Thursday, July 07, 2016

Yra Harris sees Europe as the epicenter of the financial crisis moving into the 2nd half of this year: "The most important topic facing the world: THE ECB’s ROLE IN CREATING A SITUATION THAT MAKES GERMANY LIABLE FOR THE DEBT OF THE ENTIRE EUROPEAN UNION .. The question for me (and will continue to be): WHO GUARANTEES THE ECB, AND, OF COURSE, THE COROLLARY QUESTION, SHOULD ALL SOVEREIGN DEBT BE A ZERO WEIGHTED RISK ASSET CLASS? .. It is the market’s acceptance of the full faith support of Germany that is responsible for the success of Draghi’s 'whatever it takes' program. If the Germans were to demand a vote on EUROPE the shock waves would render the BREXIT aftereffects a small wave relative to a German promoted tsunami .. President Draghi is in a hurry to accumulate more and more debt so as to make any German NEIN a systemic event. If the ECB balance sheet is loaded with the sovereign debt of Spain, Italy, Portugal and others then a German effort to reduce its liability would cause a collapse of the entire European financial system. Remember, the Italian, Spanish, French, Dutch, German and other domestic bank balance sheets are loaded with domestically issued sovereign debt and they currently are NOT REQUIRED to account for any reserves against these assets. If you believe Italian banks are under severe stress now contemplate their capital needs if the BIS were to adjust the Basel rules and render not all sovereign debt a risk-free asset for banks. If you want to feel the effects of a negative feedback loop let the BIS become a more objective rules maker. Again, Mario Draghi is adhering to rule number one of finance: If you owe the bank 10 billion it is your problem, but if you owe the bank a TRILLION it is their problem."
link here to the commentary

1 comment:

Anonymous said...

Yes it is Germany's turn. Everyone is going to live off the Germans. The Brits were there once upon a time. Now the Germans can have their day. What fun !