Major Dollar Shortage Exposed In Europe As Deutsche Bank Contagion Spreads

Tyler Durden's picture

"Storm in a teacup" this is not.

While global markets remain calm(ish), distracted by OPEC headlines, US election 'entertainment', and Middle East proxy wars, the reality is, something very ugly is accelerating in Europe. With the collapse of the "most systemically dangerous bank in the world" we should hardly be surprised, but Deutsche Bank's crash is being shrugged off by average joes on mainstream media... and besides, the central banks will save us, right?

Well, Deutsche contagion is spreading... rapidly.

Since Deutsche's recent highs, the short-end of the EUR-USD basis swap curve has collapsed...

Simplifying - this chart measures the degree of USD shortage (willingness to spend money just to get USD now) across time - the lower the level, the more desperate for USDs.

And no, it's not a quarter-end issue...

 

Still not sure... Then explain why European banks just increased their demand for USDs from The ECB's 7-day lending facility by over 2000%...

As @Landonthomasjr notes, since 2009: DB shareholders put up 13.5 billion euros in equity. DB has paid 19.3 billion euro in bonuses. Perhaps they should have saved some of that cash eh?

Simply put - trust in the European Banking system is faltering, counterparty risk hedging is accelerating...

 

And liquidity concerns are exploding... ahead of Germany's bank holiday on Monday.

Mint's Bill Blain - in his Morning Porridge note - had some more 'market realist' thoughts...

Meanwhile, Mario Draghi was in “robust” form yesterday telling Europe’s languid political classes about the need to do more in terms of structural reform – yada, yada, heard that one before - but also the need for other policies to boost recovery in Europe. Optimal fiscal policy? That’s an interesting call.

 

The likelihood of banking embarrassment in Germany means his comments about banks being able to operate successfully in zero interest rate environments were particularly elucidating.

 

Let’s see.. if interest rates are zero, then borrowers don’t pay any interest and can extend their loans indefinitely? Then banks can’t have any NPLs, and will therefore be absolutely default free?

 

Suddenly I understand.

 

ECB NIRP is absolute genius. European banking is fixed and nothing to worry about. (US Readers – massive sarcasm alert!)

 

My day started in the Bloomberg studio where I was somewhat surprised to read a comment from Man’s CEO that Deutsche Bank is “healthy”. Right….

 

I’m not sure I buy that.

 

Banks are enormously complex beasts. They are not simple businesses. To turn around a bank is complex. To reinvent a bank – which is what Deutsche Bank, UBS, CS, and others are desperately trying to do, is one level below impossible.

 

Earlier this year we had commodities firm Glencore teeter on the edge of disaster. Swift action, clear plan, and it’s back from the brink. That is not going to happen with banks. In my 30 years of markets I can’t think of a single bank that’s got in trouble that has staged anything like a similar comeback. Once bank’s catch a cold, it often develops into dangerous pneumonia.

 

Deutsche – and the others – are anything but healthy. The need to reinvent. The news flow yesterday was positive-ish. Rumours of a SWF capital injection, rumours of a domestic rescue plan, but the reality is more likely to be further deterioration. If that develops into a full crisis any rescue will come at the cost of contingent capital deals being triggered (which will send shock-waves around banking confidence) and the strong/inevitable bail-in of senior debt holders.

 

Others say the senior debt is safe. Delighted they think so. Call me and tell me how much you want to buy?

Confirming there is a problem:

  • *DIJSSELBLOEM REPEATS DEUTSCHE BANK MEETS CAPITAL REQUIREMENTS

The denials continue... and so does the blame-mongery...

The U.S. Department of Justice fine imposed on Deutsche Bank is very high and “damaging for financial stability,” Dutch Finance Minister Jeroen Dijsselbloem tells lawmakers in The Hague Thursday.

 

U.S. fines against European banks are “repeatedly so high that all the money European banks tap on the international markets, also from U.S. investors, is skimmed by the U.S. government. That’s a risk for the financial stability and that worries me sincerely.”

