Quantum Pranx

ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Posts Tagged ‘European fiscal crisis

The Charade of World Depression

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from The Daily Bell
Posted originally, December 23, 2010

Self-righteous Germany must accept a euro-debt union or leave EMU If Germany and its hard-money allies genuinely wish to save the euro – which is open to doubt – they should stop posturing, face up to the grim imperative of a Transferunion, and desist immediately from imposing their ruinous and reactionary policies of debt deflation on southern Europe and Ireland … One can sympathise with the German people. Their leaders in the 1990s told them “famine in Bavaria” was more likely than the preposterous suggestion that Germany might have to bail out countries as a result of EMU. But events have moved … Chancellor Angela Merkel must know that the Spanish state, juntas, and banks cannot refinance €300bn (£254bn) next year at a bearable cost if the Tesoro is already paying a decade-high of 5.45pc to sell 10-year bonds, yet she continues to play for time she does not have. – UK Telegraph

Dominant Social Theme:
Germany must grasp the nettle.

Free-Market Analysis:
The problem of the EU seems simple, as indicated by this article excerpt above. The Southern PIGS are bankrupt but cannot devalue because of the euro contract. The wealthy North will therefore have to bail out the PIGS and in doing so, provide substantive oversight. Germany ends up being the guarantor of last resort and also the state providing the watchdogs, basically, since it is German money that will save the EU. It is a German EU after all, and the Germans will have to stop dithering …

This is one (fairly simplistic, we would argue) way of evaluating the situation that is currently evolving in the EU. But here at the Bell we have also argued that the Anglo-American axis is really behind the EU – and perhaps the average German won’t have much say in the matter. The Anglosphere seeks world government and the EU is a basic building block.

The point we want to advance in this article is that there is perhaps a deeper subterfuge going on. Yes, we’ve suggested this before, but as the EU unwinds, as America quakes from unemployment and China shudders from inflation, we continue to explore the possibility. And so we ask, once more … Is the world being manipulated into an ever-more-massive depression? And how would that work exactly?

In order to explain it, we need to establish (for purposes of argument anyway) that there is an Anglo-American power elite composed of certain fabulously wealthy families that seek one-world government. There has been speculation, for instance, that these families have a hand in the recent saga of Foundation X which sounds more like the plot of a bad paperback novel than anything real. Lord James of Blackheath mentioned Foundation X at the House of Lords in early November.

It was his contention that ‘Foundation X’ had the resources to “bail out” the UK and that Foundation X’s gold reserve was larger than what is considered to be the world’s total mined reserves. Lord James of Blackheath was roundly derided as a “nutter.” We don’t find him so. We have asked if Foundation X was merely a cover for the financial interests of the Anglo-American power elite. It still seems a pertinent question. This kind of money is massive indeed, assuming Lord James didn’t drop off his meds for a day. It reinforces the idea that what we are watching around the world is a charade.

We have previously argued that there is a level of behind-the-scenes collusion between ALL the powers-that-be. All of them, East and West, may be cooperating to bring down the current system with an eye toward instituting something in its place that will be mutually agreed upon. (The IMF’s bancor comes to mind.)

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QE2 and the Great Mis-Diagnosis

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by Jim Willie CB
Originally published: November 24, 2010

http://www.goldenjackass.com/

Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

THE BACKDROP HAS TURNED DIRE ON SEVERAL FRONTS SIMULTANEOUSLY. The great millstone around the USEconomy’s neck continues to drag it down. CoreLogic reported 2.1 million units have created a swamp in Shadow inventory of the housing market. That equates to 23 months inventory, whereas normal is 7 months. They tallied the growing tumor of bank owned properties as a result of home foreclosures, also called the REOs (real estate owned). Look for no housing market recovery for at least another two years.

