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The Russian Default Scenario As Script For Europe's Next Steps

Tyler Durden's picture





 

Submitted by Nicholas Bucheleres of NJB Deflator

Russian/Euro Credit Crisis Analog

Below is the second half of a timeline on the Russian/Asian Credit Crisis of the late-90s that I amended with what I think are the analogous happenings of the Euro Crisis.  Italicized text is the Euro Crisis equivalent of the Russian analog; full Russian Crisis timeline can be found here.  No event has been rearranged, removed, or edited, so there are some temporal discontinuities between the months leading up to the Russian default and the current Euro Crisis, but the resemblance is remarkable. 

Russia and the southeast Asian countries are analogs for Greece, Spain, and Cyprus, with no particular association between their references within the timeline.  The timeline runs through the Russian pain; things begin to turn around after the timeline ends.

This is meant to serve as a reference point: In retrospect it was clear throughout the late-90s that Russia would default on its debt and spark financial pandemonium, yet there were cheers at many of the fake-out "solution" pivot points.  The Russian issues were structural and therefore immune to halfhearted solutions--the Euro Crisis is no different.  This timeline analog serves as a guide to illustrate to what extent world leaders can delay the inevitable and just how significant "black swan event" probabilities are in times of structural crisis. 

It seems that the next step in the unfolding Euro Crisis is for sovereigns to begin to default on their loan payments.  To that effect, Greece must pay its next round of bond redemptions on August 20, and over the weekend the IMF stated that they are suspending Greece's future aid tranches due to lack of reform.  August 20 might be the most important day of the entire summer and very well could turn into the credit event that breaks the camel's back.

*UPDATE: Over the weekend Germany's Roesler said he was "very skeptical" that Greece can be rescued.

Analog runs through August 13, 1998--the point to where I believe the Euro Crisis has evolved.  What happens after that in Russia may stand as a strong indicator of where things will head in the coming weeks/months in Europe.

May 21, 1998
[Indonesian President] Suharto resigns after 32 years in power. Vice President Habibie succeeds as president.

Greek leadership shake-up over lack of confidence in government, wherein prime minister Papandreou steps down (Spring 2012).

May 22, 1998
The IMF indefinitely postpones aid disbursement to Indonesia of $1 billion scheduled for June 4. US Treasury Secretary Robert Rubin says the aid should be delayed until the political situation stabilizes.

 The US, UK, and Canada refuse to add to the IMF's bailout package for Europe (Spring 2012).

May 27, 1998
  Russia's financial system is stretched to the breaking point as panic-striken stock and bond markets continue to plunge, forcing the central bank to triple interest rates to 150% to avert a collapse of the ruble.

 The Athens Stock Exchange drops 27% from May 1 through June 1.

May 27-28, 1998
A two-day, nation-wide strike is held in South Korea by union workers to protest the growing wave of unemployment in the country. Since February, South Korean companies have been laying off 10,000 workers per day.

 One of the many strikes within the EMU as companies shed jobs as a result of high-unemployment driven drop in demand.  International shipping companies halt business with Greek ports due to uncertainty over the nation's finances (Spring 2012).

June 1, 1998
Russia's stock market crashes and Moscow's cash reserves dwindle to $14 billion amid unsuccessful attempts to prop up the ruble and pay off burgeoning debts. President Clinton pledges support for Yeltsin.

 Greek bond yields rise throughout 2012 reaching a peak coupon of 30% on the 10yr.  President Obama urges European leaders to handle the situation swiftly (Spring 2012).

June 12, 1998
Japan announces that its economy is in a recession for the first time in 23 years.

 The UK enters double-dip recession (April 2012).

June 17, 1998
The yen's fall to levels near 144 to the dollar rattles Wall Street, prompting the US Treasury and Federal Reserve to intervene to prop up the yen. Japan and the US spend some $6 billion to buy yen in order to strengthen it. Clinton calls on Tokyo to quickly resolve its banking problems and stimulate the economy.

 The Bank of International Settlements (BIS) supports the euro, especially the EURUSD cross, throughout the summer of 2012 through intervention in the foreign exchange market.

June 24, 1998
Russian Prime Minister Sergei Kirienko submits a budget austerity plan to the IMF, which releases a previously held loan installment of $670 million.

