Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

European Bank Stress Test Politicians Desperate to hide the Truth of Insolvent Banking System

Interest-Rates / Credit Crisis 2010 Jul 23, 2010 - 06:07 PM GMT

By: Nadeem_Walayat

Interest-Rates

The long waited stress test of the 91 of Europe's largest Banks resulted in just 7 of the smaller regional banks failing the test including one from Germany and Greece, and five in Spain, that require capital injections of just Euros 3.5 billion, which is a drop in the ocean when compared against PIGS sovereign debt of Euros 1.2 trillion, but off course the so called stress test FAILED to test for sovereign debt default.


The banks were tested in their ability to primarily withstand economic contraction of a mere 0.4% which is less than 1/10th that of the recession of 2008-2009, which would have and did wipe out ALL of Europe's banks demanding capital injections and unprecedented tax payer support.

On the basis of 7 banks failing at 0.4% GDP contraction implies that even a mild recession of 2% would in reality see as many as 35 banks fail. Therefore the stress amounts to white wash to try and mask the truth that approximately half of Europe's banks would have FAILED a REAL stress test, requiring at least Euro 120 billion of recapitalisation.

Another failure of the stress test was not to test for the impact of a sovereign debt default as the ECB is in a state of denial that countries such as Greece will not be allowed to default on their debts, which is manifested in the European Unions policy of piling ever more debt onto countries such as Greece whilst at the same time forcing severe austerity measures onto the countries thus insuring economic contraction plus greater debt burden which equals a ever higher real probability of default. Greek debt is on its way towards 150% of GDP where the debt interest burden is already at more than 10% of the Greek governments revenues i.e. $15 billion interest bill against revenues of $115 billion to service a debt mountain of at least $330 billion at over 110% of GDP. Give it a couple more years and the debt interest burden will be at more than 15% of government revenues despite ECB attempts to cap the interest rate at 5%, which means debt default is a near 100% certain, as the ultimate consequences of carrying on with the farce of ever rising total debt and interest payments would be for eventually ALL of the Greek revenues to go towards servicing the countries debt. Other countries such as Portugal and Spain are on a similar path of ever rising unsustainable debt interest servicing burdens that will also culminate in debt defaults.

Therefore the E.U. is living in fantasy land, which is basically what the Bank stress tests are based on fantasy assumptions of VERY mild recessions and no sovereign debt defaults despite the fact the recessions are usually 5 Times as severe as that which has been tested for and countries such as Greece are directly heading towards default within the next 2 years which effectively means that rather than 7 banks failing the stress test, a real stress test would have indicated at least 70 of the 91 banks would have failed the stress test.

Clearly the politicians and the ECB know that most of Europe's banks are insolvent and therefore are running scared and hoping that the stress test publicity stunt will buy them some time so that they can recapitalize the insolvent banks without triggering a crisis in the immediate future.

Bottom line - The European banking system is trending towards another banking crisis as a consequence of near certain sovereign debt default in at least Greece. The E.U. are desperate to persuade the markets that this is not going to happen until it actually happens, in the meantime they intend on immunising their banks against an inevitable sovereign debt default as now they know exactly what exposure the banks have Greek, Spanish and Portuguese debt so know how much the potential losses could be that will be covered by primarily German tax payers.

Comments and Source: http://www.marketoracle.co.uk/Article21351.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

PS
29 Jul 10, 10:12
inevitable sovereign debt default

Will the stealth bull market continue after the inevitable sovereign debt default in Europe happens? Thanks.


Nadeem_Walayat
29 Jul 10, 11:26
stocks stealth bull market

The whole point of a stocks stealth bull market is that most investors remain too afraid to invest.

and I can't think of anything scarier than a soveriegn debt default :)

Watch stocks break to new highs as most analysts remain fixated on the rear view mirror ;)

A knife that slices through perma beraish rhetoric.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules