Tag Archives: eurozone

Euro Crisis Brings World to Brink of Depression

By Darrell Delamaide | From Marketwatch.com | On Monday, July 24th, 2012

Europe is a tinderbox waiting for a spark.

The financial volatility in Europe may have created a situation that is now beyond the capacity of policy makers to control or curb.

When an accomplished fixer like Pascal Lamy, the head of the World Trade Organization and the longtime chief of staff for former European Commission President Jacques Delors, describes the situation in Europe as “difficult, very difficult, very difficult, very difficult,” you know it is time to run for cover.

The Great Depression was worsened by bank runs.

The crisis has now gone well beyond the prospect of breaking up the euro to the threat of a full-fledged financial and economic collapse in Europe that could plunge the world into a second Great Depression.

Few Americans are aware that a worldwide banking crisis started by cascading bank failures in Austria and Germany was one of the major causes of that earlier Depression.

It was in the summer of 1931 that the collapse of Creditanstalt in Vienna forced one of Germany’s big banks, Danatbank, to fail, leading to a credit crisis that prompted bank holidays around the world and exacerbating an already severe economic crisis.

The spark in the current crisis could come from a bank failure, and not necessarily in Spain. It could be a bank in Italy — or Austria, or Germany. German banks are notoriously undercapitalized and poorly supervised and have created a number of mini-crises in the past few decades since the collapse of the Herstatt Bank in 1974.

German economist Fabian Lindner drew the parallel to 1931 in an op-ed last fall when he compared his country’s intransigence toward southern Europe now to the misguided harshness of the U.S. and France toward Germany in the earlier crisis.

Hough: Now is the time to buy Spain

Spain has led headlines following its surging bond yields but investors who plunk money into a broad basket of Spanish shares today could see average returns of 20% a year over the next several years. Jack Hough discusses on Markets Hub.

“Both the German public and politicians should learn from history,” Lindner wrote in a commentary for Die Zeit that was also published in The Guardian. “Solidarity with the crisis countries is in Germany’s long-run interest. The German government should stop abusing its power to dictate economic decline to other nations. The alternative is economic stagnation and increased tensions between European nations.”

The situation has deteriorated since Lindner hoped in vain for some enlightenment on the German side. Instead, German Chancellor Angela Merkel and Bundesbank President Jens Weidmann have held to the prescription Lindner saw leading to disaster: “Germany and the German central bankers demand drastic austerity and only give piecemeal and insufficient help in return — too little, too late.”

The latest austerity measures in Spain, approved by the national Parliament last week even as the economy continues to contract, has led to new riots in the streets, pushing the yields on Spanish bonds above the 7% level deemed manageable, and increasing the likelihood of contagion to Italy.

Meanwhile, German Economics Minister Philipp Roesler whistles in the wind, saying the possibility of a Greek exit from the euro has “lost its horror,” and German Finance Minister Wolfgang Schaueble says Greece must try harder to meet its austerity commitments.

The problem, meine Herren, is not poor little Greece, long since written off by a smug German officialdom. The problem is the growing possibility of defaults in Spain and Italy that will lead to bank failures across the continent and incalculable consequences.

Paul Krugman quipped at the beginning of the current crisis that someone will be able to write a sequel to Liaquat Ahamed’s Pulitzer Prize-winning book, “Lords of Finance” — which chronicles how the four leading central bankers of that era plunged the world into the Great Depression with their wrong-headed policies — and call it “Lords of Finance: The Next Generation.”

The target of Krugman’s barb was Jean-Claude Trichet, then president of the European Central Bank. But his successor, Mario Draghi, has proven equally clueless in his public statements and actions.

Federal Reserve Chairman Ben Bernanke, an avowed admirer of Ahamed’s book, has nonetheless been relatively timid in recent months, keeping his distance from the European crisis and failing to make a convincing case for the Fed’s inaction in following its own mandate to promote employment in the U.S.

History is not likely to be any kinder to Bernanke and his cohorts than to the European policy makers who collectively have not been equal to the task.

The worst may still be averted but the challenge is indeed very, very, very difficult, and it is hard to see at this point where salvation could come from.

The article was originally posted at http://www.marketwatch.com/story/euro-crisis-brings-world-to-brink-of-depression-2012-07-24

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About The Author: RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with nearly five years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.

