The Vultures Fly Again And Again

[camberiu]

Not so much in Ireland, so that PIIG can be better classified as a PIG. Non EU (I imagine middle east and US?) and UK exposure is much greater. I imagine the US have a large degree of exposure, it would not be unfathomable for example that after GSachs cooked the books to allow Greece into the club a few of their contemporaries poured credit in at a furious rate.

In the end, is all so inter-connected that I don't know if it really matters much. German banks might be heavily exposed to UK banks or Middle Eastern banks, which are themselves heavily exposed to Ireland.
That is the thing about this: It is such a massive house of cards that when it goes down, it takes everything with it.

 

[germano]

In the end, is all so inter-connected that I don't know if it really matters much. German banks might be heavily exposed to UK banks or Middle Eastern banks, which are themselves heavily exposed to Ireland.
That is the thing about this: It is such a massive house of cards that when it goes down, it takes everything with it.

Sorry that I could not find a source in English but this article states that German banks are the biggest creditors for Ireland with 113 billion Euros before UK with 107 billion Euros and the US with 47 billion Euros:

http://www.spiegel.d...r-a-735458.html

I would not shed a tear if Deutsche Bank went belly up ... they deserve it.

 

[Dublin2BuenosAires]

Sorry that I could not find a source in English but this article states that German banks are the biggest creditors for Ireland with 113 billion Euros before UK with 107 billion Euros and the US with 47 billion Euros:

http://www.spiegel.d...r-a-735458.html

I would not shed a tear if Deutsche Bank went belly up ... they deserve it.

In terms of moral hazard, perhaps, but I think you would find the millions of people would suffer if another major institution tanked.

Be very careful what you wish for. As our Brazilian friend mentioned, it's a house of cards, if DB went they wouldn't fall alone. The impact would be global, politically, financially and on a human level it would result in unemployment and suffering.

 

[Dublin2BuenosAires]

In the end, is all so inter-connected that I don't know if it really matters much. German banks might be heavily exposed to UK banks or Middle Eastern banks, which are themselves heavily exposed to Ireland.
That is the thing about this: It is such a massive house of cards that when it goes down, it takes everything with it.

Thats why I think the system will survive, with some casualties. It is too interconnected, too all encompassing to go under. Too many vested interests, when collapse becomes a risk to society and capitalism then the club will find a way to forgive debt, wipe the slate and start again.

 

[camberiu]

Thats why I think the system will survive, with some casualties. It is too interconnected, too all encompassing to go under. Too many vested interests, when collapse becomes a risk to society and capitalism then the club will find a way to forgive debt, wipe the slate and start again.

The world will not end,but I don't think the unrevealing of this will be pretty. We are seeing the largest accumulation of debt in human history. Previously in history, every time we saw the economy go into similar levels of indebtment, the final outcome was always war. For the victorious went the spoils, and for the losers, bankruptcy and default.

 

[germano]

In terms of moral hazard, perhaps, but I think you would find the millions of people would suffer if another major institution tanked.

Be very careful what you wish for. As our Brazilian friend mentioned, it's a house of cards, if DB went they wouldn't fall alone. The impact would be global, politically, financially and on a human level it would result in unemployment and suffering.

That is pretty much the same argument they used for the last bank bailout in Germany. I disagreed back then and I do, now. As camberiu says the world woudn't end.

 

[Dublin2BuenosAires]

No one is claiming the world wouldn't end, but you must realise that widespread unemployment and economic downturn would result?

Each counter party would lose their investment, we would see another credit freeze and many small businesses would lose their funding sources.

 

[camberiu]

No one is claiming the world wouldn't end, but you must realise that widespread unemployment and economic downturn would result?

Each counter party would lose their investment, we would see another credit freeze and many small businesses would lose their funding sources.

I don't think there is a choice. I don't think there is a possibility of a different outcome, no matter what the "club" does. Even if they forgive the debt, someone must take the losses. And taking the losses means unemployment, economic downturn, etc...There is no way to resolve this debt issue that is not ugly.

 

[germano]

No one is claiming the world wouldn't end, but you must realise that widespread unemployment and economic downturn would result?

Each counter party would lose their investment, we would see another credit freeze and many small businesses would lose their funding sources.

That is incorrect. Large private banks like the Deutsche Bank haven't been the source of funding/credits for small to medium sized business for a long time. Having had a small business myself I can speak from experience. In fact Deutsche Bank even tried to get completely rid of their retail banking by spinning of their retail branches in the Bank 24 corporation in 1995 (it was a failure though). Small to medium sized business get their funding from publicly owned savings banks ("Sparkasse") and bank cooperatives (like "Volksbank" and "Raiffeisenbank"). Also the majority of the end consumers use the savings banks and cooperatives.

 

[camberiu]

You might be right Germano, but that still does not change anything. Where do the large corporations, the ones that buy and do business with smaller firms, get their credit from? Where do they deposit their money? It is all interconnected on a level we have no seen before. I am not defending bailing out the Deutsche Bank, quite the opposite. I just want to point out that there is no clean way out of this mess. There will be pain, no matter what.