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drbubb

In a time of Bank Runs, you want a Strong Bank

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Paul Thomason's view:

 

There's a capital flight to safety going on at the moment - it's just started and it's got a long way to go - the beneficiaries will be US Treasuries and the US Dollar - don't get caught on the wrong side of it - it's going to be a sight to behold.

 

Yours faithfully,

 

Paul Thomason

Elliott Wave Market Service

 

Is that a recent comment?

 

The dollar rally might have "just started" but the flows into treasuries seem to have been going on for a while now.

 

Dollar Index futures

c91ff4d0.jpg

 

30 year T bond futures

a4c1f988.jpg

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The comment is from an email received today

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THERE IS NO ENTITY ON EARTH THAT CAN BAILOUT EUROPE.

 

The media is rife with misrepresentations and analysis of the EU. Here’s the real deal

 

The ECB is tapped out. Having provided over €1 trillion in funding via LTRO 1 and LTRO 2, taking on over €700 billion in PIIGS debt putting its own solvency at risk, it simply cannot launch another LTRO scheme for the following reasons:•Those banks accepting LTRO funding are being punished by the market, thereby indicating that ECB funding is no financially toxic to a firm’s reputation in the market place•The positive effects of LTRO 2 lasted only one month compared to several months for LTRO 1. Thus, we find that with each additional intervention the benefits are shorter lasting.

 

(he then goes through a list of huges institutions, explaining why Europe is too big to save.)

 

Spain is on the verge of a banking collapse. Its efforts to deal with an insolvent banking system by merging crappy banks and shifting losses onto its public balance sheet are proving to be absolute failures due to the fact that:•Total Spanish banking loans are equal to 170% of Spanish GDP.•Troubled loans at Spanish Banks just hit an 18-year high.•Spanish banks need to rollover 20% of their debt this year. •Spanish private sector debt is nearly 300% of Spanish GDP.

 

In plain terms, having spent two years and hundreds of billions (even TRILLIONS of Euros) dealing with the EU Crisis, the powers that be over there have backed themselves into a corner from which they cannot escape. Let me be blunt:

 

THERE IS NO ENTITY ON EARTH THAT CAN BAILOUT EUROPE.

 

It’s game over for that idea. And the idea that one bankrupt nation (even Germany sports a REAL Debt to GDP of over 200% when you include unfunded liabilities) prop up several others is ridiculous.

 

And all of this is happening at the precise time that Spain is about to implode.

 

This is the REAL DEAL for Europe. Anyone who has some kind of counter-argument to these points either doesn’t understand the political environment we’ve entered (even Central Banks are fed up with bowing to political pressure from politicians) or is simply hoping that by ignoring these realities they (the realities) will go away.

 

They won’t. Europe’s banking system as a whole is at risk a la 2008. And it’s nearly four times the seize of the US banking system.

 

So if you’'re not already taking steps to prepare for the coming collapse, you need to do so now. The US will not escape from this unscathed. No one will. The global banking system is too interconnected: some estimates put US exposure in the ballpark of several TRILLION Dollars.

 

+continues: http://nesaranews.blogspot.com/2012/05/there-is-no-entity-on-earth-that-can.html

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EURO CANNOT SURVIVE a Relay Race Bank Run (on Greece and Spain)

 

Spain's Run might be 10X the size of Greece

 

“When you have Greece and Spain happening at the same time, the problem becomes exponential and very, very dangerous,” said Stephen Jen, a former economist at the International Monetary Fund who runs a hedge fund in London. “So far, the policy has been to buy time and build a firewall — but that just makes the cost bigger. There is just no good ending here.”

 

The numbers do look dire.

 

Stephane Deo, an economist at UBS, estimates that the cost of a Greek exit to European taxpayers would be €225 billion, assuming Greece defaulted on the money it now owes to European public institutions.

 

But, he says, the real fear is that while that was happening, the slow-motion collapse of Spanish banks from toxic real estate loans could suddenly turn into a fast-moving bank run, as depositors pulled out their money.

