With Merkel’s PC economic ignorance, and the fear of bail-ins, some hedge funds finally blinked, yanking funds from one of the worlds largest banks, with a notional derivative book of almost $50 TRILLION.
Exactly one year ago I highlighted the risk associated with DB’S massive interconnected derivative book, which looks poised to finally provide the necessary coiling for US stocks and sufficient fear to capture the last of the govt bond bag holders.
Will the current loss of confidence lead to the kind of runs that produced the Bear Stearns/Lehman Brothers moment? Time will only tell, but a few things are the same – the troubled bank denies there is a problem, the mainstream media is silent, and the average person is oblivious to the brewing calamity. One can also count on the markets to call Merkel’s bluff by forcing DB’s shares lower, forcing Merkel to lose face and the election next year. It will also demonstrate to the world that EU austerity only applies to the PIIGS, which will certainly produce more protests and civil unrest as the global economy spirals downward.
Real estate did not need Lehman and Bear to pop the bubble, and the govt debt bubble does not need DB. There are plenty of foreign entities holding massive amounts of dollar-based debts with their pins in the air, which will be exposed as the dollar rises due to growing fears in Europe, Japan, China, Brazil, and the Middle East. Although, Saudi Arabia may be looking to sell US assets with yesterday’s override of Obama’s veto of the 9/11 bill.
If all of these hot spots are not enough to drive capital into the safety of the US Dollar, we had Dumb’s successor, Dumber, threatening to cut off diplomatic ties with Russia. As we have been documenting for years, the Obama administration has been setting up Russia as the next foreign boogeyman that justifies another World War to distract the masses from the economic mismanagement by self-interested bureaucrats. The only way to lesson the coming economic reset and chance of war is to eliminate the career politician by voting out EVERY incumbent, EVERY election. Otherwise, the necessary reforms will never occur proactively.