Will Deutsche Bank Collapse The Global Market?
- Will Deutsche Bank Collapse The Global Market?
by Clif Droke, Gold Strategies Review, http://www.goldseek.com/
The past year has seen its fair share of worries. From the China slowdown to the Brexit, successive waves of overseas fear have rolled onto our shores since 2015, yet none of them were the Tsunamis the bears had predicted.
The latest foreign fear concerns the possibility for a global credit crisis led by the collapse of a major international bank. A simplified summary of this scenario goes something like this: Deutsche Bank is on the brink of bankruptcy and its insolvency could spark a systemic European banking crash. This in its turn could send shockwaves throughout the global financial system, resulting in widespread economic turmoil on par with the previous worldwide crisis.
Commentators who favor this outlook tend to illustrate their dire predictions with a graph of Deutsche Bank’s stock performance since last year. It certainly adds a spark of credence to their argument based solely on the depth of the stock’s plunge.
Could a Deutsche Bank collapse serve as the catalyst for a 2008-type global credit storm? When analyzing this question one must be very careful from making dogmatic statements since no one (especially an outsider to the international banking industry) can possibly know all the variables involved. There are, however, some guidelines that can help us understand the position of the broad market vis-à-vis the effects of an ailing global institution. These guidelines should allow us to at least handicap the odds of a global financial meltdown.
One important guideline is the underlying strength and internal health of the financial market, notably the U.S. equity market. In the months prior to the 2008 credit crash the U.S. stock market was exceedingly weak as evidenced by the sustained decline in NYSE internal momentum. In fact, this is what the longer-term internal momentum indicator for the NYSE broad market looked like just prior to the 2008 collapse.
No comments yet.