The past week in equities can best be described as “barfworthy” at best. But it’s not the crash, the capitulation, the bald guy screaming they know nothing moment, hell it’s not even moving into a direction of dire consequences.
The big story this weekend is the rumors swirling around Bear Stearns and Lehman Brothers; that is the Bear and Lehman of Europe, Credit Suisse and Deutsche Bank. The warning signals are everywhere on FinTwit:
That looks bad.
That’s not reassuring.
That looks like I picked the wrong week to quit sniffing glue.
Tomorrow will be the death knell when someone looking like this guy on his 6 p.m. ET show says something like this about CS:
IF, and that’s a big IF, either or both Credit Suisse and/or Deutsche Bank goes down in the next few weeks, the implications are mind boggling as the US international investment banks will be at risk and it will spread faster than an alleged Chinese bat soup virus.
In fact tonight’s screaming story and headline from the Financial Times pretty much means bad things are about to happen:
Yet this isn’t the ongoing crash which began after Jackson Hole. It will exacerbate it and start a credit crisis, thus why this is happening tomorrow:
I know this hard for some to believe, but emergency discount window relief to the big banks can occur with Fed Funds rates rising along with an insane amount of overnight reverse repo activity.
So banks are parking their money there for safety instead of risking it on sovereign debt.
As a result the US Treasury market is taking a beating with price declining like a penny stock or cryptocurrency:
This continuing crash is going to create massive turmoil for all buyers of sovereign debt and will not end well no matter what people think of the US dollar’s reserve currency status. The world has seen what this has done to an established economy like the United Kingdom, but what about the emerging markets?
That’s right, pain, massive pain.
The next financial/credit crisis will be triggered by the start of massive monetary inflation, then central banks freaking out, then finally a collapse in the sovereign debt markets and restructuring of the global currency and trading system. Why would anyone believe that the UK, EU, or US will make good on their debts for more than one year when they refuse to do what is right and secure their fiat currencies back to a reasonable peg which for over two decades was almost inflation proof?
The US Federal Reserve refuses to acknowledge this risk and the European Central Bank is even further out in the wilderness. Thus when this crash hits the public their pensions, 401Ks, and other retirement instruments will not only have to deal with stagflation, but a lack of full faith and credit backed securities to guarantee their ability to maintain a decent standard of living.
Welcome back to work grandma and grandpa.
Just like 2008.
But this time, the inflation truly does make this crash different.