10 thoughts on “NEWS AND VIEWS FROM THE NEFARIUM JULY 18 2019”

  1. Robert Barricklow

    Containing the bank run is the objective.
    Starting Bank Runs is someone else’s objective.

    China has one going in its shadow banking sector:

    Wonder how India’s doing?
    The digital cash champion?
    Aren’t they supposedly distancing themselves from D.C.?

    These banking sectors are so connected; one wonders how the whole house of cards keeps the game afoot w/o crashing down more often? Are there some w/ungodly amount of liquidity that could plug these contagious holes? You’d think they wouldn’t risk a chance of totaling the whole shebang? Of course, in 1929 they set it all off; to buy everything under the sun, on the cheap.
    Even owning private armies isn’t fool proof? Wouldn’t the armies sooner steel it than protect it?

    Oh, what a tangled web of deceit.

  2. I noticed a couple of years back Bank of the West merged w/BNP where I live. Even found a couple of job openings…”wealth manager.”
    No doubt, when it hits the propeller, there will be ripples felt in the ussa.

  3. It seems like there are two things in the air: First is a Lehman-style withdrawal of funds based on loss of confidence, spiraling to a conventional bankruptcy. DB is in big trouble here…

    Second is a AIG-like time bomb waiting in the wings due to ‘stored’ derivatives. AIG was set-up to be kind of an insurer on derivatives speculation, raking-in when they guessed right and doling-out when they guessed wrong. As it more-or-less evened-out for them, they got into it in a big way – raking-in fees. Then, the Recession of 2007 happened, and AIG found themselves dramatically over-extended. Insurance losses mounted until they were technically bankrupt. However, we the taxpayers were coerced to hand them big bucks to bail them out.

    This second aspect hangs over DB. The derivative insurance they hold is only ‘neutral’ when the economy is neutral. A good slump, let alone a recession, will put them in the position of AIG. Then, we will see calls going out for salvation…

    Crawling out on the edge of the twig, the PTB control whether or not there will be a recession. They print the helicopter money and control interest rates. They can forcibly postpone or induce any recession. Thus, they can sustain or implode DB at will.

    Two possibilities here: If DB is slowly going-down in a Lehman-type bankruptcy, one could “pull it” by inducing a recession. All the derivative insurance ‘overhead’ would go-away in the bankruptcy. Two birds with one stone.

    Alternatively, one could keep DB on life support, and avoid a Lehman-type bankruptcy until some Big agenda-point was reached. Then, “pull it” with a precise recession to serve your Goal(s).

    Either way, there are hundreds of starting points to plausibly start a recession. The PTB should have no trouble “pulling it” with the exact timing they need…

  4. Good on ya for your eyes Doc.

    Is there a picture of Merkel standing at a teller window or atm at DB shaking? Or a cartoon of DB and Merkel standing side by side trying to not shake?

  5. Sounds like DB is in a whole lot of sheet, and it couldn’t happen to a nicer bank. So if DB goes under then the Euro will shake like Frau Merkel. One wonders if the European Bank will step in to save DB from a death spiral ??

    1. DB is a Systemically Important Financial Institution (SIFI). I’m not an expert, but I believe the Fed has the power to print as much money as it takes to keep any SIFI afloat, even a foreign one like DB. Also, DB is subject to the European bank recovery and resolution directive (law), which I believe requires all depositors’ and bondholders’ funds to be used first in resolving an insolvency before taxpayers’ funds are used.
      Derivative counterparties are first in the queue of creditors. DB has about USD45 TRILLION in notional derivative exposures, although its net exposure is probably relatively tiny. However, the big problem is that, should DB fail to meet its obligations in a derivative transaction, its counterparty’s net exposure then becomes the same as the counterparty’s gross – hence the systemic risk. So it is very important for the global financial system that DB is declared insolvent before all the cash to settle those derivative transactions goes out of the door. And DB are reputed to have some real stinkers on their books.

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