Scripting News: Switzerland may go bankrupt (Scripting News)
AlanY
· 1 year ago
Iceland's government was in an equally sound position. The problem isn't public spending. It's excessive leverage of the financial sector and the relative size of the financial sector relative to the economy. Credit Suisse is levered by more than 40 times and UBS is levered by more than 64 times. To put that in perspective, Bear Stearns and Lehman Bros were only levered 32-35x. The danger of either Credit Suisse or UBS going down is thus very significant. Both banks combined represent a larger share of Swiss GDP than the Icelandic banks.
Like Iceland, if this happens, the problem will be entirely of private making (though obviously one needs to ask about the wisdom of letting banks be unregulated to the point where they become levered up like hedge funds).
There's no good solution. Personally if I were the president I'd set up an international committee to receive derivative contracts, collect them from all the largest players, and then run a graph-theoretic algorithm to net as many of them out as possible. (Un-netted contracts go back to the holders.) If the banks keep failing one-by-one, you just get a domino effect of these things exploding.
Christoph Jaggi
· 1 year ago
Bear Stearns and Lehman Bros were investment banks, whereas UBS and CS are universal banks. The leverage numbers thus are not comparable and cannot serve as a valid indicator.
Christoph Jaggi
· 1 year ago
I am sorry to dissapoint you, Dave, but Switzerland (the country) is actually making a profit. Also nearly all key industries are doing just fine and the unemployment rate is at 2.5% This makes it highly unlikely that Switzerland will go bankrupt any time soon. Island might have a better choice...
A couple of years back, Switzerland's population voted on what is known as "Schuldenbremse" (restriction for the federal government to make additional debt), which forces government and parliament to limit expenses to match revenues.
The only time Switzerland is mentioned - among other countries - is in the speculation "who might be vulnerable" at the end. But have a close look at the requirements that would need to be fulfilled. It is pure specualtion on which characteristics are needed for a country in order to have a certain probability to be subject to the same problems as Iceland. The low number of four characteristics used gives a good idea on the amount of speculation exercised.
You cannot really compare Iceland with Switzerland, the two countries, their economies, their administration and their banks are completely different. More different than apples and oranges. And thus the probability of Switzerland becoming the next Iceland is incredibily low, actually pretty unrealistic.
Overall, it is pure specualtion based on fabricated "facts". There are too many "ifs" in there: 1) UBS would need to fail, 2) UBS would need to loose all its assets and 3) Switzerland would have to replace all of UBS's assets. And on top of that Switzerland would need to immediately sevenfold the inflation rate, etc. The probability is about the same as the US car makers getting bailed out today with instant availability of 25 billion dollars with no strings attached.
UBS publishes its numbers on its website: www.ubs.com. The author of the article on Portfolio.com somehow did not figure that out yet, so he missed the changes in UBS’s numbers between 31.12.2007 and today.
There is an interesting twist to this whole reporting: The UK competes with Switzerland as a banking center and UK banks compete with Swiss banks. Most of the articles were published by UK organizations (FT and Economist) and UK-centric writers (Felix Salmon and John Quiggin). Do they want to deviate the attention away from the UK banks?
Granted, the headlines of the articles were attention-grabbing. The articles, though, are pure fiction. Once could also call it bs.
Christoph Jaggi
· 1 year ago
Thanks for the pointer, which lead me to another pointer, which actually serves as source and foundation for the article you referenced.
The only time Switzerland is mentioned - among other countries - is in the speculation "who might be vulnerable" at the end. But have a close look at the requirements that would need to be fulfilled. It is pure specualtion on which characteristics are needed for a country in order to have a certain probability to be subject to the same problems as Iceland. The low number of four characteristics used gives a good idea on the amount of speculation exercised.
You cannot really compare Iceland with Switzerland, the two countries, their economies, their administration and their banks are completely different. More different than apples and oranges. And thus the probability of Switzerland becoming the next Iceland is incredibily low, actually pretty unrealistic.
