Financial Armageddon!!

[Perry]

Maybe this is a factor?
Bailing out countries we don't like
with more money we don't have
to impress people who are thick.

From: http://www.youtube.com/watch?v=Fyq7WRr_GPg

[Realist]

A more competitive exchange rate for Europe's exports, US barely need to export anyway.

[muppet]

Spain Is `Big Elephant' in Room After Ireland, Roubini Says

By Peter Laca and Alan Crosby - Nov 29, 2010
Spain is the “big elephant” in the European debt crisis because there may not be enough money to bail out the Iberian nation, saidNouriel Roubini, the New York University professor who predicted the global financial crisis.
Investor concern has shifted to Spain and Portugal since yesterday, when European governments sought to bolster the euro by giving Ireland an 85 billion-euro ($113 billion) aid package and diluting proposals that would have forced bondholders to bear some costs of future bailouts.
“It is quite likely that Portugal” will be next in line for a financial assistance, Roubini said today in Prague at a conference of chief executive officers sponsored by ING Groep NV. “The big elephant in the room is not Portugal but, of course, it’s Spain. There is not enough official money to bail out Spain if trouble occurs.”
HSBC Holdings Plc estimates Spain may need 351 billion euros over three years. The European Union may be able to deploy only 255 billion euros of the 440 billion-euro European Financial Stability Facility, according to Nomura International Plc. That’s because the bailout fund is financed by bonds, and governments agreed to set aside cash and link lending to the creditworthiness of donors to secure a AAA rating.
The cost of insuring the debt of Spain, which has the fourth-largest euro-region economy, and Portugal soared to record-high levels today, according to CMA prices for credit- default swaps. Contracts on Spain climbed 14 basis points to 336 while Portugal rose 23 basis points to 524.
‘Not Stressful Enough’
Spain, which has the euro region’s third-highest budget deficit, said last week it wouldn’t adopt new measures to protect itself from the worsening debt crisis after cutting the central government shortfall by almost 50 percent and controlling regional spending.
Spanish lenders have 181 billion euros of “troubled exposure” to construction and real estate after a decade-long property boom collapsed, according to the Bank of Spain. Five Spanish lenders failed stress tests in July.
“In Spain, in my view, the eventual fiscal costs of cleaning up the financial system are going to be much larger than have been so far estimated by the government,” Roubini said. “As we saw, the stress tests were not stressful enough, if not a total fudge.”
As the number of countries needing bailouts or financing help grows, Roubini said sovereign debt, and in turn “supranational debt,” will increase as well.
‘Debt Restructuring’
“At some point there might be debt restructuring that become inevitable for the sovereigns and also those financial institutions” that are providing funds, Roubini said. The International Monetary Fund may be one such institution, he said.
Roubini in 2006 predicted the U.S. economy was “headed toward a serious slowdown” because of the slump in the housing market, high oil prices and the delayed impact of interest-rate increases. He hasn’t always been right. In October 2008 Roubini said he saw “significant downside risks to equity markets,” failing to anticipate the 76 percent gain in the Standard & Poor’s 500 Index since its March 2009 low.
The U.S. Federal Reserve’s second round of asset purchases, known as quantitative easing, or QE2, may spark asset inflation and is unlikely to add little more than a few tenths of a percentage point to gross domestic product.
The Federal Reserve said Nov. 3 it would buy $600 billion of assets top spur economic growth. During the first round of quantitative easing, it bought $1.725 trillion of government and mortgage bonds between November 2008 and March 2010.
“Even the QE2 is not sufficient to restore growth to the trend level,” he said. “The problems of the economy are not problems of liquidity, but problems of credit insolvency, and therefore monetary policy cannot resolve this.”

http://www.bloomberg.com/news/print/2010-11-29/roubini-says-portugal-quite-likely-to-need-funding-update1-.html

[Austrokiwi]

Interesting read:

Spain has another asset to bring to the table in the form of 281 tonnes of gold. It would go any where covering all the debt but Spain may well be forced to consider bringing that asset to the market surreptitiously( if it hasn't already)

[Davo36]

Trillions Lent In Bailout

Fed reveals true extent of crisis-era bank loans

1:30 PM Thursday Dec 2, 2010
Trillions of dollars in loans and credit were extended by the Federal Reserve to banks in the US and around the world during the recent financial crisis. Photo / Thinkstock



WASHINGTON - The US Federal Reserve has revealed details of trillions of dollars in emergency aid it provided to US and foreign banks during the financial crisis.
New documents show that the most loan and other aid for US institutions over time went to Citigroup (US$2.2 trillion), followed by Merrill Lynch ($2.1 trillion), Morgan Stanley ($2 trillion), Bear Stearns ($960 billion), Bank of America ($887 billion), Goldman Sachs ($615 billion), JPMorgan Chase ($178 billion) and Wells Fargo ($154 billion).

