posted on Sep, 30 2016 @ 05:50 AM
Whats happening with Deutche Bank is simple. Its not just Deutche bank, its all the big banks in the world, and small banks also.
They operate on what is called Fractional Reserve Banking. Made possible by various central bankers that had political influence to get politicians
to pass laws to allow them to do this.
In simple terms it means banks can lend out more money than they have. It wasnt until the 2008 financial crash that they found out just how much
money they were lending out. Use to be way back they could lend out 10 dollars for every dollar they had in deposit. In 2008 they found out that
these mega banks from citi bank to others were lending out 20 to 40 dollars for every dollar they had in deposit. Before 2008 it wasnt an issue since
everything was running smooth. But by 2008 they found out that these banks have over leveraged themselves to the point where they could not pay back
creditors if loans started defaulting. But they thought insurance companies would take care of it. Problem was insurance companies run on the law of
averages, so they sell basically 100 insurance policies for everyone that is claimed. When everyone is filing a claim or huge claims, the insurance
company doesnt have the money to cover everyone.
So what happened in 2008 was the banks had packaged triple A credit mortgages with D credit or worse mortgages, and got a crediting company to label
it Triple A investment. Now banks dont want to carry the liability on this so they do something called off balance sheet financing. What this means
is those # mortgages packaged with a few good mortgages, well they get sold off on the stock market in 25 million dollar bundles to pension funds,
retirees, hedge funds and other investors world wide. And those loans started defaulting in 2008 and caused the financial meltdown.
So the banks all filed claims, and the insurance companies said they didnt have the cash. What happens in this situation is the banks file claims,
insurance companies go under, and the next day the banks go under. But the banks and insurance companies got bailed out in 2008 with trillions of
dollars. These investments they sold with # mortgages with a few good ones were called Derivatives.
The financial regulators did tighten the rules after this, but the banks simply changed the name of these Derivatives and still sold them. Also they
still had trillions of these Derivatives on the books from like 30 years of this crap going on. The bail out they got was intended so they would loan
out money and the economy would grow. But they didnt lend the money. My guess they were paying the creditors on the bad loans still on the books.
Also in the last budget in the USA, for the democrats to pass the budget, they had to agree to the republicans to loosen the financial rules and allow
the banks to sell derivatives more easily again.
Deutche bank is a tricky situation for Germany and Europe. By law banks cant be bailed out by state intervention. Its why greece ireland and italy
could not bail out their own banks. Also the germans pushed austerity down their throats saying they should be more responsible cuz thats what
germans want by bailing them out. So if germany bails out Deutche Bank, its gonna cause a # storm in Europe cuz they didnt let others do that. Could
break the EU apart.
That said Deutche Bank is in the category of too big to fail. Its one of the largest banks in the world. This means global exposure and all the big
banks have exposure to Deutche Bank. So if Deutche Bank goes down, all the other banks and markets in the world will take a big hit. Deutche Banks
impact is 5 times larger than Leyman Brothers at least.
Right now based on zero hedge info Deutche bank is leveraged 27 to 1. They have 74 billion in share holder equity value and have total asssets of 2
To put in simple terms say you bought a million dollar house. based on this leverage ratio, you put down 37000 dollars deposit and took out a loan
for the rest.
The problem is, this 27 to 1 ratio of leverage or debt to cash, it doesnt include the Derivatives. As I said before its called off balance sheet
financing so it doesnt show up in the books. But their exposure to derivatives is 63 trillion based on zero hedge site.
So basically they have 74 billion dollars, and have 65 trillion in debt.
I dont think they have a choice but to bail em out. Either way the markets are going to tank like 2008 if they dont act on it fast. And europeans
make decisions very slowly.
Deutche Bank has problems making payments to creditors so its why this has all come to light.
But Deutche Bank is not the only bank leveraged this high. You can bet every bank in europe and north america is leveraged this his or worse cuz they
been dealing in financial instruments called derivatives i believe since the 1980's so they got alot of bad loans on the books they sweating to pay
off, hoping no one finds out.
Think of it like paying off one credit card debt or making payments with another credit card, or as many as you have. At some point they all get
maxed out and then the # hits the fan. Deutche Bank is just the first domino to fall after 2008. All the other banks are up to their eye balls in
the bad loans also. Some leveraged 40 to 1.
Its how the economies grew so much since the 1970's. They grew by cheap money and debt. The ride was good till 2008 but after that the party was
You see the economic growth globally based on high debt was artificial. People and countries borrowed and the times were good but the debt ceilings
were hit and surpassed in 2008. The economic growth wasnt based on actual growth and profit but enormous amounts of debt and cheap money. So you
borrow money and spend it and have a good time until the money runs out and you gotta pay back the loans. This is the point we are at.
Also the stock markets although they are at an all time high. Its artificial also. After 2008 crash the stock market going up wasnt based on profit.
Banks gave zero or negative interest to push people into the markets and gamble. At the same time governments were doing quantitative easing. With
this money and and cheap interest, corporations borrowed money and bought back their own stocks called Corporate Buy Backs to artificially drive up
their stock price and the stock market. So the stock market being at record highs is not based on fundamental economics and profit. Its an illusion
created by companies buying back their own stocks at a rate of 40 billion a month of borrowed money since 2008 to make it look like everything is
doing fantastic. Median incomes are at 1990 levels, and aside from the small rise in wages this past quarter, there hasnt really been any wage
increases since 1990's. Also 50 percent of the american population make 30k or less as a family. And this past quarter new home housing numbers are
Also from 2008 banks still have about 2 million foreclosed homes still on the books in the USA that they didnt put on the market. They were hoping
home prices would rebound and then they would put them up for sale.
Long story short, only way to fix this is to reset and forgive everyone debt. Its partially a reason why these events happen every 60 years or so.
When things become over valued, their is a market crash and wealthy come and buy it back on pennies on the dollar.