Overall, it is pure specualtion based on fabricated "facts". There are too many "ifs" in there: 1) UBS would need to fail, 2) UBS would need to loose all its assets and 3) Switzerland would have to replace all of UBS's assets. And on top of that Switzerland would need to immediately sevenfold the inflation rate, etc. The probability is about the same as the US car makers getting bailed out today with instant availability of 25 billion dollars with no strings attached.
UBS publishes its numbers on its website: www.ubs.com. The author of the article on Portfolio.com somehow did not figure that out yet, so he missed the changes in UBS’s numbers between 31.12.2007 and today.
There is an interesting twist to this whole reporting: The UK competes with Switzerland as a banking center and UK banks compete with Swiss banks. Most of the articles were published by UK organizations (FT and Economist) and UK-centric writers (Felix Salmon and John Quiggin). Do they want to deviate the attention away from the UK banks?
Granted, the headlines of the articles were attention-grabbing. The articles, though, are pure fiction. Once could also call it bs.
Christoph Jaggi
· 1 year ago
The article is poorly researched. It is based on three key assumptions: (1) At least one of the two big Swiss banks will go belly up, (2) The funds needed for a bail out are higher than 3 trillion USD and (3) the Swiss government would need to come up with those 3 billion USD. Now, let's have a look at the probability of those assumptions: (1) Both large Swiss banks are properly financed and have a good BIS capital ratio, so that the probaility of one of them going belly up is very low. (2) None of the large Swiss banks has uncovered obligations that come anywhere close to even 100 billion USD, they actually have no uncovered obligations today. Hence even the probability of funds needed for an unlikely bail out to exceed 100 billion USD is close to zero. (3) The probability of the Swiss government needing to come up with 3 trillion USD to bail out the two large Swiss banks is close to zero.
There are simplily no facts to back up the claim that Switzerland might go bankrupt.
Using the same kind of specualtion, the US could also go bankrupt if they need to bail out the financial and auto industry and come up with 150 trillion USD. It is just the probability which is close to zero.
Bessi
· 1 year ago
Well, the Icelandic goverment was also making profit until a month ago, 'negative' unemployment rates (i.e. we had to import labour) and key industries doing fine. Iceland was indeed the fifth riches country in the world.
However that doesn't help if the profit the goverment has been making is in a currency that becomes worthless when an overgrown banking system failes. It does also not help if the goverment is forced (by other countries) to take on some of the foreign dept the overgrown banks had. Then you quickly go from beeing one of the richest countries to beeing one of the poorest.
So don't feel to safe :-/
Christoph Jaggi
· 1 year ago
Iceland and Switzerland are as comparable as apples and oranges. Switzerland's banking system is sound. A look at the BIS capital ratios gives a clear indication. The two largest banks did have to make some substantial write-offs due to investment banking activities in the US and the UK, but did scale back US and UK investment banking substantially over the last 18 months and recapitalized.
thoughtful1
· 1 year ago
I have Swiss friends who say the world will never forgive America for what the Bushies have done. It is far from over. Hubris has its consequences.
Joshua Allen
· 1 year ago
The risk is real, and no salvation in sight for several years. And the rest of the world has every right to be bitter. This was primarily caused by the U.S., and the U.S. will feel less pain than any other nation, because of the reserve currency status of the dollar. In fact, most of the money being "deleveraged" from swiss banks is flowing into dollar-denominated t-bills.
As for the adjustment to way of life; it had to happen. I just hope people learn the right lessons from this. If people learn that we're all vulnerable and interdependent, it will be a good thing overall.
It sucks that this is all happening right at the moment that newspapers are extinct.
We're about to find out what happens when whole populations stick their heads into the boob tube and allow corporate talking heads to determine the discourse of entire nations. This crash is engineered, was predicted, and very few listened. Welcome to the New World Order. What we are witnessing is Financial Terrorism, as prerequisite to planned (global) social reengineering.
Given that most of the readership of this blog belongs to the geek (as in thinking) set, you are requested to stop and think as to just why a company with massive cash reserves (citi) needs to be bailed out because its stock price is sinking. And let us not forget, volume is heavy so somebody is buying all these assets for pennies on the dollar. (hint: 401Ks and pensions and bit players get wiped out.)
