Here's The Real Financial Situation For Europe... Clear as Day

Let’s rehash the European situation for those who still don’t get it.

 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 nearly twice this at over 25 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 25 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?

Now 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. 

These leverage levels alone position Europe for a full-scale banking collapse on par with Lehman Brothers. Again, I’m talking about Europe’s ENTIRE banking system collapsing.

This is not a question of “if,” it is a question of “when.” And it will very likely happen within the next 10-12 months if not sooner depending on how soon Greece defaults.

The reason that this is guaranteed to happen before the end of 2012 is that a HUGE percentage of European bank debt needs to be rolled over by the end of 2012.

Between now and then…

§  French banks need to roll over 30% of their TOTAL debt.

§  Spanish banks and Italian banks need to rollover more than 33% of their TOTAL debt.

§  German banks need to roll over nearly 40% of their TOTAL debt.

§  Irish banks need to roll over almost HALF (50%) of their TOTAL debt.

Good luck with that.

The situation is no better for European Sovereign states themselves, which are facing their own debt roll over issues at a time when investors are rapidly losing their appetite for sovereign debt.

To wit, Spain, Portugal, and Italy have all relied heavily on the ECB to buy their debt at recent auctions. Germany actually just had a failed debt auction this morning.  And in this environment , these nations need to meet the following debt roll over obligations:

	Maturing Debt Plus Budget Deficit as a % of GDP
	2011	2012
Portugal	21.6%	21.0%
Italy	22.8%	23.1%
Ireland	19.5%	18.0%
Greece	24.0%	26.0%
Spain	19.3%	18.7%
UK	15.7%	13.6%
France	20.6%	19.7%
Germany	11.4%	10.5%

And this is just maturing debt that’s due in the near future: it doesn’t include unfunded liabilities.

Jagadeesh Gokhale of the Cato Institute puts the situation as the following, “The average EU country would need to have more than four times (434 percent) its current annual gross domestic product (GDP) in the bank today, earning interest at the government’s borrowing rate, in order to fund current policies indefinitely.”

As I said before, Europe is finished. The region’s entire banking system is insolvent (with few exceptions). European non-financial corporations are running massive debt to equity ratios. And even EU sovereign states require intervention from the ECB just to meet current debt issuance, to say nothing of the huge amount of sovereign debt roll over that is due over the next 14 months.

Again… Europe. Is. Finished.

The Great debt Implosion will hit Europe within the next 14 months and likely much much sooner. When it dues, we will see numerous debt defaults and restructuring on both the corporate and sovereign levels. We’re also very likely going to see significant portions of the European banking system collapse “Lehman-style” along with subsequent HUGE losses of capital.

The impact of this will be global in nature. The EU, taken as a whole, is:

1)   The single largest economy in the world ($16.28 trillion)

2)   Is China’s largest trade partner

3)   Accounts for 21% of US exports

4)   Accounts for $121 billion worth of exports for South America

So if the EU banking system/ economy collapses, the global economy could enter a recession just based on that one issue alone (ignoring the other issues in China, Japan, and the US).

Again, we’re in for a rough rough future in the financial system.

So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We're literally at most a few months, and very likely just a few weeks from Europe's banks imploding.

When this happens the entire system could go down. I’m talking about bank holidays, sovereign debt defaults, retirement accounts and pension funds wiped out, even food shortages in some areas.

This will NOT be permanent, nor will we enter some kind of Mad Max apocalypse. But there will be temporary shutdowns of the banking system as they work through this mess. And given that most folks rely almost entirely on their credit cards to survive and haven’t prepared at all, things could indeed get very messy at times.

So you NEED to take steps now to prepare for all of this. This includes having some cash on hand as well as actual physical bullion. It also means stockpiling some food and water.

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Good Investing!

Graham Summers

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Comments

[Zero Govt]

Mr Summers

When you say there could be "some" food shortages could you be more specific please?

ZH bloggers for example would be completely fuked without popcorn.. we need to know about popcorn, seriously!

Otherwise a good article with tasty info ...not as tasty as popcorn though (that's seriously tasty;)

[pineyard]

I have just looked through previous posts by this " PHOENIX CAPITAL " website

It is OBVIOUS that the authors behind this site behind a MASK of professionalism have OTHER ERRANDS .

As DOCUMENTED by me above they are marketing information presenting these as professional  facts which IMPOSSIBLY can be TRUE .

If ZEROHEDGE does NOT take action to delist them as a fitted to post articles .. my attitude towards  ZEROHEDGE will take a serious DOWNTURN as a medium where it is possible to find trustworthy information

[pineyard]

And as a small additional information . FRANCE GDP is approx 2.5 TRILLION USD

Now You can calculate Yourself !

[earnulf]

We really don't know how the "masses" will react when the steady credit drip is suddenly cut off for an indefinate period while the politicans discuss how to properly reset the who shebang.

