The European Central Bank Is Insolvent

Euro rescue is a case of the blind leading the blind, or rather the insolvent bailing out the insolvent.  Never mind George Osborne offering to bail out Ireland's banks, when the UK is itself heavily into fiscal deficit. Look at the ECB which purports to being able and willing to bail out Ireland, Portugal, Spain and Greece, as the need arises.


As one commentator pointed out yesterday, the ECB is itself insolvent on any rational assessment.  Open Europe -


Peter Jungen, who is the President of SME Union, the pro business wing of the European People's Party (EPP), highlighted at an EPP debate that the ECB is more leveraged than the average hedge fund. He said the ECB is leveraged 21 times, and the Eurosystem 24 times, while the average hedge fund is only leveraged three to four times. He added, "A fall in assets of 4.2% would wipe out the reserves of the ECB balance sheet, which begs the question: who will then bail out the ECB?" He further said that if the ECB applied mark-to-market accounting, it would already be insolvent.


Mark to market means valuing assets at what they are worth today.  The latest banking rules enables banks to make an estimate of what their assets might be worth at some point in the future, and valuing them at that.  The whole of Europe's banking system is valued, based on dreams of property prices one day recovering to boomtime levels.  The Irish rescue proposed today in Dublin is a fantasy rescue, merely delaying the inevitable.  If even the ECB is insolvent, what chance has any other bank that depends on them for their future solvency requirements.  The whole bail-out game is tantamount to farce.  When push comes to shove, there's no money there.  


EWI writes -  

Eur-WOE-zone: The European Tinderbox Is Burning
"Iceland isn't Dubai." "Greece isn't Iceland." "Ireland isn't Greece." "The Eurozone isn't Ireland." Well, now it seems that it might be.