Banking crisis now over. Really.

A few months ago I discussed the state of the banks in The Netherlands with my dad. He was sure it was all fixed then, ABN AMRO just having been nationalised. I told him ING would be next. ING hasn't been nationalised in name, but received another 20 billion Euro.this week. On top of the 10 billion they already received. Deputy Prime Minster, and minister of Finance, Wouter Bos assures the taxpayers:

In the Netherlands we now have everything under control.

Famous last words I'm afraid. To see why ING is in such a trouble, look at their stock value:

That says it all, doesn't it? There share market value is completely wiped out. It lost 6/7 of its value in two years. On October 20, the Dutch government bought shares for 10 Euro a piece. they dropped to 5 Euro since. 50% loss for the taxpayer. There are about 2 billion ING shares, at 5 EUR a piece, ING's market value is 10 billion, so this injection is twice its market value...

But even if the minister of Finance believed this wasn't the last time, he wouldn't say so of course. But I'm afraid he actually might believe his words.

As many people dont' understand what is happening in the world of finance, let me give a short summary: most banks are insolvant. They don't want to admit this. They don't have to from their respective governments. This leads to an enormous loss of trust: because of the cover up, we don't know who is solvent and who isn't. The bailouts and cash injections are not helping, because they are covering up that many banks were run by incompetent people. All these money injections keep these banks in the hand of the incompetent, instead of, what should happen, turn these banks over to the competent in a bankruptcy. Capitalism has a way of dealing with incompetent businessmen: their business goes bankrupt and the assets move to more capable people.

We can also predict what will happen: if a bank is run by the government, as more and more banks will be, loans will be made for political purpose, not for business purpose. This will further deteriorate these banks, all leading to the final implosion where no one can deny the truth that the bank is insolvent.

Short term trends: it seems that stocks will go up for a while, a few months perhaps, if Obama goes ahead with his bad debt bank. Then we'll dive very deeply again.