By John Galt
August 18, 2011 – 05:15 ET
While the American side of the world slumbered, something very serious began to occur. It would appear that a European liquidity crisis is indeed beginning to accelerate. Per a Bloomberg story, Denmark’s regional banks are dumping assets in a rush to generate cash (Click on this link to read in full: Denmark’s Regional Banks Dump Assets) as they attempt to escape the international funding market. This could be a further indication that people are diving into cash and extremely liquid assets around the world in the fear that a second credit freeze is about to occur.
From the Bloomberg article by Tasneem Brogger and Frances Schwartzkopff:
“It still looks difficult for banks of our size to get money in the international markets,” Lasse Nyby, chief executive officer at Spar Nord Bank A/S, Denmark’s fourth- largest listed lender, said in an interview yesterday. “We think it will remain that way for some time.”
IF a regional Danish bank is having a problem it means regional U.S. banks are having the same problem and the flight to safety we have witnessed the last 90 plus days is just like 2007-2008 where money was flying, not flowing, from risky assets and banks and into government bonds and other safe havens.
Watch the 10 year US Treasury today as the yield this morning as of this article was falling fast and down to 2.12%, a mere 4 basis points above the all time record low set in 2009. There is no better indicator that there is a major crisis on the horizon than the currency and credit markets and they are a screaming indicator that the central banks of the world have failed in their reflation attempts since that era because they went small instead of attempting to overwhelm the system and “purchase” solvency by relieving institutions around the world of their non-performing and deteriorating assets.
Also standby to see what the results of the Federal Reserve Bank of New York meeting on the European impact on US banks will be, as the sudden realization that we could see 2008 in reverse has just caused a light bulb to go off above the Fed heads.