France has a host of home-grown economic woes that have nothing to do with the EU. The social model is funded by punitive taxes on employing labour, creating one of the worst 'tax wedges' in the world.  A quarter of French aged 60-64 are in work – compared with 40pc for the OECD average – due to early retirement incentives. The state consumes 56pc of GDP, a Nordic level without Nordic labour flexibility.  There are 360 separate taxes, some predating the revolution. Trade unions have a legal lockhold on companies with over 50 employees, yet command 7pc of membership. "It is an inferno that sadly lacks the poetry of Dante," says Prof Brigitte Granville, a french economist at Queen Mary University London.

Hard reforms were put off by leaders of all parties. They coasted through the boom years of the euro, and now it is too late. France is trapped within the straight-jacket of monetary union. The International Monetary Fund's health check in June said the 'real effective exchange rate' is up to 9pc overvalued. It is roughly 16pc overvalued against Germany. The only practical way France can claw back competitiveness is through deeper deflation than in the rest of the eurozone, but this would prolong the slump and play havoc with nominal GDP and debt dynamics. It would be self-defeating.

 

List of stocks that have been upgraded by Merril Lynch

1. Marathon Oil Corp. (NYSE: MRO) to a buy from neutral, with a price target of $21, which is higher than the $18 consensus of various analysts. The new target price implies a gain of more than 33% from the current price of $15.7.

2. Noble Corporation PLC (NYSE: NE) from underweight to neutral. However, the target price of the stock is unchanged at $7.5, which is below the consensus target price of $8. The stock closed at $6.39 hitting a new multi-year low.

3. Patterson-UTI Energy Inc. (NASDAQ: PTEN) to neutral from underperform. The new target price on the stock is $22, whereas the consensus target price is also the same. The stock closed at $19.96.

4. Sasol LTD. (NYSE: SSL) to a buy from an earlier rating of neutral. While the consensus target price of the stock is $32.09, the stock closed the day at $27.71.

5. Devon Energy Corp. (NYSE: DVN) makes it to the US 1 list of top ideas for Merrill.

Notwithstanding, the valuations of the energy sector at 40 times its forward price-to-earnings (P/E) is more than double to the S&P 500’s forward P/E of 17, according to Yardeni Research.

Though the Merrill Lynch report agrees that “energy looks expensive on depressed earnings,” they believe that “higher oil prices should drive higher earnings estimates. Investors are still underweight the sector and the sector’s weight in the S&P 500 has fallen to historically bullish levels”.

Elderly Germans may have to keep working until the age of 69 if a Bundesbank proposal is adopted.

It says Berlin should consider raising the retirement age to that level by 2060, from around 65 at the moment.  The central bank says that otherwise the country may struggle to honour its pension commitments. It points out that the state pension system is in good financial health at present, but will come under pressure in coming decades. The Bundesbank says that as baby-boomers - those born in the post-World War Two period - retire, there will be fewer younger workers to replace them.. The retirement age for Germans is set to rise gradually to 67 by 2030.  However, the bank believes that from 2050 this increase will not be enough for the German government to keep state pensions at their target level of at least 43% of the average income.  It is therefore proposing pushing the retirement age up to 69.  "Further changes are unavoidable to secure the financial sustainability (of the state pension system)," the Bundesbank said in its monthly report.  But German government spokesman Steffen Seibert said they stood by retirement at 67.  "Retirement at 67 is a sensible and necessary measure given the demographic development in Germany. That's why we will implement it as we agreed - step by step," he added.

You can see the oil industry's woes for yourself, at anchor in the Firth of Forth. Very Large Crude Carriers are parked off the coast of East Lothian until the price rises, full of North Sea oil recently loaded through the Hound Point terminal.  Onshore storage facilities are full. You can see other tankers at rest and laden with the crude stuff off the coasts of Suffolk and Cornwall.   The gamble made by oil traders is that the cost of storing oil in these tankers - two million barrels in each of the larger ones - is less than the gain to be made out of waiting to sell it.  But industry hopes of a rise in the oil price have been dashed time and time again over the past two years.  Other consequences can be seen over the horizon, on Shell platforms, where Wood Group maintenance workers are back on strike this coming week, in protest at the sharp cut to their pay.  Others have protested at the change to rotas, shifting from two-week turnarounds to three-weeks. The consequences were also clear from another grim week for the oil and gas industry, as the majors unloaded their half year results.  The message was consistent, and no reassurance to those offshore workers facing diminished pay and conditions - the cost-cutting goes on.  As the results were published, the oil price fell yet again. Brent crude fell below $43, down 20% from a peak it reached in early June.  With global supply still buoyant, the short-term expectation is for a continued fall, even if those tankers at anchor in the Forth are a sign of expectations that the price will pick up again before too long.  In Britain, it is no compensation for the oil industry that the dollar value appear more attractive in pounds, following the weakening of sterling. The industry thinks, invests, accounts and reports in US dollars. The exchange rate becomes an issue when it reaches the customer.  That rise in the sterling price for a given dollar rate represents the increased cost, for those who earn and invest and buy their fuel in pounds - businesses and households alike.

