December 11, 2011 – LONDON – The Telegraph sounded alarm bells late Friday that the Eurozone banking system is on the edge of collapse. Specifically, the problem is related to a lack of acceptable collateral, or ‘collateral crunch’, for overnight and other short-term bank funding (emphasis added): Senior analysts and traders warned of impending bank failures as a summit intended to solve the European crisis failed to deliver a solution that eased concerns over bank funding. The European Central Bank admitted it had held meetings about providing emergency funding to the region’s struggling banks, however City figures said a ‘collateral crunch’ was looming. “If anyone thinks things are getting better then they simply don’t understand how severe the problems are. I think a major bank could fail within weeks,” said one London-based executive at a major global bank. Many banks, including some French, Italian and Spanish lenders, have already run out of many of the acceptable forms of collateral such as U.S. Treasuries and other liquid securities used to finance short-term loans and have been forced to resort to lending out their gold reserves to maintain access to dollar funding. Izabella Kaminska at FT Alphaville wrote about this story early and has covered it well. She wrote that the problem is becoming so acute that even the Bundesbank is running out of money. While policy is decided centrally, actual enforcement and implementation of that policy is conducted on a national central bank (NCB) level. Generally speaking, the system ensures that all NCBs carrying surpluses channel them over to NCBs carrying deficits. The problem is that since the crisis unfolded, the number of NCBs handling deficits has started to outnumber the number of NCBs holding surpluses. One particular NCB — the Bundesbank — has become a sort of lender of last resort for the whole Eurobanking system. –Seeking Alpha emphasis italicized or added
Alpha lists the stock charts from four very stressed European banks, which it calls the Four Horsemen of the Euro Banking Apocalypse:
(left) Commerzbank– 2nd largest bank in Germany and (right) Crédit Agricole– the largest retail banking group in France
I America, when and how were banks deregulated? I was paying attention to other things–family, sickness, work–like most Americans–and I failed to notice loosening of banking regulations. Was it under Carter, Bush I, Bush II? I know Obama kept it going. Everyone says they don’t want a socialist state, and equates “control from the top” to socialism–but if we don’t have regulations that are enforced….Everyone says it is too late, but it’s a paper house of cards, isn’t it?
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How modern banks were deregulated by repeal of the Depression era Glass-Steagall Act:
The bill that ultimately “repealed” the Act was brought up in the Senate by Phil Gramm (R-Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999. The bills were passed by a Republican majority, basically following party lines by a 54–44 vote in the Senate and by a bi-partisan 343–86 vote in the House of Representatives. After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bill resolving the differences was passed in the Senate 90–8 (one not voting) and in the House: 362–57 (15 not voting). The legislation was signed into law by President Bill Clinton on November 12, 1999.
In reality, the repeal involved only one provision of the Act, the one preventing the same holding company from controlling both a commercial bank and an investment bank.” Proponents argue that repealing this provision had little impact on the financial system and even helped restore stability during the financial crisis.Ten years after its repeal, detractors condemn Glass-Stegall’s repeal for reestablishing conflict of interest within the financial industry and fostering “too big to fail” institutions that led to the housing market collapse and its associated financial crisis. The banking industry had been seeking the repeal of Glass–Steagall since at least the 1980s. In 1987 the Congressional Research Service prepared a report which explored the cases for and against preserving the Glass–Steagall act. –Wikipedia
http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act
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The derivative debt is staggering, how can you instill confidence (which is the last straw) in the market when debt is used to pay debt.
Time to start worrying is an understatement.
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Probably big event this week surrounding this issue.
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Sadly Alvin, your summary on page 305, of your book, could not have been more accurate. We really are on the verge of collapse.
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Thanks, Evo. I think that corresponds to page 263 in the new edition. And you’re right- we’re on the brink of something “unfantomable.”
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Start worrying? My field, civil engineering, has been on the fritz since 911! No amount of worrying seems to be helping though. This country’s banking system was hijacked by the Federal Reserve, and the collapse is intentional as of the Gramm bill passed in the shadow of, you guessed it, 911, the new buring Reichstag. That’s the bill that created the derivative funds, and Gramm is working now at a Swiss bank. Hello?