 

With Spanish banks now holding deposits of €2.3 trillion, such a loss of confidence could be disastrous for Spain and for the highly interconnected global banking system. The financial world’s assumption lately has been that it is sufficiently prepared to absorb the consequences of a Greek withdrawal from the euro. But if a Spanish banking collapse were factored in, Europe’s long-dreaded “Lehman moment” might finally arrive. “The scale is just so much bigger, when you talk about Spain,” Mr. Deo said.

 

/more: http://www.nytimes.com/2012/05/21/business/global/europes-worst-fear-spain-and-greece-spiral-down-together.html

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A Full-Fledged European Bank Run is already Underway

 

euro-zone-bank-run-21-1.png

 

The above chart is from the Financial Times article The anatomy of the eurozone bank run by Gavyn Davies.

 

A bank run is now happening within the eurozone. So far it has been relatively slow and prolonged, but it is a run nonetheless. And last week, it showed signs of accelerating sharply, in a way which demands an urgent response from policy-makers.

Troubled countries

ftblog259.gif

 

Gavyn Davies has a disturbing chart looking at cross-border flows in the euro zone. The trend is stark: The ECB’s interventions have not stopped depositors from moving their money to Germany en masse. This slow-motion bank run, Davies writes, is particularly tricky to stop because it isn’t just about worries of bank failures. It’s about fears that the euro will crumble altogether, leaving Europeans holding their own country’s devalued currency.

 

The euro zone crisis, Jeffrey Sachs writes, is now a very immediate banking crisis; Greece, like Spain, is mainly suffering from “chronic lack of working capital.” Adam Posen thinks Europe’s problem isn’t Greece, it’s undercapitalized banks.

 

/source: http://blogs.reuters.com/felix-salmon/2012/05/21/counterparties-meet-the-new-european-bank-run/

 

MAGNITUDES

 

Government Debt / Bank Deposits -

Eur.Billions

COUNTRY : Gvt.Dbt : Deposits : GD + Dt. : x Greece

Greece- : Eur.0,134 : Eur.0,171 : Eur.0,305 : 1.00X

Portugal : Eur.0,117 : Eur.0,229 : Eur.0,346 : 1.13X

Spain---- : Eur.0,598 : Eur.1,655 : Eur.2,253 : 7.39X

Italy------ : Eur.1,558 : Eur.1,414 : Eur.2.972 : 9.74X

Ireland---: Eur.0,083 : Eur.0,196 : Eur.0,279 : 0.91X

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ANCIENT TIMES

 

http://thefilmarchived.blogspot.com/2011/06/george-burns-and-gracie-allen-show.html

 

Gracie and her checking account (10 minutes in)

 

Mr. Vanderlip: Charming woman, Gracie. One of my favorites. Really crazy about her. Do me a favor, will you George?

 

George: Certainly.

 

Mr. V: Keep her out of my bank.

 

George: What, uh, what seems to be the trouble?

 

Mr. V: Well, it's that checking account you opened for her. First of all, our bookkeeping never quite agrees with hers. Now last week, for example, we computed her balance to be twelve hundred dollars.

 

George: What did Gracie figure it was?

 

Mr. V: Two million, eight-hundred thousand.

 

George: I wish she was right.

 

Mr. V: And then we come to the matter of the checks Gracie has written. Tell her that a check is intended only as a means of transferring MONEY from one person to another, not recipes, song lyrics, the latest gossip, or ten-day diets.

 

George: She writes all that on the checks?

 

Mr. V: Not only that, she signs them "Guess who?"

 

 

Back in the olden days when customers made the mistakes and not the bankers

 

Then, the bankers stopped being boring, got clever, and turned themselves into casinos.

(Ask Jamie Dimon about that.)

