• Tag Archives Bailout
  • Who Bought The New Greek Bonds: Here Is The Answer

    After triumphantly returning to the bond market three years after it last issued a euro-denominated long bond (which one year later nearly defaulted when only a third bailout prevented Grexit), this morning Bloomberg has provided details of who the lucky buyers of the just priced 3BN bond offering were. And not surprisingly, the biggest source of new funds for the Greek government (which will then use most of this to pay interest owed to the ECB) were US buyers.
    As Bloomberg notes, just under half, or 1.425BN of the 3BN deal was new money with 1.57b of existing paper rolled, with the following geographic distribution of new sources of cash:
    U. S. 44% U. K./Ireland 26% Greece 14% France 7% Spain/Portugal/Italy 3% Germany/Austria 3% Others 3% By investor type:
    Fund managers 46% Hedge funds 36% Banks/private banks 13% Others 5%

    This post was published at Zero Hedge on Jul 26, 2017.

  • Greece Approved for $1.8 Billion Conditional Loan From IMF

    The International Monetary Fund agreed to a new conditional bailout for Greece, ending two years of speculation on whether it would join in another rescue and giving the seal of approval demanded by many of the country’s euro-area creditors.
    The Washington-based fund said Thursday its executive board approved ‘in principle’ a new loan worth as much as $1.8 billion. The disbursement of funds is contingent on euro-zone countries providing debt relief to Greece.
    ‘As we have said many times, even with full program implementation, Greece will not be able to restore debt sustainability and needs further debt relief from its European partners,’ IMF Managing Director Christine Lagarde said in a statement. ‘A debt strategy anchored in more realistic assumptions needs to be agreed. I expect a plan to restore debt sustainability to be agreed soon between Greece and its European partners.’
    IMF officials estimate that, even if Greece carries out promised reforms, the nation’s debt will reach about 150 percent of gross domestic product by 2030, and become ‘explosive’ beyond that point. European creditors could bring the debt under control by extending grace periods, lengthening the maturity of the debt or deferring interest payments, the IMF said in a report accompanying the announcement.

    This post was published at bloomberg

  • Greece Sells 3 Billion In Bonds In 2x Oversubscribed Offering

    So it can either come cheap with the new issue, which adds to existing debt service problems, or it can….structure around that.
    — Owen Sanderson (@OwenPSanderson) July 25, 2017

    Just over three years after Greece “triumphantly returned” to capital markets in April 2014, when it issued 3 billion in 5 year bonds at a yield of 4.95%, and a cash coupon of 4.75% – an offering which was 8x oversubcribed – and which crashed and nearly defaulted one year later when only the 3rd Greek bailout prevented the country from going bankrupt, only to get taken out at 102, moments ago Greece once again returned to the bond market, if far less triumphantly, by selling another 3 billion in 5 year paper which however was “only” 2x oversubscribed, with indications from Bloomberg that there was only 6.5 billion in demand for the “high yielding” paper. And speaking of yield, it came in lower than 3 years ago, pricing at 4.625% with a coupon of 4.375%.
    For those who did not get their desired allottment in today’s offering, fear not there will be more:

    This post was published at Zero Hedge on Jul 25, 2017.

  • Against Irredeemable Paper – Precious Metals Supply and Demand

    The Antidote
    Something needs to be said. We are against the existence of irredeemable paper currency, central banking and central planning, cronyism, socialized losses and privatized gains, counterfeit credit, wealth transfers and bailouts, and welfare both corporate and personal.
    When we write to debunk the conspiracy theories that say manipulation is keeping gold from hitting $5,000 (one speaker here at Freedom Fest claimed gold will go to $65,000), we are not trying to defend the Fed. When we discuss the flaws in predicting that kind of price, and the error in expecting to profit from it, we are not expressing a pro irredeemable dollar view.
    We are saying there are good arguments against the regime of irredeemable paper currency – but this is not one of them. Irredeemable currency has two fatal flaws. One is the interest rate is unhinged.
    It can skyrocket as it did from the end of WWII through 1980, or collapse as it has been doing since then. Two is there is no extinguisher of debt. Debt grows – must necessarily grow – exponentially. As it has been doing for many decades.

    This post was published at Acting-Man on July 25, 2017.

