Yesterday I blogged about the improbability of the Bundesbank's gold inventory list being intended to shut down debate within the German gold repatriation movement. If anything, as I tried to illustrate, it fueled a detailed criticism and analysis from the very movement the media would have us believe it was trying to silence. Indeed, from my high octane speculative point of view, it was designed to do that, and to fuel even more scrutiny of the Bank of France, the Old Lady of Threadneedle Street, and the NY Fed. The Bundesbank list also indictaed that, no, it now wants to repatriate more of its gold than originally intended, though at the slow pace of getting half of it back on German soil by 2020.
There may be reasons lurking in the background for this, reasons highlighted by the increasing difficulties of Germany's largest bank, Deutschebank, which is awash with bad paper - you guessed it, derivatives - and posting a gigantic 3rd quarter loss of almost $7,000,000,000, in addition to all the fines imposed on the bank by US regulatory authorities. He's the New York Time's take, shared by Mr. V.T.:
There has been much speculation that with the financial salvos straddling Deutsche Bank, it could become the next Lehman. Under such a scenario, the bank falls under the category of "too big to fail", if one applies the current American way of dealing with banker malfeasance. It therefore would mean its current and previous leaders are "too big to jail"(unless one is in Iceland, of course). Thus, as some regular readers here have commented to me privately, that gold would be a nice thing to have on German soil over the next few years if the German government should think itself required to bail out the big bank. With all that bad paper on its books, no one is going to take "paper gold" reassurances. After all, it's the corruption in the system itself that is coming home to roost right on top of the heads of the banksters.
But there's a curious set of statements in the Times article, the imply perhaps other, deeper, long-term agendas might be in play:
Still, shareholders of Deutsche might take heart from the fact that the third-quarter loss stemmed mostly from a $6.5 billion write down of so-called intangible assets. These can be assets that reflect past paper gains, so reducing their value is not thought to be as serious as slashing the value of, say, financial assets like bonds or loans. Still, the write-downs of intangible assets appeared to be prompted by higher capital requirements by regulators. Since many regulatory capital changes have been known for a while, it is not clear why Deutsche would be taking the charge now.
Cutting the value of intangible assets may not have much of an impact on an important regulatory capital measurement, something that Deutsche noted in its news release.
In addition, Deutsche said that it would write down its stake in a Chinese bank, Hua Xia Bank, by nearly $700 million. “This reflects an updated valuation triggered by a change of the intent of the holding as Deutsche Bank no longer considers this stake to be strategic,” the bank’s statement said.
When reading this, I was reminded of the insight of former Assistant Secretary for Housing and Urban Development Catherine Austin Fitts, that it appears that what is being done on the west's part of the global financial stage is that all the liabiliies are being moved into the public sector - which Deutsche Bank's write down of intangible assets could conceivably fall under, under certain circumstances - while all the assets are being moved into the private and largely hidden systems. But even if my interpretation is not true(and it has its flaws), Deutsche Bank's move to do so, at precisely this juncture in its corporate history, and with the growing pressures for bullion repatriation, and Germany's own participation in China's Asia Infrastructure Development bank, could be, as the bank itself stated in its own releases, "strategic" in nature, with its current crisis simply providing the cover for a massive repositioning. Write-downs of derivatives - some of its "intangible assets" - could be signaling a significant withdrawal from the run-amok finance capital of Wall Street, and a return toward much more prudent investment in tangible things.
Whether any of this high octane speculation is true or not will depend on how events unfold over time, and specifically, how much, and what type, of its intangible assets will be "written down", and how much, if any, of Germany's gold is repatriated, and how much, if any, pressure is applied on the west's major central banks to come clean on their gold holdings and accounts. One way to measure this reading of events will be to watch if the gold repatriation and audit movements not only in Germany are given new life, but if in fact they grow in other countries to become major domestic political memes. In the USA Ron Paul has consistently called for it, but this has fallen on largely deaf ears. After all, in the current context of American culture and politics, who would trust anyone to conduct a genuine audit of the Fed and its gold?
There is, additionally, one final thing to watch for, if any of this intensely high octane speculation is true, and that is not only how much "write down" is done, but whether any of it touches the open festering sore at Deutsche Bank, the derivatives. And, of course, one must watch the German government and political parties themselves, to see if any new laws or regulations curtailing derivatives trading in any significant degree are going to come up for discussion.
See you on the flip side...