It’s private debt, consumer debt, that will offer the winner his or her poisoned chalice. With 94 million Americans not counted as part of the workforce, and untold million others in jobs that pay hardly or no living wage, with so many millions of jobs that no longer pay sufficient or even any benefits, consumer spending has nowhere to go but down. In an economy where that spending is good for 70% of GDP, taking spending power away from people is deadly. The only way people have been able to either keep up appearances or even just make ends meet is going into debt.
"I am concerned that the appointment for Treasury Secretary offers either a great opportunity or a lost one or in one case would create a future problem. The latter, obviously, is Larry Summers who is... arrogantly unpleasant to his subordinates, dismissive to his equals and pandering to his superiors."
Deutsche Bank may be forced to shrink its U.S. activities as part of a deal to settle litigation over residential mortgage-backed securities with the Department of Justice, German newspaper Welt am Sonntag reported, in a move that will be sure to delight its US-based competitors.
At bottom, it is not central bank stimulus and intervention alone that drives equities and bond markets; it is the naive faith and willful ignorance of average market participants. There is a problem with this kind of economic model, however. Reality is never kept in check indefinitely. Fiscal truths will be exposed, one way or another.
Deutsche Bank suffered a further blow to its image over the weekend with a third alleged "IT outage" in the space of a few months on Saturday, that prevented some customers getting access to their money for a short time: "Customers can not access their cash because it is blocked", a customer complained to Germany's Handelsblatt.
It is never a good thing when official sources either named or unnamed are quoted in the media as denying bailout discussions. For any bank such rumors and denials are harmful because, obviously, they are a reflection of common perception. Furthermore, most people know all-too-well the true nature of any denials, thus reinforcing only that much more the troubling perceptions in the first place.
"To our surprise, we find that financial market information provides little support for the view that major institutions are significantly safer than they were before the crisis and some support for the notion that risks have actually increased."