Monday, September 26, 2011

Mon Post#2: "The Collapse is coming..."

Stunning interview on BBC today, the kind of which you will NEVER see on North American financial TV.

UK trader Alessio Rastani shines in this three-and-a-half-minute interview where he says what most know but simply ignore:
  • "This economic crisis is like a cancer, if you just wait and wait hoping it is going to go away, just like a cancer it is going to grow and it will be too late!"
It's a painfully frank interview and shows you how some view opportunity in what others view as crisis.

Speaking of crisis, the harsh reality is that nothing has been fixed in the financial system since the Great 2008 Financial Crisis.

All government has done is paper over the problems and pushed the problems down the road.

In Europe, as Greece teeters on the brink of collapse, it's the world's banks that are at risk from the contagion.

And the banks are still in serious trouble. 

One European banker recently said"it is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels."

Mark to Market accounting is the great lie of the banking system right now. Instead of valuing the assets on their books at what they can be sold for today, we have this fantasyland-esque hope that values assets at what they 'think' they will get for them a couple of decades in the future.

European and North American banks are being kept alive with phony accounting.

This was not the case in 2008. Now we have insolvent banks AND phony bookkeeping to make them appear solvent. The problem has only been kicked down the road.

But the desperate efforts to ignore the problem continue. EU finance ministers are taking criticism from around the globe because they are not printing enough money to bail out their banks.

Yesterday, Reuters reported,
  • “After a weekend of being told by the United States, China and other countries that they must get more aggressive in their crisis response, European officials focused on ways to beef up their existing 440 billion-euro rescue fund. Deep differences remained over whether the European Central Bank should commit more of its massive resources to shoring up Europe’s banks and help struggling euro zone member countries.”
The Telegraph is now reporting on how German and French authorities have begun work on a three-pronged strategy  to build a “firebreak” around Greece, Portugal and Ireland to prevent the crisis spreading to Italy and Spain, countries considered “too big to bail”.

The reality is that the banks are still in just as much trouble as they were in 2008, and probably more.

Lost in the blizzard of economic news last week were the downgrades of three very big U.S. banks.

There was zero talk of downgrades in 2008, and now Moody’s has cut the debt rating of Bank of America, Wells Fargo and Citigroup.

To paraphrase UK trader Alessio Rastani, the economic crisis is like a cancer. And it's growing.

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1 comment:

  1. The situation would be laughable if it were not so serious. The central bankers and finance ministers strut around the globe as if they know what they are doing and this is reinforced by the mainstream press who fawn over them. However, they have nothing to offer, especially since they are most responsible for the problem. The only solutions they offer are more debt or printing money, neither of which will cure anything.
    The individual in the interview clip also said that governments don't rule, but that Goldman Sachs is in charge. Why is Mark Carney, ex Goldman Sachs, Canada's central bank chief?