Here Comes The Double Dip Pt. 3

[Daniel_Plainview]

Global lenders face 'killer losses' on Greek debt
Foreign holders of €422bn of Greek debt were warned to brace themselves for "killer losses" as coalition talks in Athens collapsed, threatening Greece's future in the eurozone.

The euro tumbled to a four-month low and European stock markets dropped as political leaders and economists warned that the next round of elections called in Athens amounted to a vote on Greek membership of the euro

“What’s at stake isn’t just the next Greek government,” said Guido Westerwelle, Germany’s foreign minister. “What’s at stake is the Greek people’s commitment to Europe and the euro.”

“A second vote means Greece is edging closer to the point where it’s inevitable they have to exit the euro,” Fredrik Erixon, head of the European Centre for International

Political Economy in Brussels, said. “No other course of events is now likely.”

As the Greek president, Karolos Papoulias, admitted defeat on coalition talks, Alexis Tsipras, leader of the radical Left-wing Syriza party which is leading the Greek polls, said he couldn’t “guarantee” the country would stay in the euro.

[AgentR11]

Looks like a great place to live - NOT!!!!!!!!!!!!

Ouch. I agree with VM. I couldn't be paid to live in such a place.

[dsula]

Looks like a great place to live - NOT!!!!!!!!!!!!

Ouch. I agree with VM. I couldn't be paid to live in such a place.

Come on guys, what's not to like. It will have a swimming pool (with hot whirl pool), a community room and is within driving distance to stores and entertainment. It will have a sound damping wall towards the side that borders the freeway and regular 12 feet walls everywhere else. It will be colored in 4 different browns and there's a choice of 2 floorplans. Each door is equiped with triple security locks and you can stay completely annonymous since it's not required to know or say hello to your neighbours. GO AMERICA!

[Daniel_Plainview]

Chris Martenson sounds the alarm ...

Get Ready: We’re About To Have Another 2008-Style Crisis

Well, my hat is off to the global central planners for averting the next stage of the unfolding financial crisis for as long as they have. I guess there’s some solace in having had a nice break between the events of 2008/09 and today, which afforded us all the opportunity to attend to our various preparations and enjoy our lives.

Alas, all good things come to an end, and a crisis rooted in ‘too much debt’ with a nice undercurrent of ‘persistently high and rising energy costs’ was never going to be solved by providing cheap liquidity to the largest and most reckless financial institutions. And it has not.

Forestalled is Not Foregone

The same sorts of signals that we had in 2008 are once again traipsing across my market monitors. Not precisely the same, of course, but with enough similarities that they rhyme loudly. Whereas in 2008 we saw breakdowns in the credit spreads of major financial institutions, this time we are seeing the same dynamic in the sovereign debt of the weaker European nation states.

Greece, as expected and predicted here, is a right proper mess and will have to leave the euro monetary system if it is to have any chance at recovery going forward. Yes, all those endless meetings and rumors and final agreements painfully hammered out by eurocrats over the past year are almost certainly going to be tossed, and additional losses are going to be foisted upon the hapless holders of Greek debt. My prediction is that within a year Greece will be back on the drachma, perhaps by the end of this year (2012). ...

If You Think Greece is Bad

Greece, of course, is tiny compared to Spain or Italy. The situation in Spain -- which is big enough to matter -- is truly dire, very large, and getting worse.

Spain has been playing fast and loose with the numbers, and that fact has now been revealed to the world. It’s not a pretty picture. ... And this is just the losses that Spanish banks face on their real-estate portfolios. They are also now facing losses on all the Spanish sovereign debt that they bought with their LTRO funding as well. Very simply, Spain now needs a massive rescue, and soon.

Meanwhile German citizens are all done with helping their southern neighbors. Merkel has used up all of her political capital on the rescues performed to date, and it is far from clear that any more help is politically doable here. The only way that I can see such help coming is under some terms other than drawing upon the savings of Germany’s citizens. Printing, perhaps, but even that is a dicey political proposition here.

