Infinite Unknown

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Fortis Bank Predicts US Financial Market Meltdown Within Weeks (28 Jun 08)

Source: Bye bye dollar, bye bye Treasuries…

Deflation? “Sure!” Just wait and see.
- The Neo-Alchemy of the Federal Reserve by Ron Paul
- Interview: Peter Schiff still grim on future
- Interview with Peter Schiff (12/13/08)

This is ‘the worst financial crisis‘ because every institution is doing its best to make it worse.

MADRID (AFP) - The governor of the Bank of Spain on Sunday issued a bleak assessment of the economic crisis, warning that the world faced a “total” financial meltdown unseen since the Great Depression.

“The lack of confidence is total,” Miguel Angel Fernandez Ordonez said in an interview with Spain’s El Pais daily.

“The inter-bank (lending) market is not functioning and this is generating vicious cycles: consumers are not consuming, businessmen are not taking on workers, investors are not investing and the banks are not lending.

“There is an almost total paralysis from which no-one is escaping,” he said, adding that any recovery — pencilled in by optimists for the end of 2009 and the start of 2010 — could be delayed if confidence is not restored.

Ordonez recognised that falling oil prices and lower taxes could kick-start a faster-than-anticipated recovery, but warned that a deepening cycle of falling consumer demand, rising unemployment and an ongoing lending squeeze could not be ruled out.

“This is the worst financial crisis since the Great Depression” of 1929, he added.

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Tags: Bank of Spain, Deflation, Depression, Economy, Financial Crisis, Great Depression, Hyperinflation, Inflation, Meltdown, Recession, Spain

Dec. 16 (Bloomberg) — Spanish building materials producers spanning cement to steel may cut twice as many jobs this year as forecast earlier and face “catastrophe” if cash flow doesn’t improve, an industry group said.

Companies may fire 75,000 workers, or 15 percent of the total, compared with an April figure of 35,000, Rafael Fernandez, chairman of construction products trade group CEPCO, said in an interview in Madrid today. Annual sales may fall by as much as 25 percent from 46 billion euros ($63 billion) in 2007.

“We knew there was going to be a drop in activity, but it’s been steeper than expected,” Fernandez said at CEPCO’s offices. “The whole credit structure has seized up. Cash-flow is our members’ main anxiety and if measures aren’t taken to resolve that, we’re headed for catastrophe.”

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Tags: Economy, Spain, Unemployment

Record numbers of companies will go bankrupt next year with 200,000 insolvencies in Europe alone and “an explosion” of failed businesses in the US, according to the world’s largest credit insurer.

The US will see 62,000 companies go bust next year, compared with 42,000 this year and 28,000 last year, says a report by Euler Hermes, part of German insurer Allianz.

The absolute numbers, however, pale in comparison with the figures from western Europe, where the larger number of small companies mean insolvencies are expected to rise by a third from 149,000 last year to 197,000 next.

“The financial crisis will increase the risk of bankruptcy dramatically, particularly next year,” said Romeo Grill, chief economist at Euler Hermes. “There will be an explosion in the US but also big rises in Europe and especially the UK.”

Mr Grill said he expected most company failures in Europe to be focused around the struggling car, retail and textile sectors as well as logistics.

The country with the highest number of insolvencies expected for next year is France with 63,000. But in Europe, Spain, Ireland and the UK are forecast to see the most dramatic rises.

Nearly four times as many Spanish companies will go bust next year as in 2007 while it will be nearly double in Ireland and the UK with 640 and 38,000 businesses respectively.

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Tags: Bankruptcy, Economy, EU, France, Ireland, Spain, U.K., U.S.

A demonstrator burns a note during a protest in downtown Madrid as Spain’s economic miracle threatens to unravel

For years, it has been a staple of daytime television, alongside the inane chat, creaky old movies and decorating do’s and don’ts - the “let’s-go-live-in-the-sun” show, in which Stoke and Stoke Newington are swapped for, much more often than not, Spain.

But now it has an evil twin. You may have seen it. The we’re-not-celebrities-but-please-get-us-out-of-here show, in which the dream has gone horribly wrong. And it is symptomatic of the wider malaise that has gripped what was once a land of boom and money.

After a decade in which per capita income doubled - and household debt tripled - the Spanish economic fiesta is well and truly over. More than 40,000 workers are losing their jobs each week, a far higher rate than elsewhere in Europe. Unemployment is at 2.99 million, a 12-year record of 12.8 per cent of the workforce and the highest unemployment rate in the eurozone.

And there is no respite in sight. According to Pedro Solbes, the Economy Minister: “There is a risk the unemployment rates will be worse next year.”

In November, the grim jobless figures were compounded by a further decline in the services sector as activity, new orders and employment plunged to a record low.

The Markit Purchasing Market Index, which covers service companies ranging from hotels to insurance brokers, dropped to 28.2 in November from 32.2 in October, the sharpest monthly decline since figures were first collected in 1999. The figure is drastically below the 50 level where growth begins.

And underpinning it all is the Spanish construction industry, which accounts for 9 per cent of GDP. It has collapsed. After those years of boom, more than 150 property companies have gone bust so far this year, going into administration as debts mounted and they were unable to pay back creditors.

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Tags: Economy, GDP, Government, Politics, Recession, Spain, Unemployment

The International Monetary Fund has slashed its forecast for the world economy next year, predicting outright contraction for the rich economies of North America, Europe, and Japan for the first time since the Second World War.

Taxi driving through Tokyo at night. Photo: GETTY

“Prospects for global growth have deteriorated over the past month. The financial crisis remains virulent. Markets have entered a vicious cycle of asset deleveraging,” said the fund yesterday.

