Comment: The vicious cycle of the financial storm spreads in Europe and America must b

Source: Ming Pao

Ming Pao Society Review

The storm has swept the European and American banking industry again. Following the closure of Silicon Valley banks, the larger scale of Swiss Credit (Credit) last week was "major defects" and the stock price fell sharply."Blood washing" once again caused people to worry more about the financial system.Although the reasons for the bursting pots of American banks such as Silicon Valley and the Bank of Silicon Valley are different, the central banks of various countries have decisively rescued and emphasized that the banking system is stable, but from the cause of this wave of bank storms, it is more or less added with the European and American central banks.The trend of interest is also affected by geopolitical conflicts, and the rescue operations of various countries may "relieve cough" for a while. It is still questionable whether it can really cure the root cause.Under the dilemma of suppressing inflation and stable financial system, European and American monetary policy may fall into a vicious circle of interest rate hike-burst-pot-water-tolerant-high inflation-re-interest rate hikes.It is worthy of vigilance all over the world.

Credit Suisse, established in 1856, is the fifth largest consortium in the world and the second largest bank in Switzerland. Its business is all over the world. By the end of 2022, its assets are about 580 billion U.S. dollars.More than twice, the assets of Hong Kong branch alone are nearly 140 billion Hong Kong dollars.Last Wednesday, its stock price plummeted, dragging down the European banking index sharply by 7%. The stock price of European banks such as Bank of France, Germany, German Commercial Bank, French Industrial Bank, and Italian United Credit were both double -digit.Although the Swiss central bank imitates the US Silicon Valley Bank (SVB) approach and provides a loan of 50 billion Swiss francs to Creditses, the integration of Creditses and the global financial system is far greater than Silicon Valley Bank.Come to worry about the stability of the global banking industry.

Audit rate of interest rate hikes in the United States and Europe

Frozen Russian Assets Switzerland Ploves

Although the officials of the United States and Europe vowed to be healthy and stable, people are still worried. The squeezing of banks in the United States and the loss of CITIC customers is a true reflection of this worry.The radical interest rate hikes of the Bank of the United States and the European Bank of the United States and the European Union leads to indirect causes of this wave of bank storms.U.S. Treasury Secretary Yellen said that Silicon Valley Bank had to sell unprepared assets (referred to as bonds) in order to meet the needs of liquidity.Like Silicon Valley Bank, Creditkin holds a large number of bonds. The abundant assets should not be a problem. However, because of the rise in interest rates, the value of bonds is degraded, and the sale causes huge losses.

Confidence is more valuable than gold. Last year, more than 120 billion Swiss francs (about $ 129.9 billion) of funds flowed out of Credit.Trust, its explosive pot is covered with the financial industry -based Swiss economy.In 2020, Switzerland's banking assets were about five times that of the country's annual GDP, and it was also 5 times that of the US banking assets.With the permanent neutral national brand, Swiss banks have always been known for their security and reliability and confidentiality for customers. However, after the outbreak of the Russian -U -U -U -U -Wars war last year, Switzerland abandoned the neutral national field and joined Russia's sanctions.The Creditses' family frozen more than $ 19 billion in Russian assets.Since then, funds have begun to flow out of the Swiss banking system, and Credit Suisse's "blood loss" can also be described as benevolent.According to reports, other smaller banks in Switzerland are also facing financial difficulties.

In the face of this wave of bank explosion, the Federal Reserve and the European Central Bank seem to have a tacit understanding, that is, as long as there is a bank, they will intervene and allow banks to closure, but they cannot be involved in others.The intervention method is to rely on the "Banking Regular financing plan" (BTFP), which is essentially allowing banks to use their own garbage assets for short -term loans.According to the Federal Reserve's plan to use a maximum of nearly $ 2 trillion, which is equivalent to all the amount of bond tickets held by the US banking industry except the five major banks of Wall Street.As of the week of last Wednesday (15th), it has borrowed 153 billion US dollars through the discount window to break the $ 111 billion record in the 2008 financial tsunami in 2008.

Although this method does not need to pay for the taxpayer, it is equivalent to buying a debt in disguise to "put water" and run counter to the target of depressed inflation.The European Central Bank raised interest rate hubs in accordance with the plan last week. It seems that it is not moved by the Credit Crisis. President Lagarde claims that "the stability of the financial market is as important as the stability of prices."How to have both bear paw.However, the market ’s interest rate hike expectations for the Federal Reserve have been greatly reduced, and the inflation of the United States and Europe is still between 6%and 8%. It is slightly relaxed and returned to double digits at any time.This interest rate hikes lead to explosive pots. In order to save the financial system, they were forced to buy debt and increase their inflation, so they raised interest rates, so repeatedly, the economy may fall into a vicious circle.

Fill in the bank to change the water

Emerging economy or suffer

The global financial system has become integrated, and the financial risks of any place may have a butterfly effect. For example, Alecta, the largest pension fund in Sweden, recently acknowledged, Caused a stir in Sweden, becoming the "first drop of blood" in the Silicon Valley bank crisis and Europe.Yellen also acknowledged to Congress a few days ago that "it feels a serious risk of spreading."

The financial crisis is not only mutually contagious in Europe and the United States, but also spreads to emerging Asian economies.Historically, the US dollar rate hike is often accompanied by the chaos of international capital flow. In 1983, it was in South America and in Japan in 1988, which caused economic recession.Since last year, the US dollar rate hike has caused debt crisis in Sri Lanka, Turkey and Pakistan.In the future, some financial countries with fragile finance, especially the "Belt and Road" partner countries, may also be affected. In this regard, China must be highly alertly alert and plan to prevent financial storms.