Forum Post: The Bank Run Has Begun In Europe
Posted 12 years ago on Nov. 24, 2011, 5:32 a.m. EST by alouis
(1511)
from New York, NY
This content is user submitted and not an official statement
http://www.cnbc.com/id/45417735
Has the Bank Run Begun in Europe?
Published: Wednesday, 23 Nov 2011 | 1:33 PM ET Text Size By: John Carney Senior Editor, CNBC.com
In many ways, the answer to that question is obviously yes.
Money-market funds in the United States have quite dramatically slammed shut their lending windows to European banks. According to the Economist, Fitch estimates U.S. money market funds have withdrawn 42 percent of their money from European banks in general.
And for France that number is even higher — 69 percent. European money-market funds are also getting in on the act.
Bond issuance by banks has seized up because buyers have gone on strike.
From the Economist's Free Exchange Blog:
In the third quarter bonds issues by European banks only reached 15 percent of the amount they raised over the same period in the past two years, reckon analysts at Citi Group. It is unlikely that European banks have sold many more bonds since.
Corporate depositors are also pulling their cash.
Free Exchange:
“We are starting to witness signs that corporates are withdrawing deposits from banks in Spain, Italy, France and Belgium,” an analyst at Citi Group wrote in a recent report. “This is a worrying development.”
And there are troubling signs that banks are even running out of collateral to back their borrowings from the European Central Bank .
So far the liquidity of the European Central Bank (ECB) has kept the system alive. Only one large European bank, Dexia, has collapsed because of a funding shortage. Yet what happens if banks run out of collateral to borrow against? Some already seem to scrape the barrel.
The boss of UniCredit, an Italian bank, has reportedly asked the ECB to accept a broader range of collateral. And an increasing number of banks are said to conduct what is known as “liquidity swaps”: banks borrow an asset that the ECB accepts as collateral from an insurer or a hedge fund in return for an ineligible asset — plus, of course, a hefty fee.
Right now, according to sources I spoke with in Europe, there isn't much of a sign of retail customers withdrawing funds. But hoping that customers don't notice what is happening to every other source of bank funding is not exactly a strategy for stability.
RELATED LINKS Is Germany in Trouble? A Fiscal Union Won’t Fix Europe Why Europe's Banking Crisis Squeezes US Credit Supply Questions? Comments? Email us at NetNet@cnbc.com
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Lets just get this collapse done and over with
Looks like it might be happening.
http://www.nytimes.com/reuters/2011/11/24/business/business-us-germany-auction.html
Analysis: Poor German Auction Spells Tough Times for Euro By REUTERS Published: November 24, 2011 at 2:12 PM ET E-MAIL SEND TO PHONE PRINT LONDON (Reuters) - Weak demand at a German debt auction suggests investors are starting to shun even the euro zone's strongest economy, which could trigger more losses in the shared currency as many shift from euro-denominated assets to safe havens outside the region.
As Italian, Spanish and even French yield spreads have blown out to record levels in recent weeks, the trend has been for portfolio flows to switch into German Bunds, resulting in no foreign exchange outflows from the euro zone.
Those flows, combined with talk of repatriation of capital by euro zone banks desperate to shore up their balance sheets as money markets seize up, have been cited as reasons behind the euro's recent resilience around $1.34.
But that appears to be changing and on Thursday the euro slid to a 7-week low at $1.3316 on trading platform EBS.
The Euro was too ambitious from the start because of the varying cultural, monetary and political structures of each country . Now instead of letting the weaker countries fail, cutting their losses and centralizing the currency among the fiscally responsible members they seem willing to scuttle the ship hoping austerity measures will produce enough life rafts. When the banks start trading Euros for dollars you'll know the end is in sight.
Too much pride and not enough common sense.
Unlike ECB, the Fed created trillions of dollars and debasing its currency.
"The Federal Reserve has expanded its monetary base from $873.8 billion in September of 2008 to its current level of $2.036 trillion. U.S. financial institutions now have over $1.045 trillion in excess reserves, compared to only $59.5 billion in excess in September of 2008." [ http://inflation.us/2010inflationreport.pdf ]
Europa could do the same to pay off the debt but Germany is intensionally resisting it. How would that impact EURO/USD do you think?
Yes, Germans have a fear of inflation and for good reasons. I'm not the best resource for info on currency or options trading. Here's an article that does a good job explaining the possibilities.
http://tycoonreport.tycoonresearch.com/articles/151117308/huge-euro-move-coming-how-to-trade-it
Good article, and I say exactly the case: it's a power struggle. Here is how I look at it:
1) Banksters will push ECB to print money, hence socializing their loses over the people of all EU nations with inflation mechanism. Our FED did it here against all opposition from the People. Our politicians did not give a shit to the voice of the People as they serve the banking elite before the People.
2) German law makers are the only ones that are trying to protect the people of EU nations against bankster's socialize-loses-with-inflation policy. And I applaud Germans.
And I think yesterday's German bond auction shortage is the part of that power struggle.
[ Here is a long version of my opinion: http://occupywallst.org/forum/join-me-applauding-chancellor-angela-merkel-of-ger ]
I see the ECB is considering increasing loan terms to banks so that should appease the European market at least for today lol...
They'll try every trick in the book before they print money. Good post in your other thread and I agree with all that you wrote.
I join you in your lol. Unlike us, looks like EU has a better tract record of legislation power and I have more faith in them than our corrupt politicians. Here in US we become a TRUE Banana Republic. We MUST to stop them – I'm grateful that #OWS has started.