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Sometimes banks gamble, and lose.
On 12 December 2011, Global Research had an article suggesting that banks, and others, still hold a vast amount of worthless assets.
The suggestion is that many, many billions in 'ghost assets' will disappear by 2013.
(The Derivative Debt Bubble: "Ghost Financial Assets" and the Widespread Discounting of Western Public Debt)
Think of a French bank holding Greek government bonds which are suddenly worth only half of what they were before.
And it may not just be Greek bonds.
And it it is not just French banks that may suffer..
According to the Global Research article:
There is the possibility of a decline of 30% in the US dollar in 2012.
The United Kingdom could be absorbed into Euroland by 2020.
Scotland may break with England.
A global and US recession could involve falling tax revenues and further drops in home values.
US private debt is far worse than in Greece.
Europe has takes steps to reduce expenditures and debts.
But the US continues increasing debt.
"We have entered a phase involving the decimation of Western banks...
"Customers of all financial operators - banks, insurance companies, investment funds, pension funds - are now questioning the soundness of these institutions.
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"The Economic Collapse", on 13 December 2011, gives us
17 Signs That The European Financial System Is Heading For An Implosion Of Historic ProportionsFrom this we learn:
Greece has raised taxes and reduced government spending.
This has caused the Greek economy to slow down and tax revenues to decline.
100,000 businesses have closed.
A third of the population is living in poverty.
The following are signs that the European financial system is heading for an implosion of historic proportions.
1 When you reduce government spending you also slow down the economy.
2 As the economy slows down in Europe, unemployment will rise.
3 Germany, and the other wealthy nations of northern Europe, are sick and tired of bailouts and do not plan to hand over trillions of euros.
4 The European Central Bank could print trillions of euros, but this would go against existing treaties and most of the major politicians in Europe are strongly against this right now.
When the CIA hits the economies of such countries as Libya, Egypt, Tunisia, India, Russia, Indonesia, or China, the global economy suffers.
5 Europe is rapidly running out of time.
6 Germany has kept the focus exclusively on fiscal deficits.
This crisis was not caused by fiscal deficits (except in the case of Greece).
Spain and Ireland were in surplus, and Italy had a primary surplus.
7 There are dozens of European banks in danger of failing.
Nobody wants to 'throw any more money into those black holes'.
We could start to see banks fail in rapid succession.
Charles Wyplosz, a professor of international economics at Geneva’s Graduate Institute, says:
"Banks will collapse, including possibly a number of French banks that are very exposed to Greece, Portugal, Italy and Spain."
8 According to financial journalist Ambrose Evans-Pritchard, European banks need to reduce the amount of lending on their books by about 7 trillion dollars in order to get down to safe levels.
9 European banks are overloaded with worthless assets that have a book value of trillions of euros.
10 Either the Germans will have to allow the ECB (European Central Bank) to print money out of thin air to buy bonds with, or, "we will finally see the market determine the true value of European government bonds."
11 Huge amounts of European sovereign debt are scheduled to be 'rolled over' next year (Money is due to be paid back to lenders; so new money must be borrowed.).
The poor cannot afford to shop in Walmart
12 Once the new treaty is ratified, eurozone governments will lose the power to dramatically increase government spending.
The coming recession could become a full-blown depression.
13 Credit rating agencies are warning that more credit downgrades may be coming in Europe.
14 S&P has put 15 members of the eurozone (including Germany) on review for a possible credit downgrade.
15 The stock prices of many major European banks are in the process of collapsing.
16 Bank 'runs' have been reported in certain parts of Europe.
At the start of 2010, savings and time deposits held by private households in Greece totalled €237.7 billion.
By the end of 2011, they had fallen by €49 billion.
Savings fell by a further €5.4 billion in September and by an estimated €8.5 billion in October.
17 Economic activity is slowing down.
In October, Japanese machinery orders dropped 6.9%, following an 8.2% drop in September.
South Africa has recently reported a 5.6% drop in manufacturing activity.
Britain recorded a 0.7% decline.
China’s October exports fell 1.7% after dropping 3.8% in September.
Korea’s exports are down three consecutive months. Singapore’s were off in September and October. Indonesia’s plunged 8.5% in October after slipping 2% in September. India’s dropped 18.3% after being flat in September.
"Brutal austerity + toxic levels of government debt + rising bond yields + a lack of confidence in the financial system + banks that are massively overleveraged + a massive credit crunch = A financial implosion of historic proportions."
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What governments could do:
1. Nationalise or close down the zombie banks.
Nationalise the US Federal reserve.
2. Get government financial institutions to lend to business.
3. Ban the trade in 'derivatives' and other forms of gambling by banks and financial institutions.
4. Slash spending on defence and handouts to the rich.
Increase taxes on the rich.
5. Increase spending on infrastructure.
