CIF collapse: this is going to be a bank-run, not a fun-run

Almost imperceptably, the downfall of Crédit Immobilier de France (CIF) has been and gone just a few days afer Moodys gave it the thumbs-down. Not many folks as yet (as far as I can see) have drawn a parallel between this event and the grisly demise of Northern Rock in the UK. But it is there, nevertheless.

Like Northern Crock, it has a tiny deposit base, and a massive reliance on wholesale markets for the vast majority of its funding. Wholesale costs go up as mid-to-southern Europe gets increasingly liquidity-frozen and….p’doing, down goes CIF. What this goes to show is that there is far more to contagion than just a mere debt-domino connection – although that is massively important. What we see here is lunatic business-models (written in the mad old days of New Paradigm) colliding with the reality of a eurozone rendered catatonic by a three-way impasse.

The longer Berlin holds out against a Draghi splurge, the more likely a bank-run will become. Relatively relaxed traders I spoke to last Tuesday were edgy by Friday. By Tuesday next, they’ll be close to panicky. It’s the third time I’ve posted about this in a week. Somebody needs to take control right now, or we are going to see the mother and father of a collapse. Berlin may have the political upper hand, but the folks up there really do not understand what happens when one or two managers getting the trots morphs into a new 100 metres world record on the scale of the Alaskan Gold Rush.

Draghi gets it, as does Monti. Hollande doesn’t, neither does Rajoy, and even less does Merkel. This could be a horror of a week.

36 thoughts on “CIF collapse: this is going to be a bank-run, not a fun-run

  1. Getting a bit tired of the Eurozone being gang raped by US banking criminals.
    Time to put the Euro on Gold, invoke a new Glass-Steagall European stylee and have done with the criminal US banking scum, their wanky sick petro-dollar propping up their hollowed out zombie US economy.

  2. It is similar to 1974.House price collapse in Spain(hence,insolvent banks),something similar in France,coming,hence Hollande’s ‘volte face’ over CIF,Greece already gone,Italy teetering on the brink,and, lest we forget,the UK in a very similar situation.The end of ‘growth’,an inconvenient truth for politicians,highlights the fact that you cannot finance social welfare payments by government borrowing,without a growing economy..Expect fireworks,shortly.

  3. My money is on next week coming and going without any more drama than we have seen over the last few months. I have to say that it appears to me that everything is going to plan nicely. But, there again, as I have said before, they are greater plans being enacted here.

  4. I agree with kfc – not that I think there is a great conspiracy. Governments just ran up too much debt due to finance fraud enabling politician’s to promise too much to too many.

    Now we have the great deleverage. The man on the street doesn’t know or care to know about how money works, so the politicians just keep on talking down expectations over and over. Hell – look at Greece. Still no dead politicians. You can take France and Italy a long way down that road too before they kick off. You can take the lobotomised Brits all the way down that road and further and they wouldn’t even question it.

    More of the same forever and ever.

  5. December 2010, Philipp Bagus:
    ‘Money printing cannot make society richer; it does not produce more real goods. It has a redistributive effect in favor of those who receive the new money first and to the detriment of those who receive it last. The money injection in a specific part of the economy distorts production. Thus, QE does not bring ease to the economy. To the contrary, QE makes the recession longer and harsher.’
    Anybody mentioned this to Draghi I wonder?

  6. Would it be too cynical that a ‘horror week’ might be just what is needed to encourage the Karlsruhe court to rule in favour of Frau Merkel?
    It’s all starting to look like the ‘market turmoil’ in the run up to TARP.
    I wonder if they’ll be fooled twice…

  7. Merkel doesn’t care about anyone but Merkel. What outcome this week will give Merkel the most satisfaction? My guess is the leaders of Spain, France, Italy and Greece pleading with her. That sets the scene for a bank run if she miscalculates.

