Greece Faces Cash Crunch This Friday Without “Plan A Or Plan B”: What Happens Next

Greece’s day of reckoning may be fast approaching. Athens will have to pony up more than €2 billion in debt payments this Friday to the ECB, the IMF, and (get this) Goldman Sachs, for an interest payment on a derivative and it’s not entirely clear where the money will come from. On Wednesday, the government will vote on a “plan” to boost liquidity which includes tapping public funds and diverting bank bailout money. Here’s Bloomberg:

Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than 2 billion euros ($2.12 billion) in debt payments Friday…

The government’s revenue-boosting plan includes eliminating fines on those who submit overdue taxes by March 27 to encourage payment, helping cover salaries and pensions due at the end of the month. The bill also requires pension funds and public entities to invest reserves held at the Bank of Greece in government securities and repurchase agreements, and transfers 556 million euros from the country’s bank recapitalization fund to the state. A vote on the measures is scheduled for Wednesday… Continue reading

ECB Pulls The Trigger: Blocks Funding To Greece Via Debt Collateral – Full Statement

Just what the market had hoped would not happen…

  • *ECB SAYS IT LIFTS WAIVER ON GREEK GOVERNMENT DEBT AS COLLATERAL
  • *ECB SAYS IT CAN’T ASSUME SUCCESSFUL CONCLUSION OF GREECE REVIEW

What this means simply is that since Greek banks are now unable to pledge Greek bonds as collateral and fund themselves, and liquidity is about to evaporate, the ECB has effectively just given a green light for Greek bank runs, as suddenly it has removed, both mathematically but worse politically, a key support pillar from underneath the already bailed out Greek banking system, (or merely a negotiating move to let Greece see just what kind of chaos this will create ahead of the big D-Day on Feb 25th when ELA could be withdrawn). Continue reading

Gazprom’s AAA Credit Rating Ensures Cheap Credit for China Projects

What Russian and China basically did was create new rating agencies to give each other legitimacy. Here we now have the end result. As the U.S. suicidally declines, look for these to gain traction.

 

MOSCOW, February 2 (Sputnik) — Gazprom’s AAA investment rating with Chinese rating agency Dagong will help reduce the costs of obtaining Chinese loans, which in turn will help to ensure the completion of the energy companies’ projects with China, BCS financial analyst Kirill Tachennikov told Sputnik on Monday. Continue reading

Citi Warns “Central Banks’ Grip On The World Economy Is Waning”

While central banks’ grip on the economy seems to be waning, notes Citi’s Matt King, additional liquidity still seems as potent as ever when it comes to propping up global markets. The question in our minds revolves around whether central banks remain willing to keep pumping when the economic benefits are so questionable. Equally, though, valuations are already so elevated that we doubt they can afford to stop. One way or another, this feels like a recipe for increased volatility. Continue reading

“De-Dollarization” Deepens: Russia Buys Most Gold In Six Months, Continues Selling US Treasuries

The rumors of Russia selling its gold reserves, it is now clear, were greatly exaggerated as not only did Putin not sell, Russian gold reserves rose by their largest amount in six months in December to just over $46 billion (near the highest since April 2013). It appears all the “Russia is selling” chatter did was lower prices enabling them to gather non-fiat physical assets at a lower cost. On the other hand, there is another trend that continues for the Russians – that of reducing their exposure to US Treasury debt. For the 20th month in a row, Russia’s holdings of US Treasury debt fell year-over-year – selling into the strength.

Continue reading

Russia Just Pulled Itself Out Of The Petrodollar

Back in November, before most grasped just how serious the collapse in crude was (and would become, as well as its massive implications), we wrote “How The Petrodollar Quietly Died, And Nobody Noticed“, because for the first time in almost two decades, energy-exporting countries would pull their “petrodollars” out of world markets in 2015.

We added that in 2014 “the oil producers will effectively import capital amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and $248 billion in 2012, according to the following graphic based on BNP Paribas calculations.”

The problem was compounded by its own positive feedback loop: as the last few weeks vividly demonstrated, plunging oil would lead to a further liquidation in foreign  reserves for the oil exporters who rushed to preserve their currencies, leading to even greater drops in oil as the viable producers rushed to pump out as much crude out of the ground as possible in a scramble to put the weakest producers out of business, and to crush marginal production. Call it Game Theory gone mad and on steroids. Continue reading

Banking crisis in Russia will be massive — Sberbank CEO

MOSCOW, January 14. /TASS/. The banking crisis in Russia in the current economic situation will be massive, CEO of Russia’s largest lender Sberbank German Gref said on Wednesday. Continue reading