Also note that our dear-leader-elect has just named yet another CFR alum and "Federal" Reserve lackey to be the future Sec, of Treasury. Now that is change you can "believe" in ...
If you pay attention to the content, not form, of ALL governments (including the so called axis of evil) you will note the uncanny similarity across the board, with emphasis on highly intrusive governments backed by massive police forces. This is just as true for United States of America as it is for the Islamic Republic of Iran. They are all the same. In every single case, a variety of "threats" (form) are used to justify social reengineering manifested as surveillance societies with a total disregard for the rule of the law by entrenched elite. They are all the same.
Technologists have a heavy responsibility in this era given that we are enablers of the electronic surveillance societies. When we remain silent (at best) and/or lend our creative prowess to the elites (at worst) we are betraying our responsibility to our fellow human beings who do not (and will not) understand the implications of the deployment of new technologies into the society at large:
I understand that there is a mass hysteria about the state of the economy and it is prompting lots of people not to let go of any money and that activity it is causing a negative ripple effect on many industries in many countries.
To those that were not invested or lost jobs its been a bonus with large reductions in gas and home heating oil and consumer price drops.
What I don't understand is why people day after day seem to enjoy reading the latest words of doom and gloom about the economy. Why are the articles about more financial tragedies more popular that the articles about strategies that did work?
Bryan "bytehead" Price
· 1 year ago
I think it has to do with the fact that the outgoing tide is sinking the yachts faster than it's sinking the fishing boats. It's not just that the stock market is sinking, but the hedge funds that are supposed to work the opposite way of the stock market are also sinking. And it seems that the only strategies that are currently working are shorts, particularly naked shorts. And the SEC is trying to stop those dead in their tracks.
Bryan "bytehead" Price
· 1 year ago
That's sad.
I enjoyed my two weeks in Basil, Switzerland last year. Fountains all over the place, even for your pets. Friendly people, a great public transport system. At least their currency is still somewhat in line now with what it was then.
I spent a month in South Africa July. The Rand is now 70% of what it was four months ago!
As far as Citibank, we're already showing signs of bailout fatigue as evidenced by the auto bail out talks. I myself wouldn't be cynical if it weren't for Hank Paulson pulling a switcheroo with the TARP program. Then again, I felt that he needed to get the boot to start with. Along with Bernanke We still have the foxes guarding the hen house, and I think history will bare that out in the end.
What does the world look like in the future? I'm afraid my crystal ball is cracked way to much to even get a glimpse.
All Comments
Like Iceland, if this happens, the problem will be entirely of private making (though obviously one needs to ask about the wisdom of letting banks be unregulated to the point where they become levered up like hedge funds).
There's no good solution. Personally if I were the president I'd set up an international committee to receive derivative contracts, collect them from all the largest players, and then run a graph-theoretic algorithm to net as many of them out as possible. (Un-netted contracts go back to the holders.) If the banks keep failing one-by-one, you just get a domino effect of these things exploding.
A couple of years back, Switzerland's population voted on what is known as "Schuldenbremse" (restriction for the federal government to make additional debt), which forces government and parliament to limit expenses to match revenues.
Detailed information can be found at www.admin.ch
http://crookedtimber.org/2008/11/21/end-of-the-...
http://www.portfolio.com/views/blogs/market-mov...
And both articles are somewhat based on pure speculation, published here:
http://voxeu.org/index.php?q=node/2498
The only time Switzerland is mentioned - among other countries - is in the speculation "who might be vulnerable" at the end. But have a close look at the requirements that would need to be fulfilled. It is pure specualtion on which characteristics are needed for a country in order to have a certain probability to be subject to the same problems as Iceland. The low number of four characteristics used gives a good idea on the amount of speculation exercised.
http://voxeu.org/index.php?q=node/2549
A description of Iceland's situation and how it got there.
You cannot really compare Iceland with Switzerland, the two countries, their economies, their administration and their banks are completely different. More different than apples and oranges. And thus the probability of Switzerland becoming the next Iceland is incredibily low, actually pretty unrealistic.
http://ftalphaville.ft.com/blog/2008/10/08/1681...
