Lloyd’s of London ABANDONS
European banks!
European banks!
“Banks could be taken down,”
says Lloyd’s finance director.
says Lloyd’s finance director.
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Without warning, Lloyd’s — the world’s oldest insurance market —announced that it has withdrawn its money from European banks.
The reason? According to Lloyd’s, the banks are in danger of failing as Europe’s debt crisis continues to intensify.
The company’s Finance Director, Luke Savage, put it simply:
“If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them.”
Which European governments is Lloyd’s talking about? They’re not saying.
But it IS interesting to note that Lloyd’s didn’t just withdraw its money from Greek banks; it withdrew its money from banks all over Europe!
One thing you can be sure of, though:
When the world’s oldest insurance company ...
A firm that for 323 years has made its living by accurately calculating the odds of future disasters ...
When that company suddenly takes its money and runs, it’s a MASSIVE red flag for investors — a clear sign that the beginning of the end is near!
Lloyd’s has every reason to worry. In addition to the government debt crisis that’s threatening to destroy European banks, a huge credit crisis is spreading across the Continent as well.
Spanish and Italian banks are rejecting massive numbers of loans and charging customers more as the sovereign debt crisis continues to drive their own borrowing cost higher.
Any way you look at it, this shrinking of European credit markets is the worst kind of downward spiral:
- The government debt crisis is making it harder and more expensive for banks to borrow money; the banks are passing those higher costs along to borrowers.
- Corporations have to pay more to borrow; their cost of doing business is rising.
- Consumers can’t or won’t borrow at higher rates, so corporate earnings plunge.
- As corporate earnings evaporate, the taxes they pay also plummet.
- Falling tax revenues cause the government’s deficits to explode higher, driving the banks’ cost of borrowing even higher.
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