October 3, 2016
Germany's Banking Crisis Accelerates
By Gary North
GaryNorth.com
I think there will be a government bailout of Deutsche Bank this year. Commerzbank may be in equally bad shape. Its shares are sliding.
If Germany's government must intervene, then European depositors will ask themselves: Which banks are safe?
They can deposit euros in banks in every nation in the eurozone. But which banks? Which nations? Germany has been the favorite.
Some hedge funds are now pulling money out of Deutsche Bank. Bloomberg reports:
The funds, a small subset of the more than 800 clients in the bank's hedge fund business, have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Among them are Izzy Englander's $34 billion Millennium Partners, Chris Rokos's $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, said a person familiar with the situation who declined to be identified talking about confidential client matters.
To pull out, they must put in. This is digital money. To get your digital money out of Bank A, you must have it sent to Bank B. This is essentially simultaneous. So, the banking sector as a whole is not imperiled. The money supply does not shrink. But confidence erodes.
I don't see any nation's banks in the eurozone competing successfully with Germany. The Netherlands has conservative banks, but they are small. Austria is also known for its conservative banking. But the money will probably stay inside Germany's banks.
If the government lets the bank go under, that will send a message to depositors in other countries: Germany is no longer a safe haven. Depositors -- especially large depositors -- will have to do due diligence in selecting banks. But today, they don't have a lot of time. They must get off the sinking ship before it takes down its depositors. A haircut is looming.
This is making Brexit look wise in retrospect. The Brits never did join the eurozone currency system. Their departure has caused no crisis in Britain. The talk about recession and trade crisis was all nonsense. The stock market is up.
Now we see Germany's banks under siege. If the strongest banks in the eurozone are facing a crisis, then what of Spain, Italy, Portugal, and France?
This is sending warning signals to the Eurocrats. The EU and its bureaucracies are looking shaky. The benefits of staying in will not be clear if the eurozone currency system falls apart. Nations will demand sovereignty over banking. This means a return to national central banks and national currencies.
Merkel can assure voters that her government will not bail out Deutsche Bank. I think she will back down if the alternative is bankruptcy. The bank now owes $14 billion to defrauded mortgage borrowers. The total capitalization of the bank is $14 billion.
It all looked so easy in 2007, when the bank's shares were selling for 100 euros. Today, they are around ten.
At the heart of globalism are the banks. Failures here reveal the unstable foundation of the globalist experiment. That is why the Deutsche Bank crisis extends beyond the depositors, whose capital is at risk. It could spread to the other banks in the eurozone.
Mario Draghi promised in 2012 to do "whatever it takes." That promise looks problematical.
The markets are taking this in stride. They took 2007 in stride, too.
These are big banks. The fact that they are encountering problems seven years after the recovery began is ominous. They should be out of the woods. They are going into the woods.
I leave you with Rick's treatment of Deutsche Bank. He set the precedent. http://www.youtube.com/watch?v=BztF71vFpnE
http://www.garynorth.com/public/15732.cfm
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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