Baltic Dry Index. 1901 +32
LIR Gold Target by 2019: $3,000.
“For the authorities, [excessive risk-taking by the financial sector] poses a dilemma. Ex-ante, they may well say “never again.” But the ex-post costs of crisis mean such a statement lacks credibility. Knowing this, the rational response by market participants is to double their bets. This adds to the cost of future crises. And the larger these costs, the lower the credibility of “never again” announcements. This is a doom loop.”
Banking On The State
Piergiorgio Alessandri & Andrew G Haldane. Bank of England. November 2009
Today I only have time for a short update, so this morning we cover the banks going negative again. The west’s banks went bust, got bailed out by dumping much of the rubbish on their balance sheets on the central banksters that aided them in going broke, and got a pass on the rest of their balance sheet rubbish by being allowed to value it to the fantasy model rather than to reality. Below, Moody’s gets cold feet on the banks. Unlike Messrs Alessandri and Haldane at the Bank of England, Moody’s obviously thinks that next bankruptcy round at these three banks at least, “too big to fail” support will be limited. Better line up the Squids over at Morgan Chase and Goldie, it looks like one or both will be getting some more “Bear Stearns.” Actually I think Messrs A&H have it right, I see no sign in America or Britain that “never again” is anything more than an empty slogan. When the next Lehman hits, I think the Squids will hit the Fed and BOE’s panic button again.
BofA, Citi, Wells Fargo Outlook Negative: Moody's
Published: Tuesday, 27 Jul 2010 | 5:54 PM ET
Moody's on Tuesday changed its outlook on Bank of America, Citigroup and Wells Fargo to negative, from stable, citing lessened government support for the institutions under new U.S. regulations.
A negative outlook indicates the banks are more likely to be downgraded over the next 12 to 18 months. The credit ratings agency also said it may cut its ratings on ten regional banks on reduced government support.
---- The new financial reform bill, however, is intended "clearly to eliminate government—i.e. taxpayer-support to creditors," Moody's said. Some support, however, is likely to remain for large institutions as regulators work to implement new laws, it added.
"Over the next 12 to 24 months ... we expect that our support assumptions for systemically important banks will likely revert to pre-crisis, or even lower, levels—though we do not anticipate that we would completely eliminate support from these firms' senior debt and deposit ratings," Moody's said.
http://www.cnbc.com/id/38436527
Below, just when you thought Europe had gone away and that Europe’s banks had passed their “stress tests,” The Telegraph goes and ruins everyone’s breakfasts again. Is a Europe run by Brussels bunglers really worth 30 trillion euros after all.
Europe's €30 trillion headache
European banks have amassed €30 trillion in liabilities and face a serious funding threat over the next two years as authorities withdraw emergency support, according to a new report by Standard & Poor's.
By Ambrose Evans-Pritchard, International Business Editor
Published: 6:00AM BST 29 Jul 2010
The rating agency said banks are at risk of a vicious circle as sovereign debt fears and financial stress feed off each other. "Banking sector woes are eroding sovereign credit-worthiness, which is in turn reducing the real and perceived capacity of governments to support weak banks," said S&P.
"The collective funding needs of Europe's banks are vast. The industry is much larger than America's or Asia's. Most of their mortgages and other personal loans stay on their balance sheets and require funding. This contrasts with the US, where financial institutions securitize (these) loans and which do not require balance sheet funding," said Scott Bugie, S&P's credit strategist. Total liabilities are €23 trillion for the eurozone and €8 trillion for the UK, Sweden, and Denmark.
S&P said the European Central Bank's emergency lending had inadvertently created a snare. Its three-month loans have had the effect of concentrating roll-over risk for large amounts of debt. Banks will eventually have to refund these loans in a crowded market, competing with debt-hungry states. "ECB loans have contributed to a shortening of liability maturities. The result is a growing funding mismatch for the European banking industry. This is happening as regulators prepare to introduce tougher liquidity standards. This is one of the greatest vulnerabilities of the industry," it said.
The Netherlands has already ended state debt guarantees, forcing its banks to go the market as bonds fall due. Others are following suit. Roughly €1 trillion of such debt in the eurozone and Britain will come due by 2012. "The need to refinance the maturing guaranteed-debt looms over many banks," said the agency. Stronger banks can cope: weaker ones will be left floundering in "a two-tier funding market".
S&P said Greek banks have seen a leakage of €10bn to €20bn in customer deposits since the crisis began, or 5pc to 10pc of the total. They are shut out of the capital markets. The ECB is propping up the country with €140bn of exposure to Greek debt in one form or another. It has €126bn of exposure to Spain and €71bn to Ireland, mostly in loans to weaker lender such as Spain's cajas. The exit from this will be a minefield.
