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Austrian Bank On The Edge! Derivatives Is 10 Times The Size Of The Global Economy
INVESTMENT WATCH BLOG ^

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 Moody’s Investors Service.

http://www.zerohedge.com/news/2015-01-27/bonds-third-largest-austrian-bank-are-crashing

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 Moody’s 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 bank’s 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!

Sources:

- 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...


TOPICS: Business/Economy
KEYWORDS: austriabank; austrian; bank; beneficialcrisis; derivatives; economy; eurobanking; europeanunion; eussr; swissfranc

1 posted on 01/28/2015 1:49:24 PM PST by alexmark1917
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To: alexmark1917

Quick! Bail them out!


2 posted on 01/28/2015 1:50:58 PM PST by rightwingcrazy (q)
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To: alexmark1917

3 posted on 01/28/2015 1:53:24 PM PST by ClearCase_guy (Malort, turning taste-buds into taste-foes for generations.)
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To: alexmark1917

Coming soon to to the future third world nation known as Dorkbamaland.


4 posted on 01/28/2015 1:54:18 PM PST by Da Coyote
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To: alexmark1917

What could go worng?


5 posted on 01/28/2015 1:55:30 PM PST by Flick Lives ("I can't believe it's not Fascism!")
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To: rightwingcrazy

Or let them crash and burn.


6 posted on 01/28/2015 1:58:39 PM PST by OneWingedShark (Q: Why am I here? A: To do Justly, to love mercy, and to walk humbly with my God.)
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To: alexmark1917

“Derivatives Is 10 Times The Size Of The Global Economy”

They is?


7 posted on 01/28/2015 2:00:47 PM PST by Hugin ("Do yourself a favor--first thing, get a firearm!",)
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To: alexmark1917
"Too big to fail" is too big to be successfully bailed-out.
8 posted on 01/28/2015 2:01:41 PM PST by E. Pluribus Unum (Government is the religion of the fascists.)
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To: OneWingedShark

Our betters tell us that our future depends on their ability to take absurd risks without fear of jeopardizing their obscene wealth.


9 posted on 01/28/2015 2:02:31 PM PST by rightwingcrazy (:>@)
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To: alexmark1917

Who cares what happens to Austria’s 3rd largest bank? Is there no end to financial fear-mongering?


10 posted on 01/28/2015 2:02:58 PM PST by montag813
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To: montag813
"Is there no end to financial fear-mongering?"

Where there's a goldbug, there is fearmongering. And there is no end to goldbugs.

11 posted on 01/28/2015 2:06:24 PM PST by DannyTN
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To: Da Coyote
We're going to have a Third World world. Soon after JEB! is elected in 2016, he will announce that US and global debt is so astronomical that the only way to fix it is a one-world currency. He will blame individual currencies and their fluctuations for our economic policies.

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.

12 posted on 01/28/2015 2:12:20 PM PST by Dr. Thorne ("Now when these things begin to happen, look up and lift up your heads." - Luke 21:28)
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To: alexmark1917

Every financial market in the US is leveraged in this manner. When the failures start, it is going to be real bad quick.


13 posted on 01/28/2015 2:21:37 PM PST by vetvetdoug
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To: alexmark1917
A gentle breeze through the window and the cards begin to tremble.
Islam threatens weak leaders all, and knees begin to buckle.
The window opens, finger of God, the house of cards does crumble.
Man cries out to God to save, and sees himself more humble.
Will He save, or will He watch, we don't know what to say.
Time to change, turn back to good, and all men stop to pray.
Then it all ends swiftly now, and all face judgement day.

Mene Mene Tekel Upharsin

14 posted on 01/28/2015 3:01:13 PM PST by MeneMeneTekelUpharsin ( Freedom is the freedom to discipline yourself so others don't have to do it for you,)
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To: OneWingedShark

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.


15 posted on 01/28/2015 4:43:37 PM PST by Vermont Lt (Ebola: Death is a lagging indicator.)
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To: Vermont Lt
But it really isn’t something you should wish for.

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.

16 posted on 01/28/2015 4:53:01 PM PST by OneWingedShark (Q: Why am I here? A: To do Justly, to love mercy, and to walk humbly with my God.)
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To: rightwingcrazy
Our betters tell us that our future depends on their ability to take absurd risks without fear of jeopardizing their obscene wealth.

They made their bed, let them lie in it.

17 posted on 01/28/2015 4:53:59 PM PST by OneWingedShark (Q: Why am I here? A: To do Justly, to love mercy, and to walk humbly with my God.)
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To: Dr. Thorne

Yuck — You paint a terrible, horrible, and altogether too possible picture for the future.


18 posted on 01/28/2015 4:55:03 PM PST by OneWingedShark (Q: Why am I here? A: To do Justly, to love mercy, and to walk humbly with my God.)
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To: OneWingedShark

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.


19 posted on 01/28/2015 5:05:40 PM PST by Vermont Lt (Ebola: Death is a lagging indicator.)
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