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Three Things Investors Don't Know About Europe

Phoenix Capital Research's picture




 

 

Europe is heading into a full-scale disaster.

 

You see, the debt problems in Europe are not simply related to Greece. They are SYSTEMIC. The below chart shows the official Debt to GDP ratios for the major players in Europe.

 

 

As you can see, even the more “solvent” countries like Germany and France are sporting Debt to GDP ratios of 75% and 84% respectively.

 

These numbers, while bad, don’t account for unfunded liabilities. And Europe is nothing if not steeped in unfunded liabilities.

 

Let’s consider Germany. According to Axel Weber, the head of Germany’s Central Bank, Germany is in fact sitting on a REAL Debt to GDP ratio of over 200%. This is Germany… with unfunded liabilities equal to over TWO times its current GDP.

 

That’s one thing most invetsors don’t know about Europe.

 

To put the insanity of this into perspective, Weber’s claim is akin to Ben Bernanke going  on national TV and saying that the US actually owes more than $30 trillion and that the debt ceiling is in fact a joke.

 

What’s truly frightening about this is that Weber is most likely being conservative here. Jagadeesh Gokhale of the Cato Institute published a paper for EuroStat in 2009 claiming Germany’s unfunded liabilities are in fact closer to 418%.

 

And of course, Germany has yet to recapitalize its banks.

 

Indeed, by the German Institute for Economic Research’s OWN admission, German banks need 147 billion Euros’ worth of new capital.

 

To put this number into perspective TOTAL EQUITY at the top three banks in Germany is less than 100 billion Euros.

 

And this is GERMANY we’re talking about: the supposed rock-solid balance sheet of Europe. How bad do you think the other, less fiscally conservative EU members are?

 

Think BAD. As in systemic collapse bad.

 

Indeed, let’s consider TOTAL debt sitting on Financial Institutions’ balance sheets in Europe. The below chart shows this number for financial institutions in several major EU members relative to their country’s 2010 GDP.

 

Country

Financial Institutions’ Gross Debt as a % of GDP

Portugal

65%

Italy

99%

Ireland

664%

Greece

21%

Spain

113%

UK

735%

France

148%

Germany

95%

EU as a whole

148%

Source: IMF

 

As you can see, financial institutions in Germany, France, Italy, Spain, the UK, and Ireland are all ticking time bombs.

 

Indeed, taken as a whole, European financial institutions have more debt than Europe’s ENTIRE GDP.

 

And this is only the “official” numbers. When you account for off balance sheet liabilities, bank’s are even more indebted than this!

 

That’s the second thing most investors don’t know about Europe.

 

Let’s compare the situation there to that in the US banking system.

 

Taken as a whole, the US banking system is leveraged at 13 to 1. Leverage levels at the TBTFs are much much higher… but when you add them in with the 8,100+ other banks in the US, total US bank leverage is 13 to 1.

 

The European banking system as a whole is leveraged at nearly twice this at over 26 to 1. That’s the ENTIRE European Banking system leveraged at near Lehman levels (Lehman was 30 to 1 when it collapsed).

 

To put this into perspective, with a leverage level of 26 to 1, you only need a 4% drop in asset prices to wipe out ALL capital. What are the odds that European bank assets fall 4% in value in the near future as the PIIGS continue to collapse?

 

On that note, if you’ve yet to prepare for Europe’s BIG collapse…we’ve recently published a report showing investors how to prepare for this. It’s called What Europe’s Collapse Means For You 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://gainspainscapital.com/eu-report/

Best Regards,

Graham Summers

PS. We also offer a FREE Special Report detailing the threat of inflation as well as two investments that will explode higher as it seeps throughout the financial system. You can pick up a copy of this report at:

http://gainspainscapital.com/gpc-inflation/

 

 

 

 

 

 

 

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Mon, 10/22/2012 - 22:40 | 2911586 anonnn
anonnn's picture

University of CHicago founded/funded by John D. Rockefeller of Standard Oil  fame.

SUrely a meaningless detail of no consequence to U of Ch  spawn Leo Strauss, Milton Friedman, etc.

Refer to Naomi Klein's Shock Doctrine  for details of U of Ch's global effects., [the book oddly does not mention Rockefeller's original influence].

Mon, 10/22/2012 - 16:06 | 2910546 blindman
blindman's picture

oh, so the fiat money system is a ruse?
no way. to benefit the issuers of credit money
at the expense of all else in the universe.
never, the law and the good faith and conscience
of the elect would not have it.
did i get that right?

Mon, 10/22/2012 - 14:51 | 2910301 JustObserving
JustObserving's picture

Jagadeesh Gokhale of the Cato Institute published a paper for EuroStat in 2009 claiming Germany’s unfunded liabilities are in fact closer to 418%.

And Kotlikoff has a paper saying that USA's unfunded liabilities ($222 trillion) are 1423% of GDP, 3.4 times Germany's:

"In 2007, the first year the CBO produced the Alternative Fiscal Scenario, the gap, by our reckoning, stood at $175 trillion. By 2009, when the CBO began reporting the AFS annually, the gap was $184 trillion. In 2010, it was $202 trillion, followed by $211 trillion in 2011 and $222 trillion in 2012.