Merrill Lynch was later acquired by Bank of America, while Bear Stearns collapsed and was sold to JPMorgan.
Foreign banks also benefited from the Fed's aid. They included Swiss bank UBS, which borrowed more than $165 billion, Deutsche Bank ($97 billion) and the Royal Bank of Scotland ($92 billion).
Many of the individual loans the banks took were worth billions and had short durations but were paid back and renewed many times.
Among the largest recipients were foreign central banks, such as the European Central Bank, Bank of England and the Bank of Japan. They borrowed huge amounts of dollars from the Fed to assist their own banks.
The documents are a reminder of how crippled the financial system had become during the crisis and how much it's recovered since. Banks earned $US14 billion from July through to September this year.
The Fed released the data in the form of more than 21,000 transactions. The disclosures are required under the financial overhaul law. The Fed's programs were credited with helping restore the health of individual banks and stabilise the financial system.
The documents disclosed details of more than $3.3 trillion in loans to financial institutions, companies and foreign central banks during the crisis. The figure comes from adding up the maximum amount of aid provided for each of the Fed's credit programs.
The Fed detailed more than $2 trillion it lent through eight programs from December 2007 to July this year to ease a credit crisis. It came at a time when the financial crisis had caused credit to virtually dry up, sidelining companies and municipalities in need of short-term cash.
The credit clog worsened the deepest recession since the Great Depression.
"The system basically failed because banks stopped lending to each other," said Paul Miller, a banking analyst at FBR Capital Markets. "After Lehman failed ... the Fed essentially opened the floodgates and pushed as much liquidity into the system as possible. And it worked. It helped stabilise the system."
The emergency credit programs had never been used before and are now defunct. Most of the loans have been repaid, and none are overdue, Fed officials say.
The Fed also detailed the $1.25 trillion in mortgage securities it bought from US mortgage giants Fannie Mae and Freddie Mac to help drive down mortgage rates, ease credit and provide some support to the crippled housing market.
In addition, the Fed disclosed details of "swap" arrangements with foreign central banks. These occurred when the Fed traded much-in-demand dollars for foreign currencies to try to ease credit.
The foreign central banks, in turn, lent the dollars to banks in their countries that needed dollar funding. The Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan were involved in the exchanges.
One of the emergency lending programs the Fed created provided low-cost, short-term loans to banks. Another sought to ease credit problems in the "commercial paper" market, which many US companies use to finance everything from salaries to supplies.
Another was designed to spark low-cost lending to consumers and small businesses. Investors used the Fed's loans to buy securities backed by auto loans, credit cards and other debt.
Big US and foreign banks made repeated use of the programs. Bank of America, for instance, took out 14 loans worth $15 billion each under the Fed program that provided short-term loans. The loans were repaid after either one month or three months. The last was repaid by July 2009.
Barclays, a British bank, tapped the same facility 49 times. Its individual loans ranged from $300 million to $15 billion. Citigroup used the program 26 times.
The documents help illustrate the global scope of the crisis. The Federal Reserve provided credit lines to some of the largest central banks overseas: The European Central Bank took $8 trillion in temporary credit lines, while the Bank of England took $918 billion. That credit ensured that overseas markets wouldn't freeze for a lack of US dollars, the global reserve currency.
"There's very much a sense from the data that the Federal Reserve was not just providing liquidity to US banks but was creating stability for the entire world's financial system," said Linus Wilson, assistant professor of finance at the University of Louisiana, who has studied the financial crisis.
Large non-banking companies in the US used the Fed's lending programs, too, the documents show. They did so to meet immediate payments such as payroll or payments to suppliers, because private financing had all but evaporated.
General Electric borrowed more than $16 billion, Harley-Davidson borrowed $2.3 billion and a group of independent Caterpillar dealers borrowed $733 million.
Two other recipients were the California State Teachers Retirement System and the City of Bristol General City Retirement Fund.
But the emergency aid that was extended to banks and Wall Street rankled many ordinary Americans who weren't getting any help in their struggles with high unemployment, rising foreclosures and sagging home values. And many expressed anger toward banks and Wall Street for lax lending and for taking risky gambles that contributed to the crisis.
Much of the information the Fed is disclosing is similar to what would be required under a court case that a group of commercial banks is appealing to the Supreme Court
The Fed didn't take part in that appeal. What the court case could require - but the Fed wasn't providing on Wednesday - are the names of commercial banks that got low-cost emergency loans from the Fed's "discount window" during the crisis.
The Fed has long acted as a lender of last resort, offering commercial banks loans through its discount window when they couldn't obtain financing elsewhere.
The Fed has kept secret the identities of such borrowers. It's expressed fear that naming such a bank could cause a run on it, defeating the purpose of the program.
The Fed didn't oppose releasing the information being disclosed on Wednesday.
But the new financial overhaul law will require the Fed in late 2012 to provide information on any commercial banks that are drawing emergency loans from its discount window now. That doesn't include banks that drew loans from the discount window during the 2007-2009 financial crisis.
-AP


