Here's my Top 10 links from around the Internet at 6 pm in association with NZ Mint.
I welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
Sorry it's so late. But plenty to chew on. This weekend could be epic. I have my bad feeling again about global markets...
1. MF Global's window dressing - Now it's all coming out. The WSJ reports MF Global disguised its debt levels to investors and counterparties by temporarily slashing the amount of debt on its books at the end of each quarter...
These are the types of things that Wall Street investment bankers do, yet the US government still bails them out and gives them government guarantees.
This is what the biggest moral hazard seen in our time does to behaviour.
Bankers, in this case former Goldman Sachser Jon Corzine, believed it was ok to gamble with clients money on European bonds and then cover it up at the end of each quarter.
The aim was to make big profits (and therefore bonuses).
The only reason this one blew up and was allowed to fail was it wasn't Too Big To Fail.
Here's the WSJ with the gory details:
This comes as it emerged that MF Global, which filed for bankruptcy protection amid questions about its bookkeeping and whether it had properly segregated customer funds, lobbied against a Commodity Futures Trading Commission proposal that would have placed tighter restrictions on how futures-trading firms can invest cash sitting in customer trading accounts.
MF Global Chief Executive Jon Corzine in July participated in a conference call with CFTC officials and strongly opposed the restrictions, saying they would hurt business. The CFTC proposal, which hasn't been voted on, is sure to gain greater scrutiny amid charges that MF Global's customer accounts are short by about $633 million.
And here's the WSJ on how the rest of the industry window dresses too. (The chart below courtesty of Zerohedge shows how all primary dealers of bonds do it.)
No wonder young people without jobs want to occupy Wall St. In olden times peoples heads would be on pikes on bridges. Now? They get bonuses and buy even bigger yachts and more politicians.
And where is Barack Obama in all of this? Employing a Citigroup Chief Executive as his Chief of Staff...
Investors and regulators grew concerned about window dressing last year, after a series of articles by The Wall Street Journal found such activity among "primary dealers," major banks and securities firms that trade directly with the Federal Reserve.
The Journal found that in 2009 and 2010, primary dealers as a group reduced a key form of short-term borrowing by an average of 42% at the end of fiscal quarters from the peak level during the same quarter. They then boosted those levels after the next quarter began. The borrowing was done through repurchase agreements, or "repos," which allow a firm to make big trading bets with borrowed money.
The figures for MF Global, not a primary dealer at the time of the previous Journal analysis, show a similar pattern.
2. Mini Lehman - The fallout from the collapse of MF Global is proving to be wild and violent.
I have a bad feeling about the next few weeks. Remember too that the US Congress is supposed to agree on its budget deficit cutting plans within a few weeks or some automatic shutdowns start being triggered.
Here's Reuters with the gory detail on this. Tonight could be an ugly night.
Call it the mother of all margin calls: Up to 50,000 former customers of bankrupt broker MF Global must find some $1 billion in additional collateral almost overnight, or be forced out of their trades.
Come Friday, with the mass transfer of commodity trading accounts from Jon Corzine's fallen firm to six of its erstwhile rivals, margin clerks will be wrapping up a reckoning of how much additional money is needed to cover millions of positions. Clients who can't quickly meet their margin will have to liquidate, making for a tumultuous day's trade.
Stephen Harbeck, president of Securities Investor Protection Corp, a group that recovers assets from failed brokerage firms, told Reuters that they were having trouble finding brokers willing to take on the accounts.
A mass liquidation in the commodity markets wouldn't have the same effect as in equities, when most of the trade would be selling. For every long futures position there's an offsetting short, and therefore just as many customers should be selling long positions as buying back short ones.
But it may make for a wild session.
"Risk managers out there are going to be as cautious as possible. Obviously with no money coming out of MF, positions are going to have to be liquidated just because there will be accounts that are carrying debit balances over," said Rob Kurzatkowski futures analyst with OptionsXpress in Chicago.
3. Geithner and Summers are the villains - Pullitzer Prize winning political affairs author Ron Suskind has written a book about the early years of the Obama Presidency called Confidence Men: Wall Street, Washington and the Education of a President
I've always wondered what went wrong with Obama. He protrayed hope and change and then changed nothing, instead taking the advice of the same people that ran Bush's economic and financial policy.
Obama has failed dismally to take on the banks.
Here's Ezra Klein's review in the New York Review of books.
Suskind’s story goes something like this: in 2008, Obama was presented with an economic crisis of astonishing severity and complexity. In the beginning, he showed himself to be unexpectedly prepared to deal with it, both intellectually and temperamentally. His self-assurance and personal magnetism attracted a variety of impressive and able advisers, including former Federal Reserve Chairman Paul Volcker, billionaire investor Warren Buffett, UBS America chief Robert Wolf, former Labor Secretary Robert Reich, and former SEC Chairman William Donaldson.
