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German Pope, Italian Central Banker

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by Gary North
Posted November 24, 2011 

CONCLUSION: EUROPE IS IN BAD SHAPE. This is hedge fund manager Kyle Bass’s assessment of the situation in Europe. He stated this in a rousing interview on the BBC’s TV network. Here is the segment:

He made two crucial points – points that stock market investors are ignoring. First, over the last nine years, there has been an increase of world debt from $80 trillion to $210 trillion. These numbers are staggering. Global debt over the last nine years has grown at 12% per year, while GDP has grown at 4% per year.

While he did not verbally spell out the conclusion for the interviewer, it is this: when credit must grow by 12% per year in order to produce 4% GDP growth, at some point there will not be enough GDP to supply sufficient credit. It is time once again to quote economist Herb Stein: “When something cannot go on forever, it has a tendency to stop.”

Bass had a great metaphor: the PIIGS have “sailed into a zone of insolvency.” Second, he explained, the sovereign debts in Europe will be written down. There is no other solution. The airhead interviewer with the Oxbridge accent seemed to be doing a college-skit imitation of Emma Thompson. She challenged him. What about Germany? Can’t Germany continue to fund Europe’s “southern neighbors”? Germany has “the earning power.” (Note: this means German taxpayers.)

Bass responded instantly. First, the German court has determined that any further bailouts are unconstitutional. Second, Greece – and, by implication, the other “southern neighbors” – will spend every euro it borrows from Germany and then come back for more, threatening a default if its demands are not met – exactly what it has done so far. This goes on until the write-down takes place, which it will.

There are two ways of looking at this: the Bass way and the Bass-ackwards way. The airhead chose the latter.

He draws conclusions from the numbers. No one in the mainstream media and mainstream investment fund world seems to be willing to do this. They talk and invest as if the process can go on forever. Debts need not be repaid. This is ancient Keynesian dogma that goes back to the New Deal. “We owe it to ourselves.” On the contrary, specific borrowers owe it to specific creditors. At some point, the specific borrowers are going to default, leaving specific creditors with huge losses. How huge?

THREE TRILLION EUROS!

Charles Hugh Smith agrees with Bass. He says that there will have to be a write-down. By “write-down” he means write-off. He estimates the losses at three trillion euros. Someone will have to take the hit. The great political debate in Europe today is over who will take this hit, and how soon.

It will be investors. But, to forestall the day of reckoning, Europe’s politicians pretend that taxpayers’ credit lines can be used by superficially solvent Northern European governments in order to borrow more money from creditors in order to lend to the PIIGS’s governments, so that the PIIGS’s governments can continue to (1) delay real austerity measures, i.e., massive layoffs of government workers and massive cuts in welfare payments, and (2) make payments on what they owe to investors, mainly banks.

Smith admits that three trillion euros is a guess. Nobody knows how much bad sovereign debt there is, so we must start somewhere. In a world of $210 trillion worth of debt, his estimate seems reasonable to me.

Let’s start with the most basic fact about all this uncollectible, impaired, bad debt: every euro of debt is somebody else’s asset. Wipe out the debt and you wipe out the asset. That’s why there’s no willingness to accept the writedown of debt: somebody somewhere has to suck up 3 trillion euros of loss.

This is the source of Europe’s present policy of “kick the can,” or more accurately, “kick the can with press releases and summits.” If there were a pain-free solution, it would have been implemented long ago. There is no way Europe is going to “grow its way out of this debt.” How much of the eurozone’s “growth” was the result of rampant malinvestment and risky borrowing? More than anyone dares admit. It won’t take austerity to crash the euroland economy, all it will take is turning off the debt spigot.

Europe is facing the problem that Bass raised when he spoke of 12% per year increases of credit and 4% increases per year of GDP. There is no way to grow your way out of this. This is not just Europe’s problem. It is the world’s problem. But Europe is facing it now because the debts are coming due now. They must be rolled over. Creditors must agree to re-lend. But why should they?

The Establishment world of crony capitalism speaks of “re-structuring” the debt. What does this mean? Smith does not pull any punches.

