Oct

4

 Like the German fairy tale Hansel and Gretel, the financial markets often have clues you can follow to safety and profits.

Sometimes though the clues that you intended to use, or thought would be there, are not. The question with DB is not if there will be a Lehman moment because there surely will not be. Rather, the consideration should be of the vicious cycle of bad politics leading to bad economics.

The key questions that should be asked include some of the following: First, to what extent does this weaken Chancellor Merkel's position in front of next year's German elections? Second, what does this mean for ECB chief Draghi and easy money which is wildly unpopular in Germany already? Third, what does this mean for Italian banks?

Surely, if Germany bails out DB, which is a given, how can the Germans ask Italians to play by different rules? Fourth, what does this mean for European banking union? Fifth, how might this influence German growth which has been the locomotive for Europe? Sixth, if Europe can't grow with a weaker Euro, low energy prices, and record low rates what does it take?


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