But as “the severity of the crisis bore down on him,” Obama found himself leaning toward a different sort of adviser—safer, more predictable. He wanted people who knew Washington, and knew how to get things done. The “bold visions of the campaign season had meanwhile resolved into the serious, often risk-averse business of actually governing,” writes Suskind. “In the midst of a battering economic storm, it no longer seemed like the right time to be making waves.”
And no single adviser better encapsulates Suskind’s criticisms, and the contradictions in his argument, than Larry Summers. Even more than Geithner, Summers is the villain of the book. Suskind describes him as “brilliant at cultivating the sense of control, even as events spun far beyond what could be managed with any certainty.” He calls that talent “an illusionist’s trick calling for a certain true genius.”
4. 'All we need is confidence' - Even Australia's Julia Gillard is now telling the Europeans what to do. Here's Bloomberg's latest catalogue of handwringing and desperation at the G20 meeting over the weekend.
Hold on tight people.
Here's Julia.
Such calls -- echoed by the U.S., Britain, China and Russia -- highlight international disappointment that Europe missed the G-20’s deadline of this week to deliver a fix for its fiscal woes. German Chancellor Angela Merkel and French President Nicolas Sarkozy sought to regain the initiative by keeping aid for Greece on ice and demanding Italy accelerate austerity.
“The euro zone must absolutely send a message of credibility to the whole world,” Sarkozy told reporters. “When we take decisions they must be applied, when we set rules they must be respected.”
Yeah right, as the Tui Billboard might say. Do you think there's a Tui billboard in Cannes?
5. 'Where did they get all that money' - Here's an animated watercooler conversation about the European bailout plan.
I'm sure this is much more interesting than the sort of watercooler discussions about Kim Kardashian's divorce. I need to get out more.
"Who will buy the debt? Someone. What about Aliens? Yes, hopefullly Aliens. What if there are no aliens? If there aren't any aliens then we are screwed."
6. Chinese bad loans - Reuters reports from the official China Securities Journal on how bad loans in the key Chinese city of Wenzhou have risen for the first time in 10 years in September.
"Related authorities have ordered (banks) to lift their tolerance level for NPL for small-sized firms, therefore, the NPL ratio will be highly likely to keep rising over next few months," it quoted a source as saying. The source said that the NPL at local financial institutions reached about 1.1 billion yuan ($173 million) in September.
Wenzhou, the capital of coastal Zhejiang province, was recently hit by a debt crisis, in which at least 80 business people were reported to have disappeared, committed suicide or declared bankruptcy.
Authorities estimate the fleeing company bosses owe more than 10 billion yuan in total debt to individual creditors pooled from the informal lending market.
7. G-Pap to go - Reuters reports from sources that George Papandreou has agreed to fall on his Shish Kebab.
Greek Prime Minister George Papandreou bowed to cabinet rebels and agreed to step down and make way for a negotiated coalition government if his Socialists back him in a confidence vote on Friday, government sources told Reuters.
"He was told that he must leave calmly in order to save his (PASOK) party," one source said on condition of anonymity. "He agreed to step down. It was very civilized, with no acrimony."
8. What Roubini really thinks - BusinessInsider reports Nouriel Roubini told clients at a Manhattan soiree this week to expect the worst in Europe, and eventually on China. Cheery chap.
Finally on China, he predicts it avoids a hard landing this year and next year, but sees trouble in 2013-2014.
Ultimately it will end in pain for three reasons:
- A buildup of non-performing loans at the banks.
- A high level of government debt (when you include municipalities)
- And finally every single case of a country that boomed via a huge fixed-asset stimulus ends up in a hard landing, ultimately.
And here's Kenneth Rogoff at Project Syndicate on the future of the Euro:
Do the gnomes of currency markets seriously believe that the eurozone governments’ latest “comprehensive package” to save the euro will hold up for more than a few months?
The new plan relies on a questionable mix of dubious financial-engineering gimmicks and vague promises of modest Asian funding. Even the best part of the plan, the proposed (but not really agreed) 50% haircut for private-sector holders of Greek sovereign debt, is not sufficient to stabilize that country’s profound debt and growth problems.
So how is it that the euro is trading at a 40% premium to the US dollar, even as investors continue to view southern European government debt with great skepticism? I can think of one very good reason why the euro needs to fall, and six not-so-convincing reasons why it should remain stable or appreciate.
9. Kiwi success story - Willy Moon is a 21 year old from Wellington who taking Britain's pop scene with this cracking song and video. HT Giles via email.
10.Totally Clarke and Dawe on the Global economy - Tai Marcheson pays A$800 million for a cup of tea without milk.
74 Comments
FYI here's another subsidised green energy disaster in the making in the US
SunPower Corp., a San Jose-based solar power company that received a last-minute Department of Energy loan in September, announced today that it lost more than $370 million in its fiscal third quarter – more than double its second-quarter loss – and that its chief financial officer would resign.
A little balance there please Bernard. California is the centre of the U.S. financial meltdown, its only to be expected that any company is going to struggle in today's economic environment.
