Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-60106 Wed, 29 Jun 2016 15:18:10 GMT Against the Populist Tide, Draghi Wants More Central Bank Coordination http://implode-explode.com/viewnews/2016-06-29_AgainstthePopulistTideDraghiWantsMoreCentralBankCoordination.html Mario Draghi has just pushed the boundaries of central banking further into the realm of globalization, at a time when globalization is on the run.

Following the work of Reserve Bank of India Raghuram Rajan and others, the European Central Bank president on Tuesday became the most senior global central banker so far to call for more explicit policy cooperation between jurisdictions. Draghi's aim is to mitigate the damaging cross-border side-effects brought on by the combination of monetary activism and tighter global financial links.

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"What he's getting at is simply the idea that we don't have a great understanding of all the financial linkages and capital flows," Sharif said. "That certainly does call for better understanding among central banks, not necessarily coordinated policies."

Technocrats, including those at the the Bank for International Settlements in Basel, go further, saying that new global rules are the best way to create more financial stability for all concerned.

But if central bankers seek to increase coordination, either on interest-rate policies or financial rules, the groundswell of nationalism and populism sweeping developed economies risks making their job next to impossible. While monetary policy is increasingly global, most politics remains local.

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iehi-feed-60105 Wed, 29 Jun 2016 15:16:36 GMT Britain wins Brexit breathing space at gloomy EU summit http://implode-explode.com/viewnews/2016-06-29_BritainwinsBrexitbreathingspaceatgloomyEUsummit.html EU leaders gave Britain breathing space Tuesday by accepting it needed time to absorb a shock Brexit vote before triggering a divorce but insisted the crunch move could not wait months.

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After hours of talks in Brussels, EU President Donald Tusk said that he understood that time was needed "for the dust to settle" in Britain before the next steps can be taken.

But reflecting wider concerns of a domino effect of other states wanting to leave, European Commission president Jean-Claude Juncker said Britain did not have "months to meditate".

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iehi-feed-60104 Wed, 29 Jun 2016 01:21:58 GMT A Brexit conspiracy theory nails the no-win situation Boris Johnson now finds himself in http://implode-explode.com/viewnews/2016-06-28_ABrexitconspiracytheorynailsthenowinsituationBorisJohnsonnowfind.html If [Boris Johnson] runs for leadership of the party, and then fails to follow through on triggering Article 50, then he is finished. If he does not run and effectively abandons the field, then he is finished. If he runs, wins and pulls the UK out of the EU, then it will all be over -- Scotland will break away, there will be upheaval in Ireland, a recession ... broken trade agreements. Then he is also finished. Boris Johnson knows all of this. When he acts like the dumb blond it is just that: an act.

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When Boris Johnson said there was no need to trigger Article 50 straight away, what he really meant to say was "never". When Michael Gove went on and on about "informal negotiations" ... why? why not the formal ones straight away? ... he also meant not triggering the formal departure. They both know what a formal demarche would mean: an irreversible step that neither of them is prepared to take.''

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iehi-feed-60102 Tue, 28 Jun 2016 23:40:40 GMT Satyajit Das: What If Anything Does Brexit Really Signify? http://implode-explode.com/viewnews/2016-06-28_SatyajitDasWhatIfAnythingDoesBrexitReallySignify.html The decision by Boris Johnson, an Etonian like David Cameron and of similar background and leanings, to back the Leave vote showed ruthless calculation and accurate political sensitivities. His position reflected his aspirations for leadership not solidarity with the Leave voters or fundamental policy shifts. In an editorial after the vote, Mr. Johnson seized with post Brexit Bre-gret or Bre-morse suggested that wholesale changes in the relationship between the UK and the EU were now unnecessary.

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In essence, for those who believe they are born to rule, Brexit signals the need to limit democracy to ensure that important decisions are left to self-certified experts. European Parliament President Martin Schultz was refreshingly clear: "It is not the EU philosophy that the crowd can decide its fate".

History may well record that little changed as a result of Brexit after the long tortured process of negotiation of the terms of withdrawal and arrangements regarding trade and other matters with the EU. Those in charge and their attendant retinues continued, as British blogger John Ward wrote in 2015, to ignore the individual, State sovereignty, debt mountains, currency realities, poverty, its responsibilities and every legal and constitutional restraint on their power.

If the deep seated economic and social divisions within Britain or other societies cannot be dealt with peacefully and through existing processes, the risk is that it will unleash the furies of nationalism and isolationism in unknown ways and with unpredictable results.