 Becoming clear that Germany will be on the hook for financing further bailouts, Merkel filibusters all aid plans that don't include strict austerity measures (Spring 2012).

June 25, 1998
Indonesia and the IMF announce a fourth agreement to rescue an economy quickly sinking into chaos. The IMF agrees to restore subsidies for food and fuel and provide another $4 billion to $6 billion for basic necessities.

 The ECB OKs LTRO2 worth 529.5billions euros to save "an economy quickly sinking into chaos" (February 2012).

July 1, 1998
Russia's lower house of parliament, the Duma, postpones action on spending and tax reforms needed to close the budget deficit and qualify for IMF loans.

 Spanish citizens continue to emigrate from Spain in droves to countries like Argentina to avoid looming austerity measures (Spring 2012).

July 6, 1998
Moscow's markets get pummeled as the government fails to raise cash by selling government shares of a state-owned oil company. Moscow hints that an IMF loan agreement is near.

 Spain's IBEX 35 falls 30% from March 19 through June 1 as the austerity versus growth debate intensifies within Europe.  Political entropy paralyzes Europe.

July 10, 1998
President Clinton calls on the IMF to quickly conclude negotiations over emergency loans for Russia after getting a call for help from Boris Yeltsin, sparking a rally in Moscow's markets.

 Treasury Secretary Geithner reminds Europe's public financiers that currency swap lines are open, which offers little respite to markets (Spring 2012).

 July 13, 1998
The IMF announces a package of $23 billion of emergency loans for Russia. The international lender dips into an emergency line of credit to provide its share of financing. Russian stocks and bonds soar.

 The ECB shores up a 100billion euro bank bailout for Spain, though Spain publicly denied it would need such a bailout until hours before its announcement.  Markets rallied on the rumor of the bailout and promptly sold-off once the bailout was officially announced
(June 2012).

July 16, 1998
Russia's Duma approves some of Yeltsin's $16 billion proposed tax reforms needed to meet conditions for IMF loans. But it rejects higher sales and land taxes.

 Spain lays out a plan to lower its public deficit by 65billion euros by 2015 that includes harsh austerity measures (July 2012).

July 19, 1998
Yeltsin vetoes tax cuts approved by parliament and issues decrees imposing a 3% tax on imports and quadrupling land taxes to close the budget deficit and secure IMF loans. He also pledges renewed efforts to collect taxes.

 In an attempt to raise up more public money, the Spanish government plans the sale of 100 government-owned commercial real-estate properties (July 2012).

July 20, 1998
The IMF gives final approval to a $22.6 billion loan package to Russia. However, because the Duma fails to enact some of the austerity measures mandated in the loan agreement, the first two planned installments are reduced from $5.6 billion to $4.8 billion.

 Finland, an opponent of a no-strings-attached Spanish bailout, votes to officially support the rescue package, and the bailout is OKed by the Eurogroup.  At the same time, more trouble is detected within Spain's regional governments, who were supposedly well capitalized (July 2012).

July 28, 1998
The IMF announces that it will ease conditions on its $57 billion aid package to South Korea which had been blamed for rising unemployment and overburdened welfare programs.

 While negotiating stimulus versus austerity, Merkel eases a bit on her reform timeline, which offers little relief to GIPSI government debt yields, which continue to scream higher (Summer 2012).

August 3, 1998
Wall Street reacts to the deepening crisis; the Dow plunges 300 points in its third-biggest loss.

 Cyprus requests a bailout worth 10% of its GDP; Cyprus is the fifth European nation to formally request a bailout.  Trader commitments reach all-time bearish levels (June 2012).

August 4, 1998
Amid speculation that China will be forced to devalue its currency, Hong Kong's dollar and stock market come under attack.

 Global markets begin to sell-off again amid consistent global GDP growth downward revisions and sovereign European credit downgrades after a short-covering rally in June (July 2012).

August 6, 1998
The World Bank approves a $1.5 billion loan for Russia as Moscow puts pressure on striking miners and tax deadbeats in an effort to put its finances in order. Asian markets plummet as Hong Kong and China step in to defend their currencies against attack.