SunPower and its rivals have struggled this year against soft demand in Europe--the world's largest solar market--and falling prices due to an oversupply of panels from Asia. The difficulties have triggered a wave of solar company bankruptcies, including the high-profile collapse of Solyndra Inc. LLC, which obtained more than $500 million in government help, and they have driven solar-company stocks to multiyear lows.
http://online.wsj.com/article/BT-CO-20111103-727087.html
All new industries have gone through this weeding out process as they've historically developed. Railroads, coal, oil, gold, motor vehicles etc etc
"SunPower and its rivals have struggled this year against soft demand in Europe"
Not enough government subsidy from the european side I see...
Oh boy. This chart on reverse Repos is mighty scary from Zero hedge, and the explanation below.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/10/Rev%20Repos%20total.jpg
In the just released H.4.1 update, foreign Reverse Repos with the Fed soared from $81.3 billion to $124.5 billion, the most ever, and a weekly surge of $43.2 billion, the second largest ever, second only to the Lehman collapse.
Furthermore, as noted daily, European banks have been doing precisely that with local cash from non-US subsidiaries, and parking near record amounts with the ECB (today the European central bank disclosed a whopping €253 billion had been deposited with it: just shy of the 2011 high), even as they have been dumping US Treasurys on one hand, and now are forced to repo what little paper they have left with the Fed due to systemic uncertainties in the MF aftermath, one can see why suddenly there was absolutely no liquidity left in the market, and why the meager €3 billion EFSF bond offering, so desperately needed to fund the ongoing Irish bailout and which incidentally is the story of the week, had to be pulled.
Thats just excess reserves. All that extra liquidity Bernanke pumped into the system has nowhere to go. QE1,II, TARP etc. have all circled the globe and come back home. Like the time my cat caught a rabbit and ate the whole thing except the legs.. Two hours later she was throwing up and crapping everywhere.
How are the Central Banks going to clean up the mess caused by all the excess liquidity they gave the banks?
Thats the trouble with creating liquidity, its just money without a purpose. Capital is what liquidity is chasing, but when the stocks look bad, and bonds look doubtful, where do you put your liquidity?
Thats my theory anyway, it would be more exciting if the banks were paranoid though.
The WSJ looks at what a Greek exit from the Eurozone might actually look like, including the historical precedents.
Historians can cite examples of currency union breakups, including that of the U.S. at the onset of Civil War in 1861. Economists led by Stephane Deo at UBS Investment Research say the best parallel may be the break-up of the Austro-Hungarian Monetary Union in 1919.
The main method of separation was over-stamping existing banknotes, but various parts of the empire also imposed forced loans to governments, capital controls and travel curbs to prevent people carrying suitcases of cash from perceived weak-currency jurisdictions to strong-currency ones.
This model, in theory, could be used in the euro area. With capital controls and curbing of the movement of people across borders, the "physical euro could be stamped and converted into national currency. Bank accounts could first be frozen and then converted at an arbitrary exchange rate," the UBS researchers wrote in a September research report.
http://online.wsj.com/article/SB10001424052970203804204577015990542256190.html
It's clear that suit case manufacture is the place to be!
The way in which 'big banks' own American politicians is indeed worrying. But is it any different in lil old NZ?
Banks are still allowed to make very nice profits. Will Kiwibank be allowed by the current government to survive if it ever gets big enough to be more than a slight irritant to our Australian banks?
A nice inequality chart via Paul Krugman
The Occupy Wall St Kids are damn right.
Here, from the CBO report, are the changes, in percentage points, of the shares of income going to three groups. The top quintile excluding the top 1 percent – which is basically the abode of the well-educated who aren’t among the very lucky few – has only kept pace with the overall growth in incomes. Just about all of the redistribution has taken place from the bottom 80 to the top 1 (and we know that most of that has actually gone to the top 0.1).
http://krugman.blogs.nytimes.com/2011/11/03/inequality-trends-in-one-picture/
That would be Steven,s mate, Paul K. The guy with all the ideas, something about economy and alians.
And Iron ore prices are falling fast as the Chinese infrastructure splurge slows down. Bad for the Aussies. No wonder the RBA cut their OCR this week.
The growing signs of distress in the Chinese housing market bode poorly for construction activity. Reflecting this, iron ore prices tumbled last week—the Platts' index for 62% iron ore hit US$116.75 per ton at Friday's close, having fallen nearly 36% since mid-September. However, other commodities have been holding up better, so the scale of the decline may also reflect factors specific to the iron ore and steel markets, where oversupply has left firms particularly vulnerable to a slowdown in building.
Maybe Goldman Sachs pulled the plug on MF Global via Barry Ritholz and Bruce Kastings.
Delicious.
Given Corzine’s relationship with Goldman I put them high on the list of probable plug pulling bankers. Nomura was a place to go to finance AAA sovereign positions. One of the French or German banks could have been the warehouse for MF’s sovereign exposure. It wouldn’t surprise me if any one of them pulled the plug on the leveraged bets.
It should be noted that all of the big players talk when they are moving on collateral and closing relationships with financial firms.When the SHTF, they act as one.
