Who would have thought that...

The in face of disaster spreading from Hypo Real Estate last night the German government has decided to guarantee all bank deposits of private savings in Germany. That's a sum of 1 trillion EURO, roughly double the Paulson Plan in volume. However, keep in mind this is a guarantee, not a sum paid to anyone. As so often an insurance keeps the bad things from happen.

Germans had been expecting a fair chance of bank runs. The need for physical cash money has increased strongly among all national banks as they report. That is, by all means, the overture of a bank run, call it bank walk if you want.

This unilateral move will force most of our neighbour countries to do the same, otherwise private savings would get withdrawn in country.x and send to German banks. Good for Germany, bad for Europe and the whole situation unless all neighbours agree on the same terms, effectively turning Europe into a safe haven for private deposits.

We just spent enough on just one Bank.. :mrgreen:

BloodRayne wrote:

We just spent enough on just one Bank.. :mrgreen:

Who is we and which bank? Fortis? If so, that's the beginning.

I heard a German woman disagreeing with Irelands promise to guarantee all deposits, and then announce that German deposits are safe. I hope this doesn't start a free for all with every European government thinking "every country for itself". There's talk of a european bail out but they're not sure that countrys would be happy with bailing others out. Some Americans even resent their money going to other states :shock:

I think that we should be in this together though. I've always thought that Europe has enormous potential if it works together more closly. The diversity and culture of a united Europe would be unmatched in history. We're a way off but heading in that direction I think. The current situation could accelerate that, or push us apart.

BNA! wrote:

...the German government has decided to guarantee all bank deposits of private savings in Germany. That's a sum of 1 trillion EURO, roughly double the Paulson Plan in volume.

How does the German government have such authority? In reality, its the German people that are guaranteeing 100% of the German people's bank deposits. Its circular logic.

pbmax wrote:

BNA! wrote:

...the German government has decided to guarantee all bank deposits of private savings in Germany. That's a sum of 1 trillion EURO, roughly double the Paulson Plan in volume.

How does the German government have such authority? In reality, its the German people that are guaranteeing 100% of the German people's bank deposits. Its circular logic.

Yes, it is, but better than the equally circular logic of a bank run leading to German people destroying 100% of German people's bank deposits.
Edit: Only government have the authorities to step in when such a massive crisis occurs. They are the only ones able to print money and change the laws necessary to continue operations. This is questionable, but throughout any epic crisis this happened. The alternative is what? Forcing people at gunpoint not to withdraw money? I don't know.

wal wrote:

I heard a German woman disagreeing with Irelands promise to guarantee all deposits, and then announce that German deposits are safe. I hope this doesn't start a free for all with every European government thinking "every country for itself". There's talk of a european bail out but they're not sure that countrys would be happy with bailing others out. Some Americans even resent their money going to other states :shock:

I think that we should be in this together though. I've always thought that Europe has enormous potential if it works together more closly. The diversity and culture of a united Europe would be unmatched in history. We're a way off but heading in that direction I think. The current situation could accelerate that, or push us apart.

In the end we'll see a global rescue plan and just for the record, say good bye to any "bail out" phrase.
Angela Merkel was disagreeing with Irelands promise to guarantee all deposits. But on Sunday you could see people lining up at the ATMs withdrawing money. If one country starts a 100% guarantee it sort of forces every country to do the same.

It's like a burning house with 20 flats. If one tenant decides to take down the fire in his apartment the other 19 tenants will gravitate towards the non burning flat.

I was very much surprised Merkel shot down a united European rescue plan as fast as it was on the table. That was, in my opinion, very bad politics. We are going to see the sea monster rising it's head and stomping all around the world. I was fearing that when the Paulson plan got shot down over re-election worries last Monday. In my opinion it caused a severe destruction of what was left in confidence. Now there is no more chance for an easy way out. An easy way out I would define by simply throwing billions to no end at the capital markets.

This is going to end in a fundamental reorganisation of capital markets, perhaps even currencies.
Edit: Iceland is close to declare state bankruptcy.

