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Plan B: Central Banks Getting Ready For Financial Armageddon

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If the US debt-ceiling debate goes past the eleventh hour, and the default of the world’s largest economy becomes a reality, leading central banks around the world are gearing up to minimize losses and keep the world economy functioning.

If US lawmakers don’t reach a budget consensus and raise the debt ceiling by Thursday October 17, the US will become the first Western power to default since Nazi Germany in 1933, and will send markets into uncharted territory.

The rest of the world is bracing itself for what would happen if the bill is rejected, and the US inches closer to defaulting on its debts, which are largely foreign- held in the form of US Treasury Bonds.

Central banks have begun preparing for the worst-case scenario if US does fault, which would result in a serious devaluation of Treasury bonds, delayed payments, and a more large-scale version of the current government shutdown.

“Because in the past it’s always been sorted out is absolutely not a reason to fail to do the contingency planning,” Jon Cunliffe, who will become the Bank of England’s deputy governor for financial stability in November, told UK lawmakers.

“I would expect the Bank of England to be planning for it [uS default]. I’d expect private-sector actors to be doing that, and in other countries as well,” said Cunliffe, who acknowledged a default as “the main risk to the [global] financial system”.

The European Central Bank and the People’s Bank of China (PBC) have struck a deal that moves both banks farther from the dollar orbit. The two banks agreed to ‘swap’ $56 billion worth of yuan for $60.8 billion worth of euros.

Many central banks have reserves in the form of Sovereign Wealth Funds, which are also at risk if the US defaults, as many of the assets are held in dollars. These investment vehicles could be crippled by a default. China’s is estimated at more than $1.3 trillion - the world’s largest.

A historic shift

Neil Mackinnon, a former UK Treasury official, told RT the US default tango marks a shift in the global economic paradigm, from West to East.

If the US doesn’t act soon, “the dollar will decline and its importance will move to a multi-polar currency system and other currencies will take on board more importance,” said Mackinnon.

Over the weekend, economic leaders from around the world met in Washington DC at the International Monetary Fund’s annual meeting. The fund’s managing director, Christine LaGarde, issued a harsh warning the global financial system could enter a recession if the US misses its debt deadline.

The US Senate said they will announce a deal to end the shutdown and extend the debt ceiling on Tuesday, which will pass through to the House, where it will face Obama’s hard-nosed Republican opponents who want to cut funding of the Affordable Care Act.

Senate Majority Leader Harry Reid, a Democrat, said Tuesday has the potential to be a “bright day” and bring calm back to the global markets.

http://rt.com/business/plan-b-central-banks-217/#.Ul3k6xO_22o.twitter

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If the US debt-ceiling debate goes past the eleventh hour, and the default of the world’s largest economy becomes a reality, leading central banks around the world are gearing up to minimize losses and keep the world economy functioning.

If US lawmakers don’t reach a budget consensus and raise the debt ceiling by Thursday October 17, the US will become the first Western power to default since Nazi Germany in 1933, and will send markets into uncharted territory.

The rest of the world is bracing itself for what would happen if the bill is rejected, and the US inches closer to defaulting on its debts, which are largely foreign- held in the form of US Treasury Bonds.

Central banks have begun preparing for the worst-case scenario if US does fault, which would result in a serious devaluation of Treasury bonds, delayed payments, and a more large-scale version of the current government shutdown.

“Because in the past it’s always been sorted out is absolutely not a reason to fail to do the contingency planning,” Jon Cunliffe, who will become the Bank of England’s deputy governor for financial stability in November, told UK lawmakers.

“I would expect the Bank of England to be planning for it [uS default]. I’d expect private-sector actors to be doing that, and in other countries as well,” said Cunliffe, who acknowledged a default as “the main risk to the [global] financial system”.

The European Central Bank and the People’s Bank of China (PBC) have struck a deal that moves both banks farther from the dollar orbit. The two banks agreed to ‘swap’ $56 billion worth of yuan for $60.8 billion worth of euros.

Many central banks have reserves in the form of Sovereign Wealth Funds, which are also at risk if the US defaults, as many of the assets are held in dollars. These investment vehicles could be crippled by a default. China’s is estimated at more than $1.3 trillion - the world’s largest.

A historic shift

Neil Mackinnon, a former UK Treasury official, told RT the US default tango marks a shift in the global economic paradigm, from West to East.

If the US doesn’t act soon, “the dollar will decline and its importance will move to a multi-polar currency system and other currencies will take on board more importance,” said Mackinnon.

Over the weekend, economic leaders from around the world met in Washington DC at the International Monetary Fund’s annual meeting. The fund’s managing director, Christine LaGarde, issued a harsh warning the global financial system could enter a recession if the US misses its debt deadline.

The US Senate said they will announce a deal to end the shutdown and extend the debt ceiling on Tuesday, which will pass through to the House, where it will face Obama’s hard-nosed Republican opponents who want to cut funding of the Affordable Care Act.

