This is the mark of the derivative beast. Many large and small banks worldwide are insolvent, and all the liquidity injections in the world can't save them.

The only result of the central bankers' intervention is hyperinflation. This 100% correct, guaranteed.

Please see also updated signature.

http://uk.reuters.com/article/businessNews...16?rpc=401&
Subprime crisis may spread further
Sun Dec 16, 2007 10:19am GMT

ZURICH (Reuters) - The subprime crisis is not over yet and could spread to other credit markets, making it important that banks have a strong capital base, a Swiss regulator and prominent member of the Basel Committee said.

well theres and idea

i really think its nearly game over for the central planners this time - and good riddance to them

Just on Fivelive Mark Lawrenson (the football pundit) talking football finances and pre big afternoon games said he had a dinner with some Barclays bigwigs the other day and apparently it's all going to hit in February.

Well let's think about that for a moment,

1. Alan Greenspan says the credit crunch was an accident waiting to happen
2. Paul Krugman is as bleak as a bleak thing
3. Mervyn et al are pulling all the right levers

It's bad, it's going to get worse, house prices will fall significantly, declining productivity allied to increasing inequality portends a flat to declining income future for the bottom 80% of the British population, but...the financial system and the fiat currency will both survive intact.

Alan Greenspan was largely responsible for the accident!

I hate bankers.

I'm not a big fan of nutters.

Tip hyperinflation. Of all the lame justifications for higher prices, this has to be the most outlandish.

http://news.bbc.co.uk/2/hi/europe/7146650.stm
Spaniards tip too much - minister

Spaniards still have not fully got to grips with the value of the euro and often tip too much, according to Economy Minister Pedro Solbes.

Over-tipping had added to the sense among Spanish consumers that the cost of living is higher since the euro's introduction in 2002, he said.

Ohi ohi ohi ohi. The derivative beast is angry and wants more.

http://www.ft.com/cms/s/0/233ae764-abef-11...?nclick_check=1
Hold tight, the central banks have no plan

By Wolfgang Munchau

Published: December 16 2007 16:03 | Last updated: December 16 2007 16:03

This has been the year when many deeply held beliefs have been challenged. One such belief was that central banks have the toolkit to sort out any conceivable economic or financial crisis.

Last week’s co-ordinated liquidity action by five central banks taught us that this is not the case. The idea was that a co-ordinated response would reassure the markets, but it had the opposite effect. It turned out that market participants are not infinitely stupid. They know by now that this is not a liquidity crisis at its core. If it had been, it would be over by now.

It is a fully fledged solvency crisis that has arisen because two giant and interlinked bubbles burst simultaneously – one in property, one in credit – leaving banks and investors at the brink of bankruptcy, some hanging on by their fingernails. Yet there is nothing the central banks are offering at this stage to alleviate a solvency crisis.

So the message from last week is that central banks have no game plan. Expect continued stress in financial markets for most of next year and possibly beyond. Expect also further declines in property prices in the US and the UK and spill-overs to the real economy.

Yup, that's what I've been thinking - the banks have a solvency crisis, NOT a liquidity crisis, therefore the central banks' easy money solution will not help.

On the contrary, it makes things worse, triggering hyperinflation.

Apologies, but I asked this on another thread with no answer, what might be the implications of a Basel II relaxation to cope with a solvency crisis?
CG - let me guess, hyper inflation??

Did you know that the recent closure of the village hall in Little Ramperton will lead to hyperinflation?

Less surprisingly, the drive to reduce the carbon "footprint" of refuse trucks in Burnley will also lead to hyperinflation.

In all scenarios however, postings featuring pictures of space rockets and nothing else on forum sites will increase by 42.5%.

100% guaranteed.

Laugh all you want, but inflation on a massive scale is coming. I personally don't find it that funny.