The Financial Times has published a chart from a Citibank report which showed bank assets as a percentage to their home country's GDP.
http://www.economist.com/blogs/freeexchange/200...
This article did not mention Switzerland until the last sentence.
http://www.portfolio.com/views/blogs/market-mov...
A pure speculation without any foundation.
http://ftalphaville.ft.com/blog/2008/11/12/1812...
Combines the previoulsy published chart from Citi with the speculations pubished by Portfolio.com.
http://johnquiggin.com/index.php/archives/2008/...
And then a blog entry combining all the speculation and trying to make it sound realistic.
Overall, it is pure specualtion based on fabricated "facts". There are too many "ifs" in there: 1) UBS would need to fail, 2) UBS would need to loose all its assets and 3) Switzerland would have to replace all of UBS's assets. And on top of that Switzerland would need to immediately sevenfold the inflation rate, etc. The probability is about the same as the US car makers getting bailed out today with instant availability of 25 billion dollars with no strings attached.
UBS publishes its numbers on its website: www.ubs.com. The author of the article on Portfolio.com somehow did not figure that out yet, so he missed the changes in UBS’s numbers between 31.12.2007 and today.
There is an interesting twist to this whole reporting: The UK competes with Switzerland as a banking center and UK banks compete with Swiss banks. Most of the articles were published by UK organizations (FT and Economist) and UK-centric writers (Felix Salmon and John Quiggin). Do they want to deviate the attention away from the UK banks?
Granted, the headlines of the articles were attention-grabbing. The articles, though, are pure fiction. Once could also call it bs.
http://www.portfolio.com/views/blogs/market-mov...
And both articles are somewhat based on pure speculation, published here:
http://voxeu.org/index.php?q=node/2498
The only time Switzerland is mentioned - among other countries - is in the speculation "who might be vulnerable" at the end. But have a close look at the requirements that would need to be fulfilled. It is pure specualtion on which characteristics are needed for a country in order to have a certain probability to be subject to the same problems as Iceland. The low number of four characteristics used gives a good idea on the amount of speculation exercised.
http://voxeu.org/index.php?q=node/2549
A description of Iceland's situation and how it got there.
You cannot really compare Iceland with Switzerland, the two countries, their economies, their administration and their banks are completely different. More different than apples and oranges. And thus the probability of Switzerland becoming the next Iceland is incredibily low, actually pretty unrealistic.
http://ftalphaville.ft.com/blog/2008/10/08/1681...
The Financial Times has published a chart from a Citibank report which showed bank assets as a percentage to their home country's GDP.
http://www.economist.com/blogs/freeexchange/200...
This article did not mention Switzerland until the last sentence.
http://www.portfolio.com/views/blogs/market-mov...
A pure speculation without any foundation.
http://ftalphaville.ft.com/blog/2008/11/12/1812...
Combines the previoulsy published chart from Citi with the speculations pubished by Portfolio.com.
http://johnquiggin.com/index.php/archives/2008/...
And then a blog entry combining all the speculation and trying to make it sound realistic.
Overall, it is pure specualtion based on fabricated "facts". There are too many "ifs" in there: 1) UBS would need to fail, 2) UBS would need to loose all its assets and 3) Switzerland would have to replace all of UBS's assets. And on top of that Switzerland would need to immediately sevenfold the inflation rate, etc. The probability is about the same as the US car makers getting bailed out today with instant availability of 25 billion dollars with no strings attached.
UBS publishes its numbers on its website: www.ubs.com. The author of the article on Portfolio.com somehow did not figure that out yet, so he missed the changes in UBS’s numbers between 31.12.2007 and today.
There is an interesting twist to this whole reporting: The UK competes with Switzerland as a banking center and UK banks compete with Swiss banks. Most of the articles were published by UK organizations (FT and Economist) and UK-centric writers (Felix Salmon and John Quiggin). Do they want to deviate the attention away from the UK banks?
Granted, the headlines of the articles were attention-grabbing. The articles, though, are pure fiction. Once could also call it bs.