Actually it's quite a brilliant move. It doesn't actually cost anything and I think it addressess the major concern for stakeholders and that's trust. I don't know if Germany has fractional banking like here in North America, but I think once people learn about that, coupled with the recent American meltdown, they get nervous about their savings and other holdings. I wonder whether the German banks are trying to reassure people given the dramatic devaluation of German currency pre-WWII? Still if there's a run on the banks, we all find out about the banker's dirty little secret, that they've long since loaned out our money about five dozen times over again. In what other industry can you produce something from nothing, and make a profit to boot?

DoV_Tomas wrote:

Actually it's quite a brilliant move. It doesn't actually cost anything and I think it addressess the major concern for stakeholders and that's trust. I don't know if Germany has fractional banking like here in North America, but I think once people learn about that, coupled with the recent American meltdown, they get nervous about their savings and other holdings. I wonder whether the German banks are trying to reassure people given the dramatic devaluation of German currency pre-WWII? Still if there's a run on the banks, we all find out about the banker's dirty little secret, that they've long since loaned out our money about five dozen times over again. In what other industry can you produce something from nothing, and make a profit to boot?

Yes, the German banking system is very fractional. I was talking to near-border bankers today and they all experience customers from European neighbour countries lining up for cash deposits in the 20k to 50k Euro range. That shouldn't be necessary since I believe everyone is equally save in their homecountries with savings in that range.

As far as the bankers dirty little secret goes, we all know and always knew they throw far more money at the market as they have. That's why we need interbanking lending back up again.

There are, by the way, plenty of industries where you make something from nothing and collect a profit. Just think what would happen if every insured car would crash into each other? Every health care insurance customer get's terminally sick?

To be nitpicky, banks make something more out of something, not out of nothing. Only if you unwind everything there probably will be less. Every business to some extent makes some cut above something less, that's why they're profitable (unless they're boo.com).

The market in general is under pressure and will continue to be so, but it's unlikely we'll have to unwind everything down to how do apples trade to peas.

Who would have thought that...

The in face of disaster spreading from Hypo Real Estate last night the German government has decided to guarantee all bank deposits of private savings in Germany. That's a sum of 1 trillion EURO, roughly double the Paulson Plan in volume. However, keep in mind this is a guarantee, not a sum paid to anyone. As so often an insurance keeps the bad things from happen.

Germans had been expecting a fair chance of bank runs. The need for physical cash money has increased strongly among all national banks as they report. That is, by all means, the overture of a bank run, call it bank walk if you want.

This unilateral move will force most of our neighbour countries to do the same, otherwise private savings would get withdrawn in country.x and send to German banks. Good for Germany, bad for Europe and the whole situation unless all neighbours agree on the same terms, effectively turning Europe into a safe haven for private deposits.

We just spent enough on just one Bank.. :mrgreen:

BloodRayne wrote:

We just spent enough on just one Bank.. :mrgreen:

Who is we and which bank? Fortis? If so, that's the beginning.

I heard a German woman disagreeing with Irelands promise to guarantee all deposits, and then announce that German deposits are safe. I hope this doesn't start a free for all with every European government thinking "every country for itself". There's talk of a european bail out but they're not sure that countrys would be happy with bailing others out. Some Americans even resent their money going to other states :shock:

I think that we should be in this together though. I've always thought that Europe has enormous potential if it works together more closly. The diversity and culture of a united Europe would be unmatched in history. We're a way off but heading in that direction I think. The current situation could accelerate that, or push us apart.

BNA! wrote:

...the German government has decided to guarantee all bank deposits of private savings in Germany. That's a sum of 1 trillion EURO, roughly double the Paulson Plan in volume.

How does the German government have such authority? In reality, its the German people that are guaranteeing 100% of the German people's bank deposits. Its circular logic.

pbmax wrote:

BNA! wrote:

...the German government has decided to guarantee all bank deposits of private savings in Germany. That's a sum of 1 trillion EURO, roughly double the Paulson Plan in volume.

