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ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

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Europhrenia

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by Gonzalo Lira
Posted originally June 1, 2011

http://gonzalolira.blogspot.com/2011/06/europhrenia.html

ACCORDING TO THE DICTIONARY, SCHIZOPHRENIA IS “A LONG-TERM MENTAL DISORDER of a type involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception, inappropriate actions and feelings, withdrawal from reality and personal relationships into fantasy and delusion, and a sense of mental fragmentation.”

In Europe, they’re having the same thing—only writ large: It’s not that the political/financial leadership of Europe is at odds with the people—it’s that they’re two minds locked in a single body, struggling for control. In the one hemisphere of this divided brain, the political/financial leadership is convinced the European union is something devoutly to be wished—no matter what the costs, no matter what fortune and the people throw up in opposition.

In the other hemisphere of the europhrenic brain, the people of Europe overwhelmingly do not want integretation “at all costs”. In some parts (a lot of parts) of Europe, they don’t want integration at all.

Now, like a lot of schizophrenics, europhrenia has been latent over the past dozen years—since the 1999 monetary union, as a matter of fact—because everything’s been going great guns. This is natural—and completely predictable: You ever see a schizophrenic have a break-down when he’s happy, high, and just got laid? No, you do not—he only has his little “episode” when he’s stressed. Same with europhrenia: Everything was copacetic between 1999 and 2008—though there were signs of the disease. In fact, lots of unmistakable signs of europhrenia:

• No country ever voted for monetary union—ever. European monetary integration only ever happened by either government diktat or the legislature overriding the will of the people.

• Switzerland is not a eurozone member because, although the political leadership rather desperately wanted in on the union, legally the only way to do such a monetary union is through a Swiss-wide referendum—and the Swiss political leadership knew that they would lose any such referendum.

• In the nations where the European Constitution was put to a vote in 2005—Spain, France, Holland, Luxembourg—the results were so embarrassing that the other countries retreated on a referendum. In Spain, the Yes vote won—but in the lowest voter turn-out in Spain ever—while in France and Holland, the Constitution lost by resounding margins. And this was back in 2005, when everything was booming. In the end, rather than face the electorate, the European Constitution was superceded by the Treaty of Lisbon—a work-around that short-circuited the democratic process, and got the European leadership what it wanted. These examples are to emphasize one and the same thing: The people of Europe never wanted total European integration, not even in the best of times—whereas the European leadership adamantly insisted upon it.

Now, we are no longer basking in the golden glow of good times: On the contrary, Europe is facing a nasty solvency crisis. So naturally, we’re heading into the manic phase of europhrenia.

The basic problem of the current crisis is, countries of the European periphery—Greece, Ireland, Portugal, Spain, Italy—took on too much cheap debt from banks in the core eurozone countries—France, Germany and Holland—and now are unable to pay for it. It’s not more complicated than that.

(One could argue that the reason the European nations overspent was that the leaders were basically bribing the people with a false sense of affluence, bought and paid for via debt, so that they would acquiesce to the European Union and the eurozone. But that’s for another post.)

There are five ways to get over an unpayable sovereign debt:

1. Default on the debt.

2. Restructure the debt, with both sides making sacrifices.

3. Inflate the currency, as the United States is currently doing.

4. Lend more money in the form of “bailouts”, which is essentially kicking the can down the road.

5. Or squeeze blood from a stone—i.e., impose austerity measures.

Option #1—default—helps no one, and wrecks economies in the short term. Option #3—inflating the currency—is a bad idea for the euro, as it is too young a currency—if the ECB starts really inflating, there might well be a panic out of the euro. Option #4—lending more money—is just postponing the day of reckoning, while adding more to the debt burden. And Option #5—austerity measures—cripples an economy by leaving it too weak to grow its way out of the solvency jam that it’s in.

