Germany & THE 800 POUND GORILLA

The derivative exposure mentioned by Martin Armstrong is what has been covered on Global Geopolitics numerous times over the years under the following posts:

Is Deutsche Bank Kaputt?

New financial MELTDOWN set to sink EU as German banks lose £14,292,610,000.00 in 90 DAYS

Deutsche Bank Exodus Continues As Real Estate Chief Leaves For Blackstone

Is Deutsche Bank the next Lehman?

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

End of the eurozone? Germany’s biggest lender Deutsche Bank CRASHES with first annual loss

Deutsche Bank shocks with warning of €6bn losses

 

This week, a German cooperative savings bank in the Bavarian village of Gmund am Tegernsee with less than 10,000 in population, announced it will begin charging retail customers to hold their cash starting in September. This will apply to accounts greater than €100,000 euros. This means the bank will charge customers 0.4 percent, which amounts to a direct pass-through of the current level of the ECB’s negative deposit rate. After speaking directly with banking sources, what is happening is that cash is flooding into German banks from around Europe just to park avoiding the negative deposit rate. Now, the banks are starting to pass the negative rates back to the clients. However, much of this flow of capital has also been money fleeing other banks outside of Germany for fear that the euro will break and they will get Deutschemarks. Continue reading

Merkel Backs Two-Speed Europe With Core Euro in Poke at Cameron

As has been discussed in previous posts, Europe is looking like it’s heading to a two tier system economically and politically. Top tier nations will be seperated into a collective of 10 or so while the remaining will reside within a periphery system, most likely for providing cheap labor. What’s also seems will happen is the creation of a two tier currency system to go along with the two tier economy. For example we could see a Euro A class and a Euro B class form of currency. Another future possibility is the return of the Deutschmark with the core nations formally adopting it while the periphery nations holding on to the Euro. It would likely be the best option with the least damage should Europe continue pushing for further integration. Meanwhile, resistance from Great Britain indicates not all are willing to subjugate themselves to Brussels/Germany. In fact, British Prime Minister Cameron suggests this is an opportunity for the unwilling to go back to the way they were before the EU formed: Sovereign nations.

German Chancellor Angela Merkel said that she supports a two-speed European Union, with a core group in the euro pressing ahead with deeper integration and the U.K. among the others relegated to Europe’s margins. Merkel’s comments, made as she prepares to host British Prime Minister David Cameron in Berlin today, underscore her differences with the U.K. leader, who is pressing for more aggressive action by euro countries to counter the financial crisis roiling the 17-nation currency zone. “Those in a monetary union will have to move closer together,” Merkel said in an interview with ARD television broadcast today. “We have to be open. We always have to make it possible for everyone” to join. “But we must not stop because one or the other don’t want to come along just yet.” … “We need more Europe, we need not only a monetary union, but we also need a so-called fiscal union, in other words more joint budget policy,” Merkel said. “And we need most of all a political union, that means we need to gradually give competencies to Europe and give Europe control.” Ceding more control to Brussels is anathema to many lawmakers in Cameron’s Conservative Party, more than a quarter of whom defied the government in October and voted in favor of a referendum on continuing British membership of the EU. Cameron said the following month that the euro crisis offered an opportunity for powers to “ebb back” from Europe to nation states. “We should look skeptically at grand plans and utopian visions,” Cameron said then. “We’ve a right to ask what the European Union should and shouldn’t do.” Merkel, in her television interview, said that EU leaders at a summit later this month will discuss a plan to transform the EU into a political union. Still, a breakthrough can’t be achieved at just one summit, she said. “The economic and political division between the Anglo- Saxon world and the ‘Germano-sphere’ is increasing,” Fredrik Erixon, head of the European Centre for International Political Economy in Brussels, said in a telephone interview.

Full article: Merkel Backs Two-Speed Europe With Core Euro in Poke at Cameron (Bloomberg)

Three Months to Save the Euro: George Soros

Regardless of who the message is from, all signs still point towards Germany as the winner of the Euro crisis. It’s also interesting to note that the Deutschmark coming back is mentioned in articles a little more often than usual lately, indicating that it could be slowly being introduced in people’s minds to build support for it — such as what we’re seeing with the Eurobonds.

Here is currency wrecker, convicted felon and “philantrophist” George Soros on the Euro:

Euro-zone governments have around three months to ensure the survival of the single currency, billionaire investor George Soros said in a speech on Saturday.

“We are at an inflection point. After the expiration of the three months’ window, the markets will continue to demand more but the authorities will not be able to meet their demands,” he warned in a speech at the Festival of Economics in Trento, Italy.

The European Union is “like a bubble” – not a financial bubble but a political bubble — that could pop as a result of the euro -zone crisis, Soros said.

“In the boom phase, the EU was what the psychoanalyst David Tuckett calls a ‘fantastic object’ – unreal but immensely attractive,” he said.

“In retrospect, it is now clear that the main source of trouble is that the member states of the euro have surrendered to the European Central Bank (ECB) their rights to create fiat money. They did not realize what that entails – and neither did the European authorities,” he said.

Soros believes Germany will eventually do what it takes to keep the euro zone going because of the large losses German banks would suffer if it broke up and the damage to exports which could be caused by a return to the Deutschmark, which would likely be substantially stronger than the euro.

A German empire with the periphery as the hinterland,” could be the result of the current predicament, he warned.

Full article: Three Months to Save the Euro: George Soros (CNBC)