If we go down this road (we will if MF/the Banks actually used/seized clients money) the short-term consequence will be another big ramp up in volatility. Most assets classes will suffer in that environment.
Leveraging of “liquid” assets is a critical component of the global system. The repo markets are already under serious attack. The MF story could take us to a new level.
The absolute craziest outcome would be that we learn that it was Goldman who closed the books and seized the cash last Friday (someone did). It would be even crazier if this leads to a problem that gets out of hand. There’s a decent chance that it plays out along these lines.
And here's Paul Volcker with an excellent overview of the problems
It should be clear that among the causes of the recent financial crisis was an unjustified faith in rational expectations, market efficiencies, and the techniques of modern finance. That faith was stoked in part by the huge financial rewards that enabled the extremes of borrowing, the economic imbalances, and the pretenses and assurances of the credit-rating agencies to persist so long. A relaxed approach by regulators and legislators reflected the new financial zeitgeist.
All the seeming mathematical precision that was brought to investment, all the complicated new products, including the explosion of derivatives, that were intended to diffuse and minimize risk, did not work as had been claimed. Instead, the vaunted efficiency helped justify an explosion of weak credit and an emphasis on trading along with exceedingly large compensation for traders.
If those remarks sound critical—and they are meant to inspire caution—let me also emphasize that the breakdown in financial markets and the “Great Recession” since 2007 are also the culmination of years of growing, and ultimately unsustainable, imbalances between and within national economies. These are matters of failures of national economic policy and the absence of a disciplined international monetary system.
I can't help thinking that economics is the art of running away from maths. We need money and money is debt, and debt requires interest, and the interest is unrepayable, there we have a mathmatical unsolvable problem, anything other then facing that fact is can kicking however you spin it.
Yes Bernard, Paul Volcker does indeed have a good grasp of the situation. He is not a stupid man, but unfortunately he is still under the illusion that such a devilishly complex structure as the international financial system is amendable to control by enlightened, capable technocrats. The Global Financial Crisis transparently demonstrates the delusion of this belief. One could argue that he is capable devastating outcomes of this Crisis.
"Volker and his international aides worked assiduously to protect the earnings of the banks, particularly the money-center banks which were most exposed [to third world nation default]. In the negotiations over new loans, Volcker usually supported the bankers in their persistent refusal to make any concessions on interest rates. The Fed also took care to instruct its bank examiners to treat the huge portfolios of questionable LDC loans with special solicitude. If the rules were applied to strictly, major banks might be confronted with huge loan write-offs that would wipe out their capital."
"This observation leads to yet another powerful phrophecy in Greider's book:
"The problem is that by the time the crisis ends, the regulatory authorities may be so deeply compromised by the concessions that they have made to the banks that there is no return."[9]"
http://econospeak.blogspot.com/2010/01/1983-ponzi-game-prediction.html
And now the IMF might start printing its own currency ( a basket of currencies)
Where will it end?
I kid you not, via Dow Jones:
http://online.wsj.com/article/SB10001424052970203804204577016554222191164.html
World leaders are actively considering mandating the International Monetary Fund to print more of its special currency to help solve the euro-zone crisis, according to several people familiar with the matter.
Asking the IMF to print more of its Special Drawing Rights—essentially an IOU that countries can exchange for cash—is one of the ways the Group of 20 industrialized and developing countries is considering supplementing European efforts to stem the debt crisis that is threatening to spark a global financial meltdown and another recession.
Two people familiar with the matter said the SDR issue could total $250 billion. One option under discussion is to use some of that money to beef up the European Financial Stability Facility, the euro zone's bailout fund.
The IMF would essentially print and distribute a certain amount of SDRs, which are valued based on a basket of major currencies: U.S. dollars, yen, sterling and euros.
Charles Crawford
What is money, after all, but an expression of moral value, above all an expression of confidence about trust and integrity? Not merely now, but based on hard-won reputation for reliability in preceding generations, and echoing down the decades still to come
Who wants to be paid in North Korean or Zimbabwean or Cuban currency? No-one.
Why? Because that currency is an expression of cruelty, inefficiency, waste and stupidity. It is literally worthless for most practical purposes.
"Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow.
Those pieces of paper, which should have been gold, are a token of honor -- your claim upon the energy of the men who produce.
Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money."
Crossing the line there Andrewj.
Not only suggesting there are morality problems underneath the poo pile - but - further suggesting it's a personal morality problem.
Unbelievable - you'll be burned like a witch mate.
Tell a man what he already knows and he'll thank you for it.
Tell a man what he doesn't want to hear and he'll lynch you for it.
I'll be snide and say debt is the root of money, and the need to repay debt gives money life.
Money in ancient times was a veil for barter, which is far removed from what we have today.
Indeed debt is the root of money, but worse still, compound interest is the prime characeristic of money derived from State power. It evolved as a form of taxation, with which rulers requisitioned the goods and services produced by their nominally free vassals. Primarily those goods were used to acquire symbols of their power, temples, palaces, State ceremonies, and surplus food to provide for the specialized labour force which provided for their needs.