Britain’s economy will suffer and will see the steepest decline in G7 club of leading powers, shrinking 1.3pc as the crunch in the City of London leads to more job losses. Germany will decline by 0.8pc, The US and Spain by 0.7pc.

Sending shivers through stockmarkets everwhere, the Fund cut its world outlook next year to just 2.2pc, down from 3pc just a month ago. This is a global recession under the IMF’s 3pc rule-of-thumb.

“Financial stress is likely to be deeper and more protracted than envisaged in October. Markets are pricing in expectations of much higher corporate default rates, as well as higher losses on securities and loans,” it said.

“Activity is increasingly being held back by slumping confidence. As the financial crisis has become more entrenched, households and firms are increasingly anticipating a prolonged period of poor prospects for jobs and profits. As a result, they are cutting back.”

Olivier Blanchard, the IMF’s chief economist, called on authorities around the world to respond rapidly with combined monetary and fiscal stimulus, saying risk on an inflationary surge had subsided as commodities prices slump.

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Tags: Economy, EU, Financial Crisis, G7, Germany, IMF, Japan, Politics, Recession, Spain, U.K., U.S.

The crisis in Hungary recalls the heady days of the UK’s expulsion from the ERM.

The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria - the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down - and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.

The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect.

They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom - a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.

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Tags: Argentina, Austria, Banks, Brazil, Credit Crisis, Credit Crunch, Dollar, Economy, Euro, GDP, Hedge Funds, Hungary, IMF, Meltdown, Poland, Romania, Russia, Spain, Sweden, Switzerland, U.K., U.S.

FRANKFURT (Reuters) - German banks lent the most to Icelandic borrowers and were owed $21 billion before the recent financial storm swept markets, according to figures released by the Bank for International Settlements.

The research shows that German banks, as well as handing out almost one third of loans in the Nordic outpost, are the most exposed to some of Europe’s fragile economies, such as Spain and Ireland.

In a snapshot taken at the end of June, Germany’s banks lent far more in crisis-stricken Iceland than had rivals in Britain, who were owed just $4 billion, or Iceland’s neighbor Sweden with less than $400 million.

Despite being Europe’s biggest economy, Germany’s levels of lending to countries such as Iceland are disproportionately high.

And in the week that Berlin launched a rescue plan for its banks, the first signs were emerging that lending at the height of the Icelandic bubble had come back to haunt Germany.

BayernLB, a state-backed regional lender that was the first to seek government help this week, said it expected to write off 800 million euros ($1.03 billion) of its 1.5 billion euro exposure to the tiny island state.

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Tags: Banks, Financial Crisis, Germany, Iceland, Ireland, Spain

Oct. 13 (Bloomberg) — France, Germany, Spain, the Netherlands and Austria committed 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders, racing to prevent the collapse of the financial system.

The announcements came as Britain took majority stakes today in Royal Bank of Scotland Group Plc and HBOS Plc. The coordinated steps followed a pledge yesterday by European leaders to bolster market confidence as the global economy slides toward recession.

“What it should do is stabilize the banking system,” said Peter Hahn, a fellow at London’s Cass Business School and former managing director at Citigroup Inc. “Will it stop us from having a recession? No, nothing is going to stop us from having a recession.”

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Tags: Angela Merkel, Austria, Bailout, Banks, BNP Paribas, Citigroup, Credit Crisis, Credit Crunch, Debt, Economy, EU, France, GDP, Germany, Gordon Brown, HBoS, Holland, mortgage crisis, Mortgages, Nicolas Sarkozy, Politics, RBS, Recession, Spain, Stock Market, Wall Street

The UK stock market has suffered its worst one-day fall in history as the banking crisis intensified.

The FTSE-100 index of Britain’s biggest companies dropped by 391.06 points - its steepest ever fall - to end the day down 7.9 per cent.

The FTSE’s tumble was mirrored across Europe, as markets in France, Germany, Italy and Spain all recorded heavy falls.

On Wall Street, the panic drove the Dow Jones Industrial Average down through the 10,000 level for the first time in four years. The Dow was off 4.6 per cent at 9580.68 by lunchtime in New York as the Standard & Poor’s 500 index lost 5 per cent. The mild euphoria that greeted the passage of the $700bn bail-out of Wall Street on Friday evaporated as traders digested the more bad news from Europe.

A statement by Alistair Darling, the Chancellor, to Parliament failed to calm nerves with the stock market taking a further dive as he spoke.

The Chancellor refused to outline firm plans to deal with the crisis - however, he confirmed the Government was working on a radical scheme which could be implemented in the coming weeks.

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Tags: Economy, Germany, Government, Italy, Politics, Spain, Stock Market, U.K., U.S., Wall Street

Germany, the UK and Spain all face recessions this year, the European Commission forecast yesterday, dashing finally any remaining hopes that Europe would avoid a sharp economic downturn. France and Italy would fare little better, it said.

The steep downward revisions in growth forecasts by the European Union’s executive arm showed it had accepted that tumbling business and consumer confidence was hitting economic activity - even though the European economy had been “generally sound” prior to the credit crisis .

Joaquin Almunia, economics and monetary affairs commissioner, described the environment as “difficult and uncertain”. As well as financial turmoil and a near doubling of oil prices over the past year, significant housing market corrections in some countries were taking their toll, he said.

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Tags: Credit Crisis, Credit Crunch, ECB, Economy, EU, France, Inflation, Italy, Recession, Spain, Trichet, U.K.