EUROZONE PREPARES FOR MASSIVE JOLT: INSOLVENT BANKS SET TO TUMBLE

Janet Daley writing in the Telegraph expresses well the sense of apocalypse currently gripping the eurozone as insolvent banks and insolvent states come tumbling down.

http://www.telegraph.co.uk/comment/columnists/janetdaley/8770696/The-European-dream-lies-in-ruins.html

The stark figures of the bank balance sheets show why a bank crash is now inevitable and underline the urgent need to set up a new financial system by the end of the year or the beginning of next year at the latest.

If nothing is done to reset Europe’s financial button, the result could be an economic depression far worse than the 1930s as banks go bust and jobs are lost.

The 91 largest eurozone banks in the eurozone need about €4000 billion or four trillion euros to roll over their debt or funding in the next year alone , according to the FT.

The total GDP of the eurozone is about 12 trillion euros. That means, the largest banks need one third of the total GDP of the eurozone to remain solvent for just one more year.

Money markets have now frozen out eurozone banks so that the money to keep banks rolling over their debts has to come from the tax payers through eurzone bailouts or the build up of liabilities on ECB balance sheets n what is a stealth eurobond.  The ruin of the real economy is certain if a third of the eurozone GDP is fed to the fractional reserve banks in one year.

“Morgan Stanley, for example, calculates that of the €8,000bn funding that is currently in place for the largest 91 eurozone banks, some 58 per cent needs to be rolled over in the next two years. More startling still, some 47 per cent of this funding is less than a year in duration. Much of that is in euros.,” writes Gillian Tett in the FT.

http://www.ft.com/intl/cms/s/0/1a430216-cf29-11e0-86c5-00144feabdc0.html#axzz1YOenQ77v

To clarify, the largest 91 eurozone banks need to refinance about €5000 billion or 5 trillion of their funding in the next two years and €4000 billion in the next year alone.

These are sums that are many multiples of the planned 700 billion EFSF facility, which itself  is a significant amount of entire annual tax receipts of eurozone governments.

The entire EFSF facility could, therefore, be used up to recapitalise banks in just three months.  

The ECB is engaging in a souvereign bond buying programme and in a dollar funding programme, replacing the gap left by a lack of private credit with public money, knowing tax payers will have to pay for their bad loans.

Private creditors are not giving money to the banks because they have no capital.

Much of the core capital of the eurozone banks is in the form of the souvereign bonds of insolvent states. The ECB gave banks the money to buy these bonds at 0% interest and without demanding any collateral. The banks were able to make a 6% profit on the interest generated by various eurozone bailouts.

Now Greece looks like it is about to default, the ECB and eurozone banks will have to write down their losses and they will become insolvent because they have only junk collateral.

The Greek cabinet called a crisis meeting on Sunday and signed off on an emergency Greek central bank liquidity programme for  commercial banks as the eurozone ministers come under political pressure to continue pouring money into the black hole of Greek bankster debt.

Because the bankster bailout money is drying up, the fractional reserve monster of a banking system is now entering  its death throes.

The only question now is: how much of the real economy will the banks gobble up before they go down?

„The ECB is ultimately underwritten by taxpayers, which means that there is a hidden – and potentially huge – cost of the eurozone crisis to taxpayers buried in the ECB’s books,“ notes Open Europe. 

http://www.openeurope.org.uk/research/ecbandtheeuro.pdf

A new poll shows 85% of the Germans reject the euro EFSF bailout and another 50% would now vote for a euro sceptic party.

Who can be surprised?

This catastrophe is not necessary. It is time to reform the fractional reserve banking system and bring the banks under public control by nationalisation.

Under the current rules, the ECB is allowed to lend money only to private banks and it does this at 0% or low interest. These banks then lend money to governments and people but charging with interest.

The accumulation of interest owed to banks due to the privatisation of the money supply is the root cause of the debt of banks, states and people. More money has to be printed to pay the interest on the existing privatised money leading to ever larger amounts of money in circulation and ever higher interest payments. Eventually, the mathematical limits of the system are reached. A bust is preprogrammed after 70 to 80 years and we are now reaching just such a bust where vast amounts of the real economy are going towards paying interest to banks.

We need a new financial system – and now! Banks need to be nationalised and our money supply changed to public money.

This disaster can be avoided if governments take the right action and reset the financial system.