Is Deutsche Bank the Key Log?
It’s hard to know what will prove to be the key log in the log jam.
That’s the log that, once moved, sets the whole destructive torrent of all the other logs loose to destroy everything downstream in their path.
It could be Germany’s Deutsche Bank.
In the Panic of 2008, Bear Stearns went first. The Fed threw $29 billion into the mess to get JPMorgan to take over the Bad News Bear.
A lot of good that did. Soon other logs were rolling: IndyMac, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac.
It was the biggest bust since the Great Depression.
Deutsche Bank is the world’s 15th largest bank. It is slashing operations everywhere and cutting 18,000 jobs.
While Deutsche Bank is flailing about, the Bank of International Settlements in Switzerland, sort of a central bank for the world’s central banks, is warning that the corporate debt market is growing unstable. From a story in the Guardian:
“The Basel-based watchdog said a surge in the sale of collateralized loan obligations (CLOs), which are collections of low-grade corporate debts packaged for sale to investors, was reminiscent of the steep rise in their forerunner – collateralized debt obligations – which ‘amplified the sub-prime crisis’.”
It is eerily like the last time. Gold was about $600 an ounce at the beginning of 2007. Then banks started failing and the mortgage crisis set gold running to $1900 in 2011.
Deutsche Bank’s problems are just one sign that “the financial system is in trouble,” says Jim Rogers.
Deutsche Bank could be the key log in the log jam. But there are others major European banks that are going to have to confront similar restructuring.
It’s best to just get out of the way of a crumbling financial system. It’s best to move into gold now.