Anyone seen a drug addict suddenly cut off and told 'don't call us, we'll call you?'

Seconds seem like minute, minutes like hours, hours like days, days like weeks.   Wimpy doesn't last five seconds in that scenario, let alone till next Tuesday for that Hamburger today.

It's not a pretty sight, I don't want to do it, but I plan to be ready just in case.

[pineyard]

I do NOT understand the numbers mentioned in this Article and i doubt the numbers

How can it be that EUROPEAN BANKS according to latest BIS ( Bank of International Setllement ) data October 2011) have a POSITIVE CAPITAL BALANCE versus the remaining World. Aproximately to the tune of 10 TRILLION USD !

European Banks are OWED 19,66 TRILLION USD by the entire world ( That is the credit given by European Banks to Others. ) Of this 9.7 TRILLION USD are owed to the european banks by EUROPE . The remaining approx 10 TRILLION USD are owed to the european banks by the remaining world amongst these the US which NET ows 2.3 TRILLION USD to the European banks

 Those NUMBERS are what the bank of banks BIS present .

http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/EXTDECQEDS/0,,menuPK:1805431~pagePK:64168427~piPK:64168435~theSitePK:1805415,00.html

from the web-site of BIS

http://www.bis.org/

The EU GDP is around 16 TRILLION UGD .. How can the European Banks as delineated in above article  have DEBT surpassing the entire EU GDP as CLAIMED.. when the money they have in CREDIT is considerably higher than this GDP ( 19.66 TRILLION )

I can give one more example. In the article it is stated that the DEBT of French Banks is 148% of GDP

If You look at numbers in BIS DATA .... FRENCH BANKS have a NET CAPITAL BALANCE ( What they are owed from the world = 3.348 TRILLION USD minus what they owe to the world = 1.810 TRILLION USD meaning a NET CAPITAL POSITION  towards the WORLD equal to approx 1.5 TRILLION USD ...NET !

There is therefore something WRONG

Either are BIS DATA a LIE ..or above AUTHOR  is a BLOODY LIER ..

Both cannot be correct ! ... WHOM  ... do YOU believe ?

[Toxicosis]

The business as usual meme is once again propagated by Graham "Peachy Keen" Summers, expecting that deflation, not currency collapse is the main course.  Sorry Graham, methinks your playing the other side and know damn well that the shadow banking system derivative complex monster cannot be defaulted on or swept away so easily.  We could only wish money was the only issue.  But sorry.  Resource utilization is what really drives the economy, including the all important petroleum input, and as that is consumed all the more and shortages rein, the health of the banking/economic system will be the least of our worries.  Good luck there spewing what you spew Graham.

[The Big Ching-aso]

".......the global economy could enter a recession........"

WTF.    What are we into now, an economic boom?

You really are the sharpest tack in the box.   I don't care what anybody else says.

[Chump]

This will NOT be permanent, nor will we enter some kind of Mad Max apocalypse. But there will be temporary shutdowns of the banking system as they work through this mess. And given that most folks rely almost entirely on their credit cards to survive and haven’t prepared at all, things could indeed get very messy at times.

I disagree with your conclusion here.  If most people rely on credit, have no cash on hand, have no stored food or water on hand, then any temporary disruption sends us instantly to Mad Max.  It's not like just because the bank opens back up people are going to forget they were looking into starvation's steely eyes just yesterday.  Welcome to the apocalypse.

[Zero Govt]

the assumption is we enter Mad Max (anarchy) Stage when Govt and banks blow up because there is no Police or Law ...nothing could be further from the truth

we have anarchy NOW ...groups of money thugs/robbers running riot across society

Society is self-regulating.. the protests and riots are a very good and healthy signs that society is rising up to attack the parasites/anarchists. Once the Govt and banking systems break down society will sort itself out into normal social order (see nature get on with it without any Law/Police/Govt)

It's heartening to see groups in the beginnings of groups in society (Tea Party and Occupy) wanting to throw off the parasites sucking away on our back... both sets of protestors targetting the righ groups: financial terrorists (bankers)

We have anarchy now... society needs to cleanse itself of these crimnal bankers and their fronts/puppets, Govt

[Moe Howard]

These free reports are damaging my bottom line.

[Lord Welligton]

Not being picky but the Irish financial services debt as % of GDP includes financial services companies in the IFSC (Irish Financial Services Centre). Many of these are European banks and insurance companies.

[SheepDog-One]

I disagree, theyre not just going to hit the wall, take their loss haircuts, and get busy going back to business as usual restructuring and whatnot. Banksters do not take losses, they start world wars when faced with losses.

[s2man]

Cash - check

Bouillon - check

Food & water - check

You forgot Bullets and Bandages

[SheepDog-One]

Bandages? We dont need no stinkin bandages!

[Diet Coke and F...]

Bullish.