City regulator the Financial Services Authority has told banks to ready themselves for Armageddon by running "stress tests" on their balance sheets. FSA chief Hector Sants met the heads of BARCLAYS, SANTANDER, HSBC, LLOYDS and RBS last week. News of the shock warning came as the world's biggest central banks today launched a desperate bid to save the global economy by flooding markets with cheaper cash. The Bank of England was one of six pledging to make it cheaper for big banks to access "unlimited amounts" of US dollars. And EU chiefs warned Europe had TEN DAYS to solve the debt crisis or face catastrophe. The central banks' shock action should make it easier for businesses and households to borrow — and for banks to fund themselves. Stock markets around the world soared, with the FTSE 100 up 152 points by 2pm. Germany's DAX leapt four per cent. In a statement, the Bank of England said: "The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit." The Bank of England was joined by the European Central Bank, the US Federal Reserve, Bank of Japan, Bank of Canada and the Swiss National Bank. They launched weekly and then three-monthly auctions of dollars in September in a bid to make more cash available. But lowering the cost is a clear sign of the growing fear that the Eurozone crisis will spark a crippling double-dip. Earlier today, EU monetary chief Olli Rehn warned: "We are now entering the critical period of ten days to complete and conclude the crisis response of the European Union." France's central bank governor Christian Noyer added: "We are now looking at a true financial crisis." - The Sun.Yesterday, Standard & Poor’s cut its credit ratings for many of the world’s largest banks, including Citigroup, Goldman Sachs and Bank of America.
The move follows S&P’s shift, announced earlier this month, in the methods it uses for rating the banks. Citigroup, Goldman Sachs and Bank of America Corp. each had their long-term credit rating downgraded a single notch to A- from A. Similar cuts were applied to JPMorgan Chase (NYSE: JPM), Wells Fargo & Co. (NYSE: WFC) and Morgan Stanley (NYSE: MS). Dozens of other banks were also affected by S&P’s new criteria and many of the downgrades stemmed from the affected banks’ exposure to the European debt crisis. S&P cited weaker confidence in governments' ability to bail out struggling banks. - Fox Business.Meanwhile the Eurozone unemployment rate rose slightly to 10.3% in October, up from a revised 10.2% in September, with the number of people unemployed rising by 126,000 from September to 16.3 million. European Council President Herman Van Rompuy is warning of the growing seriousness of the crisis.
"The trouble has become systemic. We are witnessing a full-blown confidence crisis," he said in the run-up to the finance ministers' meeting. "Some may blame it on the irrationality of the market, but it's a fact and we need to confront it."... the latest figures from the European Central Bank (ECB) show that Eurozone banks are becoming increasingly nervous about lending to each other. Banks deposited 300bn euros with the ECB on Tuesday night, a rise of 100bn euros over the past two weeks. The increase "shows that parts of the Eurozone are close to a credit crunch, if not already in one," said the BBC's business editor Robert Peston. - BBC.If, that was not enough, reports are coming out of Europe and around the world that international companies are preparing contingency plans for a possible break-up of the Eurozone.
Concerned that Europe's political leaders are failing to control the spreading sovereign debt crisis, business executives say they feel compelled to protect their companies against a crash that can no longer be wished away. When German chancellor Angela Merkel and French president Nicolas Sarkozy raised the prospect of a Greek exit from the eurozone earlier this month, it marked the first time that senior European officials had dared to question the permanence of their 13-year-old experiment with monetary union. "We've started thinking what [a break-up] might look like," Andrew Morgan, president of Diageo Europe, said on Tuesday. "If you get some much bigger kind of ... change around the Euro, then we are into a different situation altogether. With countries coming out of the Euro, you've got massive devaluation that makes imported brands very, very expensive." Executives' concerns are emerging as Eurozone finance ministers weigh ever more radical options to tackle the sovereign debt crisis, including the possibility of funnelling European Central Bank loans to struggling countries via the International Monetary Fund. Car manufacturers, energy groups, consumer goods firms and other multinationals are taking care to minimise risks by placing cash reserves in safe investments and controlling non-essential expenditure. Siemens, the engineering group, has even established its own bank in order to deposit funds with the European Central Bank. - CNN.Financial analysts and economists are forecasting that even a strengthening of the United States growth would not be enough to withstand the severe damage from the thunderstorms in Europe, that the possibilities exists for a financial meltdown that would result in global havoc. China is already cutting the amount of money, banks need to hold in reserve, a desperate effort to free up those funds to stimulate the Chinese economy. The European Union is China's largest export market, so a Eurozone recession would cause a major slowdown in China, dragging down other Asian countries, as well. And, if you believe the following report from World Net Daily, then it becomes even more obvious that we are dealing with a problem on a extraordinary and monumental scale.
China's debt is about $36 trillion yuan (or $5.68 trillion USD). This number is astronomical considering that it is just a little more than one-third of the U.S. total debt, but the difference between the U.S. and China is that the U.S. national income per capita is $47,140, whereas China's national income per capita is $4,260 – not even one-tenth of the U.S. amount. To be on par with the U.S., China's total debt should be around $1.5 trillion USD, but it is three times that! Considering that the U.S. has an unsustainable debt position, China's is ridiculously out of control and puts that country in extreme danger of a financial collapse of epic proportions. China's officially published interest rate of 6.2 percent is fabricated. In reality China's inflation is 16 percent. This is eerily similar to the United States as well. The U.S. official inflation of around 3 percent is nowhere close to unofficial inflation estimates of 10-13 percent. What does this mean for China? This means that cost of living, wages and cost of goods sold in China will have to rise, and instead of exporting deflation, China will be exporting higher priced goods, thus affecting the rest of the world that purchases its goods. The world is on the verge of an inflationary cycle like we have never seen. Additionally, central banks around the globe are printing money on a massive scale to try to stimulate liquidity and spending (this is the definition of inflation!). Add to this a rising price structure in China, the major exporter to the world, and we could be preparing for a global hyperinflation.