 

If Deutsche Bank has to pay the $14b fine, it will reduce capital, then it will have to raise new capital.

 

Deutsche Bank will have to bring things "back in order."

Add another to the list of 'elites' distancing their actions from Deutsche's demise. And one more denial...

Deutsche Bank's troubles are not Europe's Lehman Brothers moment, Austria's finance minister said on Thursday, although he warned the region's lenders were facing a broader profitability crisis.

 

"After the financial crisis we haven’t quite worked through the banking issues….but what I am very convinced of is that we don’t have a banking crisis, we have a profitability crisis in our banks,"

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Tom Servo's picture

It's probably nothing.

 

Transitory.

 

Please. Do not panic.

 

Rainman's picture

Sweet Jeezus have mercy !! ... the 2/20 gets posted in less than 48 hours !

nibiru's picture

Mackerel has really bad year.

 

I guess being Soros puppet didn't pay that much at the end of the day. Well, she may as well enjoy leaving politics now instead of leaving in a year while being the most hated person in Germany.

http://independenttrader.org/diy-how-to-destabilise-the-continent.html

kliguy38's picture

If there is a dollar shortage then it is already decided they are to die........no wonder merkel said to store food....she knows we're gonna take um down

MillionDollarBonus_'s picture

This highlights why we desperately need a global central bank and governing structure, with a global currency, so that we can provide liquidity to any multinational entity as and when it is needed. We cannot continue to enact fiscal and monetary policy at a local level, when our economy is inherently global. We need a system of global governance, run by the best and brightest economic minds from across the globe, so that we can solve the world's financial problems together, rather than negotiating with each other as isolated nation states. 

Why We Need Family Audits

Deathrips's picture

They say there is a shortage of promises from liars....?

 

I call bullshit.

https://www.youtube.com/watch?v=awY1MRlMKMc

 

RIPS

oops's picture

It'll get worse with the Sept 11 Bill, the DEATH KNELL for America. https://goo.gl/oehIgG

Huh Reeeally's picture

If by that you mean that it might hold the US accountable for its terrorist actions worldwide then I would have to agree.

f_symbols's picture
f_symbols (not verified) Huh Reeeally Sep 29, 2016 11:06 AM

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... http://tiny.cc/477bfy

Automatic Choke's picture

db should just have the leverage dept load up on puts of their own stock. problem solved.

Pairadimes's picture

Same shit, different day until little red holes start appearing on banksters.

SafelyGraze's picture

fortunately, the us central bank stands ready to issue 10T, denominated in usd, in exchange for an equivalent amount denominated in euros

which will tide everyone over until such time as a global authority intervenes to calm the waters

hugs,
mizzlegarde 

hedgeless_horseman's picture

 

...the us central bank stands ready to issue 10T, denominated in usd, in exchange for an equivalent amount denominated in euros

True.  

But don't tell anyone.

It is supposed to be a secret.

Alan Grayson: "Which Foreigners Got the Fed's $500,000,000,000?"

Bernanke: "I Don't Know."

 

koncaswatch's picture

+1000  Thanks for the video, hadn't seen that repartee before; quite interesting back and forth.

ejmoosa's picture

Too bad you are paid by the year...

DirkDiggler11's picture

You a Soros funded BLM rioter ? How was Charlotte?

f_symbols's picture
f_symbols (not verified) Huh Reeeally Sep 29, 2016 11:06 AM

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... http://tiny.cc/477bfy

RAT005's picture

This is a strange setup for gold and silver.  Dollar going up because of more bankrupt EU but PMs appearing to go down in US$ terms.  Sell expensive $US and buy cheap gold if you've got the stomach for it.

Terp's picture

lmao...no shortage of that, ever.

Jim Sampson's picture

Don't you dare say a lack of USD!!! 

