New Europe after the first phase of engineered economical chaos and split up of EU and then the US break down is following.
PIMCO CEO signals the collapse of entire global banking system underway as a panic driven institutional bank run drains French banks of nearly all their capital.PIMCO’s CEO tells the Financial Times that the institutional bank run on French Banks has left them with as little as 1% capital against the total assets reported on their balance sheets and institutional panic in the global financial system is underway
If this is true, we are looking at the collapse of the very foundation of the entire European banking system which in turn means the collapse of an essential pillar of the entire global banking banking system
Seriously, the Europeans have been pulling their money out of banks for weeks and so have many of the world’s most important corporations. Don’t be a fool and wait until the last minute to do the same.
I provided complete background context to this story when it became evident that the bank run that started Greece had spread into French banks, then across Europe, and even into China.
While officials have known about the run on European bank assets for weeks they have failed to react choosing to ignore repeated calls from world renowned economists, influential money managers, investors and even the financial leaders from various nations around the world.
Instead of dealing with the crisis, officials in France and Europe responded to the calls to inject capital into the French banks with a PR campaign of denial.
It appears now, based on the statements from PIMCO’s CEO to the Financial Times, that the assertions of French officials and Banks that a capital injection wasn’t needed were outright lies.
Now, as The Daily Baily reports on a new article from the Financial Times, the we are mpw pm the collapse of the entire global banking system.
PIMCO’s El-Erian Drops The F-Bomb: “French Banks Are Down To 1% Capital, Institutional Panic Underway”
El-Erian just screamed ‘shut their ass down‘ from New York to Paris.French banks have 1% capital. No polemic is needed. This is a solvency and liquidity crisis.
Notice below the bold quote from the CEO of the world’s largest bond fund. Not to overstate the obvious, but 1% capital ratios imply leverage of 100:1.
Calling Helicopter Ben…Sarkozy would like you at the launch pad, immediately.
How soon does Bernanke’s central bank rain dance begin?
FT via Marketwatch
Meanwhile, high-profile warnings over the state of Europe’s banks, particularly in France, came from a variety of sources.Read The Rest …
Mohammed El-Erian, chief executive of bond fund giant Pimco, warned in an op-ed in the Financial Times published Thursday that French banks could tip Europe back into recession.
Private institutions around the world have sharply reduced short-term lending to French banks, while a plunge in bank shares since August has left bank equity trading at a 50% discount to tangible book value on average, he wrote.
At the same time, El-Erian noted that the ratio of market capital to total assets for the sector has fallen to 1% to 1.5% — far short of the range of 6% to 8% typically seen for healthier banks.
“These are all signs of an institutional run on French banks,” he wrote. “If it persists, the banks would have no choice but to de-lever their balance sheets in a very drastic and disorderly fashion.”
To be clear, the run on the banks and the collapse it will cause is already underway and “If it persists” the French Banks will have “no choice but to de-lever their balance sheets in a very drastic and disorderly fashion” which means forget about the plans of propping up or bailing out Greece, Ireland, Portugal, Italy and Spain.
In fact, such an event in happening in “very drastic and disorderly fashion” would trigger a Lehman style collapse wiping out any hope of those nations being able to pay off their debt.
The resulting financial turmoil drag down Germany and the entire Euro-zone resulting in sovereign debt defaults in many of those nations as well.
From there the counter-party risk turns to contagion and drags down banks in Great Britain, China and even the U.S , resulting in the greatest economic crash in the history of man kind.
The question is will officials fess up to reality or continue to pretend the patient is not sick until he reaches the point that vitality can no longer be preserved?
Finally, I will leave you with excerpt from an article from Zero Hedge:
Head Of UniCredit Securities Predicts Imminent End Of The Eurozone And A Global Financial ApocalypseEither the YesMen have infiltrated Italy’s biggest, and most undercapitalied, bank, or the stress of constant, repeated lying and prevarication has finally gotten to the very people who know their livelihoods hang by a thread, and the second the great ponzi is unwound their jobs, careers, and entire way of life will be gone. Such as the head of UniCredit global securities Attila Szalay-Berzeviczy, and former Chairman of the Hungarian stock exchange, who has written an unbelievable oped in the Hungarian portal Index.hu which, frankly, make Alessio “BBC Trader” Rastani’s provocative speech seem like a bedtime story. Only this time one can’t scapegoat Szalay-Berzeviczy “naivete” on inexperience or the desire to gain public prominence. If someone knows the truth, it is the guy at the top of UniCredit, which we expect to promptly trade limit down once we hit print. Among the stunning allegations (stunning in that an actual banker dares to tell the truth) are the following: “the euro is “practically dead” and Europe faces a financial earthquake from a Greek default“… “The euro is beyond rescue”… “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”….”A Greek default will trigger an immediate “magnitude 10” earthquake across Europe.“…”Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes.” In other words: welcome to the Apocalypse…
But wait, there’s more. From Bloomberg:
The impact of a Greek default may “rapidly” spread across the continent, possibly prompting a run on the “weaker” banks of “weaker” countries, he said.And now, for our European readers (first) and everyone else (next), it is really time to panic.
“The panic escalating this way may sweep across Europe in a self-fulfilling fashion, leading to the breakup of the euro area,” Szalay-Berzeviczy added.
Szalay-Berzeviczy has just arrived in Hungary from a trip abroad and can’t be reached until later today, a UniCredit official, who asked not to be identified because she isn’t authorized to speak to the press, said when Bloomberg called Szalay-Berzeviczy’s Budapest office to seek further comment.
Read The Rest…