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Greece Likely to Exit the Euro / says Hong-kong based Louis-Vincent Gave:

 

If Greece exits, ECB will follow with “Shock and Awe” money-printing to help at-risk European countries

 

MP3: http://www.financialsensenewshour.com/broadcast/fsn2012-0525-1.mp3

 

Louis believes that Greece will ultimately exit the Euro, and the ECB will then ease massively to stem the tide of bank runs in other at-risk European countries. He sees opportunities in US blue chip stocks.

 

=== ===

 

 

To save Spain and Italy : the ECB may need to Grexit Greece fast,

and then step in with Euro-support for Spain etc.

 

That would be a way to strongly "draw the line"

 

And it needs to happen fast, because Greece is running out of money, and the bank runs are accelerating

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NO BRAINER - is joining a bank run...

 

Southern Europeans Wire Cash to Safer North

 

Nikos sent his cash to a Swiss bank offering much lower interest rates than his Greek bank paid but he said the sacrifice is worth it for peace of mind.

 

Financial advisers and private bankers whose clients have accounts too large to be covered by a Europe-wide guarantee on deposits up to 100,000 euros ($125,000), are reporting a "bank run by wire transfer" that has picked up during May.

 

Much of this money has headed north to banks in London, Frankfurt and Geneva, financial advisers say.

 

"It's been an ongoing process but it certainly picked up pace a couple of weeks ago We believe there is a continuous 2-3 year bank run by wire transfer," said Lorne Baring, managing director at B Capital, a Geneva-based pan European wealth management firm.

 

"Where there is liquidity it is moving to the safest part of Europe and the perceived safest part of Europe is in the North... It's a no brainer," he said

 

/more: http://www.cnbc.com/id/47587424

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5. Caisse des Dépôts et Consignations(CDC), (France)

 

 

The CDC is not your usual bank. It more like the federal reserve bank, although it does have an insurance as well as an investment bank subsidiaries.

 

I think this 10 item list is probably a list of the 10 safest banking entities, rather than listing banks that are customer facing.

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Senior isnt Senior anymore, when it comes to bank bonds

 

Bond investors could desert banks

 

May 28 2012 .. By Reuters

 

Bond investors say they could stop funding Europe's fragile banks if rules designed to insulate them from shocks are put in place, making financial institutions even more vulnerable to the debt crisis and possibly more reliant on taxpayer money.

 

Global regulators want bondholders to give up a privileged position which gives them a priority over other investors if a bank runs into trouble, in favour of people who deposit their money in an account.

 

The European Union will unveil its draft version of the rules for big cross-border banks next month. They are designed to make sure taxpayers do not pay the bill for bailing out banks again, to prevent a run on banks and to make sure bank bonds are not seen as risk free.

. . .

“Why should I as a buyer of bonds wish to get into a senior bank bond today when I know that there's a very good chance that my bonds will become subordinated to other creditors?,” said Stephen Snowden, fund manager at Kames Capital.

 

/more: http://www.iol.co.za/business/international/bond-investors-could-desert-banks-1.1306083

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Senior isnt Senior anymore, when it comes to bank bonds

 

Bond investors could desert banks

 

May 28 2012 .. By Reuters

 

Bond investors say they could stop funding Europe's fragile banks if rules designed to insulate them from shocks are put in place, making financial institutions even more vulnerable to the debt crisis and possibly more reliant on taxpayer money.

 

Global regulators want bondholders to give up a privileged position which gives them a priority over other investors if a bank runs into trouble, in favour of people who deposit their money in an account.

 

The European Union will unveil its draft version of the rules for big cross-border banks next month. They are designed to make sure taxpayers do not pay the bill for bailing out banks again, to prevent a run on banks and to make sure bank bonds are not seen as risk free.

. . .

“Why should I as a buyer of bonds wish to get into a senior bank bond today when I know that there's a very good chance that my bonds will become subordinated to other creditors?,” said Stephen Snowden, fund manager at Kames Capital.

