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The Scariest Number Revealed Today: $1.114 Trillion In Eurozone Bad Debt
As we previously reported, the ECB's latest stress test was once again patently flawed from the start. Why? Because as we noted earlier, in its most draconian, "adverse" scenario, the ECB simply refused to contemplate the possibility of deflation. And here's why. Buried deep in the report, on page 75 of 178, is the following revelation which contains in it the scariest number presented to the public today.
Due to the fact that on average banks' internal definitions were less conservative than the simplified EBA approach, the application of the simplified approach led to an increase in NPE stock of €54.6 billion from €743.1 billion to €797.7 billion. The CFR and the projection of findings led to an additional increase in NPE of €81.3 billion, resulting in a total increase €135.9 billion to €879.1 billion of post-CFR NPEs across the participating banks as a result of the AQR. The impact of the application of the EBA simplified approach and the credit file review on the stock of NPEs varied amongst debtor geographies, with overall increases among SSM debtor geographies ranging from 7% to 116%.
Translated: due to a lotta ins, lotta outs, lotta what-have-you's, and the now traditional "fluidity" when it comes to European term definitions (recall that as of this year, in Europe hookers and blow contribute to (estimated) GDP otherwise the Eurozone would be in deep triple-dip recession, if not outright depression by now) the stress test, while concluding that Europe's banks are "safe", also uncovered some €136 billion in previously undisclosed NPE or "Non-Performing Exposure", aka Bad Loans - loans which will never be repaid.
Which in turn leads to the new bad loan total amount (that will also in the coming quarters be revised sharply higher) among Eurozone banks: a whopping €879 billion, or some $1.114 trillion at today's exchange rate. This amount to a stunning 9% of the the Eurozone's GDP and is precisely the reason why the ECB can't possibly even conceive of deflation, as without the much needed rising prices to inflate away this NPL debt tumor, Europe's banks are all insolvent, regardless of what today's stress test may have revealed about just a paltry 25 of them.
And then there is the question of what is the real NPLs number. If the ECB, which clearly is happy to goalseek data to fit the optimistic, "confidence-building" narrative was willing to admit that there was a massive 18% delta in European bank NPLs based just on what definition one uses to define these, as it concluded that banks are largely safe, one wonders: is the real bad debt number €2 trillion, €3 trillion, or even more, and is the ECB's sudden attention shift to the total outstanding NPLs what should be the take home message from toda, and also explains why Mario Draghi is suddenly rushing to inflate bank reserves by another €1 trillion: a number which would almost perfectly offset the negative impact of some €880 billion in bad debt.
Finally, the €64 trillion question: how long until the ECB begins monetizing secured debt on European bank balance sheets. After all, for everyone in Germany the ECB is already Europe's "bad bank." Why not end the pretense, and do away with the facade of prudent monetary policy, and admit what everyone knows: before all is said and done, and Europe implodes in a bad debt singularity, the ECB will, with 100% certainty, monetize the Eurozone's bad loans?
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Lower rated EU debt = "EuroTrash"
Go go Mario
Horrors... a Trillion in Monopoly Money... That we owe to the chosenites... Why does anyone go along with this?..
Um, because they're smarter than you?
ctrl-c
ctrl-v
ctrl-pnext
The ECB will go full retard CTRL+P before something explodes somewhere.
I think the US, UK and Japan have entered their last rally in the current financial system. I think the EMZ has one more to do after the next collapse.
Interesting times we live in.
so you fully expect the ECB to return to the 3 trillion balance sheet mark, soonish? or above it? to reach the 4.4 trillion mark that the FED reached? interesting prognostication, there are lots and lots of banksters that are cheering for the same
care to make a more detailed prognostication? relative to the FED's bs? or in nominal EUR amounts? by when?