EU Leaders Discuss Possible Greek Exit, Seek Legal Advice

By Beckett Adams | From TheBlaze.com | On June 12th, 2012

As the possibility of a Greek exit becomes more likely, leaders in the European Union are seeking legal advice from the European Commission on how to shift money and keep people within borders, the Associated Press reports.

“European finance officials have discussed limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls as a worst-case scenario should Athens decide to leave the euro,” Reuters reports.

E.U. spokesman Olivier Bailly said Tuesday that, legally, the EU can limit the movement of people and money across national borders “if it’s necessary to protect public order or public security.”

“There is a possibility for member states to restrict movement of capital in specific cases relating to public order and public security,” Bailly told reporters.

Yes, you read that right. The EU can legally limit the movement of people and capital if it deems it a “safety issue.”

Bailly added that the EU cannot restrict the movement of people or money if it’s for “economic reasons.” But who gets to define what’s a “safety issue” and what’s an economic issue? The same people who thought it was a good idea to let Greece into the eurzone?

“Some people are working on scenarios,” he said, but refused to confirm or identify which organizations and people were working on them.

Perhaps hoping to calm anxious investors, Bailly insisted that although multiple scenarios are being discussed, the only one that’s being taken seriously is one where Greece remains in the 17-nation union.

“The Commission is not working on a Greek exit plan,” Bailly said, according to the Wall Street Journal.  “We‘re working on one plan and one plan only and that’s to keep Greece in the euro zone.”

This article was originally posted at http://www.theblaze.com/stories/is-the-eu-preparing-for-a-breakup/

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About The Author: RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with nearly five years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.

Spain Enters New Round Of Quantitive Easing

Spain Sells 2.07B Euros of Bonds, Tops Target

From MarketWatch.com | On June 7th, 2012

FRANKFURT (MarketWatch) — Spain saw borrowing costs rise Thursday in a closely-watched debt auction, but topped its target range, selling a total of 2.07 billion euros ($2.6 billion) of government debt, news reports said. Spain’s Treasury had aimed to sell a total of 1 billion to 2 billion euros of debt. A sale of 10-year government bonds produced an average yield of 6.04%, up from 5.74% in a previous sale, Bloomberg reported. Bids exceeded supply 3.29 times, up from a bid-to-cover of 2.56 in a previous auction, the report said. Spain also sold bonds maturing in 2014 and 2016. In the secondary market, the yield on 10-year Spanish government bonds was down 0.13 percentage point at 6.14%, according to FactSet.

This article was originally posted at http://www.marketwatch.com/story/spain-sells-207b-euros-of-bonds-tops-target-2012-06-07

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About The Author: RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with nearly five years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.

Rehn: EU Weighing Direct European Bank Bailouts

From MarketWatch.com | On June 4th, 2012

Olli Rehn

FRANKFURT (MarketWatch) — The European Commission has considered the possibility of directly recapitalizing euro-zone banks via the region’s permanent bailout fund, but such a maneuver would require a treaty change, Olli Rehn, commissioner for monetary and economic affairs, said Monday, according to news reports. “We have been considering this as a serious possibility, of breaking the link between the sovereigns and the banks,” Rehn said at a briefing in Brussels, according to Reuters. Such moves aren’t allowed under the treaty, “but we see that it is important to consider this alternative of direct bank recapitalization as we are now moving on in the discussion on the possible ways and means to create a banking union,” Rehn said, according to the report.

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About The Author: RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with nearly five years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.

Jim Cramer Predicts Run On Banks In Spain & Italy

By Erica Ritz | From The Blaze.com | On May 20th, 2012

Jim Cramer, a former hedge fund manager and the host of CNBC’s Mad Money, was on Meet the Press with David Gregory this morning where the two discussed Europe’s economic woes and the worldwide ramifications of the disaster.

“I’m predicting bank runs [in] Spain and Italy within the next few weeks.  Without a coordinated policy, there is going to be financial anarchy in Europe and [it's] going to cause a slowdown worldwide, China and here.”

Watch the interaction, below:

Just a few days ago, Cramer was discussing the run on Greek banks and how it would become a “slippery slope.”

“This is not Argentina and Brazil in the 80′s,” he said, “these are big countries.”

The Street TV, which conducted the interview, summarized: “Our Banks Can’t Outrun European Banks.”

