- According to the IMF, European banks as a whole are leveraged at 26 to 1 (this data point is based on reported loans… the real leverage levels are likely much, much higher.) These are a Lehman Brothers leverage levels.
- The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).
- The European Central Bank’s (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany’s economy and roughly 1/3 the size of the ENTIRE EU’s GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).
- Over a quarter of the ECB’s balance sheet is PIIGS debt which the ECB will dump any and all losses from onto national Central Banks (read: Germany)
- It means we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.
- Monetize everything (hyperinflation)
- Allow the defaults and collapse to happen (mega-deflation)
United States of America
European Central Bank
US Federal Reserve
Total Assets Relative to GDP
Total Assets Relative to Central Bank Balance Sheet
Germany and its central bank are unlikely to lead the way out of the euro zone debt crisis within three months time, after which it will be too late, U.S. billionaire George Soros said on Saturday.As I have stated many times, this crisis is far from over.
Speaking at an economic conference in Trento, Italy, Soros said that the euro crisis - which he defined as a sovereign debt crisis and a banking crisis closely interlinked - threatened to destroy the European Union and plunge it into a lost decade like Latin America in the 1980s.
The Greek crisis is liable to come to a climax in the fall. By that time the German economy will also be weakening so that Chancellor (Angela) Merkel will find it even more difficult than today to persuade the German public to accept any additional European responsibilities. That is what creates a three-month window," he said.
Mark Zandi, chief economist at Moody’s Analytics, said yesterday that President Obama will not let Europe fail.
"Europe is the key swing factor. If Europe addresses its financial troubles, and keeps Greece in the eurozone, the financial markets are likely to settle and boost U.S. employers’ confidence. But if Europe slowly worsens, it will be a drag on the U.S. economy."
as we approach the endgame for Europe, the choice facing those empowered to make decisions about how it ultimately plays out is actually a fairly simple one—allow massive, widespread sovereign defaults and a continent-wide bank-run or print unlimited amounts of Euros... is anyone still confused about how this will all play out?
Europe’s ‘leaders’ will NOT arbitrarily choose to inflict the pain necessary to deal with the current debt crisis when they have the means to print free money at their disposal and the only impediment to doing so is an as-yet undetermined percentage of 81 million German citizens.
If Germany has to leave the EU in order for the moneyprinting to happen, then they will leave - either because they choose to or because the ‘Latin-bloc’ (which now includes France) forces them to. Either way, the end will come in a shower of confetti paper money.
There may well be a period of deflation or deleveraging prior to inflation taking hold, but with inflation the central bankers’ firehose of choice, we can be fairly certain that inflation is in our future.
Because the Central Banks MUST intervene, I believe tremendous opportunity lies ahead in terms of Gold and Silver, especially Silver.
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