“Restructuring” is a code word for writeoffs. Here, let me “restructure” the euro bond you bought at a 4% coupon yield. Now you’re going to get 2%, and you’re going to like it. Bang, your bond just lost half its market value, but everyone gets to keep it on the books at full value. Nice, until you have to sell it to raise cash. Oops, the euro has slipped in value so you lost more than 50%.

The banks keep the assets on the books at face value. The underlying value is down by at least 50% for Greek bonds. The European experts admit this. (Why the debt is worth that high a percentage is beyond me.) The Greeks are going to default, one way or another.

Who will take the hit? Smith writes: “There’s a fundamental truth that everyone has to understand: what the government spends, the public will pay for sooner or later, whether in taxes or inflation or having their debt defaulted on.” This is reality. But it’s not precise enough.

WHO IS THE PUBLIC?

If there is hyperinflation – price inflation above 30% per year for a decade or more – the public that takes the hit will be almost everyone inside the eurocurrency zone. There will be almost universal hardship.

On the other hand, if monetary inflation ceases for more than a few months, there will be a depression. Big banks will fail. Their depositors will lose everything. The money supply will shrink. It will be 1930-38 all over again.

Central bankers do not allow such things. The European Central Bank will try to walk the tightrope, just as the national central banks in Europe did after World War II. The ECB will pursue boom-bust policies, refusing to capitulate either to a Great Depression or hyperinflation.

But how can it walk this tightrope? The losses will be huge for large banks. The politicians will try to transfer the cost of bailing out Europe’s banks to Germany. But the debts are too large.

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German endgame for EMU draws ever nearer

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by Ambrose Evans-Pritchard
Telegraph International Business Editor
Posted September 4, 2011

For fifty years Germany has invariably stumped up the money required to keep Europe’s Project on track, responding to unreasonable demands with grace and generosity. We will find out to what extent Germany’s constitutional court (pictured) shares these views when it rules this Wednesday on the legality of the EU rescue machinery. Photo: AP


It bankrolled French farmers through the Common Agricultural Policy, that disguised tithe for war reparations. It then bankrolled Spanish farmers as well. It funded each new wave of EU expansion, though reeling itself from the €60bn annual cost of its own reunification. It gave up the cherished D-Mark, the anchor of German economic stability.

We are so used to German self-abnegation for the sake of Europe that we can hardly imagine any other state of affairs. But the escalating protest against EMU bail-outs by Germany’s key insistutions go beyond the banalities of money. The fight is over German democracy itself.

Those who talk of a Fourth Reich or believe that EMU is a “German racket to take over the whole of Europe” – as Nicholas Ridley famously put it – have the matter backwards.

Germans allowed their country to be tied down with “silken cords”. They are the most reliable defenders of freedom and parliamentary prerogative in Europe, precisely because they know their history. Finance minister Wolfgang Schäuble could hardly have chosen a more toxic term than “Bevollmächtigung” or general enabling power when he requested blanket authority from the Bundestag for EU rescues, as if Weimar were so soon forgotten. He was roundly rebuffed.

You can feel the storm brewing in Germany. Within days of each other, President Christian Wulff accused the European Central Bank of going “far beyond” its mandate and subverting Article 123 of the Lisbon Treaty by shoring up insolvent states, and Bundesbank chief Jens Weidmann said bail-out policies had “completely gutted” the EU law.

Both believe the EU Project has taken a dangerous turn. Fiscal powers are slipping away to a supra-national body beyond sovereign control. “This strikes at the very core of our democracies. Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies,” said Mr Wulff.

Otmar Issing, the ECB’s founding guru, fears that the current course must ultimately provoke the “resistance of the people”. Instead of evolving into an authentic union with a “European government controlled by a European Parliament” on democratic principles, it has become deformed halfway house.

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September 2011: 25 signs that the financial world is about to hit the big red panic button

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from The Economic Collapse
Posted August 30, 2011

MOST OF THE WORST FINANCIAL PANICS IN HISTORY HAVE happened in the fall. Just recall what happened in 1929, 1987 and 2008. September 2011 is about to begin and there are all kinds of signs that the financial world is about to hit the big red panic button. Wave after wave of bad economic news has come out of the United States recently, and Europe is embroiled in an absolutely unprecedented debt crisis. At this point there is a very real possibility that the euro may not even survive.