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Yes, he helped repeal the Glass-Steagall Act of 1933 which de-regulated the banking system.
And fate preserves the farmer in strength to reap his own harvest.
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this news is indeed verry alarming! but it don’t really suprise me you have to be verry dumb for not have seen this coming
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Thanks for all your great work Alvin…
May I add to the above thread that the derivatives timebomb has just been overtaken on the dragstrip to the brickwall…hypothecation is name, hi-octane implosion is the game…
http://www.zerohedge.com/news/why-uk-trail-mf-global-collapse-may-have-apocalyptic-consequences-eurozone-canadian-banks-jeffe
http://silverdoctors.blogspot.com/2011/12/jim-willie-jp-morgan-crashed-mf-global.html
http://www.zerohedge.com/news/gold-rehypotecation-unwind-begins-hsbc-sues-mf-global-over-disputed-ownership-physical-gold
http://harveyorgan.blogspot.com/2011/12/extremely-important-more-fallout-on-re_6521.html
Best wishes and good luck to readers hoping to get ahead of the high-speed collapse that may now be imminent as a result of this fundamental breakdown in trust between depositors and investors in most vehicles of financial transaction, including your local bank…globally…
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You’re welcome friend. Thanks for the links and information.
Best regards,
Alvin
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I have a question about JP Morgan Chase and their 78 trillion dollar debt since they are who I bank with. What happens if you get approved for a home mortgage through them and then they go belly-up? Does anyone have an answer or idea on this? It would be greatly appreciated.
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One, derivative debt is kept off bank balance books so they look healthier than they really are and they can pass so-called “public stress-tests”…and secondly, the day that J.P Morgan Chase crashes- I don’t think there will be much of a world left for any of us to worry about.
If you want a financial technical answer to your question, those mortgage debts would probably be placed in a government receivership trust similar to the Resolution Trust Corporation, which was set up in the 1980’s-90’s when the Saving & Loans were liquidated.
See: http://en.wikipedia.org/wiki/Resolution_Trust_Corporation
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“Well, well, well, looks like Maggie was right after all. Who will be the next domino to fall in the next installment of As Socialism Falls? Stay tuned in next week for the answer to this and many other questions. Same bat time, same bat channel.”
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Unfortunately, when the collapse comes, so will social order and war will break out. Total chaos, will need a leader to emerge to take control and restore balance among the nations and order.
Someone to cling to, to restore confidence.
Just a thought…………….
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So true Dennis E. And I believe that “someone” has already been groomed for the position and is waiting in the wings – waiting for the final collapse and for the upcoming wars. People will flock to him as a savior, treating him like an idol and a god. Unfortunately, doing so will only bring their final destruction. I cry and grieved for those who are and will be deceived.
Maranatha
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Thanks Omniveresling and Luisport,
Luisport posted a link the same or similar to the MF Global link above, I think the other day, but I just can’t find it now.
I think it no doubt answers some questions in Mariel’s mind.
A key couple of paragraphs:
“Keen to get in on the action, U.S. prime brokers have been making judicious use of European subsidiaries. Because re-hypothecation is so profitable for prime brokers, many prime brokerage agreements provide for a U.S. client’s assets to be transferred to the prime broker’s UK subsidiary to circumvent U.S. rehypothecation rules.
Under subtle brokerage contractual provisions, U.S. investors can find that their assets vanish from the U.S. and appear instead in the UK, despite contact with an ostensibly American organisation.
Potentially as simple as having MF Global UK Limited, an English subsidiary, enter into a prime brokerage agreement with a customer, a U.S. based prime broker can immediately take advantage of the UK’s unrestricted re-hypothecation rules.”
These guys know the rules and are expert at finding ways around them. When the whole global system finally unravels, no doubt very very soon, the world will be amazed, gobsmacked is probably a better word, at just how large and intricate the honeycomb is.
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Thanks, Alvin, for your answer to my question about deregulation. I would have looked at this sooner but I was babysitting and bringing what little of the gospel may come to my 6 years old grandson, praise God for the fortuitous opportunity.
