Prevailing Gray Swans: The Clear and Present Danger List for the Week Ending January 13, 2017
5. The collapse of the European Union due to a successful Brexit-like referendum in France or Italy
Deep Background and Threat Forensics: Briefing Focus
[economics | finance | politics | sociology | technology]
Government boils down to two forms of count: headcount or money count and a third form when those two lock horns past the boiling point: body count. Throughout history money count (“he who has the gold makes the rules”) has been dominant. Even in countries ostensibly with democratic (“the people have spoken”) forms of government, like as advertised by the U.S. Constitution or its blueprint from ancient Greece, in practice the other form of count is what really counts when push comes to shove on serious matters the lion’s share of the time. There are many devious ways headcount is marginalized or derailed particularly when the constituency is asleep behind the wheel and could even rear its ugly head post-Brexit, the path to invoking Article 50 is loaded with opportunity for money counters to neuter or reverse the authority of the headcount including Japanese intervention on the eve of the G20 summit in China borderlining on some form of ultimatum.
With Brexit, these two forms of count were at loggerheads and, so far, headcount prevails.
With the fate of the EU in the balance, these two forms of count will be at loggerheads many times in the near future.
Only one form of count can win: as for the EU, how will this play out?
30,000 foot perspective
In the big picture, first an assessment of which countries in the EU are possible candidates to vote to exit via a referendum in the near future:
Many EU countries are on the docket for referendums in the wake of the ice-cutting Brexit. Which way are the people leaning?
Another political issue is a potential upsurge of referenda. At the European level, countries such as Denmark, France, Greece, Hungary, the Netherlands, and Sweden could be next. Pew polling shows that less than half of the populations of Spain, France, and Greece have a favorable view of the European Union, and the majority of populations in many countries disapproves of its handling of refugees. Majorities in Italy and Sweden and pluralities in the Netherlands and Hungary disapprove of how Brussels has handled economic issues. Additionally, other countries will see their regionalist movements strengthened, which could lead to more internal referenda for independence in places like Scotland and Catalonia.
(Source: War on the Rocks, Alex Crowther and Kieran Green, June 27, 2016,“The Security Costs of Brexit and What to Do About It”)
The European Central Bank is becoming dangerously over-extended and the whole euro project is unworkable in its current form, the founding architect of the monetary union has warned.
“One day, the house of cards will collapse,” said Professor Otmar Issing, the ECB’s first chief economist and a towering figure in the construction of the single currency. “Realistically, it will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly,” he told the journal Central Banking in a remarkable deconstruction of the project.
(Source: The Telegraph, Ambrose Evans-Pritchard, October 16, 2016, “Euro ‘house of cards’ to collapse, warns ECB prophet”)
The purpose of this intelligence briefing is not to provide exhaustive research on all the referendums in the pipeline and their spiny issues but to address the vulnerabilities and likelihood of the disintegration of the eurozone (i.e. the countries that adopted the euro as a common currency) because it is that event that equates to a gray swan and will impact your life.
With that in mind, the problem is greatly simplified by focusing on Italy and France because if either of them were to leave in the wake of the UK’s exit the eurozone would no longer be structurally survivable given their economic weight in proportion to the aggregate (not to mention a global banking contagion from a systemic derivatives meltdown in parallel with a colossal bond selloff and euro devaluation):
Bear in mind that the UK was in the EU but not in the eurozone; the UK had its own currency with a long and storied history — the Pound Sterling — not the upstart euro. Despite this difference, the UK’s exit is unquestionably a destabilizing event to the EU and eurozone but not a fatal blow. The viability of the eurozone is the strength in numbers of the constituent nation states much like a tent remains standing only as long as a critical contingent of tent poles support the structure.
Structural analysis of the eurozone tent, however, reveals that not all tentpoles are created equally; Germany is the center pole and France and Italy are major poles and then there are many lesser poles on the periphery. If many peripheral poles were yanked it would be death by a thousand cuts, but either France or Italy would deliver a mortal blow because there would be capital flight from Europe and this would trigger a domino effect. A bond selloff would initiate before the French or Italian referendum to leave the EU simply because the massive capital gains accrued in bonds as bond yields declined to zero or below zero (NIRP) since 2008 (bond yields decreasing means bond prices increasing) would be imperiled with a sudden yield spike; investors would be foolhardy to not only sell but to make a valiant effort to be the first out in a bond selloff to maximize profits as others surely would follow, musical-chair style, long before France or Italy even vote to leave:
What does this mean for investors that bought bonds with long maturities years ago? For example the German 4.75% Bund, issued in 2008 and due in July 2040 trades at 202.3 cents on the euro, having doubled its value over the past eight years. The sellers of those bonds are the true beneficiaries of Draghi’s monetary policies, and they can sell them right to the ECB.