If Spain drops here, then you can just set an egg timer for when Italy will go. And then France. The dominoes will rapidly fall from there. ...

[Daniel_Plainview]

Rumor: Moody’s said to downgrade 21 Spanish banks

Moody's is reportedly set to downgrade 21 Spanish banks according to a Spanish economic daily, thereby casting another blow to the banking industry in Europe.

­The move wouldn’t come as a surprise -Moody’s has been poised for the rating cut since February, when the agency announced it was planning to downgrade 122 financial institutions by May. The ratings of 114 banks from 16 European countries were put under consideration, with the downgrade risks mainly relating to the eurozone periphery.


The rumors of a possible Spanish downgrade come days after the agency cut the ratings of Italian banks. On May 14, Moody’s dropped the debt rating of 26 financial institutions, including the giant UniCredit, as Rome struggles with recession, tough austerity measures and 1.9 trln euro of outstanding public debt.


The banking sector across Europe is very much under pressure this year. In April, the IMF issued a report saying that the total assets of 58 largest EU banks are likely to be decreased by 7% (2.6 trln dollars) by the end of 2013. The decrease in assets is down to meeting the new regulatory framework of Basel III, as well as by the activity decline in the M&A and IPO sector, the latter being the main source of profit for investment banks and divisions.

[KingM]

I'm really coming around on this thread. It provides a lot of entertainment.

OilFinder2: THIS JUST IN!!! "Job growth strongest since 1776, economists agree..."

Daniel Plainview: "A new study says that one in four Americans now lives on cat food and recycled cardboard..."

OIlFinder2: "Lake Michigan actually filled with crude oil, according to geologists..."

Daniel Plainview: "...and as oil hits sixteen thousand dollars per barrel..."

Oil Finder2: "Every American will be living in a gated mansion by 2016, if present trends hold..."

Daniel Plainview: "Leading experts agree that cannibalism is inevitable by Christmas, while some southern states may begin eating school children by Labor Day..."

[ralfy]

I'm really coming around on this thread. It provides a lot of entertainment.

OilFinder2: THIS JUST IN!!! "Job growth strongest since 1776, economists agree..."

Also, growth based on low-paying jobs.

Daniel Plainview: "A new study says that one in four Americans now lives on cat food and recycled cardboard..."

Probably more like this:

"US families saddled with debt, have few savings"

http://www.wsws.org/articles/2012/may20 ... -m15.shtml

OIlFinder2: "Lake Michigan actually filled with crude oil, according to geologists..."

Many other places are filled with oil. The problem is the energy cost for accessing it.

Daniel Plainview: "...and as oil hits sixteen thousand dollars per barrel..."

Certainly not, but high enough to affect the global economy.

Oil Finder2: "Every American will be living in a gated mansion by 2016, if present trends hold..."

More like recovery based on factors involving the construction industry, etc.

Daniel Plainview: "Leading experts agree that cannibalism is inevitable by Christmas, while some southern states may begin eating school children by Labor Day..."

More like housing prices, from which probably a significant portion of consumer spending is based, and one indicator of U.S. economic "growth."

[Daniel_Plainview]

Saudis, soaring costs may keep oil above $100

Oil industry executives and bankers are assuming oil prices will stay above $100 a barrel in the year ahead, despite mounting economic worries, as any fall below that level would trigger a cut in Saudi Arabia’s output and force closures at high-cost projects around the world.

A straw poll by Reuters of oil executives, traders, bankers and fund managers showed seven respondents predicting Brent crude trading at $100-$120 a barrel in the next 12 months. Four respondents saw prices at $120-$140 and only four at $80-$100.

At a previous summit last June, most respondents also saw prices above $100.

Then worries centered around supplies following a full outage of Libyan output and OPEC’s failure to boost production to compensate for the loss.

By contrast, the current mood is dominated by demand concerns as euro zone collapse worries, poor U.S. economic data and signs of slower demand in China overshadow jitters about a potential loss of Iranian oil supplies.