"It is now recognized that most of the techniques that would become basic commercial practices in classical antiquity were already developed in the third millennium BC in the temples and palaces of the Bronze Age Near East – money, along with the uniform weights, measures and prices needed for account-keeping and annual reports (Hudson and Wunsch 2004), the charging of interest (Van De Mieroop 2005, and Hudson and Van De Mieroop 2002), and profit-sharing arrangements between public institutions and private merchants ranging from long-distance trade to leasing land, workshops and retail beer-selling concessions (Renger 1984, 1994 and 2002)."
"Money in ancient times was a veil for barter, which is far removed from what we have today."
Its a little more complicated than that. For Maori in particular, the basis of exchange was koha, or gift. Trades were conducted in the form of a gift, though with an implicit, informal obligation to return the gesture sometime in the future. Three interlinked elements of Maori Tikanga Koha (Gift), , and Utu (Compensation), combined the services of trade, credit, behaviour moderation, and debt payment.
This kind of arrangement prevailed in most pre-civilized societies prior to disruption by European colonizers.
And even in the European culture, there is scant evidence that economic relations were premised on hard or commodity money. Instead like the economies of so-called primitive cultures, they were predicated on credit, though in a more formal, explicit form.
"To start, with Adam Smith's error as to the two most generally quoted instances of the use of commodities as money in modern times, namely that of nails in a Scotch village and that of dried cod in Newfoundland, have already been exposed, the one in Playfair's edition of the Wealth of Nations as long ago as 1805 and the other in an Essay on Currency and Banking by Thomas Smith, published in Philadelphia in 1832; and it is curious how, in the face of the evidently correct explanation given by those authors, Adam Smith's mistake has been perpetuated...In both these instances in which Adam Smith believes that he has discovered a tangible currency, he has, in fact, merely found—credit."
http://www.ces.org.za/docs/what%20is%20money.htm
Cheers Anarkist, I learn new things everyday. "ignorance is bliss"
Hey Skudiv,
No worries. It never ceases to amaze me how how a mistaken, even delusional view of the world can persist so long and be held by people that should know better. Self-interest trumps sense everytime I suppose. Not to mention the herd mentality of the majority of humanity. It takes courage to wade against the current in public debates.
Fears for banks behind commodities 'bloodbath'
http://www.agrimoney.com/news/fears-for-banks-behind-commodities-bloodbath--3804.htmlhttp://www.agrimoney.com/news/fonterra-ditches-nonsense-milk-price-forecast--3761.html
Sir Henry van der Heyden, the Fonterra chairman, said that the group was "not yet seeing the recovery of international dairy prices we initially anticipated"
"That sounds like nonsense, doesn't it?" says US Milk Producers Council's John Kaczor .
Stewart-Peterson analyst Steven Schalla was three weeks ago warning of a 20-30% decline in US milk values, a forecast reflecting "historical price patterns".
http://www.interest.co.nz/charts/commodities/dairy-prices
This implosion of the commodity markets will trigger the deflation that will supress the production of comodities. This shortage will drive up prices again, and when nitroed with a couple of shots of the ole' QE from the US and now Europe we will get our hyper-inflation. After that things might get ugly for a while. Get your economic disaster pack ready.
:)
Number 3. Obama morphs into a mutt. That's what happens when the powerful, the influential, the financial elite, get into the ear of the political top-dog and tell him how it's going be. Top-dog becomes a Lap-dog. PDQ.
David Rothkopf over at Foreign Policy has a good list of 20 Things the G-20 could focus on achieving. Several heresies are mentioned, including a global central bank and a Tobin tax.
Good morning Folks
Don’t try this at home – unless you have plenty of money, friends and a supporting mother: Verbal entrepreneurial spirit versus “Fat ass authority” (the Police)
http://www.youtube.com/watch?v=xIOILNg95JI&feature=player_embedded
Have a nice weekend !
Maybe Goldman Sachs pulled the plug on MF Global via Barry Ritholz and Bruce Kastings.
Delicious.
Thanks for the great link.
But Barry Ritholtz' preamble to the comment stream on his blog deserves a wider audience.
CommentsPlease use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Nice!
It looks to me, that as the stakes get higher and the inaction by the US and Euro leaders to sort their house out, we are now entering a 'free for all' grab for cash.
Perhaps this is the start of the end game, the financial dogs will mow down the naive, thereby satsfing their insatiable greed.
For those who have not got their financial house in order, I fear it may now be too late?
Doom...doom...its doom I tell you....
:/
Its probably too late for most ppl....just some will hurt more than others, initially. Everything is so inter-linked that I dont see anyone (well few) being unhurt.
I think the end game started 3 or so years ago....but those kneeled at the alter of growth, with pollies leading the surmons have managed for 3 years to put off the effects of peak oil.....ie expensive energy killing the ponzi growth scheme.....