You can laugh as much as you want bu this does not change the fact that many major banks around the world are insolvent and that central bankers are literally giving away cash to bail them out. This is extremely inflationary, and all you need to know. It is also 100% correct, guaranteed.

http://www.afxnews.com/about488/index.php?...p;story=2226438
2007-12-16 19:21:37

UBS expects further subprime writedowns of 4.5 bln sfr in Q1 - report

ZURICH (Thomson Financial) - UBS AG expects further subprime-related writedowns of 4.5 bln sfr in the first quarter of 2008, after announcing a writedown of 10 bln usd earlier this week, Swiss Sunday paper Sonntag reported.

"On Tuesday JP Morgan said it expects UBS to have to write down another 4.5 bln sfr. According to information of Sonntag, this is in line with expectations of the (UBS) board," the newspaper wrote.

On Monday, the Swiss bank said it will write down the value of its US subprime-related holdings by 10 bln usd after booking a 4.2 bln sfr subprime loss in the third quarter.

Earlier this week, UBS also said that in order to strengthen its capital base, it will issue 13 bln sfr of new capital, 11 bln of which has been placed with GIC, and a further 2 bln sfr with an undisclosed strategic investor in the Middle East.

If you don't mind me asking Cgnao, what nationality are you?

I think this too.

+It seems to be slowly emerging that NR will not secure a buyer at all - this suggests it's insolvent.

+The easy money is causing worstening inflation.

+Presumably they will continue injections of liquidity until inflation is so high they are faced with a stark choice - Complete collapse of the currency or let banks fail.

+A big dose of inflation without currency collapse could suit the USA as it's a way to get out of it's massive debts.

The capital adequacy rules are designed to ensure the banks have sufficient cover in the event of default.

It is counter intuitive for them to suggest relaxing them in the face of large scale defaults.

The rules for capital adequacy would kick in before insolvency. Relaxing the rules may defer the problem - it doesn't really solve the issue of default but it may buy time.

The other problem is that a lot of the lending in the last decade has been off balance sheet and has not required capital to be provided against it. On the one hand this has resulted in limitless amounts of credit (money), and on the other, the banks have very little capital set aside in the event of default against these huge amounts of lending.

Mortgage resets peak in the first half of next year. We will find it is not just a sub prime problem and we will find it is not just an American problem.

As capital is wiped out and confidence disappears, the ability of the banks to lend will be hugely restricted - "the great unwinding". This is deflationary, but because of the inflation in the system already it will come out of property into many other sectors such as commodities (food and oil) as investors deem these to offer a better return than mortgage backed bonds.

American mortgage resets histogram.

Europe is similar and lags 12-18 months behind.

This particular mess has not even hit the fan yet and it will last for years.

I am from Wonderland.

Guys,

How can an organisation whose business is lending money be insolvent? If it is, whose money is it lending to others?

Also, if we do get a large dose of inflation, what will be the BOE reaction? Their remit is to keep inflation between 1 and 3 percent is it not?

Inflation hasn't been between 1 and 3% for a long time. It's been 10% or more for years.

MUHAHAHAHAHHAHAHAHAHAHHAHAHAHAH

MUHAHAHAHAHAHAHHAHAHAHAHAHAHA

MUAHAHHAHAHAHAHAHAHHAHAHAH

OK......what if the CPI basket remains unchanged, and it starts to rise above 3%....what then? Will they let it rise or will they....gulp....increase IR?

Welcome to the FED, BOE and any other State run bank, the lesser banks are copying the model of these. Creating money from thin air, the only difference is they have been caught out!!!!!

So what is going to happen? We are talking 100's of billions are we not?

Errol's response refers to money supply....inflation. The target you refer to is deemed by some quarters to refer to price rises as a result of the inflation of the money supply on a basket of goods.

Read up about where money comes from it's enlightening.

http://en.wikipedia.org/wiki/Money_creation

They can be insolvent if their reserves are wiped out by bad debts essentially - or before that if they breach rules such as the Basel capital adequacy rules. ..And lending is money.

The inflation target refers to a basket of goods and excludes housing (where a lot of the inflation has gone). If housing goes into reverse there is the possibility that investors come out of housing releasing all the inflation of the last decade into other assets that are eventually measured by cpi.

