Contagion Spreads To Asia: CDS Update

Tyler Durden's picture

There are those who may be surprised to find that China is not completely insulated from the latest fun in Europe, America, and all those other places where the ponzi is imploding. To those same people we suggest a casual reading of the following two articles by Bloomberg and MNI - frankly we are too lazy to summarize. As for the market: it already knows whats up. Below is the nth consecutive drift up in most Asian CDS as once again credit predicts and idiots momos react, and after losing a shitload of money, confirm.

CDS 5Y          MID-MKT        

ASIAIG s15     171
SOVX s5         163
CHINA            128
KOREA            151
MALAY            134
THAI               150
PHIL               180
INDO              186
NAM               401
HK                   90
HUTCH            140

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gdogus erectus's picture

Too lazy for links too?  Damn, you're making it tough for a holiday evening.


Edit - That's better!  Just blowing you shit, Tyler. You know we love you!

Oh regional Indian's picture

Hey, India has been tightening, all by itself, lately. I think the crash of th esoftware sector via th ecrash in EU/America is a well known event. 

I think we'll see a huge widening here in India this week, as the EU issues get worse and America begins to totter. Some of the largest customers of Indias Software Outsourced Code Jockeys? 

Global banks and sundry financial institutions. 60% of revenues from the US alone!!!

Like a roller coaster running out of rail!

yeeeeee haw!


Skid Marks's picture

Globalism....... everybody's own private Titanic.

Tense INDIAN's picture

most of the IT service sector are suporting Banks and Insurance companies ...the inevitable BANKING collapse will surely affect these....even energy , airlines will get affected the bangalore, checnnai, pune , delhi, mumbai, gurgaon software people are highly leveraged ( housing loans , car loans)...entirly dependant  on high salaries and future hikes, ......we were having problems in 2008....what is goig to happen now ....cant imagine.....and those MBA grads, what about their education loans...

Pure Evil's picture

Well, they're about to find out what the phrase, 'reamed a new asshole', means.

Of course, I can't feel the least tiny bit of sympathy for them, since they probably felt no remorse when those same American software developers, and MBA's, were thrown out into the streets when their jobs were offshored or they were replaced with insourced labor, and were forced to train their replacements just to receive a two week severance check and unemployment.

I think they'll be gettin their "Just Desserts".

Of course, being an American software developer, I'm a tad biased.

ManufacturedOpinion's picture

Damn, Indian dude - that water article of yours is kind of lame.  How many times do you plan to pump it on these boards?  Until somebody calls you on its lameness?

Well ... I'll be first I guess.




You ain't gonna manufacture anybody's opinion with THAT though.

bob_dabolina's picture

Jim Chanos

What else is there to say...

Oh yeah, he's awesome. 

Caviar Emptor's picture

The undead, half-decomposed zombie banks are starved and they're roaming the streets looking for....more money !!

They need it and they don't care how they get it...

They're coming to get you. They'll eat your tax money, your cash, your credit, your checking account, your pension, your 401k, and then they'll go after the others in your family. 

It's a dystopian nightmare on Wall Street aaaaaaahhhhhhh

crash_davis's picture

"Wang" Krugman thinks 13% growth is smothering the chinese economy. 6 or 7 % inflation is no big deal.


Sequitur's picture

Jesus. Just declare fucking defaults already, get it over with and start anew.

Yamaha's picture

Starting to love the smell of shit hitting the fan........

BlackholeDivestment's picture 

...woe. Use the front brake too Yamaha, the shit hit the fan already, now it's flown off and it's in our faces. Full face helmet and cross country leather required.

TruthInSunshine's picture

Nouriel 'Disco Boy' Roubini is of the opinion that there are no crises in the world today that some stimuuuuuloooooos programs can't fix.

Never mind that the ARRA (American Recovery & Reinvestment Act) produced jobs costing on average (by many estimates) as much as $550,000 each, and that these jobs are vanishing and will continue to vaporize like a fart in the wind...if a Ph.D like Roubini, who is a rock star of economics in his own mind, says that stimuuuuulooooos is needed (rather than a solution geared towards the structural issues impeding organic GDP growth and JOB growth), than by golly, Roubini surely should be listened to.

