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I've Uncovered the Darkest Secret of the Financial System... Get Some Coffee Before Reading This
As noted in yesterday’s piece concerning how and why Europe could bring about systemic risk, EU banks are likely leveraged at much, much more than 26 to 1.
Indeed, considering how leveraged and toxic US banks’ (especially the investment banks’) balance sheets became from the US housing bubble, the chart I showed you should give everyone pause when they consider the TRUE state of EU bank balance sheets.
This fact in of itself makes the possibility of a systemic collapse of the EU banking system relatively high. Let me give you an example to illustrate this point.
Let’s assume Bank XYZ in Europe has a loan portfolio of €300 million Euros and equity of €30 million Euros. This means the bank is “officially” leveraged at 10 to 1 (this would be a great leverage ratio for a European bank as most of them are leveraged to at least 26 to 1 or worse).
So… let’s say that 10% of the bank’s loans (read: assets) are in fact worth 50% of the value that the bank claims they’re worth (not unlikely if you’re talking about a PIIGS bank). This means that the bank’s actual loan portfolio is worth €285 million (10% of 300 is 30 and 50% of 30 is 15).
With equity of only €30 million, the bank, at some point, will have to take writedowns or one time charges on its loan portfolio that would erase HALF of its equity. At this point, the bank becomes leveraged at 19 to 1 (€285 million in assets on €15 million in equity).
This announcement would result in:
- Depositors pulling their funds from the bank (thereby rendering it even more insolvent)
- The bank’s shares plunging on the market (raising its leverage levels even higher as equity falls further).
Thus, at a leverage ratio of 10 to 1, even a 50% hit on 10% of a bank’s loan portfolio can result in the bank needing a bailout or even collapsing.
Now, what if that €300 million in loans is actually the amount the bank’s in-house risk models believe to be “at risk” and the REAL loan portfolio is around €800 million?
Immediately, we realize that the bank is in fact leveraged at 26 to 1. At this level even a 4% drop in asset prices erases ALL equity rendering the bank insolvent.
And yet, based on Basel II requirements, this bank can claim in all public disclosures that it is only leveraged at 10 to 1. With this in mind, you should understand why the banks lobbied so hard against a rapid implementation of Basel III capital requirements (which would require equity and capital equal to 10.5% of all of risk-weighted assets.)
Indeed, Basel III requirements which were meant to go in effect at the end of 2012 will now gradually begin to be implemented in 2013. And banks will have until 2015 to adjust to the new capital requirements and until 2019 conservation buffers in place.
With that in mind, take my XYZ bank example, apply it to all of Europe, assume leverage ratios of 26 to 1 at the very minimum (Lehman blew up when it was leveraged at 30 to 1), and take another look at the housing bubbles in the above chart.
In simple terms Europe’s entire €46 trillion banking system is in far worse shape than even the US investment banks were going into 2008. And this is based on their leverage ratios alone.
However, even this analysis doesn’t go deep enough to explain how and why Europe will implode. Indeed, I’ve spent the last six months digging as deep as I can into the financial system to find the unquantifiable risks that aren’t being discussed by the financial industry.
I’ve found them. And they are worse than anything I expected to find. Indeed, what I’ve discovered is more horrifying than I’d care to admit. And I would very much like to share this information with you.
To find out more about it, swing by www.gainspainscapital.com.
Sincerely
Graham Summers
PS. For those of you anxious about Europe, we’ve recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.
This report is 100% FREE. You can pick up a copy today at: http://www.gainspainscapital.com
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ask them money changers. They got their asses striped, but good.
That myth is popular 'mongst the ZeroHeads.
is it possible that people the world over are willing to abandon our bankster based growth system because they realize they can destroy their thieving government and banksters simultaneously by doing so?
stay tuned.
no, they do not realize that.
wait. we discovered the global equity market is rigged and manipulated?
At least we know how Phoenix Capital will survive the crisis... subscribe, baby, subscribe...
I've discovered GS is full of shit. A long time ago.
I was worried about how this crisis was going to develop but now I know that Graham's report will show me: "...exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it", I am greatly relieved - even excited - because with Graham's help I will profit :)
I hope you'll stay out of my labs water dish from now on, you will soon be able to afford your own place...
Why is it so bad to let banks fail? Iceland did it. Maybe I'll move there.