But although Brent prices are almost $20 down from their 2012 peaks at $110 a barrel, few expect a repeat of the 2008 crash which saw them collapsing to $34 per barrel from an all time high of $147 in a space of six months.

“The marginal cost of production is the ultimate floor in the oil market. In the North Sea it can be $80 to $100 dollars,” said Andrew Moorfield from Scotiabank. “But the real marginal cost of production also includes social costs that some big oil producers need to pay. When you add social costs in Russia and Saudi Arabia, it means that the effective floor on Brent is around $100 a barrel,” he said.

Saudi Arabia has ramped up output to 10 million barrels per day – the highest in decades – to calm market fears over a potential outage of Iranian oil flows amid Tehran’s stand-off with the West over its nuclear program.

Riyadh has said it wants oil to fall to around $100 a barrel as higher levels damage the global economic recovery.

Saudi’s current desired oil price level is only a third higher than $75 per barrel it sought back in 2008. But its oil price budget needs are estimated to have doubled from $50 to $100 as it had to splash money to calm discontent at home and unrest among neighbors.

“I believe there is a floor at $100. Ultimately the Saudis are the ones that have the single biggest positive influence in the oil price, other than anyone starting a war – which would have a negative but upward impression on oil price,” said Philip Wolfe, head of energy EMEA for UBS. “There is no point for the Saudis having production of 10 million barrels per day at $50 or even at $75 per barrel if you can adjust the barrels and keep the oil price up at $100 or more… I think the Saudis can do a lot without having to announce anything,” he added.

COSTS SURGE

Global inflation might have already pushed the costs of exploring and producing oil from new most expensive projects – known in the industry jargon as the marginal cost of production – above $100 per barrel, according to JBC energy consultancy.

That compares to $50-$75 prior to the 2008 financial crisis while a decade ago, oil companies such as BP (BP.L), were saying they would start a project if oil traded above $17-$20.

“The United States is producing an awful amount of oil from tight shale and tight sands reservoirs… If oil prices send a signal and drop below the $90-$80 level it is going to be uneconomic to drill those well. So drilling will stop immediately,” said Michel Hulme, fund manager at Lombard Odier.

U.S. tight oil production already amounts to 0.5 million bpd and is expected to rise steeply in the years to come.

Global inflation is not only endangering developments of the most difficult fields but is also testing profitability levels of existing projects or greenfield projects in areas generally seen as low-cost.

“It seems the gap between the cash cost per barrel of existing production and the cost to bring on incremental production is narrower than it has been for a long time,” said Bob Maguire, partner at Perella Weinberg, previously with Morgan Stanley and adviser on some of the world biggest oil mergers.

Even the International Energy Agency, which represents consuming nations, says production costs have gone up sharply. “There is not a single drop of oil in the world that cannot be produced at a price of oil of $85-$90,” IEA’s chief economist Fatih Birol told the summit.

Scarce equipment availability is one of the reasons behind it, according to shipping tycoon John Fredriksen.

“It looks like oil companies will all have to stall part of their drilling programs because there is limited drilling capacity. There are just not enough rigs around,” he told Reuters ahead of the summit.

For Mercuria, one of the world’s top oil traders, the dangers are still as much on the upside as on the downside for the oil price.

“The danger is that if for some reason the geopolitical tensions in the Middle East start rising again, prices could very quickly go back up to where they were one-and-a-half-months ago,” said Mercuria’s co-owner Marco Dunand.

Consumers seems to be well aware of those risks too.

“With the price going lower in the first few weeks of May, we have seen a very big hedging flow from end users such as airlines, shippers, utilities,” said Cyril Youinou, global head of oil trading at Standard Chartered Bank Plc’s.

“We believe China will keep on building their strategic reserves especially at this price,” he added.

[Daniel_Plainview]

Philly Fed Manufacturing Report Disappoints

Mid-Atlantic manufacturers report business conditions unexpectedly contracted this month, according to a report released Thursday by the Federal Reserve Bank of Philadelphia. Hiring also turned negative. The Philadelphia Fed said its index of general business activity within the factory sector fell to -5.8 in May from 8.5 in April. It was the first negative reading in eight months.

