Saturday, November 26, 2011

J.P.Morgan Chase is Now a Much Safer Bank than Deutsche Bank

Here's a little insight into the crisis in the eurozone. Bill Bonner writes:
Guess how much growth the Eurozone has had over the last 4 years? Zero. Less than zero. The euro economy has shrunk. Not as much as Japan’s 5% decline, but it’s still down.

And guess which bank is safer – a solid German bank such as Deutsche Bank…or one of Wall Street’s finest, J.P. Morgan? Grant’s Interest Rate Observer compares the two and finds the American bank ahead by almost every measure. In terms of leverage – measured by assets-to-equity – Deutsche Bank has more than 3 times as much.

And Germany has almost as much debt, compared to GDP, as the US. Practically all the rest of Europe has even more. No wonder people don’t want to buy their bonds.
Bonner also reaches the correct conclusion about EZ steps from here:
So what gives? Our guess is that the ECB – Europe’s answer to the Fed – gives...Will the ECB fail to inflate? Will its printing presses remain silent…deaf to the cries of so many bankers and rich people? How could it be so hard-hearted? So insensitive?

No, dear reader, the best bet is that the ECB will come to the rescue – whether it is legal or not…whether it is sensible or not – and buy the bonds itself. This is classic “monetization” of debt…because the ECB would have to create the money out of thin air to do so. It’s not authorized to counterfeit money like that, but you know what happens in a crisis. People forget the rules.
Or, as Treasury Secretary Geithner put it just a week ago, it's not rocket science to get around the rules that prevent the ECB from monetizing eorozone sovereign debt.


  1. ***
    "it's not rocket science to get around the rules"

    That quote should be brought to the attention to anyone that believes in the silly idea of "limited government."

  2. " It's not rocket science to get around the rules that prevent the ECB from monetizing eorozone sovereign debt." No....but doing so IS revealing about just how bad things really are, right?