Oh bankers crystal ball, who is the fairest bank of all? Answer: Take your money out of the bank and buy some gold.
Financial oversight agencies now have software to pre-inform them of the predicted day of their demise. This software goes beyond predicting the death of any single bank to calculate the inter-connectedness of the entire banking system and show when one banks falls if the rest will fall with it.
They call it DebtRank. You can call it Bankers Doomsday Software, an algorithmic oracle that tells when a financial crisis is nearing that would crumble the entire global financial system. What its initial test run is telling us is that the world banking system is so intertwined with credit default swaps and derivatives that a relatively small banking institution can bring down the entire system of world banking. Using DebtRank software, prognosticators were retrospectively able to determine that the financial crisis of 2008, started by the collapse of a relatively small firm, Lehman Brothers, could have wiped out more than 70% of the wealth of the world’s financial network if bailout funds had not been provided in a timely manner.
The DebtRank development team says a problem uncovered by its analytic software is that its ability to avert a future worldwide financial meltdown is hampered by the fact most global transactions are confidential and regulation occurs only at the national level. Therefore, there is no authority keeping track at the international level to monitor the global finance system as a whole.
The deputy governor of the Bank of England didn’t have DebtRank at hand last October (2011), but he issued a warning to chief executives of Britain’s largest banks that there was a serious chance none of their institutions would survive to the end of the year. His precise wording, posted online by the UKs Telegraph, said: “Gentlemen, you could all be out of business by Christmas.”