Bank Of England Warns Of 'financial Storms'

[wheels]

http://www.bbc.co.uk...siness-15984504

 

The Governor of the Bank of England, Sir Mervyn King has urged banks to brace themselves for a potential eurozone collapse.

Delivering a financial stability report he warned that financial systems around the world are vulnerable to the eurozone debt crisis .

He said: "In the UK, we most try to bolster the resilience of our financial system to better withstand the storms that may come in our direction."

 

Also

http://www.bbc.co.uk/news/business-15984291

the Bank itself was making "contingency plans" in case of a eurozone break-up.

However, he would not go into any details as to what these were.

[Lxxx]

This was predicted by many back in 2008 when the 'credit crunch' first erupted. You can't solve a debt problem by printing more currency and causing more debt, and then insuring the default on the debt by using derivatives totalling more than $1.1 QUADRILLION, which are now in circulation on balance sheets all over the world. This is what will cause a financial tsunami when, not if, we have the first country defaulting or the first 'too big to fail' bank going to the wall.

[Evil Goblin]

derivatives totalling more than $1.1 QUADRILLION, which are now in circulation on balance sheets all over the world. This is what will cause a financial tsunami when, not if, we have the first country defaulting or the first 'too big to fail' bank going to the wall.

But what's the betting that the ruling body on derivatives will pull the same stunt as they did with Greece - because the haircuts were "voluntary" there was no default and no claims could arise under Credit Default Swaps. As a result the CDS market has dried up because the contracts are no longer thought worth the paper they're written on, so the pros obviously consider a repeat performance will come when Portugal or whoever defaults..

[Lxxx]

derivatives totalling more than $1.1 QUADRILLION, which are now in circulation on balance sheets all over the world. This is what will cause a financial tsunami when, not if, we have the first country defaulting or the first 'too big to fail' bank going to the wall.

But what's the betting that the ruling body on derivatives will pull the same stunt as they did with Greece - because the haircuts were "voluntary" there was no default and no claims could arise under Credit Default Swaps. As a result the CDS market has dried up because the contracts are no longer thought worth the paper they're written on, so the pros obviously consider a repeat performance will come when Portugal or whoever defaults..

 

That can be the only solution as the size of the derivative market is a ticking timebomb waiting to off, and if it does it will blow holes in every bank on the planet, which is when we get bank runs and bank holidays. If you would have said that a few months ago on these threads you would have been told to put your tin hat on....now it's in the mainstream.

 

Although I'll still get told to put my tin hat on anyway, it's the standard line.

[manxy]

(Flippancy mode)

Financial storms - Does this mean that the banks won't get their dividends?

[guzzi]

It is the inability of the debt-crippled countries to print money and inflate their way out of the problem that will cause them to leave the Euro, and I think we will see the first quite soon now, and in fact a long Christmas bank holiday would be a good time to undertake the initial conversion. I think the markets have already recognised this, so we may not see further huge falls in equities beyond the inevitable initial reflex reaction.

 

The printing presses will then roll in the country concerned, and they will seek to re-denominate their debt in Drachmas, Lira, Escudos or Pesetas at an agreed starting rate. They will then hope that rampant inflation will quickly render their debts less burdensome, and that their inflated currencies will help tourism. Their balance of payments, of course will worsen hugely as their currencies plummet against the dollar.

 

I wonder whether the IoM Government is examining vulnerabilities and opportunities for the Island? We will probably see huge movements of value around the globe - can anything be done to attract some of that value here? As things stabilise afterwards and the shape of the post-Euro world emerges, might there be opportunities around (say) financial transaction taxes or banking regulation to benefit the Island?

[Lxxx]

I think we'll have the printing presses within the euro roll before that happens. The ECB has no option but to print to stave off the crisis for a few more months while they work out some other kind of plan, which of cours they won't do, as the debt won't just go away. Wednesday's dollar-swap move only bought them a few weeks at most, although the whole thing there stinks of maybe bailing out a huge european bank to me, with the haste in which it was all done.

 

Whatever happens the whold of europe, UK and IoM included, are in for tough times ahead.

[guzzi]

I think we'll have the printing presses within the euro roll before that happens. The ECB has no option but to print to stave off the crisis for a few more months while they work out some other kind of plan, which of cours they won't do, as the debt won't just go away..

i

Possibly, although Germany has a deep aversion to that. They swapped a sound currency for the Euro, and if I were a taxpayer there I would rather have a smaller Euro zone composed of fundamentally sound economies and have a strong currency. They succeeded in exporting their products very well before the Euro, despite a strong Deutschmark.

 

The fundamental mistake was allowing weak economies to join in the first place, without requiring fiscal union.