I still maintain that QE is vastly misunderstood. one half of it's reasons were the megabanks, the other half was the currency war. and you can't mention the currency war without mentioning China, since it's two trillion mark of stored USTs
so what is it? will the ECB in your view reach 4.4 in one year, while the FED stays still? that's a difference of 2.4 trillions. or perhaps 1 trillion per year? that would make nearly two and a half years, and still with the assumption that the FED does, indeed, stay put
all this because I still think that the most important part of this game is... who accumulates USTs, and what for. the FED is in many ways "just the buyer of last resort"
note "little" Turkey, with the Turkish Lira under attack. it "gently urges" it's banks to exchange EUR into USD, imo mainly because it needs the ammo to defend the Lira. Then the attack is not on the Turkish Lira vs EUR front, it's on the Turkish Lira vs USD front. behold the perks and power of a global reserve currency
so many numbers, and assertions in this article. let's see
new bad loan total amount: €879 billion. or, "in today's CB terms", € 0.879 trillion
"Europe's banks are all insolvent, regardless of what today's stress test may have revealed about just a paltry 25 of them.
not so fast, fellah. the 130 "stress-tested" banks have, together, a total volume of 85% of the eurozone. bring that in perspective
"...why Mario Draghi is suddenly rushing to inflate bank reserves by another €1 trillion: a number which would almost perfectly offset the negative impact of some €880 billion in bad debt."
so is this the "butcher's bill"? a number similar to TARP/TALP? 1 Trillion? Which is the very amount by which the ECB decreased it's balance sheet, lately?
"Finally, the €64 trillion question: how long until the ECB begins monetizing secured debt on European bank balance sheets."
Well, Tyler points out that there is not enough collateral, for that, eurozone small and medium businesses being so damn conservative with their assets and keeping them so much private instead of going public, and so creating suitable collateral. Isn't that a very high price tag, sixty-four, for a question about one trillion?
"After all, for everyone in Germany the ECB is already Europe's "bad bank." Why not end the pretense, and do away with the facade of prudent monetary policy, and admit what everyone knows: before all is said and done, and Europe implodes in a bad debt singularity, the ECB will, with 100% certainty, monetize the Eurozone's bad loans?"
Any evidence for that? Including "Germany's opinion"?
look, it's simple. the US had TARP and TALP. The request for the eurozone to "do the same" is still there, hanging in the air and in all those articles. price tag: 1 trillion
the ECB pumped instead liquidity, reaching the 3 trillion mark. and now returned to the 2 trillion mark. Difference: 1 trillion (9% of eurozone's GDP)
that's one (1) frigging trillion the banks want to have. all the rest is noise
but don't tell me that if the ECB would somehow (question is how) come back to the 3 trillion mark - while the FED stays at the 4.4 trillion mark - and somehow bankroll this one trillion of bad debts... that this would be the "doom moment". the two "big boyz" were, at one point, both at a 2 trillion mark. and had a 1 trillion currency swap trick going on, which was then reversed
meanwhile, I do question the original 0.879 trillion "bad debt" "price tag", reminiscent of Hank Paulson's price tag of a few years ago
"doom" has a price, in this article, but it is not 64, it's 1. and the real degeneracy of our times is how easily banks are raising demands for 1 trillion. and yet it's not the straw that can break the ECB's camel back, then it was just detracted from it's perch. in the case of the FED... it went from 2 to 4.4
Hello.
What could possible go wrong?
Memo to the writer:
Read some European History.
There will never ever ever be an ECB QE like Fed does.
Europe will go to war with itself, literally speaking
Welcome to the Ukraine, interventions incouraged.
Wars over arable land for control of food will never stop
Listen EKM1.
I do believe that USSA QE set the "TONE" for the big "DEFENSIVE PLAYS" in the financial markets.
Meaning: "If things get really scarey, potentially fatal for a Regional Economy, the Central Bank will intervene.
The soothing physiology imparted from their actions 2008-2014 is what supports their #1 product, "CON-fidence in Fiat".
So the numbers will continue to grow, whitewashed as insignificant in the bigger picture. It's all just a bunch of 1's and 0's anyway.
We've got another 100 years of CB dominance and minor Booms and Busts around the globe.
There is no such thing as 'central bank dominance', never existed and it will never exist.
Putin proves my logic
Guns and assassinations end up solving problems and I am speaking literally
So all those peoples borrowed over $1 Trillion smakeroos? Where'd it go? Didn't just disappear.
