Since the GFC, 'The Great Wall of Money' that Bretton Woods II has furnished via its vendor-financing relationship, has masked the deleveraging of our world economy. The Great Wall is about to collapse and fall.
Because no discussion of global dollar pegs and entrenched FX regimes would be complete without mentioning the Hong Kong dollar...
As the great EM unwind continues unabated, we’ve noted that in some hard-hit countries, the terrible trio of falling commodity prices, decelerating Chinese demand, and looming Fed hike has been exacerbated by political turmoil. Now, we turn to Malaysia where an already tenuous situation just got worse as PM Najib Razak is now facing calls for a no-confidence vote amid allegations he embezzled some $700 million from the country's development fund.
In the wake of China's unprecedented attempt to rescue its collapsing equity markets, Deutsche Bank is out with a history lesson for Beijing where officials can learn some "sweet and sour" lessons from the crash of '87.
The Big Crisis, the one in which entire countries go bust, has begun. It will not unfold in a matter of weeks; these sorts of things take months to complete. But it has begun.
This was the “Rubicon” moment: the instant at which Central Banks gave up pretending that their actions or policies were aimed at anything resembling public good or stability
Considering that Chinese equities are the best performing market in USD terms (second only, oddly enough, to Russia) in 2015, one can see why after a disappointing 2012 and 2013, and modest 2014, Hendry has hit 2015 out of the park with a bang, generating a 10.6% return in the first two monthes of the year. So is Hendry still bullish on China's stock market prospects? Why yes, and then some. But is he is contrarian just for the sake of being contrarian? Does he see something in China that nobody else does? Or is he simply right... or wrong, as the case may be? We will let readers decide.
The entire formerly rich world is addicted to debt, and it is not capable of shaking that addiction. Not until the whole facade that was built to hide this addiction must and will come crashing down along with the corpus itself. Central banks are a huge part of keeping the disease going, instead of helping the patient quit and regain health, which arguably should be their function. In other words, central banks are not doctors, they’re crack dealers and faith healers. Why anyone would ever agree to that role for some of the world’s economically most powerful entities is a question that surely deserves and demands an answer.
Financial systems that seem robust are more often than not inherently fragile - China is no exception!
"Spectacular Developments" In Austria: Bail-In Arrives After €7.6 Billion Bad Bank Capital Hole "Discovered"Submitted by Tyler Durden on 03/01/2015 20:59 -0400
Slowly, all the lies of the "recovery", all the skeletons in the closet, and all the bodies swept under the rug are emerging. Moments ago, Austrian ORF reported that there have been "spectacular developments" in the case of the Hypo Alpe Adria bad bank, also known as the Heta Asset Resolution, where an outside audit of Heta's balance sheet exposed a capital hole of up to 7.6 billion euros ($8.51 billion) which the government was not prepared to fill, the Austrian Financial Market Authority said. The punchline: "The finance ministry noted that creditors can be forced to contribute to the costs of winding down Heta - or "bailed in" - under new European legislation that Austria adopted this year so that taxpayers do not have to shoulder the entire burden."
With the Fed and other Central banks now leveraged well above 50-to-1, even those entities that were backstopping an insolvent financial system are themselves insolvent.
Everything has to come to an end, sometime...
Now that Europe has demonstrated that one can go NIRP and not crash the system, will the Fed - once its silly obsession with hiking rates in the summer only to launch even more easing and/or QE as the ECB did in 2008 and 2011 - follow suit and join a rising tide of "developed" world central banks in punishing savers for hoarding cash? In a note released last night titled "Revisiting Negative Interest Rates in the US", Goldman shares its thought on the matter. It goes without saying that Goldman is important, because whatever Goldman's econ team shares with Goldman's Bill Dudley over at the NY Fed, usually tends to become official policy with a 3-6 month lag.