[Lxxx]

Whatever happens they can't fix the system using the same methods that broke it.

[hboy]

Its time to buy that shotgun and head for the hills! Nothing has changed since 2008, the debt bubble has just got bigger and bigger and its gone from banks going bust to countries going bust as the debts have just been passed upwards rather than been written off. There is no real way out of this if the Euro goes - there is no real bail out mechanism for whole economies they just go bust. That said the offshore Islands have a nice little business model emerging in the next 10 years as chaos and civil unrest will start to set in across the West. At least you can fortify an Island and keep the chaos out and those who can afford to will relocate to the peripheral Islands of Europe as they will be the only relatively secure places to be as economies and lives slowly unwind.

 

Fortify a few International airports and just fly in and out of the mess when you need to.

[guzzi]

Whatever happens they can't fix the system using the same methods that broke it.

 

I agree, but at least Greece, Italy etc. go to hell on their own handcarts if they exit the Euro then print their own money, rather than taking the good economies with them. On the radio today, it was said that as part of contingency planning, the presses are already rolling in Germany printing Deutschmarks.

[guzzi]

Its time to buy that shotgun and head for the hills! Nothing has changed since 2008, the debt bubble has just got bigger and bigger and its gone from banks going bust to countries going bust as the debts have just been passed upwards rather than been written off. There is no real way out of this if the Euro goes. That said the offshore Islands have a nice little business model emerging in the next 10 years as chaos and civil unrest will start to set in across the West. At least you can fortify an Island and keep the chaos out and those who can afford to will relocate to the peripheral Islands of Europe as they will be the only relatively secure places to be as economies and lives slowly unwind.

 

I think you are probably overstating the chaos, there, hboy. Argentina went bust quite a few years ago, Iceland went bust, Zim went bust. Life and economic activity continues in those countries by various means and at various levels. I don't buy the apocalyptic vision, although no doubt there will be riots and demonstrations because people are suffering.

[Lxxx]

Its time to buy that shotgun and head for the hills! Nothing has changed since 2008, the debt bubble has just got bigger and bigger and its gone from banks going bust to countries going bust as the debts have just been passed upwards rather than been written off. There is no real way out of this if the Euro goes. That said the offshore Islands have a nice little business model emerging in the next 10 years as chaos and civil unrest will start to set in across the West. At least you can fortify an Island and keep the chaos out and those who can afford to will relocate to the peripheral Islands of Europe as they will be the only relatively secure places to be as economies and lives slowly unwind.

 

I think you are probably overstating the chaos, there, hboy. Argentina went bust quite a few years ago, Iceland went bust, Zim went bust. Life and economic activity continues in those countries by various means and at various levels. I don't buy the apocalyptic vision, although no doubt there will be riots and demonstrations because people are suffering.

 

In the cases above the main difference in all of the past examples of countries going bust is that they had the rest of the world to trade their way out of it with. In this case we are looking at a truly global economic implosion, with very few areas, if any, immune to it. This time around it will be tougher and it will involve everyone....and I don't need a tin hat either.

[G_Kelly]

Its time to buy that shotgun and head for the hills! Nothing has changed since 2008, the debt bubble has just got bigger and bigger and its gone from banks going bust to countries going bust as the debts have just been passed upwards rather than been written off. There is no real way out of this if the Euro goes. That said the offshore Islands have a nice little business model emerging in the next 10 years as chaos and civil unrest will start to set in across the West. At least you can fortify an Island and keep the chaos out and those who can afford to will relocate to the peripheral Islands of Europe as they will be the only relatively secure places to be as economies and lives slowly unwind.

 

I think you are probably overstating the chaos, there, hboy. Argentina went bust quite a few years ago, Iceland went bust, Zim went bust. Life and economic activity continues in those countries by various means and at various levels. I don't buy the apocalyptic vision, although no doubt there will be riots and demonstrations because people are suffering.

 

Add in most of these places have a vary simple life. No huge house to pay off, no credit cards, no flash cars or hol in the sun. There way of life is massivaly diffrent.

iceland had something like 2.2 billion from the IMF to pull it out of the ground.

Christ look what happins when the boat does not sail and they cant get everying in the shop. We have been spoilt for 15-20 years of the easy life, we do not know what hardship really is.

[guzzi]

Don't misunderstand me, there will be hardships throughout the developed world, and very low growth in Europe, North America and Japan. However, I am convinced that Latin America and remaining Asia/Pacific regions will continue to grow, and some of the newly emerged economies like Turkey, Colombia, South Africa will grow strongly. At least I hope so, as that's where a sizable chunk of my capital is going!