Simply go after the asset purchased with the borrowed money; or are they too lazy or simply don't want to give it back since it's resting peacefully in Swiss bank accounts?
People do not understand how money is created and what money is.
When you buy a $40k car this is what happens:
Bank creates $40K RESERVES on dealer's account
Bank creates $40k LOAN/CREDIT to you at 4% for 5 years
So, RESERVES and Credit/Loans are created SIMULTANEOUSLY.
Loan/debt can be extinguished by paying it down or default.
Debt is paid down with RESERVES (cash)
Problem is that reserves cannot be extinguished by banks. Only Fedederal Reserve or Congress/Federal Gov can extinguish reserves.
Like this the economy via commercial banks creates 97% of the money.
So, those Eur 1 trillion RESERVES did not disappear. But the DEBT/LOAN which was created simultaneously CANNOT BE paid down with RESERVES because debt holder have no reserves and any means of obtaining those reserves.
Enter: CENTRAL BANK
Dont think you got this correct. The reserve would be for the difference in the value of the asset less its recovery costs, versus the loan balance. THis would be in a normal accounting world since we have mark to Unicorn, who knows what they do, but i think it can be assumed that there are no meaningful reserves on the books. The last few years banks have been releasing their reserves to profit. What you havent seen are hits on the banks numbers due to increasing bad loans (Yet) or possibly ever.
To put a magnitude on the size of the whole the best credit cards out there are around 10% apr.... in 7 years, well rule of 72, the whole should have been more than completely filled when they borrow from the fed at 0....
ekm is not talking about loan loss reserves.
But this type of reserve.
http://www.investopedia.com/terms/b/bank-reserve.asp
So US kids have borrowed 1.2 trillion for school loans. What are you going to repossess when the defaults get really big?
Their future wages.
Some days I think it will be paid off with their VOTES.
They will vote for the guy that will help them write off the debt that they didn't understand and would not have borrowed if they would have knew it would have to be paid back.
You know sort of like sub prime home mortgages -
"So all those peoples borrowed over $1 Trillion smakeroos? Where'd it go? Didn't just disappear."
As any Spaniard would explain to you:
"It was danced away"
Listen EKM1.
You have been watching too many USSA movies out of the "FILTHY" land of Hollywood. Brainwashed into violence and thuggish thoughts.
Next movie I command you to view is: Dilwale Dulhaniya Le Jayenge, the Indian classic.
http://www.youtube.com/watch?v=r7NVIwO8_pI
You will then start to understand. At least 100 years of dominance.
Keynesian wet dream: Nobody does it better...FED makes me sad for the rest.
FED has the privilege of fiat Reserve Currency for now.
Later not so much.
If your going to troll here you really need to bring your game up a couple of notches....
Listen.
Weekends use to rock on The Hedge. B9K9, Trav777, a long list of "REAL" good posters all chased off by the drivel that drips from your keyboard.
Duties of the 'Troll Manager', identify and manage the troll.
Get it? Not too hard is it? $6 USD bucks per hour, OK? On a 1099 basis.
When Murdock bought out this website it really started going down hill, now they pay CNN to plug it. All the life has drained from it. Murdock uses it as a news incubator.
Where did B9K9 go?
ekm1: "There is no such thing as 'central bank dominance', never existed and it will never exist."
correct
what does exist is a global reserve currency status. which China and Russia find distasteful
what did exist was the Old World Order, centered on the UN. Where Bush tore the book, something China and Russia find distasteful
what does exist is the IMF (and the World Bank). Which China and Russia want to reform, or else have their own institutions
but there is no such thing as a "central bank dominance", globally. At the end, national banks are parts of the "state weaponry" of the owning sovereigns
so claiming a "central bank dominance" during a full blown currency war is the same as claiming the "dominance of the military" during a full blown war. it sounds like truthiness, but it hides the fact that those militaries are busy butchering each other, for "national interests"
That's what Europe is all about - to again end up in civil wars.
With the bankers and the 0.01% again laughing all the way to their bank.
