As reported in this article at Zerohedge: “…in an unexpected outcome, German economic research institute ZEW found that Germany’s largest bank, Deutsche Bank, had the highest potential capital shortfall, as much as €19 billion in a study of 51 European banks using U.S. Federal Reserve stress test methods. The capital gap is greater than DB’s entire market cap. [17 Billion]
“Martin Hellwig, director of the Max Planck Institute for Research on Collective Goods, said stress tests carried out by the European Central Bank revealed the Deutsche Bank would be left in a precarious position in the event of another financial crisis, and warned that Germany’s biggest bank is teetering on the edge of crisis and they only way to protect it against future shocks is to nationalise it.
While it would probably not go bust in a fresh downturn – he predicted the bank which is crucial to the German economy would face serious equity problems. He said: “Putting it short: for a long and serious crisis there simply wouldn’t be enough money.”
As another writer at Independenttrader noted long ago (back when Deutsche Bank was valued at 2Trillion ABOVE zero) in an article titled: Deutsche Bank on the brink of bankruptcy
“The real problem of Deutsche Bank is its exposure on derivative market. The sum of just under 55 trillion EUR is 20 times bigger than the GDP of Germany. Majority – 70% – of all derivatives are interest rate derivatives and they are secured with government bonds….
Problems of one bank nearly immediately creates domino effect onto other banks. Not only banks but also countries themselves are affected. What is more, central banks already exhausted opportunities to smooth out crises. Every single time in the past the quantitative easing (pumping money into the markets) was used and lowering interest rates to prevent credit crunch.
What is worse is that the main security used here is government bonds that are losing its value continuously. Prices of bonds of the biggest countries lost 10-12% in just three months. For years interest rate market was being successfully manipulated but it seems that market forces finally are breaking through.
Market of bonds is big enough that there is no way for everyone to escape its consequences without creating a crisis. Today’s situation is operating on the first come, first served basis. Knowing that there is no liquidity (demand) in the market and with this scale central banks cannot save the day anymore.
It is worth remembering that financial crises are happening once per 7 years, give or take. We had ‘black Monday’ of 1987. The Great Bond Massacre in 1994. The burst of NASDAQ bubble in 2000 is remembered by everyone just like the collapse of Lehman Brothers which nearly ended up dragging whole financial system down with it.
The Deutsche Bank problem is serious because of many reasons. The DB is way bigger than the Lehman Brothers thus, scale of the potential damage is incomparable. Modern global financial sector resembles a system of communicating vessels. The interconnectedness is very strong.
Problems of one bank nearly immediately creates domino effect onto other banks. Not only banks but also countries themselves are affected. What is more, central banks already exhausted opportunities to smooth out crises. Every single time in the past the quantitative easing (pumping money into the markets) was used and lowering interest rates to prevent credit crunch.”
The bottom line is that to many analysts, Deutsche Bank is going bankrupt and it is so big that it is likely to take down the rest of the global economy (which is just as bad) down the tubes with it. Economic collapse worse than the Wall Street crash of 1929 and the Great Depression that followed (and the World War solution to get out of it) is a very real possibility. Soaring gold and silver, social chaos, martial law, and dictatorship are very possible soon, as I pointed out in my last book. Are you ready?