The US has abused its three phenomenal privileges – including the control of the only world currency – to put global financial stability at risk, “like a truck full of dynamite heading right toward us,” said the chairman of the International Advisory Board of the Universal Credit Rating Group. But a “new financial order” is forming. And there’s a timeframe.
Debtor Nation
Which Law To Break If The Debt Ceiling Isn’t Raised?
by Wolf Richter • • Comments Off on Which Law To Break If The Debt Ceiling Isn’t Raised?
That’s the question for Treasury Secretary Lew and Fed Chairman Bernanke during the debt-ceiling charade; it seems they’re boxed into a contradictory situation where one of them will have to break one of the laws, whether they want to or not, writes Vincent Reinhart, managing director at Morgan Stanley and former head of the Fed’s monetary division.
Wall Street Brushes Off Debt-Ceiling, Republicans Beg To Differ, But Default Would be “Catastrophic,” And Nothing Is Priced In
by Wolf Richter • • Comments Off on Wall Street Brushes Off Debt-Ceiling, Republicans Beg To Differ, But Default Would be “Catastrophic,” And Nothing Is Priced In
Wall Street is convinced the government shutdown won’t hurt unless it drags out too long. It’s even more convinced that Congress would never be crazy enough to refuse to raise the debt ceiling in time and send the mighty and sole superpower, biggest debtor of all times, into default. That risk hasn’t been priced in. But a majority of Republicans begs to differ.
S&P Threatens To Cut US Debt To Junk
by Wolf Richter • • Comments Off on S&P Threatens To Cut US Debt To Junk
“This sort of political brinkmanship is the dominant reason the rating is no longer ‘AAA,’” S&P ratings agency wrote in a research note. More ominously, it warned that if Congress failed to pass a debt-ceiling hike before the out-of-money date in mid-October, it would cut the U.S. to “selective default.” And then there would be the post-default era.
BofA-Merrill: “When Excess Liquidity Is Removed, It Will Get ‘CRASHy’”
by Wolf Richter • • Comments Off on BofA-Merrill: “When Excess Liquidity Is Removed, It Will Get ‘CRASHy’”
With Q3 GDP growth tracking 1.6%, Wall Street strategists, whose bullishness has been deafening despite realities on the ground, are starting to hedge their bets with some unusually candid analyses. Seeing overvalued assets everywhere, they’re struggling to point at solutions, other than a crash. And they predict a sour future for stocks and bonds.
Debt Zombie Verizon
by Wolf Richter • • Comments Off on Debt Zombie Verizon
Verizon will unleash a tsunami of money on Wall Street. To pay for its $130 billion acquisition of Vodafone’s share of Verizon Wireless, it will print $60 billion of its own inflated stock. It will borrow the rest – much of it via the largest bond sale in history, though it’s drowning in debt. Now that sale is slamming the already deflating bond bubble.
Bonds Bleed: Largest Bubble In History Unwinds, But The “Great Rotation” Into Stocks Is Deceptive Wall Street Hype
by Wolf Richter • • Comments Off on Bonds Bleed: Largest Bubble In History Unwinds, But The “Great Rotation” Into Stocks Is Deceptive Wall Street Hype
The bond-fund massacre is spectacular. Antsy investors yanked $7.7 billion in August out of the world’s largest bond fund, Pimco’s Total Return Fund. In July, they’d yanked out $7.5 billion, in June $14.5 billion. From May 1 through August 31, the fund’s assets shriveled 14%. Other bond funds got hit too. And September is shaping up to be even worse.
Japan Inc. Wins Big, Gloating Ensues
by Wolf Richter • • Comments Off on Japan Inc. Wins Big, Gloating Ensues
“We welcome the ruling party’s victory,” announced Hiromasa Yonekura, chairman of Sumitomo Chemical, and chairman of the Japan Business Federation, the country’s largest business lobby. He is one of the faces of Japan Inc. He’d been handed a gift: the ruling coalition controls both houses of parliament and will push Abenomics deep into the system.
Biggest Bond Bubble In History Is Turning Into Carnage
by Wolf Richter • • Comments Off on Biggest Bond Bubble In History Is Turning Into Carnage
“We’ve intentionally blown the biggest government bond bubble in history,” confessed Andy Haldane, Director of Financial Stability at the Bank of England. The bursting of that bubble was a risk he felt “acutely.” He saw “a disorderly reversion” as the “biggest risk to global financial stability.” Seatbelts are being fastened; the clicks can be heard around the world.
The “Chinese Dream” Come True: Gobbling Up Assets Overseas
by Wolf Richter • • Comments Off on The “Chinese Dream” Come True: Gobbling Up Assets Overseas
The “Chinese dream” is the dream of the whole nation and also of every individual Chinese, explained Fu Ying, chairwoman of the Foreign Affairs Committee. The slogan had been coined by President Xi Jinping after he’d ascended to the throne of the Communist Party. It would benefit the world, she said. But for the richest Chinese, it has already come true.