[soprofaxel]

Ominous given the situation in the Eurozone.....

THE world's top central bankers began arriving in Australia for high-level talks as renewed fears about the strength of the global economic recovery gripped world share markets.

Representatives from 24 central banks and monetary authorities, including the US Federal Reserve and European Central Bank, landed in Sydney to meet tomorrow at an undisclosed location.

Organised by the Bank for International Settlements last year, the two-day talks are shrouded in secrecy with extensive security believed to have been invoked by law enforcement agencies.

Speculation that the chairman of the US Federal Reserve, Ben Bernanke, would make an appearance could not be confirmed last night.

The event will be dominated by Asian delegations and is expected to include governors of the People's Bank of China, the Bank of Japan and the Reserve Bank of India.

The arrival of the high-powered gathering coincided with a fresh meltdown on world share markets, sparked by renewed concerns about global growth and sovereign debt.

Fears that countries including Greece, Portugal, Spain and Dubai could default on debt repayments combined with disappointing US jobs data to spook investors.

Australia's ASX 200 slumped 2.4 per cent to its lowest close since November 5, echoing a sharp fall on Wall Street.

Asian share markets were also pummelled, with Japan's Nikkei 225 down almost 3 per cent and Hong Kong's Hang Seng off 3.3 per cent.

The damage was also being felt by European markets last night with London's FTSE 100 down 1 per cent in early trade.

Sovereign debt fears rippled through to the Australian dollar, which was hammered to a four-month low of US86.43 and was trading close to that level last night.

"This does feel like '08 and '07 all over again whereby we had these sorts of little fires pop up and they are supposedly contained but in reality they are not quite contained," said H3 Global Advisers chief executive Andrew Kaleel.

"Dubai should have been an isolated incident and now we are seeing issues with Greece, Portugal and Spain."

World bankers meet in Sydney as recovery fears intensify | Herald Sun

[poekfpojoibien]

I'm not sure exactly why US shares are going down over this. We' are (Uncle Sam) still going to keep our AAA Moody's rating no matter what since we're the "currency of last resort" in international settlements, even if it's fiat.

The Euro is going to be put under extremely tight pressure because there's a huge bureaucratic mess with dealing with a Eurozone member that's about to default on its bonds. Greece will be bailed out. The Euro countries are going to pass a bunch of laws to make it happen. You better believe it. If they don't, then the Eurozone banking system will fracture and split apart, and the Euro currency will fall into a monetary crisis. Greece's debt is large enough to cause a cascade of problems all over Europe and leave France & Germany paying for all of the aftermath.

But the only US banks that are going to hurt badly are the ones with heavy exposure to EU bonds and EU-denominated assets.


No matter what happens, the Euro is going to devalue monetarily whether they like it or not.



Japan's debt is also screaming upwards so high and so fast that they might run into the same situation as well. I give them about another 2 years before they're in the same boat as Greece.

But I think we will be lending money to Japan to help them refinance their debt.

[soprofaxel]

Because there is global overcapacity that is being covered up by artificial aggregate demand (Quantitative easing). Countries because of fiscal pressures and rising deficits are pulling back. US is supposed to end their QE in March although politically I suspect they will continue it but maybe not until after a market correction. The Eurozone however has got the PIIGS and eastern europe debt that is going to drag them down and they can't continue their QE. The fact is that private demand is anemic and gov't induced artificial demand cannot continue ad infinitum. Thus you have massive growth worries going forward. That is not good in a globalized economy that is so interconnected and wrought with counterparty risk. It also doesn't help that companies that depend on demand are multinational....hence the pressure on equities. The US has a massive budget deficit it has to service this year so the flight to the least worst currency (the dollar) will actually alleviate some of the pressure on the US sovereign debt situation in the short term but it will cause a second leg down in the market...wash, rinse and repeat