What is causing all of this? Over the last couple of decades a gigantic debt bubble has fueled a tremendous amount of “fake prosperity” in the western world. But for a debt bubble to keep going, the total amount of debt has to keep expanding at an ever increasing pace. Unfortunately for the global economy, sources of credit are starting to dry up. That is why you hear terms like “credit crisis” and “credit crunch” thrown around so much these days. Without enough credit to feed the monster, the debt bubble is going to burst. At this point, virtually the entire global economy runs on credit, so when this debt bubble bursts things could get really, really messy.

Nations and financial institutions would never get into debt trouble if they could always borrow as much money as they wanted at extremely low interest rates. But what has happened is that lending sources are balking at continuing to lend cheap money to nations and financial institutions that are already up to their eyeballs in debt.

For example, the yield on 2 year Greek bonds is now over 40 percent. Investors don’t trust the Greek government and they are demanding a huge return in order to lend them more money.

Throughout the financial world right now there is a lot of fear. Lending conditions have gotten very tight. Financial institutions are not eager to lend money to each other or to anyone else. This “credit crunch” is going to slow down the economy. Just remember what happened back in 2008. When easy credit stops flowing, the dominoes can start falling very quickly.

Sadly, this is a cycle that can feed into itself. When credit is tight, the economy slows down and more businesses fail.  That causes financial institutions to want to tighten up things even more in order to avoid the “bad credit risks”. Less economic activity means less tax revenue for governments. Less tax revenue means larger budget deficits and increased borrowing by governments. But when government debt gets really high that can cause huge economic problems like we are witnessing in Greece right now. The cycle of tighter credit and a slowing economy can go on and on and on.

I spend a lot of time talking about problems with the U.S. economy, but the truth is that the rest of the world is dealing with massive problems as well right now. As bad as things are in the U.S., the reality is that Europe looks like it may be “ground zero” for the next great financial crisis.

At this point the EU essentially has three choices. It can choose much deeper economic integration (which would mean a huge loss of sovereignty), it can choose to keep the status quo going for as long as possible by providing the PIIGS with gigantic bailouts, or it can choose to end of the euro and return to individual national currencies.

Any of those choices would be very messy. At this point there is not much political will for much deeper economic integration, so the last two alternatives appear increasingly likely. In any event, global financial markets are paralyzed by fear right now. Nobody knows what is going to happen next, but many now fear that whatever does come next will not be good. The following are 25 signs that the financial world is about to hit the big red panic button….

#1 According to a new study just released by Merrill Lynch, the U.S. economy has an 80% chance of going into another recession.

#2 Will Bank of America be the next Lehman Brothers?  Shares of Bank of America have fallen more than 40% over the past couple of months. Even though Warren Buffet recently stepped in with 5 billion dollars, the reality is that the problems for Bank of America are far from over. In fact, one analyst is projecting that Bank of America is going to need to raise 40 or 50 billion dollars in new capital.

#3 European bank stocks have gotten absolutely hammered in recent weeks.

#4 So far, major international banks have announced layoffs of more than 60,000 workers, and more layoff announcements are expected this fall. A recent article in the New York Times detailed some of the carnage….

A new wave of layoffs is emblematic of this shift as nearly every major bank undertakes a cost-cutting initiative, some with names like Project Compass. UBS has announced 3,500 layoffs, 5 percent of its staff, and Citigroup is quietly cutting dozens of traders. Bank of America could cut as many as 10,000 jobs, or 3.5 percent of its work force. ABN Amro, Barclays, Bank of New York Mellon, Credit Suisse, Goldman Sachs, HSBC, Lloyds, State Street and Wells Fargo have in recent months all announced plans to cut jobs — tens of thousands all told.

#5 Credit markets are really drying up. Do you remember what happened in 2008 when that happened? Many are now warning that we are getting very close to a repeat of that.

