I have safely arrived in Moscow. Weather is nice.
Since my sister works during the week, I will have plenty of time to update MarketSkeptics.com. Below are a couple of the topics I want to write more about:
London's role in the financial crisis
I have come to view London as the center of the financial underworld and the root of all financial evil.
- The off-balance-sheet SIVs of US banks were set up in London
- Credit Derivative Product Companies (ie: "most idiotic financial instrument ever created") are all located in London
- Mayfair's hedge-fund industry (80% of all European funds) is located in London.
- London is by far the largest global centre for over-the-counter (OTC) transactions.
- The majority of the world's gold trading/ leasing takes place through the London Bullion
- Marketing Association
- GLD's gold "supposedly" is stored in HSBC's London vaults
- AIG's financial division is based in London
British meltdown as a possible trigger for a dollar collapse
While I am certain the dollar will collapse in 2009, it is an open question what will be the event which triggers the chain reaction leading to this collapse. Here are a few of the events I am watching for evidence that the dollar's end is beginning:
- Default on COMEX gold contracts
- Soaring world food prices (which would lead China breaking dollar peg)
- Failed auctions for long dated US treasuries
- Collapse of the British pound
The fate of Britain and the US are tied together. Both are deeply involved in the suppression of gold for example, which means both countries are heavily short gold. The collapse of the pound would create severe doubts about the dollar and lead to an exit from the currency.
Foreign currency checking accounts
Just like banks offer unallocated gold accounts, they also offer foreign currency checking accounts. Problem is that, just like for unallocated gold accounts, banks use derivatives (futures contracts) to hedge these foreign currency checking accounts, which means there is severe counter party risks to these accounts.
I want to write an entry exploring these foreign currency checking accounts, how they work, and what are the risks. (preview: stay away from them)
Counter-party risks on futures contracts
The evils of guarantees
Government bailout efforts to date
Finally I am behind on answering comments and emails. I will hopefully be able to catch up on both those accounts next week.