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Strategies & Market Trends : The Financial Collapse of 2001 Unwinding
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To: elmatador who wrote (944)8/11/2018 9:56:32 AM
From: robert b furman  Read Replies (3) of 13801
 
Hi El,

I'm not sure what will happen to the ECB and the Turkish Bonds that European banks no doubt have been holding.

There are some huge paper losses on those bonds. European banks were years late in writing off nonperforming loans, if those bonds default, they'll lose their capital again or the ECB will buy the junk to cover up the continued loss of capital.

That's just the bonds.

With the drop of the lira - inflation is running around 15%. in Turkey. A smart move would have been selling an interest rate credit derivative.

I looked into that back when I had my dealership. They sell them in 5 year increments with a 3 year get out early clause allowing an even lower rate .

If one would have sold a credit derivative they would have locked in a low rate and the bank would be paying a much higher rate to buy down the agreed upon rate.

That means to the degree that has occurred, - the bank is bleeding capital monthly.

Not sure how many banks, but I have read that Deutsche Bank is huge in those.

There is a definite possibility of the need for a bank collapse and if it is not handled quickly with finding a buyer, there is a possibility of it becoming systemic.

I'm not sure on this but it is worrisome for the Euro and the ECB.

Bob
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