Deutsche Bank Keeps Wobbling

Melbourne is famous for having unpredictable weather. People say it can have four seasons in one day.

Earlier today, the sun was shining. Now, the southern winds have picked up, bringing dark heavy clouds. The sun is gone. The air feels dense. And it smells of rain.

A storm is coming.

Things are getting tough in Europe. The Eurozone is suffering from low growth, low rates and high unemployment.

Britain is leaving. Italy is at a crossroads; there’s an impending referendum, and Italian banks have US$400 billion of non-performing loans. Meanwhile, Spain has not had a government in nine months, and is yet to recover from the global financial crisis in 2008. France has been hit with a string of terrorist attacks. And there is the refugee crisis.

And in Germany, the strongest EU economy, Germans have stopped using their banks.

According to the Wall Street Journal, German’s have been stashing away cash at their homes.

It doesn’t pay to keep money in the bank, and on top of that you’re being taxed on it,’ said pensioner Uwe Wiese to the journal.

They are following the lead from Japan, which has been suffering from low interest rates. In fact, Japan recently announced that they will need to print 1.23 billion yen due to people hoarding money at home.

In Germany, constant negative interest rates have forced banks to look for revenues elsewhere. Some of them are now even charging fees to hold deposits.

The thought of having to pay fees on deposits has turned Germans away. And with low inflation rates, they would rather stash the cash at home.

The truth is that German banks are struggling. And Deutsche Bank, Germany’s symbol of strength, is in crisis.

It has been in trouble since 2015, with losses of €6 billion. Both the IMF and the Federal Reserve have given it bad grades, considering it as the riskiest financial institution in the world.

The bank’s shares have been steadily falling, as you can see in the below graph.  Especially after having to pay US$14.69 billion to settle legal disputes since 2012 for past wrongdoings.

The bank is suffering from low confidence from its investors, low market gains, and sinking profits.

And now its shares are trading at the same levels as in the 1980s.

 Deutsche Bank Germany

Source: Bloomberg

After the IMF’s announcement, the Deutsche Bank announced a large restructuring to reduce costs. It cancelled dividends for 2015 and 2016, while cutting jobs and closing branches.

Meanwhile, Deutsche Bank has called for more fusion between banks. They believe there are too many banks in Germany, and in Europe. So they want to cut the competition.

And the bank has criticised the EU’s monetary policy. It’s calling for more government fiscal spending and helicopter money.

Yes…that’s exactly what they need — to get into more debt, increasing the risk of rising inflation.

Europe has only timidly recovered from the global financial crisis of 2008. But if the German giant keeps wobbling, we may be witnessing the start of another European crisis.


Selva Freigedo,
For Markets and Money

Markets and Money’s Vern Gowdie believes we’re already at the beginning of the next major crisis.

Vern is the Founder of The Gowdie Letter and Gowdie Family Wealth advisory services. As one of Australia’s top financial planners, Vern says the coming crisis is already in motion.

Australia has gone through two credit bubbles in its history. The third, and latest, has built up over the past 65 years. When it pops, the impact will leave a lasting mark. One that makes the 2008 financial crisis look like child’s play.

The fallout of this crash could damage your wealth. But you can safeguard your wealth from the worst effects of the coming crisis, provided you act now.

Vern will show you how to do this, and more, in his latest report, ‘Global Financial Crisis 2016: 3 Crisis Scenarios, and How They’ll Impact Australia’. To get your free copy today, click here.

Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.

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