I’ve yet to do a whole lot of reading on the results of the just concluded European bank stress tests that commercial banks passed (surprise!) with flying colors. Whether or not others have delved into the details or not hasn’t stopped a couple hundred of them from responding to this WSJ poll that clearly comes down on the side of the stress tests being more like an afternoon stroll than anything that would raise one’s blood pressure.
When you think about it, like the modern day currencies, commercial banks really are based on confidence more than anything else and faith that the system, as currently constructed, will somehow persevere regardless of how shaky it may appear at times. The word “credible” as used in the survey question above surely means something quite different today than if applied to stress tests that might have been conducted 50 years ago or 100 years ago. The current system of pure fiat money and fractional reserve banking, neither of which have any practical limits, is, basically, designed to fail.