The Truth About Europe... That The Media Won't Touch

Phoenix Capital Research's picture


I realize that the situation in Europe can be very confusing. Aside from the fact that we’re dealing with over 20 different countries all with their own respective economies and debt issues, we also have the European Central Bank and the numerous bailouts and bailout funds (the LTRO 1 and 2, the EFSF, the ESM and now the OMT) to keep track of.


So for clarity’s sake, I’m going to explain Europe’s problems in simple terms.


The first thing you should know is that European banks, taken as a whole, have far more leverage than their US counterparts. According to the IMF, US banks are leveraged at 13 to 1.


European banks are leveraged at 26 to 1. Put another way, they have $26 in assets for every $1 in equity.


Think of it this way, imagine if had $100K in the bank and you borrowed $2.6 million to buy homes and other items. Do you think you would be in a stable financial condition?


That’s Europe’s banks on the whole.


However, we also know that the IMF only reports based on known assets or the asset levels that the banks admit. How many times in the last few years have we found out that banks were being honest and open about their risk levels?




So you should use the 26 to 1 leverage level as the minimum. Reality is likely far worse. Which means… European banks are insolvent.


Outside of this, European nations are also bankrupt. I realize that everyone likes to focus on Debt to GDP levels, but the reality is that European banks owe far more when you account for unfunded liabilities.


I know the same is true for the US, but the US’s unfunded liabilities pale in comparison to Europe’s. As far back as 2004, we know that:



Debt to GDP Including Unfunded Liabilities











EU as a whole






So, we have a bankrupt banking system in bankrupt countries.


Now for the zinger…


This entire financial system is based on the assumption that European sovereign bonds are still are risk free.


So you have bankrupt nations, selling bonds to insolvent banks, which then use these bonds to leverage up to over 26 to 1 (by the way, Lehman was 30 to 1 when it blew up).


And that’s the ENTIRE European financial system.


I hope this clarifies why Europe is doomed. It is absolutely 100% impossible for Europe to get out of this mess unless the entire union suddenly started growing its GDP at over 10% for a decade.


That will never happen.


My advice to everyone: trust your gut. All of the accounting gimmicks and bailout ideas will never work for the simple fact that the system in Europe is totally broke. The US’s financial system, while problematic (that’s putting it lightly) is nothing compared to how bad Europe is.


In simple terms, this time around, when Europe goes down (and it will) it’s going to be bigger than anything we’ve seen in our lifetimes. And this time around, the world Central Banks are already leveraged to the hilt having spent virtually all of their dry powder propping up the markets for the last four years.


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:


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:


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Freegolder's picture

Graham still here is he? Despite getting the QE3 call so wrong?

Graham, how's about you do a piece on the reason why the Eurosystem and Euro currency is the strongest in the world, rather than this garbage?

Something about mark-to-market physical gold reserves?

Nah, you won't have a clue about that big picture sort of stuff will you?

Rest assured though, if need be, the Eurozne will pull the cord and destroy the paper gold markets, and the dollar, and away we go with freegold.

ImnotPOTUS's picture

Sooooo what your telling me is that all Putin has to do is demand payment in tangible assets instead of fiat paper for the gas and oil and he gets to be the true ruller of Europe.

Vladimir:"Vote for me and everyone drives a Benz, Audi or BMW, comrades!!!!!"

Of course for that to work he would have had to have been shedding all his fiat debt assets before that declaration.

(Holds hand to earpiece) "They did that already!!!!!!!!!!!! ohhhh sh!te!!!!!!!!!"

Diamond Jim's picture

with regards to Mr. Putin..he has just arranged to buy out BP's interest in its oil field coop with another Russian oil company. Then he puts that into his pals oil company Rosneft (sp) and now is a major player in supplying Europe with oil, already having Europe by the nuts with nat gas. All he is waiting for is a cold winter..shuts off the gas and oil for Europe and he now owns Europe as they are bankrupt and cannot pay their utility bill. Mr. Romney may be a fence sitter and moderate, but he is right in this respect...Russia is still a dangerous adversary and they still have the means to make trouble in the world if not take over a good portion of it. And Prez Owe says he will have more wiggle room for a deal after he is elected to a second term......20 acres in colorado or montana with an alligator infested moat looks better and better...

LiesAreTheOnlyTruth's picture

They'll just print, problem solved.  Printing ALONE is a problem, but when EVERYONE prints, it's just global inflation but you are providing money to "fix" the problem via inflation of assets on the books! 

We already see the results ... gas prices are inflating, thereby inflating goods and services and, not to mention that housing prices are inflating as well.  The Fed FINALLY gets their wish ... 20% inflation to "fix" the price problem in housing and the rest of the markets.

