Roubini : Situation in Europe A Slow Motion Train Wreck

"Nouriel Roubini called the ongoing political turmoil in Europe a “slow motion train wreck.” Speaking to CNBC in Las Vegas on Tuesday, Roubini said he expects Greece to leave the euro zone by next year..."


at http://nourielroubini.blogspot.com/2012/05/roubini-situation-in-europe-slow-motion.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NourielRoubiniBlog+%28Nouriel+Roubini+Blog%29

Von Greyerz - Bank Failures, Disorder, Massive Panic & Gold

"The banking world is on the way to bankruptcy here. We’ve talked about the leverage in the banking system, but people don’t seem concerned about it. What we are going to see, one day, is when these dominos start falling, there will be panic.

Banks are supposed to come down to 20 times leverage. There is only one bank of the top twenty-five banks in the world today that is below 20 times leverage. Every other bank is above. 20 times leverage means that if they only lose 5% on their loan book, they have lost their capital.

I will bet you that virtually every bank in the world has a bad debt position which is worse than 5% of their assets. And if you look at an entity such as Deutsche Bank, do you know what their leverage is? 62 times. It means that if they have a bad debt position of 1.5%, the bank is bust. Deutsche Bank is bigger than German GDP. So, if something happens to Deutsche Bank, Germany goes under.

Credit Agricole, the largest French bank, has 63 times leverage. This is absolutely frightening. This situation is untenable. Some of these banks will not survive. Of course, central banks are aware of this, governments are aware of this, and they will print money. Will they print in time? Maybe for some banks, but some banks will not survive, I’m sure.

The two big Swiss banks combined total 7 times Swiss GDP. The banks have a leverage which is unsustainable, and in many cases are bigger than the countries themselves.

So, central banks, being aware of this, are going to keep accumulating more and more gold. And that trend will accelerate because central banks know that buying bank debt or government debt is a bad move. So, all of these dominos that will fall are going to accelerate the trend into gold.

The IMF came out with a report yesterday saying we are very near a eurozone breakup, a disorderly one. That would create panic in the market. There would be an even greater flight of deposits out of the banking system which would make the situation even worse.

The IMF is coming out with statement after statement that should frighten the world. Today they said that European Banks will have to sell roughly $3.8 trillion in assets. In reality, it could be well over $10 trillion in the next couple of years.

We are in a mess, Eric, and the IMF recognizes this. The central banks know this as well, but for right now they are trying to tell the markets, ‘We are not going to print any more money.’ They will print money. The know they will print money. 

The IMF, by making these statements, is saying central banks are going to have to print money, just to sustain the financial system. Improvements in the economy are unthinkable, things are going to get a lot worse.”

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/18_Von_Greyerz_-_Bank_Failures,_Disorder,_Massive_Panic_%26_Gold.html

George Soros: Eurozone Crisis Has Entered “A Less Volatile but Potentially More Lethal Phase”

"As the next INET conference begins in Germany, one topic of conversation is sure to be George Soros’s piece discussing the Eurozone crisis. He points out that the Eurozone has been quietly restructuring its financial arrangements along national lines, ending an era of co-mingled assets and liabilities across national borders. This is something I hadn’t realized, but it presents, as he shows, other dangers.

At the onset of the crisis, the eurozone’s breakup was inconceivable: the assets and liabilities denominated in the common currency were so intermingled that a breakup would cause an uncontrollable meltdown. But, as the crisis has progressed, the eurozone financial system has been progressively reoriented along national lines.

This trend has gathered momentum in recent months. The LTRO enabled Spanish and Italian banks to engage in very profitable and low-risk arbitrage in their own countries’ bonds. And the preferential treatment received by the ECB on its Greek bonds will discourage other investors from holding sovereign debt. If this continues for a few more years, a eurozone breakup would become possible without a meltdown – the omelet could be unscrambled – but it would leave the creditor countries’ central banks holding large, difficult-to-enforce claims against the debtor countries’ central banks.

The big problem, Soros says, is Germany. The Bundesbank doesn’t want to be left with credit losses or the remote possibility of inflation, so it is seeking to reduce aggregate demand in Germany..."

at http://www.nakedcapitalism.com/2012/04/george-soros-eurozone-crisis-has-entered-a-less-volatile-but-potentially-more-lethal-phase.html

IS EUROPE’S RECESSION SPREADING BEYOND THE EUROZONE?

"When Sweden’s Q4 GDP fell 1.1% from the previous quarter, most analysts thought of it as a temporary blip. After all the Q4 GDP was still positive on a year-over-year basis.

Sweden GDP YOY (Bloomberg)

But the “temporary blip” out of Sweden has turned into something more ominous when the February industrial production numbers came out this morning. Here we are no longer talking about Q4 which was challenging for most major economies.

Reuters: Swedish industrial production suffered its sharpest fall since 2009 in February, jarring a reassuringly rosy outlook painted by other recent economic indicators and calling into question expectations the central bank will not take rates any lower.

Sweden Industrial Production YOY (Bloomberg)

Industrial orders have also turned sharply negative.

Sweden Industrial Orders YOY (Bloomberg)

Of all the European economies, Sweden was supposed to be fairly insulated from the Eurozone problems, particularly given its decent debt to GDP ratio of 37% and export oriented economy..."

at http://pragcap.com/is-europes-recession-spreading-beyond-the-eurozone