The Red King
July 14, 2014·2 comments
European banks are being examined for real for the first time. This isn't the old game of patsy national regulators turning a blind eye. What the ECB is discovering in the fine print of balance sheets suggests the problem isn't a few bad apples, but the orchard itself.
• European banks are being examined for real for the first time. This isn't the old game of patsy national regulators turning a blind eye. What the ECB is discovering in the fine print of balance sheets suggests the problem isn't a few bad apples, but the orchard itself.
• The rot runs deeper than anyone publicly admits. Espirito Santo's loans to politically connected interests in Angola, BMPS's entanglement with Italian power structures, Erste's hidden liabilities. These aren't exceptions to how European banking works. They're examples of how it was designed to work.
• This was the entire architecture of European banking for decades. Not crony capitalism by accident, but by design. Italian banks were systematically allocated to political factions to fund state priorities and connected businesses. It's not corruption in the margins. It's the entire system.
• The problem for regulators is that you can't clean it up one bank at a time. Executing one institution solves nothing when the contamination is systemic. You can't scrub away three decades of political capture with show trials and write-downs.
• Draghi now faces the choice no central banker wants to make. Keep the dream alive by protecting a system he knows is fundamentally compromised, or let it wake up and risk everything, including the entire European project itself.
Subscribe Today to Read More
Unlock instant access to this and hundreds of other evergreen essays that explore the world of narrative through hard science and human wisdom.
- Make more informed decisions as an investor and citizen.
- See through the nudges of Big Politics and Big Media.
- Become a better consumer of news.
- Maintain your autonomy of mind in a swarm of narratives.
- Join a community of more than 100,000 truth-seekers.
Looking for Deeper Insights?
Unlock exclusive market intelligence, trade ideas, and member-only events tailored for investment professionals and active investors with Perscient Pro.
VISIT PRO
DISCLOSURES
This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.
Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives.
Comments
“Nothing to see here,” say the Euro bulls according to Bloomberg:
“Investors who are bullish on the euro needn’t lose sleep over Italy yet because any signs of strain are due mainly to political implications rather than the economic impact.”
https://tinyurl.com/yaxqc4fo
Just “political implications” = no big deal, right? These folks need to read Epsilon Theory.
Amen, brother!
Continue the discussion at the Epsilon Theory Forum...