Deutsche Bank is also an American bank

by on February 8, 2016 at 11:18 pm in Current Affairs, Economics | Permalink

Deutsche Bank AG became the largest lender in at least four years to feel compelled to reassure investors and employees that it has enough cash to pay its debts.

Germany’s biggest bank said in a statement Monday that it has more-than-sufficient means to pay coupons on its riskiest debt both this year and in 2017. Deutsche Bank also published a note to employees from Chief Financial Officer Marcus Schenck that said the firm’s “capital and risk position remains strong.”

The cost of protecting Deutsche Bank’s debt against default has more than doubled this year, while its stock trades at about one-third of the company’s liquidation value.

Here is the article, here are additional links on the situation, few if any are positive.  So far this year, European bank stocks are down about twenty percent, and the Japanese ten-year yield is now negative.  It is worth repeating that we don’t actually know the end of the story for the strange economic situation much of the world has been in for some number of years now…

1 Matthew February 8, 2016 at 11:39 pm

“It is worth repeating that we don’t actually know the end of the story for the strange economic situation much of the world has been in for some number of years now…”

– Conflagration of the fiat currencies and their unpayable debts in favor of cryptocurrency.

2 GC February 9, 2016 at 1:39 am

Deflagration of the fiat currencies in favor of a fiat currency cube? Riiiight. Logic, especially.

3 ChrisA February 9, 2016 at 1:52 am

Negative interest rates on Government debt don’t sound like a loss in confidence in fiat currencies to me. If you are correct I look forward to your becoming a billionaire through shorting bonds.

4 Matthew February 9, 2016 at 11:51 am

GC, it seems that you don’t deeply understand cryptocurrencies and how they differ markedly from government fiat currencies.

ChrisA, I don’t think you understand what has been driving down interest rates, and why negative rates indicate the rapidly approaching endgame for our present financial system.

I would recommend to everyone a cryptocurrency hedge in your portfolio of about 5%. Mine is 25% Bitcoin, 75% Ethereum.

5 GC February 9, 2016 at 12:27 pm

Matthew, you seem you don’t deeply understand the concept and definition of what a fiat currency is. Cryptocurrency are more fiat than government issued currency, as the latter, at least in theory, have the hard assets of the government to back them up.

Good luck paying your taxes with a cryptocurrency, have it accepted as a mean of exchange for real tangible goods or services. That is, if they aren’t outlawed outright by the government under whose jurisdiction you happen to live.

But by all means go ahead, everyone can use his money as they see fit.

6 ChrisA February 10, 2016 at 12:06 am

Matthew – please explain to me why if there is really an “approaching endgame” in fiat currency government debt, the price of that debt keeps rising in value? This is pretty simple logic, it’s like you are saying my house is about to become valueless despite people keep offering me more and more money for it. Who should I believe – you, or the people putting their hard cash on the table? It is an interesting approach to valuing assets – is this a new economic theory? Does this mean anything rising in price is likely to become worthless very soon and can I then assume an asset falling in price mean the opposite? If so I have some rusty old cars for your consideration.

7 prior_test February 9, 2016 at 1:56 am

Deutsche Bank’s German based directors live in much greater fear of effective legal action resulting in their being fined and/or jailed. This is considered to be a major reason why DB refused any German government money, as the cost would be too high – the directors would have been replaced, and their various cover-ups made too plain for prosecutors to ignore.

‘It is worth repeating that we don’t actually know the end of the story for the strange economic situation much of the world has been in for some number of years now’

Irving Fisher would disagree.

‘Irving Fisher (February 27, 1867 – April 29, 1947) was an American economist, statistician, inventor, and Progressive social campaigner. He was one of the earliest American neoclassical economists, though his later work on debt deflation has been embraced by the Post-Keynesian school.[1] Joseph Schumpeter described him as “the greatest economist the United States has ever produced”,[2] an assessment later repeated by James Tobin[3] and Milton Friedman.[4]

Fisher made important contributions to utility theory and general equilibrium.[5][6] He was also a pioneer in the rigorous study of intertemporal choice in markets, which led him to develop a theory of capital and interest rates.[3] His research on the quantity theory of money inaugurated the school of macroeconomic thought known as “monetarism.”[7] Fisher was also a pioneer of econometrics, including the development of index numbers. Some concepts named after him include the Fisher equation, the Fisher hypothesis, the international Fisher effect, and the Fisher separation theorem.

Fisher was perhaps the first celebrity economist, but his reputation during his lifetime was irreparably harmed by his public statements, just prior to the Wall Street Crash of 1929, claiming that the stock market had reached “a permanently high plateau”. His subsequent theory of debt deflation as an explanation of the Great Depression, as well as his advocacy of full-reserve banking and alternative currencies, were largely ignored in favor of the work of John Maynard Keynes.[3] Fisher’s reputation has since recovered in neoclassical economics, particularly after his work was rediscovered in the late 1950s,[3][8][9] and more widely due to an increased interest in debt deflation after the late-2000s recession.’ https://en.wikipedia.org/wiki/Irving_Fisher

And for a look at the broad outlines of what Fisher, after being humiliated by his public pronouncemments concerning Wall Street in 1929, developed, a simple link – https://en.wikipedia.org/wiki/Debt_deflation

8 JWatts February 9, 2016 at 11:43 am

“Deutsche Bank is also an American bank”

Did you get the idea that Tyler was counter trolling you with that headline?

9 dearieme February 9, 2016 at 7:04 am

“Some number of years”? Dear God, what’s wrong with “several”?

10 bot075693 February 9, 2016 at 8:48 am

Old crank.

11 John Mansfield February 9, 2016 at 9:11 am

“Some number of years now” communicates not only a period of several years, but also an uncertainty of when the several years began.

12 rayward February 9, 2016 at 11:16 am

Of course, central banks and governments worked in concert to re-build bank balance sheets in part with actions designed to inflate the value of assets held by the banks. And it worked. Maybe too well. Having ridden the boom in asset prices, some of the banks refused to make an orderly disposition of them. But this isn’t limited to a few reckless banks (Deutsche Bank being on the regulators’ radar for several years), as private equity firms, hedge funds, and other investors have purchased many of those assets (including repackaged debt and even shipping loans) in search of higher returns. That’s the real risk, that falling asset prices will spread throughout the system and have a cascading effect not only on banks but other investors as well. And nobody really knows the potential for a crisis since the information isn’t public.

13 JWatts February 9, 2016 at 11:42 am

“The cost of protecting Deutsche Bank’s debt against default has more than doubled this year, while its stock trades at about one-third of the company’s liquidation value.”

That doesn’t show much confidence.

14 John February 9, 2016 at 1:29 pm

Do you have a theory on the demographic cycle for savings and spending? To me it looks like a glut of world savings is ending…

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