Europe’s Lost Decade as $7 Trillion Loan Crunch Looms!
- “It was a carefully contrived occurrence. International bankers sought to bring about a condition of despair, so that they might emerge the rulers of us all.“
Louis McFadden on 1929 Stock Market Crash. Louis McFadden died of poisoning shortly thereafter.
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“The depression was the calculated ‘shearing’ of the public by the World Money powers, triggered by the planned sudden shortage of supply of call money in the New York money market….The One World Government leaders and their ever close bankers have now acquired full control of the money and credit machinery of the U.S. via the creation of the privately owned Federal Reserve Bank.”
Curtis Dall, FDR’s son-in-law as quoted in his book, My Exploited Father-in-Law
– - The world is heading towards a global economic, financial and monetary meltdown! It is inescapable! It will start in the Eurozone, spread to UK, the rest of Europe, Japan …. and finally America. The rest of the world will follow down the toilet bowl.
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Europe’s lost decade as $7 trillion loan crunch looms
By Ambrose Evans-Pritchard, http://www.telegraph.co.uk/
Europe’s banks face a $7 trillion lending contraction to bring their balance sheets in line with the US and Japan, threatening to trap the region in a credit crunch and chronic depression for a decade.
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The risk is “Japanisation” without the benefits of Japan: without a single government, or a trade super-surplus, or 1pc debt costs, or unique social cohesion.
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Even today, the jobless rate for youth is near 10pc in Japan. It is already 46pc in Spain, 43pc in Greece, 32pc in Ireland, and 27pc in Italy. We will discover over time what yet more debt deleveraging will do to these societies.
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Stephen Jen from SLJ Macro Partners says the loan to deposit (LTD) ratio of Europe’s lenders is 1.2, much like Japanese banks in the early 1990s at the onset of the country’s Lost Decade (now two decades).
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How Europe allowed this to happen will no doubt be the subject of many enquiries. Suffice to say that it was an intellectual failure by everybody: lenders, economists, regulators and the European Central Bank. The ECB misread the implications of the global capital surplus in the middle of the last decade (like the Fed) and gunned the M3 money supply at double-digit rates (like the Fed).
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This great error further juiced the fatal flood of lending from North Europe to Club Med. Interestingly, it is what US lending did to Germany in the late 1920s. When the music stopped — when Wall Street cut off loans, as Germany has now cut off loans to Spain — trouble ensured within two years. Weimar limped on, but not for long.
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The Japanese eventually trimmed their LTD ratio to the current safe level of 0.7pc, the same as US banks. It is a fair bet that new bank rules and market pressure will force Europe to do likewise. Mr Jen said this means slashing the loan book from $19 trillion to nearer $12 trillion, given the dearth of fresh deposits.
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It will be an ice-cold douche for the world. European banks have $3.4 trillion of cross-border loans to emerging markets (BIS data), three-quarters of the total. They account for 46pc in Asia, 63pc in Latin America, and 90pc in Eastern Europe.
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Either these banks will cut funding to Eastern Europe, or they will curtail loans at home. Most likely they will do both. Mr Jen said a lot of nasty “feedback loops” will blight the whole European region for a long time.
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The sheer scale of Europe’s bank excesses — roughly equal to Alan Greenspan’s household bubble in America — shows what EU leaders are up against as they thrash out their latest “Grand Plan” to save Euroland.
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… for the full article click here!
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