What is this " more at 11:00" marketing ploy crap? Your subscription revenues are that bad?
Phoenix Capital discovered the business section of a 3 year old Newspaper under the couch. They really should have checked the publication date before posting to their newsletter.
So the Euro goes 'splat' before the $US....... doesn't seem to matter much who hits the ground first when you've all fallen out of a plane without parachutes.
Last one to hit the ground = winning.
"You have to pass the tax hike to know whats in it..."
Paraphrased- Nancy Pelosi
he's gone so deep he come round the globe. Summers needs to winterise his gems of wisdom.
Put it in the deep freeze as Greenland is thawing fast and mid west is scorching. When you compare US banks to UK banks to Euro banks and you dig deep into the Japanese cabal then we'll talk of the first world banking circus. You are short on the capital ratio of Anglo banks, when you include off balance sheet derivative scams. It beats the skyscrapers of new china RE bubble.
saving the bank is always the worst mistake, throwing good money after bad.
http://expose2.wordpress.com/2011/11/20/a-voice-from-the-dark/
One would think someone who was such an expert on the financial system would not constantly have to hawk their "special" reports but would
instead be making a handsome living by trading the markets themselves and utilising that expertise.
Do we still have any free markets? How quaint!
And where in my post did I state or imply markets were free shill?
"Don't talk to me about Basel capital requirements unless you're ready to discuss restructuring all the big banks." -- RC Whalen, in an interview
You're preaching to the choir Graham.
Billions of blistering blue barnacles! How're Tin Tin and Snowy?, Capt.
Things that actually grow wealth:
1 - Watering the garden instead of the lawn
2 - Fertilizing your garden
3 - Timing the planting of your seeds correctly
4 - Utilizing microclimates
5 - The ability to subdivide your land and build homes without government (bankers) requiring you to get permission or tell you what you can do and what you can't do
6 - The ability to buy/sell land without government (bankers) charging unpayable usury
7 - Legalzing the use of Gold and Silver as money
8 - Legalizing barter and trade without restriction
9 - End property taxes so that people can stay on their land and FARM it, instead of having to move to the city to get a job to come up with government monopoly money
10 - End the Fed for once and for all, make it legal to educate americans on how the fradulent money system work so that it never happens again
Things that can actually bear interest:
1 - Zuchinni plants bear prolifically
2 - Rabbits multiply rapidly
3 - Apple trees grow and bear fruit
4 - Cows mulitiply and you can utilize their meat and milk
5 - Potatoes are easy to grow and rapidly increase in number
6 - Pigs make babies that grow up to be bacon, pastrami, ham sausage and more
7 - Corn grows and makes enough seed to plant your neighbors fields too, plus gives the beans a place to climb
8- Chickens are productive and give both meat and eggs, which are great for making Flan
9 - Tomatoes are the best investment for your time, you will never go hungry
10 - Fish require little effort and were worthy of mention in the bible
11 - Grapes can be eaten or used for wine
12 - Shellfish taste good and make your muscles strong
13 - Trees can be cut into lumber
14 - Wheat can be used to make donuts, pies and waffles
Things that do not bear interest, grow or multiply:
1 - Rocks. They don't grow, they just sit there
2 - Iron. It expands with heat but always returns to the same size and weight
3 - Your coffee maker, it does not make babies
4 - Water. It expands when frozen or heated, but inevitably returns to it's liquid state
5 - Molten lava. Difficult to invest in
6 - Oxygen. Subject to the same laws of physics as the rest of the universe
7 - Glass. Although it's cool to look through it
8 - Dirt. It is good for growing things though
9 - Gold. No matter how many chemistry classes you take, it is impossible to loan a coin to somebody and have it return after a year goes by and actually expect it to be 10% bigger
10- Paper money. The concept that paper could magically bear interest is a joke. If paper were the exception to the laws of physics, eventually paper would grow until it expanded to the point where it would explode the entire universe
Things that impede, delay or prevent the growth of wealth:
1 - Government
2 - Politicians
3 - Lawyers
4 - Corrupt judges
5 - Bankers
6 - Taxes
7 - Main stream media, other wise known as downstream or false media
Things that transfer wealth ( from to good people to evil people):
1 - The Federal Reserve and Banking "industry" with their Paper Monopoly Money, they have stolen all of America's wealth with their printing press and their computer keyboards
Well and truly said. And as to the biggest bullshit term ever invented by lying economists, "LEVERAGE", it's time for people to realize it was created as a euphemism for REAL LEVERAGE in the physical world involving a lever and a fulcrum.