(Source: Wolf Richter, June 29, 2016, “NIRP Absurdity Soars after Brexit, Hits $11.7 Trillion”)
Yes, the European Central Bank (ECB and other central bank intervention) could counter the exodus by buying from the sellers to make Europe appear “stable” but they would be bag-holders with such a move because of the loss of integrity of what remained (the euro would be harshly devalued versus the other major currencies: USD, yen, yuan) not to mention many other countries would choose to flee after Italy or France left bringing the euro(zone) to its knees. Also, after the smoke cleared, who would be buying these bonds given that the risk of sovereign default of said bonds would skyrocket from nil to nail-biting, emerging market status or even worse? The regulatory agencies would need to declare massive downgrades but probably would treat it with kid gloves given the global, political impact at stake. Of course, ECB intervention would add to the eurozone debt which has gone vertical since 2008 and would take another large leg-up:
Additionally, just the possibility of France or Italy leaving is tantamount to a big short of the euro itself; its foreign exchange rate would be affected with capital flight with flight to safety to the USD. There would be a de facto bank run as astute depositors throughout Europe would not want to be holding euros knowing full well that the currency would be devalued precipitously plus there would be concurrent risk of bail-ins.
The eurozone remaining intact comes down to this: Italy AND France must not exit or else the eurozone, along with the euro, will collapse. Germany is not going to pull out but France and Italy are a completely different matter once you descend from this 30,000 foot and assess the view natively on the ground.
Examining just the UK, France, and Italy, in what order does leaving outweigh remaining in the EU given those individual vantage points?
Of the three, the UK — by a wide margin — is in least need of leaving the EU. Given the status of London as not just Europe’s but the world’s premiere financial center plus having the luxury of its own currency to manipulate as needed to adapt to the volatile, competitive pressures of globalization, the need was not dire to leave the EU, it could survive either way but — surprise — it Brexited anyway. An argument that the UK was first runner-up to Germany as poster child for the EU would not fall on deaf ears. That is a major shot across the bow that does not bode well for countries in the EU that must leave in order to survive on their own two feet or else risk being relegated to failed-state status like Greece. Greece now only exists on austere life support as a lowly vassal of Brussels and Berlin. Many other EU countries took notice of Greece’s golden fleecing as foreshadowing of their own dark, future prospects should they be perceived as disobedient debt slaves. Why would they be treated differently?
What about Italy?
Due to the one-two punch of globalization with its incessant labor arbitrage (think China vs. Italy) and adoption of the euro in 1999, a much stronger currency then the Italian lira was (and the inability to finesse the euro’s exchange rate to the Italian government’s liking…), Italy lost its ability to remain competitive on the global stage. Its non-performing loan (NPL) predicament and the present and deteriorating Italian banking crisis is scoreboard of said loss of competitiveness and that is a problem that will never go away under the tyranny of the euro:
Consider that globalization had already done a number on the country’s once magnificent industrial base when Italy opted into the euro and left the lira behind. Since then, the country’s industrial capacity has been further decimated, shrinking by 15 percent. To take but one example, in 2007, Italy manufactured 24 million appliances; by 2012 it had declined to 13 million.
Add up the economic consequences and you begin to understand why Italian unemployment is running north of 12 percent while putting four-in-ten young Italians out of work.
The reason the numbers [Ed. Italy’s NPLs] have deteriorated, in Italy as in the rest of the eurozone, is because bad loans are the iceberg above the water. Under the surface lurks a bigger problem: a persistent lack of economic growth. Italy inched out of recession last year but the International Monetary Fund recently estimated that its economy would not return to pre-crisis size until 2025. Thousands of small and medium-sized companies have gone under, taking with them the bank loans on which they depended, as well as demand for lending. The banks’ challenges do not just affect Italy’s economic prospects; they have the potential to derail its political future.