Investors’ love for bonds continued in July, with intermediate-term bonds seeing an inflow of $15 billion for the month — the largest inflow of any Morningstar category. Intermediate-term bonds, which have gained 4.74% the past 12 months, have led Morningstar’s monthly report for the past five months. At the same time, investors — mainly with advisers at their sides — yanked $27.3 billion from U.S. stock funds and $5.3 billion from international stock funds. For the most part, investors seem to be driven by fear, not greed, said Todd Rosenbluth, director of ETF and mutual fund research at S&P Global Market Intelligence. “There’s a nervousness among investors, given that we’re in the 8th year of a bull market,” Mr. Rosenbluth said. Rotating into investment-grade corporates isn’t exactly a daring move. “Verizon, ATT, General Electric are all doing fine.” Investors also seem to be less convinced that passively managed fixed income funds are better than actively managed ones, Mr. Rosenbluth said, despite the fact that any supporting data for active management is “mixed at best.” Investors put $13.5 billion into actively managed bond funds, vs. $20.5 billion for passively managed once. In contrast, investors pulled $32.9 billion from actively managed stock funds and added $33.8 billion to actively managed stock funds. The big worry is whether investors are seeking riskier types of bonds in their search for yield. Unfortunately, the answer seems to be “yes.” High-yield bonds, which have returned an average 13.59% this year, saw a $3.2 billion inflow in July. Emerging-markets bond funds saw a $2.9 billion inflow. Those funds have gained 12.88% this year.  Rising interest rates could short-circuit any bond rally, although that doesn’t seem to be a danger in Europe, where the economy is still stagnant. But both high-yield funds and emerging-markets funds could take significant hits if the U.S. or world economy falls further.

Oil charges into bull market territory on hopes of output freeze Brent crude charged into bull market territory, smashing $50 a-barrel, as the world’s biggest oil producers prepared to discuss a possible output freeze at next month’s Opec meeting in an attempt to curb the global supply glut.Since hitting a low of $41.69 on August 3, oil has rallied almost 22pc, touching an intraday high of $50.87 yesterday - its highest level since July 4 when it touched $51.29. The latest leg up in the black stuff is pinned on the hopes that Opec’s meeting in Algeria on September 26 to 28, which takes place on the sidelines of the International Energy Forum, will revive talks on freezing production levels to help bolster prices. It was also lifted by the weak dollar which makes commodities cheaper for other currency holders. However, the oil price bounce comes less than three weeks after it fell into bear market territory, having fallen by more than 20pc from June 8 to July 29 amid oversupply concerns and pressures about slowing economic growth. Joshua Mahony, of IG, cautioned: “Given that this market turned higher almost instantaneously after confirming a bear market earlier in the month, perhaps this definition should be something to worry about rather than drive enthusiasm.”

The return of the bulls prompted oil majors to make gains, BP rose 2.8p at 435.6p, Tullow Oil climbed 5.5p to 239.6p and Amec Foster Wheeler advanced 13.5p to 540.5p.

The Financial Services and Markets Authority (FSMA) of Belgium has issued an announcement to inform that the authority establishes a framework for the distribution of OTC Derivatives (Binary options, CFDs, etc.).According to FSMA’s announcement, the distribution of certain financial derivatives among Belgian retail clients will be restricted as from 18 August 2016. Certain derivatives such as binary options, CFDs with leverage, etc. may not be distributed, and certain distribution practices will also be prohibited. The Regulation drawn up by the Financial Services and Markets Authority (FSMA) on this matter has been approved by royal decree.  The Royal Decree of 21 July 2016 is published with today’s date in the Belgisch Staatsblad/Moniteur belge (Belgian Official Gazette). The Royal Decree approves the FSMA’s Regulation (published in French and Dutch) on the distribution of OTC derivatives. The Regulation applies to derivative contracts distributed to consumers in Belgium, usually from abroad, via electronic trading platforms. According to the providers, these are products that can generate high yields at a time of historically low interest rates. In reality, however, these are products that are marketed aggressively and are extremely risky, often involving transactions over a very short period and without any connection to the real economy.