It's a totally false metaphor. For every increase in length of the lever, you are actually exerting LESS force for a given distance traveled over the arc the FAR end (the one YOU are holding) of the lever travels in comparison to the short arc length of a short lever. With a long lever, the total arc distance may be several times the arc distance of a short lever. Granted, you can move a bigger weight but there is a trade off. The lever length is not a freebie. You have to make it very strong so it doesn't snap when the force is exerted. You need a way to grasp the lever over a lot of travel on the arc.
The clever rascal economists don't care that their "leverage" lever is a figment of the imagination that is so weak that it it needs the force of a government to keep everyone from using the same scam. Leverage is basically a loan WITHOUT collateral in the service of the upper class.
This is an excerpt from the article "View From the Catbird Seat".
Full article here:
http://www.doomsteaddiner.org/forum/index.php?topic=631.0
The real dirt...
Try to follow me here, I'm going to sink Obummers ship right now.
"Leverage" and "derivatives" are another way of saying "Gambling". If you and I enter an even bet, one of us wins and one of us loses. Well thats fine, and some are better than others and make a living at betting. But there are those that want to make even more money even faster, so they bet at 25:1 odds for example. So for every 24 people that lose, 1 person wins. If you are real tricky and cheat like hell you can make some real bread here. Now this is where Obummer fucked up royalaly. While they wanted us all to believe that there was 1 Bank that won and 24 that lost and needed to be bailed out, we now know that all 25 were actually just different branches of the same Bank and were in collusion with Obummer to scam the American People into believing that if we did not give them Trillions of Dollars for free that the economy would collapse. Nice scam and they got away with it, but shame on us if we let them do it to us again. And shame on anyone that does not vote for Ron Paul this time
I vote engineertheeconomy for president.
Why is it that the human race strives and conceives these kind of concrete, achievable and noble goals but yet has never come close in all our history?
Collectively, why are we so smart at being so dumb?
Thanks Bill :)
I think that often the individual instinct to survive dominates the internal instinct to facilitate group/species survival. An example would be cops. We pay their salaries so they can shoot us dead. They are more than happy to take the check and deposit it in their checking accounts as that increases the probability that they and their offspring will survive and reproduce. But then when confronted with an Occupy demonstration they switch to a combination of group(cop) and self preservation/survival when they should be looking at the bigger picture and see that the Fed is killing off the entire human species and will only leave their own criminal genetics behind to reproduce in a nuclear wasteland
Please vote for Ron Paul for President
Great Post!
Only logged in to give a +1 and make this post :)
I could not resist the temptation to reveal the real dark secrets of the Bankers, namely that they just print themselves gazillions for nothin subsequently devaluing our dollars and asset values and secondly that "interest" on a loan is mathematically impossibe without there being a gigantic ponzi that they control, resulting only in foreclosures and repossessions at their convienance
thx for the lulz!
You know we live in a completely bullshit world because these are things kids should be learning in elementary school. But NOOOO... kids are stupid little pieces of shit who can't be given useful information or any responsibility at all. Let's feed them lots of HFCS and keep them indoors glued to screens. Playing outside is for looooosers
There is no good reason that all children, world wide, should not be taught what has been listed in the comment above you. Any person could write a book physically or with zero's and one's here on the net. If every person e-mailed it to 5 or 10 people, every person in the world would have it in a few days
- pass it on -
Don't need schools anymore.
Just tell the shitty little brats to google it.
Scroll up to where I made the point about Mainstream Media Propaganda and Brainwashing. Google is the master of Propaganda, Brainwashing, Diversion tactics, misleading and false information and deliberately manipulated search results to specifically hide the truth from all of us
The Bankers own and controll Google entirely
The worst thing you could do to your child ever would be to let them have access to Google without parental supervision
You may as well give thim a six pack, a handfull of assorted pills, and a fully loaded pistol and then send them outside to play russian roulette until it gets dark
http://duckduckgo.com/
Google search is still safer than a public education, where reserve banking is described as having reserves and having low leverage.