The International Monetary Fund says European bank losses will hit $1.3 trillion by the end of 2010, which is 35% more than the USA. Europe’s banks have been just as reckless as the US banks in racking up the dirty debt that caused the Global Financial Crisis, and potentially could cause a double dip recession in the later part of 2010. The IMF isn’t immune to its own mistakes, it didn’t see or forecast the GFC to begin with so the numbers and forecasts they provide should be taken with caution. The bottom line is you should not be exposing yourself and over committing in any stock, CFD or long term Forex position for the balance of 2010. Markets are still volatile and there are many long term traders that are currently holding no stock whatsoever and sitting on the sidelines to see the balance of this year come to a close.

Back to Europe’s woes. Banks in Europe have poured $2.5 trillion dollars into Greece, Ireland, Belgium, Portugal and Spain. If these countries fail in the next 18 months (and I see no way out for Portugal and Greece)  you can be assured it will have massive ramifications for the rest of the world, not to mention the complete failure of the Euro dollar. Ask any German what they want and most will tell you they want the Mark back. Ask most French people what they want and the story is the same. They say “bring back the Frank’. And ask any Brit and they will tell you that they are very glad they didn’t enter the Euro.

It could be argued that in good times the Germans and French love being part of the Euro Zone and Mr Cozy (my nick name for the French President) still personally supports the Euro Zone, but for how much longer only time will tell.  French banks are reported to be the most reckless of all lending money to Greece, Portugal and Spain at alarming rates. Europe is an incredible complex group of nations, many corrupt, many bordering one another like a tight knit neighbourhood and many of the nations people struggling to make ends meat.

Today many believe the debt surrounding European banks is currently being hidden, and attitudes are that they may be able to sweep the debt under the carpet until things improve. Germany is also largely to blame as they continue to run a stealth like operation in covering bank debt, nobody really knows the size of their dirty debt.

The bottom line is this. Unless the European banks get fair dinkum and open up and show how much real debt they have and commit to genuine reform the chances of the Euro recovering from this current crisis is slim in my view. One of the biggest problems facing the Euro is simply trust. It seems nobody trusts one another enough to open up and come clean and certainly nobody wants to be the first to declare their hand.

As I have continued to trumpet in this blog, Asia is the new powerhouse in the Global Economy. Wall St, the UK and Europe is sadly in serious denial. Obama is trying hard but government debt keeps soaring and soaring and he has little control. The trouble maker who is in such denial Alan Greenspan is long gone. His policies mostly lead to the cause of much of the USA’s woes.  In the UK treasury is now wanting to tighten government spending 40% or more. How do you think the Brits like that?  Their standard of living has been on the decline for the past 20 years and now budget spending is set to tighten like a hangman’s noose.

One thing is for sure, the government and banks in the USA and Europe are not going to help you if you are hanging around thinking they will come to the rescue. It sadly is every man for himself for the next few years if you live in the USA and Europe.

Tags: Double dip recession, Euro Crisis, Forex Forecasts, Wall street