Debt crisis: a $46 trillion problem comes sweeping in - News and Current Events | futures io social day trading
futures io futures trading


Debt crisis: a $46 trillion problem comes sweeping in
Updated: Views / Replies:552 / 0
Created: by kbit Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors – all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you don’t need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

Debt crisis: a $46 trillion problem comes sweeping in

  #1 (permalink)
Elite Member
Aurora, Il USA
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
 
kbit's Avatar
 
Posts: 5,872 since Nov 2010
Thanks: 3,301 given, 3,332 received

Debt crisis: a $46 trillion problem comes sweeping in

Just as you thought things couldn't get any worse, credit markets are about to be hit by a veritable tsunami of maturing corporate debt. Standard & Poor's estimates that companies in Europe, the US and the major Asian economies require a combination of refinancing and new money to fund growth over the next four years of between $43 trillion and $46 trillion. The wall of maturing debt is unprecedented, raising the prospect of further, extreme difficulties in credit markets.

With the eurozone debt crisis still at full throttle, the Chinese economy slowing fast and a still tepid US recovery, it's not clear that the banking system is in any position to deal with this incoming wave of demand.

As if the refinancing problem wasn't already challenging enough, into it all stumbles the European commissioner for internal markets, Michel Barnier, to prove the old saw that there is no mess quite so bad that official intervention won't make even worse.

A traditionalist French socialist by background, Mr Barnier positively revels in his job as the EU's top financial services regulator. In a recent interview, he said that he liked the term "shareholder spring" because it implied "a regulation spring, a rule making spring". Yes, indeed, Mr Barnier likes very much rules and regulations. He wants to regulate everything from pay to solvency. The financial crisis has given him a wide open canvass on which to paint.

After a crisis of the magnitude we've just seen, it's perfectly right and proper, and certainly very human, to want to take immediate steps to fix the system, so as to ensure that this kind of nonsense can never happen again. There is also something to be said for striking while the iron is hot. Leave things too long, and the political will to act melts away.

Even so, it's not clear that right now, with the crisis self evidently approaching some kind of fresh denouement, is the time to be buttressing the system against the once in a hundred year event of the present maelstrom. Nor in any case can the sort of extreme regulatory overkill we are seeing at the moment ever be seen as appropriate.

As far as I know, Mr Barnier is well intentioned enough. He wants to protect us all from the calamities of the past. But in attempting to regulate away all future risk, he also threatens to undermine growth and further reduce already wanting European competitiveness.

To be fair, it's not all Mr Barnier's fault. He's only part of a posse of international regulators riding furiously off in the wrong direction long after the horse has bolted. If even a fraction of the time spent on trying to protect us against a crisis that's already happened was devoted to finding a way out of it, then we might actually be getting somewhere. As it is, almost every part of the reform agenda is making matters worse, not better.

In its analysis of the refinancing challenge, S&P concedes that it might just about be possible for the banking system to cope with the wave of corporate debt maturities, assuming no further deepening of the eurozone crisis. But providing the $13 trillon to $16 trillion of new money to spur growth is going to be a much bigger ask, especially in Europe.

"Much will depend on the continued ability of banking system regulators to pilot a path through the minefield that lies ahead", S&P observes. Well that appears to be that, then. Abandon all hope, for at the moment these very same regulators seem to be blundering their way forward as if entirely unaware of what lies beneath their feet. Ever more onerous capital and liquidity requirements have steepened the refinancing challenge, even with highly supportive central bank funding on hand.

European banks, still grappling with high leverage and a worsening sovereign debt crisis, are particularly badly affected. Because of the escalating European banking crisis, they face intense pressure to meet new capital and liquidity requirements more quickly. With new equity virtually impossible to raise, this has only further exaggerated the de-leveraging problem. Enforced recapitalisation from governments which are themselves insolvent scarcely helps matters.

In the US, there is at least a highly developed corporate bond market to act as an alternative to bank funding. That's not the case in Europe, where to the contrary, the regulatory agenda seems determined to put as many obstacles in the way of a viable bond market as possible.

Standard & Poor's calculates that if corporate issuers in Europe were to tap the bond market for 50pc of their new funding requirements (up from 15pc historically), it would imply net new yearly issuance of $210bn to $260bn. In only two years in the last decade has net new European issuance exceeded $100bn.

You might think this a significant growth opportunity, but Mr Barnier's new solvency directive threatens to snuff that one out too, by requiring that only the most credit worthy and liquid bonds count for capital purposes.

The new solvency requirements virtually outlaw bundling together corporate loans and issuing them as asset backed securities, or rather, they prevent financial institutions from providing a viable source of demand for such bonds. Instead, finance is pushed by regulation ever more aggressively into sovereign bonds, even though many of them are now less than credit worthy.

The rules also threaten to stymie Government hopes of the private sector substituting for the public infrastructure spending being cut as part of the austerity drive. Many long dated infrastructure bonds don't meet the investment grade deemed necessary to qualify as a "safe" investments for insurers.

A more nonsensical piece of regulation is hard to imagine. Public investment in infrastructure is being cut almost everywhere to meet deficit reduction targets, leaving EU member states highly reliant on private sector funding for essential investment in the future.

Governments could of course do as the CBI suggests in a new report on infrastructure spending, and either guarantee the bonds or enhance their credit rating by entering into first loss agreements, but this is just off-balance sheet window dressing, where the private sector takes the upside, and taxpayers the downside. Governments might as well spend the money themselves.

Europe desperately needs growth, but it seems determined to stifle the credit needed to provide it. How stupid can you get?


Debt crisis: a $46 trillion problem comes sweeping in - Telegraph

Reply With Quote

Reply



futures io > > > > Debt crisis: a $46 trillion problem comes sweeping in

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Jigsaw Trading: TBA

Elite only

FuturesTrader71: TBA

Elite only

NinjaTrader: TBA

Jan 18

RandBots: TBA

Jan 23

GFF Brokers & CME Group: Futures & Bitcoin

Elite only

Adam Grimes: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Europe Has A Much Bigger Problem Than Debt..... kbit News and Current Events 0 January 9th, 2012 03:01 PM
The $30 Trillion "Problem" At The Heart Of Shadow Banking - A Teaser Quick Summary News and Current Events 0 December 12th, 2011 07:50 PM
Sweeping the book, ECN style.... kronie Commodities Futures Trading 24 December 2nd, 2011 11:44 PM
DOM in MultiCharts DT 7.0 beta 3 (Build 46) jz166 MultiCharts 9 June 5th, 2011 03:32 PM
Banks Face $3.6 Trillion 'Wall' of Debt: IMF Quick Summary News and Current Events 0 April 14th, 2011 05:10 AM


All times are GMT -4. The time now is 05:51 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-17 in 0.10 seconds with 19 queries on phoenix via your IP 54.163.210.170