Starting in summer 2007, the Jackass forecast each year has been for another two years of housing market declines, all correct. Ireland might be squarely in the news, but the big enchalada is Spain. The Irish banks have presented a grand headache for the European banks, with a $150 billion exposure. Ironically, Ireland has done more to reduce its budget spending effectively than any EU member nation, yet is left to twist in the soft rain. They cut their government budget by 20%. The USGovt budget grows every year without remedy or remorse. Few seem to remember that Irish fund managers lost the German civil service pension funds a couple years ago, a source of hidden tension and great resentment. Spain will rock Europe and the Euro currency in the springtime. The gold price consolidation will center on the Spain debt crisis hitting fever pitch, with the Euro hit. Then again, perhaps a mammoth new wave of European gold demand will neutralize any USDollar stability. On Tuesday this week, the Euro fell by 200 basis points, but the gold price was stable like a rock. That is notable strength. But the bigger story of strength is with silver. The round robin of destruction to major currencies that makes the Competing Currency War, the race to the bottom in rotated currency debasement, it will lift gold & silver in a round robin of strong demand.

MISDIAGNOSIS: INSOLVENCY NOT ILLIQUIDITY
The US bankers often go home to mommy and order a giant slosh of monetary inflation whenever in deep intractable trouble, like after the previous mistake in QE1 when ordering a giant slosh of monetary inflation. The USFed, led by the academic professor with no business experience, has ordered a fresh supply of gasoline from a lit fire hose, but he does so on a collapsing building. Bernanke has very erroneously diagnosed lack of liquidity within the system to be the underlying problem. He has prescribed a huge swath of ‘free money’ to be sent into the bond market as a solution. He has prescribed that cheap money continue to be delivered to the USEconomy. Bernanke has failed to notice the insolvency in banks, and has failed to notice that 0% has yet to prompt any revival in lending among banks. Bernanke is fighting INSOLVENCY with LIQUIDITY for a second time after learning nothing the first time.

The USTreasury 10-year yield has risen from a grand bond market dare, not at all from evidence of growth. Bond players dare the USFed to create another $1 trillion in new money. In no way does another lift in retail spending constitute a recovery. Household insolvency rises every month from worsening home loan balances. The USFed wants households to spend more on borrowed funds, yet they have depleted home equity and vanished income security.

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“The Euro game is up… Just who the hell do you think you are? You are very dangerous people”

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by Tyler Durden
Posted Zero Hedge on Nov 25, 2010

FAMOUS EUROSCEPTIC NIGEL FARAGE, IN JUST UNDER FOUR BRIEF MINUTES, tells more truth about the entire European experiment than all European bankers, commissioners, and politicians have done in the past decade. As we have already said pretty much all of this before, we present it without commentary:

“Good morning Mr. van Rompuy, you’ve been in office for one year, and in that time the whole edifice is beginning to crumble, there’s chaos, the money’s running out, I should thank you – you should perhaps be the pinup boy of the euroskeptic movement. But just look around this chamber this morning, look at these faces, look at the fear, look at the anger. Poor Barroso here looks like he’s seen a ghost. They’re beginning to understand that the game is up. And yet in their desperation to preserve their dream, they want to remove any remaining traces of democracy from the system. And it’s pretty clear that none of you have learned anything.

When you yourself Mr. van Rompuy say that the euro has brought us stability, I supposed I could applaud you for having a sense of humor, but isn’t this really just the bunker [or banker] mentality? Your fanaticism is out in the open. You talk about the fact that it was a lie to believe that the nation state could exist in the 21st century globalized world. Well, that may be true in the case of Belgium who haven’t had a government for six months, but for the rest of us, right across every member state in this union, increasingly people are saying, “We don’t want that flag, we don’t want the anthem, we don’t want this political class, we want the whole thing consigned to the dustbin of history.”

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Is Europe coming apart faster than anticipated?

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by Gonzalo Lira
Originally posted November 16, 2010

The sky is black with PIIGS coming home to roost: I was going to write my customary long and boring think piece— but the simmering crisis in the Eurozone just got the heat turned up: Things are boiling over there!