The Regulation consists of two elements which apply cumulatively. The first element is a ban on distribution of a few specific types of derivative contracts to consumers via electronic trading platforms. These are:

• binary options: a binary option is a contract in which one party undertakes to pay the other party a specified amount if the value of a given asset (listed share, currency, commodity, index, precious metal, etc.) changes in a specified direction within a predetermined – sometimes very short – period (a few seconds or minutes);
• derivative contracts whose maturity is less than one hour;
• derivative contracts with leverage, such as contracts for difference (CFDs) and rolling spot forex contracts. A CFD is a contract between a buyer and a seller in which the parties agree to exchange the difference between the current price of an underlying asset (listed share, currency, commodity, index, precious metal, etc.) and the price of that asset at the end of the contract. A rolling spot forex contract is a type of contract for a foreign exchange transaction which is renewed indefinitely until one of the parties closes its position; at that point, the transaction is settled in cash on the basis of the changes in the underlying currency since the beginning of the contract.

A cultural association based near Barcelona is asking the mobile messaging service WhatsApp to add the porrón to its list of emojis, claiming the spouted glass pitcher possesses a “cultural and social meaning” that warrants recognition. In a petition at Change.org, the Blaus de Granollers argue that the wine flask – beloved of locals and feared and abused in equal measure by tourists who struggle to master its vinous stream – is “a symbol of our land” that occupies a unique place in Catalan culture. “[It] is much more than a kitchen tool,” the group says in a letter to WhatsApp’s CEO, Jan Koum. “It helps to create community, to strengthen bonds during meals.” The porrón, it adds, is passed from hand to hand, allowing many people to drink from the vessel, thereby creating a sense of cohesion and equality.  “It makes you feel part of a team. Besides, it helps us Catalans remember our roots – and you already know that if you lose your roots, you lose your identity.”

Perpetually weak growth has bedevilled attempts to tackle Greece’s chronic debt problem. Back in May 2010, when the European commission, the European Central Bank and the International Monetary Fund organised the first bailout, it was assumed that a rapid recovery and tight budget controls would see Greek national debt as a share of gross domestic product fall steadily. These forecasts proved to be wildly optimistic. As Greece sank deeper and deeper into recession, the debt ratio carried on rising, and now stands at about 180% of GDP.  Unfortunately, lessons have not been learned. The 2015 bailout package assumes that Greece will run a budget surplus, once debt interest payments are excluded, of 3.5% of GDP year in and year out. The IMF, which now has a more realistic assessment of Greece than the commission or the ECB, says few countries have managed to sustain budget surpluses of this size, and that Greece could do so only by further cutting wages and pensions. The IMF also thinks “it is no longer tenable” to imagine that Greece can move from having one of the eurozone’s weakest productivity growth rates to the highest. The IMF says that without debt relief, Greece’s debt could hit 250% of GDP by the middle of the century. Germany would prefer those discussions to be delayed until after its election in autumn next year. But the chances are that Greece will be back in the headlines before then.

Italy's economy failed to grow between April and June as the country struggled with its creaking banking sector. GDP growth shrank to 0% in the second quarter compared to 0.3% in the first quarter.Germany's economy also slowed in the second quarter, albeit less markedly than had been expected.  Europe's largest economy expanded by 0.4%, down from 0.7% in the first quarter, but above forecasts of 0.2%. Overall, a second estimate of GDP across the eurozone confirmed that growth halved to 0.3% from 0.6% in the first three months of the year.GDP also fell across the 28-nation European Union to 0.4% from 0.5% between the first and second quarters.  In Italy, analysts had expected GDP to grow by between 0.1% and 0.3%.Italian Prime Minister Mario Renzi, is battling to reduce the bad debt in its banking sector, which is currently buried under €360bn worth of bad loans. Monte dei Paschi di Siena, Italy's third largest bank and the world's oldest lender, is saddled with €46.9bn of bad debt.  Alberto Bagnai, economic policy professor at the University of Chieti-Pescara, said: "There is no way to solve the banking problem without economic growth. If the whole nation doesn't start earning more it can't pay back its debts - public or private." The government expects the country to grow by 1.2% this year. However, the International Monetary Fund recently reduced its economic growth from 1.1% to 1%.The new data means that growth in the Eurozone's three biggest economies - Germany, France and Italy - has either slowed or completely stalled between the first and second quarters. France recorded no growth between April and June after GDP rose by 0.7% in the first quarter, boosted by business from the Euro 2016 football tournament.

