Collapsing Global Banking? Signpost to watch!

from sovereignman.com

Today, subprime is back.

There’s been a lot of talk lately about a growing bubble in the subprime auto loan market, and even student loans.

But the biggest subprime bubble of all is the negative interest loans being made to sovereign governments.

All over the world now there are governments that are issuing sovereign bonds with negative yields… and many of these governments are totally bankrupt.

Japan, with its debt level at more than 220% of GDP, is the latest entrant into the world of negative interest bonds.

Japan’s debt is so high, in fact, that it takes 41% of government tax revenue to service.

Even in Italy, one of Europe’s most notoriously and hopelessly bankrupt countries, the government bonds have negative yields.

‘Negative yield’ means that an investor who loans money to government will get back less money than s/he invested once the bond matures.

In other words, the government is getting paid to borrow money.

So it’s not much different than when banks paid subprime homeowners to borrow money ten years ago based on a misguided premise that home prices always go up.

Now they’re just paying subprime governments to borrow based on a misguided premise that governments will ALWAYS pay. (Just like Greece!)

The key difference is size. At the peak of the housing bubble ten years ago, there was about $1.3 trillion worth of subprime mortgages in the financial system.

That $1.3 trillion bubble was enough to bring down several major banks and cause cascading damage across the global financial system.

Today’s bubble is EIGHT TIMES the size of the last one, with more than $10.4 trillion worth of government bonds that yield negative interest.

And what’s even more concerning is how quickly it’s growing.

In January 2016, the total amount of government bonds in the world with negative interest totaled $5.5 trillion.

One month later in February the total had grown to $7 trillion. By May it was $9.9 trillion. And today it’s $10.4 trillion.

So this gigantic sovereign bond bubble where governments are being paid to borrow money has practically doubled just in the last several months.

This isn’t a cause for panic or to assume that the financial system is going to crash tomorrow.

But it’s clearly a disturbing trend… the proverbial powder keg in search of a match.

And when future pundits write the history of the financial crisis to come, whether it happens today, tomorrow, or years from now, you can bet they’ll wonder how the entire system failed once again to see something so dangerous… and so obvious.

 Time Price Research,

China has completed its cycle as a high-growth, low-wage country and has entered a new phase that is the new normal.

China will continue to be a major economic force but will not be the dynamic engine of global growth it once was. International capitalism requires a low-wage, high-growth region for high rewards on risk capital. In the 1880s it was the United States, for example. China was the most recent region, replacing Japan. No one country can replace China, but we have noted 16 countries with a total population of about 1.15 billion people where entry-level manufacturing has gone after leaving China. Identifying the Post-China 16 countries is not a forecast. It is a list of countries in which we see significant movement of stage industries, particularly garment and footwear manufacturing and mobile phone assembly.

The Post-China 16 countries are strictly successors to China as low wage, underdeveloped countries with opportunities to grow their manufacturing sectors dramatically.

....of course there is a serious problem with this overall scenario!
Without high rewards on risk capital in China...the bloated China banking sector will collapse......whatever the time frame....this trend guarantees it! 

Globalist Bankers Sent Into Mass Panic Over Brexit

Steve Watson

The world’s major banks have been instantly absolutely hammered by the decision. The markets had heavily bet on the UK remaining in the EU.

Britain’s biggest banks faced double digit losses on the stock markets, with shares plunging. Barclays dropped by 23.08% to $8.60, HSBC shares dropped 7.35% to $31.25, Royal Bank of Scotland sunk a whopping19.63% to $6.02.

All in all at the time of writing, Britain’s banks were facing a $100 billion smackdown, while world stocks saw more than $2 trillion wiped off their value.

The British pound took a massive nosedive by 18 U.S. cents, hitting 31 year low, reaching a 10 percent plunge at one point, and marking by far the biggest drop in recent history. The euro also dropped by 3 percent, with investors fearing it may eventually completely collapse altogether.

In the US, JPMorgan Chase shares were down 6.26% to $60.04. Bank of America shares fell 6.34% to $13.15, Citigroup shares dropped 8.3% to $40.77, and Wells Fargo dived 4.7% at $45.66.

The big investment banks were also hit hard with Goldman Sachs shares down 5.26%, and Morgan Stanley shares dropping 8.57% to $24.94.

Almost every major financial institution was forced to declare that they will provide emergency liquidity to stabilise the global economy.......

....emergency liquidity?

And where pary tell will this come from? What with banks ratings already in jeapordy, way overleveraged holding billions, trillions of toxic waste corporate bonds and derivatives.....

why from the government of course! We the People...and how about the stealth introductions of bail in clauses (In Canada with Harpers 2013 budget!) so expect the high end workers bank accounts to be discounted...then watch the flood gates...

whew all scary enough...but will it motivate people to take action?