“Euro Dead” by Ryca

SO LET’S TAKE A BREAK FROM OUR REGULARLY SCHEDULED PROGRAMMING, and give you a run-down of this late-breaking news: The bond markets have no faith in Ireland—Greece has been shown up as having lied again about its atrocious fiscal situation—and now Portugal is teetering — in other words, the PIIGS are screwed. I would venture to guess that we are about to see this slow-boiling European crisis bubble over into a full blown meltdown over the next few days—and it’s going to get messy.

So to keep everything straight, let’s recap: The spreads on Irish sovereign debt widened, and the Germans are pressing them to accept a bailout—despite the fact that the Irish government is fully funded until the middle of 2011. But it’s not the Irish fiscal situation that the bond markets or the Germans are worried about—it’s the Irish banking sector that is freaking everyone out.

After all, the Irish government fully—and very foolishly—backed the insolvent Irish banks back in 2008. And for unexplained reasons, the Irish government is committed to honoring Irish bank bonds fully—which the country simply cannot afford. However, German banks are heavily exposed to Irish banks, which explains why Berlin is so eager to have Ireland accept a bailout.

Right now, European Union, International Monetary Fund and European Central Bank officials are meeting with Irish representatives, putting together a bail-out package. The reason the Irish are so leery, of course, is that any bail-out would be accompanied by very severe austerity measures: In other words, the Irish people would suffer the consequences of shoring up the Irish banks—which is the same as saying the Irish people would suffer austerity measures in order to keep German banks from suffering losses. Also, the EU/IMF/ECB bail-out would probably also cost the Irish their precious 12.5% corporate tax rate—a key magnet for bringing capital to the Emerald Isle.

Add to the Irish worry, Greece is once again wearing a bright red conical dunce cap: They’ve been shown up to have lied again about their fiscal situation. Three guesses what they lied about: If you guessed Greek deficit, you win—yesterday, the Greek government officially revised its deficit figures: 15.4% for 2009, and 9.4% for 2010 (as opposed to an original 7.8% projection). Odds are good that these figures will be revised—for the worse—soon enough: Nobody believes anything other than Greece is insolvent.

That’s what’s going on this morning—and as a reaction, the dollar (if you can believe it) is roaring back alive: As I write (noon EST), the Euro is at $1.3511, the Pound at $1.5870, gold down to $1,333 an ounce, silver $25.05 an ounce; the dollar is up ¥83.45.

There was no specific reason why things took a turn for the worse today—but this downturn of sentiment has been having a cascading/contagion effect through the rest of Europe:

As a result of the Irish not taking the EU bail-out, Portugal’s debt started to tumble—which has everyone worried. Portugal is looking an awful lot like Greece did five-six months ago: It’s debt spread over the German benchmark is 6.5%, and climbing. Even France’s debt yield spread widened against the German bund—it costs more to insure French debt than it costs to insure Chilean debt (I guess a good “Viva Chile!” would be in order?).

The reason the entire slate of Euro bonds are tumbling is because of Ireland—but the real worry is Spain. If Ireland and then Portugal go down the tubes, then it would only be a matter of time before Spain is next—and Spain is far larger than Greece, Ireland and Portugal combined. If Spain goes, then it’s curtains for the whole Eurozone, perhaps even for the European Union as a political entity.

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France: Can you hear us now?

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from The Daily Bell
Originally posted Friday, October 22, 2010

(left) Nicholas Sarkozy

Nobody expected this French revolution … The pensions row has turned into a referendum on Sarkozy … As the French Autumn of Discontent morphs into its second week (more trains, fewer planes, long lines at petrol stations, banlieues kids indulging in a bit of self-administered wealth redistribution in the streets), no one can predict how things will turn out for Nicolas Sarkozy (left) and his embattled government. And yet this should have been the easiest reform of his first term … The strikes have turned into a referendum on Nicolas Sarkozy – not his actual policies, so much as his style. The perception is that he panders to the rich, an unfair one when you consider his predecessor Jacques Chirac, who never paid for any holiday he took in or out of office. … Sarkozy (whose fortune is the product of selling his family flat for £1.6 million when he was elected in 2007) earned himself, early on, the “bling bling president” tag. Nothing he has done since has shifted the impression that he wants the French to make efforts he will not subject himself and his rich friends to. – UK Telegraph

Dominant Social Theme:
The French are crazy and need to blow off steam once in a while.