Even after the 100billion euro Spanish bailout is approved, Spain's 10yr government bond yields still flirt with the 7% threshold that would banish them from the debt market by making borrowing costs unsustainable (July 2012).

August 11, 1998
The Russian market collapses. Trading on the stock market is temporarily suspended. World markets are rocked by fears of a financial meltdown in Asia and Russia.

 Greece admits to not adhering to reforms attached to their bailout; the IMF plans to stops loan tranches to Greece.  Global markets close July 20, 2012 in the red across the board, erasing the week's gains.

August 13, 1998
Russia's markets collapse on fears that Moscow will run out of money and default.

 Catalonia, in addition to Valencia, will need a regional Spanish bailout (July 2012)

August 14, 1998
Yeltsin calls for an emergency session of parliament and declares that "there will be no devaluation" of the ruble. In Hong Kong, authorities spark a stock rally by moving to foil speculators with surprise purchases of stocks and dollars.

August 17, 1998
Russia announces a devaluation of the ruble and 90-day moratorium on foreign debt repayment, triggering panic in Moscow as Russians line up to buy dollars. Western leaders denounce the Russian default. Latin American stock and bond markets plunge on fears of default and devaluation in South America.

August 19, 1998
Russia fails to pay its debt on GKO or treasury bills, officially falling into default. The IMF and Group of Seven (G-7) say they won't provide additional loans to Russia until it meets existing promises.

August 21, 1998
Russia's economic crisis shakes world markets, bulldozing stocks and bonds in Latin American and reverberating through the US and Europe. Russia's Duma calls for Yeltsin's resignation. Investors pile into US Treasury bonds as a safe haven from the storm, causing yields to drop to record lows.

August 24, 1998
Yeltsin dismisses Kirienko and names Viktor Chernomyrdin as primeminister.

August 31, 1998
After weeks of decline, Wall Street is overwhelmed by the turmoil in Russia and world markets. The Dow Industrial average plunges 512 points, the second-worst point loss in the Dow's history.

Sept. 4, 1998
Federal Reserve Chairman Alan Greenspan says that the US is ready to cut interest rates to keep the crisis from snuffing out US growth. "It is just not credible that the United States can remain an oasis of prosperity," he says. Latin stocks and bonds plummet.

Sept. 7 or 8, 1998
Russia's Duma rejects Prime Minister-designate Chernomyrdin and the central bank chairman resigns, deepening the country's political and economic turmoil. Russian investors and lenders estimate their losses at $100 billion. The Dow surges 381 points after Greenspan suggests that policy makers are considering an interest cut.

Sept. 10, 1998
The Dow loses 249 points as Brazilian stocks fall 16%, adding to drops that have erased half the Brazil market's value. In Mexico, the Central Bank sells some $50 million in its first attempt to buoy the peso in three years. Yeltsin nominates Yevgeny Primakov as prime minister.

Sept. 11, 1998
The IMF announces that the debacle in Latin American markets is "an overreaction to Russian events" and that it is ready to lend Latin American countries, using an emergency line of credit. Investors flee Brazil, drawing out more than $2 billion a day despite an interest rate rise to 50% by the Central Bank.

Sept. 17, 1998
Tokyo's Nikkei index hits a 12-year low amid steep declines in Hong Kong, France, Britain and the US. The Dow drops 216 points. Congress blocks Clinton's request for $18 billion in funding for the IMF.

Sept. 23, 1998
Pushed by the New York Federal Reserve, a consortium of leading US financial institutions provides a $3.5 billion bailout to Long Term Capital Management, one of the largest US hedge funds, amidst fears that a collapse could worsen the panic in the financial markets.

Sept. 24, 1998
Stocks on Wall Street and in Europe swoon amid fears that the losses suffered by the world's largest banks in the Long Term Capital debacle could put the entire banking system at risk.

Sept. 29, 1998
The Fed cuts interest rates by a quarter point.

Sept. 30, 1998
Worries that the Fed isn't doing enough to rescue the US and global economies cause a 238-point drop in the Dow, for a loss of more than 500 points in a week. Investors around the world flock to US Treasury bonds for safety, causing the yield on 30-year bonds to drop below 5% for the first time in three decades.

