The next step is the collapse of the Japanese, then Europe, and then the American banks. About it and talk.
Elephant's something we did not notice
We all irons past eight years, talked about revive the global financial system, the integrity and stabilizing the political and economic model in Europe, stunning results in the United States. Who among us has not dreamed to be in the center of venture capital transactions, when clumsy unprofitable company suddenly becomes a billion-dollar business. We are told that it was possible to deal with Greece, with a debt grows Eurozone manufacturing and so on. There is some slowdown in corporate profits, but who cares?
Let's just look at the stock charts of the largest banks in Europe.
HSBC. The largest bank in Europe. The cost of the bank's shares has been declining for three years and is now almost at the 2008 level of the peak of the crisis
BNP Paribas. The second largest bank in Europe. Halfway to the bottom in 2008
Deutsche Bank. The fourth bank in Europe. Complete collapse of the stock. The bank is cheaper than in the crisis year of 2009, and, as we see in sales volume, there is a mass dumping of shares. Bank fell by 10 times since 2007
The rest of the banks in Europe about the same situation.
The third "dominoes"
The banking crisis in Italy there was no accident. After the 2008 crisis, the Bank of Italy gradually building up greater and greater credit mass in which the share of "bad" debt rose to 20% in recent years.
On the chart, the percentage of bad debts bad Italian banks rose to 12% of GDP by the end of 2015, GDP growth is reduced by 25%, even the most conservative banks will have serious problems. Business is ruined, and no one to repay debts. In 2016, the share of "bad" debts left over 20% of GDP.
Italy - the fourth country in Europe in terms of GDP and is one of the weakest (Greece only weaker). The national debt is more than 130% of GDP. Unemployment - a little lower than in Greece, the total portfolio of non-performing loans exceeded $ 400 billion is obvious that the banking system will require significant assistance, which the federal government is not there.. In the best case, using different tricks, banks will be able to "razrulit" up to 40% of non-performing loans, but it is obvious that it is almost impossible.
Competent investors blown away - bank shares are in the agony of death, and of the ECB reach a completely unequivocal signals - save yourself, the aid money is not, under the laws of the European Union, adopted after the collapse of 2008, depositors strip the last.
The new Lehman Brothers, but otherwise all good
Once the ECB has called Italy the weakest link in Europe's banking, enraged Italian Prime Minister Matteo Renzi called the weakest and at the same time the most dangerous element not only in Europe but throughout the world Deutsche Bank. If the monetary authorities will allow Europe to fail Italian banks - on the order of Deutsche Bank as a holder of the largest in the $ 75 trillion derivatives portfolio in the world, which includes a large number of financial instruments of Italian banks.
At the end of its existence, Lehman Brothers had a ratio of equity to reserves only 3%. The fall of the total value of assets in the portfolio to refinance more than 3% of the bank destroyed.
Today, these same figures shows Deutsche Bank with 3.5% reserves and the volume of the portfolio in the $ 75 trillion global GDP roughly equivalent.
Investors are watching the Deutsche Bank since 2013, sees two parallel universes: one bank and officials warn about the wonderful position of the Bank and that he managed to get out of the crisis in 2008, to another bank repeatedly issues additional shares and in June 2016 fails the stress test by the Federal Reserve, the IMF calls the bank the biggest threat to the banking system of the world. The result - almost complete impairment of the bank's shares.
Citi Bank with Deutsche Bank issued a statement saying that the bank needed to raise the level of reserves before 2017 to at least 4%, to increase reserves by € 7 billion. After Deutsche reported a € 7 billion in losses for 2015.
Brexit? What Brexit?
After Brexit markets and banks had to lie on the blades, but this did not happen. Even the investment division of Goldman Sachs, to recommend to customers to go from a stock as soon as possible, we have to right now be explained to those who listened to him. After all, the markets after Brexit not only not fallen, but rose by more than 10%. How can this be, if after 2008 the activity of private investors in the market fell several times and if in 2016 for 17 consecutive weeks investors withdraw money from the market?
The graph clearly visible flow of money funds. Red columns in the negative zone - closing of positions and withdrawal.
So, who is pulling the market up, they should have long ago to be at the bottom?