  • The Elephant in the Room: Debt

    It’s the elephant in the room; the guest no one wants to talk to – debt! Total global debt is estimated to be about $217 trillion and some believe it could be as high as $230 trillion. In 2008, when the global financial system almost collapsed global debt stood at roughly $142 trillion. The growth since then has been astounding. Instead of the world de-leveraging, the world has instead leveraged up. While global debt has been growing at about 5% annually, global nominal GDP has been averaging only about 3% annually (all measured in US$). World debt to GDP is estimated at about 325% (that is all debt – governments, corporations, individuals). In some countries such as the United Kingdom, it exceeds 600%. It has taken upwards of $4 in new debt to purchase $1 of GDP since the 2008 financial crisis. Many have studied and reported on the massive growth of debt including McKinsey & Company http://www.mickinsey.com, the International Monetary Fund (IMF) http://www.imf.org, and the World Bank http://www.worldbank.org.
    So how did we get here? The 2008 financial crisis threatened to bring down the entire global financial structure. The authorities (central banks) responded in probably the only way they could. They effectively bailed out the system by lowering interest rates to zero (or lower), flooding the system with money, and bailing out the financial system (with taxpayers’ money).
    It was during this period that saw the monetary base in the US and the Federal Reserve’s balance sheet explode from $800 billion to over $4 trillion in a matter of a few years. They flooded the system with money through a process known as quantitative easing (QE). All central banks especially the Fed, the BOJ and the ECB and the Treasuries of the respective countries did the same. It was the biggest bailout in history. As an example, the US national debt exploded from $10.4 trillion in 2008 to $19.9 trillion today. It wasn’t just the US though as the entire world went on a debt binge, thanks primarily to low interest rates that persist today.

    This post was published at GoldSeek on Friday, 21 July 2017.

  • Stocks and Precious Metals Charts – No One Sees, No One Knows

    “It is no exaggeration to say that since the 1980s, much of the global financial sector has become criminalised, creating an industry culture that tolerates or even encourages systematic fraud. The behaviour that caused the mortgage bubble and financial crisis of 2008 was a natural outcome and continuation of this pattern, rather than some kind of economic accident…And yet none of this conduct has been punished in any significant way.”
    Charles Ferguson, Inside Job
    ‘The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true. It really happened. These suspicions are valid.’
    Neil Barofsky
    “The historical evidence is overwhelming. Many societies have done well for a while – until powerful people get out of hand. This is an easy pattern to see at a distance and in other cultures. It is typically much harder to recognize when your own society now has an elite less subject to effective constraints and more able to exert power in an abusive fashion. And given the long history of strong institutions in the United States, it appears particularly difficult for some people to acknowledge that we have serious governance issues that need to be addressed.”
    Simon Johnson

    This post was published at Jesses Crossroads Cafe on 17 JULY 2017.

  • Is California Bailing Out Tesla through the Backdoor?

    Tesla will lose federal subsidies; so something big needs to be done. The California state Assembly passed a $3-billion subsidy program for electric vehicles, dwarfing the existing program. The bill is now in the state Senate. If passed, it will head to Governor Jerry Brown, who has not yet indicated if he’d sign what is ostensibly an effort to put EV sales into high gear, but below the surface appears to be a Tesla bailout.
    Tesla will soon hit the limit of the federal tax rebates, which are good for the first 200,000 EVs sold in the US per manufacturer beginning in December 2009 (IRS explanation). In the second quarter after the manufacturer hits the limit, the subsidy gets cut in half, from $7,500 to $3,750; two quarters later, it gets cut to $1,875. Two quarters later, it goes to zero.
    Given Tesla’s ambitious US sales forecast for its Model 3, it will hit the 200,000 vehicle limit in 2018, after which the phase-out begins. A year later, the subsidies are gone. Losing a $7,500 subsidy on a $35,000 car is a huge deal. No other EV manufacturer is anywhere near their 200,000 limit. Their customers are going to benefit from the subsidy; Tesla buyers won’t.

    This post was published at Wolf Street on Jul 16, 2017.