Oct. 3, 1998
Japan announces a $30 billion aid package for Southeast Asia to help the region recover from recession.
G-7 ministers create a rescue plan for Brazil.

Oct. 5-8, 1998
In Washington, the IMF and World Bank hold a joint plenary session to debate the global economic crisis.

Oct. 15, 1998
The Fed cuts interest rates for a second time to prevent weak financial markets from tripping the US into a recession. The Dow shoots up 331 points and world markets rally.

Oct. 22, 1998
Amid warnings of winter food shortages in Russia, Moscow creates an emergency food reserve and approves an emergency spending plan that will require the central bank to print at least $1.2 billion to help pay back wages, rescue banks and bring food to desperate regions.

Oct. 27, 1998
Brazil's President Fernando Cardoso announces an austerity plan of $80 billion in tax increases and spending cuts over three years in order to secure an IMF assistance package.

Oct. 31, 1998
The IMF refuses to disburse to Russia a $4.3 billion installment of the $22.6 aid package it agreed to in July, and says it will not resume negotiations about disbursement until Russia produces a realistic budget for 1999.

Nov. 5, 1998
Russia strikes an agreement with foreign investors to accept repayment in rubles of $40 billion of debt frozen in August, but says it will not be able to repay $17.5 billion of debts due in 1999 and will reschedule them. Russia also wins an $800 million loan from Japan, originally part of the IMF rescue deal.

 

 

 


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Sun, 07/22/2012 - 20:14 | Link to Comment bob_dabolina
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Bush's fault

Sun, 07/22/2012 - 21:28 | Link to Comment aint no fortuna...
aint no fortunate son's picture

But, but, the Greeks only need $3.6 Billion in August - couldn't Warren make the payment for them?

Sun, 07/22/2012 - 23:40 | Link to Comment Precious
Precious's picture

They are presently negotiating a new line of credit with the AMF (African Monetary Fund) and the Beijing Plumbers Credit Union.

Mon, 07/23/2012 - 02:44 | Link to Comment Spitzer
Spitzer's picture

Euro zone is a net creditor with no trade deficit.

This guy has everything right except he is talking about the wrong currency. The US dollar fits this scenario a hell of allot better then the Euro does.

Mon, 07/23/2012 - 05:08 | Link to Comment AldousHuxley
AldousHuxley's picture

Why should US default now, when US gets free money?

 

Euro problem is of political unity within Eurozone. Germany has money. they just don't want to help out non-Germans in need.

 

 

Mon, 07/23/2012 - 09:21 | Link to Comment Spitzer
Spitzer's picture

exactly. What is wrong with it is what is right with it

Sun, 07/22/2012 - 23:41 | Link to Comment Jumbotron
Jumbotron's picture

"But, but, the Greeks only need $3.6 Billion in August - couldn't Warren make the payment for them?"

Well...of course he can...right after he signs the check for extra taxes above and beyond what he already pays...you know...because its the rich's duty....right Warren....RIGHT WARREN ???!!!

Is this geezer's hearing aid on?

Sun, 07/22/2012 - 22:30 | Link to Comment Silver Bug
Silver Bug's picture

Greece, Ireland, Spain, Italy etc etc etc should all just default so they can begin the meaningful process of rebuilding. Especially before the IMF hollows them out and takes anything of value.

 

http://silverliberationarmy.blogspot.ca/

Mon, 07/23/2012 - 00:07 | Link to Comment Stuck on Zero
Stuck on Zero's picture

If the fools voters put Obama in office for a second term will he go on blaming Bush until the end?

 

Mon, 07/23/2012 - 02:51 | Link to Comment zhandax
zhandax's picture

The end of what?

Mon, 07/23/2012 - 06:51 | Link to Comment Offthebeach
Offthebeach's picture

Of course. The US didn't come out of the first GD until 1947. Near 20 years( not counting rural farm depression which would make 30 years ).

Plus Hussein has to fight racism too. He's going to need four terms followed by Regular Joe Step'n Fetch.

