The GLOBAL Debt crisis …

May 18, 2011
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Investors Lament: “In market terms – He who hesitates … falls on their sword …

The GLOBAL DEBT crisis … revealed and about to become more exposed …

Several DEBT stories have began to appeared in the many News feeds I read every day over the last week. The level of concern spoken of in these stories about Global DEBT – has continued to become more mainstream headline over the last six months or so. The text of two such stories read today are pasted in full below: [they can be read online via the links provided.]


Moody’s downgrades ANZ, Commonwealth Bank, Westpac, NAB

| Geoffrey Rogow | From: Dow Jones Newswires | May 18, 2011 4:08PM |

In a blow to the Australian banking industry, ratings firm Moody’s Investors Service downgraded the debt ratings of the country’s four largest banks, citing their dependence on global lending markets.

A downgrade to Aa2 from their previous investment grade rating of Aa1 – one notch below Moody’s top rating – will likely increase their costs even as worries grow that Australia’s rising interest rates will crimp profitability.

The four banks – ANZ, Commonwealth Bank of Australia, Westpac and National Australia Bank – dominate lending in Australia. The local industry came through the global financial crisis largely unscathed, and a ratings downgrade likely would leave them still well within investment-grade territory.

The move brings Moody’s ratings in line with the other two major ratings agencies, Standard & Poor’s and Fitch, and follows a review of their ratings that began in February.

Earlier this year, Moody’s said its review would focus on the Australian industry’s dependence on the global wholesale lending market, in which big banks lend to each other.

The markets can tighten during times of uncertainty, such as during worries about finances of European Union nations.

Shares of all four banks have declined since the Moody’s decision today.

There is no way to sugar-coat the comments in this story – ever since the GFC – this increased interest rate cost has been coming and it won’t be the last downgrade – or increased in wholesale funding of existing DEBT.

As quickly as everyday workers are trying to pay down their personal debt – Banks are finding new ways to try and maintain asset levels – Governments are predominately the new borrowers – the interest cost on their debt levels are more than what can be serviced by the Governments with their existing forward estimates and commitments – thus requiring the issue of new debt. The USA are the leader of this pack. There is a website out there that illustrates this in a no-holds barred way. It’s called the US Debt clock and can be viewed on-line here. A snapshot taken 18th May appears below …

None of the updating numbers appear in this snapshot – but if you use the link provided above – every number is updating continuously. Whilst you are there – check out the links at the bottom of the page to get a handle on some other relative information …

Australian Banks have relied on wholesale funding for well over a decade – maybe two – and this makes them very vulnerable to International pressures and risk weighting’s. Another story put out today by HSBC – suggested the A$ was very exposed to a sharp fall if International assessment of Risk weighting’s in commodities was to suddenly become a concern – this would be a big help to the Australian exporters – but the volatility is something markets and investors don’t want. That linked story is presented below –

A$ CoinsAustralian dollar susceptible to ‘vicious’ decline, warns HSBC

| Eva Szalay | From: Dow Jones Newswires | May 18, 2011 6:49AM |

THE Australian dollar has overtaken the Canadian dollar as the major currency most closely linked to broadly buoyant investor sentiment, leaving it overvalued and susceptible to a “vicious” decline, HSBC said in a research note.

The bank said the currency has been supported by a generally upbeat view among investors on the prospects for global economic recovery, drawing on the country’s large commodities exports.

Last week’s abrupt sell-off in commodity markets has had a limited impact on the currency, but the high correlation between risk sentiment and the Australian dollar gives cause for concern, HSBC added.

“We believe the valuation of the Australian dollar is extreme and any move to a risk-off scenario could see a vicious unwind in the (currency),” the bank said in a note to clients.

The bank said that on the other side of the spectrum, the Swiss franc and the Japanese yen have usurped the US dollar in recent weeks as the currency most likely to benefit from a decreased inclination to take chances.

Because the Swiss and Japanese currencies benefit most from soured sentiment and the Australian currency is most responsive to a positive shift, the bank recommends selling the Australian dollar against the franc and the Japanese units — and not against the US dollar –when that appetite wanes.

According to the bank’s analysis, the New Zealand dollar has become less sensitive, however, after two strong earthquakes disrupted the economy and caused the currency to be less driven by market sentiment than by its own idiosyncratic forces.