Economists surveyed by Dow Jones Newswires expected the latest index to edge up to 9.3. Readings under zero denote contraction, and above-zero readings denote expansion.

The important hiring index plunged to -1.3 after it jumped to 17.9 in April from 6.8 in March. The workweek index worsened to -5.4 from a contractionary -2.3.

Price pressures eased significantly this month. The prices-paid index dropped to 5.0 from 22.5 in April, while the prices-received index fell to -4.5 from 9.4 last month.

Philadelphia manufacturers grew less optimistic about the future. The expectations index for business conditions over the next six months declined to 15.0 from 33.8 in April.

[Daniel_Plainview]

Spain beset by bank crisis, recession, bond pressure

MADRID | Thu May 17, 2012 9:43am EDT
(Reuters) - Spain's borrowing costs shot up at a bond auction on Thursday, after economic data confirmed the country is back in recession and reports of an outflow of deposits from nationalized Bankia hammered its share price.
The Spanish Treasury had to pay around 5 percent to attract buyers of three- and four-year bonds. The longer-dated paper sold with a yield of 5.106 percent, way above the 3.374 percent the last time it was auctioned.

"This ... fits the pattern of recent sales, with the Spanish treasury successfully getting its supply away but at ever-higher yields," said Richard McGuire, rate strategist at Rabobank in London. "This unfavorable trend looks set to remain firmly in place ... Ultimately, this ratcheting up of yields will likely require some form of outside intervention," McGuire said. ... Spain's 10-year yields have spiked back above 6 percent, which investors view as a pivot point that could accelerate a climb to 7 percent, a cost of borrowing widely seen as unsustainable even though Madrid has sold well over half its debt needs for the year.

Top of the heavily indebted country's worry list is a banking sector beset by bad loans, the result of a property boom that bust in spectacular fashion.

... Stuart Gulliver, head of Europe's biggest bank HSBC, reflected on his biggest external concerns. "It's absolutely how the euro zone plays out and whether Greece stays in, and/or whether firewalls are high enough to protect Spain and frankly whether markets take things into their own hands before (Greek elections on) June 17," he said.

Official data confirmed the Spanish economy shrank by 0.3 percent in the first quarter, putting it back into recession and facing a prolonged downturn as the government cuts spending in an attempt to wrestle down its budget deficit. Unemployment is already running close to 25 percent, rising to around 50 percent among the young.

... "It's not Greece leaving the euro that is the major issue," said John Bearman, chief investment officer at Thomas Miller Investment, which manages roughly 3 billion pounds ($4.8 billion) of assets. "It's the domino effect."

[Armageddon]

Philly Fed Plunges, First Contraction Since September 2011

Remember the surge in the Empire Fed which was the straw so desperately clutched by all those who still held on to hope the US economy was still kinda sorta growing? Oops. The May Philly Fed just came out and was a disaster, printing at -5.8, down from 8.5 and crashing expectations for an increase to 10.0. This was the first contractionary print since September 2011 and the biggest miss since August 2011, but the worst news is that the Number of Employees indicator was in absolute freefall, plummeting from 17.9 to -1.3. And now come the downward NFP revisions, and NEW QE (because courtesy of AAPL it is no longer QE [X] anymore) whispers.

Consumer Blinks as "Consumer Comfort" Collapses Most In 4 Years

We have seen three very loud and very clear messages this week on the state of the US consumer's mind. After a few months of extravagance, on the back of what can only be described as depression-fatigue, reality is biting once again. The Bloomberg Consumer Comfort index just missed expectations by its greatest amount in three years and has plunged over the last 5 weeks by the most in four years - dropping back to four-month lows. Do these two messages explain the catastrophe that is JCP's results this quarter? We suspect so as the outlook for the economy (sub-index) has plummeted by the most in 14 months - once again echoing the last two years and the end of the central-bank easing periods exposing the sad reality beneath.

