Deutsche Bank Is Scared: “What Needs To Be Done” In Its Own Words

As each day passes by, it looks like Germany will lead the world into economic collapse and bring the EU with it. However, this will not lead to a complete breakup of Europe, but a United States of Europe — Germany’s long-term ambition for decades. The crisis, be it economic or social, is leading to further integration within some member states, such as forging the creating of a European Army. The greatest heist of all time is under construction and destroying what we see as the EU today, in order to reshape it into the United States of Europe.

If you follow Bible prophecy and know of the great late David Wilkerson, you might give pause to think about what’s going on today, as his vision laid out in 1973.


It all started in mid/late 2014, when the first whispers of a Fed rate hike emerged, which in turn led to relentless increase in the value of the US dollar and the plunge in the price of oil and all commodities, unleashing the worst commodity bear market in history.

The immediate implication of these two concurrent events was missed by most, although we wrote about it and previewed the implications in November of that year in “How The Petrodollar Quietly Died, And Nobody Noticed.”

The conclusion was simple: Fed tightening and the resulting plunge in commodity prices, would lead (as it did) to the collapse of the great petrodollar cycle which had worked efficiently for 18 years and which led to petrodollar nations serving as a source of demand for $10 trillion in US assets, and when finished, would result in the Quantitative Tightening which has offset all central bank attempts to inject liquidity in the markets, a tightening which has since been unleashed by not only most emerging markets and petro-exporters but most notably China, and whose impact has been to not only pressure stocks lower but bring economic growth across the entire world to a grinding halt.

The second, and just as important development, was observed in early 2015: 11 months ago we wrote that “The Global Dollar Funding Shortage Is Back With A Vengeance And “This Time It’s Different” and followed up on it later in the year in “Global Dollar Funding Shortage Intensifies To Worst Level Since 2012” a problem which has manifested itself most notably in Africa where as we wrote recently, virtually every petroleum exporting nation has run out of actual physical dollars.

Which, incidentally, brings us to none other than one of Deutsche Bank’s most respected credit analysts, Dominic Konstam, who clearly has an appreciation of the existential risk he finds himself in, not only career-wise, but in terms of the entire financial structure. We know this, because after reading his email blast from this morning we realize just how vast the fear, if not sheer terror, is among those who truly realize just how broken the system currently is.

We have reposted his entire letter below, because it represents the most definitive blueprint of everything that is about to be unleashed – especially since it comes from the perspective of one of the people who is currently deep inside Deutsche Bank and realizes just how close to the edge the German bank is.

What Konstam makes clear, in no uncertain terms, is that the the problem is the one we laid out back in November 2014: “It is not oil, it is not in the banks, it is a run on central bank liquidity, especially dollar based and there needs to be much more ($) liquidity.”

He also makes it quite clear that investor fears about contagion are well-founded: here it is in the words of a Deutsche Banker:

The exposure issue has been downplayed but make no mistake banks are heavily exposed to Asia/MidEast and while 10% writedown might be worst case for China but too high for the whole, it is what investors shd and do worry about — whole wd include the contagion to banking hubs in Sing/HKong

His solution? It’s actually quite disturbing to all those who thought that all our warnings that cash would be outlawed were nothing but a joke. For those pressed for time jump straight to the “What needs to be done section” – it’s a doozy.

So back to the  original question WHAT NEEDS TO BE DONE. Simple?
  1. Recognize the problem. It is not oil, it is not in the is a run on central bank liquidity, especially dollar based and there needs to be much more ($) liquidity. Keynes said to deal with overinvestment boom you cut you don’t raise rates. QE is impractical but getting the dollar down would greatly lift dollar based liquidity. So for a starter Fed shd stop raising rates and clearly signal an extended time out.

The existential fear in Deutsche Bank’s analyst is tangible, as is the implied threat: “don’t do these things, and if Deutsche Bank and its $60 trillion in derivatives blow up, it will be on you.”

As a result, we expect all of Konstam’s suggestions, from a major China devaluation, to a halt to negative rates, to a Yellen relent (perhaps as soon as tomorrow), to negative rates being passed on to savers, to the taxing of cash withdrawals “to encourage spending not saving”, and all the other bullet points. Unless, of course, someone is intent on seeing Deutsche Bank liquidate, as was the case with Lehman.

That said, Konstam’s final sentence is the most ominous:

“Austria July 31 1932 was a great success; Sept 1 1933 beginning of the end (see Worgl experiment, Gesell).”

He is referring to the “Miracle of Worgl“, when during 1932 – in the middle of the Great Depression – the Austrian town unleashed a monetary experiment in which “Certified Compensation Bills” were issued, a form of currency commonly known as Scrip, or Freigeld, one influenced by the monetary theories of the “hyper-Keynesian” Silvio Gesell.

Why does Konstam bring up scrip as the solution to not only Dutsche Bank’s problems, but the entire problem of a run on central bank liquidity, and by implication, credibility?

Because it’s coming… just to save the banks one more, final time.

Full article: Deutsche Bank Is Scared: “What Needs To Be Done” In Its Own Words (Zero Hedge)

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