Posted on 08/04/2011 3:04:58 PM PDT by ScaniaBoy
Less than an hour ago, Larry Kudlow tweeted the following: "Sources tell me Italy has to restructure bonds.Deposit run on Italian banks.EU will have to mount Tarp rescue.Big stress on interbank loans." Basically, this is the worst possible combination for Europe which means that another bailout is not only imminent but has to happen tomorrow. Incidentally Reuters is reporting of an emergency meeting between Sarkozy and Merkel and Zapatero on "the markets" which can only mean damage control following today's disastrous Trichet performance. Too bad the markets won't buy it any longer absent some actual actions to back up the deeds. Yet what we are more concerned about is whether or not there really is a bank run in Italy which would be the end of the euro. For that we went to the most trustworthy indicator for European "bankrunnyess" the EURCHF. To our surprise, the pair just plunged nearly 100 pips after hours, after dropping over 200 pips from intraday highs following yesterday's SNB intervention. Will this force the SNB to intervene again? Find out shortly. AS to what Sarkozy has up his sleeve, we will just have to wait and see when the European markets open in about 10 hours.
See also: The Real Banking Crisis: Global Depositor Bank Runs And Why Gold Is Going Much Higher As A Result
PING!
ping
And a couple of months ago,
and a couple of years ago,
and so on...
We need it now that half the family is out of work and needs a roof over its head.
bump for later reference.
bump
Summarizing Italy's Catastrophic Predicament In 15 Simple Bullet Points
The markets have been sleeping - but you all knew that.
And just in case one forgets, and one certainly shouldn't; Spain is no better shape:
ping on that.
I’ve been wanting to quit my job just to preserve/move what little 401k assets I have left to a place where I control it. Still underage but at this point, what’s another ?& tax haircut off the top. At least the mortgage would be paid off.
He made a great point of the Euro-Swiss Franc index (EURCHF), but what does that mean? Apparently, the Swiss National Bank (SNB) intervened yesterday, after which the EURCHF dropped 200 points, and then today, it dropped another hundred points.
He implied that this neutralized the SNB intervention.
What does the Euro-Swiss Franc index (EURCHF) follow? In what units is it denominated, and what percentage drop is 300 points?
How does this index falling neutralize the SNB intervention?
(Much appreciated, sir.)
Cheers!
Sorry for late reply. Time difference!
The EURCHF is the exchange rate between Euros (EUR) and Swiss Francs (CHF). Early yesterday morning the head of the Swiss National Bank announced a reduction in interest rate (and some other measures) to try and push down the value of the CHF. It has increased tremendously during the last couple of months, due to cash fleeing the unstable Euro-area (and possibly the USD as well) to one of the few safe-havens available. The high exchange rate now threatens the Swiss export industry.
Initially the CHF fell on the announcement, but then slowly over the course of the day the EUR fell and the CHF incerased in value, meaning that people exchanged their euros for “swissies” (CHF).
The euro area is known to leak cash into Switzerland, and knowing how porous the Italian northern border is - at least to money transfers - it is no wonder that house prices have gone though the roof in souhern Switzerland, those parts that border onto Italy.
We will see what happens today. If it turns out that Kudlow wasright, then things are going to get very ugly. I have always been against the creation of the Euro. I was campaigning against Sweden joining the Euro in 2003, and thankfully we won our referendum. Although, I have been certain the Eurozone (EZ) would evenually break-up, I have become more and more convinced that the politicians and bankers running the EZ would make certain that the break-up would never happen in an orderly and amicable fashion.
No they would go for the “Götterdämmerung” - the end of the world.
(Sorry for sounding so pessimistic, but really the politicians we have running our countries these days are no better than the ones who ran the world in 1914.)
PS: Have you donatd to the Freepathon? Any little bit helps, and we got to get it finished now!
See my post #13. Hopefully that answers your questions.
From the graph in the linked article it appears that 100 “pips” which was actually more like 66 (1.0820 to 1.0754) were equivalent to a decrease in the exchange rate of 0.6%. 300 pips would then be close to 3%.
PS: Have you donatd to the Freepathon? Any little bit helps, and we got to get it finished now!
Ah, good old Gresham’s law. “Bad money pushes out good money.”
Since there are some 19, I believe, printing offices for Euros, I wonder if one or more of these central banks hasn’t quietly printed up a whole bunch of “extras”, that could be blamed on counterfeiters, if push came to hyperinflation shove.
Interestingly enough, the US has only 2 printing offices, in Fort Worth and Washington, D.C., that work at capacity to print mostly $1 bills, and proportionately fewer higher denomination bills. And the bulk of the $100 bills are sent overseas. And printing around the clock, they produce only enough paper currency to support 5% of US daily retail.
This means that no matter what else happens, they cannot produce more paper money, nor can they produce higher denomination bills, even $500 or $1000 denominations, because nobody could make change for them.
However, at the same time, all the government has to do is change some numbers on a computer, and say it has “printed” more money.
But this only works if business continues to accept virtual money instruments. They only have to accept legal tender paper notes; not anything else, in payment of debts. “No checks or credit cards” could become the norm.
This could result in a strange phenomenon of a “currency split”, in which virtual money hyper-inflates, but paper money becomes instantly 95% deflated. Gresham’s law with a chainsaw.
Soon, $100m in the bank could become worthless, and a $1 bill in your hand could be worth 20 or a hundred times its face value.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.