  • Chapter 36: Bailouts

    Christian Economics: Teacher’s Edition
    It is as I told Pharaoh; God has shown to Pharaoh what he is about to do. There will come seven years of great plenty throughout all the land of Egypt, but after them there will arise seven years of famine, and all the plenty will be forgotten in the land of Egypt. The famine will consume the land, and the plenty will be unknown in the land by reason of the famine that will follow, for it will be very severe. And the doubling of Pharaoh’s dream means that the thing is fixed by God, and God will shortly bring it about. Now therefore let Pharaoh select a discerning and wise man, and set him over the land of Egypt. Let Pharaoh proceed to appoint overseers over the land and take one-fifth of the produce of the land of Egypt during the seven plentiful years. And let them gather all the food of these good years that are coming and store up grain under the authority of Pharaoh for food in the cities, and let them keep it. That food shall be a reserve for the land against the seven years of famine that are to occur in the land of Egypt, so that the land may not perish through the famine’ (Genesis 41:28 – 36).
    AnalysisA bailout is a government program that transfers wealth from the government to an organization that has suffered a major setback. This text describes a bailout. But it was like no other bailout in history. It was a bailout of the entire nation. It was paid for by taxing the nation’s farmers. But since most Egyptians were farmers, this was not a bailout of a special-interest group at the expense of the taxpayers. It was a bailout of the whole nation.
    There was a warning about the need for this bailout. First, there was a prediction of a series of events over a 14-year period. Then there was a plan to implement it. From the point of view of the masses, this was a bailout in advance. Joseph did not recommend that Pharaoh announce this prophecy to government officials. He did not tell them to tell the masses: ‘You’re on your own.’ He possessed unique information. He believed it. He was given a plan by Joseph. This was central planning by the state.
    The bailout was not a free lunch. The masses had to pay for food with money. Pharaoh kept the money. In year two, the people’s money was gone.

    This post was published at Gary North on July 14, 2017.

  • The Part-Time Critics of Central Banks

    There seems to be no shortage today of investors and pundits criticizing the market interventions of the world’s central banks. Monetary stimulus in the form of artificially low interest rates and bloated central bank balance sheets ($18.5 trillion, to be exact), the argument goes, have created another dangerous financial bubble (evidenced by ubiquitously bubbly stock market valuation ratios) that ultimately threatens the financial system yet again. The author shares wholeheartedly in this criticism.
    The ethical problem is, where were these voices when this all started, with Greenspan in the 1990s and, more specifically, with Bernanke in 2008? The central bank critics today who were not critics of – and in most cases were even sympathetic to – the great bailouts and stimulus that started almost a decade ago have reserved their criticisms only for those interventions that appear to hurt their interests, as opposed to those that have helped them. After all, no one would disagree that bailouts and monetary stimulus got us out of the last financial crisis, but they also certainly got us to where we are today, vulnerable to another even bigger one.
    We are so concerned about our friend the strung-out junkie, though we paid little mind when they were but a casual user. It is so easy to care when problems become obvious and critical, so hard when they are subtler and nascent. Artificial stimulus in an economy is the same: it is easily ignored as a problem in its infancy, but it always develops into a huge problem. Economies and markets are structurally altered and distorted by such stimulus, such that it cannot be removed without breaking those new structures. It must rather be ever increased, though even this will only delay an inevitable collapse.

    This post was published at Ludwig von Mises Institute on July 14, 2017.

  • Fade the Great Rotation into Europe

    This is a syndicated repost courtesy of theinstitutionalriskanalyst. To view original, click here. Reposted with permission.
    News last week that European Central Bank chief Mario Draghi was considering an end to the ECB’s extraordinary purchases of securities quickly let some air out of the Great Rotation into EU stocks. Sure the euro surged against a weakening dollar, but Europe’s mountain of bad debt remains unresolved – even after the election of Emmanuel Macron to the French presidency. Yet hope springs eternal in some quarters after Draghi’s claim of a successful ‘reflation.’
    ‘All the signs now point to a strengthening and broadening recovery in the euro area,’ Draghi told the ECB’s annual conference. ‘Deflationary forces have been replaced by reflationary ones,’ the former head of the Bank of Italy declared. Draghi’s bull call on inflation provides optimism for relief on excessive levels of bad debt, albeit in a context where the EU’s rules on resolving dead banks remain entirely subjective.
    The July 4 approval of the latest state-supported rescue for Banca Monte dei Paschi di Siena (Montepaschi) illustrates the deflationary challenges still facing Europe. As part of the overhaul, Reuters reports, Montepaschi ‘will transfer 26.1 billion euros to a privately funded special vehicle on market terms, with the operation partially funded by Italian bank rescue fund Atlante II.’ The bank will receive 5 billion euros in new public equity funds for its third bailout in a decade.