Many of us are getting our first real look at economics these days. Hahahah!
Brrr, the world grows cold with that news about economy. It’s very cold physically here in New Mexico and snow will fall on snow on Tuesday.
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Wonder if we should max our credit cards on supplies that we will need to survive the coming storm? If the banks collapse, we won’t have to pay back what we owe, right?
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“I wanna get out of this city. First thing I’m gonna do is take a bath in the creek and wash this city dirt off me,” Dix Handley to his girl, Doll Conovan –The Asphalt Jungle, 1950
I think the tag line for this movie Traffic sums up the corruptive maze of this world. “No one gets away clean.” If the system can find dirt on you; it’ll also find a way to hold it over your head. Debt is the slavery of the 21st century.
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So Clinton signed into law that repeal of Glass-Steagall.
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To say that this is frightening is an understatement. But now is not the time to panic. Now is the time to depend on Jesus who promised to provide His children with what we need. My prayers are for all of my EP friends.
Maranatha
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I never even took an accounting class. I am criminally ignorant of economic theory and practices but it seems to me that the entire global system is built around trust and we’ve reached a point where that trust is rapidly diminishing. My question is what happens the day after the CRASH?
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The Global Banking System: the magic of turning a little cash into a mountain of credit
The word “con” comes from the word “confidence” and like any great magician, the skill of the artist is based on his ability to convince the audience to look in the wrong place at the right time- something known as ‘misdirection.’
“Misdirection is one of the most important skills that a good magician must master before he can truly make his audience believe in his magic.” -Magicmotta
Here’s my commentary from a previous post. Here’s a simple analogy of how banks perform magic tricks with your money: Mike moves from the U.S. to Costa Rica and transfers his account of 10,000 from Bank U.S to Bank Costa Rica. Does Bank U.S. ship the cash to Costa Rica? No. Bank U.S. simply issues a credit to Bank Costa Rica. Bank Costa Rica takes the $10,000 credit and now goes to Bank of Brazil and uses the $10,000 credit to leverage against borrowing $100,000. With the $100,000- Bank Costa Rica will put $5,000 in cash reserve, place $50,000 in trading, futures and derivative options and will loan out most of its own money of $400,000 at 5% interest while balance leveraging the remaining $45,000 Brazilian dollars which is used as instant liquidity. Bank Cost Rica expects to make $100,000 from its market trading and $420,000 from its loan portfolio. So, it now leverages that $520,000 to borrow $1 million from the Bank of Mexico. Meanwhile, the Bank of Brazil is expecting $106,000 back from the Bank of Costa Rica, so it leverages that incoming credit to borrow $600,000 from the Bank of Colombia to strengthen its portfolio. We have not inflated $10,000 in cash to a declared credit value of about $1,700,000 dollars.
Now the problem: Mike withdraws his $10,000 out of Bank Costa Rica to help purchase his retirement home. Just as Mike begins settling into retirement- a Recession hits and there are huge losses in financial markets. Because of the Recession, people are laid off so the $400,000 residential loan tendered to Construction B Company by Bank Costa Rica defaults. Now Costa Rica has lost its $10,000 cash deposit, it has lost $30,000 in a bad market and it has $400,000 to write off as a bad debt. Now the bank is looking at $440,000 in loses less its $45,000 in liquidity = $395,000 in loses on the books. But wait, it still owes the Bank of Brazil $100,000 + ($4,000 in interest) and the Bank of Mexico $ 1,040,000—- so now, it’s total loses is $1,539,000 because it gambled with Mike’s $10,000 in the wild hopes of striking it rich. Bank Costa Rica has now put both the Bank of Brazil and the Bank of Mexico in jeopardy because it cannot repay its loans to either institution. Worst, the bonds both banks used to insure against default loses cannot be redeemed in time to recover operating capital because of contract dates. Now, the Bank of Brazil has put the Bank of Colombia in jeopardy because of its loan defaults.
