Thanks for some really good sources lately.

As you say, the amount of Interest Rate Swaps derivatives could well be the next ticking time bomb.

This probably tallies with this crisis morphing into a full out currency war.

Note that the Gold price keeps nudging record levels, again, which is further evidence of weakening fiat paper.

Meanwhile, Wednesday will see a German constitutional court giving a ruling on whether Germany is breaking German law and European treaties by helping to bail out Greece, Ireland and Portugal. And Italy, with the world’s third largest public debt (€1.84 trillion), must redeem €14.6bn of debt this week and €62bn by the end of September, the highest ever in a single month. It needs to roll over €170bn by December. (http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8740389/German-endgame-for-EMU-draws-ever-nearer.html ).

The words "shit", "hit" and "fan" spring to mind.

"The 2008 mess (‘Crash 1′) was caused by another derivatives sector – the one for credit default swaps. All up, that sector was never bigger than $55 trillion in size – and at the time of the crash, only about $37 trillion. Even at only 7.8% of the derivatives market, CDSs took down Bear Stearns and Lehman.

Today, the interest-rate derivatives swap sector is worth $342 trillion. It is, by miles, the biggest market in the world.

The total global economy is around $58 trillion. And given that the Global worth of all the bourses everywhere is only $36 trillion, you can see why, if only a small number of bets were dumb, then it’s all over this time around."

http://hat4uk.wordpress.com/2011/02/17/the-banks-v-the-people-decision-time-for-the-west/ .

By way very interesting about this huge outflow of funds to the US Banks but does anyone know what is the exact benefit for the UK and European banks of transferring this money to the US?

If its a currency hedge aren't there easier ways to do this? They can obviously not hide the fact of moving it. I s it somehow protected in the US …surely if it is in the banks subsidiary then in a liquidity crisis or a bankrupcy it can be forced to be returned? And wouldn't moving money out of a bank over here make it even less capitalized so more prone to disaster?
What am I missing here?

I too am tucking into Heinberg's "End of Growth" at the moment. Well written and fast paced. I also enjoyed his earlier book "The Party's Over" after it was referenced in Rob Newman's frighteningly hilarious "History of Oil" (check it out on Youtube if you've never watched it before!)

thanks for all those links. So far I've only read the first one, on the "Slog" blog. The Slog often has good stuff on it.

The others about money flows out of European banks I had not seen. Very interesting. Again, thank you.

It ends thus:

"according to this ECB data, MFIs [i.e. bank and money-market accounts] in the UK have seen by far the largest falls in deposits over the past year and a half in absolute terms. But keep in mind that the UK does not even use the euro. That's a potentially chilling reminder that if Europe's debt crisis worsens and spreads, there's every reason to believe that its effects will be felt well beyond the euro-zone."

For "if", I think we can safely read "when".

Banks 'would not survive sovereign debt devaluations'

A number of European banks would not survive a cut in the value of their sovereign debt investments, the chief executive of Deutsche Bank has warned.

Speaking at a gathering of bank bosses in Frankfurt, Josef Ackermann said he was "stating the obvious".

His comments come as Greece is asking private investors to swap their current Greek bonds for others that pay less interest over a longer term.

This has raised concern that other eurozone nations may do the same.

Mr Ackermann said: "It's stating the obvious that many European banks would not survive having to revalue sovereign debt held on the banking book at market levels.[…]"

http://www.bbc.co.uk/news/business-14786589

And another article from the web:

"Europe's Banking System: The Transatlantic Cash Flow

[…] ECB data seems to indicate that monetary financial institutions (MFIs) in Europe have been moving their deposits out of European banks. Where is that money going?

It looks like much of it is being placed with US banks instead.
[…] the recent rise in deposits with US banks has been dramatic, with an above-trend increase in deposits of approximately $500 billion over the past 6 months. […]
The cash assets (i.e. bank deposits) that foreign banks are keeping in the US banking system has risen sharply over the past 6 months — not coincidentally, by about $500 billion. Meanwhile, domestic US banks have started showing some similar tendency toward accumulating cash, but only to the tune of approximately $150 billion, and only over the past 2 months.

Recall from yesterday's post that MFIs in Europe have drained their bank accounts at European banks by about €700 billion over the past year and half, which at current exchange rates is approximately $1 trillion. It seems that much of that money has recently found its way into the bank accounts that European MFIs keep in US banks. And conversely, it seems likely that the large inflow of cash deposits held at US banks this year is largely from European banks.

Putting it all together yields a compelling story: European banks are shifting their cash assets out of European banks and putting much of them into US banks. (An interesting question is what European MFIs have done with the remaining money they've withdrawn from the European banking system… but that's a story for another day.) This has happened at a significant rate, with a net transatlantic flow from European to US banks that probably totals close to half a trillion dollars in just six months.

If you're wondering exactly who has been the first to lose confidence in the European banking system, look no further. It seems that at the forefront is the European banking system itself."

http://streetlightblog.blogspot.com/2011/09/europes-banking-system-transatlantic.html

Cameron pushing to dilute ICB ring fencing proposals

(Fortunately most of the Telegraph.co.uk commenters can see through the veil – but I doubt this reflects the majority of their print readers)

Quite frankly the big banks can go and take their oversized leverage elsewhere. I don’t want my country’s assets on the line again if they are to blow up.

Not in my name.