While the warning flags are raging in Illinois and Connecticut, JPMorgan’s Michael Cembalest states that New Jersey’s problems are “not mathematically solvable.” The stunning admission from a status-quo-sustaining bank that is “very focused on the total indebtedness of US states,” should be worrisome enough but as Cembalest explains the answer to a debt problem is not always piling up more debt – “when debt reaches a certain level, the can kicking is over and difficult decisions need to be made;” the issue is to address the root of the problem, which can be a delicate and at times politically incorrect topic.
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It turns out that Puerto Rico’s plan to default on its debt and beg congress for help is working out as planned.
After a slight delay, House Republicans have reached an agreement with the Obama administration to provide a path to restructure Puerto Rico’s $70 billion debt load. The bill would offer the island a legal out similar to bankruptcy and wouldn’t commit any federal money according to the WSJ. Continue reading »
Following Donald Trump’s Thursday comments that rising interest rates would be disastrous for the economy, saying that “we’re paying a very low interest rate. What happens if that interest rate goes up 2, 3, 4 points?” hinting that the U.S. should “renegotiate longer-term debt” with creditors and that if the economy crashes he “can make a deal”, various media outlets went to town on Trump, most notably the NYT, which took Trump to task: Continue reading »
The dollar’s recent rapid slide has been accompanied by a constant backdrop of dovish cooing from the Fed. Until this week, SocGen’s Albert Edwards notes that both equity and commodity markets had embraced the weak dollar as the elixir to solve all their ills. That relief, however, has now proved fleeting as fear of weak economic activity has reasserted its influence on investors. The weak dollar, Edwards warns, should be seen as merely a shuffling of deckchairs on the Titanic before the global economy sinks below the icy waves. Continue reading »
It’s showdown time.
The IMF has threatened it will pull out of the Greek bailout program unless Greece gets debt relief.
German Chancellor Angela Merkel, Austria, Finland, and the other Eurozone creditors will not like today’s development one bit.
Showdown! Continue reading »
In an interview with Wolf Blitzer, Donald Trump said that although he is the “king of debt”, and that he “loves debt”, he wouldn’t bail out Puerto Rico.
Responding to whether or not Trump would bail out Puerto Rico as president of the United States…
“No I don’t believe they should, and I think frankly Puerto Rico is better if they don’t because they’ll cut the bonds, they’ll cut them way down there’s far too much debt. The problem with Puerto Rico is they are far, far too much in debt. Don’t forget, I’m the king of debt, I love debt“
As far as how he would suggest Puerto Rico solve its debt issue, The Donald, of course, has a solution for that. Continue reading »
Update: PR Governor Padilla has spoken…
- *PUERTO RICO GOVERNOR SAYS WON’T PAY DEBT TOMORROW
- *PUERTO RICO GOVERNOR SAYS ISLAND WON’T PAY DEBT MONDAY
- *PUERTO RICO GOVERNOR: GOVERNMENT SIGNED MORATORIUM BILL YESTERD
- *PUERTO RICO NEEDS DEAL W/ CREDITORS AND/OR CONGRESS: GARCIA
And of course, demands a bailout…
- *PUERTO RICO GOVERNOR CALLS ON U.S. CONGRESS, PAUL RYAN FOR HELP
And then threatens… Continue reading »
Moments ago Unilever NV was set to raise money in bond markets Monday that will cost the consumer-goods giant almost nothing, in the latest sign of how the European Central Bank’s stimulus measures are slashing funding costs across the continent. In one tranche of a €1.5 billion deal, the Anglo-Dutch company was set to sell €300 million of debt maturing in 2020 with a coupon of 0%, potentially offering investors a yield of just 0.06%,
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Take away Saudi Arabia’s oil and all that’s left are a couple of Islamic shrines and a lot of sand and hot air.
Guest Post by Robert Gore at Straight Line Logic
After three decades of internecine war, Abdul-Aziz bin Saud, allied with the fundamentalist Wahhabist Islamic sect, consolidated the House of Saud’s dominance over Arabia in 1932 with the tacit support of regional imperial power Great Britain. The bedrock of the Saudi Arabian economy, the massive pool of oil in the Al-Hasa region along the Persian Gulf coast, was discovered in 1938 and development began in 1941. Towards the end of World War II, President Roosevelt and Abdul-Aziz reached a handshake deal that has governed relations between the two nations ever since: Saudi Arabia would guarantee the flow of oil to the US at a reasonable price; the US would protect the Saud regime. Continue reading »
And since stocks follow junk bonds….
