A Bank Run in London? Debt Rattle 2014
By: Raul I Meijer
Jan 25, 2014
It seems to come as a surprise to some, but when you think about it, it seems obvious that it only makes sense that if you try to hide a crisis behind huge amounts of money and credit leaked into global financial markets, those markets become addicted to credit injections faster than you can say taperworm.
There may be something to say for stimulus and Keynesianism in certain situations, but not in all cases, and certainly not in a world already drowning in piles of leveraged debt. There it merely serves to further distort economic systems, a distortion that makes it so difficult for people to see what is real and what is not, that it can and will safely be used by the financial industry to dump its part of the debtload on everyone else. It is then inevitable that cracks will appear, first among the weaker parties involved: Argentina, Greece, Venezuela.
And it would be a great idea for everybody to wonder why, as the BBC of all news services reported yesterday that HSBC has put restrictions on cash withdrawals. Don’t ever forget, please, that banks will always be very careful with actions like that, because before they know it they may be causing a bank run. There can be no doubt, therefore, that what’s happening at and to HSBC is something truly serious. Not having enough cash to pay people’s demands for their own money is not the picture a major bank – or any bank – wants projected out there in the world. You might also, especially if you live in the UK, want to ask yourself what this means for other British banks. They’re all very much interconnected, and if one imposes such measures, there’s no telling how far others may be behind.
Still, the biggest story yesterday was the 2.5% loss in many western European stock markets, a severe swing for that part of the globe, something you normally, in the “rich markets”, see only in the Nikkei (it lost 1.94% before Europe started plunging) . Something’s going on alright. Wall Street lost 2%, London 1.6%. The talk is all of emerging markets, but is that really the whole story? Does a looming Argentina default crush trans northern atlantic stocks by that much? There’s a lot of short covering going on, that much is clear, but whether that’s restricted to emerging stocks and bonds remains to be seen. This may continue into the new week. There’s only so much trust to go around, and trust today looks as leveraged as credit and asset “values” do: one big storm, or even one flapping butterfly wing, and it could all be gone. No more trust, no more credit, and no more value.