Okay this is scary stuff...

[dkf]

http://www.dailykos.com/storyonly/2009/2/21/142822/939/516/700199

Europe's entire banking system on the edge of the abyss
by gjohnsit
Sat Feb 21, 2009 at 11:53:56 AM PST

This headline is scary enough.

European bank bail-out could push EU into crisis

The article talks in vague terms about "secret reports".
The problem is that the article has been changed. A Google search will reveal it's original headline which is much scarier.

European banks may need £16.3 trillion bail-out, EC document warns.

The Telegraph changed more than the headline. They had also removed two paragraphs from the original news article. Fortunately other blogs had captured those missing paragraphs.

European Commission officials have estimated that impaired assets may amount to 44pc of EU bank balance sheets. The Commission estimates that so-called financial instruments in the trading book total £12.3 trillion (13.7 trillion euros), equivalent to about 33pc of EU bank balance sheets.

In addition, so-called 'available for sale instruments' worth £4trillion (4.5 trillion euros), or 11pc of balance sheets, are also added by the Commission to arrive at the headline figure of £16.3 trillion.

Suddenly the article isn't vague anymore.
£16.3 trillion is equal to $25 Trillion. Where can Europe find $25 Trillion in a hurry? Only one place - the European Central Bank printing presses.

[dixiegrrrrl]

1. Same as our banks.

The secret we are bankrupt is now a loud whisper.
Exactly the same thing is applicable ehre.
The debt is 30 x more than any real income we have even had. so to speak.

[dkf]

2. I hadn't heard as large a number as $25 trillion for the US though.

That is a crazy number.

I wonder if the poster's analysis is wrong.

[alittlelark]

3. Look into derivatives.....

but not tonight... go to sleep...nightmares are for the waking hours.

[leveymg]

4. Outlaw naked trades in derivatives. Invalidate all swaps contracts. Nationalize all banks.

That's where we're going. It will be a different world, but it's a better one than bankrupting the public sector to try -- futilely - to prop up the existing global financial industry and its tens of trillions of dollars in imaginary trading instruments.

[sixmile]

6. Well said

Let all derivatives expire worthless. They are a small percentage of the world's biggest casino. Sidebets by bookies for loansharks, organized crime and speculators. Enough corporate welfare.
Let the market decide. That's their mantra, right?
If your shit is worth nothing so be it. No handouts.

[malaise]

8. What if bankrupting the public sector was their only goal?

Seriously. I'd love to drag Friedman from his grave and kill him again.
This happens when irresponsible men are allowed to rule at the barrel of a gun. Fuck Reagan, Thatcher, Bush, the IMF - they have raped this planet and the worst is yet to come.

[Doremus]

9. Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen

From 2008 article:

http://www.marketwatch.com/news/story/derivatives-new-ticking-time-bomb/story.aspx?guid=%7BB9E54A5D-4796-4D0D-AC9E-D9124B59D436%7D

To grasp how significant this five-fold bubble increase is, let's put that $516 trillion in the context of some other domestic and international monetary data:

*
U.S. annual gross domestic product is about $15 trillion
*
U.S. money supply is also about $15 trillion
*
Current proposed U.S. federal budget is $3 trillion
*
U.S. government's maximum legal debt is $9 trillion
*
U.S. mutual fund companies manage about $12 trillion
*
World's GDPs for all nations is approximately $50 trillion
*
Unfunded Social Security and Medicare benefits $50 trillion to $65 trillion
*
Total value of the world's real estate is estimated at about $75 trillion
*
Total value of world's stock and bond markets is more than $100 trillion
*
BIS valuation of world's derivatives back in 2002 was about $100 trillion
*
BIS 2007 valuation of the world's derivatives is now a whopping $516 trillion

Moreover, the folks at BIS tell me their estimate of $516 trillion only includes "transactions in which a major private dealer (bank) is involved on at least one side of the transaction," but doesn't include private deals between two "non-reporting entities." They did, however, add that their reporting central banks estimate that the coverage of the survey is around 95% on average.

[REACTIVATED IN CT]

5. I heard on Wash Journal the ot her morning that the Canadian

system is sound. They invested conservatively (not a bad word in this context) and also had a lot of that "R" word - regulation. Hopefully Obama's ecenomics team is studying their system

[dkf]

7. I'm still confused as to why the European banks are so screwed up.

I can't figure out if the collapsing assets were from the US or if their own domestic real estate markets are mucked up.

[sixmile]

10. They SAY it's our toxic debt but I suspect it's much worse

The layers of the economic onion are being peeled away for all to see, and we are at the threshold of a new global socioeconomic era.