 

SHIT!  I think I hear Bernanke coming out of retirement.  Way to go!

knukles's picture

Yep
Fed to the rescue

Currency swaps, extensions of credit to the sick lame and dying.
Wash and repeat, a la 2008/9

These people have built us a fucking house of cards, rampant speculative activities, losses insured by the citizenry.
Something wrong, ya think?

By The Way, This is the Exact Type of Activity Screams Real Problems Accompanying Panics

Once loosed, gold and long bonds should do well under a flight to quality/safety.
Just wait until after the election.  The Establishment MUST make all appear Happy and Congenial for Hillary

Uncertain T's picture

The Banksters are interconnected

Their puppets we've always elected

A true global sham

A fraudulent scam

When failing they'll all B affected

..... The Limerick King

GunnerySgtHartman's picture

This highlights why we desperately need a global central bank and governing structure, with a global currency, so that we can provide liquidity to any multinational entity as and when it is needed.

MDB needs to go on the comedy show circuit.

lasvegaspersona's picture

When Trump is elected we are going to have people 'Green Listed' (like the days of 'Black Listing).

Anyone who has uttered leftist nonsense will be shamed. those who fired people for conservative views will be fired themselves.

Iniversiry presidents who allowed safe spaces will be launched into safe space...kinda like a superman villian....perpetually frozen until evil makes a comeback.

Carpe Tutti Bastardi's picture

" MDB needs to go on the comedy show circuit".

Actually, MDB needs to be IGNORED!

IridiumRebel's picture

Best and brightest. I'll pass. Multiple boats are better than one big yacht waiting for the rogue wave to hit. Placing it all in one central bank basket means we get what we deserve. For the record, I still think your posts are satire.

JRobby's picture

Get Benny! We need FX "swaps"

Maybe he does "family audits" too?

bh2's picture

What we desperately need, MDB, is to abandon the mad belief that unpayable debt is "money".

Accomplishments by the "best and brightest" have been uniformly dismal and sordid, at best, owing mainly to functional illiteracy fostered by academia.

moneybots's picture

"We need a system of global governance, run by the best and brightest economic minds from across the globe, so that we can solve the world's financial problems together, rather than negotiating with each other as isolated nation states."

 

Such dripping sarcasm.

Antifaschistische's picture

MDB...you forgot to add that our global currency needs to be 100% electronic so we can inject as much capital into the system as necessary in times of crisis.  Our paper fiat has always been a constraint to progress and the central banks ability to eliminate painful economic cycles.

geno-econ's picture

Can you name one brightest economic mind that is not corrupt, does not represent top 1%, Bankers, Multinationals, is internationally respected, and able to convince soveriegn nations and legislators that global governance is better than local jobs and community, social well being and family values ?  

Jtrillian's picture

Wrong. Wrong. Wrong. Wrong.

https://www.youtube.com/watch?v=WrjwaqZfjIY

Listen up junior. 

You write well and you sound smart but I sure as hell hope that you were being sarcastic.  If not, you have in fact not only drank the BRAWNDO, but you guzzled the whole thing and went back for seconds. 

Seriously, do you think that a single banking system is a good thing?  Seriously?  SERIOUSLY???  If you do then you clearly have not done any homework on what the signers of the Declaration of Independence had to say on the matter.  Nor do you know what Rothchild has to say on the matter.  Nor do you have any idea with regard to the history of the FED or how the central banking system was formed.   In other words, when you argue FOR a central banking system, you are either a part of it, or you are showing your ignorance (assuming you are not being sarcastic). 

Bottom line... you do NOT want to make banksters the center of the universe or the driving force of any economy because they will surely sacrifice long term sustainability for short term profits.  That is the status quo these days.  Buybacks are a perfect example. 

