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Thread: Deutsche Bank

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    Deutsche Bank

    Ok, Karl Denninger is talking about Deutsche Bank, today.

    If you've read any of the stuff I've posted about derivatives, the big US banks, and Detsche Bank (DB), it's all coming to a crescendo. DB is within a week of failing.

    They've been the bail-out bank for the EU these last 8 years, and mostly that's become bad debt. Couple that with their "derivatives exposure" (basically packaging loans, getting someone to "underwrite", or insure them... and then pretend their assets) and basically the largest bank in the EU is one giant air ball. Debt has nearly doubled since 2008, but growth hasn't budged. Worker productivity is actually down, which means the factories aren't producing, because nobody is buying.

    This means that the loans to their commercial customers for equipment and production financing, have produced zero income to pay Deutsche back with. Put it all together and it's what economists call "Bad."

    "How bad? I mean, can't they just get a "bail out" from the government like the US banks did?"

    Ummm... no. Let me give you a spoiler off the end of Karl's article:

    Their total derivative exposure grossly exceeds the entire net value of everything in Germany! Not just the government's resources, all private resources as well!

    So no, there is nowhere they can go to get "bailed out". The hole in the bank is bigger than every other bank's assets, every piece of government property, every factory, house, BMW, Mercedez, right down to the Nikes on every school kid's feet.

    About 3 weeks ago DB stopped honoring their gold contracts. It means that people who paid cash for actual gold can no longer stop by and pick up their own gold.

    Deutsche goes bust it could very well be the "trigger event" that will cascade throughout the whole world's financial system.

    Oct 1st could be real interesting. anyway... Here's Karl Denninger:


    Whistling Past Your Graveyard

    C'mon folks...
    Deutsche Bank is on the verge of collapse. Let me remind you that back at the time of the financial crisis in 2007/08 I wrote specifically about them, calling the firm repeatedly DoucheBank as they had an utterly ridiculous derivative exposure compared against their capital. In fact they made US bank exposure in this regard look like the work of pikers.

    Not only has nobody done a thing about that in our markets Germany, I remind you, urged them to expand their exposure -- and they have. In addition total credit market debt has expanded by $57 trillion since 2007, a close to 40% increase! GDP, on the other hand, has gone up nowhere near as much. Indeed, global government debt has roughly doubled since 2008 -- to $59 trillion.

    One of the largest increases has been in college student loans, which are up a staggering 130% since 2007 in the United States alone.

    The problem is that economic expansion -- that is, the common output of the economy, has not matched debt expansion. Not even close. This is an unsustainable practice since without output expanding at a rate that exceeds expansion of debt you must eventually stop or the economy will contract even though debt is expanding, and once that begins to occur it is a black-hole event horizon from which you cannot escape until virtually everyone who is in debt has been liquidated and those who hold that debt will take monstrous losses -- in many cases 100% losses!

    When Donald Trump said in the debate that we were in a huge bubble he was exactly correct -- we are. We are in a bubble where market prices for stocks have risen dramatically, housing has gone up to a material (and unsustainable) degree, and the embedded but not measured in inflation statistical data cost of living (e.g. medical) has risen at a ridiculous rate as well. Trump has repeatedly charged that policy from The Fed, which is largely responsible for this bubble, is political in nature; whether that's the case or it has simply resulted from Fed hubris (which Greenspan and Bernanke both displayed in abundance and only Greenspan has admitted to) is immaterial to the outcome.

    This deterioration has been reflected in labor productivity, which has now gone negative. But that's just one small place that we can measure; the other places are not measured but have far more impact. Nonetheless, that the impact has managed to filter into unit labor productivity and costs is especially troubling.

    Remember that bank leverage in the form of derivative exposure is what made the crash in 2008 happen. Lehman, alone, blowing up was no big deal -- companies fail all the time and Lehman, in terms of size, employee count and economic impact was a literal non-event.

    It was the threat of cross-default on derivatives that took down the markets and the economy, and we now have it happening again but nobody is talking about it.

    If you think Germany can bail out Deutsche Bank you're delusional. Their total derivative exposure grossly exceeds the entire net value of everything in Germany! Not just the government's resources, all private resources as well!