    This post was published at Wall Street Examiner on July 4, 2017.

  • Face to Face with the Fed

    “There’s no question the banking regulators blew it leading up to the [2008] financial crisis. And the problem is we’re gonna blow it again… Human societies are prone to mass delusion.’
    Well, props for honesty, I guess. But it’s about the most transparency you’ll ever get from one of the most opaque institutions on the planet, the Federal Reserve.
    Your editor was present last night as Minneapolis Fed President Neel Kashkari held a ‘town hall’ meeting. Kashkari performs this exercise in public outreach every few weeks somewhere in the Fed’s sprawling District 9 – stretching from Michigan’s Upper Peninsula 1,400 miles west to Montana.
    Kashkari saw the Panic of 2008 up close and personal. He was the Treasury Department’s point man for the bank bailouts. Since he began his current gig 18 months ago, he’s made it his mission to break up the big banks. We even cited his first speech on the job here in The 5: ‘I believe the biggest banks are still too big to fail and continue to pose a significant, ongoing risk to our economy.’
    Heh. The contrast to Fed chair Janet Yellen couldn’t be more, umm, striking.
    Hours before Kashkari held court last night, Yellen was speaking in London – declaring the banks are ‘very much stronger’ and another 2008-level crisis is unlikely to occur ‘in our lifetimes.’

    This post was published at Wall Street Examiner on June 28, 2017.

  • The Ultimate Regulatory Reform: Abolish Fractional Reserve Banking!

    Convocation of the Clueless The Trump Administration has presented the first part of its plan to overhaul a number of Wall Street financial regulations, many of which were enacted in the wake of the 2008 financial crisis. The report is in response to Executive Order 13772 in which the US Treasury Department is to provide findings ‘examining the United States’ financial regulatory system and detailing executive actions and regulatory changes that can be immediately undertaken to provide much-needed relief.’*
    In release of the first phase of the report, Treasury Secretary Steven T. Mnuchin stated:
    ‘Properly structuring regulation of the U. S. financial system is critical to achieve the administration’s goal of sustained economic growth and to create opportunities for all Americans to benefit from a stronger economy. We are focused on encouraging a market environment where consumers have more choices, access to capital and safe loan products – while ensuring taxpayer-funded bailouts are truly a thing of the past.’**

    This post was published at Acting-Man on June 28, 2017.

  • Hong Kong Small Caps Crash Amid Marketwide Margin Call: “It’s A Domino Effect”

    Dozens of HKEx penny stocks plunged 40%~90% today amid rumor HKEx will force all "zombie stocks" to delist.
    HKEx denies the rumor!
    — Simon Ting (@simonting) June 27, 2017

    A few weeks ago, we reported that in a bizarre development – and the latest in a long series of red flags involving Chinese and HK stocks – various Chinese small and micro cap companies had asked employees to buy their stock while promising to cover losses” amid rising margin call pressures as the underlying stocks had been drifting lower. As we also noted, China has a broader issue with collateral that could endanger the health of its financial system, such as fraudulent or “ghost” collateral, where pledged products either don’t exist or are already sold or pledged to multiple lenders.
    This in turn led BofA strategist David Cui warned that a potential “vicious selling circle” could lead to a replay of China’s mid-2015 market crash. “As the 2015 experience shows, with high leverage, a vicious selling circle can quickly develop,” he said, noting a “moderate” risk of broad-based financial instability. To which we concluded that “at that point either Beijing will have to step in with another bailout, or scenes such as this one which emerged during the 2015 market rout, will become the norm once again.”
    Less than three weeks later we got a vivid example of just how dire the impact of a coordinated margin calls on Chinese markets could be, when overnight dozens of Hong Kong microcap stocks plunged amid what started as a rumor that the local exchange will force all “zombie companies”to delist (since denied)…

    This post was published at Zero Hedge on Jun 27, 2017.