If you want to address the root cause then look to history.  It's too much risk.  It's called "systemic risk" for a reason.  There is too much leverage out there and when the market corrects, contagion spreads.  This is mainly due to derivatives but it's worse than 2008 as it's spread to credit risk as well in the form of buybacks, consumer credit bubbles, high yield corporate debt and the massive bubbles that have been created in equities, bonds, and certain sectors like housing thanks to endless global "stimulus". 

What did you think was going to happen?  Did you really think that all this credit risk was just going to work itself out without another financial collapse?  If that is the case, then you TRULY HAVE NOT LEARNED ONE THING from the 2008 financial collapse. 

The banking system would be best without a central bank, or "too big to fail" banks.  The best banks would be those at the local level with strict capital requirements to ensure that systemic risk is kept to a minimum.   And for the love of God, when a bank invests in derivatives with your money... that's not investing.  That is creating systemic risk and creates a clear conflict of interest with regard to the banks need to make a profit to satisfy shareholders and keeping your money safe. 

But people are going to believe what they will.  There is a very small percentage who are open to the truth and will seek it out. To those, I recommend Mike Maloney's "Hidden Secrets of Money".  That series is a great history lesson in why these systems fail.  Its' a start anyway. 

Count Ayjin de le Verage's picture

-1

 

I love milliondollarbonus_ sarcasm.  Lets make banks and governments a single global entity because after all they will protect you from bad things happening!

 

ROTFL!!!   SNORT!!!!!!   ROTFL!!!!

SNORT!!!! cough, fart, SNORT!!!!   ROTFL!!!!

 

 

 

CONTAGION DELEVERAGE!!!!

 

 

 

 

 

RACK 'EM!  STACK 'EM! 

 

For those bankers about to rock....

 

 

JACK 'EM!!!!

 

 

CONTAGION DELEVERAGE!!!!

 

 

GO!!!  GO!!!!  GO!!!!

 

 

 

.... love the deleverage,  'cause it is your friend.

 

Count, out.

 

John Prewett's picture

Interesting. Wonderful.  So we need just what the Revelation predicted humanity would get. 

Deathrips's picture

Dollars are worth something? THey are collateralized.....

 

Calling Bernanke!

 

https://www.youtube.com/watch?v=awY1MRlMKMc

 

I call bullshit.

 

RIPS

koncaswatch's picture

The US bills in my pocket say FR NOTE. I would assume there is collateral somewhere; maybe it's our butts.

MFL5591's picture

This situation in Europe than in the USA is all by design, no one can foolishly believe this along with its perfect timing!

Ghost of Porky's picture

"Somebody's gotta go back and get a shitload of dimes."

Doom Porn Star's picture

"since 2009: DB shareholders put up 13.5 billion euros in equity. DB has paid 19.3 billion euro in bonuses.  "

 

This is all you need to know about what DB is really about.

The management are bonusing themselves cash faster than they can raise capital even when supposedly under pressure by the ECB to raise capital ratios.

All the cash in the bank is being stolen by the management and the NPLs and Derivatives exposures are being left behind...

Hitlery_4_Dictator's picture

I'm not panicing, I've seen these charts for years and years...nothing will happen

Philo Beddoe's picture

When the entire fucker comes down we will not even be able to come here to bitch about how we saw it coming. 

Deathrips's picture

This does indeed suck.

 

Ill say it now..

 

I saw it coming.....ok thats good enough for me.

 

RIPS

MagicHandPuppet's picture

For the past few years I've almost wished it would just happen already... Except, now, I really don't want it to happen until at least after the election.  I'm not really sure that will change anything - especially the way the goobermint behaves as its power structure weakens.  But, at least there's a chance it might.

TradingTroll's picture

Nothing? Not the 15% drop in US indices Jan-Feb '16? Not the steep drop in same Aug '15? Not the steep drop in the fall of '14?

Some people I know made millions on the other side of your 'nothing will happen'.

Wait for the topping action next week and then get short. OTM puts on the QQQ and IWM look juicy.

Some people will make out like a bandit next several weeks.