Nouriel Roubini, Paul Krugman, et al.; advocating for an economic prescription whereby the deeply indebted nation-state, which never should be charged with the task of creating jobs (and especially not bailing out banks, squids and vampires), and is already 5 feet deep in a giant sink hole, is given a shovel and told to dig another foot deeper.


macholatte's picture

What other choice is there? What would you expect them to say? The fact of the matter is that the TBTF experiment is a failure and all the big banks need to be broken up and disolved. Citi alone has 200M credit card customers and could easily be broken into 5 pieces resulting in still huge companies. The residue of the so called "toxic assets" are already owned by the governments (tax payers). But the concept of sending them to BK is out of the question. So what's left? Establishment cronies like Krugman and now Roubini are more show than substance which is all they need to maintain their celebrity status. How much does Krugman make a year? Roubini? Soon they will have their own line of cloths and cosmetics. WTF

Contradictions do not exist. Whenever you think you are facing a contradiction, check your premises. You will find that one of them is wrong.
Ayn Rand

cobber's picture

nothing new here. see below from UBS. Seems this banks is getting worried..

Crisis Convergence
Why the global economic crash, the rise of the Tea Party, the Arab Spring, and China’s coming fall are all connected.
The clamor of economic and political events this year -- including the Arab Spring, the intensification of the Western economic crisis, the rise of the Tea Party, and the growing ascendancy of China -- has been deafening. But though most reporting has described these events as disconnected, they are far from coincidental.

The crisis of capitalism that erupted with the 2008 financial bust has very much to do with all of these seemingly disparate events. During the long boom period from 1980 to 2008, mainstream thinking ignored the principles of political economy laid out by Adam Smith, Karl Marx, and John Maynard Keynes. Instead, we got monetarism, free market ideology, Alan Greenspan's facile notions of a "new economy," and even the often self-serving hype about China's ability to rule the world and sustain global prosperity. Today, we can see better how the crisis of 2008 and 2009 marked the end of one era and the start of a new and still very uncertain one.

Smith, widely seen as the father of modern capitalism, had been convinced that public institutions were essential to a well-functioning market economy. But Marx in particular resonates today -- not for his predictions of capitalism's collapse, but for his analysis that "contradictions" between capital and labor would lead to recurrent economic and political crises, and social conflict. And Keynes continues to loom larger than life as a reminder that crises in capitalism need not be terminal.

The 2008 eruption demonstrated the hollowness of claims made by economists and politicians in the 1980s and thereafter that lasting stability and prosperity would be assured by low inflation, free markets, and unfettered globalization. The last quarter-century of faulty economic thinking has left us with a sour and acrimonious legacy, including the need to reduce the dead weight of 25 years of accumulated debt; the loss of credit creation, housing, and financial services as leading drivers of growth; rising income inequality; and a populist backlash against political and financial elites. The crisis shocked the pre-existing economic and political order on a scale unseen since the 1930s. The fabric of globalization, which had been stitched together around the so-called Washington Consensus, began to fray.

Seen in this light, many of 2011's international developments don't look so random at all. It was perhaps inevitable that the weakest links in the global system suddenly became much more vulnerable. And the Middle East certainly qualifies as a weak link, not least because the countries from the Sahara to Saudi Arabia were not strongly anchored into the globalization of manufacturing and finance, save through oil-dominated autocratic regimes supported by Western powers.

There is little question that the crisis has drained U.S. economic power and legitimacy, a dynamic that has been aided and abetted by a rising China. As the United States confronts economic, demographic, budgetary, and populist constraints over its global role and power, "American decline" has gone from fringe theory to conventional wisdom in a few short years.

This view may also be myopic, but for now the United States is on its back foot and under increasing pressure to readjust its global position. This fact was highlighted by its decision, after initial hesitancy, to lend its support to the removal of President Hosni Mubarak from power in Egypt, along with its threat to block financial aid if he did not step down. The decline in American influence doubtlessly also emboldened opponents of regimes elsewhere -- for example, in Bahrain, Tunisia, and Yemen -- to call for their rulers' overthrow.