....... Monday morning the local media reported that Renzi's
government was pursuing a six-month waiver of EU state-aid rules,
allowing it to shore up banks without forcing investors to share losses. Two days ago, when we first reported of Italy's proposed bank rescue plan, we said that the chairman of Lower House’s Finance Commission, Maurizio Bernardo, confirmed that the government is studying options to support the banking sector, including a capital injection, and said a law decree “with measures going in that direction” could be approved by the end of this week. 

We pointed out that how such an intervention would be implemented was unclear; it was is also unclear how such a direct state recapitalization of Italian banks using public funds would be permitted by current EU and ECB regulations, which prohibit state bailouts of insolvent banks, although Europe has a long and illustrious history of finding massive loopholes to that particular prohibition. "Last but not least it is unclear how existing stakeholders, shareholders, bondholders and uninsured depositors, would be impaired under such a bailout."

Well, they wouldn't, despite Europe's recent implementation of bail-in rules. That was the whole point.

However, while Italy was hoping it would get a "pass" on using public funding, mostly Eurozone generated and thus courtesy of Germany, this appears to have hit a dead end moments ago, when Bloomberg reported that Germany opposes any attempt to shield private bank investors from losses if Italy pushes ahead with plans to recapitalize lenders. Chancellor Angela Merkel’s government says that European Union rules on handling struggling banks should apply in any rescue effort, including forcing losses on shareholders and some creditors before public money can be injected, the person said, declining to be identified because the deliberations are private.

...this is just temporary! The fix is set...a major crisis soon will force major bank bailouts with public money...and bailins with depositer accounts!

Ready? For increasing austerity? The elites cannot let the European banking sector collapse!

A Look Inside Europe's Next Crisis: Why Everyone Is Finally Panicking About Italian Banks...from zerohedge and Wall Street Journal......

.....getting pretty close to the edge...meaning bailins and bank runs...and of course not just Italy...it'll be a domino effect encompassing all of Europe first!

Brexit, the final catalyst for the collapse of the global financial ponzi scam?

This confirms what had long been speculated, if not confirmed, namely that German banks have been some of the biggest lenders to the shipping sector, a sector which has since found itself in significant trouble as a result of the ongoing slowdown in global trade.

And now, it appears that some shipping loans gone very bad could be the catalyst for Europe's banking crisis to finally breach the most impenetrable border of all, that of Germany.

Because it is in Germany where we find what may be the next domino to fall as part of Europe's latest banking crisis incarnation: Bremen Landesbank....from zerohedge

The global recession has collapsed world trading.....shipping is in trouble...so interesting to note which are the banks on the front lines!...just watching the dominoes fall....

from today;s Bloomberg...IMF demands structural reforms to the Italian Banking crisis amid proposals for investor bail ins...

...what they have in mind of course are serious bank restructurings..... including writedowns of bank debt? Austerity programs aside government subsidy programs?
Either way the finances are crumbling, the political fallout of course increasing support for the alternative policis Parties!
So here in Canada when? will be begin looking for our alternatives!! 

Bloomberg reports, the bank’s 1.75 billion euros ($2 billion) of 6% additional Tier 1 bonds, the first notes to take losses in a crisis, are crashing... as the world's most systemically dangerous bank faces existential problems once again.

Deutsche Bank AG’s riskiest bonds plummeted after the German lender received a $14 billion claim from the U.S. Justice Department to settle an investigation into the firm’s sale of residential mortgage-backed securities.

“They are dropping like a stone,” said Tomas Kinmonth, a credit strategist at ABN Amro Bank NV in Amsterdam. “The fine, even if reduced, could surpass all provisions held by the bank.”............

.....This of course is a check mate situation for the global banksters....while they consider further QE mechanisms to prop up the failed financial system, their hopes to focus on negative interest rates....only puts greater pressure on the survivability of the ¨too big to fail¨ banks.....

Russia as an emerging market economy is no less vulnerable to a global banking collapse and hyperinflation of fiat currency, although they have the advantage of not being so totally under the control of corporatism...they are moving to a new financial system and currency based on precious metals...another advantage they have is their greater self sufficiency, in capital indiustrial production, (organic) food production plus of course their energy surplus...meanwhile North America has become the most vulnerable what with the loss of our industrial sector and dependency of raw matwerial export crops...

Needless to say, Canada`s political system leaves no opening presently for this reality...everyone is in bed with corporatism and fiat currency accumulation....I fear it will take this imminent financial crisis to wake people up to alternatives (certainly people here in these threads have no interest presently!), but my oft expressed fears of course is that under martial law and financial scarcity not to mention economic depression we will have little room to do anything!

