Monday, December 6, 2010

Pan-European Bank Run Tomorrow?

I wonder if they are still serious about doing it.

The simple plan - to withdraw money from your bank account - was hatched first in France, then spread to Germany, the Netherlands, UK, and Greece.

If anything, it will be no more than a symbolic gesture, a middle finger to the European banks who are being bailed out by the European taxpayers (and the US and Japan and the rest of the world, via the IMF). But is there any chance of actually causing bank runs in Europe?

Well, it might. Why? Because the European banks remain much more leveraged than the US banks. 1 euro taken out of the deposit (liability) may impact the banks' assets much more.

Here are two charts that shows the potential vulnerability of the European banks vis a vis the US banks. The first one is from Zero Hedge's November 1st article on the topic. The second one is from Wall Street Journal's July 15 article. They are both pretty much self-explanatory.

(Just a reminder: the GDP of the US and the GDP of EU are about the same, $14 trillion. Japan's GDP is about $5 trillion.)


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