The Phaserl


Emerging markets selloff picks up, drags down Europe, U.S.

from Reuters:

A full-scale flight from emerging market assets accelerated on Friday, setting global shares on course for their worst week this year and driving investors to safe-haven assets including U.S. Treasuries, the yen and gold.

U.S. stocks slumped, with the benchmark S&P 500 falling as much as 1.5 percent. Concerns about slower growth in China, reduced support from U.S. monetary policy and political problems in Turkey, Argentina and Ukraine drove the selling.

The Turkish lira hit a record low. Argentina’s peso fell again after the country’s central bank abandoned its support of the currency.

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1 comment to Emerging markets selloff picks up, drags down Europe, U.S.

  • rich

    Friday, January 24, 2014
    Something Ominous May Be Coming At Us

    But now the financial system is wearing the Scarlet Letter of negative T-bill rates. The source that is lighting the fuse is emerging market problems, reflected in the currency devaluations by Argentina and Venezuela. But the currencies of other important emerging market economies have been plunging against the dollar as well. The cost of derivatives “insurance” on the sovereign debt of these countries has suddenly increased at a rate that would make Obamacare insurance providers blush.

    What the currency plunge/derivatives blow-out implies is that sovereign bond defaults are on the horizon. This is not just confined to “emerging” economic countries. Spain, Portugal, Italy and France are on the ropes financially and economically as well, despite the official European story-line that Europe is in “recovery.”

    The issue for the U.S. here is that the Too Big To Fail banks are the ones who have underwritten most of the credit insurance derivatives associated with the sovereign debt that may be at risk to default. They also hold a lot of it on their balance sheet. That’s why the Fed’s Excess Reserve accounts of the big banks have ballooned up in correlation with amount of QE that has been printed. The Fed has monetizing the derivatives exposure but that works only up to the point of a default event.

    In other words, a big nuclear derivatives may be coming at our system. Another interesting tidbit to think about. While the paper price of gold was being plunged using Comex futures by the Fed-backed big banks, a major portion of the gold held in the GLD Trust was removed. The common narrative scooped up like dog crap and tossed in our face by Wall Street analysts was that the decline of the gold in GLD was indication of a new bear market in gold.

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