Mon, 07/23/2012 - 00:11 | Link to Comment kdrury12
kdrury12's picture

Not Bush's fault at all, this was clearly the work of HFT

Mon, 07/23/2012 - 01:04 | Link to Comment mick68
mick68's picture

Obama wins in November= Economic armageddon

Romney wins in November= War armageddon

 

Pick your poison...and oh, economic armageddon ALWAYS leads to war anyway, so with Obama you get 2 for 1.  ;-)

Sun, 07/22/2012 - 20:15 | Link to Comment RobotTrader
RobotTrader's picture

10-yr. futures just cleared 135.

 

Heh, Bernanke might have to implement the Paul Krugman "Final Solution" just to stop a runaway bond market.

Sun, 07/22/2012 - 20:44 | Link to Comment bob_dabolina
bob_dabolina's picture

What comes after a "runaway" bond market?

Doesn't take a genius to know someone is pissing on you.

Weren't you pushing Chipotle not too long ago?

I also remember you pushing NFLX at 285... As I recall you said "shorts will get blow torched"

Sun, 07/22/2012 - 22:26 | Link to Comment AssFire
AssFire's picture

At least Leo knows shame and left after his solar flare out.

Robo is shameless; on par with the elite politicans.

Sun, 07/22/2012 - 22:50 | Link to Comment Fish Gone Bad
Fish Gone Bad's picture

Robo always had hot women to look at.  I always found it quite entertaining. 

Mon, 07/23/2012 - 00:04 | Link to Comment Bringin It
Bringin It's picture

yes but the Robo connection makes it something like a fish gone bad.

Sun, 07/22/2012 - 20:19 | Link to Comment fonzannoon
fonzannoon's picture

Sept 22 2016. Aliens that made initial contact 5 months ago have landed today. The President ( either party) and the treasury secretary made sure they were the first to greet the little green people. In exchange for time travel secrets the President is going to share the developed world's view of a consumer driven economy and how debt can successfully finance that. The US wants to be make sure to have the first bilateral trade agreements where we import resources from their galaxy in return for providing them with what the President feels should now easily be considered that Galaxy's reserve currency"

The aliens balked and seemed to almost show a level of distrust.....

Sun, 07/22/2012 - 21:16 | Link to Comment engineertheeconomy
engineertheeconomy's picture

We need to send Bernanke to their planet with a printing press quick... just from what you've described so far I am sure that they need an immediate rescue package of 1.8 Trillion at, say 28% interest. Of course we'll have to bail them out within 40 days...

Mon, 07/23/2012 - 04:26 | Link to Comment TPTB_r_TBTF
TPTB_r_TBTF's picture

Contact with aliens was made a loooooong time ago.  Contact was made at least 6,000 years ago.

Our Elite have been working together with the aliens throughout human history.  Humans used to call their elite caste "priests"; today we call them "politicians".

Huge amounts of gold have been pledged to finance global projects together with the aliens: 

Basically, ..., the amount of publicly known and tradable gold would be contrived by deflating the amount of historically mined gold to the current estimate of 165 thousand tons.

In reality, the amount of “black gold” (black = hidden, or shadow gold) greatly exceeded this by as much as a factor of a 100 or even more. Keeping Asia’s and Europe’s “black gold” off the books would offer a cache of gold that could be moved, traded and/or liquidated in ways that would generate enormous sums for different national intelligence agencies.

Quote from here:  Shadow Gold finances Bilderberg global projects

 

The aliens balked and seemed to almost show a level of distrust.....

Why would they balk? DonT they trust our politicians?

Maybe we should elect some trustworthy politicians to work together with the aliens!

Sun, 07/22/2012 - 20:40 | Link to Comment francis_sawyer
francis_sawyer's picture

 January 26, 1998

"I did not have sex with that woman"

January 27, 1998

"The great story here for anybody willing to find it and write about it and explain it is this vast right-wing conspiracy that has been conspiring against my husband since the day he announced for president."

September 11, 2001

My Pet Goat

November 4, 2008

Yes We Did [nothing]

August 4, 2012

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

November 6, 2012

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

 

Sun, 07/22/2012 - 20:21 | Link to Comment Divine Wind
Divine Wind's picture

 

 

It's already priced in.

 

 

Sun, 07/22/2012 - 20:24 | Link to Comment RobotTrader
RobotTrader's picture

Nobody remembers that the SOX had the biggest, fastest run in world history off those lows, as Fleckenstein documented in his "Mania Chronicles"

 

Its always a good time to buy during these crisis, not sell.