(Source: Financial Times, August 10, 2016, “The spreading pain of Italy’s bank saga: The country’s political and economic future is being threatened”)
SVIMEZ warns that the downward spiral is turning a cyclical crisis into a “permanent state of underdevelopment”. In short, southern Italy is close to social collapse, and there is precious little that premier Renzi can do about it without reclaiming Italian economic sovereignty.
This is politically explosive. Tens of thousands of Italian depositors at small regional banks have already faced the axe, learning to their horror that they had signed away their savings unknowingly. The Banca d’Italia said the EU bail-in law has become “a source of serious liquidity risk and financial instability” and should be revised before it sets off a run on the banking system.
(Source: Daily Telegraph, Ambrose Evans-Pritchard, May 11, 2016, “Italy must choose between the euro and its own economic survival”)
Bail-ins are not theory in Italy. More than 100,000 investors last year in four small Italian banks saw their investments wiped out. Some lost their life savings. This is in the foreground of the Italian mind unlike Americans who are in the same boat due to legislation passed in the US Congress without front-page press coverage.
Italy is like Greece on steroids but with a longer fuse before it implodes. After the UK’s shocking Brexit outcome, Italy secured significant leverage and now occupies the catbird seat in regards to resolving its long-brewing NPL banking predicament for one simple reason: if the ECB and Berlin cannot bend the rules and offer a bail-out in lieu of a mandated, bone-crushing bail-in, then Italy will most assuredly leave the EU at the first opportunity without looking back with an attitude of good riddance. In a preliminary referendum (i.e. not directly addressing exiting the EU) to be held either October 30th or November 7th, it is too close to call as of September 2nd but if there is a “No” vote then the odds of Italy leaving the EU become much greater:
Italy’s only rational chance of survival in a light-footed, globalized world is to regain its sovereignty and control its own fate with its own currency — win, lose or draw. Otherwise Italy faces a certain fate of slow and painful death — or austerity — belly up — Greek style. In fact, a default on its debt to the hilt, both sovereign and commercial, is the most fruit-bearing strategic option going forward notwithstanding immanent short-term chaos both within and without.
And Then There Is France…
The waxing of supranational institutions, the waning of the national economy, the appearance of new immigrant communities, the disappearance of old industries and jobs: All of these are the tributaries spilling into the brackish bog called Frexit. As with Brexit, Frexit is fundamentally a crisis of national identity. The inability of both conservative and socialist governments to redress the growing social and economic fissures in French society, and to reinvent the republican model for the 21st century, has encouraged the retreat to nativism and nationalism. Tellingly, a 2015 poll revealed that if the 2005 referendum on the European Constitution were to be held again, 62 percent of respondents would vote against it, a 7 percent rise from the original “non” vote.
(Source: Foreign Policy, Robert Zaretsky, June 29, 2016,“Frexit Is Coming: Britain’s departure meant the end of an era. France’s departure would mean the end of the EU”)
The French people and the European Commission are at loggerheads and assume an adversarial posture whereas current French politicians at the top are bedfellows of the EU brass and all but utter “let them eat cake”:
But the greater part of the political class has decided that the way to deal with ‘this disaster’ is not to abandon the European Union but to strengthen it. Gaining public support for this programme will be no easy task: 61 per cent of French voters are hostile to the European Union. Among those the French blame for this unpopularity are Angela Merkel, for encouraging immigration; President Hollande, for a failure to reduce unemployment; and the entire European Commission, for inefficiency and-losing contact with the people it purports to govern. There is also — something new in Paris — an increasing hostility towards Jean-Claude Juncker, president of the Commission. Even convinced Europhiles see the one-time prime minister of Luxembourg as a bureaucratic dinosaur who behaves as though he were the head of a nonexistent federal state.
(Source: The Spectator, Patrick Marnham, July 9, 2016, “Frexit? Stranger things have happened: Britain’s EU vote has thrown French politics into turmoil, too”)
The French people that want to leave have their champion in Marine Le Pen who has built her political platform on Frexit which is in strong opposition to the EU-friendly politicians currently in power:
Since 2013, Le Pen has maintained that, if she attains power, she will hold a referendum on France’s membership in the E.U. within six months. A survey in March found that fifty-three per cent of French voters would support such a referendum, and another, published today, found that only forty-five per cent are certain they would vote to remain. Le Pen consistently leads polls for next spring’s Presidential election, and is all but certain to advance into the second round of voting. On Friday, she proclaimed Britain’s vote a first concrete step toward her vision, and the European question certainly will now become central to the campaign. “Before, this was unheard of,” Florian Philippot, a National Front vice-president and Le Pen’s top strategist, told journalists gathered at the Party headquarters, in Nanterre. “Now it’s no longer unheard of. There’s a precedent, and that changes a lot.”
