Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Euro Bond Crisis Returns As Germany Pushes Euro Sovereign Debt Bail-in Clause

Stock-Markets / Eurozone Debt Crisis Feb 16, 2016 - 02:57 PM GMT

By: GoldCore

Stock-Markets

European Banks holding European sovereign debt may have to take haircuts and be part of bail in plans should that same debt default, according to a plan being pursued by German government advisers. In another attempt to shelter German tax payers from the largess and excess of fellow European neighbouring countries’ national banks, the move could trigger a run on billions of euro of sovereign debt of said banks. In an article penned by the Telegraph’s Ambrose-Evans Pritchard, one of the council’s dissenting members describes the plan as the “fastest way to break up the Eurozone”.


The plan, by The German Council Of Economic Experts, calls for banks to be bailed in should losses occur from a sovereign default before the European Stability Mechanism steps in to stabilise the situation.

Italian and Spanish banks hold vast amounts of their national government debt; in Italy’s case they are supporting the Italian treasury. Should that debt default, which is a very real possibility, then Italian banks would have to take significant losses first, only then would the ESM be allowed to step in.

Professor Bofinger, who sits on the council, has dissented. He believes that such a move could force Italy and Spain to actively depart from the euro in order to prevent their countries from facing bankruptcy. The mere prospect of such a move could ignite a bond run and cause the collapse of European sovereign debt, forcing up yields and crashing bond prices. This would mean that European nations would face far higher refinancing rates.

So will it happen?

So far the plan has attracted a number of high profile supporters, including the influential German Finance Minister Wolfgang Schauble and the German Bundesbank. When questioned about the plan, ECB president Mario Draghi stated, tellingly, on Monday that “…it is an issue that we do have to deal with. But we have to take a very considered and phased-in approach”. Portuguese 10-year bonds are already trading at yields not seen since 2014.

What does it mean?

It means that national banks facing losses from government debt defaults cannot now rely on official support until they have expended their own reserves, which may include the expropriation of customer deposits. Should a heavily indebted European country default on its bonds, any bank holding said bonds will have to cover the losses by tapping its existing reserves. The losses may then suck in client deposits as bank depositors get forced to cover the capital shortfall on the bank’s balance sheet. The possibility of contagion then rises as counterparties to the bank and the defaulting government dump any related assets or parties they suspect as having exposure. It is a house of cards that could destabilise the entire monetary system.

European integration is a mess and it will likely end very, very badly. The noble euro experiment has exposed deep chasms of distrust which the architects of the EU felt would be overcome only by throwing each member’s lot in together. Alas, we now see that German benefactors are circling the wagons in anticipation of a collapse by digging firebreaks wherever they can. They are following a nationalist mandate to protect their citizens from the excesses of their neighbours, utterly misdiagnosing the causes of the issue in the process. If you were in Whitehall, London and tasked with drafting a policy paper for Britain and its integration with Europe, what would you think? You would likely seek to make serious preparations for a disorderly wind down of the European monetary experiment.

Myopic

German conservative financial elite refuse to accept any shared responsibility for the euro, that much is clear. They believe in having their cake, (a vastly depreciated export currency that ensures competitive and high value German exports), and eating it too (refusing to support by a system of transfers the benefit accruing to the German tax payer with their fellow debtor nations). The machinations of European debt problems should be shared. The peripheral European countries should take a disproportionate amount of any financial adjustment pain resulting from their greed and poor management, but the process by which this is achieved needs to be managed far more sensitively and in concert with those European neighbours. It seems that this plan may create the very storm it seeks to manage.

What you can do

In short you need to take some action now.

If you have significant euro savings you should seek to secure them in the safest of banks in the safest of jurisdictions. For more information read GoldCore’s guide to bail ins and get key insights into how bail-ins will operate and how to protect you and your family’s wealth.

You need to have an allocation to precious metals (gold or silver), a form of money that can not be debased by nefarious governments. Your bullion needs to be allocated and segregated, that means you need to be able to put your hands on the metal when and where you wish without having to enter a market sell order. You cannot do this with a gold fund or with a digital gold trading platform. There are lots of reputable dealers, few though can offer secure storage that can weather what may be coming.

Read our guide to storing metals.

Store cash and metal in your immediate possession, should a bank collapse occur you may need, as awful as this sounds, reserves to protect your family for a few days or weeks while the system corrects itself.

If you are a client of GoldCore feel free to make an appointment to discuss your issue with one of our advisers. Click here to book your appointment.

One final word

Do not panic, seriously. It is unlikely that we will face a banking collapse in the near future as we hope in time that cooler heads will come to bare. It is prudent to have some insurance in place should the unthinkable happen. A casual review of history, especially European history, will demonstrate just how boneheaded officialdom can be sometimes.

This update can be found on the GoldCore blog here.

Mark O'Byrne

IRL
63
FITZWILLIAM SQUARE
DUBLIN 2

E info@goldcore.com

UK
NO. 1 CORNHILL
LONDON 2
EC3V 3ND

IRL +353 (0)1 632 5010
UK +44 (0)203 086 9200
US +1 (302)635 1160

W http://www.goldcore.com/uk/

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: Past experience is not necessarily a guide to future performance. The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. GoldCore Limited, trading as GoldCore is a Multi-Agency Intermediary regulated by the Irish Financial Regulator.

GoldCore is committed to complying with the requirements of the Data Protection Act. This means that in the provision of our services, appropriate personal information is processed and kept securely. It also means that we will never sell your details to a third party. The information you provide will remain confidential and may be used for the provision of related services. Such information may be disclosed in confidence to agents or service providers, regulatory bodies and group companies. You have the right to ask for a copy of certain information held by us in our records in return for payment of a small fee. You also have the right to require us to correct any inaccuracies in your information. The details you are being asked to supply may be used to provide you with information about other products and services either from GoldCore or other group companies or to provide services which any member of the group has arranged for you with a third party. If you do not wish to receive such contact, please write to the Marketing Manager GoldCore, 63 Fitzwilliam Square, Dublin 2 marking the envelope 'data protection'

GoldCore Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in