September 23 - CNBC (Katy Barnato): “Toxic loans in the Chinese financial system could be 10 times as high as official estimates suggest, Fitch Ratings has warned. The international ratings agency said in a report on Thursday that, as a proportion of China's total loan pool, non-performing loans (NPLs) could be as high as 15-21 percent. By comparison, official data put the NPL ratio for commercial banks at 1.8%... ‘There seems a high likelihood that banks' NPL ratios will continue rising over the medium term, in light of this discrepancy. There are already signs of stress, most obviously in the increased frequency with which banks are writing off or offloading loans, such as those to asset-management companies’… Solving China's bad loan problem would result in a capital shortfall of 7.4 trillion-13.6 trillion yuan ($1.1-2.1 trillion), equivalent to around 11-20% of China's economy, Fitch said.”

...it's hard to predict where the final catalyst will come from...here in China...or Japan, or the failing German and Italian banks?

The Run Begins: Deutsche Bank Hedge Fund Clients Withdraw Excess Cash  by Tyler Durden Sep 29, 2016 12:34 PM

By Whitney Webb

After the UK voted to leave the European Union in June, populist movements throughout the Eurozone have gained popularity. Though no other European countries are set to vote on leaving the EU, the strength of populism threatens the passage of an Italian constitutional referendum set to take place this upcoming Sunday, December 4th.

The December referendum, championed by current Prime Minister, Matteo Renzi, seeks to greatly reduce the power of the nation’s Senate as well as its regional governments, making the executive branch significantly more powerful. Renzi has staked his position on Prime Minister on the referendum’s outcome, vowing to resign if the referendum fails.

However, Renzi is not the only one who could suffer if the referendum fails. Not one, but eight of Italy’s largest banks “may fail” if Italians vote against the measure, according to senior bankers who spoke to the Financial Times. Many of Italy’s largest banks have been in crisis for quite some time and largely considered to be completely insolvent as Italian banks, overall, hold €360 billion in bad debt yet only have €225 billion of equity. Renzi’s hands have been tied regarding how to address the crisis thanks to new EU banking regulations and has since championed a “free market” solution, which unfortunately has proven near impossible due to the magnitude and prevalence of bad debt among Italian banks.

The Italian Bank Run: Monte Paschi Capital Shortfall Surges 75% To €8.8Bn Due To "Rapid Liquidity Deterioration"...from zerohedge

U.S. Quietly Drops “Financial Bombshell”: Wall Street Banks Have $2 Trillion European ExposureBy Pam Martens and Russ MartensGlobal Research, January 04, 2017Wall Street on Parade 3 January 2017Region: Europe, USATheme: Global Economy

Just 17 days from today, Donald Trump will be sworn in as the nation’s 45th President and deliver his inaugural address. Trump is expected to announce priorities in the areas of education, infrastructure, border security, the economy and curtailing the outsourcing of jobs. But Trump’s agenda will be derailed on all fronts if the big Wall Street banks blow up again as they did in 2008, dragging the U.S. economy into the ditch and requiring another massive taxpayer bailout from a nation already deeply in debt from the last banking crisis. According to a report quietly released by the U.S. Treasury’s Office of Financial Research less than two weeks before Christmas, another financial implosion on Wall Street can’t be ruled out.

The Office of Financial Research (OFR), a unit of the U.S. Treasury, was created under the Dodd-Frank financial reform legislation of 2010. It says its role is to: “shine a light in the dark corners of the financial system to see where risks are going, assess how much of a threat they might pose, and provide policymakers with financial analysis, information, and evaluation of policy tools to mitigate them.” Its 2016 Financial Stability Report, released on December 13, indicates that Wall Street banks have been allowed by their “regulators” to take on unfathomable risks and that dark corners remain in the U.S. financial system that are impenetrable to even this Federal agency that has been tasked with peering into them.

At a time when international business headlines are filled with reports of a massive banking bailout in Italy and the potential for systemic risks from Germany’s struggling giant, Deutsche Bank, the OFR report delivers this chilling statement:

“U.S. global systemically important banks (G-SIBs) have more than $2 trillion in total exposures to Europe. Roughly half of those exposures are off-balance-sheet…U.S. G-SIBs have sold more than $800 billion notional in credit derivatives referencing entities domiciled in the EU.”

When a Wall Street bank buys a credit derivative, it is buying protection against a default on its debts by the referenced entity like a European bank or European corporation. But when a Wall Street bank sells credit derivative protection, it is on the hook for the losses if the referenced entity defaults.