The trend: Euroskepticism has steadily increased since 2004 in France and 2008 in Italy. Compared to the UK pre-Brexit, the EU is viewed more favorably by Italians than by the French. Time is not in the favor of EU remaining together given these trends and more terrorism caused or perceived by “immigrants” will accelerate these dispositions:
Summer is gloomy for the tourism sector. After the attacks that hit France in recent months, foreign travelers will not press on the territory.
In the first six months of the year, the number of overnight stays of foreign tourists in France fell by an average of 10%, due to concerns over the attacks, revealed Sunday, August 7 Secretary of State for tourism promotion, Matthias Fekl, in an interview with Sunday newspaper .
In Paris, the hotel occupancy fell by 9.8 points to 78.1% in July compared to last year, according to figures from the Economic Observatory of Paris tourism . The largest decreases relate to international customers so-called “long-haul” (arriving from distant sources), more sensitive to security issues than French tourists. Airline reservations American tourists, first foreign tourists, thus declined by 19.2% between 25 and 31 July, while they were up 14% between June 27 and July 3.
(Source: Le Monde (translated from French), August 8, 2016, “After the attacks, foreign tourists are leaving France”)
The prevailing institutional architecture of EU foreign policy has resulted in a complete lack of European influence on developments in the Syrian war, be it from the EU collectively or from member states individually. This has negative consequences on a critical regional issue like the Syrian conflict, especially because the bulk of the security, humanitarian, and economic consequences impact the EU.
Surreal actions like this are very high octane ammunition for Frexit:
France will deploy about 3,000 reserve troops, train school authorities and ramp up school anti-terror drills in case of attacks, its education and security ministers announced on Wednesday, a week before the start of a new academic year.The French government has heightened security across the country following a series on Islamist militant attacks since January last year that has left people on the edge, with schools a feared target. “The threat is high, it is real,” Education Minister Najat Vallaud-Belkacem, said during a joint news conference in Paris with security minister Bernard Cazeneuve.
Around 500 school administrators will be trained every year at the national gendarme training center to manage crisis centers and act as liaisons with security officials, while some 1.2 million students in the fourth year of secondary school are expected to be trained in first aid. Cazeneuve said security forces will be focusing on school surroundings and that 3,000 gendarme reservists will be deployed to reinforce other forces including the police.
(Source: Reuters World News, Gerard Bon and Bate Felix, August 24, 2016, “France deploys reserve force, ramps anti-terror drills in new school year”)
Is this the way France wants to raise its children? If this today, then what’s next? A police state, 1984? How about a swift about-face and return to a safer, higher quality of life like before the EU?
[Google maps: see location relative to downtown Paris]
Note: For a more in-depth view on the Syrian refugee crisis see the Prevailing Gray Swan on the Syrian conflict.
Immigration and refugee issues weigh heavily in France and terrorists know this: without control of the borders as France deems prudent (i.e. independent of current EU policy which ties their hands), France will be a preeminent target by terrorists to sway sentiment toward Frexit and the collapse of the EU. In this regard, France has become the Achilles heel of the EU’s future survival prospects:
Why is the disintegration of the EU a Prevailing Gray Swan and what is the probability of that happening in an 18 to 24 month time horizon?
- If France leaves, the EU collapses.
- If Italy leaves, the EU collapses.
- The probability of France leaving is similar as measured by the polls to the UK leaving before the Brexit referendum.
- If Spain and 1 other smaller country in the eurozone leave, the EU collapses.
- If 3 smaller countries in the eurozone leave, the EU collapses.
- 45% chance of France leaving.
- 40% chance of Italy leaving.
- 10% chance of Spain AND 1 other smaller country leaving.
- 40% chance of 3 smaller countries leaving.
- External, structural stresses in the global economy’s foreseeable future strongly favor damage to the business climate throughout Europe along with increased count, degree, and/or frequency of terrorist attacks.
- No other gray or black swans events happen in this time frame which would force a EU collapse fait accompli (i.e. assume that Europe operates in a vacuum for the sake of the risk assessment).
