The failure of Credit Suisse vaporized $17 billion in corporate bonds and another $31 billion in market cap in the last year. That means the Swiss government would have to find nearly $50 billion in new debtors just to stay even:
Credit Suisse said 16 billion Swiss francs ($17.24 billion) of its Additional Tier 1 debt will be written down to zero on the orders of the Swiss regulator as part of its rescue merger with UBS (UBSG.S), angering bondholders on Sunday.
FINMA, the Swiss regulator, said the decision would bolster the bank’s capital. The move reflects authorities’ desire to see private investors share the pain from Credit Suisse’s troubles.
Chair Marlene Amstad said FINMA had stuck to the country’s “too-big-to-fail” banking framework in making the decision.
It means AT1 bondholders appear to be left with nothing while shareholders, who sit below bonds in the priority ladder for repayment in a bankruptcy process, will receive $3.23 billion under the UBS deal.
Engineered in the wake of the global financial crisis, AT1 bonds are a form of junior debt that counts towards banks’ regulatory capital. They were designed as a way to transfer risks to investors and away from taxpayers if a bank gets into trouble.
This is why “printing money” doesn’t work in a credit economy. Yes, it’s easier to generate the meaningless digits on a balance sheet than it is to print paper, but it’s not so easy to produce new borrowers. And mass immigration has completely failed to provide the answer it was intended to be, because the immigrants are far less inclined to service their debts.
Now do you see why the failure of the Clown World economy was always inevitable?