The Arteries in the Eurozone Interbank Lending System Get Even Further Clogged

“Just look at my screen. It tells the story. I have one big European bank willing to lend and 40 banks wanting to borrow. And look at those names, they aren’t little regional banks. They are some the biggest banks in the eurozone and they can’t get funding in the marketplace. They have to go to the ECB.”

–A trader as quoted in this morning’s Financial Times.


Posted in * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Euro, Europe, European Central Bank, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--

One comment on “The Arteries in the Eurozone Interbank Lending System Get Even Further Clogged

  1. Militaris Artifex says:

    I rather strongly suspect that it ([i]i.e.[/i], the Euro) is “all over but the shouting.” Multiple member states in the Eurozone have reneged on their agreement to limit annual government deficits to the agreed value. Just as in the USA in the 1930s, [i]et seq[/i], a number of Eurozone governments have promised their citizens government benefits which they are increasingly unable to fund, and were easily able (assuming simple honesty and an unwillingness to engage in Keynesian self-delusion) to determine that fact at the time the promises were made. The only questions that remain are: [blockquote][b](1)[/b] Will the US further underwrite the Euro, and to what lengths, by continuing to offer loans to banks in the zone, and/or the ECB; and,

    [b](2)[/b] Will the Fed engage in further [i]fiat[/i] currency creation in the U.S.—think [i]stimulus spending[/i] and [i]quantitative easing[/i]—in the United States?[/blockquote] To the extent that the answers to those questions are in the affirmative, it is simply a matter of time until the entire world financial house of cards comes tumbling down around our ears.

    The sooner we stop the Keynesian nonsense, the sooner and less painful will be the “day of reckoning,” and the longer we delay the later and more painful will it be. And the degree of pain will not necessarily be a linear function of the length of time. In other words, waiting twice as long is not guaranteed to produce no more than twice the pain.

    [i]Pax et bonum[/i],
    Keith Töpfer