Strategy radar 2012_1214 > After the ‘Fiscal’, here comes the US ‘Monetary’ Cliff

On the home front the week was marked by IAG finally selling its UK business in 2 separate transactions and taking a $240m loss. QBE also announced details of their capital raising, however the market still sees their capital too tight.

HSBC has escaped criminal indictment for its grand scale money laundering activities in Mexico, which would have likely resulted in a loss of license given they admitted the offence (they maintained an understaffed risk department despite repeated warnings; ‘turned a blind eye’ on traffickers who would deposit hundreds of thousands of dollars in cash, in a single day, into a single account, pushing the refinement into “using boxes designed to fit the precise dimensions of the teller windows.”)… So the US prosecutors estimated that criminal charges would have threatened the stability of the financial system and preferred to go for a fine instead, setting a precedent of “too big to indict”, which is likely to have risk managers, auditors and regulators – if not do some deep soul searching – at least ponder their role worldwide.

On the global macroeconomics front, the US Fed launched its fourth round of Quantitative Easing (QE4). Stepping back from the week-by-week announcements, the big picture is now clear: a currency war has been unfolding, and Australia is right on the front line with the AUD being pushed up by the various central banks programs. This correlated with the drop in commodity prices is now causing Treasury to call for the Australian Government to abandon its commitment to surplus.

The snapshot this week is looking at another ‘cliff’ faced by the US: By now, we’ve all heard about the ‘Fiscal Cliff’. But did you know about the ‘Monetary Cliff’? And what it means for us… Another economic predicament, which is increasingly having observers on the edge of their seats hoping the US will be able to avoid a (metaphorical) repeat of ‘Thelma and Louise’ last scene…

As per usual, sources are curated at


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