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Global Markets Take Fright At The Return Of The Zombie Banks

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http://www.guardian.co.uk/business/2011/aug/19/global-markets-take-fright-banks

The activities of financial markets are often irrational. Prices go up for no apparent reason and then suddenly the mood changes. What's worrying about the latest spasm that has convulsed bourses in Europe, Asia and North America is that the sell-off is grounded in real and ever-more pressing concerns. Make no mistake, something serious is going on here.

That something can be divided into three parts. The first cause for anxiety is the global economy, and in particular the United States. The report released on Thursday by the Philadelphia Federal Reserve covers only a small part of the Eastern US but it has a good track record for charting the ups and downs of the world's biggest economy. The Philly Fed's barometer has just plunged deep into recession territory.

.....

Concern number one has re-ignited fears about the health of the global financial system. Again, markets have been operating for the past couple of years on the assumption that large dollops of financial help from the taxpayer and a return to growth have made the global banking system immune from a fresh collapse. This always looked questionable, and now that activity is slowing markets suspect that some banks may go under. In the 1990s, the Japanese government prevented its financial system from collapse but only at the expense of creating zombie banks, neither alive nor dead but kept functioning thanks to the largesse of the state. The reason the sell-off in financial stocks has been more pronounced than the fall in stock markets as a whole is that investors believe Europe and North America now have their own zombie banks.

Reports that US regulators are taking a close interest in European banks and comments from Sweden's chief financial regulator that it wouldn't take much for European interbank markets to freeze only serve to bring back memories of the long descent from credit crunch in August 2007 to the collapse of Lehman Brothers in September 2008.

......

Put all that together and you get the full Japanese package: weak growth, weak banks, weak policy response. That is not a good recipe for shares. Today Tokyo's Nikkei market is at less than 25% of its level at the peak of the stock market boom in the late 1980s.

Really the West might have it's own Zombie bank problem, I think we might have created Zombie's a couple of decades ago when the US started to bailout it's banking system. I doubt this was lost on GS / JP Morgan that they could take ever increasing bets and they'd get bailed out.

The Asian crisis in the late 90's was just a huge bailout for the banker community via the IMF and everyone carried on. We have been living with Zombie banks for years and we've only just realised it.

Still if we just extend and pretend I'm sure it will all just work out fine...

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Europe and the US have zombie economies - the banking sector is just the source of the problem and the infestation of rank bad lending that has not only indebted their nations but also destroyed their income generating base and shipped it abroad.

That cannot be fixed by some idot central banker printing money and pretending the debt doesn't matter, in fact it will just make things worse.

They have made almost no attempt to fix the real problems and so they persist and oncreasingly smeared across the whole population - whereas before it would have been just the debt lunatics and idiots who would take the pain. Overall this will cause a much larger problem as a result. I should imagine those reliant on fixed income are beginning to break under the onslaught of inflation and pitiful interest rates, what is the betting that the collapse of their spending on top of a reluctance to take on debt by even the idiot classes is the real cause of the growing stagnation now seen in spending.

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Europe and the US have zombie economies - the banking sector is just the source of the problem and the infestation of rank bad lending that has not only indebted their nations but also destroyed their income generating base and shipped it abroad.

That cannot be fixed by some idot central banker printing money and pretending the debt doesn't matter, in fact it will just make things worse.

They have made almost no attempt to fix the real problems and so they persist and oncreasingly smeared across the whole population - whereas before it would have been just the debt lunatics and idiots who would take the pain. Overall this will cause a much larger problem as a result. I should imagine those reliant on fixed income are beginning to break under the onslaught of inflation and pitiful interest rates, what is the betting that the collapse of their spending on top of a reluctance to take on debt by even the idiot classes is the real cause of the growing stagnation now seen in spending.

^^ What he said

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It does seem like there is something very big and known by insiders in this move down. Likely the info is that several of the big continental European banks are headed for insolvency.

SocGen is in the news a lot, and I was reading it only has a market cap of 20 billion dollars now, even with a balance sheet nearing 2 trillion dollars. To me this suggests the market believes it will probably go bankrupt, the price reflects those willing to bet it will stay afloat and make a big multiple down the road.

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SocGen is in the news a lot, and I was reading it only has a market cap of 20 billion dollars now, even with a balance sheet nearing 2 trillion dollars. To me this suggests the market believes it will probably go bankrupt, the price reflects those willing to bet it will stay afloat and make a big multiple down the road.

SocGen will be bailed out ('recapitised'). Sarkozy has spent the last few weeks cleverly adding clauses to various EU funds' mandates to allow them to bail out eurozone banks when necessary. All very small print, under the radar, but it's been mentioned a few times at the back end of recent EU press releases. And Merkel rubber stamps them because some German banks aren't in much better shape than SocGen.

Which means all UK taxpayers will be contributing to SocGen via the back door when the next banking crash happens. Same goes for all the other EZ banks. As if we didn't have enough problems of our own.

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SocGen will be bailed out ('recapitised'). Sarkozy has spent the last few weeks cleverly adding clauses to various EU funds' mandates to allow them to bail out eurozone banks when necessary. All very small print, under the radar, but it's been mentioned a few times at the back end of recent EU press releases. And Merkel rubber stamps them because some German banks aren't in much better shape than SocGen.

Which means all UK taxpayers will be contributing to SocGen via the back door when the next banking crash happens. Same goes for all the other EZ banks. As if we didn't have enough problems of our own.

Yes it can all be covered up, and dealt with on the QT, however you are still left with a zombie bank and zombie economies in the end. I've no doubt that these zombie banks will pay zombie bonuses too, with the central banks printing the money to accelerate the looting.

Edited by John Steed

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Recapitalizing SocGen would really dilute the shareholders which is probably why people sold for what they could now. The CaC 40 has been just obliterated over the last few weeks.

The EU can easily recapitalize one bank, although all these bailouts are starting to add up. And we'll eventually hit second degree problems, like all the French pension funds that would have been invested in SocGen.

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SocGen will be bailed out ('recapitised'). Sarkozy has spent the last few weeks cleverly adding clauses to various EU funds' mandates to allow them to bail out eurozone banks when necessary. All very small print, under the radar, but it's been mentioned a few times at the back end of recent EU press releases. And Merkel rubber stamps them because some German banks aren't in much better shape than SocGen.

Which means all UK taxpayers will be contributing to SocGen via the back door when the next banking crash happens. Same goes for all the other EZ banks. As if we didn't have enough problems of our own.

How nice of Sarkozy to do this on behalf of all European taxpayers.

I wonder how long it will take before everyone admits Soc Gen et al needs bailing out.

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  • 343 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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