Sterling, meanwhile, is also less sensitive to the market’s moods, making it a better way to express country-specific fundamental views than other major currencies.

“This means we need to pay more attention to UK data, and its potential impact on the pound, than we do with similar data for other currencies,” HSBC concluded.

At 6.19am AEST, the Australian dollar was trading at $US1.0623, up from $US1.0595 at the close of Sydney trading yesterday.

Other daily updates and news headlines include commentary about IMF upheaval over a sex-scandalEuropean agreement to Portugal bailoutGreece buckling under their austerity measures to meet their Debt guarantees – Nth African civil unrest escalating in Nations close to Saudi Arabia … all providing reasons for investors to be wary when looking for somewhere to protect capital value.

G20 Logo 2011The G20 are meeting regularly and mainstream media hardly report the outcome of their meetings – this in itself is reason to ask what is actually being done to reign in Global Government Debt escalation – the latest G20 communique – linked here and held on Apr 14-15th – is a three page summary with nothing of real context – or content relating to the reality of global debt structures.

The most obvious question the G20 should be asking and reporting on is – why does America’s debt crisis appear to be of no real concern at the G20 level – or at least being exposed as a topic of concern – and the follow up is – why is it being played down in mainstream media cycles? The USA debt level is at crisis levels and as reported by the EYE-BALL GURU in previous blog’s – nobody seems to give a damn …

The Australian Treasurer asked to increase the debt ceiling to $250 billion during the 2011 budget week from $200 billion – President Obama wants to lift the US debt ceiling to US$21 trillion from its current level of US$14.3 trillion. This is indicating that discussions at the highest levels regarding sovereign debt levels – and is confirmation that nobody expects them to reduce any time soon.

That then translates to Governments being aggressive competitors with Business competing for borrowings. 

Banks who were bailed out by Governments during the GFC – will soon be dictating terms to Governments over their own debt funding – this all the while when these same Banks have their own existing Credit risk exposures – because they have not build or recovered core capital levels to cover the GFC write downs …

This is such a looming tragedy – Governments make taxpayer’s responsible for their future and escalating sovereign debt levels – and in two years – what value will a Government guarantee be worth – or a Debt Credit rating assessment when the USA credit ratings are further downgraded –

Australian Banks are very vulnerable – there is capital protection happening on their asset structures right now.  Loan arrears are being manipulated with extended periods being granted to ‘past due’ and ‘90 days overdue debt’ – normal levels where provisioning begins.

Credit Collection agencies are being told to keep bad debts on their books … a sure sign that Banks and Credit lenders do not want the ‘bad dept’ writedowns impacting on their capital positions …

There is much happening that is not being reported – nor being investigated. Every Home Loan issued where debt level was 90% or more over the last 5 or so years – now has a higher debt level that the home asset is worth … if Banks had to do revaluations on the properties they are holding securities for – their capital position would be completely compromised and render them close to insolvent – any belief that Australian Banks are truly solvent to the levels they are reporting is a complete fabrication …

A$ Debt ClockThe Australian DEBT Clock – linked here and with a snapshot appearing at left – shows each Australian owes $7k+ – and a net level of Government debt over $64 billion – Australia’s Credit Card debt is also well over $50 billion as the full page shows …

For 30 years Australians and the rest of the world have become material spenders and borrowers – and have largely relied on superannuation as their savings.

That savings nest egg pool is the investment money chasing the world looking for a safe haven and a rate of return – most of it is index fund invested and is vulnerable on so many levels. During the GFC the value of Global Equity markets fell 30-50% depending on where your funds were invested – they have recovered 60-80% – again depending of where your funds were invested – with the addition of the three years of payroll contributions less the Management fees since – the value of indivudual funds are still short of where it was pre-GFC – that further concludes contributions have not added real value to pre GRC fund levels .

Debt was responsible for the GFC – and nothing real is being done to curb the growth of sovereign debt levels – printing money has been the answer and the US$ value of Gold and Silver prices have responded in kind.

There is a crisis at every corner of Global economic management – across every demographic – across every Nation – and the G20 act as if all is normal and progressing toward recovery. One small crack will be all that it takes for this already crumbling ‘house of cards’ to topple – it is not a matter of if – but when.



