Goodbye to Swiss banks?

There is yet more from the FT about the crash: an article suggesting that while the US government had to nationalise the finance system to save it, no European government is big enough to do the same, if that proves needful:

<blockquote>a formal default by AIG would have exposed European banks to large increases in regulatory capital requirements, with possibly devastating effects on their ratings and market confidence. Thus, the US Treasury has saved, inter alia, the European banking system.</blockquote>

Now, we don’t know whether the US government has in fact saved the European banking system. The most we can say is “so far, so good”. But if it hasn’t. the authors have some jaw-dropping figures:

<blockquote>the largest European banks have become not only too big to fail, but also too big to be saved. For example, the total liabilities of Deutsche Bank (leverage ratio over 50!) amount to about €2,000bn (more than Fannie Mae) or more than 80 per cent of the gross domestic product of Germany. This is simply too much for the Bundesbank or even the German state, given that the German budget is bound by the rules of the European Union’s stability pact and the German government cannot order (unlike the US Treasury) its central bank to issue more currency. Similarly, the total liabilities of Barclays of around £1,300bn (leverage ratio 60!) are roughly equivalent to the GDP of the UK. Fortis bank has a leverage ratio of “only” 33, but its liabilities are three times the GDP of its home country of Belgium.</blockquote> The only body which can rescue such banks, they say, is the ECB: the European Central Bank. But that only works within the Eurozone. Britain and Switzerland both stand outside it. Obviously it’s no comfort to think that I don’t have any money in Barclays. If it were to go down, I wouldn’t have any money anywhere, and neither would you, gentle reader. All we would have left is the gratification of knowing how very very very very wrong the Right in Britain has been about economics for the last twenty years and under the circumstances I would rather that the Right had been right.

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12 Responses to Goodbye to Swiss banks?

  1. Louise says:

    At least you can fish, Andrew, I keep telling Rupert that our only chance is to go on that back-to-nature ‘live like neolithic man’ course in Orkney, to learn to make fire the old way, catch and cook the tasty voles and then to wait for the global warming to reach Kirkwall. I’m sure some of those neolithic houses must be re-usable.

  2. One way of looking at it is that if the worst comes to the worst we get to find out what the good old days were really like — for values of the ‘good old days’ that equal ‘the 1930s’.

  3. After my previous comment I remembered my father saying ‘I cya talk bout di good ol days, dem was neva good.’

  4. I was interested to find this blog. 20 years ago I had a book published on different economic concepts to point the way to a sustainable world economy. Someone who liked the book recently contacted me to suggest that I update and re-publish it as a blog. She set up the blog, and the book is nearly complete on the blog in a series of postings. Here is the link:

    With all good wishes,
    Charles Pierce

  5. Mrs Tilton says:

    Est-ce que c’est un spammeur, ou putain-de-blogue?

  6. simple country vicar says:

    I love it when you come over all apocalyptic!
    Of course i have nothing to lose. I have nothing.

  7. acb says:

    putain-de-blogue peut-être; mais pas dangereux. Ce n’est q’une fois. And if you retaliate in Swabisch, you’re banned.

  8. Mrs Tilton says:

    Wia wär’s oiso auf Boarisch?

  9. acb says:

    genauso wie smartarsch

  10. Smartarsch is Swabisch? Eu vou facer os meus comentarios na lengua de Rosalía entón.

  11. Mrs Tilton says:

    Given the Swabian predilection for diminutives, it really ought to be Smartärschle.

  12. Pingback: Helmintholog » Blog Archive » La Chute

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