The European banks are so fragile that any systemic shock is likely to have an outsized effect.

Bloomberg estimates Brexit cost the banks $165 billion.

In normal times that is survivable, but these are not normal times. In our ridiculously leveraged system a loss of that magnitude is compounded at least 20x, and with the weakest banks already on Central Bank life support, a hit like that is bound to be fatal to at least some of them.

Then of course there is the potential for a cascade of bank defaults that takes down the whole rotten financial system.

The next phase is just beginning.

Is this a moment of clarity or a sign of my ignorance? It suddenly occurred to me a possible reason the ECB, German, and French banks haven't been willing to be reasonable in dealing with the financial crises in Greece, Italy, Cypress, and Spain is because they are insolvent themselves and have to continue running the scam or it all collapses. A ponzi scheme only crashes when you don't have the cash to keep paying the suckers or the suckers catch on and pull their assets. I don't know if this is an alternative idea or part of the larger scam but are they hoovering up as many liquid assets and real property as possible in an anticipation of a collapse. The only way to survive a financial system crash is to have real assets and hard currency to take advantage of the chaos. It seems to me the banksters know they're fucked and are looking for a way to remain on top and not simply survive. Any thoughts?

had a good discussion with Noam Chomsky a couple months ago about structural and political defects with the EU. It doesn't directly deal with the issue of Italy Banks, but the broader context is helpful for understanding why these problems continue to persist and are likely to be unresolved anytime soon.

https://www.youtube.com/watch?v=szIGZVrSAyc

But Renzi is fighting back;

A Furious Italian Prime Minister Slams Deutsche Bank As Europe's Most Insolvent Bank

Fast forward to today when Europe is once again not fine, only this time one can't blame Europe's problems on Greece (instead the same "experts" are trying to blame everything in Brexit), when in a surprising admission of reality, none other than Italy's prime minister Matteo Renzi, "went there" and slammed Deutsche Bank as the true "derivative problem" facing Europe.

To be sure, Renzi has his own problems, chief among which is how to pass a banking bail out of his insolvent banks without implementing the dreaded bail in mechanism unveiled in 2016 as the only permitted European bank resolution mechanism. Alas, in his push to bail out rather than bail in Italian banks, Renzi has faced stiff resistance from the Germans, namely Angela Merkel and Wolfgang Schauble who have both strongly opined against this kind of backtracking. Just today, Wolfgang Schaeuble, speaking at a news conference in Berlin (just hours after Italy hinted once again at an imminent bailout of Monte Paschi), said his Italian counterpart Pier Carlo Padoan told him that Italy intends to stick to the banking-union rules. Perhaps not.

So it is not surprising that when faced with stiff resistance from the Germans, Renzi decided to call a spade a spade when, as Reuters reports, he said that the difficulties facing Italian banks over their bad loans are miniscule by comparison with the problems some European banks face over their derivatives.

I think I have this right, and am willing to be corrected. The Germans more or less "run" the EU, and their insistence on following "rules" in general, coupled with the dopey EU deficit-limit rules (I think the target is always 2% GDP) limits the Italians from creating a "bad bank" and putting Monte dei Paschi's non-performing loans into it. Italy would go over their debt limit. Such a move would make Monte dei Paschi "whole", stockholders (whose shares are now worth little would be wiped out, a new Board would be set, and the new "good bank" is sold. Meanwhile, the government capitalizes and "unwinds" the "bad bank". That's what would happen in the US, most likely, but EU laws forbid it, except in extremely dire cases, which this is, but nobody in the EU will admit that their "bail-in" law is idiotic. The Bail-in Law, which I think they did in Cyprus, is that DEPOSITORS in the bank give up their money to pay bond-holders...in return, they get "stock" in their bank, and how they price that I do not know. It's crazy.

There are a bunch of issues with the EU governance, but the economic problem is the lack of the ability of nations in Europe to manage their own economies, because they all use the EURO. The problem is a Greek EURO and an Italian EURO versus a German EURO is that, they have the same value, but shouldn't. Countries have given up currency sovereignty, so that can't "devalue" their EURO against other countries. That's a fundamental role of nation-states, which was given up in the currency "Union". That could be OK, if there was a European version of a "Central Bank" that lent freely, with penalty interest rates, in times of crisis--but Europe doesn't have that. They have the Germans in charge, and Germans think that austerity for everybody who owes money to bond-holders is the way to go. As the biggest exporter, everybody owes Germany money, but Germany can't be a net exporter without extending credit. And Germany doesn't. And they won't even look at Deutche Bank's

Modern Monetary Theory says that countries that print their own currencies cannot go broke, but yes, they can indeed make really bad inflation. Interest rates are now floating around zero...negative rates in some places, so inflation fears should be nominal. More important, if the EU is busting up. Brexit happened. Austria is re-doing it's election and the EU separatist party almost won, and might win in a re-election. Italy's separatist Five Star Party will (depending on this banking situation) win if Renzi can't fix the problem. Marie le Pen in France will likely improve her position in the next election, given France's immigration situation. Etc. It's a mess.

The issues to my mind are these: It takes 5-8 years to convert a currency. That's what it took everybody to get their ATM's and banking hardware and software to convert to the EURO. It would take the same amount of time, perhaps more, to change back to sovereign currencies. The easier solution, to my mind, is 1) to create a European version of the Treasury/Federal Reserve as a proper "lender of last resort"; 2) Relax the debt restrictions on European nations, to allow for more deficit spending as a Keynsian response to the situations in each country; 3) Find some kind of mechanism [I'm waving my hands here, because I have no idea what it would be] to somehow allow the value of the Euro to "float", based on source of origin--and the obvious answer is this won't work...the Euro didn't work...a floating currency for 8-10 years so Italy has Liras and Greece has Drachmas, and no matter what card you put into the ATM, the exchange rate works right.

Sorry for the long rant, but the Deutchebank derivative-contagion thing puts me to mind of 2008. It's why the Italians are worried. The financial Masters really don't know when a fuse is getting lit, until it's WAY too late to put it out.

Stop tying out economies to the health of private banks and claw back all inappropriate profits to make these loans healthy

YES, REDISTRIBUTE THE WELTH FROM THE TOP TO THE BOTTOM, TRICKLE UP

An article on The Kyifvpost (http://www.kyivpost.com/) that due to the rapcious theft of Ukrainian oligarchs, there are something like only 20 functioning banks in the country.