Sun, 07/22/2012 - 20:25 | Link to Comment francis_sawyer
francis_sawyer's picture

It's always a good time to shut your pie hole when you're an annoying douche...

Sun, 07/22/2012 - 20:40 | Link to Comment Hulk
Hulk's picture

Always wondered why its called a pie hole. Why not a cake, or hot dog, or Hamburger hole ???

Sun, 07/22/2012 - 20:57 | Link to Comment francis_sawyer
francis_sawyer's picture

I dunno... but pie works for me...

Sun, 07/22/2012 - 22:28 | Link to Comment jez
jez's picture

Cakehole is British slang, as in "Shut your cake'ole". Sounds a bit old-fashioned now, though.

Mon, 07/23/2012 - 09:12 | Link to Comment Metalredneck
Metalredneck's picture

It's actually "pi" hole, as he's about to have 3.14 teeth left in his head...

Sun, 07/22/2012 - 20:27 | Link to Comment fonzannoon
fonzannoon's picture

Yup right up until the world series when they threw it. Although personally I don't believe Shoeless Joe could have batted .375 in that series and still could have been on the take.

Sun, 07/22/2012 - 20:39 | Link to Comment Bob
Bob's picture

You definitely have a rendezvous with "always" coming, Robo.  BTFD. 

Sun, 07/22/2012 - 20:42 | Link to Comment zero19451945
zero19451945's picture

Right. But prices during this crisis keep going up, not down!

Sun, 07/22/2012 - 20:43 | Link to Comment Catflappo
Catflappo's picture

Are we talking about the 'crisis' which sees the S&P 500 priced a gigantic 13% off its all-time high?

Sun, 07/22/2012 - 20:37 | Link to Comment Zola
Zola's picture

Ah the debauchery of the world reserve currency... Always there to foil the natural clensing of markets. Soon USSA your turn will come - and then alas , there will be nobody behind you...

Sun, 07/22/2012 - 20:37 | Link to Comment Bob
Sun, 07/22/2012 - 20:41 | Link to Comment pvzh
pvzh's picture

Correct me if I wrong, but Russian default was "fast and furious". Everything happened in a matter of 3-4 months. In six months after the default, situation stabilized and started to improve noticeably. In Europe, it is dragging for several years (2?) with no end in sight.

"They" are better to let things fall, so everybody can move on.

Mon, 07/23/2012 - 02:56 | Link to Comment zhandax
zhandax's picture

Russia wasn't in a currency union.

Sun, 07/22/2012 - 20:55 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Russia peaked out in their oil production in the early 80s at about 11.5 mbpd.  Russia pumps 10 million bpd now.  At $106/barrel Brent.

In 1998, they pumped 6 mbpd at $30/barrel.  That's why they went bankrupt.

Anyone still doubt oil is everything?

Sun, 07/22/2012 - 21:21 | Link to Comment engineertheeconomy
engineertheeconomy's picture

Yeah right sure, I suppose you think there was some reason Zimbabwe went belly up other than excessive money printing...

Sun, 07/22/2012 - 22:09 | Link to Comment hardcleareye
hardcleareye's picture

Russia's default was not about money printing.... (if only it were so simple)  suggest you read up on the events that lead to it, this St Louis Fed report starting on page 3 is good place to start.

http://research.stlouisfed.org/publications/review/02/11/ChiodoOwyang.pdf

Sun, 07/22/2012 - 23:04 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Zimbabwe oil output -- zero.

Sun, 07/22/2012 - 20:57 | Link to Comment q99x2
q99x2's picture

Clearly the IMF and World Bank are the enemies of 7 billion people.