There are simplily no facts to back up the claim that Switzerland might go bankrupt.
Using the same kind of specualtion, the US could also go bankrupt if they need to bail out the financial and auto industry and come up with 150 trillion USD. It is just the probability which is close to zero.
However that doesn't help if the profit the goverment has been making is in a currency that becomes worthless when an overgrown banking system failes. It does also not help if the goverment is forced (by other countries) to take on some of the foreign dept the overgrown banks had. Then you quickly go from beeing one of the richest countries to beeing one of the poorest.
So don't feel to safe :-/
As for the adjustment to way of life; it had to happen. I just hope people learn the right lessons from this. If people learn that we're all vulnerable and interdependent, it will be a good thing overall.
It sucks that this is all happening right at the moment that newspapers are extinct.
We're about to find out what happens when whole populations stick their heads into the boob tube and allow corporate talking heads to determine the discourse of entire nations. This crash is engineered, was predicted, and very few listened. Welcome to the New World Order. What we are witnessing is Financial Terrorism, as prerequisite to planned (global) social reengineering.
Given that most of the readership of this blog belongs to the geek (as in thinking) set, you are requested to stop and think as to just why a company with massive cash reserves (citi) needs to be bailed out because its stock price is sinking. And let us not forget, volume is heavy so somebody is buying all these assets for pennies on the dollar. (hint: 401Ks and pensions and bit players get wiped out.)
Also note that our dear-leader-elect has just named yet another CFR alum and "Federal" Reserve lackey to be the future Sec, of Treasury. Now that is change you can "believe" in ...
http://www.youtube.com/watch?v=LHtNFZ6K0pE
http://video.google.com/videoplay?docid=-848491...
http://solari.com/blog/?p=1823
Brown in 2007 ("predicting" the crash)
http://www.youtube.com/watch?v=l8l6Af74rCY
Brown in 2008
http://www.youtube.com/watch?v=Uv5cqh26CC0
"There will be no peace unless [you do what we want]"
http://www.youtube.com/watch?v=iLOUbz8j8k4
"Governments and Businesses becoming partners in wealth creation"
http://www.youtube.com/watch?v=7vCo_Io6heo
If you pay attention to the content, not form, of ALL governments (including the so called axis of evil) you will note the uncanny similarity across the board, with emphasis on highly intrusive governments backed by massive police forces. This is just as true for United States of America as it is for the Islamic Republic of Iran. They are all the same. In every single case, a variety of "threats" (form) are used to justify social reengineering manifested as surveillance societies with a total disregard for the rule of the law by entrenched elite. They are all the same.
Technologists have a heavy responsibility in this era given that we are enablers of the electronic surveillance societies. When we remain silent (at best) and/or lend our creative prowess to the elites (at worst) we are betraying our responsibility to our fellow human beings who do not (and will not) understand the implications of the deployment of new technologies into the society at large:
http://www.youtube.com/watch?v=y3z7Tw1K17A
(That's biometrics, folks. Centralized servers. Voice pattern signatures.)
It is not too late to wake up.
To those that were not invested or lost jobs its been a bonus with large reductions in gas and home heating oil and consumer price drops.
What I don't understand is why people day after day seem to enjoy reading the latest words of doom and gloom about the economy. Why are the articles about more financial tragedies more popular that the articles about strategies that did work?
I enjoyed my two weeks in Basil, Switzerland last year. Fountains all over the place, even for your pets. Friendly people, a great public transport system. At least their currency is still somewhat in line now with what it was then.
I spent a month in South Africa July. The Rand is now 70% of what it was four months ago!
As far as Citibank, we're already showing signs of bailout fatigue as evidenced by the auto bail out talks. I myself wouldn't be cynical if it weren't for Hank Paulson pulling a switcheroo with the TARP program. Then again, I felt that he needed to get the boot to start with. Along with Bernanke We still have the foxes guarding the hen house, and I think history will bare that out in the end.
What does the world look like in the future? I'm afraid my crystal ball is cracked way to much to even get a glimpse.