ZH


Ouch, not good

[Daniel_Plainview]

Consumer Blinks as "Consumer Comfort" Collapses Most In 4 Years

More from BusinessWeek:

Consumer Confidence Craters

Consumer confidence dropped last week to the lowest level since the end of January as slower U.S. job growth contributed to pessimism about personal finances and spending.

The Bloomberg Consumer Comfort Index fell in the week ended May 13 to minus 43.6, a level associated with recessions or their aftermaths, from minus 40.4 in the previous period. The monthly expectations measure was little changed as Americans see scant improvement in the world’s largest economy.

The fourth straight decline in weekly confidence comes even as gasoline prices have retreated from an 11-month high reached in early April. The figures underscore the need for stronger job and wage gains that would help propel household spending, which accounts for about 70 percent of the economy.

“The lagged impact of rising food and fuel prices early in 2012 and a slower pace of hiring amid a decelerating economy are the likely culprits behind the near reversal of gains in consumer comfort observed through the first quarter,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The ability of the household to reassert its place as the primary driver of growth during the current business cycle remains limited due to modest job growth and incomes.”

The comfort index’s decline over the past four weeks has erased almost all of this year’s gains. The gauge began the year at minus 44.8 and reached a four-year high of minus 31.4 in the week ended April 15.

‘Severe’ Discontent

Readings lower than minus 40 are correlated with “severe economic discontent,” according to Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg. The gauge has averaged minus 15.3 since its inception in December 1985.

More Americans than forecast filed applications for unemployment benefits last week, a sign the labor market is making little progress, figures from the Labor Department showed today. Jobless claims were unchanged at 370,000 in the week ended May 12.

The median forecast of 48 economists surveyed by Bloomberg News called for a drop in claims to 365,000. The number of people on unemployment benefit rolls rose, while those receiving extended payments decreased.

Stocks fell on concern about Europe’s debt crisis. The Standard & Poor’s 500 Index dropped 0.3 percent to 1,321.31 at 9:40 a.m. in New York.

All Components Fall

All three of the Bloomberg Consumer Comfort Index’s components declined last week, today’s report showed. The gauge of personal finances fell to minus 12.9, the fourth straight drop and the weakest reading since November, from minus 11.2 in the prior week. A measure of whether consumers consider it a good or bad time to buy decreased to minus 48.2, a three-month low, from minus 45.8. Americans’ views on the state of the economy fell to a 10-week low of minus 69.6 from minus 64.2.

“The latest trend is a sharp turnaround from the CCI’s recent recovery period,” Langer said in a statement. “A separate measure of economic expectations provides little solace.”

The monthly expectations gauge was little changed at minus 1 from minus 3 in April. During that period, job growth has shown signs of cooling.

Employers added 115,000 workers to payrolls last month, the weakest gain since October, according to Labor Department figures released May 4. The same report showed the unemployment rate fell to 8.1 percent as more Americans left the labor force.

[OilFinder2]

Here's a classic case for the doomers of, "Beware of what you ask for, you just might get it."



How Greek Economic Woes Could Help US Consumers

For the past three weeks, U.S. interest rates have been falling.

But, unlike normal times, it’s not because of actions taken by the Federal Reserve. This time, rates are dropping because of fears that Greece, which is still trying to form a government, will totally default on its loans.

So, as in the 2008 financial crisis, investors are looking for a safe haven in a storm. And, as in other times of trouble, they are moving into U.S. Treasury securities, driving interest rates lower and lower.

For the U.S., there are ramifications for this flight to safety — most of them positive. Mortgage rates are now hitting record lows. Automobile loan rates are falling as well. And the cost of borrowing money for the U.S. Treasury is also dropping, perhaps helping to lower the national debt. Whether the decline in interest rates might foreshadow something more sinister, such as a global economic slowdown, is still too early to know.

[...]

