European Bank crisis

[raspberry-blower]

I've started this thread to discuss the implications of the fall-out from a European banking "Lehman moment" - which appears to becoming inevitable.

This "Lehman moment" will be blamed on the "Brexit" vote however this is being highly disingenuous as many of said institutions are structurally deficient and would have collapsed at some point in the near future regardless.

Firstly, this article from Reuters sets the scene: Brexit opens up banking faultlines from Milan to Lisbon

See? Told you Brexit will get the blame.

Then Bloomberg comes up with an editorial: EU may have to bend rules to save Italy's banks
This follows a discussion at Naked Capitalism that can be found here

It's not just the Italian banks that are a problem: Italian Prime Minister Matteo Renzi stated that it's the derivatives that cause a bigger problem

Which brings me onto Germany - where a couple of institutions are showing major signs of distress.
Wolf Richter: I'm in awe at how fast Deutsche Bank is coming unglued

Then Zero Hedge: Bremen Landesbank on the verge of failure

[snow hope]

Once again it makes one think, where are the safe havens that can be used to mitigate what could be on the verge of happening.

The only conclusions I can come to are: -
1. Get out of debt
2. Have a property to live in with a little bit of land to grow your own
3. Hold real money - gold and silver. And other things for bartering.
4. Be as self sufficient as you can be.

I was going to add be part of a small trusting community, but to be honest depending on how badly things break down, you will not be able to trust anybody other than close family.

[woodburner]

You might be ok in NI, but not in Belfast. In the SE mainland self sufficiency is a fantasy. Having enough land will not be possible as it will be taken by people who are more desperate/ruthless than you.

An enormous amount of luck will help, but that is all that's available for most of us. We already import about 50% of food, and what is grown here is fed by artificial fertilisers. We now no longer have the knowledge to be self sufficient, we would have to rely on a group of others who individually know a bit about about something, that defines it as not being self sufficient.

[kenneal - lagger]

The only saving grace in all this is the propensity of most people to sit tight and wait for the government to provide. By the time that they realise that the government won't provide they will be too weak to go anywhere. The great mass of people will die where they live or very close to it of starvation.

[woodburner]

Let's hope so, because the bit that will cause problems is the adolescents, particularly males, who are going to do their best to survive come what may. If that means killing to get enough to eat, that's what they will do.

[snow hope]

So what do you think the implications of the fall-out are going to be r-b?

[Little John]

The only saving grace in all this is the propensity of most people to sit tight and wait for the government to provide. By the time that they realise that the government won't provide they will be too weak to go anywhere. The great mass of people will die where they live or very close to it of starvation.

You are mistaken about that I think Ken. You'd be surprised what people are capable of when push comes to shove.

[raspberry-blower]

So what do you think the implications of the fall-out are going to be r-b?

Good question, Snow.

My own gut feeling is that the Italian referendum - which is, I believe, more to do with constitutional affairs, will be rejected by the Italians. This outcome will result in another Italian general election - and judging from the current opinion polls Beppe Grillo's 5 Star Movement M5S - would become the major political force. The key question now is what size margin the M5S wins by - if it can - with the aid of another anti-EU party - gain enough traction to repudiate the Euro - Grillo is the man to effect such an outcome.

If Italy leaves - or even if Grillo has a majority to effect such a plan - not only the Euro but also Deutsche Bank are radioactive toast. The banking model bust revisited.

Then we will have currencies going up in smoke - literally

[snow hope]

Do you think we would then see the Germans rescuing Deutsche Bank as I imagine it would be seen as too big to fail. AND what about the derivatives situation!!?

As usual, the answer boils down to precious metals....

[Lord Beria3]

http://www.breitbart.com/london/2016/07 ... overnment/

In just three months, Italians will vote on a referendum regarding constitutional reform on which Renzi is gambling his ministry. If the referendum fails to pass, Renzi has promised to step down, turning the referendum into a confidence vote for his government.

Yet right now Italians are staring at a financial crisis provoked by an incredible €360 billion in non-performing loans linked to decades of banking mismanagement, along with an out-of-control immigration problem that seems to be gaining momentum rather than slowing down.

None of this bodes well for Renzi, who made his imprudent wager on the constitutional reform referendum when his popularity was considerably higher than it is now.

In June, the populist Five Star Movement (M5S) won local elections in 19 Italian cities, including Rome and Turin, and is now ahead of the PD in national polls. The remarkable success of M5S, a Eurosceptic party, underscores Italians’ frustration with Brussels and a return to nationalism.

Feeling deja vu about this. Is Renzi the Italian Cameron about to fall on his sword by the end of the year.

[raspberry-blower]

Bank stress tests come under fire for being irrelevant

Zero Hedge: European Bank Bloodbath Destroys Stress Test Credibility

If the goal of the EBA Stress Tests was to reassure investors and regain confidence that 'all is well' in Europe's increasingly fragile and systemically interconnected banking system, then it has utterly failed. The broadest European bank stock index is now down 7% from the post-stress-test spike highs, Italian banks are at record lows and being halted (despite Renzi's promises), Commerzbank is struggling with capital raise chatter, and Deutsche Bank and Credit Suisse are tumbling after being booted from the Stoxx 50.

That's the European Bank stress test credibility in tatters.
Does the UK bank stress test come up to scratch?
Answer: Nope

Professor Dowd also cites the use of questionable estimates of the scale of banks' true exposures and the fact that the Bank of England, unrealistically, only models a single stress scenario at a time.

In addition, he says the Bank’s tests are less rigorous than those of the US central bank, and that if UK lenders were tested by the Federal Reserve all of them would fail.

Other former regulators have raised questions about the Bank’s reliance on stress tests to gauge the resilience of UK banks

[snow hope]

There is no doubt this is a major issue, but how big an issue is it?

Should we have serious cause for concern and what is that concern in pragmatic terms? r-b any thoughts on how worried we should be?

[raspberry-blower]

There is no doubt this is a major issue, but how big an issue is it?

Should we have serious cause for concern and what is that concern in pragmatic terms? r-b any thoughts on how worried we should be?

IMHO we should all be concerned about this as.
If there is a bank run on an Italian bank - which seems to becoming more of a probability by the day - that leads to its collapse then this will cause contagion in the European banking sector.
In short this crisis will threaten the very existence of the very badly designed Euro
There is a real danger that this could morph into a Sovereign debt crisis.
Sterling and the Japanese Yen are also likely to be the other major casualties from the fall-out

[johnhemming2]

The ECB can print enough electronic money to stop a run.

There is no doubt this is a major issue

Sorry, but I disagree. Which is a step beyond there being "no doubt".

[raspberry-blower]

The ECB can print enough electronic money to stop a run.

The key point here is not whether the ECB can print more money but that this becomes a question of confidence in the Euro.

Due to the systemic nature of the banking "industry" any bank run anywhere in Europe will cause contagion. By the time the ECB decides to fire up the printing press it may well have been overtaken by events and that it would have to increase the amounts printed. There is also a very real possibility that before the ECB printing programme kicks in the banking sector grinds to a halt.

If the markets perceive that the ECB has lost control then the Euro will weaken. The key question is "to what extent?"