Earlier this summer, IMF bureaucrats went to Sofia, Bulgaria to study the country’s economic progress; and roughly a month ago, they released an official report which stated, among other things, that Bulgarian banks are “stable and liquid.” Then 2 weeks later, there was a run on two of the nation’s largest banks (as we discussed at length here). But it's not just the IMF...the EU Commission soothingly announced that "the Bulgarian banking system is well-capitalized and has high levels of liquidity compared to its peers in other member states." The lesson here is clear: The people in charge of regulating the system and making these proclamations about bank safety are totally clueless. Clearly, Bulgaria (and Portugal) shows that the entire system can really be a bunch of smoke and mirrors.
In Wenzhou - dubbed the capital of China's private businesses - nearly 90 per cent of loan guarantors have failed since the start of the credit crisis arising from the underground banking system, according to the media. As SCMP reports, although their services are critical for the economic system and the millions of small firms - that provide the majority of the mainland's jobs - hundreds of loan guarantee groups are creaking under the weight of bad loans and are simply unable to bear any more. "It could become the last straw that breaks the camel's back," exclaims the head of a local law firm, "without the privately owned small businesses, China's economy won't have a future." But PMIs are up so everything's fine?
Even as the western media finally remembered over the weekend there was a Ukraine civil war going on following an advance by the Kiev army to retake some rebel strongholds in the Donbas region, with some curious what if anything Putin would do in retaliation, what Putin, or rather his envoy Sergei Lavrov were actually doing, was completely ignoring the Ukraine situation (where the West has long since conceded the loss of Crimea to the Kremlin) and instead focusing on securing the successful launch of the South Stream (remember: the second South Stream goes online, Ukraine becomes irrelevant). And since Russia already signed another historic agreement with Austria in June, which positioned the AAA-country (with some surprising emerging bank troubles subsequently) squarely against its fellow European peers, it was the turn of the other South Stream countries, namely Bulgaria.
Earlier today Reuters reported that the European Commission said on Monday it had approved a Bulgarian request to extend a credit line of 3.3 billion levs ($2.30 billion) in support of banks that have come under speculative attack. “The Commission concluded that the state aid implied by the provision of the credit line is proportionate and commensurate with the need to ensure sufficient liquidity in the banking system in the particular circumstances,” the EU executive said in a statement. The statement said Bulgaria’s banking system was “well capitalised and has high levels of liquidity compared to its peers in other member states. For precautionary reasons, Bulgaria has taken this measure to further increase the liquidity and safeguard its financial system”. The move follows runs by jittery depositors on two major Bulgarian commercial banks in the space of a week. And while this latest backstop of the Bulgarian bank system should provide a respite from bank insolvency fears (if only for the time being), one wonders about Europe's true intentions.
A few days ago, when we wrote our "explainer" on the need for Russia to have an alternative pathway for its gas, one which bypasses Ukraine entirely and as the current "South Stream" framework is set up, crosses the Black Sea and enters Bulgaria before passing Serbia and Hungary on the way to the Central European energy hub located in Baumgarten, Austria, we said that "one short month after Putin concluded the Holy Grail deal with Beijing, he not only managed to formalize his conquest of Europe's energy needs with yet another pipeline, one which completely bypasses Ukraine for numerous reasons but mostly one: call it a Plan B." Today we find just what said Plan B is. As Itar-Tass reports, citing Gazprom CEO Alexei Miller, "Russia’s gas giant Gazprom does not rule out gas transit via Ukraine may be stopped completely."
Fourth Largest Bulgarian Bank Seized After Bank Run: "Let's Not Tear Down Our House" Central Banker BegsSubmitted by Tyler Durden on 06/20/2014 10:57 -0400
The small, impoverished country of Bulgaria may not be in the Eurozone (even though its currency is pegged to the Euro), but it is in the European Union. Which is why we find it surprising that there has been relatively little mention that overnight the fourth largest Bulgarian bank, Corporate Commercial Bank (Corpbank) and which in recent weeks has made headlines due to the political exposure of one of its largest shareholders, was seized by the Bulgarian central bank following what Reuters reports was a run on the bank.
Is the Fed trying to start the very bond run it is allegedly attempting to prevent? Read the following, then decide.
"In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” - The Fourth Turning - Strauss & Howe – 1997
There should be no 'flexible currency' and no central planning of money. They are at the root of the boom-bust cycle, the very reason for the various crises that have beset Western economies in recent decades. Switzerland would be far better off if no-one had the power to meddle with its money supply. As it is, there has been plenty of meddling already, and quite a bit of suspension of disbelief would be necessary to conclude that there will be no price to pay. As always in monetary matters, the bill will be presented at an unknown future date, but it could be a very big bill in this case... but Switzerland's Keynesian dunderhesds are well on their way to that coming due as they blast any gold repatriation plans as "reducing the credibility of the SNB’s policy."
