The European Banking System is Finally on the Verge of Collapse

Extrait de: The European Banking System is Finally on the Verge of Collapse, By Keith Fitz-Gerald, Chief Investment Strategist, Money Morning, August 24, 2011

I hate to sound alarmist, but it looks as though the European banking system - and consequently the global banking system - is edging its way towards another epic collapse.

That means in just a few short months, stocks could be back at their 2009 lows while gold prices travel north of $2,500 an ounce.

This is the worst-case scenario that's been bandied about ever since Europe's debt problems first came to light.

How do we know that this is what's happening?

Because somebody is having trouble obtaining the money they need -- and they just borrowed it from the lender of last resort.

The European Central Bank (ECB) last week lent $500 million dollars to an undisclosed Eurozone bank through a credit mechanism that had been dormant for the past 12 months, with the exception of one $70 million draw in February.

This comes as no surprise - the warning signs have always been there.

In fact, I warned Money Morning readers just a few weeks ago that the Eurozone could have its own American International Group Inc. - or worse, its own Lehman Bros. Holdings Inc.  lurking somewhere in the shadows.

Still, while this may not surprise you, it certainly surprised the heck out of the rose-colored glasses crowd that can't seem to understand the European sovereign debt crisis is finally about to wash up on our shores.

That's why stocks in the United States and around the world have taken such a brutal beating recently. Officially the story is about the renewed worries over Europe's debt crisis and U.S. data that suggests we're once again sliding into a recession.

But what's really happening is that global traders are moving quickly to liquidate holdings and raise cash while they can.

That's why so-called risk assets like stocks, corporate bonds, industrial metals, oil and higher-yielding junk instruments are tanking, as gold, the dollar and the yen are bucking up.

The U.S. Federal Reserve already is engaging in damage control. President of the Federal Reserve Bank of New York William Dudley has said the risks of a double-dip recession are "quite low," despite anemic growth. And it's been rumored that U.S. Federal Reserve Chairman Ben S. Bernanke will telegraph new monetary stimulus measures Friday during his speech in Jackson Hole, WY.

But really, who are they kidding?

This crisis has nothing to do with liquidity
(which is how the central bankers are trying to fight it)
and everything to do with solvency
(which is how they should be fighting it).

Not only are the risks of a global recession mounting by the minute, but I believe the concentration of risks is approaching critical mass.

A Return to 2008

First take a look at the Euribor-OIS swap (the spread between the Euro Interbank Offered Rate and the Overnight Indexed Swap). This swap, widely regarded as a gauge of fear in the European banking system, is at levels we haven't seen since April 2009, and is climbing rapidly towards levels we experienced during 2008 at the height of the financial crisis.

These rates, along with the London Interbank Offered Rate (LIBOR), represent a sort of feedback mechanism similar to the body's circulatory system. If the system goes into "shock" there will be a negative, self-sustaining reaction.

At the same time, shorter-term euro basis swaps have fallen to the lowest levels we've seen since Lehman Bros. blew up.

The premium that European banks are paying to borrow in dollars through the swaps market is at its most extreme level since the credit crisis of 2008. The cost of converting euro-based payments into dollars as measured by the three-month cross-currency basis swap fell as much as 93 basis points below the Euro Interbank Offered Rate (Euribor), indicating a higher premium to buy dollars.

Historically, anything in the neighborhood of -150 basis points suggests imminent bank failure.

Extrait de : L'euro est "en train de se décomposer" (Greenspan), L’Echo, 23 août 2011

Pour Alan Greenspan, ancien président de la Fed, les banques européennes sont en difficulté car elles détiennent des titres de dette de pays comme la Grèce.

L'ancien président de la banque centrale américaine (Fed) Alan Greenspan a estimé mardi à Washington que l'euro était "en train de se décomposer" et que cela expliquait les difficultés de l'économie américaine à retrouver du rythme.

"L'euro est en train de se décomposer",

a déclaré Greenspan lors d'un forum à Washington.

Selon lui, les banques européennes sont en difficulté car elles détiennent des titres de dette de pays comme la Grèce.

"La raison pour laquelle nous sommes si lents à croître aux Etats-Unis
est le niveau d'incertitude"

provoqué par cette situation, a-t-il estimé.

Greenspan a présidé la Fed de 1987 à 2006. Agé de 85 ans, il a été l'un des principaux instigateurs de la déréglementation financière aux Etats-Unis ayant contribué au déclenchement de la dernière crise et a toujours rejeté les accusations des économistes pour qui la politique de taux ultrabas menée par la Fed de 2003 à 2005 porte une lourde responsabilité dans la bulle immobilière ayant précédé son éclatement.

Les blogueurs :

pythagore à 13:52 - 24 août 2011

il accuse les autres parce qu'il ne veut pas reconnaître ses erreurs

grimmel à 07:13 - 24 août 2011

Alors là, c'est le pompom ... La faute à l'Euro !

Nono242 à 22:12 - 23 août 2011

Et qui est responsable des "subprimes" ? Sa memoire se decompose aussi

Salomon à 20:50 - 23 août 2011

Ah voilà autre chose maintenant,...... c'est la " faute " à l'Europe et aux Grecs si les USA sont en souffrances.

FJACK à 20:06 - 23 août 2011

A voir sa tête, il n'y a pas que l'Euro qui est occupé à se décomposer