CRASH 2: Everyone wants to borrow at the same time….

…so that they can lend the money to other people who want to borrow because other people lent them too much money before. The eurobanks are full of money because the EBA thinks they don’t have enough money to withstand the backwash of ClubMed defaults, but none of the banks are lending money because they don’t trust other banks. So to help them out, the ECB is lending them cheap money so they can buy the bonds of the people they lent too much money to last time and who need more money now because they can’t pay the old debts back. But most of the money lent by the ECB goes straight back to the ECB because most of the banks are busy preparing for the EBA’s stress tests and they’re too scared anyway to buy too many more sovereign bonds. Meanwhile, the EU economy is in recession because the banks think it’s too risky to lend business money, because the economy’s in recession.

This is globalised capitalism in January 2012. Now do you understand?

Supporting evidence from today’s early news:

The IMF has asked for $500bn of new money to help stabilise the eurocrisis. Washington  is unlikely to accede to the request.

The ECB’s 489 billion euros ($623 billion) of three-year loans are a lifeline for lenders competing with governments to borrow about $2 trillion this year as they seek to refinance maturing bonds and bills.

European regulators are convinced that two of the continent’s banks will fail to produce credible plans to plug capital deficits by Friday’s deadline, exposing both to the risk of full or partial nationalisation. Officials said that it looked “almost inevitable” that a fresh injection of state funds would be needed at Italy’s Monte dei Paschi di Siena and Germany’s Commerzbank.
Greek officials are this morning closer to persuading all of Greece’s creditors to swap their current bond holdings voluntarily for a new package of debt that will give the country greater leeway to meet its obligations.If they do not, Greece may not be able to make a €14.5bn debt repayment on March 20.
Despite foreclosing on Peacocks last week, RBS wants to pay its CEO a £10m bonus.


32 thoughts on “CRASH 2: Everyone wants to borrow at the same time….

  1. Didn’t Rueters report this?

    “Based on staff’s estimate of global potential financing needs of about $1 trillion in the coming years, the fund would aim to raise up to $500 billion in additional lending resources. This total includes the recent European commitment of about $200 billion in increased fund resources,” an IMF spokesman said. “At this preliminary stage, we are exploring options on funding and will have no further comment until the necessary consultations,”
    The actual request will be lower than $500bn and the UK share will almost certainly be less than £10bn.


  2. So utterly bored of all of this, same s**t everyday. Corruption, greed, incompetence and tyranny have become totally predictable. All I see everywhere is total social inequality that is held together like water in a dam.

    Those who could do something to help instead do nothing or worse, the total opposite. It’s left me full of malaise and I need to step away from it for a few days. It’s inevitable that some good news and is coming for all of us, the present situation is unsustainable. I’m just bored of waiting.

    If you put Cameron/Kenny/Merkel/Sarko in front of me i would happily strangle any of them.

    Leadership? They couldn’t lead a f*****g dog.


  3. Time for direct action! Take John’s advice. The future must be mutual. Switch from the “casino” banks to Co-Op or similar or keep the minimum balance necessary(it’s your money they’re using) and use cash where ever possible. Check out Funding Circle and help small manufacturing businesses get our economy going again. That’s where my savings are going for my pension as such. My previous arrangement being with Unequitable Death!! Time for a quiet and peaceful revolution in our financial lives.


  4. “Greek officials are this morning closer to persuading all of Greece’s creditors to swap their current bond holdings voluntarily for a new package of debt”

    Is this a glorified version of a post-dated cheque ?


  5. “Despite foreclosing on Peacocks last week, RBS wants to pay its CEO a £10m bonus.”

    I was listening to a ‘financial expert’ defending this bonus on LBC this morning. Apparently on the basis that the CEO hadn’t applied for the job, had in fact been headhunted and it was an impossible job anyway. Added to the fact that if you didn’t pay this sort of money we wouldn’t get the best people anyway.

    I don’t buy that any of that is relevant. What we need is someone in the position who *wants* the job, believes passionately that it is one that needs doing and won’t rest until it gets done. That sort of person exists and is motivated by their drive, ambition to create worth and wealth and by money on results. Those motivated by money upfront are clearly not of the same ilk.

    Unfortunately this is a failure of vision by those in control of such decisions. It is probably about their own incompetence and need to justify raising their own income by it remaining much less by comparison than the others which, successful or not they have conspired to inflate.


  6. Greybeard – I bank with a large mutual and the wretched management spend all their time making it exactly like a bank and stripping out all the mutual features. I think they are fattening it for a buyout, with the obvious huge personal profit opportunities that brings, to the management of course.


  7. And I don’t buy the argument that ultra-high salaries and bonuses are needed to attract the ‘very best’. What we need is good competent people and there are a lot of them around. They should be paid well but not spectacularly. What we don’t need is yet another recruit from the old boy roster, marginally competent at anything but their own networking at which they excel. UK top management is, on the whole, weak and it results from the incestuous way recruiting is done. And we certainly don’t need search companies whose remuneration is a percentage of the recruited person’s salary and bonus and who actively promote the concept of there being only one person who could do a job. That’s always rubbish, but it’s convenient for those at the top to believe it.