The sensible thing, of course, would be Option #2: Restructure the debts of these countries, much like during the Latin American debt crisis in the early ‘80s, whereby everyone shares the pain, equally. Banks and other creditors take haircuts, countries are put on a fixed payment schedule and reduced credit availability: Everybody takes a hit, but nobody gets killed. Everybody moves on—bruised but otherwise okay.

Has the political and economic leadership of Europe chosen the sensible approach?

Can PIIGS fly?

The political and economic leadership of Europe has collectively chosen Options #4 and #5: They are lending more money to the insolvent nations—Portugal, Italy, Ireland, Greece and Spain—thereby adding more debt to their burden. And they are imposing austerity measures on the politically weaker countries, specifically Greece and Ireland now—but Spain, Portugal and Italy soon enough.

More loans via bailouts are of no help—they just kick the can down the road, while simultaneously making that can bigger.

Austerity measures naturally hurt an economy by slowing it down—and a slowing economy creates a whole host of problems: Unemployment, poverty among the elderly and the young, generalized discontent, all the rest of it.

But the leadership of Europe seems unperturbed: They’re going hell-bent-for-leather in the direction of bailouts and austerity—which seems strange: It would be a bit like giving an addict both more heroin and insisting he go cold turkey—I mean, make up your mind, right?

So why is the political and economic leadership of Europe insisting on both more loans and more austerity? Why, simplicity itself:

In the current eurozone crisis, the leadership class in Europe has identified the well-being of the banks with their own well-being—to the detriment of the well-being of the Continent, and of the people of Europe.

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ECB allows Irish Central Bank to counterfeit 51 Billion Euros

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by Mike “Mish” Shedlock
Originally posted January 18, 2011

http://globaleconomicanalysis.blogspot.com

Ireland central bank counterfeited 51 billion Euros out of thin air. The amount is not backed by government bonds. Nor was it a loan from the ECB or anyone else. The money is counterfeit in every sense of the word.

Please consider the facts as depicted in Central Bank steps up its cash support to Irish banks financed by institution printing own money. (see below)

The Irish Independent learnt last night that the Central Bank of Ireland is financing €51bn of an emergency loan programme by printing its own money. The figures also provide the latest evidence that responsibility for funding Ireland’s broken banks is being pushed increasingly back on to Irish taxpayers. The loans are recorded by the Irish Central Bank under the heading “other assets”.

A spokesman for the ECB said the Irish Central Bank is itself creating the money it is lending to banks, not borrowing cash from the ECB to fund the payments. The ECB spokesman said the Irish Central Bank can create its own funds if it deems it appropriate, as long as the ECB is notified.

Other Assets? What Other Assets?
It’s OK to print money as long as the ECB is notified?! Excuse me, but this is in direct violation of every EU treaty. Besides, counterfeiting is a crime everywhere. There are no “other assets” in play. The bookkeeping is fictitious. This printing is not backed by bonds. No one in their right mind would buy such bonds. The Irish Central Bank simply counterfeited 51 Billion Euros out of thin air and distributed the money to Irish banks.

Currently, there is talk about the need to expand the size of the €440bn bail-out fund. This little exercise has me wondering, “why expand anything?” Let’s solve the problem by letting Greece print Euros, Italy print Euros, Spain print Euros, Portugal print Euros, and Belgium print Euros.

As long as you are counterfeiting, and as long as the ECB doesn’t mind, why not have every country print enough Euros to pay back all European sovereign debt? Every country can be debt free in seconds. I hope everyone understands the sarcasm. This is an amazingly slippery slope and I am surprised Germany is not screaming bloody murder over it.

“Emergency Loans”
Ambrose Evans-Pritchard talked about this mad state of affairs in Irish lenders besiege central bank for emergency loans. However, he too missed the counterfeit angle.

Irish banks are running out of collateral they can use to borrow from the European Central Bank, turning instead for emergency support from their own central bank on an unprecedented scale.

Above: The cement mixer which was driven into the gate of Ireland’s Parliament Building, in protest at the bailout of Ireland’s banks. Photo: AFP

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