Thursday, September 22, 2011

A run on BNP, Europe’s Financial Collapse begins in earnest

9/22/2011 Portland, Oregon - Pop in your mints…
While it was a rough day for equity markets everywhere, in light of what is occurring, they (the markets) were amazingly resilient.  A testimony to how fast the monetary spigots at the Central Banks are running.

There are two events that appear to be on a collision course with destiny today (No, neither of them is the NASA space junk hurtling towards the earth).  It feels as if the world is reaching a sort of inflection point in modern history.  Perhaps a great awakening is about to occur.  Will people’s faith in Central Banking finally be broken?

The colliding events are the Palestinian bid for official recognition by the United Nations, scheduled for tomorrow, and the emerging institutional bank run on BNP Paribas.

The Palestinian situation needs no further discussion.  It is clear to most that it is an explosive topic to which the bid for recognition threatens to detonate, much in the way the Israeli Declaration of Independence ignited war in Palestine in 1948.

The Institutional run on BNP Paribas is an event that is occurring as we write and it is unclear how it will play out.  Reggie Middleton at the BoomBustBlog, is chronicling this event in real time.  If you are interested, we highly recommend following the event there.

Real Money is fleeing the Continent!

We have read reports of Lloyds of London, the famous Insurance Marketplace, pulling a great deal of its deposits out of banks on the continent.  We have also read reports of Siemens pulling deposits and parking them directly at the ECB.

Then there was the report of the ECB making an emergency loan of $500 million US Dollars to an unidentified bank (read BNP) with similar loans to other institutions in the cue.  It is clear that the banking crisis in France is dwarfing the ability for the French government to deal with it.

There is no use pointing out the many lessons that society will learn from this, for only one is expedient at the moment.  That lesson is that digital bits on a computer screen or numbers on a bank statement are worthless if the counterparty cannot make good on their commitments.

The run on BNP will intensify the focus on Western Central Banks, which have balance sheets that make BNP, BAC, and all of the other large sinking banks look good by comparison.  This is important because a good part of the world is to some extent a counterparty to the Central Banks.

Need proof?  Open your wallet.  If you have US Dollars or Euros, you are a counterparty to (owed money by) the Federal Reserve or the ECB, whose management is currently buying every worthless paper asset on the planet with leverage that is unimaginable for mere mortals.

Dollar and Euros are about to become extremely hot potatoes, which makes trading them for potatoes, spuds, or anything real, a real good idea.

Let us pray for the peace of Jerusalem, and that tomorrow passes uneventfully on all fronts.
Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

P.S.  For more ideas and commentary please check out The Mint at http://www.davidmint.com/

Key Indicators for September 22, 2011

Gold Price Per Ounce:  $1,736 PERMANENT UNCERTAINTY