Sun, 07/22/2012 - 21:08 | Link to Comment francis_sawyer
francis_sawyer's picture

I'm telling you... the man & the dog are definitely working together...

~~~

http://weknowmemes.com/2012/03/im-telling-you-the-man-and-the-dog-are-working-together/

Sun, 07/22/2012 - 21:23 | Link to Comment web bot
web bot's picture

THE MOMENT that the Fed needs to increase interest rates to stave off a run on the US dollar, the world will understand what terms such as HYPERINFLATION and VELOCITY OF MONEY mean.

Sun, 07/22/2012 - 21:35 | Link to Comment Totentänzerlied
Totentänzerlied's picture

Now witness the full power of a fully armed and operational Federal Reserve Bank

Sun, 07/22/2012 - 21:28 | Link to Comment The Swedish Chef
The Swedish Chef's picture

The most interesting part were the figures on each side of the timeline....

 

Russia/Asian crisis: " "... loan installment of $670 million...", ...$1 billion scheduled for...",  "...a $1.5 billion loan..."

 

Europe today: "...529.5billions euros...", "...the 100billion euro..." 

We sure have come a long way. 


 


Sun, 07/22/2012 - 21:30 | Link to Comment negative rates
negative rates's picture

Sheesh, even I hope to be a millionaire by then.

Sun, 07/22/2012 - 21:39 | Link to Comment TrainWreck1
TrainWreck1's picture

* thinking of changing my nick to "Million Ruble Bonus" *

Sun, 07/22/2012 - 21:49 | Link to Comment RobotTrader
RobotTrader's picture

I wonder what Peter Schiff thinks about this most spectacular bond and dollar rally.

Sun, 07/22/2012 - 22:01 | Link to Comment Mr. Fix
Mr. Fix's picture

I wonder if Peter Schiff thinks about what you think at all?

Sun, 07/22/2012 - 22:09 | Link to Comment engineertheeconomy
engineertheeconomy's picture

Pete's impervious to information, instead he autodispenses disinformation

Sun, 07/22/2012 - 22:19 | Link to Comment fonzannoon
fonzannoon's picture

schiff may lose a few battles but he is going to win the war

Mon, 07/23/2012 - 00:06 | Link to Comment dcb
dcb's picture

chart udn, and iuup. I don't know based on that if you can call it spectacular. compare now to 6/11/10 or so, vgk is about the same level or was a couple of weeks ago, but the dollr has about 50% to go. same with emerging markets. if one assumes markets being equal, the fact that vgk and eem are about there, but the dollr is still weaker, says a lot

Sun, 07/22/2012 - 22:38 | Link to Comment buzzsaw99
buzzsaw99's picture

The IMF is disgusting.

Sun, 07/22/2012 - 22:56 | Link to Comment TrainWreck1
TrainWreck1's picture

Anyone ever research these guys? How they got their positions? Who they might owe favours to?

http://www.imf.org/external/np/sec/memdir/eds.aspx

http://www.imf.org/external/np/sec/memdir/officers.htm

And look at their org chart:

http://www.imf.org/external/np/obp/orgcht.htm

Who are these guys? Who owns these guys?

 

Mon, 07/23/2012 - 06:22 | Link to Comment I am Jobe
I am Jobe's picture

Well connected one must say. Nothing like the inbreeding in Europe and the USA. Yeah,

Learn from your Parents Mistakes- Use Birth Control. Just sayin must be taught in Schools in the USSA.

Sun, 07/22/2012 - 23:36 | Link to Comment mjk0259
mjk0259's picture

Russia's was the biggest oil exporter at that time, also large nuclear stockpile and the only thing between Europe and 1.3 billion Chinese. Greece is insignificant.

 

Mon, 07/23/2012 - 01:41 | Link to Comment JOYFUL
JOYFUL's picture

Hidden within this "Fawlty Towers" of a Kollapse Timeline farce are a couple of gems. Let's peel away the dross and peer inside -

...May 21, 1998[Indonesian President] Suharto resigns after 32 years in power. Vice President Habibie succeeds as president...

Ah yes...

May 5, 1997 Report by independent mining firm confirms there's virtually no gold in Busang, saying samples were tampered with. Report calls the Bre-X debacle as being "without precedent in the history of mining anywhere in the world." The following day, Bre-X shares fall to 80 cents and continue to plunge. The stock is soon delisted. Investors lose everything; some Canadian pension funds are out tens of millions of dollars.

Suharto, the CIA's chosen replacement for the overthrown true leader of Indonesia is finally disposable, after the biggest scam in modern history(until MFG!) unwinds with a successful conclusion for the major movers = BARRICK GOLD[a la...the BusheyBandit\theArmsDealer\theMuslimMooch('Bob' the Blob Hasan)the KosherNostraKingpin (Bronfman) and his sidekick, the LyinLeprechaun (aka Brian Muldoon)all come out smellin o roses, while McMoRan gets the shit sandwich and de Guzman goes south whilst bungee jumpin sans chute.

