Can The EU Survive The Next Financial Crisis?
(hint-it did not really survive the '08 crash as the amounts of derivatives-ala creating massive amounts of paper debt to mask the under-lying issues of the previous policy's- began to steadily increase just prior to it)
Despite the ECB’s subsidy of the Eurozone’s banking system, it remains in a sleepwalking state similar to the non-financial, non-crony-capitalist zombified economy. Gone are the heady days of investment banking. There is now a legacy of derivatives and regulators’ fines. Technology has made the over-extended branch network, typical of a European retail bank, a costly white elephant. The market for emptying bank buildings in the towns and villages throughout Europe must be dire, a source of under-provisioned losses. On top of this, the ECB’s interest rate policy has led to lending margins becoming paper-thin.
(this is the result of the disconnect between stated performance and actual results. The system decided to go to a model called mark-to-model where everything they own was valued at whatever they decided it was worth-instead of using the mark-to-market method which uses actual price discovery or real prices derived from actual transactions-there is also another factor here called Darkpools but these are not reported and exist so that the holder's of all these bad assets can transfer them back and forth amongst themselves)
A negative deposit rate of 0.4% at the ECB has led to negative wholesale (Euribor) money market rates along the yield curve to at least 12 months. This has allowed French banks, for example, to fund Italian government bond positions, stripping out 33 basis points on a “riskless” one-year bond. It’s the peak of collapsed lending margins when even the hare-brained can see the risk is greater than the reward, whatever the regulator says. The entire yield curve is considerably lower than Italian risk implies it should be, given its existing debt obligations, with 10-year Italian government bonds yielding only 2.55%. That’s less than equivalent US Treasuries, the global risk-free standard.
(this also does not factor in the real, observed rate of inflation which is why the author states that the actual rate is far lower-among other things)
Bond prices, such as that of Italian 10-year debt yielding 2.55%, are therefore meaningless in the market sense. This has not been much of an issue so long as asset prices are rising and the global economy is expanding, because monetary inflation will keep the fiat bubble expanding. It is when a credit crisis materializes that the trouble starts. The fiat bubble develops leaks and eventually implodes.
(credit expansion or new issuance of it, has been a serious problem-look at greece, iceland-in paricular, and what habbened there)
Greek debt crisis with examples from Iceland, US, Euro and U.S.
https://www.thebalance.com/what-is-a-sovereign-debt-crisis-with-examples-3305748
Now that the global economy has stopped expanding and is on the brink of recession, under these changing conditions the monetary, systemic and economic dangers facing the Eurozone are rapidly rising. This is a problem beyond the ability of the ECB to contain. Politicians and their institutions in Brussels seem unaware of the approaching storm, but when they do become aware, they will turn to group-think for protection. Like fish in a tightening bait-ball, they actions are set to accelerate their own demise.
(think pushing on a string as once you pass a certain point there can be no real way of solving this if you are still in complete denial regarding the reason(s) that created it.
It is becoming increasingly obvious to independent observers that the EU supra-national socializing model is failing structurally, politically, economically and financially. The next credit crisis, which appears to be evolving from the seeds of today’s events, looks set to end the European dream.
(that is if you really believe it existed from a standpoint of monetary policy and how it has been implemented over the last few decades)
this is one of the main reasons that Brexit has been such a long, drawn out affair as once you cut of access to the financial center of London to the EU, the EU must stand on it's own. IT will not be able to perform as it needs to. See Deutsche Bank and it's ongoing attempts to fold itself into Commerzbank. Similar situations habbened in the US during the '08 crash with one example being Country-Wide Mortgage Co. being placed or 'purchased by Bank of America, another being Bear Stearns folded into JP Morgan. Many examples of this.
https://www.zerohedge.com/news/2019-03-29/can-eu-survive-next-financial-crisis
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