Free-Market Analysis:
Until recently we have been somewhat alone in trying to explain the reality of what was taking place in Europe. In a series of articles, we predicted that Europe would blow up sooner or later, because Europe was basically a tribal environment and, in fact, a patchwork of tribes. In one of our recent articles, we even provided a Wikipedia excerpt showing how the tribes had conquered Rome and then migrated throughout Europe in the next 500 years. To think that Europeans themselves are not quite conscious of their background, or have no tribal solidarity, was naïve in our view.

The tribes are bloody-minded. In fact, Europe has been a cauldron of blood and resentments, much of it whipped up by the Anglo-American power elite for purposes of consolidating wealth and power. But the tribal solidarity and brutal arithmetic used by the tribes to calculate their well-being had not in our view changed much in eons. We felt fairly certain the tribes of Europe would take action once they perceived that the EU was not going to prove a net benefit but would actually have a negative impact on their wealth and property. We recalled the unrest of the 1960s (in which admittedly American intelligence played a part via Operation Gladio) and we predicted that those days would come again.

The EU, in fact, was not providing any other options, or making it any easier to avoid what has now occurred. Either the elite is out of ideas or out of options. We believe it may be the latter (assuming the powers-that-be are not engineering some sort of total implosion for nefarious reasons yet to be fully comprehended.) By insisting that the common man in various PIGS nations pay back large commercial banks that had lent recklessly to those same countries and enriched their political and industrial elites, EU leaders were almost inviting (and arrogantly so) what has now occurred. The so-called “austerity” unrest was about this perception. Normal people saw that the EU had bribed national elites to build a consensus for joining – and they didn’t wish to pay the bill.

It’s not just government pensions. Taxes are going up even as services are going down. Distorted private industrial sectors, gorged on the inflationary euro, imploded over the past few years and shed jobs. Harried people have sought shelter in government work, and now the government jobs are leaving as well. Many economies lie in ruins, and still there are no jobs to be had. Meanwhile, Brussels’ Eurocrats pretend it is the “people’s” fault. Sure governments had been greedy, but ultimately the blame lies with the electorate. So it is said.

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EU Gripped by Growing Class War?

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from The Daily Bell
Originally posted Monday, October 18, 2010


Nicholas Sarkozy

Anti-austerity protests rock Europe … People demonstrate to say ”no to austerity” on September 29, 2010 in the Belgian capital, Brussels. Hundreds of thousands of people across Europe have taken to the streets to protest austerity plans, as major EU nations were hit by a wave of strikes. France has witnessed the most massive demonstrations as protesters in Paris and other large cities rallied to decry French President Nicolas Sarkozy’s (left) plans to increase retirement age from 60 to 62. The strikes have closed hundreds of schools, refineries and train stations and grounded flights amid concerns that the situation could get worse. – Press TV

Dominant Social Theme: EU citizens will simply have to swallow their medicine and realize that their greedy ways must be curbed by logical austerity. Their protests are nothing but tantrums.

Free-Market Analysis: We have tried as best we can to offer a counter-narrative when it comes to the EU, austerity and protests. The “alternative Internet news” approach is that the crisis has been cynically fomented to create a greater European Union. This has been our argument as well. But in our view, the elite has been caught by surprise by the truth-telling of the Internet and by the depth of monetary unraveling. This is having all sorts of unintended ramifications and is upsetting elite plans. The EU promotion is beginning to fail.

