08
Jun
2015

Deutsche Bank CEOs “Shown Door” – World’s Largest Holder of Derivatives In Trouble?

– Deutsche co-CEOs announce “resignation” nine months before their contracts expire
– Only two weeks ago, CEO Anshu Jain was given more power to reorganise the bank
– Deutsche have been engaged in money laundering, tax evasion, derivative and manipulation scandals
– Deutsche is world’s largest  holder of financial weapons of mass destruction (FWMD)
– Deutsche Bank’s derivatives position almost 15 times as large as Germany’s GDP
– Announcement follows Greek failure to pay IMF on Friday and growing financial risk

goldcore_chart1_08-06-15
The joint CEO’s of Germany’s largest bank, Deutsche Bank, the twelfth largest bank globally in terms of assets,  unexpectedly announced their resignation over the weekend. Anshu Jain will resign at the end of this month, almost two years ahead of schedule while Juergan Fitschen will stay on until May of next year.

It is believed they resigned but some media reported that the CEOs heads had “rolled”, they were “shown the door” and Reuters reporting that Deutsche had “purged its leadership.”

The announcement followed what Deutsche Bank described as “an extraordinary meeting” over the weekend. It is particularly surprising given that Jain had been granted extra powers at the bank only two weeks ago to reorganise the scandal plagued lender.

In the past year Deutsche, like many international banks, have been found to have been engaged in a slew of corrupt practices from manipulation of interest rates, for which the firm was fined $2.5 billion in April, to tax evasion and money laundering to “mis-selling” of derivatives.

Deutsche Bank’s derivatives position is truly enormous. It was recently estimated to be around $54 trillion. Germany’s GDP, the fourth largest in the world, was a mere $3.64 trillion in 2015. Were Deutsche Bank caught off-side in its derivatives positions there is not a government or institution on earth that could bail it out and it could lead to contagion in the German financial system and indeed in the global financial system.

The contagion from such an event would be devastating. It is for this reason that Warren Buffet described derivatives as WMD or “financial weapons of mass destruction.”

It is unnerving that the shock resignation should follow an “extraordinary meeting” over the weekend following the failure of Greece to meet its scheduled payment to the IMF on Friday.

This does not count as a Greek default but it increases the risk of a default on the amalgamated 1.5 billion euros that now must be paid by the end of June. A default and the triggering of credit default losses would cause massive volatility in financial markets and potentially destabilise an already shaky global bond market and global financial system.

goldcore_chart2_08-06-15
There have been a number of shocks to the market this year which would have been expected to have led to sharp losses in the derivatives market but slipped quietly by.

The debris caused by the massive volatility in the Swiss Franc following its being unpegged from the Euro – where it spiked 30% in minutes in January – seems to have been swept under the carpet. Austria’s bad bank Heta failed in late February with apparently no casualties.

We do not know what provoked the dramatic reversal in attitude to Anshu Jain at Deutsche Bank but it looks very much like the bank may be getting its house in order in anticipation of another major scandal or crisis. When said crisis breaks the responsibility can be dumped on the previous leadership.

Since Warren Buffett’s initial warning in 2002 , 13 years ago, he has been remarkably quiet on the real and growing threat to global markets and the global financial system. Despite the fact that the scale of the risk today is of an order of magnitude greater now than it was then.

This is unfortunate given the global financial system itself is far more volatile and casino like today than it was in 2002.
Sucking on the teet of Wall Street can lead to self induced omerta.

The global derivatives market is highly complex, totally unregulated and frighteningly large. One of the world’s leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University, has warned that the so-called notional value of the worldwide derivatives market is over $1.4 quadrillion.

A quadrillion is an incomprehensibly massive figure: it is 1,000 times a trillion or 1 with 12 zeros. A trillion is 1,000,000,000,000 and a quadrillion has 15 zeros – 1,000,000,000,000,000.  The annual gross domestic product of the entire planet is between $50 trillion and $60 trillion. Thus, the derivatives markets notional value is more than 23 times the size of the value of all of the goods and services traded in global economy in one full year.

The crisis in Greece, the rumblings in the global bond market and indeed in Europe’s fourth largest bank and the threat posed by financial weapons of mass destruction should give cause for concern. It is another reason to reduce allocations to stock and bond markets and increase allocations to gold.

The real systemic risk of today is another reason to ensure owning allocated and segregated gold in the safest vaults in the safest jurisdictions in the world.

Must Read Guide:  7 Key Gold Must Haves

MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,173.40, EUR 1,053.32 and GBP 769.85 per ounce.
Friday’s AM LBMA Gold Price was USD 1,175.90, EUR 1,044.25 and GBP 767.82 per ounce.