So I expect there will be bank runs in the EU to start with and it will get to the USA.....Govns will have to guarantee deposits but there will be bankruptcies...pensions funds will go bye bye as shares and commerical property values collapse....it will get to us, some months later, maybe, (weeks? days?) I expect our stupidly leveraged businesses and Property speculators will implode...and go bankrupt.....mortgagee sales abound....Those young families on 95%+ will be in neg equity for ever....and I mean for ever....houses will neve see their present value ever again....5 or 6 years from now we will be looking at a totally different landscape....compare to say 1933.....certainly I think the developing world will look like nightmare on elm street....not sure how bad the developed world will be not as bad....NZ as a primary producer of food and far enough from trouble spots I think will be not to bad....not sure yet how we meet the WINZ bill that will be huge at that stage...tax and print I assume....
regards
The islands of Doom....has a sort of feel about it...are they greek or Kiwi....the UK or that piece of real estate in the Hudson.!
Where will the G20 be held in 014....why across the ditch of course....maybe JK will ask for one here...give rent a mob a run....
We will by then be sick to death of either Obama or the replacement from the Elephant camp...the media will still be telling lies...Today's US debts will seem like nothing compared with those by then...Cameron will be a burned out fag....King will be Lord Mervyn of Threadneedle....and the right to free speech will be have been clubbed to death by some cops somewhere.
Like standing on the coast of Fukishima, Japan on march 11, about 3 pm and looking out to sea. An insignificant swell on the horizon is sauntering in towards you.
“
Doom...doom...
Its probably too late for most ppl....
…there will be bank runs…
…there will be bankruptcies...
…pensions funds will go bye bye…
…shares and commercial property values collapse....
… businesses and property …will implode...and go bankrupt.....mortgagee sales abound...
...young families …will be in neg equity for ever....and I mean for ever...
…houses will never see their present value ever again...
…the developing world will look like nightmare…
“
Can’t (although tempted) to prescribe you an antidepressant “in remote mode”, but may I suggest getting out more often?
anybody seen NZ's gold reserves??
We dont have any....if it gets that bad that we need gold then its really really bad and its all changed...at that point you have to think in different erms IMHO....
What is gold an IOU for?
Answer energy.....food is energy....oil is energy.....we are a net producer of food....
gold isnt needed...so in extremis we swap food with the arabs for oil....no one else is worth trading with if its got that bad we need gold.
and thats possible....
regards
Look at the bright side steven, by 2020 the world pop will blast past 8 billion....a planet virus destined to destroy itself.
I learnt something new last week Steven. Backwardation. The theory goes when it happens to gold then it is the end game. It means no one is willing to part with it for any amount worthless paper money.
I think the point is gold is a IOU for energy.......which most ppl seem to simply not get.......in and by itself its not much use....
regards
gold is a hedge against inflation and the race to the bottom currency wars going on around the planet. If NZ continues with it's current hands off market policies then we'll end up with a rising dollar & no one to buy our primary exports. At least with a few tonnes of gold in a vault we can, as a nation, hedge...
So is fiat money, but when people don't trust that then where do they go. Could go oil shares I suppose but everying, including gold I think, is in for a roller coaster ride when denominated in dollar terms.
Your point about gold not being needed is quite correct, that is why backwardation is a problem if it happens (and it has briefly& the reaction has been swift) Backwardation would normally happen in response to a shortage of supply, which is a signal to the market to produce more, but there is already plenty of gold. Hence if it happens then it means people are unwilling to sell.
Notice at this stage that people generally are not buying metals, but selling old jewellery for the money. Urban mining I heard it called.
Now backwardation in oil, hmm that would be really interesting now....... more reading to do.
You're right, there is plenty of physical gold. Trouble is most of it is allocated. The problem we have today is the demand for physical is surging as govt's are now net buyers rather than sellers. Combine this demand with the massive increase in demand from the new Chinese & Indian middle class and the existing US & EU demand & physical is being consumed faster than production can keep up. This demand isn't being reflected in the 'market price' because the market is a leveraged & leased paper market & bears no resemblance to reality. Paper manipulation by bullion banks on the LBMA & Comex is keeping the PM prices supressed. Billions of dollars worth of PM's are traded every day where on millions of dollars of physical are actually available. When gold backwardation happens this whole house of cards will come crashing down & likely see govt's (having leased out their gold will have no claim on the physical any longer) & the bullion banks (the TBTF banks) bankrupted. When this happens it's all over red rover. Fiat will be worthless overnight. If you're not holding physical PM's you're toast. Hence my original question; where's NZ's gold??
1.Expect the latest eurozone patch-up job to come unglued. When you have the heads of the eurozone's largest countries talking about levering up bailout funds or ringing up the Chinese to ask for money, you know the latest "solution" to the eurozone's intractable problems is little more than a hastily concocted plan to kick the wine bottle just a bit further down the road. The problem is that nothing suggested begins to resolve the structural problems of the eurozone – because nothing can be done to resolve those problems. Thus, a heads-up speculator will look for ways of betting on failure and place those bets during brief flare-ups of euro-optimism.