Junk bonds started to decline in June 2014, and earlier this year threatened to implode. Contagion was spreading from the collapsing energy sector to the brick-and-mortar retail sector, telecom (Sprint), the media (iHeartMedia), and other sectors. It was really ugly out there. Continue reading »
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Tags: Austria, Bail-ins, Banking, Barack Obama, Bonds, Brazil, Collapse, Debt, Economy, EU, Europe, Fed, Federal Reserve, Global News, Government, Italy, Janet Yellen, Obama administration, Politics, Society, U.S., Venezuela
Hungary has become the first Eastern European country to issue a yuan-denominated sovereign bond.
The deal that shows how currying favor with China may be a more important driver for the market than funding. Continue reading »
H/t reader squodgy:
“When I studied Accountancy & Economics back in the 60’s & 70’s, common sense told us that Countries were like businesses, buying raw materials & converting them into products which were then sold worldwide.
As third world cheaper cost countries started to take pieces of the cake, we consoled ourselves with what were termed “Invisible Earnings” such as Banking & Insurance & Shipping Fees. That was OK in UK because we had a sudden Oil Boom which filled the gap & kept us buoyant.
That’s all over now, just as it is with U.S. economy. We import the very things we used to make & all our skilled labour has either gone off grid or on benefit, and the “Invisible earnings” are nearly really invisible. A reset is the only answer, default via catastrophe or war. We are all unknowingly sitting waiting for something to happen.”
$13,903,107,629,266. Can the nation afford this much debt?
This much I have learned about debt after 40 years of writing and study: It is better not to incur it. Once it is incurred, it is better to pay it off. America, we have a problem.
We owe more than we can easily repay. We spend too much and borrow too much. Worse, we promise too much. We conjure dollar bills by the trillions–pull them right out of thin air. I won’t insist that this can’t go on, because it has. I only say that it will eventually stop. Continue reading »
Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.
Back in January, when the market was watching in shocked silence as oil prices were crashing to decade lows and as concerns emerged that Saudi Arabia may need to commence selling its vast, if unquantified, USD reserves, we wrote a post titled “Attention Finally Turns To Saudi Arabia’s “Secret” US Treasury Holdings” where we noted something very surprising: whereas we do know that Saudi Arabia is the owner of the world’s third largest USD reserves…
… their actual composition remains as a secret, because while the US discloses the explicit Treasury holdings of all other nations, Saudi Arabia’s holdings, for some unknown reason, are not officially disclosed.
Continue reading »
Since the Fed may not, or simply refuses, to see if not a bubble then at least “froth” in any asset class, perhaps it should hire Peter Thiel to be on its macroproduential supervisory committee, because according to the venture capital legend who co-founded PayPal everything is overvalued. Speaking at the LendIt USA Conference in San Francisco on Tuesday, he said that he is “somewhat concerned about the frothiness of the markets” and adds that “startup tech stocks may be overvalued, but so are public equities, so are houses, so are government bonds.”
He adds that “if there is a bubble it is probably centered on the zero % interest rates, the quantitative easing, the money printing and that’s a very strange one because it permeates everything.” Continue reading »
“You Get Nothing” is the message for German bond coupon-clippers as for the first time in history, the average yield across the entire bond complex tumbles to zero.
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Just over a year ago, a black swan landed in the middle of Europe, when in what was then dubbed a “Spectacular Development” In Austria, the “bad bank” of failed Hypo Alpe Adria – the Heta Asset Resolution AG – itself went from good to bad, with its creditors forced into an involuntary “bail-in” following the “discovery” of a $8.5 billion capital hole in its balance sheet primarily related to ongoing deterioration in central and eastern European economies.
Austria had previously nationalized Heta’s predecessor Hypo Alpe-Adria-Bank International six years ago after it nearly collapsed under the bad loans it ran up when it grew rapidly in the former Yugoslavia. Having burnt through €5.5 euros of taxpayers’ money to prop up Hypo Alpe, Finance Minister Hans Joerg Schelling ended support in March 2015, triggering the FMA’s takeover. Continue reading »
The Puerto Rican Senate and the House of Representatives have both passed an emergency declaration authorizing the governor to suspend payments on $72 billion in public debt — setting up a dramatic showdown between Puerto Rico and hedge funds amid the island’s historic debt crisis. The bill authorizes the Puerto Rican governor to “protect the health, security and public welfare … [by] using government funds first and foremost for public services.” The dramatic move comes one day after a group of hedge funds sued to freeze the assets of Puerto Rico’s Government Development Bank in efforts to stop the bank from spending money on the island that the hedge funds want to go toward upcoming debt payments.