Yesterday we showed the end result of what happens in a China, in which bankruptcy and default are suddenly all too real outcomes for the country's hundreds of millions of depositors, when the risk of losing all of one's money held in an insolvent bank becomes a tangible possibility in "What A Bank Run In China Looks Like: Hundreds Rush To Banks Following Solvency Rumors." Today, we look in detail at all the discrete elements that culminated with hundreds of Chinese residents lining up in front of a bank in Yancheng and rushing to withdraw their money only to find their money not available (at least until the regional government was forced to step in with a bail out to avoid an even greater panic).Why is this a useful exercise? Because since we will certainly see many more example of it in the near future, it pays to be prepared. Or least it certainly prevents one from losing all of their money...
Another morning melt up after a less than impressive session in China which saw the SHCOMP drop again reversing the furious gains in the past few days driven by hopes of more PBOC easing (despite China's repeated warning not to expect much). A flurry of market topping activity overnight once again, with Candy Crush maker King Digital pricing at $22.50 or the projected midpoint of its price range, and with FaceBook using more of its epically overvalued stock as currency to purchase yet another company, this time virtual reality firm Oculus VR for $2 billion. Perhaps an appropriate purchase considering the entire economy is pushed higher on pro-forma, "virtual" output, and the Fed's capital markets are something straight out of the matrix. Despite today's pre-open ramp, which will be the 4th in a row, one wonders if biotechs will finally break the downward tractor beam they have been latched on to as the bubble has shown signs of cracking, or will the mad momo crowd come back with a vengeance - this too will be answered shortly.
Curious what the real, and not pre-spun for public consumption, sentiment on the ground is in a China (where the housing bubble has already popped and the severe contraction in credit is forcing the ultra wealthy to luxury real estate in places like Hong Kong) from the perspective of the common man? The photo below, which shows hundreds of people rushing today to withdraw money from branches of two small Chinese banks after rumors spread about solvency at one of them, are sufficiently informative about just how jittery ordinary Chinese have become in recent days, and reflect the growing anxiety among investors as regulators signal greater tolerance for credit defaults.
Last week, after western sanctions against Russia expanded to include not only the first financial institution, Bank Rosiya, but also SMP bank whose main shareholders were on the sanctions list, unexpectedly both Visa and MasterCard halted providing transaction services to the two banks, without providing an explanation. Over the weekend, one of the banks got its full credit card functionality back after Visa Inc and MasterCard both resumed services for payment transactions for clients at Russia's SMP bank. What was the purpose of this escalation? Simple: as Reuters reports, SMP Bank said on Monday around 9 billion roubles ($248 million) had been withdrawn by depositors since U.S. sanctions were announced last week. Washington imposed sanctions on Thursday against 20 Russians close to President Vladimir Putin over Moscow's involvement in the Ukraine crisis, including Boris Rotenberg and his older brother Arkady, the co-owners of SMP Bank. SMP CEO Dmitry Kalantyrsky told a news conference that an estimated 4 billion roubles had been withdrawn by individuals and 5 billion by organisations. In other words, the staggered escalations against Russian banks, to which credit card processors have joined without any specific reason, were meant solely to incite a bank panic and to promote bank run conditions. With SMP this succeeded partially, with quarter of a billion withdrawn, however hardly enough to cripple the bank. At least for now.
There’s good propaganda and bad propaganda. Bad propaganda is generally crude, amateurish Judy Miller “mobile weapons lab-type” nonsense that figures that people are so stupid they’ll believe anything that appears in “the paper of record.” Good propaganda, on the other hand, uses factual, sometimes documented material in a coordinated campaign with the other major media to cobble-together a narrative that is credible, but false. The so called Fed’s transcripts, which were released last week, fall into the latter category... But while the conversations between the members are accurately recorded, they don’t tell the gist of the story or provide the context that’s needed to grasp the bigger picture. Instead, they’re used to portray the members of the Fed as affable, well-meaning bunglers who did the best they could in ‘very trying circumstances’. While this is effective propaganda, it’s basically a lie, mainly because it diverts attention from the Fed’s role in crashing the financial system, preventing the remedies that were needed from being implemented (nationalizing the giant Wall Street banks), and coercing Congress into approving gigantic, economy-killing bailouts which shifted trillions of dollars to insolvent financial institutions that should have been euthanized. What I’m saying is that the Fed’s transcripts are, perhaps, the greatest propaganda coup of our time.
"If you have physical gold or silver, you are in a golden position,” Celente said. Despite the many risks of today, Celente saw light at the end of the tunnel. He said that there are opportunities in “clean food”, breakthrough alternative energy, alternative medicine and in digital education and internet learning.