Sunday, June 19, 2016

Brexit Is Getting The Blame
GoldMoney's Alasdair Macleod emphasizes that Brexit is not the biggest problem facing the financial markets - it is the mounting problems in the European banking sector .. "Political instability for the EU is a significant and visible threat, but is not the immediate problem, which is financial. As a result of savings and spending imbalances, none of the core Eurozone states can stand on their own. Substantially, Germany’s private sector savings are loaned to the governments of, and businesses in, France Italy Spain Portugal and Greece. None of these governments are able to repay German savers, nor are they able to roll over increasing debts indefinitely. Furthermore, bad debts are piling up in their private sectors, with Italy now a basket case, where non-performing private sector bank loans officially amount to nearly 20% of GDP.iii Caught in the middle of these imbalances are the private sector banks. Because of the scale of these problems, it is no longer a patch-and-mend issue, but a serious systemic problem. The European banking system has been struggling for survival ever since the Lehman crisis, reflected in the dismal performance of share prices for nearly all the major banks .. Whatever the outcome of the Brexit referendum next week, it would appear that nothing can stop a systemic crisis developing in Europe. The two issues are unrelated, though Brexit could be blamed as a trigger. Brexit will come and go, but a European banking failure will remain with us, whatever happens on June 23rd."
LINK HERE to the essay

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