Doesn't help that the black economy keeps nearly all the available hard currency under it's mattress and not in the bank.

Oh no.

The real problem is that the black ecnomy is usng american dollars.

We are all SO ******ed.

Doing the rounds this morning.

The old Soc Gen risk manager.

The debts will be monetized which is very inflationary. In a pure deflationary scenario the institutions you talk about will be allowed to fail. Like I have said many times before - this will not be allowed to happen and the debts will be socialised (everyone pays through inflation).

Sounds very fishy to me.

boiling the frog comes to mind.

got worse and worse but didnt notice till he dies

The Reuters article says:



What do they mean "plans to raise 5.5 billion euros through a capital increase" - where is the increased capital going to come from?

well, the guy who won the bet on the other side might have a crack at it.

If the 'bet' was going long on the stock markets, is there necessarily a guy on the other side of the bet? In any case, why would anyone invest in a company that can accidentally loose a record sum by the alleged actions of rogue individual?

Are they planning to issue stock, or to win the money back with a more outrageous speculation?

well, logic dictates if a player has lost money in a gamble, there is a winner. not that I understand the stock market as I would need to be earning £150K plus bonus just to even begin to understand it.

If that was true, we couldn't have a systemic crisis. could we?

Absolutely. They can't and won't allow the large banks to fail. They will monetise their debts before this would ever happen. Just look at Northern Rock, which is hardly a Goldman Sachs or Merrill Lynch. They couldn't allow it to fail. Remember, the fed basically IS Goldman Sachs. If you think about it, what would deflation mean for the US? Increased social security obligatons (which are already unfunded). I do not see the politcal will to go back on their promises. Only solution: print the money. Increased foreign debt obligations (which are already beyond breaking point) - Result, either the US defaults (argentina style currency meltdown here we come), or they print the money to pay the debts. And this is without even considering the trillions of dollars of toxic derivative bailouts in the pipeline. No, they will do EVERYTHING in their power to fight nominal deflation. And when push comes to shove, the temptation to fire up the printing presses will prove too great. As it has done every other time in the history of fiat currency..

That is fallacious logic in an environment with contracting credit.

explain: I made a bet with someone the market goes up, there must be a counterparty to the bet or there could be no bet?

There is a counter-party... but the thing about longs is that they are equivalent to buying the stock. The counter party is equivalent to selling the stock.

If the stocks were bought on credit (which, lets face it, is likely at least indirectly the case) then something interesting happens when lenders realise that they've taken too big an average risk. They call in their loans; slash overdraft facilities and attempt to repay the central bank (or, at least, stem the rate at which they borrow more.) If the party selling the stock (for a "winning" price) merely uses this cash to repay essential debts - yet the banks don't lend the money to anyone else... this means that purchasing power within the system as a whole is reduced.

Am i right in thinking that what you are saying is that the BET never completed, the bank has just bottled out?

No, I think that SocGen lost a lot of money. However, when one takes a wider view, one may well find that the counter party in that deal did not make a lot of money (that they can spend) owing to other commitments... which is extremely likely if the counter party acted responsibly and managed their risk by hedging. It is possible that there are a lot of 'winners' - but that these 'winners' are in no position to fund new investments because their credit worthiness is impaired - and the windfalls were essential in order to stay afloat.

yeah, taken that on board, there may be a lot of counterparties, but they will as a whole get their money? yes?

Next domino lined up.

I URGE you all to protect yourselves NOW.

http://uk.reuters.com/article/stocksNews/i...24?rpc=401&
Banks move to guard against counterparty failures
Thu Jan 24, 2008 11:48am GMT

LONDON (Reuters) - As banks foresee a rise in corporate defaults in 2008, triggering payments on billions of dollars of credit default swap contracts, some such as Dutch group ABN AMRO (AAH.AS: Quote, Profile, Research) are moving to guard against losses from swaps that go sour.

But banks and investors need to act far in advance to take advantage of the options available to guard against the risk that counterparties in CDS contracts will be unable to pay.

"The golden rule is to start early. If you start worrying about the counterparty when they are under duress your options are fairly limited," said Robert McWilliam, head of the counterparty risk management team at ABN AMRO .

"You need to have a process whereby you are constantly monitoring for early warning signs of deteriorations in your portfolio and a general rule that you will always hedge exposures above certain levels, even if it's a triple-A."

In the CDS market big banks and brokers take the greatest degree of counterparty risk, because they are at the centre of trading and take one side of almost all contracts.

