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7 Reasons Why European Banks Are in Trouble

May 22, 2018

7 Reasons Why European Banks Are in Trouble

europe_1.PNG

While the euro crisis seems far away as all Eurozone countries ran government deficits below 3 percent of GDP, there is one problem for the euro that quietly keeps growing: the unresolved banking crisis. And this is not a small problem. The Eurosystems´and euro banks´ balance sheets totaled €30 trillion in January 2018, that is about 291 percent of GDP.

European banks are in trouble for several reasons.

First, banking regulation has become tighter after the financial crisis. As a consequence regulatory and compliance costs have rise substantially. Today banks have to fulfill demands by national authorities, the European Banking Authority, the Single Supervisory Mechanism, the European Securities and Markets Authority and the national central banks. Being at a staggering 4% of total revenue currently, compliance costs are expected to rise to 10% of total revenue until 2022.

Second, there are risks hidden in banks´ balance sheets. That there is something fishy in European banks´assets can quickly be detected when comparing banks market capitalization with their book value. Most European banks have price-to-book ratios below 1. German Commerzbank´s price-to-book ratio stands at 0.49, Deutsche Bank´s is at 0.36, Italian UniCredit´s at 0.23, Greek Piraeus Bank at 0.14, and Greek Alpha Bank at 0.34.

With a price-to-book ratio below 1, buying a bank at the current prices and liquidating its assets at book value, an investor could make profits. Why are investors not doing that? Simply, because they do not believe in the book value of the banks´assets. Assets are too optimistically valued in the eyes of market participants. Considering that the equity ratio (equity divided by balance sheet total) of the Euro banking sector is at only 8.3%, a down valuation of assets could quickly evaporate equity.

Third, low interest rates have contributed to increasing asset prices. Stocks and bond prices have increased due to the monetary policy of the ECB, thereby leading to accounting profits for banks.

…click on the above link to read the rest of the article…

Soon Comes The Deluge

January 20, 2016

Soon Comes The Deluge

The robo-machines are now having a grand old time hazing the August lows at 1870 on the S&P, and may succeed in ginning up another dead-cat bounce or two. But this market is going down for the count owing to a perfect storm.

To wit, the global and US economies are heading into an extended deflationary recession; S&P earnings peaked at $106 per share more than a year ago and are already at $90, heading much lower; and the central banks of the world are out of dry powder after a 20-year binge of balance sheet expansion.

Global Central Bank Balance Sheet Explosion

The latter is surely the most important of the three. It means there will be no printing press driven reflation of the financial markets this time around. And without more monetary juice it’s just a matter of time before a whole generation of punters and front-runners abandon the casino and head for the hills.

Even with today’s ragged bounce, the broad market has now gone sideways for nearly 700 days. The BTFD meme is loosing its mojo because it only worked so long as the Fed-following herd could point to more printing press cash flowing into the market or promises of “accommodation” that were credible.  But that will soon be ancient history.
^SPX Chart

^SPX data by YCharts

Indeed, it is already evident that “escape velocity” has again escaped. Q4 GDP growth is now running at barely 0.5%, and the current quarter could actually be negative for reasons we will analyze in the days ahead.

But the real economic situation is actually worse than the apparent flatling trend of recent months. As we have long insisted, the GDP does not measure true gains in national wealth or main street living standards.

…click on the above link to read the rest of the article…

Game-changing 19-minute video: Fed transcript proves open criminal admission of fraud worth trillions

October 14, 2015

Game-changing 19-minute video: Fed transcript proves open criminal admission of fraud worth trillions

John Titus, engineer and lawyer, writer and producer of Bailout, with YouTube channel of BestEvidence,read the latest Federal Reserve Open Market Committee meeting transcript (always delayed for five years), and discovered full admittance of financial fraud by the Fed in trillions of dollars. John explains:

BestEvidence’s newest film, “They Come from Planet Klepto,” undertakes an intensive examination of the transcript and exhibits from the Fed’s June 2009 FOMC meeting held during the first few critical months of the most ambitious monetary experiment of all time, which the Fed falsely swore was temporary in nature. As it turns out, the Federal Reserve never intended to unwind the radical balance sheet expansion it began 7 years ago at all, as one of the central purposes of the Fed programs—aside from enabling broke banks to erect an illusion of solvency big enough to justify bonuses—was to cover up the very Wall Street crimes that caused the meltdown of 2008 in the first place.

John’s main points, as best I see them:

  • 2009 Fed transcript reveals that the original “bailout” of $700 billion claimed as “troubled asset relief program” to buy toxic mortgage backed securities (MBS) was a LIE because they discussed how to make the public think they had an “exit plan” while not having one. The “bailout” climbed in value to $1.7 trillion, then to $16 trillion in “short-term loans.” US banks used the money to pay bonuses and buy competitors. PuppetGov documents this point at the closing 8-minute video.
  • The Fed created and transferred $1.7 trillion to insider banks to purchase MBS at more than full value when publicly sold at $.05/dollar (5% of full value). These MBS pooled loans were claimed as AAA, and were BBB at best. This fraud with sub-prime loans were hidden by appreciating home values, but when home values fell with job losses, MBS fire sales were at 5 cents/dollar. These mortgages destroyed title, were not really mortgages, and were sold more than once.

…click on the above link to read the rest of the article…

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