Skip to comments.Austrian Bank On The Edge! Derivatives Is 10 Times The Size Of The Global Economy
Posted on 01/28/2015 1:49:24 PM PST by alexmark1917
Last year Austria's largest bank, Erste Bank, sent shudders of Credit Anstalt through the European Banking System. This year it is Austria's 3rd largest bank that is scaring investors senseless. On the heels of the Swiss National Bank's decision to un-peg from the Euro, Raiffeisen Bank's Swiss-Franc-Denominated mortgage worries have resurfaced (along with Russian/Ukraine writedowns) and nowhere is that more evident than the total collapse of the bank's bonds (from over 95c to 65c today). Even after the ECB Q (and some apparent intervention to weaken the Swissy) bonds kept free-falling. Perhaps, The Freedom Party's demands for a bailout will grow louder as the contagion concerns across Europe's banking system explode...
RAFI bonds are collapsing...
As Bloomberg reports, Raiffeisen had a total of 4.3 billion euros of Swiss franc loans outstanding as of September 2014, according to estimates by Moodys Investors Service.
Swiss Franc Yield Curve Negative for 12 Years; Bond Crash - Austrian Bank Raiffeisen; Another One Bites the Dust
The casualties continue to pile up in the wake of the Swiss National Bank dropping its peg to the euro.
(See Rabbit Hole Intervention Fails: Wild Moves in Swiss Franc as Switzerland Abandons Euro Peg; Morals of the Story).
The first moral of the story was "Don't borrow money in other currencies, especially long-term mortgages."
The same applies to lenders. And banks that lent money in unhedged Swiss francs to customers in Poland, Hungary or elsewhere now finds collection difficult.
Austrian bank Raiffeisen is in deep trouble doing just that.
Austrian Bank Raiffeisen's Bonds Crash
Bloomberg reports Raiffeisen Debt Signaling Distress as Currency Woes Mount
Raiffeisen Bank International AG (RBI)s junior bonds slumped to levels typically viewed as distressed after gains in the Swiss franc added to woes triggered by the tumble in the Russian and Ukrainian currencies.
Subordinated bonds sold by the Vienna-based lender slid as low as 63.4 cents on the euro, with yields of as much as 10 percent, after trading at 91 cents at the start of December, according to data compiled by Bloomberg.
Investors are concerned because European Union rules forcing losses on junior bondholders before banks can get state aid came into force in Austria on Jan. 1. The government has injected about 8.1 billion euros into three banks in the past six years and guarantees on bonds of stricken Hypo Alpe Adria Bank were revoked to avoid a taxpayer-funded bailout.
Raiffeisen had a total of 4.3 billion euros of Swiss franc loans outstanding as of September 2014, according to estimates by Moodys Investors Service. The largest part of these are in Poland, where the franc has appreciated 17 percent against the zloty since Jan. 14, threatening to push up defaults on the banks 2.9 billion euros of mortgages in the Swiss currency.
Read more at http://globaleconomicanalysis.blogspot.com/2015/01/swiss-franc-yield-curve-negative-for-12.html#hLcuowA4CL9pfRT8.99
Derivatives 10 times the size of the global economy: trigger to a global financial meltdown?
Today on The Janssen Report (#88): the financialization of pretty much everything has caused incredible systemic risk on top of so-called collateral. In fact, this collateral is the true value upon which most derivatives are based, such as gold, silver, oil and real estate. It turns out that even the biggest financial experts do not truly understand derivatives. It's a large "unknown". Just recall Warren Buffett's letter to shareholders about his failure to unwind the derivatives portfolio of one of his newly acquired companies in the late 90s. He called derivatives a potentially lethal time bomb. Estimates concerning the volume of the derivatives market range from 700 Trillion dollars to upwards of 1.5 Quadrillion dollars (including what is sometimes referred to as shadow derivatives). Let's look at the sheer size of the numbers alone: 700 Trillion = 700,000,000,000,000 1.5 Quadrillion = 1,500,000,000,000,000
The size of the economy is at about 70 to 75 Trillion dollars (annual World GDP): 75 Trillion = 75,000,000,000,000
All it takes is one domino to bring down this house of cards (or inverted pyramid) and create a vortex that will suck all the value out of this scheme.
Imagine the epic blow to financial institutions around the globe if their balance sheets start to vaporize. And then imagine what this will do to your personal financial situation.
Educate yourself, act and become self-reliant. Stay tuned to The Janssen Report!
- Treasury Statement November 26, 2014: https://www.fms.treas.gov/fmsweb/view... - China's gold: http://goldsilverworlds.com/physical-... - Charles Hugh Smith (OfTwoMinds.com) on The Oil-Drenched Black Swan (3 parts):http://www.oftwominds.com/blogdec14/o..., http://www.oftwominds.com/blogdec14/f...,http://www.oftwominds.com/blogdec14/o... - "Official" statistics on total value of outstanding drivatives, source BIS Bank:http://www.bis.org/statistics/derstat... - Derivatives risk and Warren Buffett: http://www.investopedia.com/articles/... - Gross World Product (global domestic product): http://en.wikipedia.org/wiki/Gross_wo... - Even Forbes.com on financial (derivatives) meltdown: http://www.forbes.com/sites/stevedenn...
Quick! Bail them out!
Coming soon to to the future third world nation known as Dorkbamaland.
What could go worng?
Or let them crash and burn.
“Derivatives Is 10 Times The Size Of The Global Economy”
Our betters tell us that our future depends on their ability to take absurd risks without fear of jeopardizing their obscene wealth.
Who cares what happens to Austria’s 3rd largest bank? Is there no end to financial fear-mongering?
Where there's a goldbug, there is fearmongering. And there is no end to goldbugs.
In truth, the destruction of world currencies was the plan of the elites all along. They are the ones who brought us to this impending catastrophe.
"America is at that awkward stage. It's too late to work within the system, but too early to shoot the bastards." - Claire Wolfe
It's very close to that time, Claire.
Every financial market in the US is leveraged in this manner. When the failures start, it is going to be real bad quick.
Mene Mene Tekel Upharsin
We might not have a choice.
But it really isn’t something you should wish for. Remember the video when the EBT went down in Loisiana a while back? It will be like that, but with countries.
Perhaps not, but there's something to be said for honest dealings; given the headline of
Derivatives Is 10 Times The Size Of The Global Economy I think we can fairly say that these derivatives are not honest dealings.
Remember the video when the EBT went down in Loisiana a while back? It will be like that, but with countries.
Well, there's a really, really simple method that would prevent this: don't spend what you don't have.
It works for both micro- and macro-economics, at the personal-level and at the vast government/country level.
They made their bed, let them lie in it.
Yuck — You paint a terrible, horrible, and altogether too possible picture for the future.
That’s good advice.
But it’s not reality. And the repercussions will affect people with their heads in the sand as much as the next guy.
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