European Crisis, Insolvent Banks, Hiding The Truth

by Martin Armstrong


Deutsche Bank – the New Lehman Brothers?

Deustche Bank

The rumor mill has been nonstop. The crushing blow to Europe will be the failure of Germany’s biggest bank: Deutsche Bank. Just about every circle is quietly discussing how the bank is facing bankruptcy. The rumors have flown since March when Deutsche Bank failed the U.S. regulatory stress test, which was followed by the resignation of its head in June. A collapse of the Deutsche Bank is profound and very likely to impact Europe to the point that everyone behind the curtain is now calling for a new Lehman moment. Sources tied with the Fed’s decision not to raise rates fear that they will be seen as the cause of its failure. Germany clearly faces a major shock; if this combines with Volkswagen for the turning point next week, well, here we go again.

The potential financial chaos to the other side of 2015.75 is just mind numbing. Since Germany has been regarded as the primary driving force holding the euro and Europe together, one can only close their eyes to vision what comes in the aftermath. So pay attention here. These are critical indications within the core economy of Europe. We are not talking about Greece here. The structure of the euro undermined the entire banking system of Europe far more profoundly than in the United States, where reserves are only in U.S. federal debt, not the debt of all member 50 states. This is the major difference between European banking and U.S. banking.


If You Cannot Tell the Truth, Hide the Truth


The motto of the ECB is plain and simple: why reform when we still have some power? Governments will fight until the last drop of blood is spilled; they assume it will be your blood, not theirs. We will see the opposite of transparency unfold along with a rush to eliminate cash. This will force Europeans into electronic money for that is the solution to prevent bank runs. The head economist of the Deutsche Bundesbank warned that the ECB cannot afford to tell the people the truth about banking for it may lead to bank runs.

The banking crisis in Europe is huge because bank reserves are a mixture of sovereign debt from each member state. The only way to prevent this potential banking failure crisis is to withhold the results of bank stress tests from the public. The ECB is most likely going to follow this advice to prevent the public from knowing which banks are in the worst shape. If you do not know whom to trust, human nature will distrust everyone.



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