Part of the fiscal gap’s growth reflects changes in policy, such as the Bush and Obama tax cuts, the introduction of Medicare Part D, and the expansion of defense spending. Part reflects “natural” growth of existing programs, including growth in Medicare and Medicaid reimbursement rates. And part reflects the demographic time bomb U.S. politicians are blithely ignoring.

When fully retired, 78 million baby boomers will collect, on average, more than 85 percent of per-capita gross domestic product ($40,000 in today’s dollars) in Social Security, Medicare and Medicaid benefits. Each passing year brings these outlays one year closer, which raises their present value."

http://www.bloomberg.com/news/2012-08-08/blink-u-s-debt-just-grew-by-11-trillion.html

Mon, 10/22/2012 - 14:52 | 2910256 OneTinSoldier66
OneTinSoldier66's picture

I'm sorry but I have some trouble getting it, because somewhere on the internet I read almost exactly this same thing... like 2 years ago.

 

I mean, it's like I'm having deja vu when I read this article. I get the feeling I'll be having this same deja vu in another two years, then again in another two years after that. In fact if you look at the chart, it's from 2 years ago.

 

Have you ever had deja, deja, deja, deja... deja vu?

 

Really though, I feel like I've been re-reading this same thing over and over again for 2 years now.

Mon, 10/22/2012 - 14:00 | 2910122 mkhs
mkhs's picture

Didn't Mark Grant explain this a month ago?

Mon, 10/22/2012 - 13:30 | 2909990 Stuck on Zero
Stuck on Zero's picture

What's missing in the ratios of debt to GDP is the enormous fudge factors that go into the makeup of the "GDP" number.  Usually that number is fudged by 30% or more.  More importantly to GDP is "national income after taxes and mandatory spending."

 

 

Mon, 10/22/2012 - 13:54 | 2910090 dugorama
dugorama's picture

Don't these numbers look pretty good compared to the US or Japan?

Mon, 10/22/2012 - 14:50 | 2910299 OneTinSoldier66
OneTinSoldier66's picture

Here in the U.S. Federal Government borrowing and spending is included in the GDP.

 

So for the U.S., I have no idea how they can be called 'numbers'.

Mon, 10/22/2012 - 12:20 | 2909777 shovelhead
shovelhead's picture

It's basically Christian theology in a financial context.

They know that Big J is coming. They can read all the signs that the prophets warn of. The outcome is inevitable.

But only Big G KNOWS when J is going for his encore performance...

And he ain't telling.

Be prepared is the watchword. Forecasting the runes will be useless.

Big G is one sneaky sumbitch.

"Look over there....BAM"

Never saw it coming.

Mon, 10/22/2012 - 13:31 | 2909991 silverserfer
silverserfer's picture

are you talking about some sort walking dead zombie attack?

Mon, 10/22/2012 - 12:11 | 2909747 buster
buster's picture

from UChicagoNews, March 2011:

Axel Weber, president of Deutsche Bundesbank

from Wikipedia:

The Deutsche Bundesbank (German for German Federal Bank) is the central bank of the Federal Republic of Germany

Mon, 10/22/2012 - 12:05 | 2909722 lasvegaspersona
lasvegaspersona's picture

The biggest thing that readers do not know about Europe is the structure of the ECB balance sheet. The ECB is usually compared to the FEd which it resembles in no way....and this is not a small point as we look to the future.

Mon, 10/22/2012 - 11:56 | 2909679 flyingpigg
flyingpigg's picture

Is this guy trying to confuse us with facts?

Mon, 10/22/2012 - 13:31 | 2909996 silverserfer
silverserfer's picture

yes, outdates ones from 2010(check the date stamp on the map he used)

Mon, 10/22/2012 - 11:51 | 2909655 Zero Govt
Zero Govt's picture

Well although I got junked last time for asking here goes again...

Graham... grab balls.... put a date on Europes "systemic collapse" ?

everyone and their cat is predicting that, it's such a bore without a date

Mon, 10/22/2012 - 13:59 | 2910117 R_J
R_J's picture

not only "Again", but This article is several Agains...ehm...Months old!

Mon, 10/22/2012 - 12:02 | 2909713 Likstane
Likstane's picture

right after QE3 does

 

Tue, 10/23/2012 - 07:35 | 2909892 Zero Govt
Zero Govt's picture

QE3, or 'Pay Good Money to Buy Blankfein & Dimons Soiled Nappies' for short, is an infinite program with no end in sight (no end to the worthless crap WS bwankers produce and toilet-cleaner for the elite, Bernanke, has to mop up)

still lookin for a date, otherwise Graham's just clucking amongst a crowd of turkeys all singing the same tune.. we need 'stand out' here at ZH, we've attention spans of Goldfish afterall, a date would grip us all 

Mon, 10/22/2012 - 11:39 | 2909608 blindman
blindman's picture

"peterjbolton

October 21, 2012 at 8:00 pm | #

@ Lyonwiss

With total and due respect: I didn’t think that I was hiding anything: Economics is a communistic persuasion aka apologentica for Totalitarianism; it rules the social order for the Banking System, ie, for a few in an order defined as a “state”.