This article was originally posted at http://www.theblaze.com/stories/financial-anarchy-jim-cramer-predicts-a-run-on-banks-in-spain-and-italy-within-weeks/

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About The Author: RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with nearly five years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.

Greek Bank Run Showing More Signs As Greece Citizens Line Up At ATMs

By Allan Soldner | From Z6Mag.com | On May 15th, 2012

Greek Bank RunIt was confirmed by the President of Greece, “that the strength of banks is very weak right now.” Multiple reports including the President of Greece has reported that on Monday alone nearly $898 Million or €700 million Euros were withdrawn from Greek banks.

The tipping for for a Greek Bank Run has picked up steam as the news spreads across the world. As soon as the news started spreading to other news publications which started with the Wall Street Journal’s report, “Greek Depositors Withdrew $898 Million From Banks Monday” markets started to fall.

On top of the JP Morgan Chase & Company drama that has unfolded with the $2 billion in losses the

Greek run on banks seemed to fuel the loss of any positive territory the DOW, S&P 500 or NASDAQ had at the closing bell. The DOW ended down -63.35, the S&P 500 down -7.69 and the NASDAQ down -8.82.

The stock market in the US and the precious metals market fell nearly in sync. Gold bullion prices and Silver Bullion prices fell fairly significant amounts in lockstep with the drops of the US Stock market. Gold price was down $17.20 today ending at $1.545.30 at 5pm EDT and Silver price was down .65 cents today ending at $27.77 an ounce.

Other pressures on the market was the euro tumbling to four month lows when compared to the US Dollar which in turn had the same effect on precious metals pricing. What everyone is holding their breath trying to figure out is whether the Greek bank run will continue and erode the total deposits held by Greece’s Central Bank of €165.36 billion reported in March 2012.

A report from Tyler Durden at ZeroHedge.com asked the same question in a post called, “Has the Greek Bank Run Started?” On that post while mentioning the withdrawal numbers from Greek bank accounts there are also pictures that are shown there of citizens of Greece lining up at ATMs. ATM lines are often the hysteria that starts the ball rolling even worse in any bank run because people walking by start asking if they should be doing the same. We’re sharing pictures of those Greek ATM lines below.

The original article was posted at http://z6mag.com/business/greek-bank-run-showing-more-signs-as-greece-citizens-line-up-at-atms-169333.html

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About The Author: RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with nearly five years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.

Sixteen Spanish Banks Have Credit Ratings Cut…

From BBC News | On May 17th, 2012

Bankia shares have fallen 50% in May

Bankia shares have fallen 50% in May

Ratings agency Moody’s has cut the credit ratings of 16 Spanish banks, a further blow to a country that is struggling to deal with the bad debts of its banking sector.

It also cut the debt rating on Santander UK, a subsidiary of the Spanish banking giant.

It comes after shares in struggling lender Bankia fell another 14%. They have almost halved in value this month.

Fears about losses at Spanish banks has hit shares across Europe.

The banks include Banco Santander and BBVA, the biggest banks in Spain. Ten of the 17 banks were also put on negative credit watch, meaning that further downgrades are possible.

“The change to Moody’s credit rating of Santander UK plc has no impact on our businesses in the UK or our plans for future growth,” Andy Smith, a spokesman at Santander said about the downgrade.

“Santander UK plc is an autonomous subsidiary of the Santander Group, with more than 90% of its total assets held in the UK and a eurozone sovereign exposure of less than 1% of assets.”

In cutting the ratings, Moody’s cited the “adverse operating conditions, characterised by the renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment”.

It also said that the Spanish government, due to its borrowing difficulties, has had its ability to provide support to the banks “reduced”.

The Spanish government also had to pay higher rates of interest to borrow money on the markets, which leads some to believe it will need a bailout.

Moody’s also cut the ratings of four of Spain’s regions – Catalonia, Murcia, Andalucia and Extremadura – of whom it said there is only a “low probability that the regional governments will be able to meet the 2012 deficit target”.

‘Basically normal’

Bankia was forced to deny a report customers had taken 1bn euros ($1.3bn; £800m) out of the bank, which is set to be part-nationalised, in the past week.

Spain’s economy minister denied reports of a surge in withdrawals from Bankia in recent days.