[OilFinder2]

Mexico's Q1 GDP rises 4.6%, above expectations

Mexican economic activity expanded 4.6% in the first quarter of 2012 from the year-ago period, the Inegi statistics agency said Thursday, with growth in agricultural and industrial output driving the rate above expectations. Analysts surveyed by Dow Jones Newswires had expected growth of 4.3%. The first-quarter result was the strongest rate of growth in Latin America's second-largest economy since the third quarter of 2010. On a seasonally adjusted basis, Mexican GDP grew 1.3% in the first quarter from the fourth quarter of 2011. The report arrived a day after Mexico's central bank lifted its 2012 GDP forecast to a range between 3.25% to 4.25%. The central bank had previously expected growth of 3% to 4% this year.

[dorlomin]

Here's a classic case for the doomers of, "Beware of what you ask for, you just might get it."

How Greek Economic Woes Could Help US Consumers

[...]

Picking up pennies in front of the steam roller.

Greece cannot get out of the Euro without triggering a huge run on its banks, pretty much offshoring a huge portion of the countries money. It, however, is not able to take anymore German medicine. The firewalls around Spain and Portugal are far far too small but its Italy that sits there in the background as the real big bad wolf in the forest.

We are sat on an economic powerkeg and you still think it is all just an internet game.

[Daniel_Plainview]

Here's a classic case of a Cornie grasping for any shred of positive news:

“Lower interest rates ... are also symptomatic of heightened risk aversion, which means it could be more difficult for some borrowers to get loans.”

By way of contrast, the last time interest rates got this low was last September when there were fears that the U.S. economy was going into a second recession – a double-dip. Congress and the White House had just engaged in a stare-down over the debt ceiling which froze business investment. And the stock market was struggling.

In case you missed it:

"The last time interest rates got this low was ... when there were fears that the U.S. economy was going into a second recession – a double-dip."

LOL




Once again:

"The last time interest rates got this low was ... when there were fears that the U.S. economy was going into a second recession – a double-dip."

[OilFinder2]

Here's a classic case of a Cornie grasping for any shred of positive news:

“Lower interest rates ... are also symptomatic of heightened risk aversion, which means it could be more difficult for some borrowers to get loans.”

By way of contrast, the last time interest rates got this low was LAST SEPTEMBER when there were fears that the U.S. economy was going into a second recession – a double-dip. Congress and the White House had just engaged in a stare-down over the debt ceiling which froze business investment. And the stock market was struggling.

In case you missed it:

"The last time interest rates got this low was ... when there were fears that the U.S. economy was going into a second recession – a double-dip."

OOOPPPS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Notice he conveniently omitted "last September" when he re-quoted it!!!!

Remember ... last September ... just before you started this thread called "Here comes the double dip" ... a double-dip I'm STILL waiting for!!!!!!!!!!!!!!

[eXpat]

Very long, but interesting article, packed with info

Finally, though our overall assessment of market return/risk prospects is largely independent of our macroeconomic concerns, the joint deterioration in the growth of real personal income, real personal consumption, real final sales, and employment, coupled with our inference of leading economic pressures from "unobserved components" methods, creates not only the concern but the expectation that the U.S. economy is entering a recession - not a quarter or two from today, but most likely at present. Indeed, Europe already appears to be in a broadening recession, which the U.K. has now joined, and the confluence of economic weakness and already strained government debt conditions in Europe is likely to produce disruptive outcomes in the coming quarters.

Addicted to Hopium

Again last week, some comments from economist Martin Feldstein were worth noting, particularly in contrast to the "hopium" sprinkled around by so many Wall Street analysts.

"The big problem for Spain is not its trade and current account deficit - that's relatively small. The big problem there is how they're going to finance both their fiscal deficit and the rollover of the debt that's coming due. Those two together will be some 20% of GDP of Spain this year. So that's not something that's going to be easy to do when the banks are under tremendous pressure, and when foreign bond-buyers of Spanish sovereign debt are walking away.