Yes.

Out of thin air.

Here, have the factual equivalent of the BoE's money - £1,000,000,000,000,000

Now all you need is someone to accept it. Oh wait....they have a government in their back pocket and you WILL accept it or else.

Their BANKING ON IT!!!!

Injin, you have lost me...thats a thousand trillion!!! Who has a government in their back pocket?

It doesn't matter what the amount is, you must accept what they offer as payment.

The government is run by and for the banking establishment. This means that whenever the choice is between the general public and the bankers, the government will always choose to protect the bankers. They are the de facto rulers of the western hemisphere.

Once you accept tthis simple fact, every law that is passed, every government action - from banning smoking to letting murderers back into the community early suddenly makes sense.

In short, what is going to happen is anything and everything possible to make sure the banking system survives. if this means mass starvation and homelessness, then it will be tried. If it means going to war, it will be tried. If it means creating a dictatorship, it will be tried. If it means nuclear war, it will be tried.

Anything and everything will be attempted to save this system.

Now that HPI's gone negative, they'll soon put housing back into the CPI basket. Bingo!

Yes.

But we know that won't happen, don't we? Why? Because the Basle capital adequacy rules will be changed and/or suspended first. Thou shalt not steal, unless you are a banker and get caught red-handed, in which case the law is suspended.

Look at the amounts. There are lots more decomposing cadavers out there than officially reported. They'll all pop up in the coming months.

http://www.ft.com/cms/s/0/42827c50-abfd-11...00779fd2ac.html
Out of the shadows: How banking’s secret system broke down

GBP anyone?

http://www.bloomberg.com/apps/news?pid=206...&refer=home
Dec. 17 (Bloomberg) -- Just a month after rising to a 26- year high against the dollar, the British pound is starting to look more like the beleaguered U.S. currency.

The pound weakened against 12 of the world's 16 most actively traded currencies since reaching $2.1161 on Nov. 9. In the U.K., just as in the U.S., policy makers are cutting interest rates to restore calm in credit markets and home prices are declining.

``When we look at economies around the world which are exposed to similar problems as in the U.S., the U.K. is pretty high on our list,'' said Andrew Balls, a global bond fund manager at Newport, California-based Pacific Investment Management Co., which oversees $721 billion. ``Sterling is a good currency to sell.''

The pound depreciated 3.5 percent to $2.0195 after reaching the highest level since May 1981 and fell for a third straight week. It weakened 10 percent versus the Canadian dollar this year and 5.8 percent against the euro. The dollar lost 7.9 percent this year on a trade-weighted basis against a basket of six currencies that make up the Fed's U.S. Dollar Index. It reached a record low in November.

Here, here.

This is the truth!

As CGNAO points out, the one known behind all that is going on is that it will lead to more consolidating witthin the banking system, more control to fewer people.

Another lovely observation, showing the utter pointlesness of gov stats and information.

LIES, DAMN LIES AND STATISTICS.

From the FT 'shadow' article:



... until the next cycle starts and everything looks tickety-boo and banks start complaining about
ridiculous, outdated restrictions, and arguing that the system is now 'much safer than it was then',
and '90% of the risk has been offloaded onto a rare species of parrot living in Burma' enabling us to
proudly rate this investment product AAAA.

I seem to be getting very cynical as time goes on.

Pent

It ain't working because liquidity can't fix insolvency.

This is 100% correct, guaranteed.

http://uk.reuters.com/article/marketsNewsU...17?rpc=401&

LONDON, Dec 17 (Reuters) - Euribor interbank interest rates for three-month money edged higher on Monday for the first time since the world's major central banks announced liquidity measures, while short-term rates edged marginally lower.

Three-month Euribor <EURIBOR3MD=> fixed at 4.9490 percent at the daily fixing, compared with 4.9410 percent on Friday. Two-month Euribor <EURIBOR2MD=> also fixed higher on the day.

