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Old 12-01-2011, 06:16 AM   #1
vox
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Central Bank Actions in the EU

Here is what I'm understanding has happened so far. Can you guys check me and make sure I'm not missing something here:

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Sometime over the Thanksgiving holiday it became apparent that there were one or more major European Banks that were certainly insolvent and about to blow up for lack of funding and liquidity of assets.

The action taken was an attempt to ease the capital constriction and prevent the meltdown.

Fundamentally, we have a several banks in Europe that have severely impaired balance sheets - they are holding debt (in bonds) from the PIIGS and unfortunately that debt, according to the market is junk. It's worth 50 cents on the dollar, if that. The catch here is that the Banks are carrying it all as if its worth 100 cents on the dollar - which its not. To further complicate this matter, these banks are levered at 20, 40 maybe even 50 to 1 in that theater with ZERO transparency. Meaning, we cannot view/review balance sheets - we have no idea wtf is actually occurring on their books. (unlike American Banks which have to report to the SEC and Banking Commissions on a quarterly basis).

Last edited by vox; 12-01-2011 at 06:38 AM.
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Old 12-01-2011, 06:28 AM   #2
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Sounds about right to me. Reggie Middleton is doing some great analysis on this subject and he's been warning about it for a while now.
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