#6 The Conference Board has announced that the U.S. Consumer Confidence Index fell from 59.2 in July to 44.5 in August.  That is the lowest reading that we have seen since the last recession ended.

#7 The University of Michigan Consumer Sentiment Index has fallen by almost 20 points over the last three months.  This index is now the lowest it has been in 30 years.

#8 The Philadelphia Fed’s latest survey of regional manufacturing activity was absolutely nightmarish….

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009

#9 According to Bloomberg, since World War II almost every time that the year over year change in real GDP has fallen below 2% the U.S. economy has fallen into a recession….

Since 1948, every time the four-quarter change has fallen below 2 percent, the economy has entered a recession. It’s hard to argue against an indicator with such a long history of accuracy.

#10 Economic sentiment is falling in Europe as well. The following is from a recent Reuters article….

A monthly European Commission survey showed economic sentiment in the 17 countries using the euro, a good indication of future economic activity, fell to 98.3 in August from a revised 103 in July with optimism declining in all sectors.

#11 The yield on 2 year Greek bonds is now an astronomical 42.47%.

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In this grave crisis, the world’s leaders are terrifyingly out of their depth

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by Peter Oborne
Posted August 6th, 2011

Ineffectual: an emergency telephone conference among the G7 finance ministers feels as relevant as a Bourbon family get-together in the summer of 1789

CERTAIN YEARS HAVE GONE DOWN IN HISTORY AS GREAT GLOBAL TURNING POINTS, after which nothing was remotely the same: 1914, 1929, 1939, 1989. Now it looks horribly plausible that 2011 will join their number. The very grave financial crisis that has hung over Europe ever since the banking collapse of three years ago has taken a sinister turn, with the most dreadful and sobering consequences for those of us who live in European democracies.

The events of the past few days have been momentous: the eurozone sovereign debt crisis has escaped from the peripheries and spread to Italy and Spain; parts of the European banking system have frozen up; US Treasuries have been stripped of their AAA rating, which may be the beginning of a process that leads to the loss of the dollar’s vital status as the world’s reserve currency.

There have been warnings that we may be in for a repeat of the calamitous events of 2008. The truth, however, is that the situation is potentially much bleaker even than in those desperate days after the closure of Lehman Brothers. Back then, policy-makers had at their disposal a whole range of powerful tools to remedy the situation which are simply not available today.

First of all, the 2008 crisis struck at the ideal stage of an economic cycle. Interest rates were comparatively high, both in Europe and the United States. This meant that central banks were in a position to avert disaster by slashing the cost of borrowing. Today, rates are still at rock bottom, so that option is no longer available.

Second, the global situation was far more advantageous three years ago. One key reason why Western economies appeared to recover so fast was that China responded with a substantial economic boost. Today, China, plagued by high inflation as a result of this timely intervention, is in no position to stretch out a helping hand.

But it is the final difference that is the most alarming. Back in 2008, national balance sheets were in reasonable shape. In Britain, for example, state debt (according to the official figures, which were, admittedly, highly suspect) stood at around 40 per cent of GDP. This meant that we had the balance sheet strength to step into the markets and bail out failed banks. Partly as a result, national debt has now surged past the 60 per cent mark, meaning that it is impossible for the British government to perform the same rescue operation without risking bankruptcy. Many other Western democracies face the same problem.

The consequence is terrifying. Policy-makers find themselves in the position of a driver heading down the outside lane of a motorway who suddenly finds that none of his controls are working: no accelerator, no brakes and a faulty steering wheel. Experience, skill and a prodigious amount of luck are required if a grave accident is to be averted. Unfortunately, it is painfully apparent that none of these qualities are available: Western leaders are out of their depth.

Barack Obama feels more and more like a president from the Jimmy Carter tradition: well meaning but ineffectual. And contemplate the sheer fatuity of the statement issued by Angela Merkel’s office on Friday night: “Markets caused the drama. Now they have to make sure to get things straight again.” This remark reveals in the German Chancellor a basic inability even to grasp the nature, let alone understand the scale, of the disaster facing Europe this weekend. Such a failure of comprehension is entirely typical of a certain type of leader throughout history, at times of grave international urgency.

