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Old 12-01-2018, 04:57 AM
Danny B Danny B is offline
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Italy, Hopium & LIBOR

The next meeting of the FED is December 18-19.
The next meeting of the ECB is;
Governing Council of the ECB: monetary policy meeting in Frankfurt
13/12/2018
Press conference following the Governing Council meeting of the ECB in Frankfurt
Draghi, "The central bank has been treading a cautious path in recent months, seeking to start winding down its EUR2.6 trillion bond-buying program, known as quantitative easing or QE, without spooking international investors. "
"Speaking at the European Parliament in Brussels, Mr. Draghi confirmed that the ECB would likely phase out QE after next month. The decision is likely to be formalized at the ECB's next policy meeting on Dec. 13."
"Our policy had disastrous consequences? Yes, it created 9.5 million jobs in a few years," Mr. Draghi said."

Armstrong 2016 "Our models have been targeting 2018 for the last 30 years as the first potential year for a monetary crisis and reform."
"The most likely course of action has not changed. When confidence in government collapses among the GENERAL MASS PUBLIC, everything will breakout."
"The days of searching for some guru who is never wrong from an opinion perspective are gone and only fools seek such ideals. We are heading into the eye of a financial storm that will topple governments. The future is being constructed before our eyes if we wake up and just look. "
https://www.armstrongeconomics.com/a...ting-a-future/

Italy wants to take the tried-and-true course of defaulting. Since they don't print their own currency, they have to default by way of the bond market. Investors will be reading the tea leaves leading up to the December meeting of the ECB. They are already starting to dump Italian debt.
AT THE SAME TIME, they must try to guess what the FED open market committee will do about U.S. interest rates. Powell said that we are close to the neutral rate, NOT, at the neutral rate. This is all hogwash anyway. A so-called neutral interest rate depends on dozens of outside factors.
I've already posted links showing that the interest rate is greatly affected by the birth rate. Armstrong already mentioned that December might bring some kind of big reversal.
So, how are the markets reacting to all this news?

London Inter Bank Overnight lending Rate. LIBOR
"While stocks, and with a notable delay bonds, were happy to run with Powell's dovish reversal on Wednesday, one key market - arguably the most important one for financial conditions when it comes to the broader economy - has refused to respond.

Earlier today, instead of reacting to what has been interpreted as the Fed Chair's "dovish repricing" of future rate hike expectations, 3 month USD Libor jumped over 3 basis points to 2.73813%, the highest level in more than ten years."
The banks have a good idea of what is going on with their competitors.
"The reason why rising Libor remains a major risk to financial conditions, is because as the table below shows, its footprint can be found everywhere, from OTC interest rate swaps, to leveraged loans - considered by many as the locus of the next credit crisis - to retail mortgages, to complex securitizations. According to the TBAC, just about $200 trillion in instruments are exposed to Libor's interest rate footprint."

"Most affected by this ongoing rise may be the bond market, which has also been hit with the double whammy of tumbling oil, which earlier today dipped below $50/barrel, a price widely seen as a "red-line" for junk bond investors, below which some may sell their exposure indiscriminately. And since energy is one of the largest components of the junk bond index, it is only a matter of time before contagion spread from oil, through highly leveraged energy producers to the rest of the market."

Putin calls for $60 oil. This pretty much puts a ceiling on price. Remember that oil hit $147 in 2008. That certainly put a whammy on the economy.

"In any case, the ongoing rise in Libor which absent a reversal soon will result in even tighter financial conditions and higher interest expense on trillions in floating rate debt, Bloomberg's Alex Harris notes that those traders who took the "dovish" Powell at his word, "
Powell said MAYBE.
https://www.zerohedge.com/news/2018-...rillion-credit

So, the bankers refused to rev up the money machines. They aren't buying "hopium". Italian debt is 130% of GDP. The meeting is next month.

Central bank owns 18% of Italian government debt - Geotrendlines

https://geotrendlines.com/central-ba...vernment-debt/
Mar 11, 2018 - Back in 1990, about 70% of the Italian government debt was financed by private investors, today it is less than 10%.
France holds a LOT of Italian debt.
https://www.ft.com/__origami/service...rce=Alphaville
The planned collapse of Italian debt is going to take out quite a few banks around Europe.
Armstrong strongly recommended that Europeans get an American bank account.
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