Senate Majority Leader Harry Reid, a Democrat, said Tuesday has the potential to be a “bright day” and bring calm back to the global markets.

http://rt.com/business/plan-b-central-banks-217/#.Ul3k6xO_22o.twitter

It all seems a bit like 1984. Where its not constant war against Eurasia or whoever, but constant war against the ravages of the financial markets

Everyone is now on edge, this is going to be a complete disaster, we will all be plunged into the dark ages. Then Suddenly a statement from our glorious leaders, at the last hour the brave souls have come up with a solution to the debt crisis, a great victory, trumpet fanfare, all the proles relieved clapping etc etc. Do this every few months repeat rinse repeat

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It all seems a bit like 1984. Where its not constant war against Eurasia or whoever, but constant war against the ravages of the financial markets

Everyone is now on edge, this is going to be a complete disaster, we will all be plunged into the dark ages. Then Suddenly a statement from our glorious leaders, at the last hour the brave souls have come up with a solution to the debt crisis, a great victory, trumpet fanfare, all the proles relieved clapping etc etc. Do this every few months repeat rinse repeat

Like all confidence tricks though, it starts to wear thin, and belief in the system slowly disappears. Drip drip.

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As anyone but the MSM have noted, the US govt is constitutionally obliged to pay its debts first, not last, and even with huge deficits, its tax revenues exceed debt interest payments about 10 to 1. It would have to deliberately seek a default than simply fall into one.

Just more 'the sky is falling' tripe from the MSM.

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Many central banks have reserves in the form of Sovereign Wealth Funds, which are also at risk if the US defaults, as many of the assets are held in dollars. These investment vehicles could be crippled by a default. China's is estimated at more than $1.3 trillion - the world's largest.

A historic shift

Neil Mackinnon, a former UK Treasury official, told RT the US default tango marks a shift in the global economic paradigm, from West to East.

If the US doesn't act soon, "the dollar will decline and its importance will move to a multi-polar currency system and other currencies will take on board more importance," said Mackinnon.

Over the weekend, economic leaders from around the world met in Washington DC at the International Monetary Fund's annual meeting. The fund's managing director, Christine LaGarde, issued a harsh warning the global financial system could enter a recession if the US misses its debt deadline.

The US Senate said they will announce a deal to end the shutdown and extend the debt ceiling on Tuesday, which will pass through to the House, where it will face Obama's hard-nosed Republican opponents who want to cut funding of the Affordable Care Act.

Senate Majority Leader Harry Reid, a Democrat, said Tuesday has the potential to be a "bright day" and bring calm back to the global markets.

http://rt.com/busine...6xO_22o.twitter

There is no alternative to the dollar. That's the killing joke. The US treasury is counterparty to everything. If the US govt defaults then US rates will rise and the dollar will appreciate on the back of that.

PS There's going to be a worldwide recession next year come what may, as 2008's debt deflation resumes in earnest.

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PS There's going to be a worldwide recession next year come what may, as 2008's debt deflation resumes in earnest.

Recession? It hasn't gone away! More likely slipping into depression

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What makes me laugh is that no one seems to think there is anything wrong with them using their newly made up money to pay off their debts.

This might well go on for a few years but eventually this will have to stop.

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This evening on the BBC News they were trying to claim that it was the wording of the agreement that was causing the hold up rather than the proposal of increasing the debt ceiling itself.

It was "they've agreed on the wording now " so they won't default.

It was like the TARP when the crisis started. They as good as folded straightaway.

Edited by billybong

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Oh no they won't

Oh yes they will

Oh no they won't

Oh yes they did

Next episode in this soap / pantomime starts in January with the thrilling finale on 15th. Will the evil Republican defeat our hero Obama? will the world be saved? There are 17 or 18 trillion reasons to tune in and see the thrilling action.

It will all go pear shaped one day. but when? 2 years 5 years 10 years.

Hell knows what assets to hold to protect your self.

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It all seems a bit like 1984. Where its not constant war against Eurasia or whoever, but constant war against the ravages of the financial markets

Everyone is now on edge, this is going to be a complete disaster, we will all be plunged into the dark ages. Then Suddenly a statement from our glorious leaders, at the last hour the brave souls have come up with a solution to the debt crisis, a great victory, trumpet fanfare, all the proles relieved clapping etc etc. Do this every few months repeat rinse repeat

Nice analogy. Everything is interlinked if they allow the markets to fail correct it will destroy the pension funds etc...

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It all seems a bit like 1984. Where its not constant war against Eurasia or whoever, but constant war against the ravages of the financial markets

Everyone is now on edge, this is going to be a complete disaster, we will all be plunged into the dark ages. Then Suddenly a statement from our glorious leaders, at the last hour the brave souls have come up with a solution to the debt crisis, a great victory, trumpet fanfare, all the proles relieved clapping etc etc. Do this every few months repeat rinse repeat

A bit like the war on terror?

You have to comply with your loss of liberty and increased monitoring for your own benefit.

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