GLOBAL SYSTEMIC INSTABILITY: This Is Truly Frightening

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We are looking at major global systemic instability, this is truly frightening.

This Is Truly Frightening
June 18 (King World News) – Alasdair Macleod:  I looked at the globally systemically important banks (G-SIBs) and looked at the ratios of their assets vs capitalization of common shares. In the old days when you looked at the bank credit cycle you knew that when the relationship got to roughly 12x, things were getting a bit rich and you were heading for downturn in the bank credit cycle. And the numbers coming out of the European Union are frightening. Two French banks have a multiple of over 70x, Deutsche Bank is just under 60x. We’ve got a situation where not only are the commercial banks completely insolvent in both the eurozone, and also Japan, and I would also add in the London market as well (the 3 globally systemically important banks) which is Barclays, Standard Chartered and HSBC.

And some of these central banks because they have bought loads of bonds as part of QE, well what happens is rising bond yields undermine the value of the assets on these central banks’ balance sheets and they are, in effect, insolvent. And yet here we have these ringmasters (central banks) who have the responsibility for picking up the pieces when things go wrong in the commercial banking network. And we are talking about banks with asset vs common equity ratios in the 70s. I mean you couldn’t make this up. It is actually truly frightening, Eric…