BRICS summit to explore creation of “World Bank” like bank for southern hemisphere
The is an ambitious project for the BRIC countries that is made up of: Brazil, Russia, India, China and South Africa. They do not discount the efforts and helpfulness of the current World Bank that was setup by the U.S. and allies to help give assistance to lower developed countries that historically have had a very difficult time securing financing for development and infrastructure project that tend to create jobs and higher standards of living for the local population.
In the article, it is cited that the demand for these services are much more great that the availability of funding, this is what is driving the BRICS to formally starting discussing the formation of this bank based on the “World Bank” model. As long as the assistance is given at rates that can be paid back so these nations come out in better shape than before.
Al-Jazeera – The proposal of a development bank is high on the agenda at the summit of the five BRICS bloc nations – Brazil, Russia, India, China and South Africa – starting on Thursday in New Delhi.
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Where is the German gold bullion reserves?
Bombshell of a story. Looks like the German Central Bank (Bundesbank) has not audited their gold reserve since 2007, which I will add is when the financial crisis began. The article is a little hard to follow because I had to rely on Google Translate to bring it from German to English. The element that stood out in this article is the fact is that the Federal Reserve Bank of New York does not allow any photos or tours of the facility, but they do send you a “picture” of your gold. That picture only goes the Central Bank.
Being the huge lapse in auditing, a financial meltdown, I can understand why some of the people would be upset. Psychologically is must mean a lot to the German people to know that their reserve wealth is safe and accounted for. Especially because they have basically been underwriting this whole EU bailout. I think we will see the rectified in the next few weeks. Most likely just an oversight, hopefully.
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Greece steps up pressure on investors to take bond deal
Looks like Greece and cocked the hammer. They are putting the feet of private investors in Greece to the proverbial fire. Basically they are telling this group of investors to “take the deal” or we will pull the trigger and default. This would create contagion and they know it. The investors most likely will take the deal because they already are bailed out in the fact they made loans to a country that could not afford to service them along with having very rich social service programs that would take a very productive economy to support.
There is no easy answer to this problem in Greece and this is not a new problem with them having a large amount of social entitlement programs. I am hopeful their transition will be successful in the end and hopefully it will give a new perspective on the next generation about what they should expect from their government and what they should expect from themselves and the associated communities.
CBS - Greece stepped up the pressure on its private creditors Tuesday to sign on to a crucial bond swap without which the country will default on its debts this month, but which some investors fear may prove unsuccessful.
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China sets up fund to bankroll corporate takeovers
No surprise that China is going to start being more aggressive with their large FX reserves. This fund will be capitalized with $1.9 billion to start. It will be very interesting to see where this fund starts deploying their cash in different markets. If I had such a large base of reserves, I would want to hedge in a manner that protected my investment. I think we will see this invested in productive assets like “stuff” not so much fiat.
One of the investments cited in the article is a large water & sewer in the United Kingdom. We will see more investments along those lines in my opinion.
DW: Boasting $3.2 trillion in foreign currency reserves, China has created a new fund aimed at financing takeover bids abroad. The fund also seeks to boost China’s currency in global financial markets. In its drive to step up overseas investment, the Chinese government has set up a new fund worth 12 billion yuan ($1.9 billion), Shanghai International Group said in a statement Friday.
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Bank of England Governor: ‘World facing worst financial crisis ever’
Governor King is comparing our current financial situation to the 1930′s great depression or worst. I think he is right and this is going to be much worst than the 1930′s because the size of numbers we are talking about and the 24/7 cycle we are on so that financial pain can be transmitted in nano-seconds.
The major problem that we keep coming up against that many smart people don’t get this that the only road to a real recovery that is sustainable has to involve default of debt. You can not use debt to handle a debt problem. Why does the Bank of England think that purchasing Gilts and giving them cash is going to get lending started? It isn’t and most likely, this is not the real reason for this move. I think this is just cover for giving their banks cash so they have more reserves and a more robust “firewall” for the crisis. People just don’t want more debt with their current levels and banks know it is likely going to be worst before we see sunshine.
The Telegraph (James Kirkup) - Sir Mervyn King was speaking after the decision by the Bank’s Monetary Policy Committee to put £75billion of newly created money into the economy in a desperate effort to stave off a new credit crisis and a UK recession. Economists said the Bank’s decision to resume its quantitative easing [QE], or asset purchase programme, showed it was increasingly fearful for the economy, and predicted more such moves ahead.
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Banking crisis set to trigger new credit crunch
Interesting article. I keep reading this articles about European banks and get deja-vu from our last financial crisis that we supposedly made through. But, just as I said after all the “experts” said all is clear, we were never out of the woods.
One of the key indicators to watch it the inter-bank lending market. These are the rates bank charge each other for borrowing money. The lower the rate, the most trust in this market and hence, between banks. When banks don’t trust each other, you have serious problems because they know much more about each others liability positions then almost anyone else. Also you can look at the spread between what the central bank authority charges a bank for over-night loans and what the inter-bank lending rate is. The wider this spread, shows the deterioration of trust between the banks.
We were never out of the woods and we are getting close to another crisis. All it will take is another external shock and we will have markets react sharply and that will trigger other events that will culminate in large banks either failing or being given assistance to stay afloat. The right thing to do “this” time around is too LET THEM FAIL. We have to let these debts default so they do not become a burden on the lending market or the public in general. They made the money on the way up and now they need to take the losses on the way down and the banks that were smart enough to protect themselves will prosper and naturally become larger and make more profits.
The Telegraph (Harry Wilson) - Credit default swaps on lenders as far afield as China and Australia, countries that until recently seemed immune to the chaos, have doubled in the last two months to levels not seen since the financial crisis.
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International Monetary Fund: ‘Time is Running Out’
IMF sees this next round of de-leveraging as a not so positive thing. I see it as a very positive thing. We have way too much debt in the system, well beyond anything meaningful restructuring would do. Yes, default has pains associated with it but in the long run this is what “is” going to happen to get balance back into the financial system and the economy on a whole. We can not socialize these losses on national balance sheets.
The problem is that these liabilities are so large that they actually do seriously impair a countries federal balance sheet vis a vie their central bank. We need to just own up the problem and force these bad actors no matter who they are and how big they are to shallow these losses and write them off. If they do some systemically important function, we create a unit to keep that portion going but the share and bond holders need to take these losses. I have nothing against banks, when they do their function prudently, they are a great asset. This is just what the right move is for the majority.
If we do not take this course of action then we are going to suffer a fate that has much higher unemployment and prices in it. Is that what you want, sound off?
Fox Business (Adam Samson) – The stumbling global economic recovery and deepening euro zone sovereign debt crisis pose a heightened risk to financial markets in advanced economies, the International Monetary Fund said Wednesday, calling for swift government action.
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