This mess we have is getting wound pretty tight. Make sure you are under something safe when it blows LOL,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Submitted by Phoenix Capital Research on 10/25/2011 12:21 -0400
Ben Bernanke
China
default
Federal Reserve
Germany
Gross Domestic Product
Japan
Lehman
Lehman Brothers
While the world is awash in liquidity, no one seems to notice that it’s actually in the form of leverage or cheap debt, NOT real capital or equity.
The US banking system as a whole is leveraged at 13-to-1. While this is not horrible relative to Europe’s banking system (more on this in a moment), these levels still mean that an 8% drop in asset values wipes out ALL equity.
Then you have Europe’s banking system, which is leveraged at 26-to-1. Anecdotally, this is borderline Lehman Brothers (30 to 1). At these levels, even a 4% drop in asset prices wipes out ALL equity.
Japan’s banks are leveraged at 23 to 1. France’s are 26 to 1. Germany is 32 to 1.
You get the idea.
However, worse than any of these the US Federal Reserve. With $2.8 trillion in assets and only $52 billion in capital, the Fed is leveraged at 53 to 1. Yes, 53 to 1.
My question is: if the Fed prints money for itself… is it “raising capital?” More to the point… if that was true why doesn’t the Fed do it? Why maintain these leverage levels?
Only Bernanke can know… but the rest of us should feel a very serious shudder when we consider that THE bank that’s supposed to bailout the world/ fix the problems plaguing the financial system, is in fact even more leveraged that most of the institutions it’s helping.
Yes, stocks are rallying now based on the view that more QE 3 or monetary easing is on the way… but they’re missing the BIG picture here.
The BIG picture is that there is far too much debt in the financial system. Europe’s getting taken to the cleaners today… but these very same issues are going to spread to Japan and the US in short order. Even China, which is considered THE creditor nation of the world, is estimated to post a REAL Debt to GDP ratio of 200%.
Yes, 200%. China.
More,,,,,,,,,,,,,,,,,,,,,,,,
http://www.zerohedge.com/contributed/guess-who%E2%80%99s-even-more-leveraged-european-banks
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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