But for a Society, it (the Profession of Economics), maintains the social order of centralized Bank control of Productivity (x2 generations in advance of birth) and full ownership of Global Assets as its focus.

That this system is ethically and morally insane; (I do not give it any intellectual credence to the Profession of Economics whatsoever) it is fully apparent albeit for all those who wish to enquire that what we have, in Economics, is a scam’ and nothing but a scam.

What @Lyonwiss, is poverty? Answer: Poverty is the United Nations; Poverty is the Failure of Leadership. Poverty is led by the Economist Profession; Economists represent the protection of wealth transfer by the banking system: Economists are the facilitators of Gross Global Corruption and the deterministic Totalitarian ‘ownership’ of global productivity, by an “elite” few.
I shall call them “Unholy” warriors.

@Lyonwiss, your wisdom is always appreciated here.

Thank you for your comments."
. from here
Open For Offers
by Steve Keen on October 19th, 2012 at 4:23 pm
http://www.debtdeflation.com/blogs/2012/10/19/open-for-offers/comment-pa...

Mon, 10/22/2012 - 11:36 | 2909596 Mountainview
Mountainview's picture

You can easily bundle ECB and FED together and declare them "Ponzi-exponential" (PE). No hope of a positive solution!

Mon, 10/22/2012 - 11:38 | 2909593 Manipulism
Manipulism's picture

When is this shit written?

Axel Weber is NOT head of Bundesbank and never was.

So the rest is also questionable.

Phoenix= Idiots.

 

Mon, 10/22/2012 - 12:13 | 2909752 LostAtSea
LostAtSea's picture

Manipulism, where do you get your shit?

Here's what google found:

"Axel Weber, president of Deutsche Bundesbank, is expected to become a visiting professor at Chicago Booth, where he would teach MBA courses in central banking."

http://news.uchicago.edu/article/2011/03/10/axel-weber-bundesbank-presid...

 

 

Mon, 10/22/2012 - 13:55 | 2910100 knukles
knukles's picture

Bundesbungbankisheftenglobbulenwhatever.

Mon, 10/22/2012 - 12:07 | 2909734 Tinky
Tinky's picture

Never was? Really?

"Weber was appointed President of the Deutsche Bundesbank and a member of the Governing Council of the European Central Bank on 30 April 2004. On 9 February 2011 Weber announced that he would be resigning his chairmanship of the Bundesbank, effective 30 April 2011..."

Try a five second Google search next time.

Mon, 10/22/2012 - 11:31 | 2909573 newworldorder
newworldorder's picture

Don't worry about it. The FED is ready to help when needed.

Mon, 10/22/2012 - 11:59 | 2909678 Zero Govt
Zero Govt's picture

The Fed, like ECB et al, are just plain wrong-headed on every cranky corrupt policy they've rolled out since we collapsed in 2008, a direct result of their sustained wrong (dizzy debt issuance) policies leading back to the 80's

The Fed has cornered the market in being wrong and always choosing the dumbest path (ie. let's back the losers in DC and on WS with all the chips we've got)

Bubble Ben would miss recovery if it was 2ft away from his nose written in 120ft neon flashing signs 

Mon, 10/22/2012 - 12:34 | 2909823 Coke and Hookers
Coke and Hookers's picture

You couldn't be more wrong. The Fed has, through its 'fiat ex nihilo handed to its owners' programs been incredibly successful. In just four years it has been able to transfer at least half of the wealth of the middle class to its Wall Street owners. But the success story doesn't end there. Through taxpayer backing of its ex nihilo initiatives, it has also transferred the future wealth of the next several generations of Americans to its owners. But that's not all! By supplying taxpayer backed Euro banks with ex nihilo dollars, it has secured a good part of future wealth of Europeans too for its owners. This is pure genius!

Mon, 10/22/2012 - 12:50 | 2909876 Zero Govt
Zero Govt's picture

Never waste a good crisis eh?

Only pin-prick to this latest Fed bubble inflation of the rich list is the taxpayer. If they tell Uncle Benny they are no blood relation and will not be paying him back a Cent with their future earnings

Thought Crime for the Day: Tax Revolt ...leave Benny sucking air and Barney Frank on a diet

Mon, 10/22/2012 - 11:26 | 2909562 Dead Canary
Dead Canary's picture

Dude, you have the gloomiest reports anywhere. Good. Keep up the good work.

Mon, 10/22/2012 - 11:09 | 2909493 Tango in the Blight
Tango in the Blight's picture

Yawn...

Mon, 10/22/2012 - 14:44 | 2910269 OneTinSoldier66
OneTinSoldier66's picture

I hear you Tango. +100

 

I read almost exactly this same thing somewhere on the internet about two years ago, and feel like I have been re-reading it over and over again ever since. This shit is really starting to get fucking old and worn out.

Tue, 10/23/2012 - 17:09 | 2914024 Tango in the Blight
Tango in the Blight's picture

We're in the Groundhog Day economy. We know bad things are just about to happen but they keep on not happening just yet.

Do NOT follow this link or you will be banned from the site!