what 1999 when shockingly was when the worlds debt problems exponentially excellerated!
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