Gold and silver were both down last week – down 1.58 percent and 3.77 percent respectively.

Silver in USD - 10 Years

Silver in USD – 10 Years

Gold fell $6.10 or 0.52 percent Friday to $1,170.90 an ounce. Silver slipped $0.08 or 0.49 percent to $16.10 an ounce.

Gold in Singapore for immediate delivery ticked lower and then higher and was up 0.1 percent to $1,172.86 an ounce an ounce near the end of the day,  while gold in Switzerland was again flat. A stronger dollar, near a 13 year high verses the yen, may have contributed to gold’s recent weakness.

After Friday’s U.S. nonfarm payrolls report showed its largest growth since December, up 280,000 from last month, gold sunk to an eleven week low at $1,162.35 an ounce. The payrolls figure was significantly higher than the 225,000 that analysts were expecting. Although some question the veracity of the Bureau of Labor Statistics jobs numbers.

The jobs number led to renewed idle speculation that the U.S. Fed may start to raise interest rates in September.

A senior U.S. official today denied a news wire report that President Barack Obama had told a Group of Seven industrial nations’ summit that the strong dollar was a problem.

Bloomberg News earlier quoted a French official as saying Obama had made the comment. “The President did not state that the strong dollar was a problem,” the U.S. official said. He made a point that he has made previously, a number of times: that global demand is too weak and that G7 countries need to use all policy instruments, including fiscal policy as well as structural reforms and monetary policy, to promote growth.”

Sentiment in the euro zone weakened further in June as the Greek debt crisis and a slightly firmer single currency prompted investors to pare back their expectations for the economy. Sentix research group’s index tracking morale among investors and analysts in the euro area slipped to 17.1 in June from 19.6 in May. That was below the Reuters consensus forecast for a reading of 18.7.

The world’s largest gold back ETF, the SPDR Gold Trust, saw holdings drop 0.17 percent to 708.70 tonnes on Friday,its lowest since mid January. This shows poor sentiment in the gold market.

In South Africa, the Mineworkers and Construction Union said yesterday it would launch a strike if its rival union and gold mining companies impose a wage deal on its members.

In late European trading gold is up 0.31 percent at $1,174.81 an ounce. Silver is up 0.08 percent at $16.11 an ounce and platinum is up 0.41 percent at $16.11 an ounce.

Breaking News and Research Here

Mark OByrne

  • Greg Burton

    You’re a liar! You deleted the outstanding derivative amount in your graphic!

  • Greg Burton

    Let’s do a short primer on the toxic mortgage scam that impoverished the world.

    The Federal Reserve (City of London)…Greenspan, Paulsen, Geithner, Summers, Bernanke, many still employed by Obama, enabled the “risk” to be removed from sub-standard loans by bundling these loans into CDOs (collateralized Debt Obligations), mortgage back securities. These securitzed sub-standard mortgages were then erroneously rated “AAA” by rating agencies like Fitch, S&P, and Moodys.

    These “AAA” securities were then sold to unsuspecting pension funds, government agencies, and investors both in the US and Europe. These “AAA”, “risk free” CDOs, which offered higher margins and brokerage commissions (sales incentives), created an environment guaranteeing predatory lending practices. These CDOs were then “insured” using credit default swaps derivatives, left unregulated by the CFTC.

    Thus, allowing multiple speculators, even those who participated in their creation, to bet against these very risky “AAA” CDOs; ensuring that both the insuers, like AIG, and investors would be destroyed once this massive ponzi scheme collapsed.

    In fact, it was Larry Summers was who especially instrumental in allowing derivatives to go unregulated due to his intentional interference with CFTC Chairperson Brooksley Born; and her wanting to give testimony in favor of the regulation of OTC derivatives.

    Under duress from the private bankers, their lobbyists, both in Europe and the US, congress allowed US tax payers to pay for the massive losses due to the CDO debacle. Bailing out the private banks, corporations, and even countries. All of which has led to so-called austerity cuts to the social safety net, millions of lost jobs and homes, the destruction of the middle-class and ultimately leading to starvation of the world, chaos and martial law.

    At this moment, there are TRILLIONS of dollars in derivative overhang on the world’s people being secured by US tax payers through the unratified 16th Amendment, through the Federal Reserve (City of London). Note: This analysis does not really include the other types of bank fraud that has occurred: LIBOR or HSBC drug money laundering.

    So, really our discussion should be about why the US and European governments didn’t prosecute the bankers for fraud, as did Iceland; why we haven’t questioned the efficacy of a privately held fractional reserve banking cabal, centered in the City of London (Federal Reserve), that’s using the war on terror to solidify its death-grip upon the world (serial wars against nation-states, false flag terror); instead of having discussions about killing off the poor, the old, the useless eaters.