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URGENT! Banks and investment houses in Europe are warning of imminent financial meltdown in the U.S. and are pulling away from New York financial markets.
by Patrick Wood, Editor
July 3, 2008
You won't see this repeated in U.S. media outlets, but Europe is running scared of an impending financial disaster.
Barclays
Capital, the Royal Bank of Scotland and Fortis are pulling away from
the U.S. financial markets. The withdrawal of funds from New York
institutions has not been reported, but amounts to at least a mini-run
on the banks involved, similar to what happened to Bear Stearns in
March; the run may be expanding.
These major financial institutions in Europe are predicting imminent, major economic and market meltdowns.
Fortis expects a complete collapse of the US financial markets within
a few days to weeks. That explains, according to Fortis, the series of
interventions of last Thursday to retrieve € 8 billion.
“We have been saved just in time. The situation in the US is much worse
than we thought”, says Fortis chairman Maurice Lippens. Fortis expects
bankruptcies amongst 6000 American banks which have a small coverage
currently. But also Citigroup, General Motors, there is starting a
complete meltdown in the US" [“Fortis made cash call in face of expected U.S. 'meltdown',” CNBC News [on-line], www.cnbc.com/id/25451427/for/cnbc, June 30, 2008.]
At the same time, the Royal Bank of Scotland headlined warnings of a global crash:
The Royal Bank of Scotland has advised clients to brace for a
full-fledged crash in global stock and credit markets over the next
three months as inflation paralyses the major central banks.
“A very nasty period is soon to be upon us - be prepared,” said Bob Janjuah, the bank’s credit strategist.
A report by the bank’s research team warns that the S&P 500 index
of Wall Street equities is likely to fall by more than 300 points to
around 1050 by September as “all the chickens come home to roost” from
the excesses of the global boom, with contagion spreading across Europe
and emerging markets.
“The Fed is in panic mode. The massive credibility chasms down which
the Fed and maybe even the ECB will plummet when they fail to hike
rates in the face of higher inflation will combine to give us a big
sell-off in risky assets,” he said. [“RBS issues global stock and credit crash alert,” Telegraph, on-line edition, June 19, 2008.]
Lastly, Barclays Capital warned clients to "batten down the hatches for a worldwide financial storm":
"Barclays Capital has advised clients to batten down the hatches for a
worldwide financial storm, warning that the US Federal Reserve has
allowed the inflation genie out of the bottle and let its credibility
fall “below zero”. [“Barclays warns of a financial storm as Federal Reserve's credibility crumbles,” Telegraph, on-line edition, June 28, 2008.]
On July 2, U.S. Treasury Secretary Henry Paulson's European speech was covered live on CSPAN. He gave considerable lip-service to what would happen if a number of U.S. banks were to fail, including even a major U.S. bank. No bank names were mentioned, but the fact that he brought it up indicates that the Europeans are very concerned about it.
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