Weekend Economists: "So much to do, so little done, such things to be." April 20-22, 2012

[Demeter]

24. Delevering in Europe Remains a Threat to World Economy

http://motherjones.com/kevin-drum/2012/04/delevering-europe-remains-threat-world-economy

...As you may recall, one of the proximate causes of the Great Panic of 2008 was the fact that American banks had run up huge amounts of leverage, something that makes the banking system extremely vulnerable to sudden shocks — like, say, a housing bubble bursting.

Well, European banks were even more leveraged than American banks. The top chart on the right, courtesy of a new IMF report, shows that American bank leverage peaked in 2008 at a ratio of about 25:1, and since then has dropped to a much more sustainable 15:1. European banks, even after four years of deleveraging, are still at 25:1. This means they remain vulnerable to sudden shocks — like, say, Spain going bust — so they'll need to continue deleveraging for several more years....