“It’s not true that there is an exit of deposits at this moment from Bankia,” said Fernando Jimenez Latorre.

Later, the bank’s chief executive said volumes had been “basically normal”.

Bankia, which holds 32bn euros (£25.7bn) in distressed property assets, was partly nationalised this month. On Wednesday, it said it was delaying the release of its first-quarter results.

It has the industry’s largest exposure to the property market, which burst spectacularly and has saddled its banks with bad debt.

“Markets are worried about eurozone bank deposit runs and an escalating banking crisis,” said VTB Capital economist Neil MacKinnon.

Alberto Gallo, head of credit research at Royal Bank of Scotland, told the BBC: “The problem is Spanish banks are too large for the government to bear all of their weight.

“You [the Spanish government] need to make a choice and just protect stronger banks, otherwise Spain will go the way of Ireland – having to do a lot of austerity and potentially incurring losses for bank bondholders.”

Earlier, the Spanish government raised 2.5bn euros through issuing a number of different types of bonds.

On bonds due to be paid back in January 2015, it had to pay an interest rate of 4.373%, up from 2.89% in April. Governments have to pay higher returns to investors, or yields, as lenders become more concerned about a country’s ability to pay the money back.

On Wednesday, Spain’s Prime Minister Mariano Rajoy warned that borrowing costs could become “astronomical” as fears about the weakness of its banks persist.

This article was originally posted at http://www.bbc.co.uk/news/business-18100049

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About The Author: RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with nearly five years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.

Greek Bank Withdrawls Fuel Fears Of Bank Run

By Brian Blackstone & David Enrich | From WSJ.com | On Tuesday, May 15th, 2012

Greek depositors withdrew €700 million ($898 million) from the country’s banks on Monday, fueling fears of a bank run amid the growing political disarray.

With deposits falling, Greek banks become even more dependent on the European Central Bank to meet their funding needs, exposing the central bank to potentially huge losses if Greece leaves the euro area.

Greek President Karolos Papoulias told the country’s political leaders that bank withdrawals plus buy orders received by Greek banks for German bunds totaled some €800 million on Monday, a transcript of his comments said. A central bank official confirmed the figures.

The original article was posted at http://online.wsj.com/article/SB10001424052702303505504577406310678151998.html?mod=WSJ_hp_LEFTTopStories#articleTabs%3Darticle

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About The Author: RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with nearly five years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.

Fitch Cuts Greece To ‘CCC’ On Possible EMU Exit

By Sue Chang | From MarketWatch.com | On Thursday, May 17th, 2012

SAN FRANCISCO (MarketWatch) — Fitch Ratings on Thursday downgraded Greece’s sovereign rating to CCC from B- due to heightened risk that Greece may have to exit the Economic and Monetary Union. The strong showing of political parties opposing austerity in the recent election and the failure of the parties to form a government underscores the lack of national support for the E.U.-IMF bailout program, Fitch said. “In the event that the new general elections scheduled for June 17 fail to produce a government with a mandate to continue with the E.U.-IMF program of fiscal austerity and structural reform, an exit of Greece from EMU would be probable,” said Fitch in a statement. A Greek exit from the EMU is likely to result in defaults in the private sector as well as sovereign euro-denominated obligations, the ratings agency said. Triple-C grade is categorized as “poor quality” with possibility of default.

The original article was posted at http://www.marketwatch.com/story/fitch-cuts-greece-to-ccc-on-possible-emu-exit-2012-05-17

EDITOR’S NOTE: According to Wikipedia, A CCC bond rating means: An obligor is CURRENTLY VULNERABLE, and is dependent upon favourable business, financial, and economic conditions to meet its financial commitments. According to Fitch, anything below a B/B- has reached junk bond status.

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About The Author: RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with nearly five years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.

Dow Declines 8th Day In 9

By Kate Gibson | From MarketWatch.com | On May 14, 2012

U.S. stocks drop to 3-month lows on Europe fears.

NEW YORK (MarketWatch) — U.S. stocks closed at more than three-month lows Monday, and the Dow industrials slid for the eighth session in nine, as investors worried about Greece’s potential exit from the euro zone.

“The market appears to be discounting a Greek exit from the euro,” said Linda Duessel, senior equity strategist at Federated Investors Inc.