This is not a true sum of independent events type of probability problem because any event on this list causes the EU to collapse and renders the rest moot but there are several independent means to cause collapse and this is lethal — there are multiple independent vulnerabilities that lead to the EU’s collapse which greatly increase the probability that other countries will follow. As an analogy, The EU is a battleship that can maybe absorb the damage of one large torpedo but not two. Say the battleship somehow survives a large torpedo but then there is another large torpedo in the water as well as two smaller torpedoes… That is the predicament, precisely.
This is what the “battleship” looks like:
Below is another approach to predicting the collapse of the eurozone, this one based on polling:
It is difficult to fabricate a credible scenario that can make a case that the EU will exist in 2 years except one: the ECB essentially bribes the different governments in the form of bailouts or other favors at the expense of the ECB balance sheet; this can buy time but is not sustainable and may not work in France. When you consider that the UK voted to leave and both Italy and France could follow suit with similar odds, you begin to realize just how remarkable, in perspective, Brexit was as a historical event and — most critically — how deceptively fragile the EU is despite appearances. For example, now that the UK is gone both France and Italy, for all intents and purposes, hold Brussels and Berlin hostage because of the leverage each holds independently — they each have “GET OUT OF JAIL, FREE” cards… and so does Spain. All is not quiet on the western front.
The message here is that even though it is impossible to attach probabilities of high confidence to the above matrix, the odds of the EU collapsing are much greater than 50/50 and is much more likely than the collapse of Japan even though Japan’s financial conditions are beyond prayer. So, lifting the hood, there are deeper infrastructural flaws in Europe than in Japan and applying some social forensics will reveal their nature which is explored in the next section. There must be a reason the EU will crumble before Japan does given both their economic and financial scorecards and the EU’s distinct advantage in those dimensions.
Much has been written about the complexities, nuances, and assets and liabilities of staying or leaving in the EU. Immigration policy certainly weighs heavily on people’s minds: immigration is a blessing or a curse depending on which end of town you live. Terrorism is coming to roost in spades and is blossoming given the wrongheaded immigration policy in several EU countries; the skillful use of the terrorist’s asymmetrical warfare tactics, which are designed to change public perception, are working wonders on the headcount. But after all the dust settles what remains are the immutable economic, financial, political, and social physics of stability of the superstate — the EU — versus the nation state. There are forces in play that have brought “remain vs. stay” to society’s foreground and the biggest ones are globalization and automation and their impact on quality of life. In essence: Remain vs. stay mirrors money count vs. headcount. The depth of your pockets and how they got that way is the line in the sand with immigration weighing-in behind that but is gaining momentum in France particularly as the Syrian Conflict intensifies the refugee crisis and strains relations between the EU and Turkey regarding a much greater influx of Syrian refugees into the EU.
Globalization and automation are cold-blooded processes with clinical disregard for human dignity and quality of life for the common man; the only defense the majority can marshal against them is unadulterated democracy. If you are a banker, Fortune 1000 company C-suite executive, tech startup entrepreneur, proud business owner of a manufacturing firm replacing second-generation locals with lots of cheap robots en route from foreign lands, a major shareholder, traveler or student, then the EU is for you, but if you aren’t, then pencil-in permanent life support in some form of entitlement at the expense of your dreams and heritage sooner or later. Entitlements have morphed right before your eyes into pacifiers on a global scale but given the indefatigable tag-team of globalization and automation, they will come up short in short order. Soon helicopter money called “universal basic income” or “white elephant” or “ghost city” infrastructural projects will serve as the next wave of insurance against social unrest given the breadth of the social divide between “remains” and “stays” and the ugly fact that this chasm is only in the early stages and is a runaway truck. Hollowed-out eurozone banks in Italy, Greece, Spain, Germany and Portugal are symptoms, not the disease. Brussels and Berlin myopically and pedantically point fingers while they should be diligent students of introspection and compassion for the people they serve.
It is imperative to frame all of this from a social perspective and not reduce it to a check list limited by logical, quantifiable “data” like the EU’s powers-that-be expertly do in Brussels; you can’t eat a spreadsheet. Humanity and humanness should not be thrown under the bus for the sake of efficiency in terms of money, but they are — and the people are awake as witnessed by Brexit where the disenfranchised voted with their feet and hearts to the globe’s amazement.