And this is a simple analogy of just how easily the dominoes start falling when a little cash of $10,000 is taken to create a nightmare credit bubble of millions of dollars which is used to prop up 4 banks with nothing more than IOU’s. Now you know why debt dollars probably outnumber cash reserve dollars by about 2000 to 1. The actual statistic of credit dollars to cash is likely much higher but the whole finanical system is nothing more than an elaborate ponzi scheme as even convicted con artist Bernie Madoff himself said.
I think the day after the crash, people will be lighting fires with currencies across the globe. I think the commerce of gold will be made an illegal tender as it was during the Great Depression and I think we will see the birth of a global financial system which will mandate something called “global austerity” and “debt-sharing.” Europe has tried military, economic, and shared sovereign governance and all have failed. The missing piece of the equation will be “forced mandated religious worship” and we will see a sort of resurgence of something called a new Holy Roman Empire in Europe. The Vatican is already calling for a Central World Bank and said that the economic paradigm of the New World Order that will arise from the global economic crisis should conform to the higher principles than just to the laws of nation states or individuals. Thus the planet’s NWO ‘final solution‘ will be a religious one: “And no man might buy or sell, save he that had the mark of the beast, or the number of his name.” Revelation 13:17
http://www.silver-coin-investor.com/Gold-Confiscation.html
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Alvin, once again, you make sense of it all. And once again, I say, you are a wonderful teacher. Thank you.
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“When he ascended on high, he led captivity captive and gave gifts unto men.” Ephesians 4:8
May God be glorified in our all efforts. Thanks for being a cherished friend.
Grace in Christ,
Alvin
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The yield on the Italian 10-year bond, which had been sub-5.8% at one point last week, is now back above 6.5%, obviously reflecting some kind of return to fear.
A warning from Moody’s, that it will revisit the ratings of all EU countries in light of the summit, isn’t helping.
Markets are off overall.
US futures are down a bit less than 1%.
Italy’s FTSE MIB is down 1%.
Obviously the week will be dominated by the same Euro news, as people sort out the extent to which the Eurozone has made progress.
Read more: http://www.businessinsider.com/morning-markets-december-12-2011-12#ixzz1gJmOgohl
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It’s a cankerous cancer that’s devouring the lining of its own greedy stomach. Very interesting days ahead of us.
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Moody’s Sends Out Big Ratings Warning To All EU Sovereigns After Summit That Solves Nothing
Read more: http://www.businessinsider.com/moodys-sends-out-big-warning-to-all-eu-sovereigns-2011-12#ixzz1gJoD7fA0
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KRUGMAN: Now Fascism Is On The March In Europe
Read more: http://www.businessinsider.com/krugman-fascism-on-the-march-in-europe-2011-12#ixzz1gJovX4FP
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Italian 10 Year: 7.20%
http://twitter.com/#!/zerohedge
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So as I thought this is like a Monopoly game after all and in the end they will scrap the game and start over because no one was playing fare and we start off with new values and rules with the NWO banking system. How convenient !
In Christ,
Caroline
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Central Banks: the money printing press that ate the world
Starting over with the golden rule. “He that has the gold, makes the rules.” This is all playing like a script.
How to destroy the world’s financial system in seven easy steps
Stage One: Deregulated banks create credit bubble
Stage Two: Credit bubble creates sovereign debt bubble
Stage Three: Sovereign debt bubble under reassurance of global derivative debt bubble
Stage Four: Banking Crisis results from lack of liquidity as cash is now feeding unquenchable credit fires (Bank loans dry up for economic growth- Recession deepens)
Stage Five: Ratings Agencies downgrade banks- now they can’t borrow money from each other and are forced to turn to Central banks
Stage Six: Monetization policies of over-printing by Central banks to rescue banks. This devalues currency creating hyperinflation
Stage Seven: Entire system crashes from excessive debt, over-printing, and over-leveraging
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Wow, this has been well played (by the NWO?). Although we are just pawns in this game, in a way, this is also our fault. We wanted the “finer things” in life, for ourselves and our children. We’ve gone in over our heads in debt, both as a nation and as individuals. (Yes, I am also guilty.) There are many of us who have either cut our losses, or downsized out lifestyles. However, there are others who will not know where to turn when it all caves in.
