The news out of Europe yesterday and this morning somehow puts me in mind of the long opening sequence in the John Landis feature film rendering of The Twilight Zone, in which Dan Ackroyd says to Albert Brooks, “You want to see something really scary?”
Are you ready?
The head of Deutsche Bank yesterday said that “It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels.”
And then our friends at ZeroHedge point out an even gloomier assessment out today from UBS predicting possible end-of-days kinds of stuff from the prospective collapse of the Euro:
The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the first year. That cost would then probably amount to EUR3,000 to EUR4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.
Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade.
And that’s just in the first-page summary. Inside the main text are some wonderfully droll bits like this: “Economic modelling is not good at dealing with something as extreme as the break-up of a monetary event. It is not really what models are designed for.”
Can’t wait for Obama’s blockbuster jobs speech on Thursday. And why is Hillary still not answering her phone?
(Hat tip: JVS, my financial markets apocalypse guy. Hey, if Jonah Goldberg can have his military guy, his weird links gal, his sommelier dude, etc, I get to have my financial apocalypse guy, my theology adviser [RBY], and my obscure Progressive literature guide [RC].)