And the sheeple again in coffins or as guinea pigs or dog food.
Result of 99.99% dumbasses weltering since decades in their own dirt and ignorance.
And relentlessly re-electing the same criminals into power.
What else to expect?
This type of remote controlled brainless degenerated animals rightly deserve/call to be slaughtered.
thanks, but no, thanks. and our wars aren't "civil wars". though we had a tradition of conducting them in a civilized way, which is altogether a different thing
have your wars... somewhere else. thank you very much
@ekm1,
I take it the populace was unarmed in your native land.
I was wonder just how out of hand it got when the food was scarce?
http://en.wikipedia.org/wiki/Revolutions_of_1989
Wars? Sounds bullish to me.
As long as your not the person humping a rucksack and a rifle over hill and dale for the privilege of being shot at.
Fuck the 0.01% deceiving and stealing criminals - on top of the ponzi.
Fuck the 99.99% ignorant and dumb sheeple - who let it happen.
Save the whales,,,
Fuck the sheep,,,,
The sooner these Fuckers are in their dirt nap,the better
They already do too much of that in Europe (literally).
yeah, but did you have a look at those sheep's eyes? beautiful, with long leashes
Everyone expected the Eurozone to explode tomorrow, right? New ATHs in the cards.
Why would anyone have expected that? Stress tests are always to support confidence. That is their objective. They are by definition always positive. If they weren't postiive they wouldn't do them.
Call me when it hits 17 trillion.
Just like the crap the big banks swapped onto the Fed's balance sheet - Mario will get these NPLs onto the ECB's balance sheet! Germany has been too quiet.
879.1 Billion EUR? 1.114 Trillion USD?
8+7+9+1=25, 2+5=7
1+1+1+4=7
This seven thing gives you at least a straw to hold on in these insecure and unpredictable times.
Damn. Lookit that, Mabel! Betchu he invented a theorem or sumptin'!
Studying Bernoullis equation always made me go pee...
It's giving me a Uro problem, too.
"the ECB will, with 100% certainty, monetize the Eurozone's bad loans?"
How does one play this horse?
Long on the market and margin to the hilt
long italian banks (on margin, beware volatility drop and panic if some funds not positioned right), short gold, deflation is being fought by ECB, so ZH here actually saying deflation NOT coming...
... that is why ECB never contemplated the scenario, because it will do everything it takes including monetiise bad debt ...
... when inflation kicks in, reverse
FTSEMIB already UP 200 points from Fridays close
bullish
Ok people can't service the debt. (what has this got to do with the physical economy ? )
But you don't have to monetize it.
You simply give the debt holder the asset and turn deposits into equity like money.
Eventully these "assets" will find the right price level.
No need to destroy anybodies life for a (demonic) concept of money as debt.
http://www.independent.ie/irish-news/courts/former-model-ordered-to-give-bank-the-keys-to-luxury-home-30661792.html
Again - the problem in the eurozone is a chronic lack of purchasing power as the dark lords wanted us to be competitive.......for some reason.
As it became apparent that we could not trade with Mars (engage in further economic expansion) the euro system of extraction began to break down.
The stuff has been built already - there is no lack of stuff problem.
Why do we sacrifice our life force so that banks can somehow restart their scarcity engine ?
With diminishing scarcity comes diminishing returns to capital and labour and a surplus of both.
The nub of the capitalist system is to get labour to combine with capital and produce more, it doesnt matter what.
To get labour to produce, you have to provide some basic needs and for those that can think, hold the promise of becoming a capitalist - earning a significant surplus to the labour - without that promise the labour would revolt. This means a constant supply of credit ot labour to keep them working. The system is no different than share cropping in the days of serfdom, or modern day labour exploitation.
For the lucky few labour that break free and manage to accumulate wealth beyond the sum of borrowed capital, interest and their labour they join the capitalist class to live out their lives on the return on capital.
For every 100 businesses, or business ideas that thinking labour puts forward to capitalists or banks for funding, with the expectation of accumulating capital, only 1 makes it.
