In his interview at King World News, James Turk, founder of GoldMoney and author of The Collapse of the Dollar, noted in his travels around Europe that “there is one common trait, regardless of which country I am in: people are really frightened about the possibility of the collapse of the euro. Money continues to move out of the European banking system, which explains why central banks stepped in with some money printing last week.”
He then went on to explain that there are only three sources of funding available to a bank: its customers lending it capital through checking and savings accounts, the issuing of long-term bonds which it sells to bond investors, and short-term financing provided mostly through money market funds. If any of these sources dries up, it puts the bank almost immediately into a precarious financial position. He said that the day before the world’s central banks stepped in to make short-term money more available was “frightening:”
Even though I’ve been saying this has been coming, last week was truly frightening with the banking system about to fall into the abyss. Had the central banks not stepped in it would have been a Lehman moment.
Sadly, they haven’t solved the problem. They have bought time and whether that time is one or two weeks or maybe a month, we will soon find out.
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Photo: AP Images