- John Rubino, 8 Feb 2016: Another Monday, another extreme market move. This time, though, underlying conditions are changing in an especially serious way. European banks are running into various kinds of trouble that, if not resolved in a hurry, might lead to a replay of the 2008-2009 financial crisis. So keep an eye on Banca Monte dei Paschi in Italy and Deutsche Bank in Germany. As they go, so might go the world in 2016.
- 2007 All Over Again, Banks Starting To Implode
by John Rubino, http://dollarcollapse.com/ , 8 Feb 2016
So far, each financial crisis in the series that began with the junk bond bubble of 1989 has been noticeably different from its predecessors. New instruments, new malefactors, new monetary policy experiments in response.
But the one that’s now emerging feels strikingly similar to what just happened a few years ago: Banks overexposed to assets they thought were safe but turn out to be highly risky see their balance sheets deteriorate, their liquidity dry up and their stocks plunge.
This time it’s starting in Europe, where bank stocks are down by over 20% year-to-date and credit spreads are exploding. For a general look at this process see Is Another European Bank Crisis Starting?
Not surprisingly, the scariest stories are emanating from Italy which, despite inventing the mega-bank concept during the reign of the Medici, seems unable to grasp how money actually works. Check out the following Wall Street Journal chart of non-performing loans. When 16% of an entire country’s borrowers have stopped making their payments, that country is pretty much over.