By Dominique de Bailleul
“I think we are heading for a market shock in September or October that will match anything we have ever seen before,” an unnamed source at a major European bank told the U.K Telegraph, Friday.
With the fear of, yet, more war—especially with Iran, a likely spark for WWIII —liquidity-trapped central bankers, political squabbling within German and between eurozone members over the fate of the euro, solid evidence of a global economic catastrophe lurking, and a nasty U.S. presidential election between two grotesque candidates nearing, any hopes of consumer spending or capital formation to come to the aid of an insolvent banking system has already been thoroughly discounted in the price of the bank stocks.
And of course, it was the smart money skipping town during the two-year-long phony ‘rebound’, leaving the inevitable ‘act II’ of despair to the retail investor and captured institutionals as the usual bag holders.
“A more severe crash than the one triggered by the collapse of Lehman Brothers could be on the way,” according to the Telegraph journalists, Harry Wilson and Philip Aldrick.
Contrary to the paid cheerleaders of U.S. economy, no one is in the mood to commit to anything productive or able to consume the products (if he could) during the most tumultuous times since the Great Depression, leaving the middleman, the banks, with nothing to do.
“The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008,” a senior London-based banker told the Telegraph.
Whether the problem is a shortage of liquidity or an abundance of banks with an overabundance of bad assets, several very big banks are on the brink of failure—again. And all the banker insiders know who is who, and who isn’t going to make it unless the money printing and bailouts increase more rapidly—and soon.
This time, the world’s no. 1, 5 and 10 ranked European banks (by assets) are in trouble, with combined assets totaling $7.6 trillion.
“Credit default swaps (CDS’s) on the bonds of Royal Bank of Scotland (no. 10), BNP Paribas (no. 5), Deutsche Bank (no. 1) and Intesa Sanpaolo, among others, flashed warning signals on Wednesday,” stated the Telegraph.
The article goes on to quote that the CDS rates on RBS paper reached record highs, Wednesday, surpassing the spike premium paid during the height of the global financial meltdown of October 2008.
So, ‘act II’ of the global financial crisis is about to begin, just as George Soros had warned. According to Soros’ SEC 13-F (ending Jun, 30), the billionaire insider reported selling all of his fund’s banking sector shares, and showed his appetite for holding gold increased markedly.
Therefore, the question doesn’t appear to be whether the Fed will be there to save the U.S. banking system (it will), the question is whether the ECB will be allowed to copycat the Fed. We’ll know on Sept. 12, when the German high court rules on the constitutionality of participating further in eurozone bailouts.
And a further question is: when will the central banks overtly announce more easing? Will the ECB (assuming Germany somehow gives it the green light) and the Fed wait for something to ‘break’ before acting, or will the central bankers preempt the inevitable collapse?
We’ll find out in September and/or October. In the meantime, there are always the black and gray swans of war (or something out of the blue) to further complicate any expectation of a direction to these markets.
Source: UK Telegraph