    In other words even if the government wanted to bail them out, even if they'd survive bailing them out politically they can't, even if they attempted to confiscate everything of value within the nation.
    "Life IS mystical! Its just that we're used to it." - Wolf, the movie
    "Dad, if God is everywhere then, when he's in a piece of paper, is he squished?" - My daughter, age 7

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    Administrator Ross's Avatar
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    Re: Deutsche Bank

    Quote Originally Posted by Fredkc View Post
    DB is within a week of failing.
    I'm sure I heard today that they face 18 Billion in fines...of which they don't have.

    Quote Originally Posted by Fredkc View Post
    When Donald Trump said in the debate that we were in a huge bubble he was exactly correct -- we are.
    OOh yeah...sure are. Every market in the 'free world' is in a bubble. We're seeing property in a crazy frenzied buying spree that's been going on for around 4 yrs. Here in Auckland it's just crazy and makes pre 07 look minor. I have seen the same house bought and sold 3 times in one day. Others are turning over 3 times in a few months. The average price in AUCKLAND has now surpassed $1 million. Several cites around the world are seeing the same thing.

    In Sydney and Auckland and I'm sure elsewhere, Apartment purchasing, off the plans and sold on several times before completion, is rife...Every week I'm reading about Mortgage lenders, Real-estate folk and others, getting caught doing dodgy sh?t as in fudging figures and such...and hey, we've seen this before and guess what happened?

    It's a coming...

    P.S. 'DB is within a week of failing'...if so that could well be the start of a domino effect.
    Last edited by Ross; 09-28-2016 at 10:54 PM.

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    Senior Member Zook_e_Pi's Avatar
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    Re: Deutsche Bank

    A simple thought experiment. General outline. No details.


    Here we go. The quadrillion-dollar derivatives market was meant to exponentiate out of control. You can't have hard assets managing that amount of debt, so naturally, the derivatives market, which is about mathematical functions creating wealth, has assumed this role. Unfortunately, there is no distinction between the currency used in the commerce of hard assets and the commerce of derivatives. Question then begs, who owes the derivatives debt and who owns it?

    Those who own it can call the shots by purchasing up the hard assets, e.g. foreclosure in the broad sense. This is what is happening now. When the hard assets are all purchased, then what? Well, the little guy will have nothing left to purchase and everything will be available for rent and rent only. It won't matter if you land on St. Charles place or on Park Place, the monopoly game has been won. And the winners will now dictate where you may rest or if you may rest. You might have to finish out the days as a vagabond in a boxcar next to the singing ghost of Willie.

    At this point, money itself officially ceases having value, e.g. i's purchasing power effectively expires. What remains of the money paradigm will be its restraining power. It is now just another dog leash. "You want food? Show me your food stamps! You want shelter? Show me some roof stamps! You want a little action? Show me your boob stamps!" That sorta thing.

    Deeds become the day. Own a deed, possess purchasing power ... become a master over someone. Don't have a deed? The slave toilets are over there, flush after you're finished please or you forfeit your damage deposit.


    You good folks may develop it further if you wish, but I'm ending this thought experiment in the hope that a point has been made.


    Pax
    .
    ps: When the game is monopoly, there comes a point when monopoly money no longer carries meaning ... and that point arrives when one player possesses it all. We'll call this winning fcuker: "the elites". The only way to get meaning back now is to clear the monopoly board and start a new game. This is where the derivatives market is heading, the point of no meaning. The only meaningful solution at that point will be to proactively zero the derivatives market. Eliminate it. Push it back into the thin air from which it arrived. After all, this magic market will zero out anyways on its own accord once all the deeds have been purchased. A bit abstract, but hey, it's free.

  6. #4
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    Re: Deutsche Bank

    Quote Originally Posted by Zook_e_Pi View Post
    Those who own it can call the shots by purchasing up the hard assets, e.g. foreclosure in the broad sense. This is what is happening now. When the hard assets are all purchased, then what? Well, the little guy will have nothing left to purchase and everything will be available for rent and rent only.

    Quote Originally Posted by Zook_e_Pi View Post
    And the winners will now dictate where you may rest or if you may rest. You might have to finish out the days as a vagabond in a boxcar next to the singing ghost of Willie.
    Ha!
    You're close.
    Actually, we own this free and clear. Bought it during the crash of 2008.



    When we knew time was nigh, we paid off & cut up our credit cards, moved banking to a local bank that had never dealt in sub-prime loans.