The point, ultimately, is that if interest rates are low, labour will be more inclined to borrow, and capital willing to lend, but for capital to accumulate (which it is now doing at a slower rate based on lower interest) it must deflate the returns to labour otherwise there is a rebalancing in favour of labour.
EBOLA – CIA Project Codename MKNAOMI & Hi-Tech Assassinations
In 1948, Henry Kissinger, a 23-year-old American intelligence officer, recruited Nazi expatriates to serve in top positions in American military, aerospace, and biological science and medicine. Twenty years later, he left Harvard’s esteemed faculty and resigned a lucrative position as Nelson Rockefeller’s foreign policy attache’ to become President Nixon’s closest advisor and director of the National Security Council. Seeking alternatives to tactical nuclear weapons to bolster America’s “diplomacy” abroad, the paranoid and egomaniacal Kissinger quickly ordered the Army’s Chief of Staff to requisition $10 million from Congress for the development and testing of EBOLA & AIDS-like viruses. Within ten years, the AIDS and Ebola epidemics erupted coincidentally in the regions of Africa ravaged by CIA military covert operations also ordered by Kissinger.
In 1984, Dr. Robert Gallo, of the National Cancer Institute, claimed credit for discovering the AIDS virus. He announced it most likely originated from a monkey virus which spontaneously mutated and naturally jumped species. Dr. Gallo was a biological weapons contractor for the CIA’s top secret “Project: MKNAOMI,” and was paid to produce and test EBOLA, AIDS-like viruses as early as 1970.
EBOLA – CIA Project Codename MKNAOMI & Hi-Tech Assassinations
ECB = Fat Jesus.
https://www.youtube.com/watch?v=m4A1o3ZCHzE
Gold $800.... :(
Gold $800..... :)
Gold $500..... :)))))
Gold $300..... :))))))))))))
I'm recommending to my friends at this point that it's time. Just like confidence is lost in the congress so will the central banks.
This means Gold will break $1200 because of deflation. It means go to cash now forget about betting against the market. It means take physical gold as it goes below $1200 in exponential fashion. For me this means first post break in gold below the support = 1% buy, 5% drop = 3% buy in exponential fashion.
Super bob you know who you are this is for you. (If any doubt when you see this you had a home pool problem)
They lied to me, I will never forgive them....
Yeah but it is burried deep in a report so really no problem there until of course ZH had to dig it up.
To state the obvious ... creating more debt won't get rid of the old bad debt and it is very likely that some of the new debt will be bad as well.
It is mathematically impossible to pay off the entirety of debt.
Best the write off the debt and start again.
It's just numbers never MIND. We can FIX them.
deflation of assets ...
I got no assets. I cannot get asset deflation.
The 10% crowd are going to be very angry to loose by deflation.
The 10% will need to change their lifestyle.
No line jumping allowed in the soup line.
We are looking to corner the market on soup kitchens before that time comes. We will own the kitchens and will be first in line. We will get the good stuff at the bottom of the kettle and you will get the watery broth.
Yes and all those nations in the EU will pay back those outstanding debts. Checks in the mail, and I won't cum ....... , well you get the idea. Any bets on what the US deficit will be by the end of the decade? I'm thinking 25 trillion.
Only one Trillion and change? I don't believe that number either if it comes from the EU.
"Never trust a banker who wears socks." -- W. Sutton
No limits to ignoring the facts! Until..??? Here's another: http://online.wsj.com/articles/ecbs-stress-test-opens-door-to-possible-m... . Again- doesn't matter until..??? Have gotten my ass licked betting agnst the big boys.
Que Mario explaining how they will fix this and everything is getting better if Germany will QE foreva.
All debt is bad debt. At least to the debtor.
Money has no political affiliates,but the big three USA,EURO,JAPAN,are working together as allies.they are stronger together than those lined up against them Russia,china,brics. Because they are a political agenda,and they cannot prevail,unless through nuclear war.
I think ZH should change it's tag line to, "Pissing on the FT from a very high height."
Note: Eurozone. So only 18 out of 28 EU members. What's the state of the art of the banks in the other 10 countries? Any survivors?
greek feud & revanche.