How does the German government have such authority? In reality, its the German people that are guaranteeing 100% of the German people's bank deposits. Its circular logic.

Yes, it is, but better than the equally circular logic of a bank run leading to German people destroying 100% of German people's bank deposits.
Edit: Only government have the authorities to step in when such a massive crisis occurs. They are the only ones able to print money and change the laws necessary to continue operations. This is questionable, but throughout any epic crisis this happened. The alternative is what? Forcing people at gunpoint not to withdraw money? I don't know.

wal wrote:

I heard a German woman disagreeing with Irelands promise to guarantee all deposits, and then announce that German deposits are safe. I hope this doesn't start a free for all with every European government thinking "every country for itself". There's talk of a european bail out but they're not sure that countrys would be happy with bailing others out. Some Americans even resent their money going to other states :shock:

I think that we should be in this together though. I've always thought that Europe has enormous potential if it works together more closly. The diversity and culture of a united Europe would be unmatched in history. We're a way off but heading in that direction I think. The current situation could accelerate that, or push us apart.

In the end we'll see a global rescue plan and just for the record, say good bye to any "bail out" phrase.
Angela Merkel was disagreeing with Irelands promise to guarantee all deposits. But on Sunday you could see people lining up at the ATMs withdrawing money. If one country starts a 100% guarantee it sort of forces every country to do the same.

It's like a burning house with 20 flats. If one tenant decides to take down the fire in his apartment the other 19 tenants will gravitate towards the non burning flat.

I was very much surprised Merkel shot down a united European rescue plan as fast as it was on the table. That was, in my opinion, very bad politics. We are going to see the sea monster rising it's head and stomping all around the world. I was fearing that when the Paulson plan got shot down over re-election worries last Monday. In my opinion it caused a severe destruction of what was left in confidence. Now there is no more chance for an easy way out. An easy way out I would define by simply throwing billions to no end at the capital markets.

This is going to end in a fundamental reorganisation of capital markets, perhaps even currencies.
Edit: Iceland is close to declare state bankruptcy.

Actually it's quite a brilliant move. It doesn't actually cost anything and I think it addressess the major concern for stakeholders and that's trust. I don't know if Germany has fractional banking like here in North America, but I think once people learn about that, coupled with the recent American meltdown, they get nervous about their savings and other holdings. I wonder whether the German banks are trying to reassure people given the dramatic devaluation of German currency pre-WWII? Still if there's a run on the banks, we all find out about the banker's dirty little secret, that they've long since loaned out our money about five dozen times over again. In what other industry can you produce something from nothing, and make a profit to boot?

DoV_Tomas wrote:

Actually it's quite a brilliant move. It doesn't actually cost anything and I think it addressess the major concern for stakeholders and that's trust. I don't know if Germany has fractional banking like here in North America, but I think once people learn about that, coupled with the recent American meltdown, they get nervous about their savings and other holdings. I wonder whether the German banks are trying to reassure people given the dramatic devaluation of German currency pre-WWII? Still if there's a run on the banks, we all find out about the banker's dirty little secret, that they've long since loaned out our money about five dozen times over again. In what other industry can you produce something from nothing, and make a profit to boot?

Yes, the German banking system is very fractional. I was talking to near-border bankers today and they all experience customers from European neighbour countries lining up for cash deposits in the 20k to 50k Euro range. That shouldn't be necessary since I believe everyone is equally save in their homecountries with savings in that range.

As far as the bankers dirty little secret goes, we all know and always knew they throw far more money at the market as they have. That's why we need interbanking lending back up again.

There are, by the way, plenty of industries where you make something from nothing and collect a profit. Just think what would happen if every insured car would crash into each other? Every health care insurance customer get's terminally sick?

To be nitpicky, banks make something more out of something, not out of nothing. Only if you unwind everything there probably will be less. Every business to some extent makes some cut above something less, that's why they're profitable (unless they're boo.com).

The market in general is under pressure and will continue to be so, but it's unlikely we'll have to unwind everything down to how do apples trade to peas.