  1. yoda
    May 19, 2011 at 9:44 am

    I believe your story basically talks your book. Your book in this case being your Armageddon theory of doom gloom and total destruction. Its the sort of crap I would expect from the media!
    Firstly the Australian Banking system is probably one of the soundest in the world and its weakness is not against wholesale funding. I can accept an argument over realiance on homelending and the subjectiveness of bubble theories. Employment and supply are huge arguments against this in the near term, but again looking forward there is a potential weakness.
    Now back to wholesale funding and the popular media. You Eye Ball have been away too long, this market is entirely different to 20 years ago, when this writer could tell even the Reserve bank did not understand the classification.
    I am not going to go unto the issues and benefits of wholesale versus retail other than to say it is very grey now to the sticky-ness and cheapness of retail wholesale. Australia now is the largest net saver in the world. This dramatic turn around has taken place since the GFC where Australian banks were magnificantly able recapitalise themselves in virtually no time, the sophistication demonstrated by our retail investors is quiet remarkable. This is expediated by our superannuation system which is a savings monolithe when required.
    The bigger question for international markets are, will smaller companies have the ability to raise capital if the Australian banks have to further tap, this virtually untapped market.
    Now everyone take a breath and understand that the ratings changes will have little to do with regard to effects on cost of funds in the interim.
    The Reserve bank in terms of increasing interest rates (an absurdity in my opinion)
    underpin this cost of funds effect. Finally if the Australian dollar crashes it will be the best thing for every Australian as long as the market is not panic driven. It will provide the greatest possible benefit, because looked at logically for all the people who are doing it tough now, it will change the whole dynamic.
    The reason is for the same points you make about Australia losing its benefits because of the high dollar, a compensatory situation would arise as the Commodity markets taper off, the Aussie dollar will balance out and bring much renewed relief to what is left of the manufacturing industry that has been essentially ignored by successive governments.
    Yes we live in a very imperfect world and you Eye Ball and our destructive media continue to feed the falsities that are so destructive in our everyday lives.
    Oh for a Benevolent Dictator !!!
    Finally, because of your knowledge of Financial markets I would expect you to be able to explain these things to your readers, you choose not to because it suits your cause, which I again emphasise is the same as the media’s ” to create the best story”.

  2. EYE-BALL Guru
    May 19, 2011 at 10:20 am

    Comeon – your comment re Australians are the biggest savers at the moment is a play with words – say it like they are paying down debt – and it sounds more like the truth … and why are they paying down debt – well that behoves more reasoning at another time … you’re all over the place with your critiquing … RBA – Media – Australian Banking Syatem – Dictators – Commodity Markets – all the blog was trying to say was that global debt has become the burden that can no longer be carried without buckling the infrastructure of the financial system at large …
    Unapprove | Reply | Quick Edit | Edit | History | Spam | Trash

  3. yoda
    May 19, 2011 at 11:08 am

    Read it again dummy and you may understand it. Then check the savings ratio in the Australian economy and you will realise what I am saying is true.
    Now get your head out of your ivory tower arse.

  4. oztruth1
    May 20, 2011 at 9:17 am

    @yoda, there is no recovery, and it is indeed financial armegeddon. No country can get out of debt, so all this nonsense about ‘surplus by 2012/13’ is baloney. What we are going to see in the next 5 years will shock you and every financial ‘expert’ going around. QE3 is right on time, and ready to devalue the $US further. Sell all paper assets and real estate (rent) and buy metal (gold/silver). At some stage you will anyway. Much cheaper now.

  5. yoda
    May 20, 2011 at 9:55 am

    Oztruth, who the f_ck are you!
    Do you understand the debate? Personally I am comfortable with metals as well and you may be right about a financial Armageddon. BUT humanity has a way of handling issues and crisis. Tell me what you think will happen and how you plan to use your metals,”in a knapsack on the road to hell”?

    You are the sort of person that would have bought silver at $50 and wonders why its back there now, take a tip wait for $30 and buy carefully, do you understand how the currency works?

    Now back to what you commented on and the purpose of the blog, the blog was about the Australian banking system, wholesale funding and the savings ratio. You are so far out of your depth you would not know your arsehole from an earache.

    The purpose of my points were that the writer was talking his book using research that he interpreted. I illustrated how he was wrong in arriving at that by using other research.

