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It Begins: German Banks Lower The Deposit Guarantee Scheme
In a surprising move, the consortium of German banks has announced that the insured amounts under its mutual deposit guarantee will be lowered from January 2015 on. German newspaper Die Welt broke the news and even though this doesn’t change the state guarantee on deposits on savings accounts, banks seem to be finally giving up the idea that their mutual guarantee scheme will be able to cover collapsing banks.
Source: Die Welt
The importance of this news shouldn’t be underestimated as the fund which has 165 members had to compensate bank clients in 30 cases since it was created, and according to industry experts, the bank fund was a very important reason why bank runs haven’t really occurred in Germany.
Until now, the banks’ mutual fund had to secure and guarantee at least 30% of the equity capital of the institutions, but this ratio will now be reduced to 20% in January 2015 and further reduced to 8.75% in 2025. This means that in for instance Deutsche Bank’s case which had an equity position of $70B, the mutual deposit guarantee scheme would no longer guarantee $21B, but just $6.1B from 2025 on and this is a serious reduction and actually undermines the credibility of the German banking system.
Although the state guarantee isn’t changed, it will definitely be impacted as it’s the banks who have to contribute to the guarantee of 100,000 EUR per customer. And if those banks reduce the guarantee of their mutual insurance, then you can be 100% sure it will be much more difficult (if not, impossible) to take care of a large default in the German financial system. It gets even worse, as the total contributed cash in the mutual guarantee scheme is just 5 billion Euros. This means that should a large bank like Commerzbank or Deutsche Bank run into difficulties, there’s just no way the smaller outfits in the banking landscape will ever be able to carry the weight on their shoulders without ending up in a dire situation as well.
This is just another piece adding onto a negative interest rate on savings accounts which was announced a short while ago. The German banking system is the first one to go the ‘unconventional’ route and in times where people are looking for more safety, the German banks are reducing their liabilities and accountability. The end game seems to be starting.
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Der Hokey Pokey Rate
You put your Euro in,
You get less Euro out,
You put your Petro Dollar in,
And you shake the markets out,
You do Der Hokey Pokey rates
and you turn yourself upside down
That what it's all about.
Every body join in and a 1, 2……
They´ll be pulling out some unfortunates gold teeth next...
This is just the EZ preparing for the day when currencies are just transactional instruments and people save in other instruments (gold).
When the medium of exchange is the same as the store of value then the eternal over printing of the MoE drags down the value of the savers wealth. The Euro was designed to remedy this illness of the monetary system.
A lot of the activities of the ECB are being wrongly viewed through the same lens that people view the Fed. The Fed is the basis of the current system. It's currency, the dollar, has tried to be 'as good as gold'. Obviously it is failing. The structure of the Euro is entirely different. As the dollar price of gold rises the value of the assets on the ECB balance sheet rises.
When the paper gold market fails all this will become quite clear....probably suddenly.
It's not the EZ preparing for anything; it's an article about banking in Germany; and the fact that they are facing the facts and behaving rationally. This doesn't reflect well on the Euro System, these facts that they have to face, but the Euro System resembles an alarm clock with a couple of wheels missing, so that's not surprising. Their lender of last resort is based in Belgium, and may not find it possible or politically desirable to provide the funds to stop bank runs in Germany.
A note of caution in that countries that aren't well endowed with PMs might undertake demonization (social pressures) blaming others having PMs as being responsible for the collapse. I get nervous when there's lots circulating out there about China and Russia stock-piling PMs (not so much press on India here- because India's govt isn't a big collector?).
I'm thinking, if you haven't done it already, it is time to go long tangible items.
And the best tangibles are those that can actually produce. Next is pretty much anything that's NOT paper (PMs pretty much having to be at the top of this list).
never been a gold bug - called the drop in gold as many were calling for 2500 gold
but this is getting fucked
time to buy some phyz or own some USD bearer bonds - the fat lady is warming up for the world's biggest shit show
Investing in currencies/money isn't the first thing to do. Best is to obtain assets that work, and when you can't come up with something (I don't recommend that folks run out and try to be a poor farmer like myself) THEN look to PMs; but, I can assure you this, as long as I have producing assets I have little need to trade them for PMs (this doesn't apply to the output of what the assets produce, THAT will be readily traded for for PMs).
Never underestimate the German.
the german's arent smart, they just lack stupidity.
http://www.covert.co.nr
What;s more to the point; they can't print Euros to save failing banks; the FDIC will get freshly "printed" funds from the Fed. / Treasury complex as necessary; a huge difference. The ECB can "print" Euros, sort of; but by tiime they get done waffling; the situation inside Germany could be disastrous. Bank runs and failures tend to be contagious and fast spreading.
Bail-in's or deposit confiscations - done "for the children" of course.
And cue the propaganda campaign:
"All IN for bail-INs!"
Ve vill be seeking ur testicle now please
There shouldn't be a government deposit guarantee. It should be truly private and priced based on the quality of the institutions. People simply don't think there is any risk in leaving their money in a bad bank because of this so called insurance. That means eventually there will be a wake-up call here in the US, where we know the FDIC could never backstop that many deposits. It creates a false sense of security.
This argument was made ad-nauseum in t he Congress by the "Conservatives" of the time; in 1932; the FDIC legislation passed by a tiny margin; although how any sane person could argue for the continuation of what was going on at the time; the failure of thousands of banks, is beyond me. You're completely wrong; you need to do your homework.
T he US and the Eurozone are entirely different creatures. The FDIC is not dependent on, or limited to, whatever is in their "fund" on any given Monday Morning; The FDIC system is the most important and useful and signifcant benefit that came out of the great depression era legislation; it prevents bank runs; and failures; which are not funny. In 1930 you could wake up on Monday morning and find out that your bank was closed; done, finished; period. No money. Ever. that's not funny, and it's difficult to engineer any kind of economic recovery with this kind of shit going on. FDIC will obtain whatever funds are necessary from the Treasury / Fed. complex; and you should be thanking your stars that they can and will. It is not a false sense of security; it is real security. Replacing funds lost by banking activities gone sour, is not inflationary; it simply replaces what's necessary so you still have your bank account. We already had the 'free range Capitalism" version of Banking in 1932; and if you don't understand what it means and what happens during a serious downturn in economic activity when banks aren't getting their loan payments; then you better look it up.
"There shouldn't be a government deposit guarantee. It should be truly private and priced based on the quality of the institutions."
Yeah, glad that someone else beat me to this. I mean, the Fed (in the case of the US) is "independent." Why should the govt be responsible for the "independent" banking system fucking up? Oh yeah, I forgot, we're talking about banksters here! (who own and run everything- they get to set the rules)
False opinon based on lack of research; see above.
Deutschbanks über alles und alle!
Anyone spot the elephant [Ponzi] in the room ? I'm afraid human hubris and [self] deception won't allow it... the ending: we get stomped to death.
This is merely a forewarning of things to come and it'll only get worse....
Worse than being stomped to death by an elephant? Holy crap! (sounds of feet shuffling off into the distance)
Yes I would love to keep my money where only 8.75% is guaranteed. Lovely deal!!! /s