Many banks were side-swiped by the subprime mortgage lending crisis, which led to a loss of confidence in some counterparties such as structured investment vehicles (SIVs) and bond insurers.

Yes, but they may well not be spending it... or investing it in dodgy banks that loose billions at the whim of a rogue individual. :-)

I've a friend who has an affordable mortgage and has tinkered with the stock market for years. In 2007 he earned above average - and wondered what best to do with the cash. If it had been 2003, he'd have invested it. In 2008 he wants to pay down his mortgage - to reduce his cost of living. If lots of people think this way, there's where the money goes.

Sovereign Wealth Funds are still stupid enough. The banksters especially in New York must laugh off their @sses how stupid most of Asia and the Arabs are. Throwing cash into a black hole....

In exchange for stock, I presume?

It seemed a very odd phrase to me... if it is invested otherwise, surely it is just a loan and not a re-capitalisation?

There will be a strong element of self preservation in this as well, don' t forget.

If the yanks protection leaves a lot of the SWF guys, they will be killed by their own populations in short order.

Wow Cramer thinks were in a big time deflationary environment. He also thinks the Fed are will behind the curve on this one. Poke in the eye for the central banks indeed.



http://www.businessandmedia.org/articles/2...0122120120.aspx

Pay down debt- sounds good advice for a forthcoming recession

I think hes talking about his bonus and portfolio deflating to nothing

These are the only two things deflating, besides houses and this one here:

Exactly, we will return to the use of central bank notes, however, in taking control of monolines and credit card companies they will transfer these interest paying assets into their own coffers while crushing normal bank credit supply, the overall amount of money (digital bank balances) will decrease, but the number of their notes in circulation will increase. Remember this is a credit bubble, we are about to see the overall money supply collapse into the hands of the central banks, once they have that transfer completed interest rates are going up - like the landlord who can get away with putting up rents because the tenants have no choice but to pay.

Why else would they copy Japan just after their HPI fueled economy went into deflation. deflation is great for central banks, high lending, positive real interest rates and 0 nominal interest rates, i.e. every bank note they print starts to be worth more from the moment it leaves the presses.

I totally disagree. Central banks are not there to make profits. They are there to cover up, pool, and socialise losses of the commercial banks. They are also there to finance fiscal deficits and manipulate currency markets.

oh, you are going to get some early 30's, mid management, inexprienced in life, type replies to that one GF.

you know those people who put "Your Name: Bsc, Msc, Phd" on their business cards & in their sigs on their emails that say 'message of the day' b0ll0x.





imho,

GOM, Bsc. Bronze Swimming Cert.

Exactly, look at the panic into treasuries, the Feds private owners could want nothing more as it puts the fed in a stronger position.

You can bet it'll strike again.

I am hearing rumours circulating that

1) they knew SocGen was in trouble and needed a capital infusion
2) the "rogue trader" is just a cover story, to make it appear a problem confined to a single bank

I have no evidence but no doubt whatsoever about it.

I therefore URGE you all, more urgently than ever before, to PROTECT YOURSELVES NOW.

http://www.reuters.com/article/rbssFinanci...lBrandChannel=0
SocGen style fraud could strike again, but bigger
Thu Jan 24, 2008 11:12am EST

ZURICH, Jan 24 (Reuters) - French bank Societe Generale's (SOGN.PA: Quote, Profile, Research) 4.9 billion euro ($7.1 billion) loss, blamed on a single employee, is a stark reminder that rogue traders can elude the most sophisticated security systems until it is too late.

Many other banks could be exposed, no matter how much they have invested in security dragnets and advanced fail-safe procedures, and fraudulent losses are likely to grow in size.

"Banks are making a lot more money and taking much bigger trading positions, so you can expect the size of scandals to get bigger," said Simon Maughan at MF Global. The CEO and Chairman of Lehman, Richard Fuld, told Reuters at the annual gathering of the World Economic Forum in Davos that the loss uncovered at SocGen was "everyone's worst nightmare" -- tacit admission that no bank should consider itself entirely immune from such a calamity.

The whole rogue trader story sound like a plot right out of a Tom Clancy book. Bottom line is this SOC. GEN has to get emergency funds. That should tell you everything you need to know right there.

How soon til it's "AL Q stole my pension fund", I wonder?

The Northern Rock saga is going on and on since September, and it was only tens of billions for a single institution. Think what a mess a $2.3 trillion multi-party bail-out will become.

http://www.marketwatch.com/news/story/bond...p;dist=hplatest
SAN FRANCISCO (MarketWatch) -- Bond insurers fell Thursday after New York's top insurance regulator sounded a cautious note on any bailout of the ailing $2.3 trillion industry.