The mainstream press sees none of this. It has its own narrative of course, described in this article’s initial dominant social theme (above). But we would argue that what is going on now is increasingly a protest against the EU itself and the perspective that the EU elites expect middle class and working-class Europeans simply accept the radical diminishment of their lifestyles and opportunities. We see signs that these protests represent a populist statement that has as much to do with EU policies generally as any specific austerity measures.

Certainly, the protests continue to pick up – and the severity remains unreported in our view. In Greece the Acropolis is now being picketed. In Italy, thousands (or maybe a lot more) rallied against the Italian government and marched in Rome. Union leaders called for a general strike. In France, rolling strikes hit oil refineries and panicked the French government, which is now asking airlines to refuel overseas. In Iceland, as we reported the other day, protestors chased Iceland legislators out the back door of the Parliament building.

Perhaps the most interesting wrinkle was in dowdy old Britain. We have speculated in the past that the British psyche, conditioned from birth to a kind of institutional subservience to the upper classes and the Queen, would take a good deal of beating-up before responding. Certainly that thrashing has taken place. The arrogant upper classes have pounded unmercifully on the plebes. (As an aside, we cannot help but liken the Brits to hobbits with “proud feet” – slow to anger and determinedly attached to modest creature comforts and local society. Is it any coincidence that Tolkien presented the evil Sauren who wants to rule the earth as an all-seeing eye in his great Lord of the Rings fantasy trilogy?)

But for now, cameras watch the Brits wherever they go. If they attempt to defend themselves with guns or knives from burglars, even at home, they are apt to be cast in prison. If they throw away the wrong kind of garbage they may be brought up on charges. The school system barely functions. The health care system leaves women giving birth in taxis – as they have been refused entrance to hospitals. The government pursues a war on terror that is evidently and obviously fraudulent and continues to fight a war to conquer Afghanistan (for the second time!) and with no more success. For the privilege of living in a dysfunctional society, with its academics that still stubbornly celebrate global warming and global governance, British citizens are charged ever-higher amounts of taxes – even though most of Britain’s modern laws are now made in Brussels.

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‘”The Euro Zone Has Failed”

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by Václav Klaus Czech Republic President
Originally posted June 1, 2010

AFTER THE FALL OF COMMUNISM IN 1989, THE CZECH REPUBLIC WANTED TO BE a normal European country again as soon as possible, after being excluded from participating in the post-World War II European integration process for 41 years. The only way to achieve this was to become a member country of the European Union. We had no other choice, but the communist experience was still too “fresh.” We wanted to be free and didn’t want to lose our freedom and our finally regained sovereignty. Many of us were therefore in favor of a looser form of European integration, against the so-called deepening of the EU and against the creation of political union in Europe. People like me understood very early that the idea of a European single currency is a dangerous project which will either bring big problems or lead to the undemocratic centralization of Europe. My position was clear: With all my reservations, we had to apply for EU membership, but at the same time we had to fight against projects such as the euro.

As a long-standing critic of the idea of a European single currency, I have not rejoiced at the current problems in the euro zone because their consequences could be serious for all of us in Europe—for members and non-members of the euro zone, for its supporters and opponents. Even the enthusiastic propagandists of the euro suddenly speak about the potential collapse of the whole project now, and it is us critics who say we have to look at it in a more structured way.

The term “collapse” has at least two meanings. The first is that the euro-zone project has not succeeded in delivering the positive effects that had been rightly or wrongly expected from it. It was mistakenly and irresponsibly presented as an indisputable economic benefit to all the countries willing to give up their own long-treasured currencies. Extensive studies published prior to the launch of the European single currency promised that the euro would help to accelerate economic growth and reduce inflation and stressed, in particular, that the member states of the euro zone would be protected against all kinds of external economic disruptions (the so-called exogenous shocks).

This has not happened. After the establishment of the euro zone, the economic growth of its member states has slowed down compared to previous decades, increasing the gap between the rate of growth in the euro-zone countries and that in other major economies—such as the United States and China, smaller economies in Southeast Asia and other parts of the developing world, as well as Central and Eastern European countries that are not members of the euro zone.

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