How  Can Germany Contain  the Deutsche Bank Collapse ??

How Can Germany Contain the Deutsche Bank Collapse ??

Let’s talk about Deutsche Bank (DB).

Deutsche Bank is the 1th largest bank in the world. It has assets of $1.8 trillion and over ~$60 trillion in derivatives on its books.

From a balance sheet perspective, DB’s balance sheet is 50% the size of Germany’s GDP. By way of comparison, imagine if JP Morgan was a $9 TRILLION bank. That’s effectively DB’s status in Germany.

However, it’s DB’s derivative book that is the real problem as far as the markets are concerned. As I mentioned before, DB has ~$60 trillion in derivatives. And unlike the other derivatives giant of the financial world (JP Morgan with $52 trillion in derivatives), DB is based in Europe.

What are the differences?

Europe is where Negative Interest Rate Policy (NIRP) Brexit and exposure to a banking system that is entirely too laden with debt has proven a disastrous cocktail.

What precisely has hit DB remains to be seen. But something happened in the first two weeks of September that triggered a market meltdown. DB shares have fallen straight down a total of 27% since that time.

Put another way, this bank lost over a QUARTER of its market cap in less than a month.

 

Now we are in full-blown panic mode. This bank is too big to bailout and too big to bail-in. Moreover that massive derivatives book connects DB to over 200 financial entities. Unwinding it will be catastrophic.

This could very well lead to a 2008 type Crash. To be blunt, I don’t see how Germany or the ECB can contain it.

Seriously at this point, I don’t know what else to tell you.

Gains Pains and Capital

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