    If you want to play with the big boys, get out of your nappy first.

  6. May 20, 2011 at 10:10 am

    Site Admin here YODA –

    Your comments have been posted uncensored … but please be a little less confronting … use of ‘asshole’ or your attempt to spell with ‘arsehole’ is crossing the line …

    Just a friendly piece of advice ….

    Site Admin …

  7. oztruth1
    May 20, 2011 at 10:38 am

    Calm down. And it doesn’t matter who I am. After-all I don’t give a shit who you are. Yeh I was a bit off topic. Perhaps I like disagreeing as much as you. I didn’t buy any over $40 and I know why its where it is now. I know you’re waiting for this so I’ll end it there. Have a nice day.

  8. May 20, 2011 at 10:42 am

    well said Ozthruth – the high ground is always the stinker for the other side …

    Site admin …

  9. yoda
    May 20, 2011 at 10:49 am

    You sanctimonius sh_t, you threw enough insults learn to take a few back!

  10. yoda
    May 20, 2011 at 10:59 am

    Me calm down, I am not advocating financial Armageddon, you are.
    Explain why you hold these views and give us your thoughts as to the form Armegeddon will take and how you plan to use your precious metals. What will the landscape be, will there be a war? where do you keep your metals, ETF’s , Banks, safe Custody, I know it will be under the bed, Right!

    Once you have established all these things, you obviously believe them, explain how the public should/would behave in the circumstances.

    I will be delighted to hear your expanding thinking, rather than just be an Oddball, like Eyeball who just preaches “doom and gloom” because life has given him a wrong turn.

  11. yoda
    May 20, 2011 at 11:01 am

    spoken like a true “oddball” get off the fence and starting making sense “stinker for the other side” how old are you Oddball 10?

  12. yoda
    May 20, 2011 at 11:04 am

    I would like my article from the Reserbe bank re 10% increase in savings ratio in this section as well.
    Its an important part of the debate.

  13. May 20, 2011 at 11:08 am

    You’re losin’ it Yoda – time to take a happy pill – a daytime snap – or a ‘redbull’ …

    Please remember that this site tries to encourage debate – hostility and angst can be maintained without getting down and dirty – personal offrontary is permitted as long as it is witty and cryptic – you’re brawling at the moment YODA and looks like you been king-hit over something …

  14. yoda
    May 20, 2011 at 11:32 am

    Oddball, unless you have anything positive to say. Just sit back and shut up.
    For Christ’s sake do you want to get a bit of “spirit” in your debates or sit there like ” a self serious prick” baffling everyone with your yesterday thoughts. Your talking about getting down and dirty and you have ratbags like, harry hounddog, snooppoop and a few other guys who would not pass a libel test in Tenessee.
    Why don’t you show your not a sexist and get some womens opinions on your blogs?

  15. Bug-A-Lugs
    May 20, 2011 at 11:39 am

    Hey Yoda – I still love ya … the boys seem to be picking on ya. I’m a shiela and more than most men can handle. I love balding men and you sound cutish. You want to go for a spin. Little angry men do it for me.

    get in touch.

  16. Jerry
    May 20, 2011 at 11:42 am

    This is a hot site. Love the to and fro. But too scared to put my 2 bob’s worth. I don’t like public humiliation and Yoda seems to be someone who takes no prisoners. Keep up the good work – its a great read.


  17. I am woman
    May 20, 2011 at 12:33 pm

    I have commented on your site before,and I agree with Yoda that more woman’s input is required (mind you one of the few things that I would agree with Yoda on).
    Unfortunately much of your comment is on economics, football and politics. all three of which I cannot get to excited about. Liked to hear from Bug a Lugs, I can tell her that i am cute’r than an angry balding little man.
    If she wants to bring up some womens issues, I will be happy to join in.
    …. content deleted … …. Site Admin – the content that appeared as …. crossed out … has been deleted and was not acceptable content. Sorry … but this comments section must stay on topic and be relative …
    Over to you Bug a Lugs.

  18. oztruth1
    May 20, 2011 at 3:54 pm

    @Yoda, ok I will expand my thoughts.