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iehi-feed-60101 Tue, 28 Jun 2016 23:31:57 GMT When Markets Sour, Stuff Suddenly Oozes from the Woodwork ("The bezzle shrinks": LendingClub, Theranos, Breitling Energy) http://implode-explode.com/viewnews/2016-06-28_WhenMarketsSourStuffSuddenlyOozesfromtheWoodworkThebezzleshrinks.html iehi-feed-60100 Tue, 28 Jun 2016 14:53:48 GMT Italy eyes €40bn bank rescue as first Brexit domino falls http://implode-explode.com/viewnews/2016-06-28_Italyeyes40bnbankrescueasfirstBrexitdominofalls.html Italy is preparing a €40bn rescue of its financial system as bank shares collapse on the Milan bourse and the powerful after-shocks of Brexit shake European markets. An Italian government task force is watching events hour by hour, pledging all steps necessary to ensure the stability of the banks. "Italy will do everything necessary to reassure people," said premier Matteo Renzi. "This is the moment of truth we have all been waiting for a long time. We just didn't know it would be Brexit that set the elephant loose," said a top Italian banker.

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Italy's banks are the Achilles Heel of the eurozone financial system. Non-performing loans have ratcheted up to 18pc of total balance sheets as a result the country's slide into depression after the Lehman crisis.

The new bail-in reform this year has brought matters to a head, catching EU authorities off guard. It was intended to protect taxpayers by ensuring that creditors suffer major losses first if a bank gets into trouble, but was badly designed and has led to a flight from bank shares. The Bank of Italy has called for a complete overhaul of the bail-in rules.

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Italy is now paralyzed under the existing eurozone structure. Analysts say it desperately needs a US-style bank rescue along the lines of the ‘TARP' in 2008, which used federal funds to mop up bad assets and stabilize the banks. This is forbidden by the eurozone.

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Hedge fund veteran George Soros warned that Italy faces the risk of a "full-blown banking crisis" that could bring the rebel Five Star Movement to power as early as next year. The banking squeeze has become politically explosive in Italy after thousands of small depositors were wiped out at four regional banks late last year...

Mr Renzi may be forced to take matters into his own hands and enact a unilateral sovereign rescue of the Italian banking system in defiance of the EU, unless he wins concessions soon from Brussels. Those who know him say he will not go down in flames for the sake of European ideological purity.

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iehi-feed-60098 Tue, 28 Jun 2016 14:43:10 GMT U.S. Home Prices Continued Strong Growth in April, Case-Shiller Says http://implode-explode.com/viewnews/2016-06-28_USHomePricesContinuedStrongGrowthinAprilCaseShillerSays.html iehi-feed-60097 Tue, 28 Jun 2016 14:41:34 GMT Rent Freeze Approved For Second Consecutive Year In Historic Vote (NYC) http://implode-explode.com/viewnews/2016-06-28_RentFreezeApprovedForSecondConsecutiveYearInHistoricVoteNYC.html iehi-feed-60096 Tue, 28 Jun 2016 14:36:37 GMT Greenspan Warns A Crisis Is Imminent, Urges A Return To The Gold Standard http://implode-explode.com/viewnews/2016-06-28_GreenspanWarnsACrisisIsImminentUrgesAReturnToTheGoldStandard.html iehi-feed-60095 Tue, 28 Jun 2016 14:31:29 GMT Why Xi Refuses to Let China's Zombies Die - Pesek http://implode-explode.com/viewnews/2016-06-28_WhyXiRefusestoLetChinasZombiesDiePesek.html Now comes indications of a stealth effort to boost stimulus to hit this year's 6.5% growth target, even as Xi insists he's tackling the excesses imperiling China's future. Officially, Beijing's fiscal deficit including off-balance sheet items will be about 3% this year. Economists at UBS and elsewhere now say it's higher than 10%. In other words, the invisible hand of the state is playing an increasing role in an economy Xi claims to be turning over to the private sector and market forces, deadening China's animal spirits.

These behind-the-curtain shenanigans mean the Zhu Rongji moment investors crave to rebalance growth engines isn't afoot. China's premier from 1998 to 2003 shook up the state sector as rarely before, shuttering lifeless enterprises and killing more than 40 million jobs. Xi needs to pull off an even bigger feat if he's going resurrect a reform process that's had few obvious successes.

