British Step Up Bail-In Genocide,
As Markets Crumble
Jan. 12, 2016 (EIRNS)—"Sell everything except high quality bonds" because 2016 is going to be a "cataclysmic year," the credit chief of the Queen's own Royal Bank of Scotland (RSB) wrote in a recent note to clients, according to a Jan. 11 article by Ambrose Evans-Pritchard published in the London Telegraph. RBS's Andrew Roberts, while stupidly calling China the "epicenter" of what is actually a meltdown of the entire trans-Atlantic financial system, forecast stock market plunges in the United States and the UK of up to 20%, an oil price that could hit as low as $16 per barrel (a 50% drop from today's Brent crude price of just under $32), and that a panicked Fed and Bank of England will have to reverse field and start up with quantitative easing again in short order.
The ongoing carnage in commodities, and oil in particular, is on the mind of every speculative banker on the planet. Morgan Stanley is warning of a $20 per barrel price; Goldman Sachs says that oil storage tanks could soon reach a limit, which would "force an immediate halt to some production;" and a Barclay's research note advises that "recent price declines for major commodities are now greater than in any crisis of the past 30 years, and speculative positioning much more negative than it was even in the depths of the financial crisis." Bloomberg wire service characterized yesterday's oil trading as simply "madness," and the Wall Street Journal warned that U.S. oil and gas producers are currently losing $2 billion per week, and that at current price levels—let alone the additional drops that are coming—fully one-third of such oil and gas companies will go bankrupt over the course of this year.
But the meltdown did not originate in the oil and commodities markets, and it certainly doesn't end there. The British housing market is also about to implode, as noted by the Telegraph in a Jan. 10 piece headlined "UK house prices set to crash as global asset prices unravel." They write that the global asset meltdown has already struck commodities and stocks, and it will soon slam the housing sector, which they describe as a "ticking time bomb." A big problem in the British housing bubble is what they call "buy-to-let," i.e. people who have bought housing units not to live in them, but to rent them to others while speculating on what they hope will be an unending asset bubble—much like the "flipping" phenomenon and the sub-prime mortgages in the U.S. in the mid-2000s. "A survey of landlords suggested 200,000 plan to exit the sector. The rapid growth of buy-to-let during the past decade looks set to be slammed into reverse." And this will intersect a related bubble: "U.K. households are simply drowning in about 40 billion pounds of debt, according to the latest figures from the Office of Budget Responsibility."
And then there is increasingly panicked capital flight as fear of bail-in expropriations set in—both from carry trade destinations such as Brazil back to the United States and Europe; and within Europe from southern tier countries Italy, Spain, Portugal, etc., into German and Dutch banks. But those banks are not lending out those increased funds, not to consumers or businesses, and not even to fellow banks on the interbank overnight market. Instead they are parking the funds at the ECB, where they earn a negative interest rate.
The British policy response to the ongoing meltdown is to use the deadly bail-in procedure to rob depositors and smaller business which have funds or hold bonds in the failing banks, leaving them destitute.