    To our credit, Wifely Unit & I went three years without turning a single dollar. Where we screwed up was about 3/4 of our assets were in home equity (like most folk).

    When we became "financially viable" again, we still has about 60-90 days of wiggle room on our house. Meaning that we could have kept it. But we didn't. Turns out it was a smart move, really. It would've become a white elephant, and would have left us just as vulnerable for this next housing bubble, due to pop.

    That's how this game works. Sucker a lot of people's money into housing with rapidly escalating values, then pull the rug out, foreclosing on a vastly depreciated house. "2ns verse, same as the 1st"

    Right now, our monthly nut is less than half of what it was, then. And we're living better than we were then, too. "Hey, If you can't be smart, at least be trainable."
    "Life IS mystical! Its just that we're used to it." - Wolf, the movie
    "Dad, if God is everywhere then, when he's in a piece of paper, is he squished?" - My daughter, age 7

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    Re: Deutsche Bank

    Quote Originally Posted by Ross View Post
    I'm sure I heard today that they face 18 Billion in fines...of which they don't have.
    Chump Change!

    But there is good news/bad news on Karl's article in post #1:
    Good news is, of their $50-something Trillion in derivatives, DB is only "vulnerable" on about $18 Trillion.
    Hold it! 2 things:
    1. That number is probably inaccurate because it came from DB itself, and they haven't a good track record on "accuracy", of late. Translation: Probably bullsh|t.
    2. Kinda fun to be able to use the words "only", and "Trillion" in the same sentence, huh?

    But, because it's only $18T (again! ), it means that it might be possible to get a gov't bail-out, IF Ms. Merkel is so inclined. Yes, even though it's currently illegal. After all, $18T is only (3 times!) twice Germany's annual GDP. But that's between DB, Merkel, and the German people.

    Bad news is, the rest of the $50-something is "cross-collateralized" with other banks, hedge funds, and other investment firms. That means they represent an even more dangerous part as a "trigger".
    "Life IS mystical! Its just that we're used to it." - Wolf, the movie
    "Dad, if God is everywhere then, when he's in a piece of paper, is he squished?" - My daughter, age 7

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    Re: Deutsche Bank

    Deutsche Bank bailout denials spark 2008 Lehman Brothers comparisons.

    (DB is around 3-5 times larger than Lehmans)

    Article:

    THE German government and Deutsche Bank were at pains Wednesday to quash speculation of a rescue plan for the troubled lender, in an effort to reassure investors spooked by a potentially massive US fine.

    The denials came after Deutsche’s share price sank to a record low this week on reports that Germany’s biggest bank had asked Berlin for help after US authorities demanded an unaffordable $US14 billion ($18.21 billion) fine over the subprime mortgage crisis.

    State aid “is not on the table”, chief executive John Cryan told Germany’s biggest-selling newspaper Bild.
    But investors were further rattled when news weekly Die Zeit on Wednesday reported that German and EU officials were working on an emergency plan for Deutsche “if the worst comes to the worst”.

    Germany’s finance ministry swiftly shot down any talk of such a bailout. “The report is wrong. The government is not preparing rescue plans. There are no grounds for such speculation,” the ministry said in a statement.

    Reacting to the flurry of news, Deutsche Bank’s shares gained 2.04 per cent by close of trade in Frankfurt, ending the session at 10.77 euros ($15.71), while the DAX 30 index of leading German shares gained 0.74 per cent.

    Uncertainty over the bank’s financial health had seen shares hit a record low on Monday, dropping 7.54 per cent to close at 10.55 euros ($15.39) and ending at the same level on Tuesday.

    OFFLOADING ASSETS
    Deutsche has been dominating business headlines ever since the US Department of Justice (DoJ) made its demand for the eye-watering fine earlier this month.


    If Deutsche is unable to negotiate the sum down to less than the $US5.5 billion ($7.15 billion) it has set aside for legal costs and fines, it could be forced to raise fresh capital on the markets, diluting the value of its shares, or weakening its balance sheet.

    “We expect the DoJ will treat us just as fairly as the American banks” that have settled for much less in similar cases, Cryan insisted to Bild.

    Eager to show investors it was working to clean up its balance sheet, Deutsche on Wednesday announced it had agreed to offload its British insurance company Abbey Life to life insurer Phoenix Group for 1.1 billion euros ($1.6 billion), which will provide a slight boost to its capital buffer.