  8. John

    Were you a script writer for a Whitehall Farce? Because that is what this whole euro crisis has become – a farce. Or it would be if it wasn’t going to
    drop all of us into deep s**t.


  9. I just made a call. ZH is right: some Hedgies claim they have ‘no intention’ of settling below 4% coupon.
    But this is a very late development: yesterday am things looked tickerty-boo.
    New guys at the card table, don’t wanna play stud…..


  10. @Chris L.

    I agree with your sentiment but I wish boredom was the main problem, it’s frustration, anger and revulsion that I feel, I couldn’t begin to write what I really think about the way this situation is being handled because it would be made up mainly of ****** words not very lucid but it gets it off your chest, thousands of totally innocent ordinary people are being reduced to penury and despair by these parasitical, self serving organisms from the state governments, the E.U. and the banks.

    Your point regarding the total lack of leadership by the politicians both elected and unelected only highlights the insane situation that allows total and utter cretins often with no real life experience or expertise in anything of relevance whatsoever to the world we live in, to obtain positions within state political party’s and the E.U., move up the hierarchy by cronyism, nepotism, corruption or whatever and end up in a position whereby they are making decisions that can affect the lives of millions of ordinary people, basically without having a clue about what they are actually doing or what’s really going on outside their high salary, guaranteed pension, expense account, bubble of a life, the vast majority of these so called politicians are either so inept and ineffectual or so corrupt that when they end up trying to negotiate with the bankers the result is a comprehensive shafting for the taxpayers.

    Looking around the Europe today and seeing what is passing for leadership in a crisis is enough to make me physically sick, I could expound on this theme for paragraphs but just thinking about it I’m losing the will to live.

    I’m going to take the dogs for a walk and try to calm down.


  11. Greece will not be allowed to default, come to that no one will be allowed to default.
    I wonder what the chances of Mde Le Pen are in the forthcoming French elections?


  12. I bet all the Hedgies will fall into line when the right inducement is on the table.
    I will take some form of direct action by the people to end this thing they call the EU.
    It’s here to stay for a while, at least until Wall St is safe.


  13. The sort of person with the right attitude was Stanley Baldwin, the incoming chancellor for GB in 1922 when he gave 1/5th of his net worth of around £600,000 to the country in order to help out our struggling economy!
    What we need is a Stanley Baldwin law set on the *****!!!!*******!!’s of this world.


  14. The present situation could hardly be worse if they had employed chimps. These banks especially in the US still only exist due to taxpayers bailouts, their shares are down to up to 50%, some including RBS have been fined, are being sued for fraud & in the real world their top CEO’s would be in jail. Fred the Shred was paid a fortune, but although supposedly being a perfectionist didn’t know that they were buying billions worth of sub-prime. He should now be doing Tetley’s tea adverts. If you like gnashing your teeth, watch this:


  15. From the ZH article:
    “Legal experts suggest that the investors may have a case because if Greece changes the terms of its bonds so that investors receive less than they are owed, that could be viewed as a property rights violation…”

    Forget the property rights violation. It looks to me that the Greek threat of passing a new law to impose its wishes on bondholders is more like criminal fraud.


  16. Thanks for the link Boxer. He had fallen off my radar in recent years but it was a pleasure to be reminded of his life and times.


  17. “This is globalised capitalism in January 2012.”

    I agree with this and your analysis. But let’s be clear: this is not how capitalism in intended to work. It’s been systematically corrupted and bastardised by the political elites and their comrades across Europe, the UK and elsewhere. It is Ponzi crony capitalism. The culprits should be held to account. One could almost believe the conspiracy view that it’s a Marxist plot to destroy the West.


  18. @BT
    “criminal fraud” – that is a new development for financial dealings.

    It is the sort of thing that was practised by the banks on S&P and Moodies.


  19. @Gb
    Take your point about mutuality and keeping cash in the business for the customers/owners but mutuality certainly ain’t what it used to be, look at what’s happened at Nationwide Building Society which is always trumpeting its mutual credentials, I’m absolutely positive they could find a more than adequate chief executive for a lot less than the £2 million a year they pay Graham Beale but the remuneration committee mantra “but we have to pay the market rate”, which actually means, “I’ll serve on your remuneration committee and you serve on mine” and then they all use the same platitudes and excuses to obtain salaries and bonuses way beyond what they would get if they were paid pro rata to the actual annual increase in value and benefits received by the customer/owners of the business.


  20. Hi Jwoo
    I came across that interesting and refreshing snippet whilst reading Lords of Finance. That is the one fact which has stuck with the most, I can’t imagine why!!!


  21. Hi Jwoo
    I came across that interesting and refreshing snippet whilst reading Lords of Finance. That is the one fact which has stuck with the most, I can’t imagine why!!!
    Sorry for 2 replies but the first one went wrong!


  22. kfc you are wrong that “no one will be allowed to default”. I’m sure you, me and 300m others in Europe would be willingly allowed to default if we needed to. The game is only for the “too big to fails”. It’s time to pull the plug on all these greedy, grasping 1%ers.
    As Lou Red said “stick a fork in their ass and turn them over, they’re done”.


  23. Rui V
    I am getting a sense that I am not alone in this Windmill of mine.

    Watch out Pigs there is a storm approaching!


  24. Pingback: News Ketchup | The Slog

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