Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
SPX is at Strong Resistance - 25th May 26
US Dollar, Back From the Grave? - 25th May 26
Gold : Just the Facts Ma’am - 25th May 26
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16
Will Venezuela Be Forced to Embrace the US Dollar? - 21st May 16
Danish Central Bank Stumbles with Its Currency Peg to the Euro - 21st May 16
SPX Downtrend Underway - 21st May 16
George Osborne Warns of More Affordable UK Housing Market if BrExit Happens - 21st May 16
Gold And Silver 11th Hour: Globalists 10 v People 0 - 21st May 16
David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - 21st May 16
Gold Stocks Following Bull Analogs - 20th May 16
The Gold Chart That Has Central Banks Extremely Worried - 20th May 16
Silver Miners’ Q1’ 2016 Fundamentals - 20th May 16
Stock Market Rally At the End of the Road? - 20th May 16
British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - 20th May 16
NASDAQ 100, FTSE, and British Pound - When Rare Market Data Screams, Listen  - 20th May 16
Unintended Consequences, Part 1: Easy Money = Overcapacity = Deflation - 19th May 16
The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - 19th May 16
Stock Market Final Supports Are Broken - 19th May 16
Gold - Pro-Inflation? Anti-USD? - 19th May 16
Further Stock Market Uncertainty As Indexes Gained On Friday, Will Uptrend Resume? - 19th May 16
What This U.S. Presidential Election Tells Us About Her Millennial Generation - 18th May 16
Stock Market Trendline Broken on Fed Announcement - 18th May 16
An Incredibly Simple, Rarely Used Way to Book 170% Investing Gains - 18th May 16
Statistically Significant Stock Market Death Cross? - 18th May 16
Precisely Wrong on US Dollar, Gold? - 18th May 16
What You Can Gain From One Tech CEO's $355 Million Loss - 18th May 16
The ‘Tide’ has turned… NEGATIVE For STOCKS!!! - 18th May 16
Goldman Sachs's - Regulatory Climate is Chilling Deals; Hatzius Not Worried About a Recession - 18th May 16
Bitcoin Price Remains above $450 - 18th May 16
Crude Oil Price Trend Forecast 2016 Implications for Stock Market - 17 May 16
Could the National Debt Really Grow as High as $31 Trillion by 2023? - 17 May 16
Gold Price Possible $200 Rally - 17 May 16
Crisis Investing - Jim Rogers on “Buying Panic” - 17 May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Europe Union, or The 28 Stooges

Politics / European Union Oct 25, 2014 - 03:03 PM GMT

By: Raul_I_Meijer

Politics

Europe is fast turning into a freak comedy show. Very fast. Or maybe we should say it’s always been one, and it’s just that the Larry, Curly and Moe moves are only now coming out in droves. Or maybe, what do I know, we’re just starting to understand how much talent for farce and slapstick the boys from Brussels have always had.


Just Wednesday, I wrote in 40% of Eurozone Banks Are In Bad Shape about a Reuters report based on Spanish source Efe, that claimed 12 banks would fail the ongoing stress tests, results of which are due this Sunday at 12pm CET (their daylight savings time will be over by then). I noted how the indignation expressed over the leaked data by Brussels seemed odd, since in 2014 everything leaks.

Then, I cited Pimco’s global banking specialist, Philippe Bodereau, saying he thought 18 banks would fail, and moreover, almost a third would narrowly pass. Something that according to several sources was important than who actually failed. Because all banks have had many many months to shore up their capital positions, and if they’re now still below or just above the dividing line today, that’s suspect at best.

130 banks were supposed to have been tested, and ‘almost a third’ of that is some number north of 40. Add the 12 to 18 sure failures, and you’re north of 40%.

But today Bloomberg reports on a new draft they have obtained, which raises the numbers even further.

ECB Set to Fail 25 Banks in Review, Draft Document Shows

25 lenders in the European Central Bank’s euro-area bank health check are set to fail the regulator’s Comprehensive Assessment, according to a draft communique of the final results, seen by Bloomberg News. 105 banks are shown passing the review, according to the draft statement. Of the lenders that failed, about 10 will still face capital shortfalls they need to plug, according to a person with knowledge of the matter, who asked not to be identified…

If 25 fail, and ‘almost a third’, i.e. at least 40, narrowly make it, 50% or more of Europe’s banks are in trouble. And that’s after they’ve been given ample time to borrow, sell assets, do whatever it takes to pass. More than half of all banks. And sure, Europe has scores of ‘systemic’ or Too Big To Fail banks, and they’ll never be put in the corner with the dunce hat on. But that’s not as great as it may seem, it just means we’re not allowed to know what shape they’re really in, and if they threaten to topple over, taxpayers will need to pay up.

And that’s still not all. Catherine Boyle explains a few things at CNBC about the stress tests:

What’s Missing From The EU Bank Stress Tests

The EBA stress tests involve running banks’ books through shocks like a 14% drop in house prices from current predictions. However, they do not involve deflation, or a sustained period with higher or lower prices for commodities such as oil – both of which the euro zone is potentially facing.

If ‘shocks’ like these are the worst case scenario of the tests, and half of the banks fail that, you might want to speak of a systemic problem. Many housing markets are still very expensive, let’s see interest rates go up to any historic average of your choosing and then see what happens to home prices. No review of what havoc deflationary pressures or oil and gas prices might do to banks sounds hardly serious either.

There is also disagreement over how certain assets may be classed. In weaker economies like Portugal, Greece, Spain and Italy, the governments have passed laws allowing banks to convert deferred tax assets (DTAs), which are tax payment deferrals generally awarded during times of weaker profitability, into more capital-enhancing deferred tax credits (DTCs).

Translation: local accounting tricks are still alive and well. Deferred tax credits are just one example, obviously.

Oliver Burrows, senior analyst at Rabobank, told CNBC: “European banks have actually done quite a lot in terms of balance sheet repair and capital raising. To give it additional credibility, you need to have some victims, and those are going to be quite predictable. Another fear is that if there is a rush of these weaker “victims” to raise more capital, there may not be much demand for it – and that could weaken the sector further. “Who would want to support or buy new equity in these banks?” Burrows asked.

That’s it right there: they’ve done a lot, and still fail. So where are they going to get the rest of the investments they need?

And then the EU comes this morning with a new stunt worthy of Larry, Curly and Moe. They’ve sent new calculations about members’ economic data, and the contributions they need to send to Brussels based on those data, around, and it’s a shame all the news is about how Britain is told to pay a billion and a half or so extra. Holland must fork over much more per capita, for one thing.

But what makes it even better is that Greece has been told to pay more, and that can go straight to Germany, which is set to receive a billion. Explain that. Italy has to pay extra, France receives.

The problem is of course, Brussels feels it doesn’t have to explain anything it does. They put the data on some webpage before even informing the member nations, as per the Dutch finance minister. Who, like Cameron, had no idea where the numbers came from. Brussels thinks: you don’t have the guts to break up the EU, anyway. So what are you going to do about it? Well, Cameron feels Nigel Farage breathing down his neck, that’s what.

The best part is that everyone’s falling over one another to assure us that the new accounting methods, which include drugs and prostitution, have nothing to do with this madness. But isn’t it just great to ponder that Britain has to fork over an additional billion only because the French have cheaper hookers?

Someone finish off that inane union before it starts to do real serious harm. Because it will.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2014 Copyright Raul I Meijer - All Rights Reserved 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 losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
Raul Ilargi Meijer Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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

Catching a Falling Financial Knife