Trichet’s Fake Stress Tests Bring European Banking System to Edge of AbyssWebster G. Tarpley
TARPLEY.net
July 11, 2010
Seventy-nine years ago this month, the German banking system disintegrated. The Danat Bank closed its doors, and only a government-declared bank holiday saved the Deutsche Bank from liquidation. This July, it may well be that the entire European banking system is poised on the brink of a similar cataclysmic event. The $31 trillion European banking system, three times bigger than the US banks, may be about to dissolve.
The first weeks of summer 2010 have brought with them a series of ominous events, quite possibly harbingers of a new wave of panic at the door. In one 5-minute period, the stock of Citigroup, one of the leading US zombie banking institutions, collapsed 17% within a few minutes, and the stock had to be halted. A vigorous intervention by the ubiquitous Plunge Protection Team clawed back much of the loss, but Citigroup still closed down 7% on the day — a rout. What used to be called the New York stock market is now the plaything of the frenzied geeks who run the leading high frequency trading firms, and the hapless small investor is at their mercy.
At the end of June, the bucket shop known as the credit default swaps market was showing the second highest levels of fear registered thus far concerning an imminent default by Greece and other members of the Southern tier of the euro. A bet against Greek debt was quoted at 1,001 basis points, down just slightly from the all time record registered in the first week of June. In general, the credit default swaps-jobbers were showing a 40% likelihood of Greek default in the 25% chance of Spain going broke. We must naturally always stress that Greece and Spain are far more solvent and viable than the zombie banks, hedge fund hyenas, and ratings agency pirates who are attacking them.
On July 1, European banks were supposed to repay some €440 billion which they had received in the form of emergency bailouts sometime earlier. In the event, the banks proved unable to come up with the required sums, so the ECB had to extend them emergency financing of as little as one week in order to permit them to roll over these loans. Not a good sign.
On June 29, the European Central Bank held an auction in which they tried to market €55 billion worth of securities. This auction was a failure, and the ECB only succeeded in unloading €35 billion worth of the paper in question, with the rest remaining unsold. In addition, the interest rates the ECB had to pay were two or three times higher than what they had expected. The failed auction is one of the recurring nightmares of governments around the world, and here was a clear instance. .........(more)
The complete piece is at:
http://tarpley.net/2010/07/12/trichets-fake-stress-tests/