  8. Annually recurring social benefit payments should be financed by annually recurring taxation. We should not borrow from the future for this, only for true investments with long term benefits for the UK as a whole. I expect the crook in the Treasury who sold the politicians the idea that they could finance current revenue spending from future growth in the economy thought he was smart, but even Cameron must have realised that he was not by now. In any case he’s probably enjoying a nice state pension by now…

  9. The problem I have with your concept of electorate ignorance is that they are not ignorant of their greatly reduced living standards. Leaving aside the exaggeration due to the failure to account for the large black economy, places like Spain are threatened by a malign combination of real unemployment of perhaps 15% (25% reported) and very low (and sometimes threatened) state benefits. You try living on €400/month! Being a genuine unemployed person in Spain is really tough, and because there is no reason to think things will improve any time soon, there will come a time when such people realise they have little to lose and start to protest, perhaps violently. And there are a lot of them!

  10. Really John? All those who’ve had the chance to prevent this disaster multiple times I’ve eye last 2-4 yrs cannot be expected to grow some courage and intelligence at the last minute. All they are doing now is positioning themselves so that they aren’t the one to take the blame.

    If indeed this week is going to be a big ‘un, then it will be marked by the usual:

    1) market panic
    2) talk, talk, more talk
    3) perhaps an emergency summit will be scheduled to allow the markets to pause their freak out in hope that this time they might fix it
    4) summit that achieves the usual mix of fresh and stale air. Talk, talk and more talk and hope the markets buy it for a few weeks.

    Because thats all they have left, no real weaponry, no real money, no real plan. And do you know what? The market will probably give them a pass, like usual and we’ll meet up back here for some more of the same in a month.

    Draghi and Monti might know what’s coming, but they’re just as powerless to stop it.

  11. Strange you should say that as there are rumours that the US dollar could return to the gold standard. I don’t know about “wanky sick petro-dollar propping up their hollowed out zombie US economy” but the Eurozone is not looking too healthy either and its being propped up more by PR than sound economics.

  12. The plan all along has been to crash the financial markets and end up with a United States of Europe. This will be followed by a North Amercian Union…USA, Canada, Mexico. And then there will be a One World Government under the United Nations, a one world currency, a one world military, a one world religion and a one world ruling banking elite with 97% of the worlds population as debt slaves.

  13. Agree entirely. As is, as was, as will be — it’s just a question of when. This sh1t could drag on for years. Unless it ends on Tuesday. Or Thursday at the latest. Or not.
    Seriously, I wish I knew the actual agenda as it would help when planning next year’s holiday. Any help would be appreciated.

  14. I would also add that everything that revealed that the false flag events of 9/11 and 7/7 would happen are also indicating that there couldl be a false flag terrorist event in London on 9/9 to co-inside with the end of the Olympics.

  15. The new religion will be the one where you bow down and worship the Diamond in the Goats Ass. This is a multicultural type of religion and offends no one apart from the goat.
    Voila,peace on earth and goodwill to all.

  16. @aflatoxin. A chilling read. Just one quote for those who are thinking of clicking the link …. “Open Europe believes intelligence gathered by Indect and other such systems could be used by a little-known body, the EU Joint Situation Centre (SitCen), which it claims is “effectively the beginning of an EU secret service”
    They plan to spy on every poor bugger in Europe, folks. Post here while you still can, and meanwhile develop ways of flying under the radar.

  17. I still think they will fudge it. Give a ruling that is open to interpretation, then Merkel has a free hand. IMHO it is too sensitive an issue for an outright yes or no.
    We shall see soon enough.

  18. You got it in one. The whole problem is excess State spending. Over the last 40 years the State has exceeded its income in 35 of them. It should have run a balanced budget or a surplus in those 35 years and borrowed in the remaining 5. If it had we wouldn’t have this mess.

  19. Global money printing by all central banks working in concert is being punted, and it would not surprise me in the least. Jim Sinclair writing in states: The economic problems are so severe, so international, so global, so entwined, so insoluble and still caused primarily by the greed of 1990 to present finance in the form of OTC derivatives that only coordinated global action can kick this can one more time.

  20. Bagus is the best commentator on the eurozone crisis. a good antidote to the socialst ideas floated around on this blog about those poor victimized southern europeans, and the ever-present proclamations that politicians need to “do Something”

  21. bs, a financial market crash is the best thing that could happen to the people of europe. Deflation means falling prices. You prefer the opposite?

  22. Pingback: CIF collapse: this is going to be a bank-run, not a fun-run [The Slog] « Mktgeist blog

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