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Plan B: Central banks getting ready for financial Armageddon

 
 
 
 
 
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If the US debt-ceiling debate goes past the eleventh hour, and the default of the world’s largest economy becomes a reality, leading central banks around the world are gearing up to minimize losses and keep the world economy functioning.

If US lawmakers don’t reach a budget consensus and raise the debt ceiling by Thursday October 17, the US will become the first Western power to default since Nazi Germany in 1933, and will send markets into uncharted territory.

The rest of the world is bracing itself for what would happen if the bill is rejected, and the US inches closer to defaulting on its debts, which are largely foreign- held in the form of US Treasury Bonds.

Central banks have begun preparing for the worst-case scenario if US does fault, which would result in a serious devaluation of Treasury bonds, delayed payments, and a more large-scale version of the current government shutdown.

“Because in the past it’s always been sorted out is absolutely not a reason to fail to do the contingency planning,” Jon Cunliffe, who will become the Bank of England’s deputy governor for financial stability in November, told UK lawmakers.

“I would expect the Bank of England to be planning for it [US default]. I’d expect private-sector actors to be doing that, and in other countries as well,” said Cunliffe, who acknowledged a default as “the main risk to the [global] financial system”.

The European Central Bank and the People’s Bank of China (PBC) have struck a deal that moves both banks farther from the dollar orbit. The two banks agreed to ‘swap’ $56 billion worth of yuan for $60.8 billion worth of euros.

Many central banks have reserves in the form of Sovereign Wealth Funds, which are also at risk if the US defaults, as many of the assets are held in dollars. These investment vehicles could be crippled by a default. China’s is estimated at more than $1.3 trillion – the world’s largest.

A historic shift

Neil Mackinnon, a former UK Treasury official, told RT the US default tango marks a shift in the global economic paradigm, from West to East.

If the US doesn’t act soon, “the dollar will decline and its importance will move to a multi-polar currency system and other currencies will take on board more importance,” said Mackinnon.

Over the weekend, economic leaders from around the world met in Washington DC at the International Monetary Fund’s annual meeting. The fund’s managing director, Christine LaGarde, issued a harsh warning the global financial system could enter a recession if the US misses its debt deadline.

The US Senate said they will announce a deal to end the shutdown and extend the debt ceiling on Tuesday, which will pass through to the House, where it will face Obama’s hard-nosed Republican opponents who want to cut funding of the Affordable Care Act.

Senate Majority Leader Harry Reid, a Democrat, said Tuesday has the potential to be a “bright day” and bring calm back to the global markets.

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  • Jeremiah Taylor

    Thus says The Lord God, yes I, The Holy One of Israel: I AM COME! Says The Mighty and Strong One. Yes it is I, The Lion of The Tribe of Judah, whose eyes are like flames of fire!… I AM COME! I am come out in My anger! And with the sword of My mouth I shall strike down the nations! For I have come forth to judge; yes, the time has come! Therefore, prepare and shout!

    Thus says The Lord to the United States: Your nation is given up; behold, the mighty nation is cast down! It has fallen on its side, and who is able to deliver them?! For all who remain shall fall! They shall fall hard, and they shall break!… Behold, they shall be broken in pieces without hand! They shall be stricken and brought very low! Says The Lord in His judgment.
    Behold, My anger burns hot and My fury has come up into My face, because of you, O mighty nation! Says The Lord, yes I, The High and Lofty One. For He who holds the key of David has spoken to you, yet you would not listen, indeed you have refused to hear, nor have you walked in The Way of The Lord; your ears are full of pollution and your eyes are covered with violence… You are as a cake unturned, milk gone sour, honey which has altogether lost its flavor, a wayward people who wallow in their own filth, a most backward people! You lay snares at the feet of all who seek to do good, while persecuting those who stand up for what is right!… A most wicked and slothful generation!

    Therefore, thus says The Lord: I shall make you as stubble fully dried; and behold, in the midst of you I shall kindle a fire! Upon you shall I bring distress and tribulation! For the whole land shall be as a woman caught in the midst of great travail; like a man overcome with madness, shouting and foaming at the mouth! The land shall convulse and your glory shall be thrown down, your loftiness bowed down, in the day I trample you underfoot! Says The Lord.
    City by city shall be broken down, and the blood of the wicked shall be poured upon the ground! For as lightning sets the tree ablaze and boisterous winds drive the flames, so shall I consume you from off this land, from one end to the other!… With blackness and death, with desolation and great distress, until there is no place!
    Behold, I shall wear you out, O mighty nation! Calamity upon calamity shall batter you and break you down! Your enemies shall persecute you, without respite, and breach the wall! For you have not ceased from doing evil before My face!… Behold, day and night the innocent are murdered because of YOU!

    Thus My hand is stretched out against you, O nation not desired!
    FOR YOU HAVE SINNED AGAINST THE LORD!…

    Behold, I shall set you forth as an example,
    A sign to all nations, a warning for all those who forget God!…

    And it shall come to pass, that all who look
    Upon you shall be greatly astonished;
    They shall hide their faces and draw back from you,
    Because of the terror of The Lord!
    http://trumpetcallofgodonline.com/index.php5?title=My_Hand_is_Outstretched%2C_The_World_is_Given_Up…_The_Day_of_The_Lord_Has_Come

    • Dr Jay Veeoh

      You are quite a preacher, Jeremia. A bit like Obama.

      “Yes we can” becomes “No ,you cannot” and would be sufficient ?

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