2.Likewise, expect the US government's new Super Committee to fail. Sure, they may come up with some optics in an attempt to mask the dire nature of the situation (for instance, by pushing the impact of any proposed measures out for five or more years – time enough to ignore them), but the fundamental truth in this case is that the Godvernment is hopelessly broke, at the same time the population expects it to do ever more.
I love the metaphor "kick the wine bottle just a bit further down the road". I am sick of hearing about tin cans. How about, "kick the champagne jeroboam bottle (3 liters) down the road"?
How's about : " Kick the MP who loses their electorate seat , but slithers back into parliament on the party-list , down the road " ?
Small print: "Does not apply to National MPs."
Its all over but the actual bust....italy was 6.3% and climbing last time I looked.....very soon no one (read private investor) will be buying their bonds....looks like once this starts (the climb in the rate) its all over in about 3 months....EU she go pop!
regards
I had never heard of Cosco until a few daya ago. I would imagine that most of you are in the same boat as me. It’s an acronym for China Ocean Shipping Company. It is owned and controlled by Beijing. They call such companies SOEs – State Owned Enterprises. Very Orwellian. http://hat4uk.wordpress.com/ EXCLUSIVE: Why China has no interest in worthless eurobonds read on down to this IRAN BOMBSHELL: Energy authority to show proof of malign nuclear intentions
Israel has to do Iran sometime, Russia and China wont like it one little bit.Hence the missile shield that surrounds Russia.The last time things got hot, the Russian Scientists got out fast.I can't see the israelies or the west letting iran get close to having a Nuke. Last time the moment it looked like it might be a Sino Russian ballgame..the heat came off...and during the cool off Israel reequiped with the latest weapons. No play untill their was a good chance of winning?.
Thing is anon...Moscow Washinton and Beijing are adding up the value of the infrastructure sales that will come from the new Iranian regime post the destruction planned to take place as soon as Madjad makes the wrong move....Look at the investments that Libya now has to make with the oil revenue....Syria soon to follow....all the military stuff( lower grade) , bridges, airports, ports, storage facilities, power systems, buildings, rail ines,,,,,,,,,the profits are set to be stupendous.
While Im on the subjest of Iran someone may be interested in this article on Israels options, i last posted it two years ago but its agood one.
http://belfercenter.ksg.harvard.edu/files/is3104_pp007-033_raas_long.pdf
and latest news out of Israel
http://www.jpost.com/Features/FrontLines/Article.aspx?id=244335
Money and power alone matters – a different view by Stephen Lendman.
Human welfare is sacrificed for more of both. Equity, justice, freedom, and other democratic values are non-starters. Humanity's survival is threatened.
In recent weeks, Western and Israeli anti-Iranian rhetoric intensified.
America plans unchallenged Mediterranean Basin dominance to Russia's borders. Multiple wars rage for it. Others against Syria and Iran may follow. Still more later on. Britain, France, and Israel may participate. As a result, potential general war may engulf the entire region disastrously. Concern for their own interests may encourage Russian and Chinese involvement to protect them. Anything ahead is possible. Hopefully, cooler heads will prevail. Given past history, don't bet on it.
Here the complete article: http://www.opednews.com/articles/Washington-And-Israel-Rog-by-Stephen-L…
Some really interesting interviews about current worldwide issues:
http://www.progressiveradionetwork.com/the-progressive-news-hour/
I have a feeling someone else is going to go bankrupt this weekend. Could be wrong, should be interesting though.
I think its just timingnow ......its looking very close.....this weekend, could be next weekend....doesnt matter too much....its not years away...
regards
It's not what you know, you know. It's what you think you know that just aint so. - Mark Twain
Check out what you can trade there Osaka Pascific Rim Daily Average Sea Temperature Futures. I'll check my horoscope to see if I should go long or short.
Hurry up and crash the system, so we can see whose labour has value, and so we can see what has value.
Yep....
Sort of....of course there is massive pain and collateral damage involved...
regards
@ostrich
This will be the black swan you are looking for:
Exactly...I lost 22% in my main pension fund in 2008 after 30 years.....I now expect it to be worth pretty much zero from this event. Hence why any form of pension saving right now is pretty much suicide IMHO.....especially if you have any debt.....\
regards
I also see paper as the worst investment.
Get physical. If super funds used the money to build the things that you need when you retire, you would be fine. Instead they buy the last thing you need when you retire which is govt debt to pay off. Imagine a pension fund that buys a house for you to live in, with solar panels etc, so you don't need to worry about power bills, a veggie garden, maybe invests in some other type of food production. Then saves the rest of the money in physical goods.
