Wednesday, February 11, 2009

RBS June 19 Warning and Sept 15 Run on the Bank

Normally, I don't read the financial news because it bores the daylights out of me. But last June, I saw an article about a report and warning issued by the Royal Bank of Scotland that shocked me to the core.

What the article was saying and what I was seeing in world markets were identical - in a matter of weeks, the entire financial system of the world began collapsing and there was nothing anyone could do to stop it. Upon further investigation, I learned that the RBS was the largest European holder of American mortgage debt. Austria, Sweden, Greece, and several other countries were financing the economies of the former Soviets states with credit loans far in excess of any country's ability to repay. Those loans would reach maturity and need to be paid in 2009. A market crash was the only conclusion.

This is the article from the Telegraph June 19, 2008:

RBS issues global stock and credit crash alert

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

Such a slide on world bourses would amount to one of the worst bear markets over the last century.

RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the "Crossover" index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.

"I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names.

"Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.

RBS expects Wall Street to rally a little further into early July before short-lived momentum from America's fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.

"Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point," he said.

US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit.

The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. "The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation," he said.

"The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said.

Kit Jukes, RBS's head of debt markets, said Europe would not be immune. "Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates.

"The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured," he said.

Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.
RBS was one of the early victims of the market crash, although they very clearly saw it coming. The upheaval was just to big to avoid. Few took the warning seriously and even three weeks later when American mortgages began to tumble, still the warnings were largely ignored.

UPDATE: The following has been determined to be a lie told by a Democrat tool.

Back in Sept 2008, the Treasury Secretary and the Chairman of the Federal Reserve Board met behind closed doors in an emergency meeting with representatives of Congress and the Bush Administration. At that meeting, the government leaders decided to pump $700 billion into the economy without oversight, or guarantees, or apparently much thought beyond something must be done quickly.

Doug Ross at Doug Ross @ Journal (h/t suek) asked why was there unanimous agreement across party lines and why $700 billion? "It turns out they were merely averting a "$550 billion bank run" and a global economic apocalypse."

House Capital Markets Subcommittee chairman Rep. Paul Kanjorski (D-PA) explained on C-Span:

Look, I was there when the Secretary [of the Treasury] and the Chairman of the Federal Reserve came in to meet with the members of Congress about what was going on. It was about September 15th.

Here's the facts, and we don't even talk about these things. On Thursday, at about 11:00 in the morning, the Federal Reserve noticed a tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars was being drawn out in the matter of an hour or two.

The Treasury opened up its window to help. They pumped a hundred and five billion dollars into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn't be further panic out there. And that's what actually happened. If they had not done that, their estimation was that by two o'clock that afternoon, five-and-a-half trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.

Now we talked at that time about what would happen if that happened?

It would have been the end of our economic system and our political system as we know it.

And that's why, when they made the point that we've got to act and do things quickly, we did...

If you don't have a banking system, you don't have an economy.
For anyone looking for the beginning of the current monetary problem, stop looking. There is no beginning unless we go all the way back to the first barter exchange between two hominids millions of years ago. It's a continuum of boom and bust. We always remember the boom time, forget the busts, and are shocked when the next bust arrives. This credit bust was seen in 2006
and a few individuals and banking organs tried to deal with it then, but everyone was having too much fun to heed the warnings of the Chicken Littles.

However, during that electronic run on the bank on Sept 15, 2008, where did the money go? Who took it? What did those people do with the money? Has anyone traced the electronic trades? What is being done about it? Is anyone investigating?

The life of Indigo Red is full of adventure. Tune in next time for the Further Adventures of Indigo Red.


Anonymous said...

I had planned to retire this year, but thanks to Bahwney Fwank and Chris Dud it will be at least three more years. Don

Indigo Red said...

That's too bad, Don. Many are in the same situation. On the other hand, it may be best for me to retire at 55 this July. As a middle-aged crippled man employed by a small company that probably won't be in business in October, and a bleeding-heart Democrat government, retirement now may be my best choice.

suek said...

"where did the money go? Who took it? What did those people do with the money?"

Can you say Soros??? I'd also suspect some of our Middle Eastern friends as possibles.

" Has anyone traced the electronic trades? What is being done about it? Is anyone investigating?"

Very good questions. I expect I'll be dead and gone before we find out... This administration sure as he!! isn't going to pursue it - in fact I wouldn't be surprised if it was done with Obama's (et al)foreknowledge in order to push us into socialism just as it is succeeding in doing.

Where's Abby when you need her!
(If you're an NCIS fan, you'll understand!)

Indigo Red said...

I would be overjoyed if this could be traced to and pinned on George Soros and his Hollywood Jihadi devils. But, I agree, we'll both be dead before anything is found.

Indeed, where is Abby when you need her?

Anonymous said...

Hey Suek I am a big Abby fan!

suek said...

Updated info:

Getting the big picture is never easy!

Abby as a character is interesting - she's a natural turn-off for the type of person that is likely to be attracted to that particular type of show with the military background, but they've made her whimsical and ...puppyish...(I know that's not a word, but I really can't find a better description)enough to make her appealing. So...yes...I like her too. Also an interesting character to be their "magic" person (meaning the person all these shows have who have some esoteric skill that makes the solutions possible in the time allotted. "Magic" because they seem to pull the answers out of thin air)

suek said...

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It's new to me, and I'm looking for evaluations on the info...