For over two years, I have maintained that the German government will be forced to nationalize Deutsche Bank. Recently, talk of nationalization is making the rounds in certain circles within Germany. Authorities are stalling, hoping that the financial system, overall, will “right itself” over time. This is nothing but a Robert Rubin style ‘extend and pretend’ strategy on steroids. When we get closer to Deutsche Bank imploding to the point of risking the trigger of a derivatives market cascade, Germany will announce nationalization plans. I expect to see this announcement when DB shares slip under $9 and are making their way to $5.
Kranzler is spot-on to spotlight what’s at stake, and this implosion could happen faster than the idiotic central banker and policy makers pretending to be in control can afford. While I think Deutsche Bank will be “saved” “fast enough” to temporarily “save” the global Western banking system, the very act of saving the festering boil will prove to enough financial market participants that all the lies and vapor supporting the markets since the 2008 crash are indeed, untenable. Saving Deutsche Bank will not fix the problems of impaired debt in the system, and the whole cycle of extend and pretend will continue, with one major difference: it will be impossible to hide how screwed-up things are. THAT is what takes down the system, because the missing ingredient for a global market crash all these years has been the development of an event that is big enough in magnitude to indicate to all the system is broken, beyond repair. The system’s problems are a heck of a lot bigger than just Deutsche Bank. I think the next market crash is a multi-stage event, and we will see part of it happen this year (which will be re-inflated), but the lion’s share of the crash will be a 2017 story.
Post-2008, “the system” has survived by ultimately creating the lowest interest rate paradigm in world history…not 500 year lows, but lows tantamount to the lowest interest rates in human history. Financial markets are supported by an illusion. This is going to end horribly, regardless of what happens to Deutsche Bank.
I do not subscribe to the notion that Lehman was purposefully imploded, and Kranzler hints at this, as do others. Rather, it’s pretty clear the powers that be let Lehman fail, rather than pushing it towards failure, and the banking interests that were behind the policy makers that decided to let Lehman fail were gravely hurt by their decision. That pain scared policy makers and the banking interests they serve. There is no intention of letting Deutsche Bank implode, and as DB drives to $8 and below, Germany will be more vocal about nationalization. Here’s Kranzler’s outstanding take; he and I differ only on minor details and the end-game sequence. – Eric Dubin