  • Italy’s newest bank bailout cost as much as its annual defense budget

    Two more Italian banks failed over the weekend – Banco Popolare di Vicenza and Veneto Banca.
    (In other news, the sky is blue.)
    The Italian Prime Minister himself stated that depositors’ funds were at risk, so the government stepped in with a bailout and guarantee package that could cost taxpayers as much as 17 billion euros.
    That’s a lot of money in Italy – around 1% of GDP. In fact it’s basically as much as the 17.1 billion euros they spent on national defense last year (according to an estimate by Italian think tank IAI).
    You don’t have to have a PhD in economics to figure out that NO government can afford to spend its entire defense budget every time a couple of medium-sized banks need a bailout.
    That goes especially for Italy, whose public debt level is already 132% of GDP… and rising. They simply don’t have the money.
    Moreover, the European Union actually has a series of new rules collectively known as the ‘Bank Recovery and Resolution Directive’ which is supposed to prevent failing banks from being bailed out with taxpayer funds.
    Here’s the thing – Italy has LOTS of banks that are on the ropes.

    This post was published at Sovereign Man on June 26, 2017.

  • “Markets Have A Mind Of Their Own” But One Trader Warns “Nothing Lasts Forever”

    Despite new record highs in stocks, Bloomberg’s former FX trader Richard Breslow fears other markets (the dollar’s downfall, collapsing rates/curves, crashing commodities) have become too “fatalistic” amid the summer doldrums.
    Let’s start with some of the things we know with certainty. Yield curves will keep on flattening. Probably invert and drive home the point to everyone that the Fed committed a dreadful policy mistake. The dollar will never rally again. Just look at the numbers and you have to be a U. S. bear. And look how efficiently the latest European bank bailouts were handled this weekend. They really have their act together. Oil? It’s going to single digits, of course. And there’s nothing you can do to stop it or the carnage it will cause in places like Norway and Canada.
    It’s summer, markets have a mind of their own and there’s no percentage in fighting the tape.
    In fact it’s odd how fatalistic people seem to be. We used to furiously debate where and when we’d find the canary in the coal mine warning of an imminent market reversal to pounce on. Now, there seems to be blanket resignation that the trend is your master.

    This post was published at Zero Hedge on Jun 26, 2017.

  • Italy Bank Bailouts Send European, Global Stocks Higher; Gold Flash Crashes

    S&P futures point to a higher open following gains in Asian markets supported by stronger commodities but mostly European bourses, which are sharply higher following the 17 billion bailout of the two Veneto banks in Italy, the biggest taxpayer funded bank rescue in modern Italian history, as well as Dan Loeb’s activist campaign of the world’s biggest food company, Nestle which sent the stock up 5%, and finally Germany’s Ifo business climate index which hit new all time highs.
    Risk sentiment is broadly higher thanks to European equity markets which have rallied strongly from the open led by the Italian banking sector following the Veneto banks resolution. As shown in the chart below, EutoStoxx banks are about 2% higher as markets celebrate the return of taxpayer bailouts and the apparent death of Europe’s bail-in regime.

    This post was published at Zero Hedge on Jun 26, 2017.

  • Italian Taxpayers To Foot 17 Billion Bill As Rome Bails Out Another Two Insolvent Banks

    Two weeks after the first, and biggest, European bank bail-in took place under the relatively new European bank resolution mechanism, the EBRD, when Spain’s Banco Popular wiped out the holders of its most risky securities, including equity and AT bonds, and then selling what was left of the bank to Santander for 1 – a process that took place without a glitch – Italy may have just killed any hope of a European banking union, when the bailout of two small banks made a “mockery” of Europe’s new regulation.
    Late on Sunday, Italy passed a decree that will effectively sell the good part of the two banks to Intesa, Italy’s second-largest and best-capitalized bank. Intesa said last week that it would be willing to buy the best assets for a token price of 1 as long as the government assumed responsibility for liquidating the banks’ large portfolio of sour loans. As a result, Italy said it would commit as much as 17 billion in taxpayer funds to clean up the two failed “Veneto” banks in one of Italy’s wealthiest regions and support the takeover of their good assets by Intesa Sanpaolo SpA for a token amount. After an emergency cabinet meeting on Sunday, Finance Minister Pier Carlo Padoan said the Italian government will provide Milan-based Intesa with about 5.2 billion euros to allow it to take on Banca Popolare di Vicenza SpA and Veneto Banca SpA assets without hurting capital ratios, The European Commission, in a separate statement, said it approved the plan for the two banks and that it is in-line with state-aid rules.
    Unlike the Banco Popular bail-in by Santander, however, Intesa would only take on the good assets. PM Gentiloni said the lenders will be split into good and bad banks and that the firms, with taxpayers on the hook for the bad banks. The process was rushed to allow the failed banks to reopen on Monday and avoid a depositor panic and bank run. The intervention is necessary because depositors and savers were at risk, Gentiloni said. The northern region where they operate ‘is one of the most important for our economy, above all for small- and medium-size businesses.’