But the conditions for the Arab Spring already existed before American decline took hold. For more than two decades, per capita incomes in the Middle East -- with the exception of those in the low-population oil states -- have been low and stagnant. Unemployment rates have averaged 25 percent in parts of the region, a statistic that masks much higher rates among those under 30. The spark for these conditions to explode into a revolution came with soaring food and energy prices. Here, too, the fingerprints of the beleaguered and debt-ridden Western economies can be found.

The U.S. Federal Reserve and other central banks responded to the aftermath of the financial crisis by adopting emergency stimulus measures known as "quantitative easing," in which the Fed bought large quantities of mortgage-backed and other financial assets to help relieve the arterial blockages in the banking system. In November 2010, the Fed implemented a second round of quantitative easing, deciding to buy $600 billion of U.S. Treasury bonds by June 2011 to help spur lending and spending by households and companies. Although it is hard to quantify this program's impact on world commodity prices, it unquestionably contributed to the rising food prices that proved decisive for the revolutionary movements. Printing money undermines confidence in paper currencies, including the U.S. dollar, and prompts investors and companies to buy real or physical assets, including metals, energy, and agricultural commodities, as a hedge against currency losses and fears of rising inflation.

The consequences of the crisis in Western capitalism are also having repercussions in China, which was the biggest beneficiary of the pre-crisis political and economic order. Political unrest in China has so far remained manageable: The country's "jasmine" human rights protests earlier this year proved ineffectual, and food price-related disturbances have also fizzled out. Much bigger matters of economic stability and political legitimacy are stalking China, however.

China's capitalist model has delivered unprecedented economic success over the last quarter-century. But it is a model that is now flawed. The slump in Western demand caused China's export industries to shudder in 2008 and 2009, with exports declining by over a third in the year to the first quarter of 2009. Thousands of factories in the Pearl River Delta shut down, and 20 million migrant workers were reportedly forced to return to rural areas for lack of work.

China recovered quickly due to a stimulus program worth about 14 percent of its GDP and the global economic bounce last year, but exporters now face a very different world dictated by anemic Western consumption and growth prospects. Moreover, the explosion of credit creation since 2008 and the unsustainable rise in investment and residential real estate spending are sowing the seeds of rising inflation. The instability that will likely follow may remain in abeyance until after the Chinese Communist Party's leadership change in 2012, but China's economy is already slowing to a growth rate of around 8 percent.

In some ways, this July's high-speed rail tragedy on the newly opened Beijing-Shanghai line serves as a metaphor for China: It's a high-speed economy with (capitalist) design faults that, sooner or later, will result in an accident. There are already strong signs that the quality of investment, and of investment financing, is deteriorating. Left unaddressed, these trends might well validate Marx's prediction that investment booms, endemic in capitalism, end up in overproduction and underconsumption, and then social conflict.

China has limited time to effect a radical political and economic shift. It has to take power and privilege away from state-owned companies, coastal regions, and regional party elites. It must also de-emphasize capital investment, which currently accounts for an unprecedented 50 percent of GDP. And it has to prioritize a bigger economic weight for household consumption, which accounts for a mere 35 percent of GDP, a fairer income distribution, better employment for China's annual flow of 6 million graduates, the rights of rural migrants, and the neglected countryside.

If this shift doesn't start in earnest soon, the Chinese economy will succumb to a credit and investment bust from which significantly slower growth would follow. This will be especially sensitive in a China where incidents of social unrest are increasing significantly in number, intensity, and breadth. In the absence of the rule of law and other critical social institutions, the state's assurance of steady and persistent annual growth of 8 to 10 percent represents a social contract. If it is broken, China could suffer significant political repercussions.

Rebalancing in China promises to be an intensely political, as well as economic, process. There is great uncertainty as to whether the Communist Party's reputation for pragmatism will stand up to this challenge, especially if China's "princelings," the children of the revolutionary leaders, increase their influence in the new leadership. Should China fail, its economy is at risk of stalling out in a few short years -- a development that would make this tumultuous year appear to be the calm before another storm.

Kind regards,

George Magnus
Senior Economic Adviser
UBS Investment Bank, London


Coldfire's picture

Yes, the eagle eye view of Chinese politics from an Anglo in the City of freaking London. You'd think UBS would be applying all of its formidable inhouse brainpower to the problem of funding itself beyond next Tuesday.

Yamaha's picture

They should be worried - they are assholes!