Those houses, of cours, are NOT WORTH more, there are more of them being built and foreclosed on every day, so inventory is increasing.  The currency is just worth less, so it takes more of it to buy them.  In the Fed's mind, this will "fix" the problem.

This will "fix" all the counties near bankruptcy b/c they have steadily raised their property taxes and fees (fees were raised in % terms, not $ terms, so they go up too - smart these politicians) so ... homeowners will get hit even HARDER when values appreciate by 10% and property taxes raised to 5% or more hit them on the back end. 

When it costs you $500-1000 a month to own a home, just for PROPERTY TAXES, something is wrong here.

Of course, this just raises rents substantially since you can't "lock in" the price of a home with homestead exemption when you rent it out, which most people buying these houses up for cash are currently doing.

My question is this ... where the F@CK are average people going to get the money they need to live inside all this inflation that is only helping banks, investors and governments?

mjcOH1's picture

"My question is this ... where the F@CK are average people going to get the money they need to live inside all this inflation that is only helping banks, investors and governments?"


I'm thinking the entitled 47% will make a decent living reselling $500 worth of food stamps and the monthly Ritalin ration to the working 53% for $500.  

Of course, the cost to provide the combined benefits through the government beaurocracy will be $2000 or so.   So that'll require printing an extra trillion or two a year.

We'll all be millionaires in no time!   Multi-millionaires if  you have two loaves of bread in the fridge rather than one!

Ned Zeppelin's picture

To answer your last question, why at gunpoint of course.

3rdgrader's picture

If the Military and Law Enforcement Personel were at all serious about performing their sworn duty, their guns would all be pointed at our Politicians and Bankers.

Glitterbug's picture

It depends which goes first. If the financial system goes in one collapse, then the Euro would suffer badly. But what if the US$ goes first? A new reserve currency will be needed. Not a FIAT currency, a Gold backed currency. The Fed will have to find Gold to back the new $.  Good luck with that without starting a world war.

Countries that hold a high proportion of their reserves in US$ denominated paper will have nothing to back their new currency with.

Europe has Gold and many of the smaller countries have Gold. Do you believe that the USA has Gold?

When Nixon closed the Gold window, Gold was flowing out of the USA so fast that only a few months worth of Gold remained. Has the balance of trade improved since then?

Why is the MSM trashing the Euro and not mentioning the US$ and the GB£, which are just as bad, if not worse. It just may be that the Euro will come out of this mess as the strongest currency in the wild west.

mjcOH1's picture

"It depends which goes first. If the financial system goes in one collapse, then the Euro would suffer badly. But what if the US$ goes first? A new reserve currency will be needed. Not a FIAT currency, a Gold backed currency. The Fed will have to find Gold to back the new $.  Good luck with that without starting a world war."

If we go first, it'll be by milliseconds.   And there won't be a fiat currency on the planet escaping the black hole that is the US$.


KingTut's picture

In the US we have FASB 157, which allows our banks to lie about thier assets as much as they want.  If you back that fantasy accounting out, our banks are insolvent too.  However, Bernanke is committed to keeping US and EU banks afloat no matter what (that's the ONLY Fed mandate that is real).  The correct thing to do is to break them up, quarrentine the toxic debt, spin off the good parts and start over.  However, Bernanke can't do that because of the $1 Quadrillion in derrivatives that will trigger when the banks go under.

In fact the whole world has bought into zombification of the banks as the only way forward.  If there are no black swans, this could go on for a really long time, like a global Japanese lost century.  However, the EU must play along, which means they actually have to agree on something.  If the EU botches this  (and what have they NOT botched?), they could be the "black swan" (expected but not believable) that triggers the collapse Bernanke needs to avoid so badly.  The EU defines the concept of "Cluster Fuck", and as they go, so go the rest of us.  

Zero Govt's picture

"...if you had $100K in the bank and you borrowed $2.6 million to buy homes and other items. Do you think you would be in a stable financial condition?"

these are the same bankers that ask you to produce an income statement when taking out a car or home improvement loan yes?

these are the same bankers that ask you to produce cash flow and profit and loss when taking out a biz loan yes?

the exact same bankers that have extended un-repayable credit to punch-drunk-stupid politicos, who have not provided any repayment plan whatsoever, across Europes spendaholic Govt's yes?

So when un-taxed Christine Lagarde waves her luxury handbag around demanding more tax from Joe Public, when in fact it's over-leveraged, gambling-junkie, bonus-greedy bwankers extending idiotic amounts to politicians without any basic scrutiny of repayments that's responsible for these schoolboy mistakes, what are we to make of it????

