European Banks – Does A Dropped Bucket Of Piss Crash, Or Just Evaporate?

There are times I see a link in ‘tips’, open it, know I want to read it, but “life happens”… and it sits open and unread for days… weeks.

Eventually I get a Round Tuit and it gets read. Sometimes it’s ‘aged out’ of relevance. Others have ripened to a fine cheddar…

This one is from a ‘tip’ here (h/t Larry):

Larry Ledwick says:
30 September 2016 at 2:30 am
David Stockman also has an item on Deutsche bank and European banks.

The ‘meat’ of it is that the attempt to ‘fix’ the financial ‘crisis’ (by which they mean government and central bank induced over lending to bad borrowers and excessive money printing) by applying more government meddling (called ‘rescue’) to assure that The Friends Of The Rich And Powerful don’t take the same hit everyone else does; has resulted in negative or zero interest rates (ZIRP zero interest rate policy) on government debt and that causes two Very Bad Things. 1) Anyone who can, borrows up the wazoo at zero and buys assets with earnings, any amount of earnings. Houses, businesses (stock), whatever. 2) Banks don’t make any money on the loans.

The slowdown and halt, then the inability for Keynesian Stimulus to stimulate, is called a “liquidity trap” and was well understood by Keynes. By our present bankers and governments, not so much…

Now, as you might guess, not making those loans at zero makes them hard to get, so sometimes this is “fixed” by regulations requiring lending and by “oversight” hearings and such. This, too, causes the banks to make less profit. No profit means the bank stock and bonds drop as the bank is at risk of that thing called ‘going out of business’ (a concept beyond the ken of folks in government…)

Then he indirectly raises the question of “Once you have already ‘bailed out’ the banks, and they are being killed by your policy, how do you bail them out again?”…

It’s a very perceptive read…

But investors who believed in all the hype and in Draghi’s promises and in Merkel’s strength and in the willingness of all of them to do whatever it takes to protect bank bondholders and stockholders, and who believed in the miracle of Spain’s recovery, and in Italy’s new government and what not – well, they’re not amused.

For them, it has been bloody. The global financial crisis got swept under the rug. Then the euro debt crisis took down some banks at the periphery, and taxpayers stepped in to bail out the bondholders, mostly, and a lot more things got swept under the rug. But the problems weren’t solved. And as the decomposing assets under the rug kept exuding their pungent odor, investors held their nose and played along for a while.

But now it’s just getting worse. And investors are wondering what exactly is under these rugs – or maybe they’d rather not know for it’s too ugly to behold. And every time someone does look, for example at the Italian banks, they find even bigger problems that have started to metastasize.

This banking crisis has the potential to transmogrify into a financial crisis. All it takes is for one of the big ones to suddenly topple. The flow of credit would freeze up instantly. In an economic system that depends on credit, and whose lifeblood is credit, such an event is a financial crisis.
If a bank stock plunges from €0.04 to €0.01 over the 52-week period, such as Banco Comercial Português in Portugal, it has been toast for longer than 52 weeks, and the percentage plunge is essentially meaningless because shares were worthless to begin with.

The shares of five of these banks trade under €1. Another 8 banks trade under €3. These 29 banks form a big part of the European financial system. It includes some of the world’s largest banks, such as Deutsche Bank, Societe Generale, and BNP Paribas. It includes a slew of other “systemically important financial institutions,” such as Unicredit, ING, and Santander.

They’re troubled at the same time. The can has been kicked down the road for years. Now negative interest rates appear to have inadvertently crushed the can.

Love this graphic from the article. Austrian and Dutch near the top, German, Spanish, and Italian near the bottom. One Greek and one Portuguese at the basement level… Gee, isn’t it the German and Spanish who are most in bed with that whole “Green Power” thingy?…

European Bank Shares loss

European Bank Shares loss

Now, to my question, if you have a large bucket of piss, stand on a roof and pour it rapidly over the edge, does it make a SPLAT as it crashes to the ground, or does it just evaporate on the way down, like the stock price of Deutsche Bank?…

Deutsche Bank 10 Year slide

Deutsche Bank 10 Year slide

Or does that depend on how high you have inflated the roof before the dumping starts?…

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics - Trading - and Money, World Economics and tagged , . Bookmark the permalink.