The EU's €750bn "shock and awe" rescue has gained time but not conjured away underlying concerns about the fiscal health of the EU states themselves. The report came as the ECB's latest bank survey showed that credit conditions had tightened sharply in the second quarter, with a net 11pc of lenders restricting loans. The survey was carried out in late June, after the €750bn rescue but before the stress tests for banks.
More
Greece orders striking lorry drivers back to work
29 July 2010 Last updated at 02:31
The Greek government has used a rare emergency order to force lorry drivers back to work after a three-day strike.
The drivers have until later on Thursday to return to the roads or face arrest and the loss of their licenses.
Most petrol stations in Athens are out of fuel and shops and factories are running low on supplies.
The drivers oppose government plans to open the industry to more competition as part of austerity measures agreed with the IMF and the EU.
The reform is a key part of the multi-billion dollar EU-IMF package intended to pull Greece out of its debt crisis.
Members of the drivers' union said they would not back down and dared the government to seize their lorries.
"Leonidas with his 300 warriors said 'Come and get it'. We say the same: come and get it," said one of the organisers of the strike, Spyros Kapetanios.
Finance Minister George Papaconstantinou said the drivers would not be allowed to hold "Greek society hostage".
He added: "No one has the right to paralyse the country - no one."
The back to work order was issued hours after negotiations between the government and the drivers broke down.
The national emergency provision is usually reserved for times of war or natural disaster.
http://www.bbc.co.uk/news/world-europe-10798260
We end for today, with Belgium. For how much longer will Belgium exist? Not too much longer think the lads at Bedlam Asset Management. There goes the euro, stay long gold.
Belgium is a country invented by the British to annoy the French.
Charles de Gaulle.
Running through a minefield, backwards
Part II - farewell Flanonia?
----On the numbers alone, the most likely casualties are the UK and US in that order, but both
have good odds of escaping. Many hard issues help. In America, one such is the dollar’s
currently irreplaceable role as the world’s reserve currency. In the UK, the relatively
excellent debt duration (i.e. it is spread over many years rather than near-term) is a plus.
Each also has good soft issues: the market likes the new British government’s tax and slash
policies so is a willing buyer of UK debt, whilst the Asian central banks have so many US
bonds they simply self destruct if they refuse to keep buying.
The standout surprise candidate for sovereign default by end-2012 is Belgium. A decent
country; civilised, at peace, wealthy and globally competitive in several areas. Moreover, first
glance at the numbers gives no particular reason to expect Belgium to default. Its potential
financial problems have been on the radar screen for so long that we have grown used to
them, rather like those many parents who fail to recognise the repulsiveness of their offspring.
With net government debt of €400bn, it is hardly a huge world borrower in absolute terms.
Yet default could occur almost entirely by accident and the ripples be far greater than its size
warrants, because of its position as the de facto federal capital of the EU. Belgium’s
hastening car crash is not in current bond prices or exchange rates.
The glue has dissolved
There are five reasons why Belgium has hung together for the last 180 years: Britain, God, the
King, fear and most importantly, money. Before addressing these, it is necessary to
understand why Belgium exists at all.
More.
http://www.bedlamplc.com/c2/uploads/potw%2086.pdf
"The most puzzling development in politics during the last decade is the apparent determination of Western European leaders to re-create the Soviet Union in Western Europe."
Mikhail Gorbachev
At the Comex silver depositories Wednesday, final figures were: Registered 52.43 Moz, Eligible 58.12 Moz, Total 110.55 Moz.
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Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
No scoundrels or crooks today, just a link to some interesting weekend reading.
How the Great Recession Was Brought to an End
BY ALAN S. BLINDER AND MARK ZANDI1
http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf
Writing at the time of the 1825 banking crisis, Jeremiah Harman, Director of the Bank, described it thus:
“We lent [money] by every possible means and in modes we have never adopted before; we took in stock on security, we purchased Exchequer bills, we made advances on Exchequer bills, we not only discounted outright, but we made advances on the deposit of bills of exchange to an immense amount, in short, by every possible means consistent with the safety of the Bank…Seeing the dreadful state in which the public were, we rendered every assistance in our power.”
Bagehot.
The monthly Coppock Indicators finished June:
DJIA: +269 Down. NASDAQ: +460 Down. SP500: +290 Down.
The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators.
Help the LIR fight Banksterism, the EU, and for sound money.
If you can, help the LIR stay around and make a difference. Please make a donation at the PayPal link on the website or better still become a sponsor for what looks like an exciting 2010. Capitalism not banksterism. Many thanks to all who have helped.
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Sunspots – A 22 year colder world? (From 2004?)
Spotless Days July 28
Current Stretch:0 days
2010 total: 35 days (17%)
2009 total: 260 days (71%)
Since 2004: 803 days
Typical Solar Min: 485 days
A new powerful sunspot is just coming into view. Will we get a new “Carrington Event?”
The “Carrington Event,” September 1, 1859.
http://science.nasa.gov/headlines/y2008/06may_carringtonflare.htm
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