11/30/2009

Time Bombs

From Richard Suttmeier, via Minyanville:

As I continue to dig deeper into the FDIC Quarterly Banking Profile, there are many ticking time bombs as many loan categories continue to deteriorate and no one knows the risks embedded in the $206.4 trillion in notional amount of derivative contracts. This is a new high for this category and is up 16.5% year over year. How many more $60 to $80 billion Dubai Bombs are there, and which US banks are exposed?

Canaries…

Posted: 9:46 am

3 Comments »

  1. The Russell again badly lagging the big-cap indices.

    Comment by BMB — 11/30/2009 @ 10:31 am

  2. I think someone asked the question earlier – how much longer can they paper over these things. For now, I guess they still have plenty. Or so it would seem.

    Comment by Randal — 11/30/2009 @ 10:54 am

  3. Randal, here’s the answer to when they ‘run out’ of paper:

    In short: Central banks will inflate when that’s to their advantage, and deflate when that’s to their advantage. They are currently attempting to inflate (at absolutely astounding rates) with some level of success (but not great success).

    I assert that this is temporary because you can only “inflate your balance sheet” as long as you can service your debt. The US Treasury can borrow infinite money as long as they pay 0% interest. However, after borrowing infinite money, as soon as the interest rate goes to 1% (which it eventually will), then your “monthly minimum payment” on your credit card becomes more money than your GDP that month. In that case, you’re screwed (you can’t pay your monthly minimum, and everything stops immediately — ala Iceland).

    More at the link – “A Primer on Central Bank Suicide”

    Comment by BMB — 12/1/2009 @ 9:53 am

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