The Next Financial Panic Banking Sector Crash Could Start Tomorrow!
What is coming will make Black Monday 19 October 1987 look like a picnic!
- European banks are already starting to distrust their fellow banks and lending amongst banks is freezing up. The interbank market is locking up and banks are already starting to goto the ECB for money. This tells you we are close to a meltdown! See: Capital Flight Proves Confidence in European Interbank System has Collapsed !
- - But keep in mind that it is not a liquidity problem as much as the financial MSM say so. The liquidity problem, as evidenced by the locking up of the interbank market, is a symptom. The true cause is bank solvency. Simply put: major western banks are bankrupt/insolvent!
- - When the Eurozone falls, the rest of the world will tank too. Export driven Asia will also collapse albeit (perhaps) it will not suffer as badly as western Europe and America. I seriously doubt when we are all in deep shit, we will be comparing who is in deeper shit!
- - This excellent article explains how easily the world financial system could collapse when the sovereign debt bomb explodes! (emphasis mine)
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The Next Financial Panic Banking Sector Crash Could Start Tomorrow
By Shah Gilani, Capital Waves Strategist, Money Morning
Fears of a banking crisis and rolling contagion are making global stock and bond markets extraordinarily volatile – and with good reason. Another financial meltdown, on par with what we saw in 2008, is looming large on the horizon. One of two potential triggers could ignite a new banking crisis, a rapid contagion, and a second financial meltdown:
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- One or more of the troubled European countries could default outright.
- Or a major money center bank could be turned away from the interbank borrowing market by its peers.The panic resulting from either catalyst could start at any time.
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And it would spread like wildfire. The threat of a banking crisis leading to a meltdown centers on Europe. European banks hold huge amounts of their home sovereign’s debt, as well as debt of their Eurozone neighbors. So when default risk rises for any sovereign in the euro area, every one of the region’s banks feels the impact on their balance sheets.
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Of course, it may not be immediately reflected in write-downs because many banks hold sovereign bonds in their “held-to-maturity” books, as opposed to accounting for them in their “available-to-trade” books. Being held to maturity means bonds are accounted for at amortized cost as opposed to being marked-to-market, as they would have to be in the trading book.
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This is a double-edged sword for banks. Banks don’t have to mark down bonds in the long-hold book unless they become “impaired.” But in an uncertain market, fearful investors may hammer a bank’s stock because its true exposure to bad debt is unknown.
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A less obvious spillover of holding so much sovereign paper is that banks use those sovereign bonds as collateral to borrow from other banks in the short-term funding markets. As the value of sovereign collateral comes into question, it can be haircut (reduced in value as collateral) drastically, or not accepted at all.
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Banks right now want solid collateral from the counterparty banks to which they are lending their funds. And since lenders already own huge amounts of sovereign debt, they are starting to turn away distressed sovereign paper as inadequate collateral.
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When that happens, banks in need of funding are forced to turn to central banks. And that’s where it gets really scary. Central banks already hold large amounts of sovereign debt on their balance sheets, and now they have to take on even more sovereign debt and government-guaranteed securities as collateral for the loans they’re making to distressed banks.
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And where do central banks get the money they lend out? They get it from the same sovereign governments whose bonds are distressed in the first place. That leaves a twofold problem for central banks.
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First, if they borrow from distressed sovereigns to lend out to distressed banks holding the same debt, they are simply adding more suspect debt to their own balance sheets. That essentially makes them a leveraged extension of the sovereign country they’re supposed to backstop.
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The second problem for central banks is that if they print money, they end up devaluing the debt they are holding. Add to these scenarios the attendant stresses that would accompany any downgrade of underlying sovereigns’ creditworthiness and everything gets even more slippery. Not only are debt obligations directly affected, but the downgrades would flow through to other assets held by banks.
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Worse, downgrades reduce explicit and implicit government guarantees on all outstanding obligations carrying the backing of the sovereign.
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Finally, by virtue of their overly leveraged holdings of bilateral contract derivatives and their unquantifiable exposure to attendant counterparty risk, banks have significant exposure to the already suspect derivatives market.
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All of the stresses on sovereigns and their debt obligations flow through to the banks that hold those debts as well as the banks indirectly exposed to rolling contagion effects.
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The primary danger we face is not a sovereign default. It’s that banks will stop trusting what’s really on the balance sheets of their peers and consequently stop lending to one another in the short-term funding market.
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If just one money-center bank with significant balance sheet exposure is turned away from the interbank funding market, other banks will clamor for liquidity by hoarding cash and seizing collateral. Consequently, the whole system could falter, freeze and crack.
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Market volatility has many fathers, but the big daddy of them all is that worldwide contagion will follow a banking panic.