Christine, go hang bitch

Stop Paying Tax didn't run up the stupid bill, don't pay it

3rdgrader's picture

We already DID are paying for the new money they printed, they call it inflation. By asking for us to pay them twice, they are double dipping.

Zero Govt's picture

Can you see on what or where the $Trillions being spent by the US Govt or Eurozone Govts are going?

I mean if you spent €1 Trillion in a year you'd have a fucking lot of something to show for it right?

So where are the $14 Trillion of a fucking lot of something, like hundreds of new buildings or fleets and fleets of shiney new machines, I mean it must be the size of Las Vegas or bigger yes?

I think the majority of this debt is pure fraud, like the $billions Reagan spent on Star Wars techology that was never delivered, never existed, never seen again. The mega-con-merchants didn't deliver a single satellite or even get a water pistol into space let alone a network of lasers guns... pure fraud

steve from virginia's picture



Go one step further ... the Western World has burned through a trillion barrels of crude oil ... this is capital ... a million-million barrels x 42 gallons = 42 trillion gallons of the highest-quality, easiest to access crude oil ... and there is nothing to show for it.


Add the equivalent amount of coal. Add non-renewable phosphorus and potassium (which humans need to grow food crops), topsoil, aquifers, forestry products, fisheries ... most other metals and mineral supplies ... burned up and wasted for nothing ... other than the paper weath for a handful of fiendish 'entrepreneurs' and clever 'innovators'. Like the climate change- and resource depletion deniers, these 'first citizens' should be broken upon the wheel and their familes made to watch.


Smog and used cars ... lots of fat, angry, stupid 'motorists', nothing to show for US$1 QUADRILLION in debt (what is hedged by derivatives) ...! Nothing ... all that capital gone for nothing in return, nothing to show for it.


What a failure!



knukles's picture




(waiting for the next European tirade about it's all Bush's Fault, Bitchez)

Zero Govt's picture

dunno why you expect that, we're pretty loony-left free on ZH, it's not their type of social group (people that think independently rather than hum a collectivist mantra)

and Graham here has nailed his colours to the mast, he's been Bumma-bashing and is clearly GOP. He's not going to bash Bush even though he deserves it, followed by hot tar, feathers and strung up by the balls/throat at Gitmo ..he is the No.1 global terrorist afterall

knukles's picture

Oh, I's a just thinkin' about how every once in a while when things get way the u-kno-what muddled up over on the Continent, particularly when they step in their own stuff, somebody of dubious bureaucratic achievement begins with a "we may be, but them Yanks fur sure are even worser than we may be" routine.
Maybe one day Barosso, Juncker or one of them will be caught red handed and say publicly....

"something or other Bitchez!"


(PS I don't personally care for either of the two Twinkies from the one  party running, I'll be writing my guy in....  so much for hope and change, bitchez... but I am truly sick and tried of the Messiah's  sanctimonious hypocritical lecturing)

Zero Govt's picture

well the Yanks still diss the French fueled for not supporting Bush in the Iraq war when the French were quite correct, it was a false war

in truth i don't think there's any animosity between Euro's and Yanks at citizen level, it's all bullshit by politicians to stir up nationalism, support for biggoted foreign policy and rail road our thinking into narrow nationlistic confines 

borders are entirely false (and empty) constructs, they've only ever served political purposes, they serve the people not one iota

DoChenRollingBearing's picture

Here's one the media is JUST starting to touch: CBS, Reuters, CNN and FoxNews all chime in...

"Four Died, and Obama Lied"

Danielvr's picture

"the reality is that European banks owe far more when you account for unfunded liabilities"
No they don't - governments do. And they'll make cuts when those liabilities begin to weigh too heavily on their budgets, or print euros to cover them. Meanwhile, Europe's households do not have the gargantuan debts that American families have. And in the end, that will be the real zinger where the solvency of banks and governments is concerned (or the value of the US dollar, depending on how the next president, congress and Das Bernank will deal with their fiscal cliff in the months ahead).

Hobbleknee's picture

"Meanwhile, Europe's households do not have the gargantuan debts that American families have."

Do Americans have infinity mortgages?  Swedes do.  The AVERAGE mortgage term is Sweden is 200 years.  We have mountains of private debt.

3rdgrader's picture

No amount of interest can be paid on a loan, unless you take out a loan to pay for it. They only print the amount of the principle and loan it to you. They don't print the amount of the interest and GIVE it to you. We live in the dark ages thanks to cock suckers like Phoenix