A graph that explains everything
In the graph we can see the overall asset purchases by central banks (where the BoJ - The Bank of Japan, Fed - Fed, ECB - European Central Bank, EM - banks in developing countries, SNB - Swiss National Bank).
So who are aggressively buying up everything, when everyone else is selling? The ECB and the Bank of Japan (the red and the blue area in the graph).
Why do they need it? Why both banks so aggressively releasing more and more liquidity in the market, by declaring all large programs QE (quantitative easing), rising asset prices all to greater heights?
Japan tsunami
Imagine for a moment that you just can not get out of the crisis for many years. Prices of goods in your country do not grow, and inflation is at a minimum. In a country with a stable currency, a strong business, a budget surplus and low debt burden, deflation may even be useful, including for consumers and competition.
However, this is not the case record overextended countries like Japan. Due to the fact that your citizens are disciplined like robots and actively invest their savings and pensions are in your state bonds, you release a sea of debt permanently and can theoretically do this forever, blowing more and more credit bubble.
But all this does not work, prices are not rising, inflation is close to zero, and then suddenly, for no apparent reason the country falls into deflation, revealing all the monstrous debt load and increasing the volume of bad debts.
Now, any bank, any company must pay you for what you give them the money return on government bonds in 10 years. Yes, that really there, for what keeps the money in your correspondent accounts.
All anything, but there is one problem - the boundless release the money does not create inflation, how would you like it or passing devaluation, and you deeper and deeper lumps deflationary spiral, destroying our economy. And the deeper the spiral, the more you release the money and debt, the lower the value of the assets, the greater the revaluation of collateral creates more and more toxic debt.
At the last meeting of the G7, Japanese Prime Minister Shinzo Abe said that the world is on the verge of financial collapse, a hair's breadth reminiscent of the days before the collapse of Lehman Brothers. Perhaps he still knows he's talking about.
powder keg
I suggested that it would be the spark Brexit that explode markets. In part, it's what happened, but I could not imagine what a massive pouring of liquidity will provide the ECB and the Bank of Japan's market. Obviously, the market save in all possible ways, all stall instantly pay off, the central banks of all the forces trying to keep the value of the assets afloat, otherwise the major banks, one after another begin to collapse like Lehman Brothers. The ECB and the Bank of Japan in a panic - and use all possible manipulations.
Fed in 2016 stopped the latest quantitative easing program (simply: the release of new money), and the only thing that can keep the markets afloat - it's just corporate profits. But the past two months only bring news about the mass reduction of profits in all top corporations, which kept the indices, the producer price index (Industrial PMI), as well as the industrial production index (US industrial production) has been declining for 9 consecutive months of growth instead.
Now only one sharp shock to powder magazine blew up.
What will it be? The collapse of Europe (Grexit, Italexit, Portoexit), a major terrorist attack, the US military action against China in the South China Sea, the bankruptcy of Deutsche Bank, may, bankruptcy major Japanese banks and generally unpredictable events like "9/11" can conspirological secret srezhessirovannoe world behind the scenes for the writing off of debts. Who knows?
One obvious now: the world is already in deep financial crisis and blow up banks and markets for them can one single event, the shock of which would cause a massive margin call and the subsequent closing of positions that can not kill the ECB and the Bank of Japan.
Now you can you can be sure of only one thing - the oil market leading the Central Bank no effect, in practice, can not render. Oil is living her life. Off the coast of Singapore (as a hub between the Middle East and China) have accumulated hitherto unprecedented number of supertankers facing months laid up and performing a single function - storage. These tankers are not going anywhere, as they do not toss money. But more about that another time.
These tankers at the coast of Singapore are also causing many companies to lose a lot of money. They have to pay a lot to hire them. If oil prices keep low (which they will) this will cause more debt. At this moment anyone should buy gold, silver, bitcoin and mining shares. Unfortunately, many people don't realize it. And if you explain this to them, they don't believe you. They are also scared to change worthless fiat currency for bitcoin. That's the worst of all.
Excellent post.All explained in detail.
Good assessment of current situation. Thanks.
Indeed it is frieghtening what seems to be coming in the near future.
Let's all prepare accordingly where ever your location and conditions.
The "powers that be" will be in such a bind, so the scariest to me would be the old adage: " When all else fails, make war"
Regards,