When oil analysts look at the markets to try to get a sense of where oil prices are heading, one of the great unknowns, at least in the U.S. shale industry, is the large volume of drilled but uncompleted wells (DUCs). As oil prices began collapsing two years ago, shale drillers increasingly decided to defer the completion of their drilled wells, hoping to wait out the downturn and bring production online at a later point when prices rebounded.  But with oil prices suffering from a prolonged downturn, the DUCS began to mount, leaving a huge backlog of potential production that was yet to come online. From the point of view of the nascent and fragile oil price recovery (or more accurately, several cycles of recovery in the past year or so), the DUCs threatened to kill off the price rally, as they would bring a flood of new production online right when prices rose high enough.  However, it appears that the “fracklog” is already getting worked through. According to Bloomberg Intelligence, the number of DUCs stopped rising in the first quarter of this year.

 According to Reuters, amid the disputes between the European and Italian authorities, concerning the initiation of a new bail-out program for Italian banks, but without the prior application of the bail-in procedure, Mario Draghi, the president of the ECB, has expressed his support for the governmental aid offered to Italian banks, because "such a program will allow them to sell some of their non-performing loans, which reduce their lending ability". But is such a "release" of Italian banks' lending capability rational and prudent, when the current volume of non-performing loans shows that they are incapable of correctly evaluating risks?  In the recent meeting of finance ministers of the G20 countries, Pier Carlo Padoan, Italy's finance minister said that "we are going in the right direction and there are no risks when it comes to systemic stability", according to an article in Financial Times. Padoan also rejected the possibility of a bail-in, as he said that such a measure would not be necessary. Shortly after Padoan's statements, shares of the Monte dei Paschi bank saw a new massive drop in Milan, according to Bloomberg, over "concerns over the need for a capital increase". Other information on the web indicates that the Italian authorities already know the results of the stress tests, and that has allowed the finance minister to express his faith in the stability of the banking system in the country.  A completely opposed opinion on the financial stability of the Italian financial system comes from the statements several Italian professors gave Financial Times.   Marcello Messori, a professor at the LUISS University of Rome said that "banks have allocated funds in a distorted and not at all selective manner", while Lorenzo Gai, a finance professor at the University of Florence, estimates that the loan portfolio of the Monte dei Paschi bank represents a "a paradigmatic history of value destruction", as "the management of the loan granting process did not work, and that is an euphemism".  This explains the concerns of the Italian authorities rather well, but 50 billion Euros, the amount of the bail-out program "negotiated" with Brussels, will not be enough.

EU Commission president Jean-Claude Juncker appointed former French commissioner for financial services as chief negotiator in charge of negotiations with the UK. Michel Barnier, a 65-year old former French minister and vice-president in the previous Commission between 2010-14, was in charge of the internal market and services.  He sought the job of EU Commission president in 2014, but the task was later given to Juncker, his rival in the conservative European People's Party.   Barnier said in a tweet that he was “honoured to be entrusted” with the post.  He added: "Rendez-vous for beginning of demanding task on 1 October." His official title will be "chief negotiator in charge of leading the Commission Taskforce for the Preparation and Conduct of the Negotiations with the United Kingdom" under Article 50 of the Lisbon Treaty. The UK has not yet triggered the exit procedure under Article 50, and British prime minister Theresa May suggested it is unlikely the UK will launch the process before the end of the year. Michel Barnier will report directly to Juncker and will have a team of experts at his disposal.  He will be regularly invited to the the meeting of the commissioners to brief the college on the negotiations. Juncker said he wanted "an experienced politician for this difficult job", adding: "Michel is a skilled negotiator with rich experience in major policy areas." Most of the negotiations are nevertheless expected to be done by the council, representing member states.  They will have to navigate through the difficult two-year negotiations and find a balance between the UK's access to the single market in exchange for some level of freedom of movement from and within the bloc.  Barnier's France has been urging for a tough exit deal for Britain, as French president Francois Hollande faces challenge ahead of next year's presidential elections from far-right leader Marine Le Pen, who wants France to hold a referendum on its membership.