China Prepares To Bailout Russia

Earlier this evening China’s State Administration of Foreign Exchange’s (SAFE) Wang Yungui noted “the impact of the Russian Ruble depreciation was unclear yet, and, as Bloomberg reported, “SAFE is closely watching Ruble’s depreciation and encouraging companies to hedge Ruble risks.” His comments also echoed the ongoing FXFX reform agenda aimed at increasing Yuan flexibility which The South China Morning Post then hinted in a story entitled “Russia may seek China help to deal with crisis,” which which noted that Russia could fall back on its 150 billion yuan ($24 billion) currency swap agreement with China if the ruble continues to plunge, that was signed in October. Furthermore, two bankers close to the PBOC reportedly said the swap-line was meant to reduce the role of the US dollar if China and Russia need to help each other overcome a liquidity squeeze. Continue reading

What Do They Know? CME Implements Gold, Precious Metals Circuit Breakers Up To $400 Wide

With memorandum S-7258, titled “Implementation of New NYMEX/COMEX Rule Regarding Special Price Fluctuation Limits for Certain NYMEX and COMEX Metals Futures and Options Contracts” released moments ago by the CME Group, and set to become effective on December 21, 2014, and which seeks a 5 minute trading halt when “price movements in lead-month primary futures contracts result in triggering events”…  “as a measure that is consistent with promoting price discovery and cash-futures price convergence” in order to “deter sharp price movements that may, for example, be driven by illiquid central limit order books prevailing from time to time in otherwise liquid markets”, one wonders why now, and what does the CME know about upcoming volatility, or lack of liquidity, in the precious metals space that nobody else does (and does any of this have to do with the “berserk” algo test from November 25?)? Continue reading

‘Violent’ stock market crash could be round the corner as hidden liquidity crunch ‘blows up’ in investors’ faces, warns think-tank

  • Bank of International Settlements warns of ‘violent’ market crash
  • Low levels of market volatility persist despite conflicts and crises across the world
  • Investors buying assets on the misguided presumption of a level of liquidity
  • Share prices continue to plummet as investor confidence decreases

A potentially ‘violent’ stock market crash could be on the horizon as financial markets become dangerously stretched, a think-tank has warned.

The Bank of International Settlements said that suspiciously low levels of volatility in the markets seen this year suggest a lack of liquidity that could trip up investors who assume they can dispense of assets when a sell-off begins. Continue reading

Authorities are about to crack down on banks again – but it’s you who will feel the pain

There is no such thing as a free lunch. Everything has a cost; all decisions have consequences. It is a shame that the hordes of braying banker-bashers don’t seem to grasp that basic truth. It goes without saying that the industry needed to change dramatically after the crisis of 2008. But that obviously doesn’t mean that all change is always right, or that the authorities have pushed through the right kinds of reforms. Continue reading

Radical action needed as euro zone remains on amber alert

To get economy moving again, policymakers should go ahead with quantitative easing to boost liquidity and allow the euro to weaken

The euro zone’s “softly, softly” approach to the financial crisis is not working. The economy is sinking into deflation, dragged down by a zombie banking system and spiralling government debt. It is slipping back towards recession. A future break-up of the euro zone remains a potent threat.

Policymakers can ill afford to keep kicking the can down the road. The bailout earlier this month of Portuguese lender Banco Espirito Santo was a sharp reminder to investors the euro zone was not out of the woods by a long stretch. Continue reading

China to Set Yuan Clearing Banks in Luxembourg, Paris

In its continued push to make the yuan a global currency, China’s central bank said Sunday it plans to designate clearing banks for its currency in Paris and Luxembourg, as the two financial centers battle with London to become the leading European offshore yuan-trading city.

The People’s Bank of China announced the move in two separate statements Sunday. It didn’t say when it would designate the clearing banks. Continue reading

Singapore official discusses ‘uneasy calm’, tells banks to prepare for financial collapase

While just about every other central bank on the planet is giving everyone two thumbs up on the economy, the deputy chair of the Monetary Authority of Singapore (Lim Hng Kiang) said last night at a dinner that “an uneasy calm seems to have settled in markets” and that “we remain in uncharted waters.”

It was pretty amazing, really, to see such pointed language from a central banking official. Continue reading

John Embry: Hold onto Gold as ‘Currency Event’ Likely

John Embry said last month that the rally at the beginning of the year was encouraging, but to remember that sentiment for gold was still extremely negative. He says that the stock market’s new highs are a result of the Fed ‘jamming cash into the economy.’ With nowhere else to go, cash is creating bubbles in stocks, real-estate and bonds, he warns.

What is your view of gold in the next few years? What if we continue to have low inflation, or even deflation? How will gold fare?

Well, I don’t think that the situation that we have here is sustainable. We are going to have to create a sufficient amount of money to keep the debt load afloat. We are going to have to keep interest rates low because if those basic requirements are not met – that is lots of liquidity and maintenance of low interest rates – the system is going to collapse. Continue reading