Monday, November 7, 2011

Two Trillion Euro Clawback - Emerging Markets Drain

Recapitalization of European banks could result in a drop in overall lending to emerging markets of over 500 billion euros!  Ouch!

Shrinking the balance sheet and complying with the 9% minimum capital ratios are just reinforcing the negative feedback loop.  Raise capital and reduce risk, sell off assets, cut lending, shrink credit, economies worsen...  rinse.. repeat...

For a global interconnected economy, this could get really bad, really fast.  We're not talking just businesses anymore, we're talking sovereigns and emerging economies.

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