    This post was published at Zero Hedge on Jun 25, 2017.

  • Credit-Card Debt Slaves Move to Top of Fed’s Bank Worries

    Projected losses at the top 34 banks in a ‘severely adverse scenario.’ The comforting news in the results from the Federal Reserve’s annual stress test is that the largest 34 bank holding companies would all survive a recession.
    Based on this glorious accomplishment, the clamoring has already started for regulators to allow these banks to pay bigger dividends and to blow more money on share buybacks, and for these regulators to slash regulation on these banks and make their life easier and riskier in general. We don’t want these banks to survive a recession in too good a condition apparently.
    And it would likely be better for Wall Street anyway if banks could lever up with risks so that a few of them would get bailed out during the next recession. Let’s remember, for the Fed’s no-holds-barred bailout-year 2009, Wall Street executives and employees were doused with record bonuses. The Fed’s bailouts were good for them. And it has been good for them ever since.

    This post was published at Wolf Street on Jun 23, 2017.

  • Barclays, Former CEO Criminally Charged Over Qatar Fundraising

    Two familiar names are in the news this morning, after the UK’s Serious Fraud Office filed criminal charges against Barclays Plc and four former executives, including former CEO John Varley, for conspiracy to commit fraud regarding the bank’s 2008 capital raising from Qatar. The SFO said Tuesday that former Chief Executive Officer John Varley, former chairman of investment banking for the Middle East Roger Jenkins, ex-deputy head of investment banking Richard Boath and ex-wealth chief Thomas Kalaris face charges along with the bank.
    The SFO allegations focus on how Barclays arranged two capital injections from Qatari investors during the 2008 financial meltdown, when the bank raised 11.8 billion ($15 billion) to prop it up and avoid a state bailout unlike peers RBC and Lloyds. Barclays said it paid 322 million in ‘advisory services’ to Qatari investors, which wasn’t initially disclosed after the capital was raised. The SFO charged the individuals and the bank with conspiracy to commit fraud. Two individuals, including its former Chief Executive John Varley, were also charged with the provision of unlawful financial assistance. Additionally, the SFO’s charges also relate to a $3 billion loan facility Barclays made to the State of Qatar acting through the ministry of economy and finance in November 2008, just after its second capital raise.
    The WSJ adds that the case marks the first time that top executives at a U. K. bank face criminal charges for their actions during the financial crisis. If Barclays is found guilty it faces a fine but wouldn’t lose its banking license. Barclays said in a statement it is ‘considering its position in relation to these developments.’
    More from the WSJ:

    This post was published at Zero Hedge on Jun 20, 2017.

  • Global Equity Markets Firmer As Oil Stabilizes, Greece Gets Bailout Money

    (Kitco News) – World stock markets were mostly higher overnight. Crude oil prices are firmer today, which helped out the equities. Also, Greece’s creditors approved another release of bailout money for the indebted country, which assuaged European investors. U. S. stock indexes are pointed toward slightly higher openings when the New York day session begins.
    Gold prices are modestly up in pre-U. S. market trading, on a technical and short-covering bounce from solid selling pressure seen earlier this week.
    In overnight news, Russia’s central bank cut its key interest rate by 25 basis points. The Russian ruble rallied on the news.
    The Bank of Japan held its regular monetary policy meeting Friday and made no major changes in its policy.
    The Euro zone’s consumer price index for May was reported down 0.1% from April and up 1.4% from a year ago. The numbers were right in line with market expectations but down from the European Central Bank’s target rate of around 2.0% annual inflation.

    This post was published at Wall Street Examiner on June 16, 2017.