 

/more: http://www.iol.co.za/business/international/bond-investors-could-desert-banks-1.1306083

 

Makes sense, to restrict the taxpayers money (ideally). bondholders take the hit after equity holders

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Makes sense, to restrict the taxpayers money (ideally). bondholders take the hit after equity holders

Yes, that is right - if you tell people upfront.

And now they need to find ways to give more confidence to depositors, else they may want to:

 

JOIN THE MARATHON

 

Spain is being hollowed out by the bank runs - it is driving deflation, as money flees Spain (and its potential devaluation) for the "safety" of Germany and the UK.

 

Fewer deposits, means less bank lending, and downwards pressure on property prices and small businesses - they are shrinking fast.

 

Ultimately, there may be only two ways to stop it:

+ Europe guaranteeing deposits in Spanish banks (unlikely IMHO), or

+ Spain exiting the Euro, and putting up currency controls to keep the deposits in Spain

 

If I was Spanish (or Greek or Portugese), and wouldnt want to gamble by keeping my wealth in a local bank. I would "join the marathon" of bank deposits running out of the country.

=== ===

 

Some bulletpoints from the article:

 

+ Spanish real M1 deposits fell at an 8pc rate in mid-to-late 2011, guaranteeing the crash into double-dip recession that we now see.

+ Private sector credit has fallen for 18 consecutive months. Industrial output fell 7.5pc in March. Brussels expects the economy to shrink 1.9pc this year, with the crunch yet to come.

+ Spain’s Bankia fiasco has merely brought matters to head, though the details are shocking enough. A €4bn bail-out in mid-May. A €23bn bail-out two weeks later

+ ECB is holding the line with its three-year lending blitz. Spanish banks have taken up €316bn, allowing them to avert disaster as their debts comes due

+ The debt of the (Spanish) regions has reached €135bn, or 12.6pc of GDP, chiefly because they look after the elderly and bear the brunt of Spain’s demographic burden

+ He cannot devalue. He cannot cut rates or print money. He cannot mobilize a lender of last resort to eliminate all risk of sovereign default. He can only lament. "Europe has to come up with an answer because we can't go on like this for long," he said.

 

/see: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9293270/Europes-Maquina-Infernal-has-crippled-Spain.html

 

Note:

This big REVERSAL-of-Fortune came after DECADES of flows of speculative capital into Spain, chasing property investments. And Spain did nothing to stop those speculative flows. The article makes clear that they could have done something:

 

"The Bank of Spain tried in vain to check the flood of cheap capital from North Europe. Madrid ran a primary surplus of 3pc of GDP in 2007. Public debt fell to 42pc (Germany was 65pc at the time). Yes, Spain could have done more. It could have adopted Hong Kong controls on loan-to-value ratios on mortgages - 80pc, 70pc, 60pc, etc, until you choke the boom - but that is not what the EU or ECB said at the time."

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A Five-Day Bank Holiday ?

 

Fulford has some interesting thoughts in his latest Blog writing:

 

"The final showdown in the ongoing financial war is appearing imminent...

This would force an end game for the criminal cabal that illegally seized power in the United States.

 

Before that move, though, there will be a 5-day bank holiday in Europe followed by the end of the Euro and the re-introduction of old national currencies like the Deutschemark and the Drachma, Rothschild family sources say."

. . .

In any case once the corporate government of the US is put out of business, the Renminbi will become the currency of the world. The date given by two insiders for this event is September 16th. We again remind readers that many dates have come and gone without predictions turning true so please remain skeptical and only believe 100% when you actually see it happen.

 

However, it is true that China has been systematically buying up all natural products like trees, copper, farmland or anything tangible to back a reality based currency.

 

Will these parts of his comments prove to be on-the-mark?

Or a miss, like some of his other ideas?

 

/link: http://kauilapele.wordpress.com/2012/05/28/benjamin-fulford-5-28-12-insiders-predict-a-5-day-bank-holiday-in-europe-before-euro-ends-renminbi-may-replace-us-dollar-in-september-the-cabal-world-soap-opera-is-winding-down/#more-11469

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