After the events in Nice, some citizens justifiably complained about the failure of the security measures, in an event celebrating the National Day of France. Furthermore, some of them have announced that they were going to ask the courts to decide who and to what extent was guilty for these criminal "lapses" in the procedures and measures for ensuring people's safety in a public event, which was known and prepared months in advance!!! What was the reaction of the "state"? More specifically, of some of those wallowing in the luxury of the privileges offered by the high official institutions, starting with impotent Hollande himself? They got offended!!! How can that be, some lowly citizens daring to accuse Its Majesty, the State, of failing to honor its contractual obligations???!!! And to add insult to injury, the Internal Affairs minister has announced the subjects of the state of Freedom, Equality and Fraternity that from now on, they can expect events like the one in Nice all the time, events which the state won't be able to prevent in the future, just like it wasn't able to deal with them in the past, as a result of universal fatality!!! The same chilling wind has started blowing in Germany, as, in less than two weeks, there have been three events involving lethal violence in public. So what is the State doing? Sleeping on the job? Who cares about all the paperwork, plans, resolutions and stamps put on who knows what papers, when people are getting killed by bullets, axes or machetes, or by devastating explosions? It is clear that somebody, and not just some persons, but institutions of the state, if not the State itself, is seriously, criminally liable to its citizens!!! It seems the time has come for citizens to hold the state to account. To note the failure to meet the contractual obligations and to plan the restructuring of the institutions that we collectively call the State from the ground up.

 The "standard" model of coups organized by officers and failed is the Operation Valkyrie (Unternehmen Walkure), organized during WW2, to overthrow Hitler. The success or the failure of coups planned and executed by soldiers depends on successfully resolving three problems. The first is "concealment". Officers can't meet in secret in parks to plan a coup and they don't live for decades in foreign countries from where they are "dropped" in the country where they have to execute the coup! The solution always assumes the fact that the planning and staging activities of the coup are visible for the one whose removal from power is being sought, the supreme authority within the state, the supreme commander of the army, whether they are president or king. If the concealment of the coup doesn't work, then the military putsch will often fail in its embryo stage. In the case of Operation Valkyrie, the planning and organization was done under the pretense of a plan for exceptional situations, approved by Hitler himself, meant to prevent the loss of power under the pressure of a mass uprising of the population against the regime, due to the growing discontent and increasing sacrifices made in times of war, on the front as well as at home. It provided for the total transfer of the power in the hands of the reserve army, the legal dissolution and the dismantling of the other institutions of authority such as the SS or the Nazi party (NSDAP), the arrest of the leaders and the placing of the troops under the command of the commanders of military regions. The second condition is the quick removal of the head of state from the game, who legally holds authority over the army. Armies cannot function efficiently with divided loyalties. If the removal doesn't happen as soon as the coup starts, the odds of success fall proportionally, the longer the coup takes.

The 1943 version of the first public statement from the Valkyrie plan began with the words: "Fuhrer Adolf Hitler is dead" !!! In the real "movie" of the operation this item didn't work out, due to the failure of the attack of July 20th.

The eurozone economy grew by 0.6 percent in this year’s first four months, compared to 0.4 percent in last year’s final quarter. Growth is expected to continue this year, although at a lower pace.

Draghi stressed that it was “essential that the bank lending channel continues to function well” in the eurozone.  He said that non-performing loans (NPLs) - bad loans that weigh on banks' results - were a “significant problem for future profitability and for the capacity and the ability the banks have for lending."  The problem is acute in Italy, where banks are faced with up to €360 billion of bad debts. Draghi, a former governor of the Bank of Italy, said the Italian banks issue was “a big problem” that will take time to address.  He said the solution was to create a market to trade NPLs and that governments should pass legislation to foster its development.  He also suggested that public money could be used as a backstop “when in times of exceptional circumstances the NPL market is not well functioning” and to avoid fire sales.  He said the measure would be “useful” but should be agreed with the European Commission.

 He stopped short of saying a public backstop should be put in place to solve the Italian banking crisis. Eurozone politicians outside Italy have so far said this was not necessary.  Pressed to comment on the possibility that Spain and Portugal could be sanctioned by the EU for their excessive deficits, Draghi said the decision was “entirely in the hands of European Commission”.  The EU executive “has the responsibility, the power and the knowledge to take a decision,” he said.