The indomitable power of social coherence has much to teach here due to the astonishing lack thereof in this case. In the days of the American revolution there was a universal realization of: “We must, indeed, all hang together, or assuredly we shall all hang separately” that any adolescent could effortlessly take to heart until her last breath. Benjamin Franklin famously packaged this aphorism as his iconic, galvanizing meme “Join, or Die.” What exists in Europe is a stunning 180 to “Join, or Die”; instead, Europe is best defined by an anti-Franklin “Leave, or Die” and this is a literal truth economically and financially for the rank-and-file as well as the decaying state of the state and the mounting debt of the über state.
Something is freakishly off deep-down in the innards of Europeans and what’s twisted is the following: In the U.S., if you ask someone in Seattle where they are from they will say the United States, not Washington. If you ask someone in Atlanta where they are from they will say the United States, not Georgia. But if you ask someone from Milan they will say Italy, not Europe. Paris, that would be France, not Europe. Cardiff, the UK, not Europe. There is no sense of belonging to the EU, no sense of place — and it is sense of belonging and place that biologically wire your perception and expectation of friend or foe. Because of that, the EU is outcast DNA, not internalized as family or even country — the EU is a xenophobe and faced with an eyes-peeled combat stance in the “me, then you, then them” social hierarchy undergirding the original law of the jungle.
This begs the obvious: Why would commoners — the head count — trust the EU given their woeful track record and wanton oblivion to the people’s deteriorating quality of life and stormy horizons? Of course, these simple daily facts of life come home to roost in the trenches making “leave” vs. “remain” an elementary decision, one executed with spontaneous Gordian knot deft. It reminds you of the barrier to exit between a great marriage and teenagers living together — a paragon of resilience, singular vision and fraternity it is not.
The moral of the story is social cohesion and trust matter greatly: social qualities can outweigh financial quantities when predicting demise of complex systems, that esoteric models and number crunching cannot grok the nurturing value of indigenous mores — one’s roots are sacred and will be protected against wolves in sheep’s clothing at all costs. Now we are ready to revisit Japan versus Europe: Japan has been built from the ground-up organically for centuries to aspire to social homogeneity and harmony — and how does the EU measure up to the immeasurable, to unwritten rules that need no introduction? Europe is Japan’s social foil and there is no quick fix, no panacea for that. The EU is an experiment that has falsified the hypothesis that you can build a superstate from the top-down.
The attitude of most “Europeans” towards Brussels, with its alien, distant, steely-cold Death Star aura and total lack of any vestige of representative government of “the people” they supposedly “serve”, well, simply abandons the common man to a mantra of “Don’t Tread on Me” with “no globalization without compensation” as a chorus. When you strip out the bureaucracy, vested interests and masterplans to nowhere, what really remains is that a big chunk of Europeans, no matter what country they hail from, after 17 years of real experience of the EU, have had their fill unless they luckily benefit from globalization and its offspring: financialization and bottomless windfall monetary policy of cheap and easy money. Now could it be fixed? Theoretically, yes, but realistically, not a chance. You need to start from scratch and build organic growth from the bottom-up (think of the grassroots spirit of 1776…), not broadcast by fiat incomprehensible directives top-down from self-appointed faceless czars. Trying to approach the existing problems with cosmetic doctoring of the calculus of the backroom deals between the EU and the separate countries on an à la carte basis is dead on arrival. Until the majority of the people sing odes of “Join, or Die” it will be a non-starter and no-brainer. A state of “Don’t Tread on Me” will persist until Italy or France leaves and then the heavy blue tent will collapse under its own weight reminding one and all of the timeless wisdom of Dr. Seuss’ Yertle the Turtle and the sobering fate of imperial hubris.
Prudent Actions to Strongly Consider
If you have bank deposits denominated in euros it would be wise to transfer them outside of the eurozone into USD prior to the referendums to avoid currency devaluation and bail-in risks.
What is remarkable is the extraordinary level of complacency of the coming collapse of the EU given it is a long-in-the-tooth, high-wire act. It is a manyfold X Lehman event and is unfolding in plain sight, there is nothing hidden here, no white knights on speed dial, no excuses — a clear and present danger to planetary stability greased on a fast track. However, if you believe for some untold reason that the collapse of the EU can somehow be absorbed in stride, understand that it will detonate Deutsche Bank’s derivative book — and that will summon a systemic global financial tsunami of titanic status.