China sets up fund to bankroll corporate takeovers

February 22, 2012 by · Leave a Comment
Filed under: Global News 

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’

October 10, 2011 by · Leave a Comment
Filed under: Global News 

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

October 4, 2011 by · Leave a Comment
Filed under: Global News 

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’

September 26, 2011 by · Leave a Comment
Filed under: Global News 

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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Bank of Korea purchases gold for first time since 1997

August 4, 2011 by · Leave a Comment
Filed under: Global News 

This article hit is right on the dot.  Any purchases of gold bullion by central banks “does” reassure gold investors that it was a wise choice in this time in uncertainty.   Yes gold does not pay a dividend but also it has no liabilities other than itself.  Unlike fiat currencies (Dollars, Euros, Francs, Yuan , etc) which carries a liability being that they are brought into existence by decisions that you have little influence on and is affect by political headwinds even though they profess monetary independence from this pressure.   If that was the case then we wouldn’t not see so much intervention every-time we have any major negative news.

Right now we are witnessing the largest expansion in public debt and currencies ever.   This is why ALL central banks (basically) are increasing their gold reserves so they can show they have something tangible in their holdings that are not entirely dependent on another counter-party (ie another government).   They can all agree on value for gold.   We are seeing the re-monetization of gold and eventually silver as we continue to increase debts at increasing rates.

Bank of Korea is smart to make this purchase and we should see more in time.

Yahoo! News – South Korea’s central bank bought 25 tonnes of gold over the past two months in its first purchase in more than a decade, saying the time was ripe to boost its gold holding, but markets barely moved on the news.

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