The head of the International Monetary Fund, Christine Lagarde, will stand trial over a state payout to the French tycoon Bernard Tapie, an appeals court has ruled.  She is charged with negligence over the award to Mr Tapie of €404m ($445m; £339m) in 2008 when she was France's economy minister. Ms Lagarde had appealed against a lower court ruling from December. She is now expected to appear before a special court for government ministers.  The case stems from Mr Tapie's sale of his majority stake in the sports equipment company, Adidas, which was handled by the state-owned bank, Credit Lyonnais. The businessman sued for compensation after claiming he was defrauded by the bank and received too little from the sale in 1993.  Ms Lagarde was responsible for the rare decision to appoint an arbitration panel, rather than allowing the courts to decide on the dispute.  She served as economy minister when President Nicolas Sarkozy was in office. Mr Tapie was a supporter of Mr Sarkozy and there were allegations this may have played a role in her decision. She has always denied any wrongdoing, saying she acted in the interest of the state and with respect for the law.  After learning of the decision by France's highest appeals court, Ms Lagarde's lawyer, Patrick Maisonneuve, said he was convinced that the trial would show she was innocent. Reacting to the latest ruling, the IMF said the executive board continued to express confidence in her ability to carry out her duties and was being briefed on developments. Ms Lagarde, who was given a second five-year term as IMF managing director in January, is the third head of the organisation to face legal proceedings. For his part, Mr Tapie is currently appealing against a French court's decision to dismiss the settlement at the heart of the case.

President Francois Hollande has been trying throughout his term to reduce unemployment, long around 10 percent.  Left-wing rebels, who have already failed twice by just two votes in their bid to win a censorship motion against the bill, said they would make a last-ditch attempt to muster 60 signatures from MPs to seize France's Constitutional Council for "non respect of parliamentary debate" after the prime minister rushed through the law without a vote for the third time.  Despite the final vote, leftist unions insisted the fight to see the law scrapped - which has seen dozens of sometimes violent mass protests in recent months and blockades of fuel depots - will continue after a "summer pause". "The anger is still there. The government hasn't seen the end of this," said Philippe Martinez, whose CGT union has spearheaded militant opposition to the law. FO, another leftist union, said that the final debate on the law should have been postponed "for democratic reasons" given the "context linked to terror attacks and the debate going on in parliament on prolonging the state of emergency". The small and medium-sized businesses union, CGPME has dismissed the law, saying it "won't help in any way to create jobs". The larger employers' union Medef has called the reform "failed" as it watered down several key points but said it brings progresses in some areas. In a scathing editorial, Le Monde, the daily newspaper of reference, said the government had "pulled off the feat of turning this 'great social reform' into a fiasco" due to a "calamitous method" that has split the Left, the labour and employers' unions.

MUNICH, July 22 (Reuters) - Gunmen went on a shooting rampage in a shopping mall in the southern German city of Munich on Friday, killing and wounding many people, police said.  Authorities were evacuating people from the Olympia mall but many others were hiding inside. The Bavarian Interior Ministry said three people were dead, NTV television reported. A Munich police spokeswoman said multiple people were killed or wounded.  "We believe we are dealing with a shooting rampage," the spokeswoman said.  More than one gunman was believed to be involved and no one had been arrested, she said.  "We believe there was more than one perpetrator. The first reports came at 6 p.m., the shooting apparently began at a McDonald's in the shopping center. There are still people in the shopping center. We are trying to get the people out and take care of them."  Police special forces had arrived at the scene, NTV said.  It was not immediately clear who carried out the attack, which took place a week after an axe-wielding teenager went on a rampage on a German train. Islamic State claimed responsibility for that attack.

  In a banking system built on the foundation of money being created by banks through granting loans and fractional reserves, insolvency is the natural state of things.  In this context, the confidence of the depositors and the guarantees granted by the state, along with the permanent support of the central banks, represent essential conditions for the functioning of financial institutions. "The truth about banks" is the title of an article from the Finance & Development magazine of the IMF (author's note vol. 53, no. 1, March 2016), in which the authors, Michael Kumhof and Zoltan Jakab, write that "banks create new money when they grant loans, a phenomenon which can start and exacerbate financial crises".   Creating money out of thin air represents "a critical vulnerability of financial systems" for two reasons which have been known at least since the time of the Great Depression in the first half of the 20th century. First of all, "if banks are free to create money when they grant loans, then that amplifies the potential to create cyclical booms and busts, especially when banks mistakenly assess the debtors' repayment ability", according to the economists of the IMF.