The credit markets look to be pointing toward an increasing chance of a Lehman-style crisis.
The cost of insuring against a default on some of the bonds issued by Deutsche Bank (DB) is exploding. Various writers are pointing to charts explaining the Credit Default Swap, which is the cost of insurance bank debt.The cost of credit-default-swap protection is rapidly rising.
These so-called “CDS” contracts act like insurance against bond defaults. The cost of that insurance surges when investors grow increasingly worried about the ability of a government or corporation to make good on its financial obligations.
These are the kinds of moves we’ve only seen twice in the last decade — during the 2007-09 credit crisis and the PIIGS (Portugal, Ireland, Italy, Greece, Spain) debt crisis in 2011-12.
We cannot look only at Deutsche Bank. CDS costs are jumping across the board here in the U.S., in Asia and elsewhere in Europe. It’s just a question of degree. Investment-grade credit spreads are now also widening notably, following in the footsteps of the junk-bond market. Spreads there began going badly several months ago.
Japanese stocks also plunged more than 5% overnight, the worst decline since June 2013. Consequently, so many investors are piling into government bonds for safety that more than $7 trillion in sovereign securities are now trading at negative yields.
Last but not least: Things are getting so bad that Deutsche Bank issued an historic statement late yesterday saying it can make certain debt payments in the coming two years. That was followed up by a memo to employees today in which co-CEO John Cryan claimed the bank was “rock-solid.” The mere fact the company felt compelled to reassure customers and employees, tells you they are teetering on the icy tight rope!
Germany has been a troubled economy for some long time. The addition of “Syrian Refugees” is making matters much worse. Could their banking system go into a crash mode? Yes, possibly, and if it does, the rest of Europe is likely to follow!The entire world could be on the brink of a world wide economic disaster.
I am doing more research on this subject and will place articles related to the potential world economic disaster at this blog over the next several days.
My friend, there is no substitute for money. REAL MONEY is gold and silver. Promises to pay on paper are worth nothing and portend only potential disaster to the world and you personally.
My new website will be appearing soon and will help you contact coin dealers who are known to be trustworthy, so stay with me and keep reading.