European Banking Crisis; Gold $1,800

Europe's banks are bleeding losses today as sovereign debt fears have gripped the continent. A simple glance at some European bank stocks shows the extent of the panic:

Societe General: down 21%
BNP Paribas: down 10%
Intesa: down 10% halted
Unicredit: down 10% halted

From Bloomberg:

Societe Generale (GLE) SA posted a record decline and led a drop in French banking shares as the cost of insuring the country’s government bonds increased. UniCredit SpA (UCG), Italy’s biggest bank, paced a retreat in Italian banks after the country’s credit-default swaps widened.

Societe Generale shares slumped as much as 23 percent and were down 16 percent at 21.89 euros at 4:27 p.m. in Paris. Credit-default swaps on the bank rose 29 basis points to a record 299 basis points.

Societe Generale “categorically denies all market rumors,” Emmanuelle Renaudat, a spokeswoman for the French bank said in an interview. She declined to be more specific.

Bank shares lost 5.3 percent, for the biggest decline among the 19 industry groups in the Stoxx Europe 600 Index and the steepest drop since May 2009. French and Italian banks led the retreat. BNP Paribas (BNP) SA shed 11 percent to 35.06 euros and Credit Agricole SA (ACA) sank 15 percent to 5.82 euros.

“If credit default swaps on France are under attack, that’s not a good sign,” said Yves Marcais, a sales trader at Global Equities in Paris. “That means that France is under attack and that’s worrisome. French banks hold a lot of French bonds.”

The cost to insure French government debt against default rose 10 basis points to a record 171 basis points, according to CMA.

http://www.bloomberg.com/news/2011-08-10/socgen-leads-fall-in-french-banks-as-credit-default-swaps-gain.html

Once again the market plunges after yesterdays rally. Gold hit $1800 and is on its way to $2,000.00 and eventually $5,000.00 unless the powers that be stop printing digital fiat currency. Jeremy Grantham said that S&P fair value is 950 which sounds reasonable under the circumstances.

Bottom line: expect the economy to shrink again with more layoffs and higher unemployment. One positive is that food and gas prices will come down as crude is now trading at $80.00 woohoo.