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Tuesday, 8 April 2014
More Rumblings of Economic Dangers
We are nearer economic collapse than most people think, or in the case of governments, admits to. The Eurozone is done but still they cling on making noises about recovery and a return to financial normality. In the US, the lies of and the ever rising debt ceiling are combining to bring an economic disaster that will make the ‘credit crunch’ look like a kids party.
A Financial Typhoon Warning For Hong Kong
…Even HSBC’s house broker, Credit Suisse, appears alarmed at the storm clouds gathering over China and recently cut its recommendation on the bank’s shares from “buy” to “sell”, warning about the potential unwind of the dollar-renminbi “carry” trade.
Although neither HSBC nor Standard Chartered are likely to have lent much directly to mainland Chinese businesses the issue is more a question of whether they have lent to financial institutions that have lent to businesses that could be hit hard in the event of a severe downturn.
Victor Wang at Credit Suisse points out that it is almost impossible to distinguish “real” trade financing from “carry trade”, but estimates that the speculative trading could be worth at least $200bn (£120.5bn).
Hong Kong’s financial supervisor is widely seen as one of the world’s best macro prudential regulators, but Innes-Ker questions whether even the super-savvy Hong Kong Monetary Authority (HKMA) can save the territory from the crisis that could be unleashed if China’s credit bubble were to burst in an uncontrollable fashion.
“The biggest risk is that you’ve got a financial sector that is several times the size of the economy and you have to question whether the authority’s ability to step in is relatively constrained,” he says.
Others are more sanguine about the risks.
“The Chinese economy is so controlled they will be able to manage any issues. The idea that the authorities don’t see these problems is ridiculous. If something is happening it is because they tolerate it,” says one Hong-Kong based banker.
This all ties into the market warnings set out by Investors' Insights this morning.
With the world's biggest economies experiencing huge troubles, destiny's hand slams down hard outcomes. What if there is no higher ground? What if?
Platinum Wealth Advisors
April 8, 2014 - 7:00 am, EST
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