Wednesday, February 8, 2012

Morning Thoughts ! Wednesday Morning As We Wait For Godot !

Bank Run Shown In One Graph ! Morning thoughts.....

European Bank Run Full Frontal

Tyler Durden's picture

This chart from Credit Suisse cuts through all the propaganda BS like a hot knife through butter.
     Good morning ! This is certainly an eye-opening chart of the day ! You can see where deposits peak - around mid 2007 ( recall that was when Europe had its credit freeze up and Libor went totally batty shitte . Moving forward the declines in deposits continued from 2006 through 2010 - and then note the divergence between Europe broadly and Germany - France that began in 2011 ! What should be disturbing is the downward trend seen in Germany - France that began during the latter stages of 2011 ( as it became clear was not AAA and Germany was going to be off-loaded with more eurozone risk and obligations ( or else the whole grand euro experiment would just go bust ). As Greece suffers through a soft restructuring or a hard default , expect the trend to continue - w still have to follow the bouncing ball to see what Portugal , spain , Ireland and Italy do with their mountains of debt . Expect these countries to request a restructure as Greece as obtained or will obtain. What this chart represents is trust - or the lack thereof . No trust in the banks , no trust in the EU , no trust in the ECB , no trust that there are solutions. ECB printing does not and cannot trump runs on the banks . Banks can't lend on a fractional reserve basis when money is pulled - if approximately 350 billion has left the eurozone banks collectively since mid 2006 , then on a fractional reserve basis 3.5 trillion in lending power has evaporated ! And as european banks face demands to recapitalize and raise their reserves , further pressure on the banks will occur - putting more scrutiny and lack of trust in these banks. which means more money pulled out. The circular pattern facing the banks is similar to the circular problem facing Greece ( falling revenues beget austerity , causing revenues to further fall - resulting in further austerity which causes further revenue declines ... was , rinse , repeat . ) 

     Expect a deal on Greece - probably later today. If this does come to pass , we should see the details of the second ( but not last ) Greece rescue plan floated out over the next couple of days , the details of the PSI float out a well. the pols will postsure , bicker , duck for cover - eventually this will go to Parliament and they either will vote yea or nay. Similarly , at some point a " deal " on the private debt swap will be put forth - the banks and other private investors will say yea or nay , the ECB will do what it chooses to do ( won't take any losses though - bet on that . ) and then the focus will shift to the other PIIGS and the near PIIGS (  Belgium , Austria , France ) The chart above reflecting the ongoing run on europe's banks ensures this is the course that will be run . and the reason is - lack of trust ! Be well , have a great day !