Wednesday, July 15, 2015

The Euro Zone Remains Full Of Accidents Waiting To Happen......... EURO PROBLEM IS FAR FROM OVER!

The Euro Zone Remains Full Of Accidents Waiting To Happen

The euro zone remains full of accidents waiting to happen and some of them have the potential to become truly gigantic accidents.

As long as the ECB continues to pump €60 billion in newly created money into the system every month, such problems can probably be kept at bay. However, this comes at a price, as monetary pumping distorts prices and falsifies economic calculation, which in turn leads to malinvestment and capital consumption that is masquerading as an "economic recovery". The structure on which all this debt rests becomes ever weaker.

The chart below shows the percentage impaired bank loans (loans that are delinquent 90 days+) represent of total bank loans outstanding in a number of countries.

Not surprisingly, Greece is inhabiting the top spot, followed by Ireland, Slovenia and Italy. In most of these countries a variety of measures has been taken (mainly via the creation of "bad banks") to get the problem under control. Italy seems to largely have disappeared from the radar, but strikes us a potential powder keg – especially once the recent monetary-pumping-induced pseudo recovery implodes in another bust.  

Bad loans as a percentage of all outstanding bank loans in various countries:

NPLs

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