The odds of such a shock are dwindling as Beijing circles the wagons, even corralling one of Zhu's most famous disciples - central bank Governor Zhou Xiaochuan. The People's Bank of China is at the center of efforts to convert debt into equity. While it appears to make sense in the short run, it means China's weakest links can ramp up bond issuance, adding to a debt-to-gross-domestic-product ratio already heading in Japan's direction.

This, say analysts at Zero Hedge, amounts to the "biggest shadow nationalization in history, one which will convert trillions in bad loans in insolvent enterprises into trillions in equity investments in the same enterprises, however without any new money actually coming in! Which means it will be up to new credit investors to prop up these failing businesses for a few more quarters before the reorganized equity also has to be wiped out." Hence, their characterization of this as a "deus ex machina," or God from the machine, move.

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Japan spent 15 years trying to engineer its own miraculous ending. Only in the early 2000s did banks come clean about the magnitude of their bad loan woes and begin writing them down. Thanks to that delay, however, it's still wracked by deflation, stagnant wages and sub-zero interest rates.

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Just as "The Walking Dead" characters never know how many zombies lurk in the shadows, overseas governments and investors alike haven't a clue about the scale of China's corporate undead problem. The same goes for where Xi's restructuring pledges are real or hype. It means that just like Rick Grimes, Glenn Rhee and the rest of TV's shows characters, the world won't know the size or lethality of any China shock until it's too late.

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iehi-feed-60094 Mon, 27 Jun 2016 23:18:04 GMT Global Bond Yields Sink to Record Lows http://implode-explode.com/viewnews/2016-06-27_GlobalBondYieldsSinktoRecordLows.html Sinking government bond yields in the developed world set new milestones Monday as investors continued to pile into relatively safer debt securities following the U.K.'s vote last week to leave the European Union.

The flight for safety trade in financial markets sent the yield on the 10-year U.K. government bond below 1% for the first time on record. The 10-year government yields in Japan, Germany, France, Sweden, Denmark and Switzerland all set all-time lows. Yields fall as bond prices rise.

In the U.S., the yield on the benchmark U.S. 10-year Treasury note settled at 1.461% from 1.577% Friday. It was the yield's lowest close since July 2012, when the yield closed at a record low of 1.404%.

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Traders say lower global bond yields partly reflect that expectations are growing that major central banks may need to take fresh actions. Economists expect more stimulus from central banks in Japan, the U.K. and the eurozone, either via further rate cuts or other easing measures.

There is also a growing belief in the financial markets that the Fed may not be able to raise interest rates this year, especially if the U.S. growth momentum slows down.

Interest-rate futures suggest some investors started to bet that the Fed may need to reverse i ts tightening policy , showing how anxious some investors are to the potential fallout from Brexit.

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iehi-feed-60093 Mon, 27 Jun 2016 22:21:03 GMT China Devalues Yuan Most In 10 Months As Premier Li Warns Of "Brexit Butterfly Effect" On Financial Markets, Economy http://implode-explode.com/viewnews/2016-06-27_ChinaDevaluesYuanMostIn10MonthsAsPremierLiWarnsOfBrexitButterfly.html iehi-feed-60092 Mon, 27 Jun 2016 22:18:44 GMT I walked from Liverpool to London. Brexit was no surprise http://implode-explode.com/viewnews/2016-06-27_IwalkedfromLiverpooltoLondonBrexitwasnosurprise.html iehi-feed-60091 Mon, 27 Jun 2016 17:40:30 GMT Firms plan to quit UK as City braces for more post-Brexit losses http://implode-explode.com/viewnews/2016-06-27_FirmsplantoquitUKasCitybracesformorepostBrexitlosses.html ... fears are spreading that an estimated 100,000 roles could be lost in the financial sector if banks press on with contingency plans to move jobs out of the UK...

US bank JP Morgan has warned 4,000 jobs will go and HSBC has said 1,000 City jobs will move to France. Rumours are sweeping the City that alternative trading sites are being set up in a number of other financial centres, including Luxembourg.

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iehi-feed-60090 Mon, 27 Jun 2016 17:36:26 GMT Britain 'may never' trigger EU divorce: diplomats http://implode-explode.com/viewnews/2016-06-27_BritainmaynevertriggerEUdivorcediplomats.html iehi-feed-60089 Mon, 27 Jun 2016 16:44:57 GMT Nevermind the Brexit, UK will emerge with a good trade deal; Worry About the EU Itself http://implode-explode.com/viewnews/2016-06-27_NevermindtheBrexitUKwillemergewithagoodtradedealWorryAbouttheEUI.html The U.K. is by far Germany's most profitable export market. Last year, Germany's trade surplus with the U.K. came in at 51 billion euros ($56 billion), accounting for 34 percent of the German surplus with the EU. That surplus was also 42 percent higher than the German trade surplus with France, Berlin's largest European trade partner.

