Is the financial system of Europe on the verge of a meltdown? I have always maintained that the next wave of the economic crisis would begin in Europe, and right now the situation in Europe is unraveling at a frightening pace. On Monday, European stocks had their worst day in over six months, and over the past four days we have seen the EUR/USD decline by the most that it has in nearly seven months. Meanwhile, scandals are erupting all over the continent. A political scandal in Spain, a derivatives scandal in Italy and banking scandals all over the eurozone are seriously shaking confidence in the system. If things move much farther in a negative direction, we could be facing a full-blown financial crisis in Europe very rapidly. So watch the financial markets in Europe very carefully. Yes, most Americans tend to ignore Europe because they are convinced that the U.S. is “the center of the universe”, but the truth is that Europe actually has a bigger population than we do, they have a bigger economy then we do, and they have a much larger banking system than we do. The global financial system is more integrated today than it ever has been before, and if there is a major stock market crash in Europe it is going to deeply affect the United States and the rest of the globe as well. So pay close attention to what is going on in Europe, because events over there could spark a chain reaction that would have very serious implications for every man, woman and child on the planet…
http://theeconomiccollapseblog.com/archives/watch-the-financial-markets-in-europe
The Fed is certainly trying to plug the holes in the dike:
Last weekend Zero Hedge once again broke the news that just like back in June 2011, when as part of the launch of QE2 we demonstrated that all the incremental cash resulting form the $600 billion surge in the Fed’s excess reserves, had gone not to domestically-chartered US banks, but to subsidiaries of foreign banks operating on US soil. To be sure, various other secondary outlets picked up on the story without proper attribution, most notably the WSJ, which cited a Stone McCarthy report adding the caveat that “interpreting the data released by the Federal Reserve is a bit challenging” and also adding the usual incorrect attempts at interpretation for why this is happening. To the contrary: interpreting the data is quite simple, which is why we made an explicit prediction: ‘We urge readers to check the weekly status of the H.8 when it comes out every Friday night, and specifically line item 25 on page 18, as we have a sinking feeling that as the Fed creates $85 billion in reserves every month… it will do just one thing: hand the cash right over straight to still hopelessly insolvent European banks.” So with Friday having come and gone, we did just the check we suggested. As the chart below shows, we were right.
Another way of showing what has happened: in the past 4 weeks, the Fed has injected a record $237 billion of cash into foreign banks with access to the Fed’s excess reserves: a number greater than both the cash influx surge seen after the Lehman collapse, and faster and more acute than the massive build up of cash during the spring and summer of 2011 when all the Fed’s brand new QE2 cash was once again, solely used to overfund European bank cash…
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