Saturday, October 1, 2016

Deutsche Bank's Lehman Moment

Last month, I posted in "No Matter how it comes out' that Deutsche Bank was in deep do do and that it could be the trigger that could likely cause the collapse of the Euro and the EU.  From all indications, the bank is approaching that tipping point where depositors are taking their 'hard' money out and the fractional banking dollars they have created are going to be uncovered or bare - forcing a liquidity crisis and limiting the options for DB to get cash.  The only alternative is for Germany and ECB to step in and do a bailout to save the bank.  But Germany has said it would not do so (at least for now).

Any help however is going to be temporary at best because DB has one of the largest exposures to derivatives on the planet with nearly $46 Trillion in financial contracts on its books.  That is more than ten times the German GDP and twice the national debt of the United States.  DB is like a bookie holding bets that he is praying he will never have to pay off - we all know what can happen if lady luck turns her back to you.  

Source:  Fortune Magazine
Pink links are to US Banks

These next few weeks will be interesting for DB.  Keep your eyes on the news.  If the bank runs continue into next week, be prepared for a chain reaction that can take the whole European system down and perhaps even the entire western banking system as well.  Is DB just too big to fail?  

Will the ECB and German central bank step in?  If they are going to do so, they better be planning now as events can soon spiral out of control fast.  And after they step in, what then of those entities backing the bank..?

We are in interesting times.  I am just hoping I can get back to the land of smiles before everything blows up...

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