Source

[eri]

The Spanish government approved new austerity measures and a limited economic stimulus package on Saturday to ease investor fears about its debt - and insisted again it was taking strong steps to right its ailing economy.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10692338

[Perry]

Ireland Publishes Harshest Budget In History
Wed, 08 Dec 2010
By Shawn Pogatchnik

(Excerpts only)

Ireland must endure the toughest cuts and tax hikes in its
history as an unavoidable price for saving the debt-burdened
nation from bankruptcy, Finance Minister Brian Lenihan told
lawmakers as they prepared to vote on a brutal 2011 budget.

As he spoke, outside the wrought-iron parliament gates, hundreds
of left-wing protesters gathered in icy weather to denounce
the cuts as likely to hit the poorest citizens the hardest.
Some banged drums, blew whistles and tooted horns. Many more
waved placards demanding that Ireland's state-aided banks
default on their hundreds of billions in debts to foreign banks.

He called the €80 billion that Ireland's banks are estimated
to have lost on dud property loans "unforgivable" - yet defended
the need for Ireland's taxpayers to foot the bailout bill rather
than the foreign banks that lended Dublin institutions the money.

"There's simply no way this country, whose banks are so dependent
on international investors, can unilaterally renege on senior
bondholders against the wishes of our European partners and the
European institutions," Lenihan said. "This course of action
has never been an option during the course of this crisis."

[cube]

Citigroup (US$2.2 trillion)
Merrill Lynch ($2.1 trillion)
Morgan Stanley ($2 trillion)
Bear Stearns ($960 billion)
Bank of America ($887 billion)
Goldman Sachs ($615 billion)
JPMorgan Chase ($178 billion)Wells Fargo ($154 billion).

UBS more than $165 billion
Deutsche Bank ($97 billion)
Royal Bank of Scotland ($92 billion).

Banks earned $US14 billion from July through to September this year.
The documents disclosed details of more than $3.3 trillion in loans to financial institutions, companies and foreign central banks during the crisis.
The Fed also detailed the $1.25 trillion in mortgage securities it bought from US mortgage giants Fannie Mae and Freddie Mac

General Electric borrowed more than $16 billion,
Harley-Davidson borrowed $2.3 billion
Caterpillar dealers borrowed $733 million.

Although it is estimated that more than 90% of the global population will use improved drinking water sources by 2015, huge efforts are required to meet the sanitation target of the Millennium Development Goals (Halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation). For instance, over 16 years (between 1990 and 2006) the proportion of people without improved sanitation decreased by only 8 %. Taking into account population growth an estimated 2.4 billion people will be without basic sanitation by 2015.

To achieve the Millennium Development Goal target, the world needs to
provide access to improved sanitation to 173 million people per year at annual
cost of USD 11.3 billion. This cost is a small price to pay for the millions of lives saved, the improved quality of life and health, and the accruing benefits.

The World Health Organization (WHO) estimates
that achieving the Millennium Development Goal for
access to safe water and sanitation would have an
economic benefit of USD 84.4 billion per year.

It's almost enough to make one protest on the streets.

[Perry]

This cost is a small price to pay for the millions of lives saved,
the improved quality of life and health, and the accruing benefits.

I just hope the global eco-system
can stand it! But I do doubt it.
.

[brendan]

"There's simply no way this country, whose banks are so dependent
on international investors, can unilaterally renege on senior
bondholders against the wishes of our European partners and the
European institutions," Lenihan said. "This course of action
has never been an option during the course of this crisis."

Why can't Ireland go bankrupt? People and companies go bankrupt all the time. What would the consequence be?

[Perry]

Probably 2-5 years of pain, then the country
would come right. "Re-structuring" dud loans
only keeps the interest mill going and defers
the dreaded day of financial Armageddon.

There's too much pressure on the politicians,
as well as too much breath-taking ignorance
in their ranks. "Too big to fail" is a myth, put
out by the money lenders. An old axiom goes:

If the borrower doesn't pay: the lender does.
.

[cube]

Why can't Ireland go bankrupt? People and companies go bankrupt all the time. What would the consequence be?

Zimbabwe went bankrupt, but it is still there, still has people in it living their day to day lives as best they can.

Bankrupt companies disappear.

[Davo36]

Argentina went bankrupt in the 80s too.

But surely it must impact on a country's ability to borrow in the future?

[speights boy]

Ireland vs Zimbabwe

Ireland mattered to enough people of influence.
Not necessarily in itself, but the market contagion that would spread into Southern Europe if it defaulted.

Not enough people of influence cared about what happens in Zim.
Sad; but true.

[eri]

plus president for life mugabe makes it hard to change things