One-month Euribor <EURIBOR1MD=> fixed marginally lower at 4.930 percent, compared with 4.932 percent on Friday.

The markets seem to be hoping otherwise right now...until some more bombs drop.

edit: added 'be'

They want to save the US dollar, but they can't.

This is 100% correct, guaranteed.

http://www.reuters.com/article/bondsNews/i...17?rpc=401&
Brazil's central bank holds auction to buy dollars
Mon Dec 17, 2007 12:41pm EST

SAO PAULO, Dec 17 (Reuters) - Brazil's central bank said on Monday it would hold an auction to buy dollars on the spot foreign exchange market as part of an ongoing effort to boost international reserves.

The Brazilian real BRBY was 0.72 percent weaker at 1.81 per U.S. dollar shortly after the announcement, backtracking for the fourth straight session.

Those who live hoping most often die hopeless.

Northern Rock's situation is by no means unique.

Protect yourselves.

http://www.timesonline.co.uk/tol/comment/c...icle3060223.ece
December 17, 2007
This crisis is no longer a simple problem of liquidity
Anatole Kaletsky: Economic view

Last week’s effort by the world’s central banks to relieve the global credit crunch with a cash injection failed to impress the markets. But the move is bound to win round the sceptics within the next few months. The decision is likely to be just the precursor to much more important, but controversial, operations to ensure the “solvency” of the international financial system.

The distinction between the problems of liquidity and solvency, which looks like the next challenge for monetary authorities around the world, is illustrated by the British Government’s travails over Northern Rock. The Northern Rock crisis looked initially like a liquidity crisis.

Nobody questioned the underlying value of the Rock’s mortgages and therefore its ability to repay depositors in the long term. The problem was simply one of timing – if too many depositors wanted to withdraw their money, the bank could not sell off or “liquidate” its mortgages and other long-term assets quickly enough to pay the depositors back. It is now apparent, however, that Northern Rock also faces a solvency problem. The collapse of confidence in the British housing market has reduced the market value of its mortgages.

As a result, Northern Rock’s problem is no longer just a matter of liquidity and timing. Even if the Rock could liquidate all its mortgages tomorrow, it could not raise enough money to repay its depositors and the Bank of England in full, because the market prices of mortgage assets are today much lower than 100p in the pound.

"Banks are always insolvent, it's just a matter of people noticing" - Murray Rothbard.

Fed injects more inflation into the markets

http://news.bbc.co.uk/1/hi/business/7148459.stm

mmm - in my mind insolvency is different from bankruptcy.

I believe they have tipped from insolvency to Bankruptcy as the property asset classes they have invested so much in see their value destroyed by up to 30% (more in my opinion) they are indeed bankrupt if I am not mistaken. Remember to include the CDOs and CDIs they have bought which cannot even be valued at all in many cases.

Banks = badly run businesses which have cash flow problems right now...........

Bankruptcy is when an insolvent bank is found out.

They can't hold it together for much longer. Major disruption dead ahead.

http://www.bloomberg.com/apps/news?pid=206...;refer=currency
Currency Volatility Rises as Bank Borrowing Costs Stay Elevated

By Liz Capo McCormick

Dec. 17 (Bloomberg) -- Volatility on major currency options rose to the highest in more than a week as elevated bank borrowing costs increased demand for insurance against swings in exchange rates.

Hold tight, the central banks have no plan
By Wolfgang Munchau
Published: December 16 200

"It turned out that market participants are not infinitely stupid."

"It is a fully fledged solvency crisis that has arisen because two giant and interlinked bubbles burst simultaneously – one in property, one in credit – leaving banks and investors on the brink of bankruptcy, some hanging on by their fingertips. Yet there is nothing the central banks are offering at this stage to alleviate a solvency crisis."

"So the message from last week is that central banks have no game plan. Expect continued stress in financial markets for most of next year and possibly beyond. Expect also further declines in property prices in the US and the UK and spill-overs to the real economy."


LINK