The Scramble For US Safety, As Europe Imploded, Offset The $357 Billion Plunge In Q3 Shadow Banking
In
continuing our exclusive analysis of the periodic variations in the by
now all important shadow banking system, we next look at the change in
third quarter (3 Months ended 9/30) shadow liabilities as disclosed by
the just released Flow of Funds (Z.1) report by the Fed. As by now
should have been made all too clear, if there is one threat above all to
the monetary regime, primarily of the US but by extension, global, it
is the ongoing collapse in shadow banking, which is simply an
unregulated pass-thru funding conduit for all the non-traditional banks
and bank holding company firms which perform one or all of the three banking functions:
maturity, credit and liquidity transformations. As such these are
critical because having peaked at $21 trillion, the shadow banking
system was always substantially larger than the traditional banking
system since Q4 of 1990 when it finally overtook in terms of total
notional, and provided far more broad "credit-money" liquidity to the
global financial system than regulated (and we emphasize this word with bold and underline)
entities. And since the burst of the credit bubble, the liquidity is
now evaporating on a quarterly basis. So cutting to the chase, in Q3, US
shadow banking declined by $357 billion to $15.2 trillion in liabilities,
a decline of $654 billion in 2011 YTD, and a drop of $5.7 trillion
from the $20.9 trillion peak in March of 2008. Such an uncontrolled
ongoing collapse, primarily brought by the disappearance of dumb
incremental (marginal) money originating in Germany (Landesbanks) and
Spain (Cajas), as well as various Asian sources of dumb money, is
beyond a shadow of a doubt the biggest deleveraging threat to the
global monetary system bar none. And here is where the central banks step in. Six Tail Scenarios That Deutsche Bank Are Watching For Next Year
Jim
Reid and his team from Deutsche have produced another magnificent
compendium of information and prognostication in their 2012 Credit
Outlook and while their up-in-quality preference (non-financial) may not
be earth-shattering strategically, their timing view is of note.
Instead of viewing the looming refi-ganza among European sovereigns and financials in H1 2012
as a reason for doom and gloom, they see it as the necessary evil to
drive the ECB into the markets in size only for the latter half of the
year to disappoint significantly as the reality of the underlying
problems rear their ugly head once more. The down-then-up-then-worse-down perspective on markets for next year
hardly sounds optimistic but it is the following six scenarios away
from European woes that keep them up at night. From the positivity of a
US housing rebound or Election year cycle to much more extreme downside
risks such as geo-political concerns and non-European sovereign risks,
their views on China, QE-evolution and Inflation concerns are noteworthy.Obama Wants His Drone Back
Several
days after being humiliated by Iran which either shot down a EQ-170
drone, or worse, hacked into its navigation system and landed it, Obama
has decided to double down, and stick the other foot in his mouth. As
ABC reports in connection with Obama's handling of this embarrassing
predicament, ""We've asked for it back. We'll see how the Iranians respond,"
Obama said at a news conference. Obama said he wouldn't comment
further "on intelligence matters that are classified." Great, the only
problem is Iran will never return it, as they have already indicated,
for the simple reason that it has already been reverse engineered 5
ways from Sunday somewhere deep in the bowels of one of China's
unpopulated cities, which just doubles as a very populated military
intelligence base. The only good news is that within 6-9 months every
American will be able to buy a personal stealth drone for a new low,
low price at their friendly neighborhood Wal-Mart. Our only concern is
whether FoxConn will be able to handle the supply of both iPads and straight
for re-export drones: it would be ironic if this massive military
embarrassment ends up as being a catalyst to short Apple.Comparing Bureaucracy: No Wonder The Euro Zone Is In Crisis
12/12/2011 - 17:57
12/12/2011 - 21:39
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