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Old 08-13-2018, 02:42 PM
Danny B Danny B is offline
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Join Date: Oct 2012
Location: L.A. Ca.
Posts: 4,326
Turkey and European banks.,,, P2P lending meltdown in China

YOU might not care about the currency crisis in Turkey but, you are not an Italian Bank or a Spanish bank,,, or a French bank. Turkey is rapidly melting down. Erdogan bought his popularity by borrowing enormous sums in dollar-denominated loans. The lira has lost 45% so far this year and, the loans are getting VERY expensive to service.
The banks are required to hold a percentage of reserves. What happens when the value of the currency falls?
8/12 Turkish lira dives 10% at open; Turkish banks now insolvent – Mish

TAE talks about Turkey starting a war with Greece to deflect attention from domestic problems. IMAGINE that. One NATO member going to war with another NATO member.
Turkey made a VERY big mistake by shooting down the Russian plane and pilot.
8/12 Turkey meltdown “should be valuable lesson for risk-ignorant investors” – Zero Hedge
The first of MANY lessons. The contagion is moving FAST.
8/13 South African rand flash-crashes 10% in Turkey contagion – Zero Hedge
The end result to all this is; the scenario that Armstrong warmed about the most.
8/13 Geopolitical concerns spike US dollar to highest level of year – FX Empire

Armstrong claims that Turkey is going to abandon the West.
Turkey says that it is going to reform and fix everything so that it can join the eurozone.

OZ may be considered a Western nation but, they are very dependent on China and Asia.
8/13 58% of Australians worry about their mortgage and becoming homeless – Mish
New Zealand is making an effort to keep hot Chinese money from blowing up their RE market.
8/13 New Zealand to ban foreigners from buying homes – SMH

8/13 Russia says it will ditch U.S. securities amid sanctions – GATA
You almost get the idea that the sanctions are designed to take the dollar out of world trade.

"most at risk in China's economy: online peer-to-peer lenders who collect money from retail investors and dispense small loans to consumers, usually without collateral, putting the loans at risk of a default with zero recovery.

We pointed out that outstanding loans on P2P platforms rose 50% just last year to total Rmb1.49 trillion ($215 billion) - making the size of China’s P2P industry far bigger than in the rest of the world combined "
NO collateral What could go wrong?

We are winding down towards the end of a super-cycle. Keynes advocated centralized control by the State. This never works and generally destroys the whole system.
8/13 Weekend tweets: Keynesian time bombs, emerging market black swans – Mish
Any time that a State allows unlimited debt creation, it eventually blows up.

Yanis Varoufakis, "The crisis of 1848 brought us the Marxist tradition. The great depression produced both Keynes’s General Theory and Friedman’s monetarism. Over the past decade, the 2008 crash has given rise to a cottage industry of books, articles, documentaries, even films but not, so far, an overarching theory. Now, a compelling new book has arrived which deserves to be at the top of the reading list of anyone interested in the events of 2008 and eager to make sense of the aftermath ."

"Many economies (Ireland and South Korea for example) that were run according to what the global establishment considered “best practice” (government and trade surpluses, light regulation of banks and employers) crashed the moment 90% of global money flows dried up. Why? Because the establishment’s prescription had skilfully left out the crucial truth that the main threat came from the banking system (not the state) and from private (not public) debt."
Armstrong claims the opposite.

This is an excellent article. Just as Armstrong sees no excesses in private capital, Varoufakis sees no excesses in public debt.
Sorry, but, they are TWINS.
The private banks in Europe loaned TONS of money to Greece even though it had spent 90 years of it's recent history in default. Since the lender is exposed to the most risk, it is incumbent on the lender to calculate the risks. The banks just figured that that the State would rescue them.... which it did. The State has regulatory power and is most at fault if excess credit creation is allowed.

Once again, you can see the power of gold in limiting State created expansion of debt.
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