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As we detailed earlier, for the first time in the history of crazy, Japan ‘sold’ 10-year government bonds today at a negative yield. Translated into English, this means “investors” agreed to pay the Japanese government 2.4bps per year for the privilege of lending it money for 10 years……
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Russia wants to sell some bonds and President Obama isn’t happy about it.
Moscow is looking to issue “at least” $3 billion of foreign bonds in what amounts to the country’s first international issuance since the West imposed sanctions on The Kremlin in 2014 after the annexation of Crimea and Russia’s alleged role in “destabilizing” Ukraine (because it was very “stable” before).
Since the sanctions were imposed, relations between Moscow and Washington have only gotten more contentious and when Russia began flying combat missions from Latakia on September 30, it was trotted out as evidence that Vladimir Putin is indeed determined to reassert Russian influence by sheer force. Continue reading »
“We have reached that fork in the road within the monetary twilight zone, where Europe’s largest bank is openly defying central bank policy and demanding an end to easy money. Alas, since tighter monetary policy assures just as much if not more pain, one can’t help but wonder just how the central banks get themselves out of this particular trap they set up for themselves.”
Dr. Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University.
I, Michael Hudson, John Perkins, and a few others have reported the multi-pronged looting of peoples by Western economic institutions, principally the big New York Banks with the aid of the International Monetary Fund (IMF).
Third World countries were and are looted by being inticed into development plans for electrification or some such purpose. The gullible and trusting governments are told that they can make their countries rich by taking out foreign loans to implement a Western-presented development plan, with the result being sufficient tax revenues from economic development to service the foreign loan. Continue reading »
“… When stocks are falling this much, it’s hard to justify not acting”
“… Davos – where he mingled with central bankers such as ECB President Mario Draghi and leading company executives – likely prompted him to pull the trigger”
For the better part of the last decade, you’ve probably heard the politicians and the media tell you the same thing, over and over again. “We’re on the road to recovery” or “the Great Recession is over.” You gotta love how they call it the “Great Recession,” as if it was as bad as the Great Depression, but they can’t quite bring themselves to call it that.
In a sense though they are correct. Things are marginally better now than they were in 2008. But I say ‘marginally’ with reservations. It’s a little easier to find a job, but they don’t pay as well as they used to. Gas is cheap, but only because the economy is slowing down, and pretty much everything else we need to survive including food, medicine, and shelter, is more expensive. The stock market has recovered over the years, but that has done little to alleviate the financial woes of working class Americans. etc etc. Continue reading »
There’s been no shortage of commentary from market heavyweights this week thanks to the World Economic Forum in Davos, but for anyone who hasn’t yet gotten their fill of billionaire talking heads, George Soros gave a sweeping interview to Bloomberg TV on Thursday, touching on everything from China to Fed policy to Vladimir Putin to Europe’s worsening refugee crisis. The most important point – for markets anyway – came when Soros revealed that he is short the S&P, and long TSYs.
You don’t have to listen very hard to hear the bears growling on Wall Street, London, or Paris these days. Indeed, the Dow Jones Industrial Average was down another 300 points on Wednesday to just under 16,200
With the U.S. stock market sagging, oil off to its worst start ever, and the China’s economy continuing to deteriorate, bearish analysts have a wealth of evidence to point to.
And they don’t come much more bearish than Albert Edwards, strategist at Société Générale. He’s not had much nice to say about the global economy in years, and recent events have only hardened his convictions that the world is headed for disaster, and will take the prices of equities down with it. How much? Edwards predicts the U.S. stock market could plunge as much as 75%. That would be worse than during the financial crisis, in which stocks from their peak to trough dropped a brutal 62%. Continue reading »
Over the past week, Poland’s relations with Europe have gone from cordial to abysmal, when first Poland’s new Eurosceptic government compared the EU and Merkel to Nazis, with Polish weekly Wprost releasing the following cover saying “they want to supervise Poland again”…
… only for Brussels to retaliate and launch an “unprecedented” review of Polish media laws, a move which Poland angrily responded is far beyond the EU’s domain.
Well, as so often happens, whenever there is a political spat in Europe, the rating agencies are quickly involved (thing S&P and Moody’s downgrades and upgrades of Greece depending on how well the vassal nation is “behaving”), and moments ago S&P downgraded Poland from A- to BBB+ outlook negative, precisely due to Poland’s new media law which has been the topic of so much consternation over the past week.
In other words, S&P is now nothing more than a lackey for Brussels, threatening to send Polish yields higher if Poland does not fall in line. Continue reading »
Sep 12, 2015
Ron Paul speaks on the upcoming financial collapse that will be far worse than the 2008 collapse. It’s not a matter of if but when it will happen.