The Italian banking system is a “leaning tower” that truly could completely collapse at literally any moment. And as Italy’s banks begin to go down like dominoes, it is going to set off financial panic all over Europe unlike anything we have ever seen before. I wrote about the troubles in Italy back in January, but since that time the crisis has escalated. At this point, Italian banking stocks have declined a whopping 28 percent since the beginning of 2016, and when you look at some of the biggest Italian banks the numbers become even more frightening. On Monday, shares of Monte dei Paschi were down 4.7 percent, and they have now plummeted 56 percent since the start of the year. Shares of Carige were down 8 percent, and they have now plunged a total of 58 percent since the start of the year. This is what a financial crisis looks like, and just like we are seeing in South America, the problems in Italy appear to be significantly accelerating.
So what makes Italy so important?
Well, we all saw how difficult it was for the rest of Europe to come up with a plan to rescue Greece. But Greece is relatively small – they only have the 44th largest economy in the world.
The Italian economy is far larger. Italy has the 8th largest economy in the world, and their government debt to GDP ratio is currently sitting at about 132 percent.
There is no way that Europe has the resources or the ability to handle a full meltdown of the Italian financial system. Unfortunately, that is precisely what is happening. Italian banks are absolutely drowning in non-performing loans, and as Jeffrey Moore has noted, this potentially represents “the greatest threat to the world’s already burdened financial system”…
Shares of Italy’s largest financial institutions have plummeted in the opening months of 2016 as piles of bad debt on their balance sheets become too high to ignore. Amid all of the risks facing EU members in 2016, the risk of contagion from Italy’s troubled banks poses the greatest threat to the world’s already burdened financial system.
At the core of the issue is the concerning level of Non-Performing Loans (NPL’s) on banks’ books, with estimates ranging from 17% to 21% of total lending. This amounts to approximately €200 billion of NPL’s, or 12% of Italy’s GDP. Moreover, in some cases, bad loans make up an alarming 30% of individual banks’ balance sheets.
Things have already gotten so bad that the European Central Bank is now monitoring liquidity levels at Monte dei Paschi and Carige on a daily basis. The following comes from Reuters…
A run on the big Italian banks has already begun. Italians have already been quietly pulling billions of euros out of the banking system, and if these banks continue to crumble this “stealth run” could quickly become a stampede.
And of course panic in Italy would quickly spread to other financially troubled members of the eurozone such as Spain, Portugal, Greece and France. Here is some additional analysis from Jeffrey Moore…
A deteriorating financial crisis in Italy could risk repercussions across the EU exponentially greater than those spurred by Greece. The ripple effects of market turmoil and the potential for dangerous precedents being set by EU authorities in panicked response to that turmoil, could ignite yet more latent financial vulnerabilities in fragile EU members such as Spain and Portugal.
A senior IDF officer told a Saudi newspaper on Monday that "the IDF could put Lebanon back 300 years and in parallel conquer the Gaza Strip and destroy all of its infrastructure." The officer told journalist Majdi Halbi of the Elaph news site that despite the IDF capability, the army is subject to the political echelon that in the officer's estimation will not order such action.
Regarding Hezbollah leader Hassan Nasrallah's threat to target the ammonia plant in Haifa, the officer said Israel was prepared for such an attack and was aware that its strategic infrastructure could be cut off during a confrontation with the militant Shi'ite organization.
The officer revealed that Israel sent messages to Hezbollah, via a third party country, warning it to think twice before attacking Israel and that it would regret the action.
"Just like what happened during the Second Lebanon War in 2006," he added.
The officer said it was possible that Hezbollah was digging attack tunnels on the northern border with Israel, and that Hezbollah was expert in using tunnels in populated civilian areas during war but he didn't expand further on the topic.
"Just like what happened during the Second Lebanon War in 2006," he added.
The officer said it was possible that Hezbollah was digging attack tunnels on the northern border with Israel, and that Hezbollah was expert in using tunnels in populated civilian areas during war but he didn't expand further on the topic.
On Gaza, the senior officer said it is a question of "when and not if" regarding the next military confrontation with the coastal enclave, adding that "such a clash could happen sooner rather than later due to the fact that Hamas's situation is deteriorating."
"We estimate that there are attack tunnels leading from the Gaza Strip into Israel but we do not have the ability to prevent all of them with 100 percent success. We are prepared for a confrontation that will bring about great destruction, but we hope that we will not get to this situation," he said.
If you live in the Pacific Northwest, you have probably already heard of the Cascadia Subduction Zone. It is where the Juan de Fuca plate meets the North American plate, and it stretches approximately 700 miles from northern Vancouver Island all the way down to northern California. This subduction zone is capable of producing far more powerful earthquakes than the much more famous San Andreas fault in southern California, and scientists tell us that it is only a matter of time before another continent-killing earthquake hits this area. And when it does hit, it will be far worse than any other natural disaster that the United States has ever seen up to this point.
According to CNN, “the largest earthquake in the continental United States” took place along the Cascadia Subduction Zone on January 26th, 1700, and one of the reasons why it is considered to be far more dangerous than other west coast faults is because it is also capable of producing massive tsunamis…
The Cascadia can deliver a quake that’s many times stronger — plus a tsunami.
“Cascadia can make an earthquake almost 30 times more energetic than the San Andreas to start with, and then it generates a tsunami at the same time, which the side-by-side motion of the San Andreas can’t do,” said Chris Goldfinger, a professor of geophysics at Oregon State University.
The Cascadia is capable of delivering a 9.0-magnitude quake — an awesome show of force by Mother Nature.
So what would that look like?
What would a 9.0-magnitude quake that also produced a huge tsunami do to the highly populated northwest coast?
According to an article in the New Yorker, the head of the FEMA division that oversees Oregon, Washington, Idaho and Alaska says that “everything west of Interstate 5 will be toast”…
If the entire zone gives way at once, an event that seismologists call a full-margin rupture, the magnitude will be somewhere between 8.7 and 9.2. That’s the very big one.
…By the time the shaking has ceased and the tsunami has receded, the region will be unrecognizable. Kenneth Murphy, who directs FEMA’s Region X, the division responsible for Oregon, Washington, Idaho, and Alaska, says, “Our operating assumption is that everything west of Interstate 5 will be toast.”
In the Pacific Northwest, everything west of Interstate 5 covers some hundred and forty thousand square miles, including Seattle, Tacoma, Portland, Eugene, Salem (the capital city of Oregon), Olympia (the capital of Washington), and some seven million people.
Like I said earlier, it would be far worse than any natural disaster that we have ever experienced in the history of the United States up until now.
And it could happen at literally any moment. In fact, many scientists believe that we are way overdue for a continent-altering earthquake along the Cascadia Subduction Zone. Tension has been building up there for a very long time, and at some point that tension will be released.
A recent piece by Adam Rothstein gives us an idea of what the first few moments of such a quake might look like in the city of Portland, Oregon…
No comments:
Post a Comment