Fiat currencies always fail, thats fact. I just do not understand why they are so popular.
a comment on that article
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Olaf von Rein | November 3 9:15pm | PermalinkGovernment debt is a funny animal. In the narrowest legal sense, there's actually no way for anyone - least of all foreigners - to enforce it. The contracts are written under the law of the borrower - and this borrower has the power to rewrite that law on a whim. I suspect that government debt is repaid chiefly because the majority of investors are domestic. This makes it somewhat awkward for democratic governments to default, and hence perhaps why Russia had fewer qualms. But what about UK Gilts today? In so much as the BoE simply redeems them with funny-money, aren't they technically in default? I think that the logic used to be that creeping default (via inflation) would be signaled well in advance, through higher forward yields. Alas, as the BoE (and Fed) interventions are demonstrating: minting money in style can simply invalidate any information about future inflation. Within the Eurozone, there should always have been a reliable credit spread curve. It did not exist, probably because Germany did not make clear early enough the limits to her willingness to write cheques. Since no one member controls the currency, all Eurozone government debt is denominated in a quasi foreign currency. This may well have been the one feature that appealed to Germany the most - of all currencies in the world, the euro is most akin to gold. Without blank cheques (aka a transfer union), there's only default for Greece. But there's honesty in that too. So, paradoxically, Eurozone governments are the most upright of sovereign debtors. Alas, true to life, honesty is not always universally appreciated...
Debt Dynamics
Debt, in itself, generates more debt by attracting interest. At present it appears that the current level of debt, in Eurozone - and in almost all western economies including the US' - attracts more interest than the repayments generated through economic growth (collected as taxes). There is no doubt that recovering from the current crisis will require debt write offs. But how much would it be on a global scale? It makes a significant difference if, for example, 20% of debt on the banks' books (globally) has to be written off for the economy to recover, or 99%. And it is actually likely to be far closer to 99% than 20%. And then there is a question who will be on a receiving end of such write offs: basically who is going to lose loads of money. As the history shows the answer to this question may make the difference between peace and war.
Total reset, you can't collapse a sound money system without debt and interest. Why carry on down this road into eternity, time and again it has failed. "Insanity is doing the same thing over and over expecting a different result." "Common sense is nothing more than a deposit of prejudices laid down by the mind before you reach eighteen. " - Albert Einstein
Despite the fact that governments around the world are increasing their stores of gold with some governments encouraging their citizens to buy it (China) New Zealand remains one of the few countries in the world according to the World Gold Council that owns not one ounce. Even so called third world African countries have small stores of gold. We may have commodities that will be much needed i.e. food but I can not believe the Reserve Bank has its head in the sand so deeply that it cannot see what is happening around the world and the measures other governments are taking with regards to gold.
Here is a response from the RBNZ in Sept to my enquiry regarding its gold stores:
Thank you for your email.
The Reserve Bank of New Zealand does not hold any gold and has not done so for over 20 years.
You would need to go back fifty years to see the last time the RBNZ held significant gold holdings.
Under the Reserve Bank of New Zealand Act 1989, the main purpose of foreign reserves is to enable the Reserve Bank to quickly support the operation of the New Zealand dollar foreign exchange market during times of illiquidity.
In this context current Reserve Bank policy is not to hold gold, because gold has less liquidity (it's a more limited market) than the government and near-government securities we hold in our reserves.
Kind regards,
Knowledge Centre
Reserve Bank of New Zealand
Let's hope our commodity exports save us despite the fact our high dollar will sink us.
#5 is farcical....and i suspect true...
LOL....
can I use the f word pls?
regards
Hey Wild Bill and Smiley.......did you hear the following?
Prime Minister Francois Fillon said.
“There is no other recipe to reduce debt than to lower public spending,” bloomberg
Well ....did you?
Re Obama, he is part of the establishment and he has done his job perfectly. Namely he has delivered his constituents to his principle sponsors, the banks.
I don't think of US politics in terms of policy, it's about image and Obama was the perfect brand at the time; the saviour figure to Bushs cowboy/everyman.
"Democracy is the theory that the common people know what they want, and deserve to get it good and hard." - HL Mencken
This article in the Daily Mail sums up the farce in Europe for any who care to read it:
In a nutshell..get out of the euro...NOW.
The NZDMO will be headscratching to nut out how to refi any euro loans....
Watch now as corporates et al rush to grab as much cash as they can by flogging bonds to fools. All such bond issues have the warning..."Bonds are unsecured"..."Loss of capital can happen"...
"ECB Threatens to Halt Italian Bond Purchases; Italy Prime Minister Pressured to Resign; Bond Buyer's Strike Coming Up?"
http://globaleconomicanalysis.blogspot.com/
The domino are falling....get out of the way fast.
I don't fancy the chances for private gold holdings held by anyone in the euro hole, accept for the Germans....the rest will be grabbed...the bank private boxes will be frozen then cut open...lots of things will come out....I expect that heaps of new vaults will be set up in Germany by the German banks. Watch the weighed down cars cross into Germany...
"The Treasury (UK)believes the euro is about to "break up", according to a statement made by Financial Secretary to the Treasury Mark Hoban to the House of Commons. He also revealed that the coalition was developing a plan for what to do should the euro collapse completely.
Speaking in an emergency question on the crisis facing Greece, Hoban responded to a question on whether the coalition would rule out ever joining the euro by saying: "I don't think there's any intention for us to join the euro at a time when it is breaking up.'
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