Posts Tagged 'Crisis'

Central Banks Pump Money to Prop Up Europe

Central Banks Pump Money to Prop Up Europe

By: Daryl Montgomery

Exactly three years after Lehman Brothers filed for bankruptcy and almost brought down the global financial system, central banks in North America, Europe and Asia engaged in a coordinated money pumping operation to prevent the EU banking system from stalling. The move created a sharp stock market rally, especially in financial shares, just as was the case when similar actions took place during the 2008 Credit Crisis.

Involved in Thursday’s action were the U.S. Federal Reserve, the ECB, the Bank of ...

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Debt Crisis — Greece 2011 Compared to Argentina in 2001

Debt Crisis — Greece 2011 Compared to Argentina in 2001

By: Daryl Montgomery

For Audio Summary click here

Headlines such as “Hopes for Greek debt progress lift world stocks” and “Wall St opens higher on European hopes” are in the financial news today. Before investors buy into the hype, they should realize that the powers-that-be always deny an obvious and inevitable default before it takes place. Greece in 2011 is on a very similar trajectory to Argentina in 2001 and is well past the point of no ...

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Interest Rate Spread Widens as Greece Heads Toward Default

Interest Rate Spread Widens as Greece Heads Toward Default

By: Daryl Montgomery

For Audio Summary click here

Global interest rates continue to diverge, with rates rising in the troubled eurozone countries and falling to new lows in Germany and the United States.  The same sort of divergence took place during the 2008 Credit Crisis with yields on safe-haven governments falling markedly, while yields on low-grade corporates soared.

Nowhere in the world is the current interest-rate spread more extreme than in the Eurozone (the epicenter ...

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Risks of Market Contagion from a Greek Default

By: Daryl Montgomery

Contagion is a harmful or undesirable contact or influence

For Audio Summary click here

While U.S. markets closed slightly up on Monday September 12th, panic reigned in Europe. The risks of a hard default by Greece reached 98% according to one model. Interest rates in Greece were spiraling out of control (the two-year government yield hit almost 70%) and credit default swaps on European sovereign and bank debt reached record levels again.

While ...

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Why a Greek Default is Imminent

By: Daryl Montgomery

For Audio Summary click here

It may only be weeks, if not days, before Greece defaults on its debts. Interest rates and credit default swaps (bond insurance) have hit record levels and are still climbing. Stocks are getting slammed throughout the world, especially EU bank stocks. The Germans appear ready to abandon further attempts at bailing out the debt-ridden country.

Yields on two-year notes in Greece were above 60% Monday morning — the highest ...

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EU-Centered Credit Crisis Continues

By: Daryl Montgomery

For Audio Summary click here

The 2011 Credit Crisis continued Tuesday with the Stoxx Europe 6000 index hitting a two-year low, the Swiss taking desperate measures to control the franc, more record high prices for credit default swaps (bond insurance) on British Banks and yields on 10-year U.S. treasuries hitting an all-time low. Despite the dramatic turn of events, stock losses were somewhat muted.

U.S. markets opened sharply lower, but the Nasdaq and S&P 500 ...

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According to international economist Hernando De Soto, one of the key differences between an undeveloped economy and a developed one is clarity of ownership of real estate. The recently emerging foreclosure crisis in the United States indicates a movement toward the the third world model.

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Same Game, New Rules

Same Game, New Rules

If you can’t win under the existing rules of the game, simply change the rules. Wall Street firms were losing big money during the Credit Crisis, but not only did the federal government come to their rescue with truckloads of taxpayer money, but accounting rule changes were also instituted to make their financial position look much stronger. The much improved earnings for the banks and investment houses showing up today are the result of both and not an improved economy.

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Hyperinflation

Hyperinflation

Inflation will go to zero and then suddenly jump up to some very high level. In theory, zero interest rates should produce infinite inflation (hyperinflation), but nothing mandates that this has to be a gradual, long-term process. If you think about it, the Credit Crisis seems to have come out of nowhere. It didn’t of course; there was a slow, long-term build up behind the scenes that just exploded suddenly. Inflation is likely to follow that same path of development. Global governments eventually got control of the Credit Crisis collapse by throwing trillions ...

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