Caviar Emptor's picture

but but but can we shop without more stimulus? 

We need to be patriotic and shop till we drop buying cheap Chinese junk. 

But we need stimulus so we can do it all over again! 

chump666's picture

major Asian liquidation trade gonna kick in i.e on  everything!  So, Chanos short positions can now take effect.  Asian inflation problems now upward borrowing costs = meltdown.



Zeilschip's picture

The only thing Chanos is thinking right now is what my mentor taught me years ago: carry is a big hairy cock up your ass.

lolmao500's picture

Doesn't matter what the CDS are ... if you don't show the change...

aramsogo's picture

Hutchison Whampoa. Chinese Berk with Chinese Buffett. Instead of Oracle, they call LKS Superman.

DosZap's picture

<the rise of the Tea Party >

I love this shit, they act like this a new radical group...............of TERRORISTS

NO, just regular Americans who got off their asses and said NO MORE.

And sent out a WTF up call to the rest of Welfareville.

blunderdog's picture

A few years back, I met a couple of those TEA folks.  In Texas, as a matter of fact.

They were still spending their SS money and bitching about how Medicare didn't cover all their expenses.

Those two certainly weren't heroes saying "NO MORE."  Not to indict the movement, of course.  I'm sure they were exceptions.

Tic tock's picture

Upward Borrowing costs' - nice term - not a problem, we have over-capacity in most industries. .the crux is this talk of new economic paradyne: capitalism is simple, banks supply money, everyone else borrows money - over different periods and at different i% - depending on their ability to channel that money productively. ...there's ways of looking at  'productively', especially once overcapacity is reached. 'Velocity of money is a simple way to measure 'productively-employed'- though again, once technology can produce national demand from a single factory- classical analysis becomes literally academic... So, in the first place, if we are not going to use the velocity, then presumably, we have to use the Quantity of money.

 This is entirely new - at the M1 level - but Primary Dealers and other Banking entities, use 'Reserves earning interest' as a fundamental store of their enterprise value. This is where 'Banks measured productivity by increasing their market-paper-based value' if we were not to measure rise in Income on velocity, then we are looking at pre-known, i%-driven rise in Income; which suggests a planned economy.

Assume that every citizen has an equal share of interest-earning national debt, which is automatically passed to their heirs. The question is then, not how to manage the i%, but rather, how to allocate productive capital when a Banking Industry no longer has the power to generate capital based on transactional demand? capital is  generated by both Banking and Public Borrowing. I would think that this environment suggests 'planned maximum ROE' per industry, much narrower income-bands. A primary aim of this fiscal architecture is to re-deploy the Banking industry into assessing industrial/sectoral expansion where indusrty players already favour some form of realized market optimization.         


plocequ1's picture

Ok kids, , Nothing to see here. Futes are rising as we speak. Its all good. Robo analysis  in 5..4..3..2..1..

LikeClockwork's picture

Slightly off topic - Cisco accused of aiding Chinese authorities in monitoring Falun Gong members:


In a word, disgusting.

lolmao500's picture

Vietnam is so high because it's communist IMO.

HITMAN56's picture

What no Asia nicknames? 

GoldBricker's picture

Well, duh! The Asians have had to inflate their domestic currencies to maintain their dollar pegs, so it stands to reason that they'll march into hell right behind us. When our paper goes bad, so does theirs.

The only difference is that they have the capital assets: factories, cheap labor, young (ex China & Japan) homogenous populations and technical know-how. They can rebuild from a paper blow-up (not without some bloodshed, but they've seen that sort of thing more recently than we soft, pampered westerners have).

I was talking to an Iranian guy recently who observed that the trade embargo halted all foreign credit to Iran, so now it has no debt. If we wanted to destroy Iran, we should've sold 'em beanie babies on credit.

Zeilschip's picture

Seriously Iran? Twothirds of the population is sub-25 and they produce nothing apart from oil. Add to this fanatic Islam and the conclusion is that Iran at best kan only be described as a bigger version of Saudi-Arabia but with lots more poor young people without a job who sit in madrasahs all day doing nothing.

aramsogo's picture

In other words, UBS sucks.

Ghordius's picture

In other words, all TBTF banks sucks.

jasmine's picture

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