Security Capital Assurance (SCA 3.08, -0.71, -18.7%) was the worst hit after the bond insurer lost its AAA rating from Fitch Ratings.

New York Insurance Superintendent Eric Dinallo issued cautious remarks Thursday on the possibility of a bond-insurer bailout, saying that any plan would be complex and take time. "These are complicated issues involving a number of parties, and any effective plan will take some time to finalize," he said in a statement emailed to MarketWatch.

Ah, right on time an Uber Rogue Trader turns up,How convenient is that.

Got a Black Hole in yer accounts, get yirsel a Rogue Trader, sorted.

If inflation doesn't put a hole in your account, then the banks going titties up will, and if that doesn't do it then a rogue trader will just nick it.

Well I don't want to add fuel to an already flaming pyre of speculative frenzy, but they have named the trader and then said that he couldn't be found. Probably gone for a walk in the woods.

That seems to blow a whole in the "reason" for the DOW miraculously rising 700 yesterday. They rose on rumors of a bailout supposedly yet when someone talks sense they ignore it. It was external support that busted a load of shorts that got the ball rolling yesterday. If anything the 700 points rally on the DOW shows how much short sentiment there is out there.

The FED's fear is 100% justified, but there is nothing they can do about it.

http://www.washingtonpost.com/wp-dyn/conte...8012203065.html

At the moment, the Fed's big fear isn't a mild U.S. recession. It is a market meltdown in which the failure of one bank or hedge fund or insurance company triggers another and another as panicked investors and lenders all head for the exits at the same time.

FOR SALE: Pit props to keep the roof falling in. Millions available, locally stocked.

Reminds me of a scene in "Full Metal Jacket"

Joker has just arrived in Viet Nam and is being transported by helicopter across farmland. The guy manning the helicopter gun is randomly machine gunning Vietnamese farmers. When he notices Joker's horrified look he explains

"If they run they're Gooks. If they don't run they're well trained Gooks".

This thread will run and run.

http://www.jsmineset.com
Jim Sinclair’s Commentary

I smell a rat. Rogue trader sounds a lot better than SIVs. The rogue takes the hit, does one year at a country club lock-up and then gets retirement pay. To assume a trader had a position that could have made or lost 7,000 million and no one knew is raving BS.

BBC said they sacked him and the whole management team.

Of course, if this team was making money, the tendency for the top brass would be to let them carry on regardless.

Haw Haw Hee Haw

Was thinking that myself, even my flat mate (who knows nought) screwed her nose up and said what.



Someone would have noticed 3.7 Billion I think nes ce pas

Financial Times:

http://www.ft.com/cms/s/0/5533cf5c-cab6-11...0077b07658.html
SocGen raises questions over Fed rate cut

By Paul J Davies, David Oakley and James Mackintosh in London, Ralph Atkins in Frankfurt and Krishna Guha in Washington

Published: January 24 2008 20:10 | Last updated: January 24 2008 20:10

....

“The idea that all this was caused by one trader’s mistake is very convenient but there are worse things out there,” said a senior European investment banker.

Keep posted here - http://roguefrenchbanker.com/

Anyone offering odds on a corpse, I've a few quid I'll place?

Desperately seeking cash.

This is the beginning of the final stage: exponential, nonlinear runaway losses.

http://www.bloomberg.com/apps/news?pid=206...&refer=home
Bank of America to Sell Up to $13 Billion of Debt

Jan. 24 (Bloomberg) -- Bank of America Corp., the second- biggest U.S. bank, more than doubled its planned sale of preferred shares to as much as $13 billion, after offering the highest yields in 15 years.

The bank will sell as much as $6 billion of perpetual securities that may yield 8 percent, the most since 1992, and $6 billion to $7 billion of convertible shares, according to a person familiar with the sale who declined to be identified because terms aren't set.

http://uk.news.yahoo.com/rtrs/20080124/tbs...-9c49c44_3.html



Can't even afford a desk in London. Not exactly full coverage then.

The end is drawing near, even the Financial Times is admitting it.

http://www.ft.com/cms/s/0/88e011d0-cab6-11...0077b07658.html

For investors, it is an ominous reminder during a dramatic week for the world’s battered financial markets that the banking system is wide open to a catastrophic failure. Just as the volatility in asset prices since the start of the year added to SocGen’s problems, other banks may well be nursing similarly large trading losses from poor judgment.