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.