In a bid to restore calm, following a catastrophic drop in value, Germany’s largest bank denied seeking help from Berlin after claims it sought aid from the German government and needed to raise additional funds from investors.
German Chancellor Angela Merkel said the German people would not bailout the Bank.
But European stocks failed to rebound this morning as weak sentiment towards the banking sector saw the bank’s shares hit a fresh record low…
The panic surrounding Deutsche’s position continues to seep across Europe’s banking sector, pulling down stocks in the bloc’s biggest players, with Germany’s top stock market the DAX down by almost one per cent mid-morning.
Germany’s biggest bank reportedly has a $45 TRILLION (£34trn) portfolio of underlying assets that its clients are taking a position in – which equates to more than 10 times Germany’s entire GDP.
And the problem is that no one really knows what’s makes up Deutsche’s book of exposure and so-called derivatives book because it’s so opaque and complicated, according to Michael Hewson, chief market analyst at CMC Markets UK.
He told Express.co.uk: “Deutsche has the biggest derivatives book in the world, and people will say that its hedged to a greater or lesser extent, but it’s the interconnectedness with the rest of the system that is the problem.
“There doesn’t seem to be transparency about what’s in its book. No one really knows what the ripple-out effects would be.
“That makes Deutsche radioactive…”
This is stirrings of Apocalypse. People have not yet realized that the money they “stored” in the bank, $45 Trillion of it, may have been given to Investment Banks like Goldman Sachs, in return for paper derivatives which are not worth anything, and which will be worthless when the collapse goes down.
When that dawns on them, and it could happen any day, they will try to get the bank to give them money for their supposed account balances. As with any Ponzi scheme, the bank will give the first ones the money, in hopes they will keep quiet, and their satisfaction will placate other account holders.
If everyone rushes for the exits, however, $45 Trillion could evaporate overnight, putting everyone in a much more K-selected mood. Then the only question is if they will go after whoever ended up with their $5 Trillion.
The reality is that the exposure of Deutsche Bank exceeds the entire value of German, both public and private combined. There is no bail out, because there isn’t enough money in the government to bail them out. There is no bail-in, because even if you went full Soviet and took all the private property in Germany there isn’t enough money.
They’ve got enough momentum to keep up debt service for between 8 and 32 months according to a report I saw last week, and at some point in that range they don’t keep up the debt service, and then the bank implodes.
Just Wow.
[…] Deutche Bank Teetering, $45 Trillion In Derivatives Might Be Worthless […]
The fiat petro-dollar is about the biggest pyramid scheme conceivable. When the American-dollar bubble bursts, there is only one conclusion: World War.
China is going to come trying to settle its debts, and the US will either accept being sold off as slaves or fight to the bitter end to prevent it. World peace is a laughable joke in 2016.
“May be”?
“Feminists don’t logically …….”
Disagree here , AC. In my years with women, and yes, for the last half of that time I was a player, you can get a lot out of a woman, especially in a hot bubble bath with drinks. Several of them told me of fantasizing about being raped, one was a Navy officer and the other was 17 years married. My big concern, from learning what goes on in women’s minds, is the right to vote……………………….
But we digress to economics, ahh, MISH land. How about this little gem from CNBC re Deutsche: The bank has about about $16 billion in equity and some $160 billion in debt.
Hey, ordinary American man, what if all you could scrape together in savings was $1,600 while having $16,000 in credit card debt? [Oh, you do ?]
Derivatives, are fascinating creatures. Any one here who can give me an example of them things?
Derivatives in a nutshell: One loan is risky. It’s a flip of the coin. A hundred loans is less risky. It’s 100 flips, so it is much more likely to be 50-50. 10,000 loans isn’t risky at all, it’s always going to be 50-50 (law of big numbers.)
The problem with derivatives isn’t the derivatives themselves — its when you don’t realize that the coin is a gimmick weighted coin that actually flips 30-70, and you bet the wrong way.
Way too advanced for the average voter to understand.
A simpler definition, please.
Tailor it to Yogi, your average bear.
Can’t. They are designed to be unexplainable to the average person. That’s why there is money to be made there.
“…Derivatives, are fascinating creatures. Any one here who can give me an example of them things?…”
Derivatives are nothing more than insurance. There was a movie made about the housing crash and how several people made billions off of derivatives that were betting on other loans failing. What the banks did was they bundled housing loans together. These were sold to big investors like insurance companies and retirement investment funds. It’s a great idea that is good for all if the loans were actually what they said they were. Grade AAA. Thousands and thousands. They problem was a lot of the loans in the bundles were complete trash due to lies about the financial shape of the borrowers. They used computer profiling and actually looked through the loans to find the worst that hadn’t failed yet. They then went to the banks, sometimes the same banks that bundled the loans in the first place, and bought insurance that paid them if the loans failed. They would pick the worst “packages”, called trenches ,of loans to get insurance on. When these started failing they got paid billions from the banks.
Tranches….hell, typos aboiund…..but Sam , I doubt the average bear got past “Grade AAA”, none saw the movie.
Imagine you are teaching a night class to 15 newbies.
Derivatives, are fascinating creatures. Any one here who can give me an example of them things?…”
Gold painted turds
Very accurate, bear, from an oblique angle, but that definition applies to the current US President and congress.