What was it that Jean Claude Juncker used to say?, “When it becomes serious, you have to lie”. Well, when it comes to the ECB’s balance sheet, they must have taken a leaf out of Junker’s book. According to ZeroHedge, the real figure of the balance sheet is $15 trillion because “guaranteed debt” is not counted even if its Greece.

The ECB, as I quoted recently from their own published balance sheet, has $15 trillion in loans outstanding to Europe. They claim a $4 trillion balance sheet based upon not counting guaranteed loans by various nations and by not counting contingent liabilities. This is the same scheme that is used for calculating the debt to GDP ratios of the countries in Europe. The methodology is consistent. If a loan, a debt, is guaranteed by a nation or if the liability is “contingent;”it is not counted. This, of course, does not mean that possibility of having to fund or write-off something is not there; it just means it is not counted.

Furthermore all guaranteed loans or debts of any nation, including Greece, are deemed “risk-free” and so the balance sheet of not just the ECB but the banks in Europe are skewed, as in incorrect by American standards, by the methodology employed. What is the “Standard Operating Procedure” in Europe would be fraudulent in the United States and while you may think that everyone is entitled to their own manner of doing things it also must be said that the European invention allows for increased risks and leverage that could overcome the Continent at any point. “Not counted” does NOT mean “not there” and so the cause for my great concern.
 
European banks were supposed to be de-leveraging  in accordance with the Basel III rules but have grown by 7% according to recent data released by Eurostat. Target2 was supposed to be shrinking but has grown to almost one trillion Dollars. The loans at the ECB have been increasing and whether the credit line to the Spanish banks or the loans to the banks of many countries in Europe to buy their debt at auction keeps on growing. The risk factor is magnified so far past any margin of safety that I am fearful, more than fearful, that some event, some relatively minor event in fact could throw Europe off a cliff that will make our fiscal cliff look like a gently rolling hill in comparison.
 
I repeat and repeat again:

“NOT COUNTED” DOES NOT MEAN “NOT THERE!”

Source: ZeroHedge

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