I thank you, luisport, and other posters for all of the information you have provided. Not only for warning us of what is coming but for reminding us where our Blessed Hope is.
In reading on of the links, I came across another article.
Italy Is Getting Demolished, US Futures Keep Diving After Intel Warning
ORIGINAL POST: This is getting ugly.
The Italian stock market is off 2.77%.
Dow futures are off over 100. [Now off over 200 as of this posting.]
UPDATE: It’s getting worse. Italy is now of over 3%. US futures are pointing to losses of well over 1% in the wake of a just-announced warning from Intel.
http://www.businessinsider.com/italy-is-getting-demolished-2011-12
Maranatha – O Lord Come
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Definitely, and this shows us where we are as far as seriousness in this crisis:
Stage One: Deregulated banks create credit bubble
Stage Two: Credit bubble creates sovereign debt bubble
Stage Three: Sovereign debt bubble under reassurance of global derivative debt bubble
Stage Four: Banking Crisis results from lack of liquidity as cash is now feeding unquenchable credit fires (Bank loans dry up for economic growth- Recession deepens)
Stage Five: Ratings Agencies downgrade banks- now they can’t borrow money from each other and are forced to turn to Central banks
Stage Six: Monetization policies of over-printing by Central banks to rescue banks. This devalues currency creating hyperinflation
Stage Seven: Entire system crashes from excessive debt, over-printing, and over-leveraging
At stage 6, sovereign countries will began leveraging off their gold reserves when the Central Banks cannot print enough paper currency or print it fast enough to feed the raging unquenchable fires of a credit-debt crisis that has now engulfed the world. Note, I said credit-debt crisis because “credit” implies deliberate orchestration by international financiers. The media is calling this a debt crisis- which is only half-correct. Once the currencies are destroyed through devaluation, equity markets are depressed, banks are unsafe and insolvent and no longer safe to deposit your money, unemployment is rampant and the gold has been swapped by countries to stave off creditors and further ratings downgrades- we’re facing an Endgame scenario and this thing could crash anytime with one large so-called “trigger event.”
End Game: Japan has already started a gold and bond swap for JGB’s. See Gen’s link: http://rt.com/programs/keiser-report/episode-221-max-keiser/
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Step 6.5
The citizens start a run on the banks. Queues line up outside bank doors by those trying to get their money out.
Step 6.75
Governments enforce days of bank closures. Then weeks of bank closures.
Runs on banks are what really caused the start of the 30’s depression.
What’s happening at the moment is a virtual mirror image of what happened in the lead up to the thirties depression.
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No doubt.
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I’ve been warning friends and family for nearly 5 years that this collapse was coming. Unfortunately the can kicking that’s been done has outdated most of their attention spans. I had several convinced, but I fear many of them will be caught unaware at this point. 😦
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We dont need more regulation. We need the government to get out of the way. If these banks had failed in 2008, we would be on the road to recovery right now. Instead, the government gave our money to these gambler banks. Then they knew they could gamble more once they knew us taxpayers were going to backstop them. These too big to fail banks are now even bigger. Let let them fail once and for all
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Seen this?
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zerohedge zerohedge
Leading French Presidential Candidate Hollande Says Will Renegotiate Brussels Decision If Elected http://www.zerohedge.com/node/441610
há 1 minuto
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The magicians new trick…. ‘keyboard money’, clicketyclick, add 12 zeros, click, send it off, click, done, click, delete.
Magic.
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What a lesson learned !
Illinois Teen Learns About Bank Fees the Hard Way
Ganziano, a 55-year-old mother of five children, encouraged her fourth child, Daniel, 18, to set up a savings account at a nearby……
http://news.yahoo.com/illinois-teen-learns-bank-fees-hard-way-154654489.html
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@Tim
Now that was a good trick, not only make your money disappear but charge you for it, welcome to the new age, it’s happening to all of us.
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@Tim,
Now that was a good trick, not only make your money disappear but charge you for it, welcome to the new age, it’s happening to all of us.
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