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So be sure to watch volatility to determine if it is rising because of increasing contagion fears. And, if you see a breakdown in any of the interconnected sovereign and bank funding mechanisms I just identified, get out and get out quickly. Safeguard your investments and tread lightly.
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Jewish Teenager Violently Arrested for Speaking Truth about Palestine!
- Click here should the video not display properly! Zionist ’666′ Israel is an apartheid state. What it does to the Palestinian is abhorrent. Americans should stop their government from enabling this criminal state!
- - Modern Judaism is not the religion of the Bible! See here!
- Modern Ashkenazi Jews are not the Jews of the Bible! God’s covenant was with Abraham and his biological descendents. Ashkenazi Jews are not semitic and their ancestors were never in Palestine. They are not the descendents of Abraham/Isaac/Israel. They have no right to stay in Palestine. What the Zionists are doing to the Palestinians is called: genocide and ethnic cleansing! Zionist ’666′ Israel is not the Israel of the Bible! It is a LIE!
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1980 Jewish Almanac
“Strictly speaking it is incorrect to call an ancient Israelite a ‘Jew’ or to call a contemporary Jew an Israelite or a Hebrew.”
(1980 Jewish Almanac, p. 3)
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The Jewish Encyclopedia:
“Khazars, a non-Semitic, Asiatic, Mongolian tribal nation who emigrated into Eastern Europe about the first century, who were converted as an entire nation to Judaism in the seventh century by the expanding Russian nation which absorbed the entire Khazar population, and who account for the presence in Eastern Europe of the great numbers of Yiddish-speaking Jews in Russia, Poland, Lithuania, Galatia, Besserabia and Rumania.”
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The American Peoples Encyclopedia
… for 1954 at 15-292 records the following in reference to the Khazars: “In the year 740 A.D. the Khazars were officially converted to Judaism. A century later they were crushed by the incoming Slavic-speaking people and were scattered over central Europe where they were known as Jews.
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According to the standard Jewish Encyclopedia 96% of all the Jews known to the world today are descendents of the Khazar tribes of Russia, Eastern Europe and western Mongolia.
- - The Bible specifically forbids the ill-treatment of people different from us ie: strangers. What Zionist ’666′ Israel does to the Palestinians is called: genocide and ethnic cleansing! Zionist ’666′ Israel is in total violation of God’s law!
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Exodus 22:21
“You shall neither mistreat a stranger nor oppress him, for you were strangers in the land of Egypt.”
Exodus 23:9
“Also you shall not oppress a stranger, for you know the heart of a stranger, because you were strangers in the land of Egypt.”
Leviticus 19:33
‘And if a stranger dwells with you in your land, you shall not mistreat him.’
Leviticus 19:34
The stranger who dwells among you shall be to you as one born among you, and you shall love him as yourself; for you were strangers in the land of Egypt: I am the LORD your God.
Leviticus 23:22
‘When you reap the harvest of your land, you shall not wholly reap the corners of your field when you reap, nor shall you gather any gleaning from your harvest. You shall leave them for the poor and for the stranger: I am the LORD your God.’
Leviticus 24:22
You shall have the same law for the stranger and for one from your own country; for I am the LORD your God.
Ezekiel 47:22-23
22 It shall be that you will divide it by lot as an inheritance for yourselves, and for the strangers who dwell among you and who bear children among you. They shall be to you as native-born among the children of Israel; they shall have an inheritance with you among the tribes of Israel. 23 And it shall be that in whatever tribe the stranger dwells, there you shall give him his inheritance,” says the Lord GOD.
- - The so-called Star of David is a Satanic symbol. Satanists and occult practitioners use it for calling Satan and demons!
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Former Satanist, Bill Schnoebelen (now born again Christian)
“A hexagram must be present to call forth a demon” and ” it is a very powerful tool to invoke Satan”.
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“To the sorcerer, the hexagram is a powerful tool to invoke Satan.” In fact, the word “hex” — as to put a “hex” or “curse” on people — comes from this word.
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If you examine the so-called “Star of David,” or hexagram, closely, you will discover something astonishing. It has six points, forms six equilateral triangles, and in its interior forms a six sided hexagon — thus it reveals the number of Satan’ antichrist beast, — 6 points, 6 triangles, and the 6 sides of the hexagram — 666 !!!
Revelation 2:9 - .... and I know the blasphemy of those who say they are Jews and are not, but are a synagogue of Satan.