An emergency telephone conference among the finance ministers of the G7 (membership: United States, Japan, Britain, Germany, France, Italy and Canada) has been convened. There was a time when this organisation – with its sublime pretence that financial powerhouses such as India, China and Brazil do not exist – counted for a great deal. This latest discussion feels as relevant as a Bourbon family get-together in the summer of 1789.

Another symptom of the frivolity of the European political class is that the European Central Bank is being urged to intervene in the Italian bond market to restore stability. Standard & Poor’s and Moody’s do not produce ratings for the ECB, but if they did, it would be given junk bond status, or worse. The ECB is bankrupt, and this would be evident for all to see but for the fact that it has grossly overvalued the practically worthless Greek, Irish and Portuguese bonds in its portfolio. At some point, eurozone states will be asked to fill the massive holes in the ECB’s balance sheet, and matters will then get messy. Some may plead poverty; others will point out that the constitution of the ECB specifically prevents it from purchasing national bonds, and that its market operations must have been ultra vires.

Furthermore, it is unclear to whom the ECB – whose dodgy accounting, reckless investments and contemptuous disregard of banking standards make even the most irresponsible Mayfair hedge fund look like a model of propriety – is ultimately accountable. The idea that it can step effectively into the Italian bond market, whose total value of around 1.8 trillion euros makes it larger by far than Greece, Portugal and Ireland combined, is a joke.

Wake up: the eurozone is very close to collapse. It will come as no surprise if some Italian and Spanish banks are forced to close their doors in the course of the next few weeks. Indeed, British holidaymakers on the Continent should be advised to take care: hold only the minimum of the local currency, and treat with especial suspicion euro notes coded Y, S and M (signifying they were printed in Greece, Italy and Portugal respectively). Take plenty of dollars with you, which shopkeepers will certainly accept if there is a run on the banks, or if euros suddenly cease to be legal currency. The precautions may not prove necessary, but there is no point in taking risks.

Where does this leave Britain? First of all, there is no point intruding on private grief. Nothing we can do or say will solve the problems of the eurozone. George Osborne does, however, face one overriding imperative: he must maintain the British national credit. Fortunately, the Chancellor grasps this essential point very clearly. After last year’s general election, he took exactly the right steps to cut the deficit. He must not be driven off course, or the markets will refuse credit to Britain as well (a point that Ed Balls, Labour’s economic spokesman, appears not to understand). An economic firestorm is heading our way, and Britain will be doing very well just to survive.

This is just a warm up for what’s coming our way

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by Graham Summers
Phoenix Capital Research
Posted originally June 3, 2011

Despite the fact we were told repeatedly that the Greece situation was solved just 12 months ago, the country is once again at the forefront of the ongoing crisis in the Euro-zone. Having already thrown billions at this problem last year, this time around European officials are actually considering REAL solutions, i.e. Greece leaving the Euro-zone. Of course, as soon as these rumors surfaced, several Greek officials (who never seem to be named) quickly responded to say the rumors are unfounded.

At this point it is clear that the Euro-zone will be restructured in the near future. Whether or not it will change with Greece alone leaving the EU, or if we see multiple players drop out, one thing is clear: the EU in its current form is finished.

How we get to this outcome remains to be seen. But the “Greece issue” serves as a perfect illustration of the central issues plaguing the world financial system today. Consider that Greece’s entire GDP is less than $330 billion (about the same size as the state of Massachusetts). The country also has a debt to GDP levels of over 100% and deficit of around 12%. In other words, it’s clear, plain as day that the country is broke. So why does Greece matter so much to the EU? The answer is quite simple: derivatives and the interconnectedness of the global banking system.

It’s now well documented that Greece should never have been allowed to join the EU. The only way it met the fiscal requirements was by using off balance sheet derivatives (crafted by Goldman Sachs and pals naturally) to hide the true state of its financial health. However, once Greece entered the EU, its bonds quickly entered the toxic debt game of “hot potato” amongst the EU banks. By the time the European crisis erupted last year, German and French banks were on the hook for $65 billion and $82 billion of Greece’s debt, respectively.

