The Bronte Capital thesis breaks down
This blog has an over-arching thesis – which is that current account deficit countries are going to have bad banking systems – but current account surplus countries are going to be sort-of-OK.
This post was outlined in the second substantive post on this blog in which I said:
America is a land with little in deposits and considerable lending. There are similar lands – such as Spain, the UK, Australia, New Zealand and Iceland.
But I was pretty happy with the banks in current account surplus countries – although their profitability was limited.
Well – the facts on the ground look much uglier than that.
Sure the failure in Germany (Hypo Real Estate) was largely caused by its dumb Irish subsidiary (Depfa). And the banks in Iceland and the UK have essentially imploded – as have several in the US.
But my problem is that the banks in current account surplus countries are behaving very badly. The relatively well run Chiba bank in Japan has halved. Ditto DNB Nor – in oil rich current account surplus Norway.
This is significant and signifies either irrational panic or the thesis being wrong.
Thoughts please.