- That’s the extreme case, which would be accompanied by 1.4 pp lower growth
- Baseline case as high as $2.6 trillion
- “Essential to avoid a large-scale, aggressive trimming of balance sheets”
- Banks in study reduced assets to $580 billion in Q4 2011
On Monday, we may have seen this in action as flows seemed to indicate repatriation. European banks are being forced to sell assets abroad, often in Asia, and bring the cash back to Europe as part of this process. This helps explain the stubborn strength of the euro late last year and early in 2012 but sets the euro up for a longer-term decline. The LTROs give banks 3 years to complete this process, so it could be awhile.
