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274% of GDP


Trevi Fountain, Rome

Trevi Fountain, Rome

  “The disease runs very deep. This is a very necessary but an insufficient solution for the banking condition,” Tim Harris from JPMorgan Asset Management told CNBC Monday.

(Video here… running time ~ 5 minutes)

Well… the real truth starts to emerge… here is what Mr. Harris says (mainly from the Euro perspective)… (this video was made before the bailout was defeated.)

European financial firm debt equals approximately 274% of Euro GDP versus the historical mean of about 210%… to revert to the mean suggests deleveraging will be about $ 5 trillion for the European banking sector and about double or $ 10 trillion for the US banking sector… the “proposed bailout” (now defeated) of $ 700 billion will “jumpstart” the process and get the most toxic assets off balance sheets…”

“European banks will avail themselves of the bailout… this is a necessary but insufficient solution… it has to work… Paulson thinks the $ 700 billion will cap the gusher…”

The bank deposit to loan ratio is between 150% and 160%… which means that about 2/3 of bank assets are funded by deposits and the rest by wholesale borrowing… this is where banks rely on each other… the banks don’t trust each other now and are not lending… the markets are frozen.”  

Time for Act II… Shakespeare couldn’t have written such a thing… greed, haste, shifting alliances…

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