Monday, October 03, 2016

Deutsche Bank Exemplifies The Fragility
Of The Financial System
"Deutsche Bank is a potential catalyst for the bursting of the global Bubble. It has company, though it is almost unique as a poster child of the mess global policymaking has made of things. After the financial crisis, Deutsche Bank had the opportunity to take market share in global prime brokerage, derivatives and investment banking – and couldn’t resist. As a German institution, it benefitted from European economic and banking system fragility. Not surprisingly, all the abundant cheap finance ensured the bank found myriad avenues to get itself into trouble. And then the Draghi ECB, along with global central bankers, lost their minds, with massive QE and negative rates inciting dislocation throughout the massive global bond and derivatives markets. Deutsche Bank exemplifies the fragility of the global financial system. And this vulnerability is associated directly with egregious monetary stimulus – past and present. Trouble at Deutsche Bank comes at an inopportune for the unsound European banking system. It comes at a tough time for Merkel, the Bundesbank and the German government more generally. The political backdrop makes it difficult for the German government to support its largest bank. A faltering Deutsche Bank will only toughen German public enmity toward ECB policymaking."
- Doug Noland
LINK HERE to the essay

No comments: