We were stunned 10 days ago when, out of the blue, it seemed as if Deutsche Bank had finally figured it out: namely that constant central bank intervention is leading to increasingly more dire outcomes… such as a surge in DB CDS and its stock price plunging to record lows.

The bank which had been crushed over the past month, released a solemn appeal to the ECB and BOJ, in which it made it quite clear that any additional easing and continuous easy money will only hurt both DB and its peer banks.

In the report titled “10 days ago when” Deutsche Bank’s Parag Thatte warned that with the Zero Lower Bound already breached in nearly a third of global markets, the benefits to risk assets from further easing no longer exist, and in fact it says that while central banks have hoped that such measures would “push investors out the risk spectrum” the “impact has been exactly the opposite.”

Well, what a difference a week makes, because whoever wrote the first DB clearly got a tap on the shoulder.

Over the weekend, it was Deutsche Bank once again who reappeared with a narrative that, not all surprisingly, was the diametrical opposite of what DB said just one week earlier, when it made it very clear,  that “sorry, it was only kidding”, and that it is all up to the central banks after all. This is what Sebastian Raedler said, after he angrily took the podium over from last week’s Parag Thatte.

Without policy intervention, there is more downside risk for equities: any ECB measure to support European banks (e.g., an LTRO to reduce bank funding stress) would likely trigger a market rally, but addresses only a symptom of the current credit stress, not the root cause. To avoid a further rise in US defaults, we will likely need to see a Fed relent,leading to a sustainable drop in the dollar, higher oil prices and reduced energy balance sheet stress. The problem is that there is little sign of the Fed wanting to give up (with the JOLTS survey strong and Yellen’s remarks that easing elsewhere offsets Fed tightening). In the absence of strong policy intervention, more downside for European equities is likely:if credit spreads rise to 1,150bps to reflect our strategists’ default scenario of 7.2%, this points to 10% downside for equities, while a full default cycle would mean around 20% downside. A US default cycle would increase the risk of a US recession, as the rising cost of debt capital reduces investment and hiring, while falling asset prices push up savings ratios, thereby lowering consumption growth. Our US economists have recently downgraded their 2016 growth forecast to 1.2%, significantly below consensus at 2.2%. During the past two default cycles, IT, autos and consumer durables have all seen their consensus EPS slashed by 80%+.