"We've now had QE2 and after that we had Operation Twist, and both of these have helped to lower long-term interest rates and boost the stock market a bit. But they're not doing anything to help the real economy. They're not doing anything for economic activity. Housing remains in a slump. Businesses are not investing. Individuals have been reluctant to spend. It helps the financial markets, and that's why they are cheering for it, but I don't think it's doing anything for real economic activity.

"The state of the economy is quite poor. There was a little burst of enthusiasm in the beginning of the year, but that's come off as job growth fell very sharply in the most recent month, as real incomes are falling, real wages are falling, house prices continue to fall, so it's not a very pretty picture. There was talk of 2 1/2% and 3% GDP growth this year, but I think we will be lucky if we get as high as 2%. Last year, we only had 1 1/2%. If you look at the first quarter of this year, while the GDP number was 2.2%, almost all of it - nearly three-quarters of it - was automobile purchases; catching up for last year's shortages of automobiles. So it doesn't suggest that there is strong consumer spending on ordinary goods and services, and certainly there isn't on construction and on business investment spending."
...
"It took more than a year to learn that GDP actually shrank by 1.3% during the first quarter of the 2001 recession. But back then it was initially reported as having grown at 2.0%. That's not very different from the latest reading for GDP growth in the first quarter of 2012 - 2.2%. In August 2008, just before the Lehman collapse, GDP was reported to have risen in the first and second quarters with the latter revised up sharply, triggering over a 200-point rally in the Dow that day. Today we know that GDP actually shrank in the first quarter while the second has been revised down by two full percentage points."

For investors, I should note that by the time people said "Huh, something happened" 6 months into recessions in 2001 and 2008, the market had already lost about 20-25% in both cases, was entering free fall, and the best opportunity to reduce risk was long gone.

http://www.hussman.net/wmc/wmc120514.htm

[Daniel_Plainview]

Spanish Bad-Loans Ratio Hits 17-Year High

Bad debts held by Spanish banks rose to a 17-year high in March and the cost of insuring the debt of two major Spanish banks against default hit a record Friday a day after the sector was hit by a downgrade, underscoring the continuing challenges posed by the country's five-year property slump. The central bank said that 8.37% of the loans held by banks, or €147.97 billion ($188 billion), were more than three months overdue for repayment in March, up from 8.3% in February and the highest since September 1994. The total number of non-performing loans is now almost 10 times higher than the level reported in 2007, just as Spain's decade-high property boom peaked.

The rapid deterioration of the loan books was one of four reasons cited by Moody's Investors Service for its downgrade of the credit ratings of Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA and 14 other banks in the country late Thursday. "Moody's announcement will increase speculation that the Iberian state will be forced to ask for external support in order to effectively tackle its banking crisis," said interest rates strategists at Lloyds Bank WBM.

[dorlomin]

Smell the fear.

http://www.guardian.co.uk/business/2012 ... exits-euro

With economic output in the UK still 4% below its peak level when the recession began in early 2008, the prime minister and the governor of the Bank of England, Sir Mervyn King, have expressed concern in recent days about the vulnerability of Britain to the eurozone.

Chote said he was particularly concerned about the possibility that a second deep recession would leave permanent scars. "That means not just that the economy weakens and then strengthens again – it goes into a hole and comes out – but that you go down and you never quite get back up to where you started."

Shares in London closed down for a third week, with the jittery mood in financial markets pushing the FTSE 100 below 5,400 for the first time this year. German and French stock markets were also depressed, with even the much-anticipated stock market debut of Facebook in New York failing to lift spirits.

Meanwhile, analysts at Deutsche Bank predicted that the weak state of Ireland's banks could result in the former Celtic tiger requiring a second bailout, and in Spain there were reports that the government would call in Goldman Sachs to help sort out its banks after 16 suffered credit downgrades on Thursday.

In an echo of the months leading up to the Lehmans collapse, Mike Smith, chief executive of Australia and New Zealand Banking Group, said the turmoil in the eurozone meant Australian banks were being frozen out of money markets when seeking funds.

Its floating around the back of so many discussions. When you see Gideon and Darling on the same basic vibe you know there is a fear they can all smell.