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EU: teetering on 3x more leverage than US, about to topple the world

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posted on May, 30 2012 @ 01:47 PM

Here's why:
1) According to the IMF, European banks as a whole are leveraged at 26 to 1 (this data point is based on reported loans... the real leverage levels are much, much higher.) These are a Lehman Brothers leverage levels.

2) The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).

3) The European Central Bank's (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany's economy and roughly 1/3 the size of the ENTIRE EU's GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).

4) Over a quarter of the ECB's balance sheet is PIIGS' debt which the ECB will dump any and all losses from onto national Central Banks (read: Germany)

So we're talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.

And all of this is occurring in a region of 17 different countries none of which have a great history of getting along... at a time when old political tensions are rapidly heating up (see Germany and France's recent butting of heads over fiscal policy).

So if you’re not already taking steps to prepare for the coming collapse, you need to do so now. The US will not escape from this unscathed. No one will. The global banking system is too interconnected: some estimates put US exposure in the ballpark of several TRILLION Dollars.


Bank runs in the EU? No big deal, right? Insurance on the way?

We have explained in the recent past just why the rotation from a professional European bond-run to a retail bank-run is critical to the euro-zone banking system - with deposit losses creating even more encumbered asset levels among European banks, which would then exaggerate contagion problems as funding pressures mount. The problem is existing deposit guarantee schemes are implemented at the national level and are not currently funded to handle a systemic crisis - this is why there has been so much chatter of a pan-Europe guarantee scheme. However, not only does a euro-wide guarantee rely on credible commitments from core European governments but it misses the redenomination risk - as unlike the US FDIC, it would need to explicitly guarantee the euro-value of deposits. Barclays shares our doubts on the implementation (short- and long-term) of such a solution, noting that Eurozone deposits are greater than eurozone GDP (as opposed to US deposits at ~68% of US GDP). Between operational difficulties, the size of redenomination losses, moral hazard, and the massive (deposit/GDP) contingent liability dependent on actual exit of a member state, we would urge any exuberance over 'talk' of a guarantee to be stymied once again by the dismal reality of implementation and agreement.


Markets are down, banks are down, unemployment is abysmal in much of the EU, unrest is rising.....

Anyone have a *realistic* and *viable* solution they actually think will come out of our current power structure? .........

posted on May, 30 2012 @ 02:18 PM
I'm sure they look at it like a virus or gets worse before it gets better kind of mentality. Either way it will get a bit crazy IMO. You can only bandage up a wound so much before it becomes gangreenous and starts to eat away at everything around it. Apologies for my bad spelling. First to go are the homeless then the poor, then middle class, then rich. My advice is to buy food cause costs will rise and people will not be ready for it. Therefore food will really end up being its own currency due to people starving.

posted on May, 30 2012 @ 05:00 PM
reply to post by LemaEcho

Food for this year, seeds for next year, water purification system, a plow/tiller and some junk silver coins for un-barterable purchases.


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