13 Responses to European Banks – Does A Dropped Bucket Of Piss Crash, Or Just Evaporate?

  1. Larry Ledwick says:

    By the way is changing from an open aggregator of interesting financial news items to a subscription only site, so older links may become unreachable as that moves takes place.

    Pity as it was a very good one stop shopping place to see what is happening in the world economy.

  2. Larry Ledwick says:

    This guy is obviously pitching gold but his episodes in the invisible crash series have some interesting observations and food for thought.

  3. philjourdan says:

    Perhaps they are just waiting for a scapegoat to pull the rug out from under the cesspool. It should have crashed earlier as you said. That it has not and is very untenable is they are looking for the scapegoat. And we will find out in a month.

  4. tom0mason says:

    Bubble economics, so pretty to watch until it’s realized those are bubbles of piss and farts and nothing much else.
    And the bad smell of the current generation — is handing tomorrows generations so much rotting debt and deficit.

  5. gallopingcamel says:

    My understanding is that Japanese banks started ZIRKing long before the Germans so why did Deutche Bank collapse first?

  6. Larry Ledwick says:

    Flash crash on the pound due to Brexit

    The pound suffered a “flash crash” in Asia Friday on a computer-generated sell-off in the beleaguered currency, as tough talk from French President Francois Hollande underscored the perils ahead for Brexit-bound Britain.

    The magnitude of the six percent plunge showed there was likely further volatility ahead for sterling, which has been hammered this week after Britain’s Prime Minister set out a timetable to leave the European Union.

    In early trade the pound fell off a cliff to hit a 31-year low of $1.1841 before immediately rebounding to around $1.2450.

  7. p.g.sharrow says:

    Sounds like someone is trying to crash the pound. “Computer” glitch, followed up with talking heads pushing the EU mime. I would bet against the Euro…pg

  8. E.M.Smith says:


    Yup. I’d suspect Soros and friends with a dual economic political angle, and Soros with pound shorts.


    Japanese kairetsu gives mutual support, their cultural desire to do anything to ‘save face’, and their banks make money from ownerships as well as interest spreads… add a compliant goverment policy making and a central bank willing to loan any amount of money, then season with a nation sized rug covering huge amount lumps…

    Short form: You know Japanese banks have not functionally failed how?

  9. Larry Ledwick says:

    We are also seeing financial stress building in Saudi Arabian banks as the low oil prices continue to eat into their balance sheets as revenue stays depressed and their social spending stays up.

  10. E.M.Smith says:

    Frankly, the Saudi issue worries me the most. If they start to collapse, the whole islamic world goes up in flames and the EU with it as the invasion would make the present refugees look like a school outing… and the EU needs loans from excess petrodollars to stay funded…

    With everything from Iceland to Bangldesh in collapse and turmoil, it’s not going to be pretty…

    Saudi has turned the demographic corner and can’t go back without massive deaths. They either get diversified industry or blow up. All while oil supply globally rises and demand has major threats… so WHEN they start to pull their € Trillions home, what happens everywhere else?…

  11. pg sharrow says:

    Like the Chinese and the Japanese before them the Saudi can only move money. True American wealth resides in country and can not be moved. The rest of the world rides on the American coattails. The House of Saud can not even manage money. Even now it evaporates in socialism as their wealth in oil is shipped to Europe, Japan and China for less money. Meanwhile, the Americans save their energy wealth in country as they make oil wealth less valuable world wide to those that must sell it for money..,pg

  12. Larry Ledwick says:

    Another item on impending inflation in the UK and its possible side effects.

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