Brexit Redux
The Brexit remains a high topic of discussion, even if it feels like it is reaching the saturation point. One thing is clear: The political parties in the UK have been thrown into chaos. The British Prime Minister, David Cameron, has resigned, but not effective until October. A leadership campaign has broken out, and the PM presumed and a key leader of the ‘leaves,’ Boris Johnson, abruptly dropped out. Not so Michael Gove, a lieutenant of Johnson’s, who showed no interest in the leadership but who is now running along with Theresa May, who was a leader on the ‘remain’ side. The leadership race promises to be eventful. The opposition Labour Party is also in disarray with its leader, Jeremy Corbyn, under attack, while the leader of the UKIP Party, Nigel Farage, who was also a key leader of the ‘leave’ side, also abruptly resigned. NO wonder this week’s title for The Economist was “Anarchy in the UK.†But ex-its are breaking out all over, even though no others have stepped forward with a referendum. In behind, nothing really has changed. The EU remains in chaos. Article 50, the requirement to start the Brexit, will not be invoked until a new leader is in place in October. Could the Brexit die on the vine?
The Mess in the Italian Banks (and elsewhere for that matter)
Banco Monte dei Paschi di Siena S.p.A., founded in 1472 and the world’s oldest bank, is in a mess of trouble. But so is the entire Italian banking sector, with US$400 billion in non-performing loans, some 18% of Italy’s GDP. It’s a mess and getting messier, and there seems to be no way out except a coming massive bail-in under new EU laws that prevent bailouts. The Italian banking mess is, however, just part of a bigger banking mess lurking in behind. Everywhere, global banks are either in free fall, starting to free fall, or threatening to free fall. One of the worst is Germany’s Deutsche Bank (DB), with $1.7 trillion in assets and down 90% from its peak. The next Lehman Brothers? Actually the collapse of Deutsche Bank would make Lehman Brothers look like a Sunday school picnic.
