The dollar is increasingly money backed by financiers-manipulated debt. The euro is fundamentally money backed by real economic activity. The distinction will matter. And the finance industry will follow.
We may soon see losses in increasingly obsolete parts of manufacturing that rival those of the financial sector. Our advantage is that these seem to be in a worse shape in the US, and another is that in most of Europe we will see much less of a drop in housing prices.
Following a link from FT.com I find this article. Including for example Citigroup leverage ratio 2008: 56
There is a reason why Citibank got a lot of money from the US treasury.
Also included in the article is this important paragraph:
All of those leverage ratios are high. And they actually understate the truth. For instance, besides the $2.1 trillion of assets Citi has ON its balance sheet, it has another $1.2 trillion OFF its balance sheet. The only reason I didn't include these in my calculation is I wasn't sure how much off-balance sheet exposures the other banks have and I wanted the leverage calculations to be consistent. (I tried to look it up in their SEC filings, but disclosure varies by company. Citi is the only one of the bunch that spells it out clearly.)
I don´t know if the same is true for European banks too. I seem to remember that accounting rules are different in Europe? Anyway the numbers seem to indicate that the leverage ratios aren´t that different.
Their total assets compared to their capital base can be 30-50 times larger, compared to ratios in the 20-30 range for US banks. That's clearly going to change, but it does matter what kind of assets you hold.
Highly regulated mortgage loans to domestic households are clearly a better proposition in France and Germany than in the US or UK, even if they hold the same kind of rating and capital requirement.
You simply cannot get a loan where debt service is more than 35% of your documented income in France - it's illegal. In the long run, we're all dead. John Maynard Keynes