    ‘AT NO POINT’ ASKED FOR HELP

    Cryan insisted to Bild that he had “at no point” asked Chancellor Angela Merkel for a rescue.
    But Die Zeit is to report on Thursday on plans by Berlin “if the worst comes to the worst” to sell off parts of Deutsche to other financial institutions, and possibly buy a 25 per cent stake.

    Some voices in the government favour involving the European Single Resolution Mechanism, set up in the wake of the financial crisis to prevent taxpayer bailouts of failing banks, the newspaper said.

    In that case, creditors and customers would bear a share of the rescue costs — potentially creating fresh chaos on the financial markets.

    German officials believe attempting to intercede with the US authorities could be “potentially counter-productive”, Die Zeit said in an extract sent out on Wednesday.

    Deutsche faces further looming problems in the shape of an investigation by New York regulators into alleged money laundering at its Russian branch.

    The two cases are among the most pressing of some 8000 weighing on Deutsche, and CEO Cryan has promised to resolve them by the end of the year.

    The lender’s woes come as European banks complain of a harsh business environment, confronting low interest rates cutting into their profit margins, anaemic economic growth, fierce competition and high requirements on the amount of capital they must hold as a buffer against future crises.

    European Central Bank president Mario Draghi rejected attempts to blame him for Deutsche’s travails.
    “If a bank represents a systemic threat for the eurozone, this cannot be because of low interest rates,” he told journalists in Berlin after meeting with German politicians.

    In the boss’s chair at Deutsche Bank for a little over a year, Cryan has launched a massive restructuring of the Frankfurt institution and plans to slash almost 9000 jobs worldwide by 2020.

    Shares in the bank have lost more than half of their value since January after it booked an almost 7 billion euro ($10.21 billion) loss in 2015.

    Writing in The Telegraph, financial commentator Matthew Lynn said the Deutsche Bank crisis could take down Chancellor Merkel and the euro.

    “Last October, the shares were at 27 euros. Back in 2007, they were over 100 euros, and even in the spring of 2009, when banks were crashing all across the world, they were still trading at close on 17 euros,” he wrote.

    “For most of this year they have been sliding fast. On Monday, they crashed again, down another 6pc. Its bonds have slumped as well, while the cost of credit default swaps — essentially a way of hedging against a collapse — have jumped. It all has a very 2008 feel to it.”


    http://www.news.com.au/finance/busin...5500f3d1b168f1

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    Administrator Ross's Avatar
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    Re: Deutsche Bank

    Quote Originally Posted by Fredkc View Post
    Kinda fun to be able to use the words "only", and "Trillion" in the same sentence, huh?


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    Re: Deutsche Bank

    Not fun....


    From Bill Holter, JSMineset:


    I did not intend to write today but 3 events warrant a heads up.

    1. Deutsche Bank may be having their “Lehman moment” as 10 hedge funds have withdrawn funds and are cutting exposure with DB.

    This is how a “bank run” starts folks! Quite convenient that this Monday I believe is a banking holiday in Germany. If this is truly a Lehman moment, we will have a far larger event in a very compressed time frame than we had in 2008.

    2. The veto of the Saudi 911 bill was overridden in the House and Senate.

    The ramifications of this are beyond human comprehension to understand how widespread the fallout can be. Think “Rollover” by multiples with the added negative the U.S. is no longer the sole military superpower in the world. I wrote about this last week, the important thing to understand is the assets that get sold in dollars…will not remain in dollars very long!

    3. It looks like John Kerry is threatening to cut off diplomatic ties with Russia.

    This is horrific on so many levels, particularly to the survival of the human race. Please understand the “timing” of this particular item.

    All three of these events are happening at one time, if you believe it’s a “bad coincidence” you are wrong in my opinion.

    The take-down of the Western standard of living is happening in real time, right now.

    Ignore this at your own risk!

    Standing watch,
    Bill Holter

    Big Note: Please note that this was written by a precious metals trader.... Naturally they are forever certain "doom and gloom is upon is"... helps sell gold & silver.
    Last edited by Fredkc; 09-29-2016 at 09:32 PM.
    "Life IS mystical! Its just that we're used to it." - Wolf, the movie
    "Dad, if God is everywhere then, when he's in a piece of paper, is he squished?" - My daughter, age 7

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