Banking crisis set to trigger new credit crunch

Source

The global financial system is on the edge of a new credit crunch as the cost of insuring the bonds of banks across the world hits new highs, analysts have said.

Credit default swaps on lenders as far afield as China and Australia, countries that until recently seemed immune to the chaos, have doubled in the last two months to levels not seen since the financial crisis.

In Europe, French and Belgian government officials are due to meet on Monday to discuss the crisis enveloping Dexia as speculation mounts about a possible break-up of the Franco-Belgian lender.

Last week, the cost of insuring Dexia bonds hit an all-time high of 900 basis points, nearly double the level just two months ago, meaning the annual cost to insure €10m (£8.59m) of the bonds is £900,000.

"The money ran out in June and what you are seeing now is the beginning of a new credit crunch, except this time it will be truly global, not Western," said one senior London-based credit analyst.

Dexia, along with other European lenders, has been hard hit by the closure of the interbank lending markets and the continuing unwillingness of investors to buy the bonds of eurozone banks.

Cited only in part, the article follows with citing a couple of banks across China, Australia and New Zealand as having troubles with recent surges in their credit default swaps to double what they were only a month or two ago. The banking crisis is truly becoming global in scope and so a credit crunch of such magnitude this time round would prove disastrous to the global financial system. I submit governments and central banks will be near powerless to contain the next financial and banking meltdown.

Well, it is not as if people cannot say we haven't been telling them. It makes me annoyed and sad, like the with protests in NYC at the moment, that the "people" now just waking up to this, now that it is too obvious to ignore and stating facts that we were accused of being crazies for saying 24 months ago.

Well here we are. but I guess this is the nature of bubbles. you only benefit if you are in it from the beginning, and by the time the people get mad about it. it is about to burst.

Sooooo now the people are getting mad. its time for the rest of us to review our holdings.

Good luck all.

Good... They should all collapse.

The sooner the better.

reply to post by surrealist


UNITED WE STAND,DIVIDED THE BANKS FALL!

If these bonds are supposedly so stable and rated so highly, why do they need insured at all? I'm just saying with all this AAA and even AA paper floating around, they should be standing on there own merit.