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Capital Flight Proves Confidence in European Interbank System has Collapsed !
| Duration | U.S. | Japan | Germany | UK |
|---|---|---|---|---|
| 3-Month | -.01 | 0.10 | 0.97 | 0.51 |
| 6-Month | 0.02 | 0.11 | 0.56 | 0.59 |
| 12-Month | 0.08 | 0.12 | 0.59 | 0.53 |
| 2-Year | 0.19 | 0.14 | 063 | 0.59 |
| 3-Year | 0.32 | 0.17 | 0.67 | 0.75 |
| 5-Year | 0.93 | 0.34 | 1.20 | 1.36 |
| 7-Year | 1.52 | 0.59 | 1.63 | 1.84 |
| 10-Year | 2.18 | 1.04 | 2.14 | 2.49 |
| 30-Year | 3.55 | 2.01 | 2.98 | 3.75 |
- The European banking system is in severe distress! This coming crisis will be far worse than the Lehman Brother collapse of 2008! Its effects will be felt around the world as dominoes keep falling throughout the entire global banking system! You cannot convince me that everything is A-OK. Those of us who understand what is really going on are getting out of harm’s way. Got physical gold yet? Or are you still hanging onto pieces of CONfidence Job, fiat currencies, electronic fiat digits? The global currency crisis is coming! (emphasis mine)
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Capital Flight Proves Confidence in European Interbank System has Collapsed
by Mish Shedlock, http://globaleconomicanalysis.blogspot.com/
Capital flight from European banks has now reached such a state that for one undisclosed bank needed emergency funding last week for a mere $5 million. Previously, the ECB stepped in to provide $500 million in emergency liquidity measures to non-disclosed banks. As money flees Europe, it lands in US banks that do not know what to do with it. Capital flight has led to negative interest rates in the US.
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Swelling US Deposits as Money Flees Europe
For a look at European Bank funding needs please see 8 Trillion Euros in Borrow-Short Lend-Long Madness at European Banks; Circuit-Breaker Silliness; Dash for Cash Sends Short-Term Rates Negative Again
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“Lehman-Like” Credit Crunch Hits EU
For discussion of the European credit crunch and $500 million in emergency liquidity measures to undisclosed banks, please see “Lehman-Like” Credit Crunch Hits EU; ECB Will Not Disclose Affected Banks; Euro-Style Anxiety Spreads to U.S.
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$5 Million in Emergency Funding
$5 million is a trivial amount. That a bank would need it is not. Jean-Pierre Chevallier writing on Business économiste monétariste behavioriste discusses the setup in his latest post ECB: no more bets! More…
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The situation is out of control in the euro zone, as I have been writing it for a while… The interbank market does not work because euro-zone banks managers have lost confidence in other banks. So they keep their cash in US$ rather than lending it to other banks that need it as they would in normal times: ECB had loaned $5 million to a bank on August, 25.
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ECB had previously loaned $500 million (USD) on August 17. This caused a flash-crash in U.S. markets. The problem is serious.
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Chevallier notes that the paltry amount of money involved “shows that the interbank system is completely blocked”.
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Trust in European banks is shot, and by hiding the banks needing emergency liquidity funding, distrust spreads to all banks in the system. Then again, why shouldn’t distrust spread?
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The entire global financial system is bankrupt. Loans have been made that cannot and will not be paid back.
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Greece is in Trouble Again!
Supposedly Greece was Saved on that blue circle when yet another bailout was approved! Chart source: http://globaleconomicanalysis.blogspot.com/
- Greece will default. It is a foregone conclusion. The market is already driving Greek government bond yields to 44+% for 2 year bond and 60% for 1 year bond. No one has confidence in Greece. Can anyone or country survive with such high interest rates (even higher than loan shark rates)? I doubt so! Whatever, they do, the Eurozone leaders will fail because the whole thing is intentionally setup to fail ! The Illuminists are about to pull the plug on the whole debt house of cards. See also: September 23: The Beginning Of The End For Merkel… And The Eurozone?
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Greece Matters Again and It Could Be In Trouble
By: Patrick Allen, http://www.cnbc.com/id/15839285
On July 21, EU leaders, the European Central Bank and the International Monetary Fund agreed on a second rescue package for Greece, one they hoped would put the country in a position to come to grips with its debts. As they agreed, fears were already growing over Spain and Italy, which a few weeks later required the ECB to step into the market and start buying the bonds of both countries.
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While the ECB intervention pushed borrowing costs lower for Italy and Spain, the euro zone’s third- and fourth-largest economies, that deal for Greece is now looking like it could fall apart.
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Yields on 2- and 10-year Greek debt stand at 47 and 18 percent, respectively, and the debt swap agreed to on July 21, which required private investors to agree to accept longer-dated bonds than they had purchased, is not going well. On Friday, the Greek government indicated it would walk away from the debt swap unless it got 90 percent sign-up from private investors. So far, less than 60 percent are thought to have done so.