The Dow Jones Industrial Average ended down 125.25 points, or 1%, at 12,695.35, its lowest close since Jan. 31, after Greek politicians over the weekend failed to reach an agreement on a unity government, raising the likelihood of new elections and the risk of halted international aid payments.

J.P. Morgan Chase & Co. led decliners on the Dow, with a drop of 3.2%, followed by a 2.6% drop in Bank of America Corp. shares.

(Photo: Aris Messinis/Press Pool)Europe facing a ‘Lehman’ moment?

One of Poland’s top bankers said the euro-zone crisis was could head in a direction that may be as bad as the start of the 2008 financial crisis.

Ina Drew became the first high-ranking casualty of the scandal that has put a dent in J.P. Morgan’s reputation, with the bank saying that the chief investment officer is resigning after more than 30 years with the bank. Read more about Drew’s exit from J.P. Morgan after trading losses.

J.P. Morgan’s $2 billion trading loss sharpens the battle over financial regulation, with presumed Republican presidential nominee Mitt Romney favoring the repeal of the Dodd-Frank law, which is supported by President Barack Obama. It also prompted Elizabeth Warren, the Massachusetts Democrat running for U.S. Senate, to call on J.P. Morgan Chief Executive Jamie Dimon to resign from the board of the New York Federal Reserve.

The S&P 500 Index slid 19.64 points, or 1.5%, to 1,338.35, its lowest close since Feb. 2. Financials led the slide among its 10 sectors, all of which ended lower.

With the S&P 500 starting off the day about 5% from recent highs, not much “damage” has been done, according to Dan Greenhaus, chief global strategist at BTIG LLC. Declines of 7% are perfectly normal, and would not be all that worrisome, he said.

In executive shake-ups, electronics retailer Best Buy Co. said founder Richard Schulze would step down as chairman following a board probe that concluded he failed to report allegations of personal misconduct by former chief Brian Dunn to its audit committee. Shares rose 1.5%.

Stocks down at closing bell

The latest news from Steve Orr, including the closing numbers and J.P. Morgan Chase’s executive departure in the wake of a massive trading loss.

Scott Thompson on Sunday stepped down as Yahoo Inc.’s chief executive, with the resignation coming 10 days after hedge-fund activist Daniel Loeb accused him of faking a computer-science degree. Ross Levinsohn has been named interim chief. Shares rose 2%.

Shares of Groupon Inc. rallied more than 18% ahead of first-quarter results after the close from the daily-deal company.

The Nasdaq Composite Index declined 31.24 points, or 1.1%, to 2,902.58, its lowest close since Feb. 6.

For every stock rising five fell on the New York Stock Exchange, where 803 million shares traded. NYSE composite volume topped 3.6 billion.

Gold futures closed at a 2012 low, with the contract for June delivery losing $23, or 1.5%, to end at $1,561 an ounce on the Comex division of the New York Mercantile Exchange.

Oil prices also ended their floor session at their lowest level so far this year, with the crude contract for June delivery down $1.35 to finish at $94.78 a barrel.

In Greece, a political stalemate entered a second week with no agreement on a unity government. Greek, Spanish and Italian bond yields spiked, and European stocks dropped. German government yields, like U.S. Treasurys, fell as investors sought the two countries’ debt as relative safe havens.

“No region has done more to insulate itself from a Greek exit than Germany, where banks’ consolidated risk exposure to Greece fell from $34 billion at the end of 2010 to $13 billion at the end of 2011,” said Duessel of Federated Investors. “U.S. banks had less than $4.5 billion of exposure to Greek debt at the end of 2011.”

As for the debt crisis engulfing Spain, also in the lower Mediterranean, “the cost of ensuring against a Spanish default is now more expensive than for Hungary,” Peter Boockvar, equity strategist at Miller Tabak, noted in an email.

Boockvar also noted that shares of London-traded shares of De La Rue hit a 52-week high on Monday, with the analyst calling it another indication of what the market thinks of the chances of Greece remaining in the euro. De La Rue makes physical currency, and if Greece exits the euro, “a lot of drachma will have to be created and De La Rue would be the likely maker of it.”

Kate Gibson is a reporter for MarketWatch, based in New York.

This article was originally posted at http://www.marketwatch.com/story/us-stocks-begin-down-on-europe-woes-2012-05-14?dist=afterbell

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About The Author: RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with nearly five years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.