Loading ...The European banking system as a whole is leveraged at over 26 to 1. That’s the ENTIRE European Banking system leveraged at near Lehman levels (Lehman was 30 to 1 when it collapsed).
To put this into perspective, with a leverage level of 26 to 1, you only need a 4% drop in asset prices to wipe out ALL capital. What are the odds that European bank assets have fallen 4% in value in the last two years?
The European crisis is not over. And when the next round really hits, whether it be from Greece leaving the Euro or some other issue, both capital and border controls will be implemented.
Fast forward to today and the EU banking system is indeed imploding and capital controls are already underway with border controls to follow (once people start trying to smuggle physical cash across the border).
The real issue is just how much collateral will disappear when Greece goes bust. Because whatever happens in Greece will be used as a template for much larger problems AKA Spain and Italy.
Spain and Italy, by comparison, have €1.78 trillion and €1.87 trillion in external debt respectively.
That is a heck of a lot of collateral that would be in BIG trouble in the event of a bond crash for either country.
The next round of the great crisis is approaching. 2008 was A Crisis… what’s begun is THE Crisis.
http://www.zerohedge.com/news/2015-06-29/next-round-great-crisis-has-just-begun