Friday, 7 January 2011

Waiting for the big one... or already heading for the hills?

Swiss bank vaults filling up ... with our deposits

The Swiss franc is the canary in the coal mine of Europe finance. Every time there is a crisis anywhere in Europe, money flows into Switzerland. It is the ultimate save haven. Having worked for a Swiss bank, I remember seeing this first-hand. A wall of money swept through the bank's coffers at the first sign of trouble.

However, according to friends who work here in the Swiss banking business, this time has been different. Today the deluge of European cash is reaching unprecedented proportions. They have never seen such sums before. They are all waiting for "the big one". The big one is not Portugal or even Spain, for the Swiss bankers the big one to go will be Italy.

When Berlusconi goes... so does the euro.

This is the logic of capitalism. When you pile more and more financial burdens on the population in order to bail out the banks and to guarantee banks, the chances of the population being able to pay all this back diminish. This increases the risk. As the risk increases, capital gets scared and leaves. There is a well-established pattern in this development.

First to leave is professional capital. This is the money in the stock market which goes. Then money leaves the bond market. The bond market shuts down. Then the big corporate deposits leave as financial directors of large companies decide that they are not being paid for the risk of holding assets in the crippled banking system. Ultimately, this fear permeates down the food chain and ultimately the ordinary depositors up sticks and head for the hills.

Can't put it clearer than that!

Wednesday, 5 January 2011

2011: Year of the bank run

2011: Year of the bank run?

"Facing facts like these, each morning when I wake up I have to wonder, 'Why is today not a good day for a wholesale run on the Irish banking system?'" asks Scott Minerd, chief investment officer at Guggenheim Partners. "And if there is a wholesale run on the Irish banking system, then what stops the same scenario from cascading into Portugal, Greece, Italy, and most importantly, Spain?"

Happy New Year!

The American Dream

Great new animated film - watch and get informed!