B.I.S. Report and resulting speculation ...
(snip)"The Bank for International Settlements (BIS) issued a report on global lending and bond issuance that says both are down 70-80%, with bonds in Euros dropping 94%. This means companies can't borrow from banks, nor can they expect to raise capital in the bond markets. The result should be obvious: tons of companies, from small to large, will inevitably have to declare bankruptcy. This is true in the US, in Europe, in Japan, and the bankruptcy and job loss wave will spread from there to the rest of the planet, in a self-reinforcing manner, feeding off itself.
And I may be naive, but I would truly expect governments to prepare for this wave. However, I see no such action anywhere. Which I think will have very dire consequences, with millions of people on both sides of the Atlantic, and in markets worldwide, with no chance of finding work, and no hope of receiving government -financial- support: there'll be too many of them. All this will put enormous pressure on individual countries and their political systems.
Moody’s predicts corporate -bond- defaults to rise almost 4-fold in the US, and 10-fold in European markets. These are companies that will have to lay off people simply because they have no way of paying for inventory. This starts to look like the 1930's, when the labor was there, and so were the resources, but the financial markets made it impossible for both to come together.
We should have taken care of basic human needs, by taking them out of profit markets. But we haven't, and so supermarket shelves will be as empty as electronics stores, though both serve entirely different needs and demands. Governments, meanwhile, use what money they can get to prop up an insolvent financial system, whereas their prime concern should be to feed and clothe their citizens, and make sure they have shelter and clean water. If you know of a government that is looking at these issues today, I’d like to know about it.
The most disconcerting words these days concern the credit default swap market. Yves Smith linked to an article by the pretty brilliant and solid voice of Christopher Whalen at Institutional Risk Analytics that lays out the risks loud and clear. He quotes a large investor who claims three banks, two French and one German are so deep in the CDS casino that EU officials ponder a moratorium on CDS payments. The banks would then need, and get, 10 years(!) to clean up the mess they've made. Which is an illusion, of course: once you cut the payments, the whole machine grinds to a halt. Whalen thinks that's a good idea, and I fully agree, as you all know, since such a policy would force the exposure of all Atlantic City toilet paper.
If one country starts, the rest will be forced to follow suit, including the US. And yes, as Whalen says, this is the prime condition for restoring investor confidence. But it will be extremely painful. Chris Whalen calculates that a very conservative, absolute minimum tab for the players in the CDS market will be $15 trillion. A more likely scenario, though, is this:
The rise in loss rates for all type of collateral over the next 24 months could easily make the portion of CDS "in the money" grow to more like 60-70%. That is $40 plus trillion in notional payments vs. a recovery rate in single digits.
And before you knee-jerk that the central banks and Treasuries will simply print these amounts: the EU payment moratorium will come because the countries can't pay: “the positions are beyond the ability of the EU governments to bail them out without a cessation of CDS payments”. They can't, it's end of the line, no hyper-inflation, a giant default wave, more morose attempts to save banks that should have been thrown out the window years go, and no money to take care of the millions of desperate citizens roaming the streets. Note that Whalen's focus is only on the CDS market, and there is a quadrillion dollars more in other derivative instruments aimlessly floating around out there, certain to hit a shore somewhere one stormy day soon.
Banking and investing as we've known it won't be back for at least decades. The upcoming round of bank failures, which will leave very few, if any, standing, cannot be prevented. A lot of the suffering among ordinary people can, if only through using the current bail-out funds to make sure every American and European can get at least their basic needs fulfilled . But no politician anywhere is even looking at this reality, and the citizenry has been kept in the dark. It makes the implosion of entire societies an easily predictable fact."(snip)
Re: B.I.S. Report and resulting speculation ...
I think a lot of politicians these days are social net workers and not really qualified for what is coming. All these people around for 20 or 30 years have been living large and making mountains out of mole hills. When the hurricane comes - they are gonna be clueless what to do.
Re: B.I.S. Report and resulting speculation ...
Quote:
Originally Posted by
Deogol
I think a lot of politicians these days are social net workers and not really qualified for what is coming. All these people around for 20 or 30 years have been living large and making mountains out of mole hills. When the hurricane comes - they are gonna be clueless what to do.
AMEN to dat. Professional politicians.............sigh