Cute. That's the real history, not fairy tales...Unaligned nations gave up their gold to the Beagle Boys and entered indentured slavery, then lined up for corporal punishment from the IMF kapos...Sukharno, on the cusp of creating a power bloc of the 2\3rds of the worlds nations, is deposed, and Barry Soetero drops in to look after CIA\Mossad bizness in Jakarta....

as for the rest, I'm outta time...it will have to wait...but that's enuff bait! DIG IN!

Mon, 07/23/2012 - 02:30 | Link to Comment AUD
AUD's picture

Interesting article Nicholas. One thing you haven't mentioned though was the large amount of gold released by many governments through the late '90's.

This was at the climax of a massive run of government debt issuance into falling bond yields. This run of debt issuance was itself a response to the big credit bust of 1989-90. Sound familiar?

Thing is, many of these governments no longer have significant quantities of gold of 'good delivery' quality.

Mon, 07/23/2012 - 02:58 | Link to Comment Poor Grogman
Poor Grogman's picture

When you hear these words.

"there will be no devaluation"

Immediately turn everything into tangibles, then panic....

Mon, 07/23/2012 - 03:28 | Link to Comment Joe A
Joe A's picture

The Russian economy after the fall of the Wall experienced an implosion. They lost 40% of their GDP which only happened before during WWII. They went from 2% poverty rate to 25% poverty rate with millions unemployed. Their socialist economy was not efficient perhaps but things were worsened by the shock therapy they went through when high paid Western consultants went to Russia to 'transform' their economy. Assets that were worth billions were sold for millions to the likes of Abramovich. Then these assets were dismantled and parts were sold off. Millions lost their jobs. Jeltsin and a small clieck of oligarchs made billions while many suffered. And it was not a process to create a healthy economy: the consultants were sent to destroy the Russian economy more because empires do not take prisoners.The same Anglo-American financial system has now set its hungry greedy eyes to Europe.

Regarding the Asia crisis: the only country that was relatively unscaved was Malasia which gave a big finger to the IMF and did not allow money transfers out of the country higher than 10,000 dollars.

Mon, 07/23/2012 - 05:56 | Link to Comment TPTB_r_TBTF
TPTB_r_TBTF's picture

First they came for the russian collateral,
and I didnT speak out because I held no russian assets.

Then they came for the greek collateral,
and I didnT speak out because I held no greek assets.

Then they came for the spanish collateral,
and I didnT speak out because I held no spanish assets.

...

Who's next?  Not my assets I hope.

 

 

Mon, 07/23/2012 - 06:13 | Link to Comment writingsonthewall
writingsonthewall's picture

There was a golden rule in bond trading circles.

 

"no nuclear (super) power has ever defaulted"

 

....until one did.

 

Remember - it's ALWAYS different this time.

 

Who's up for 3 nuclear powers defaulting this time? - any advance on 3?

 

Nothing is more foolish than men who think they understand God.

Mon, 07/23/2012 - 08:48 | Link to Comment i-dog
i-dog's picture

If you understand "God's Marines", you'll understand where this is going.

The whole of the developed world is going to default ... the issue is 'their' preferred order vs. unforseen circumstances/actors derailing that planned sequence.

During a controlled demolition, it is important that the preset charges go off in the correct sequence in order for the structure to fall into the desired footprint....

Mon, 07/23/2012 - 06:37 | Link to Comment blueridgeviews
blueridgeviews's picture

I wonder if this had something to do with the repeal of Glass Steagal. You know the gov't needs super large financial companies to aid in it's distribution of funds.

Mon, 07/23/2012 - 08:14 | Link to Comment Shizzmoney
Shizzmoney's picture

August 20 might be the most important day of the entire summer and very well could turn into the credit event that breaks the camel's back.

Good, I'll be in Montreal that weekend.

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