    I think the $US is dead, and it has been allowed to die. A planned collapse to usher in a new, gold backed, worldwide currency (part of the New World Order). Orchestrated by Goldman Sachs and it’s former employees, who work at the US Treasury. Within the next five years, and probably in the next two, the $US will collapse, waterfall style. All confidence lost. QE1,2,3,4?,5? the destroyers.

    I don’t think I need to explain what this would do to the US economy. And considering the US is 1/5 of the world economy, what impact it will have on the rest of the world. As for the people… judging what the mindless masses do when there is a major retail sale (trampling everyone in front to get discounted goods), I don’t think they will have a problem looting, and even killing to survive. There is a large contingent of people in the US growing their own food, buying guns, ammunition, and precious metals in anticipation of this event.

    As for wars.. you bet, World War 3. Orchestrated by the US and Israel. Starting in Pakistan, moving to Syria, Jordan, Iran and other middle-eastern, north African and European countries. Possibly ending with China. I know this is grim, and indeed speculation, but I don’t think it’s out of the question. And how should we behave? We definately shouldn’t support war, and this includes letting our children join the armed forces.

    As for my metal..I keep it at a farm in rural QLD, as far from a bank as possible! I don’t think collapse, depressions, or wars can be avoided this time around. They can announce QE4 or 5 but it will just delay the enevitable. ALL fiat based money systems have collapsed, usually in a 40 year time period (1971 Nixon took the US off the gold standard)

    Again, some of this is speculation, but its my view. Take from it what you will.

    Since you are into your metals, here is a link to a conference call between Eric Sprott, David Morgan, Bill Murphy and some other silver ‘big guns’, talking about the obviously manipulated take down of silver over the past 2 weeks. There are 4 parts.


  19. May 20, 2011 at 4:13 pm

    Again – met the adversory on the battle groud – debate is healthy – exchanges of words never directly killed anybody … indirectly millions …

    well said Oztruth …

  20. yoda
    May 20, 2011 at 4:35 pm

    OK Oztruth, you have my attention and my respect. I am busy at work and i will give some more thought to what your saying. I understand and know the silver rhetoric and whilst you are pretty right wing, I think your position is sound. I would also be stocking up on food,weapons,water, solar panels, diesel generators,seeds,organic growing tanks,anti-biotics, sulpher,medicines,and rechargeable batteries.
    If you have children, make sure you have their tonsils,adnoids and appendixs out.
    Make sure your farm has at least two exits and try and stay high, nortwithstanding proximity of water.
    Look at things you can trade with,your metals may not be as valuable as you think, do not let anyone know what you have! just say your struggling with whay your got.
    Establish a storage area with concrete walls and a secret exit and an airway.

    Do not tell your wife your children where all your hollow logs are. They could be tortured to tell someone where they are. Learn to use the force and pray hard.

  21. May 20, 2011 at 4:47 pm

    Left – right – right – right – right – right … bloody moron ..

    … anybody who follows Parramatta deserve t be put out on the – right – right – right – right – right field ….

  22. May 20, 2011 at 4:48 pm

    Thanks Jerry – don’t worry about the Yoda – he goes a bit wonky when he misses his mid-day nap …

  23. May 20, 2011 at 4:50 pm

    Thanks Bug-a-lugs … Please don’t get fresh with the YODA – a door-stop and an ass-bumper he might be – but when someone gives him encouragemnet – he needs a leash …

  24. Michaela Rodak
    May 27, 2011 at 1:19 am

    Good site! I really love how it is simple on my eyes and the data are well written.I am wondering how I might be notified when a new post has been made.I’ve subscribed to your feed which must do the trick! Have a great day!

  25. huawei ascend
    June 1, 2011 at 6:03 am

    I do agree with all of the ideas you’ve presented in your post.They are very convincing and will definitely work.Still, the posts are too short for starters.Could you please extend them a bit from next time? Thanks for the post

  26. April 8, 2012 at 6:48 am

    The GLOBAL Debt crisis … The EYE-BALL Opinion is an impressive share. Many thanks for this article.

  27. February 5, 2013 at 2:57 pm

    A motivating discussion is definitely worth comment.

    There’s no doubt that that you need to publish more on this issue, it may not be a taboo subject but usually people don’t talk about these
    subjects. To the next! All the best!!

  1. May 19, 2011 at 5:02 pm
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