Small wonder then that these more fiscally sound countries pushed to bail Greece out. Failure to do so would mean a banking crisis in either country. So banks got the EU into this mess in the first place (Wall Street helped hide Greece’s true debt loads to get Greece into the EU) and now banks are making sure that European taxpayers pony up the cash for this dishonesty (German and French banks are leaning on politicians to not allow Greece to collapse).

And so here we are, with austerity measures and higher taxes occurring in Europe because of bankers’ greed and dishonesty. Having realized that their politicians aren’t going to do the right thing, the people are now openly expressing their disgust at the ballot box (Angela Merkel’s party is getting slammed in Germany for supporting the bailouts) and the streets (protests are occurring across Europe).

And it’s just a taste of what’s coming to the US.

Indeed, everything happening in Europe right now (civil unrest, political turmoil, currency crisis) is coming to the US’s shores in the future. We are running similar debt-to-GDP ratios, deficits and our banking system is similarly laden with worthless derivative garbage.

Again, the same upheaval happening in Europe will come to these shores. It’s only a matter of time. Which is why the wise thing to do is prepare in advance of this. This means getting some food, water, and bullion on hand. It also means considering what one would do if the stock market came undone again.

Secession: An Answer to the Sovereign Debt Crisis

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by Ron Holland
Posted originally May 12, 2011

GET READY AS SECESSION IS COMING SOON TO A FAILED UNION NEAR YOU. Over the weekend, the news has been full of reports about Scotland getting ready to vote on independence from the United Kingdom after the election victory by the Scottish National Party. The UK has stated it will abide by the coming referendum but we fear the Bank of England, their central bank will not be so agreeable.

Also we hear with the usual denials, that Greece is considering withdrawing from the Eurozone due to their sovereign debt problems. The Greek leadership believes dumping the Euro and creating their own currency will allow them to inflate their sovereign debts away as well as getting the country out of recession and forced austerity from Brussels. These same Greek politicians should have thought of this when earlier receiving their big payoffs and incentives to force the nation into the EU. They will claim the motive now is patriotism to save the nation as sometimes even politicians will become patriots when necessary but we expect they see another graft opportunity.

The European Central Bank (ECB) will not be pleased with Greece because its Greek bond portfolio will suffer. Also these free-market human political actions where individuals decide their future rather than distant central banking cartels and eurocrats threatens the entire European Union. We think this is great as the EU and ECB were just a sham and power grab from the beginning for power hungry European elites not content with just pillaging their own citizens.

Solving the Sovereign Debt Crisis

Secession is the right for an area to leave a government tax jurisdiction (national boundaries) based on the will of a majority of the voters in the geographic area wishing to peacefully withdraw by democratic means and create a government more in tune and controlled by the citizens in the region.  Often just the threat to withdraw from a larger union is enough to cause the central government politicians and central banking cartel to better follow the needs and dictates of the people. But when all other political remedies fail, secession is often the final solution to an elite political and central banking tyranny which steals from the people for the benefit of the controlling Anglo-American monetary elites in many Western nations.

The establishment media avoids like the plague the only real solution to the sovereign debt crisis around the world because they are totally controlled and exist only to protect the elites which created the sovereign debt crisis in the first place.  Today democratic secession is starting to happen in Scotland and Greece and this peaceful political tool is a real alternative to forced unions like the American and European Union as well as national politicians on the take that pillage their own individual nations.

Today, most forced, arbitrary unions of nation states are ended by negotiation, democratic voting by the regional citizens involved and then a friendly and cooperative relationship with the former state. Scotland which was annexed into the British Empire by terrible wars and force of arms over hundreds of years will likely soon depart peacefully as did the old nation of Czechoslovakia split into the Czech and Slovakia Republics back in 1993.

Creating a New Currency

I fear, here in the US, if we fail to take the necessary political actions to protect our wealth now at a time of our choosing, then foreign creditors and markets will decide when the American debt and the dollar are finished. Secession is one alternative and I hope others will come up with a better solution. But citizens of every overly indebted state need to ask themselves and their political representatives a few questions:

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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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