Fa$ten Your $eat Belt$

[Anonymous]

Warnings of this, from increasingly "authoratative" financial analysts, have been increasing in number and volume for a year now. Here's the most recent, for whatever it may be worth :

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the "Crossover" index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.

"I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names.

"Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.

RBS expects Wall Street to rally a little further into early July before short-lived momentum from America's fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.

"Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point," he said.

US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit.

The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. "The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation," he said.

The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said.

Kit Jukes, RBS's head of debt markets, said Europe would not be immune. "Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates.

"The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured," he said.

Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=A1YourView&xml=/money/2008/06/18/cnrbs118.xml

:face:

 

[PipeBrew]

ale:

Why is it that the light at the end of the tunnel is just a freight train's head light, so much lately?

 

[Justpipes]

So we will all be blinded like a deer caught in the headlights!

 

[PipeBrew]

I'll play opossum.

 

[Anonymous]

One practical rammification of it is that, the way things are going, the exchange rate is only going to keep getting further and further out of hand. The fed is ordering money printed like there's no tomorrow, while European central bankers are taking the opposite tack to control inflation over there. What results is that anything imported (like tobacco and pipes) is going to keep getting increasingly expensive as measured in dollars, because it takes more and more of them to buy them in Euros.

"Buy American" is only going to go so far, since we don't grow stuff like briar. or Latakia/Oriental tobaccos.

'Ain't pretty.

:face:

 

[thomas james]

Esteemed :face: di tutti :face: :face: :face:

I remind you that actual printed currency is only a fraction of the total money supply. I would be surprised if it were much more than 10%. The fed furiously printing it in order to keep pace with a declining exchange rate simply is not true. The exchange rate may well improve. It is a pendulum like thing as with everything in the world wide economic sense.

Using foriegn made pipes/tobacco as an example is bogus from a cash standpoint. WHO has EVER put cash in the mail for either. IF they become more expensive, relatively speaking, it will NOT be a result of more "cash" money being printed by the fed.

You're scaring people unnecessarily.

 

[Anonymous]

Esteemed :king: di tutti :king: :king: :king:

I remind you that actual printed currency is only a fraction of the total money supply.

Figure of speech. M3 figures haven't been supplied since . . . (?)

The fed furiously printing it in order to keep pace with a declining exchange rate simply is not true.

Agreed. But I didn't say it was. It's printed in hopes of avoiding a systemic meltdown. The exchange rate is just a symptom.

The exchange rate may well improve

With the US inflating by policy and Europe deflating by policy ? The spread can only widen. The honestly calculated inflation rate at present is around 15 % as it is.

WHO has EVER put cash in the mail for either

I have. Lots of times. In this country. Abroad, only for collectors stamps. But at least a hundred times.

:face:

Gotta run -- thunderstorms are returning.

 

[thomas james]

EQUALLY as important as M3, money supply, is the velocity of money. Turning a buck in x time TWICE is the same as turning 2 bucks once in the same time. Same damned M3. I am not going to do your homework anymore, YOU can google money supply. By money supply, I am NOT speaking of just cash.

 

[thomas james]

When you mail cash, you are, in effect, reducing M3, money supply, to the extent that you are, temporarily, reducing the available inventory of the cash component of M3. When you charge something on a credit card, you increase M3, to the extent that you increase a banks accounts receivables. Using credit CREATES money. Money is not created by printing it. Banks and credit card companies CREATE money with CREDIT. When credit dries up, so does capital, ie, money, ie, economies. Increase capital, increase money supply in ways printing of money can not approximate.

:king: , bozo banker.

 

[Anonymous]

No doubt an accurate description of the way the shell game works in practice, :king: di tutti :king: :king: :king:

But only in abstract theory is the creation of ledger debt "the same as" creating money. In the real world, where obligations have to be repaid, debt is debt. A debit may function as an asset, under certain conditions, but it remains essentially a debt. Classic example : Enron.

The first thing Catherine Austin Fitts' mentor at Dilon Read impressed on her was, "Cash flow is more important than your mother."

Only if this "I'll gladly pay you Tuesday for a hamburger today" crap functioning as money and the interlocking "I'll backstop this if it defaults" system of incestuous paper can actually be sold to somebody does it turn out to be an actual (liquid) (as opposed to on-paper) asset. You see this as the merry-go-round grinds to a halt : the guaranty firms can't sell the toxic waste they booked as "assets" to cover the bank's loss when Tuesday comes and the hamburger account goes into default. Because, as matters turn out, the backstop's "assets" were bundles of promises to pay on Tuesday for hamburgers today that they bought from the bank in the first place.

And some of them probably will pay when Tuesday comes. But nobody knows how many, because the debtors are depending on being able to sell the hamburger debts they bought as "investments" to raise capital, and nobody wants hamburger debts anymore.

Factor in the miracle of leveraging, where market plays were jacked up by a factor of twenty and more, with the whole thing depending on a host of somebody elses who are depending on a host of somebody elses who are in the same boat themselves, and you've got collective, systemic bankruptcy playing out like a train wreck in slow motion.

As you know better than I, banks need to maintain a certain percentage of liquidity to support their plays. Only now, this **** isn't liquid anymore. Nobody wants it. So the clock's ticking, and the scramble is on. Central banks have been making loans directly to individual banks for months -- a situation previously unimaginable. But nothing's flowing. Gridlock prevails. Call it "credit" if you want to keep playing the shell game. It's easier for me to visualize as metaphorical dollar bills, but that's me. So now the central banks in Europe are pretending this toxic waste that no actual market for exists any more is still worth something, and buying it. Have been, for months. Because without liquidity, the banks are cooked. Over here, Fanny and Freddie have been buying it on "our" behalf to postpone the day of reckoning for the banks stuck with it and no longer able to pretend that payments promised for Tuesday are still "assets." (What happens to us is not, and has never been, a concern. But you know this. You can see it everywhere).

The plot sickens : the worst of the nightmare is in the parallel financial system the banksters created outside the realm of even nominal regulatory oversight. And they're fighting, tooth and nail, to keep the figures involved secrets. This tells me something.

Now. Before we even get into the rest of it, WHAT HAVE I SAID SO FAR THAT DOESN'T SQUARE WITH REALITY ?

:face:
CONSIGLIORE