With its 89.3 billion euro worth of exports to the U.K. last year, Britain is Germany's third-largest export market, after the U.S. and France. Will Germany give this up by shutting the U.K. out of a free-trade agreement with the EU? Of course it won't.

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No wonder that Chancellor Merkel keeps saying that there is no need to be "nasty" with the U.K., while reassuring her compatriots that she would negotiate the U.K.'s exit from the EU with a great attention to German interests.

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The existing trade and defense ties explain why I think that the U.K. will have no trouble getting a deal it wants with the EU.

But the EU, and its future, is a much bigger worry. The union's leading tenors - Germany, France and Italy - have no idea what to do next, mostly because they are in a state of an intractable political disarray.

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iehi-feed-60088 Mon, 27 Jun 2016 16:41:46 GMT BofA Predicts Record Low Bond Yields In Q3, Resumed Central Bank Easing http://implode-explode.com/viewnews/2016-06-27_BofAPredictsRecordLowBondYieldsInQ3ResumedCentralBankEasing.html Equity indexes worldwide are likely to endure sustained declines and heightened volatility, as uncertainty persists. Our European equity strategists see a 16% downside the Stoxx 600 that would push through the February lows. Our US equity strategists expect up to a 6-7% drop in the S&P 500.

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The spillover from Brexit to global growth is modest but not trivial, in our view. We have trimmed 0.2pp from our US GDP growth forecast for the next six quarters, bringing 2017 growth down to 1.8% from 2.0% previously.

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Central banks that held their fire ahead of the UK referendum may soon deploy additional easing. Some fiscal stimulus is likely as well. In particular, we look for the BOJ and RBA to ease further at upcoming meetings, and the ECB to extend QE at its July meeting. We expect the BOE to cut rates by 50bp to zero in July and to expand QE by £50bn within the next few policy meetings.

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iehi-feed-60087 Mon, 27 Jun 2016 16:39:12 GMT Death to All Zombies! - Kunstler http://implode-explode.com/viewnews/2016-06-27_DeathtoAllZombiesKunstler.html The next stage of this protean global melodrama [post-Brexit] is what happens when currencies and interest rates become completely unglued from their assigned roles as patsies in financial racketeering. Sooner or later we'll know what's going on in the vast shadowy gloaming of "derivatives," especially the "innovative" arrangements that affect to be "insurance" against losses in currency and interest rate "positions" -- bets made on the movements of these things. When currencies rise or fall quickly, these so-called "swaps" are "triggered," and then some hapless institution is left holding a big bag of dog-shit. A zombie is a terrible thing to behold, but a zombie holding a bag of dog-shit is like unto the end of the world.

Once this contagion starts burning, the people-in-charge won't be able to quell it the way they did last time: by drowning it in torrents of money-from-nowhere. At least not without inducing real-deal inflation, the kind that leads to epochal ruin and more intense political upheaval: the nation-changing kind.

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iehi-feed-60086 Mon, 27 Jun 2016 16:27:04 GMT China, Russia pledge business partnership worth $50 billion as Belt & Road Takes Shape http://implode-explode.com/viewnews/2016-06-27_ChinaRussiapledgebusinesspartnershipworth50billionasBeltRoadTake.html iehi-feed-60085 Mon, 27 Jun 2016 16:07:53 GMT Soros: The Man Who DIDN'T Break The Pound (This Time) http://implode-explode.com/viewnews/2016-06-27_SorosTheManWhoDIDNTBreakThePoundThisTime.html "George Soros did not speculate against sterling while he was arguing for Britain to remain in the European Union. In fact, he was long the British pound leading up to the vote," the spokesman said in an emailed statement.

Soros, however, did profit from other investments "because of his generally bearish outlook on world markets," according to the statement.

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Soros had urged British citizens to vote to remain in the European Union in the run-up to last Thursday's referendum. The investor warned that a "leave" vote would spark a sterling plunge but without the beneficial impact that followed the "Black Wednesday" devaluation that accompanied the pound's 1992 ejection from the European exchange-rate mechanism.

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