Europe Banking Crash cooking

The Holy Spirit has fled the accursed European banking system, a harbinger of the coming crash.  The fall of the BES can mean chain effects in France, and in big players like Fidelity financial group.

Banco Espirito Santo (BES), the ca. $100 billion-assets, 150-year-old commercial bank of the Group, was nationalized Sunday by Portugal's government, which belied everything Portugal had said about BES for the past month. BES' realized losses, some 5 billion euros and growing, were put into a "bad bank" and assumed by the government, and those losses will keep growing. So far they took about 5 billion euros of the government's bail-out fund. The fiction that this was a "banking sector-financed fund" was maintained when the government lied outright that the bailout "cost it nothing". The banking sector premiums had put almost nothing in the resolution fund, so the government had to "lend" it 5 billion euros. This situation is true Europe-wide.

Now the contagion: a $1 billion loss for shareholder Credit Agricole France, pending more from its "partnership" with the already- bankrupt BES Group; $1.5 billion loss for Barriere, Inc., Brazil; $1 billion loss for the Blackstone Group, etc. The government now claims that its bailout has spared BES depositors any confiscation, and only junior creditors will be "bailed in". But since BES was selling "Group financial products" to its depositors at branches, they will be among the junior creditors bailed in. And — surprise! — this was declared NOT a credit event, so the junior creditors lose all CDS payouts!

A study by Sinclair & Co. Consultants released Aug. 1 says that bad debts in Eurozone banks (i.e. not including British) increased 20% from May 2013 (the last stress tests) to May 2014; they are now estimated at 2 trillion euros or $2.7 trillion in "value". Meanwhile lending by those banks fell by 2.8% in the same year, with lending to households falling by 4%, and to businesses by 2.1%.

While China and the BRICS add credit and productivity to the world economy, the trans-Atlantic financial system subtracts them.

In a final irony, Argentina's supposedly defaulted ("Griefalted") 30-year 2033 bonds were selling at 91 cents on the dollar Monday, while BES' supposedly bailed out, UN-defaulted junior bonds were selling at 21 cents/dollar.