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If the deal collapses, then a new support mechanism will be needed. “The financing gap in this case will have to be covered by official financing, probably by the European Financial Stability Fund,” Athanasios Vamvakidis, the head of G10 FX Strategy at Bank of America Merrill Lynch, said on Friday.
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So borrowing costs are soaring and the debt swap deal is looking shaky at best, but the problems do not end there. Next up are the terms under which other euro zone members will lend money to Greece. Finland has demanded collateral from Greece before it lends money, and others, like the Netherlands, Slovenia, Slovakia and Austria, say they will want the same deal if Finland gets its way.
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Germany, which would have to lend the most money to Greece, has said Greece can’t be forced to offer up collateral. Finland is thought to want collateral worth 20 percent of any loan. “If all five economies gained the same deal that Finland has reportedly agreed, Greece might have to set aside up to 13 billion euros of its new 109 billion euro loan package as collateral,” Ben May, a European economist at Capital Economics said in a research note.
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… for the full article click here!
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Euro Bail-Out in Doubt as “Hysteria” Sweeps Germany! Merkel Faces ‘War on Every Front’!
Will not be missed !
- September and October are the most dangerous months for the financial markets. This September will be no exception. Things are shaping up for a catastrophic sovereign debt collapse! Germany is about to blow a hole in the Eurozone bow! Got physical gold yet? (emphasis mine)
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Euro bail-out in doubt as “hysteria” sweeps Germany
By Ambrose Evans-Pritchard, http://www.telegraph.co.uk/
German Chancellor Angela Merkel no longer has enough coalition votes in the Bundestag to secure backing for Europe’s revamped rescue machinery, threatening a consitutional crisis in Germany and a fresh eruption of the euro debt saga.
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Mrs Merkel has cancelled a high-profile trip to Russia on September 7, the crucial day when the package goes to the Bundestag and the country’s constitutional court rules on the legality of the EU’s bail-out machinery.
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If the court rules that the €440bn rescue fund (EFSF) breaches Treaty law or undermines German fiscal sovereignty, it risks setting off an instant brushfire across monetary union. The seething discontent in Germany over Europe’s debt crisis has spread to all the key institutions of the state. “Hysteria is sweeping Germany “ said Klaus Regling, the EFSF’s director.
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German media reported that the latest tally of votes in the Bundestag shows that 23 members from Mrs Merkel’s own coalition plan to vote against the package, including twelve of the 44 members of Bavaria’s Social Christians (CSU). This may force the Chancellor to rely on opposition votes, risking a government collapse.
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Christian Wulff, Germany’s president, stunned the country last week by accusing the European Central Bank of going “far beyond its mandate” with mass purchases of Spanish and Italian debt, and warning that the Europe’s headlong rush towards fiscal union stikes at the “very core” of democracy. “Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies,” he said.
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A day earlier the Bundesbank had fired its own volley, condemning the ECB’s bond purchases and warning the EU is drifting towards debt union without “democratic legitimacy” or treaty backing.
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Joahannes Singhammer, leader of the CSU’s Bundestag group, accused the ECB of acting “dangerously” by jumping the gun before parliaments had voted. The ECB is implicitly acting on behalf of the rescue fund until it is ratified.
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A CSU document to be released on Monday flatly rebuts the latest accord between Chancellor Merkel and French president Nicholas Sarkozy, saying plans for an “economic government for eurozone states” are unacceptable. It demands treaty changes to let EMU states go bankrupt, and to eject them from the euro altogether for serial abuses.
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“An unlimited transfer union and pooling of debts for any length of time would imply a shared financial government and decisively change the character of a European confederation of states,” said the draft, obtained by Der Spiegel.
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Mrs Merkel faces mutiny even within her own Christian Democrat (CDU) family. Wolfgang Bossbach, the spokesman for internal affairs, said he would oppose the package. “I can’t vote against my own conviction,” he said.
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The Bundestag is expected to decide late next month on the package, which empowers the EFSF to buy bonds pre-emptively and recapitalize banks. While the bill is likely to pass, the furious debate leaves no doubt that Germany will resist moves to boost the EFSF’s firepower yet further. Most City banks say the fund needs €2 trillion to stop the crisis engulfing Spain and Italy.
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Mrs Merkel’s aides say she is facing “war on every front”. The next month will decide her future, Germany’s destiny, and the fate of monetary union.
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Pepe Escobar: Bye-bye Gaddafi, Welcome Al-Qaeda?
- Daniel 7:23 (New King James Version)
23 “Thus he said:
‘The fourth beast shall be
A fourth kingdom on earth,
Which shall be different from all other kingdoms,
And shall devour the whole earth,
Trample it and break it in pieces.
end
About
Societal and economics observer and commentator with an endtimes, future history perspective. Follow me at Twitter: socioecohistory
