Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Gold Stocks Triple Breakout - 15th Dec 18
The stock market fails to rally each day. What’s next for stocks - 14th Dec 18
How Low Could the S&P 500 Go? - 14th Dec 18
An Industrial to Stock Trade: Is Boeing a BUY Here? - 14th Dec 18
Will the Arrest of Huawei Executive Derail Trade War Truce? - 14th Dec 18
Trump vs the Fed: Who Wins? - 13th Dec 18
Expect Gold & Silver to Pullback Before the Next Move Higher - 13th Dec 18
Dollar Index Trends, USDJPY Setting Up - 13th Dec 18
While The Stocks Bulls Fiddle With The 'Fundamentals,' Rome Burns - 13th Dec 18
The Historic Role of Silver - 13th Dec 18
Natural Gas Price Setup for a Big Move Lower - 13th Dec 18
How to Get 20% Off Morrisons Weekly Supermarket Shopping - 13th Dec 18
Gold Price Analysis: Closer To A Significant Monetary Event - 13th Dec 18
Where is the Stock Market Santa Claus Rally? - 12th Dec 18
Politics and Economics in Times of Crisis - 12th Dec 18
Owning Precious Metals in an IRA - 12th Dec 18
Ways to Improve the Value of Your Home - 12th Dec 18
Theresa May No Confidence Vote, Next Tory Leader Betting Market Analysis and Forecasts - 12th Dec 18
Gold & Global Financial Crisis Redux - 12th Dec 18
Wow Your Neighbours With the Best Christmas Projector Lights for Holidays 2018! - 12th Dec 18
Stock Market Topping Formation as Risks Rise Around the World - 11th Dec 18
The Amazing Story of Gold to Gold Stocks Ratios - 11th Dec 18
Stock Market Medium term Bullish, But Long Term Risk:Reward is Bearish - 11th Dec 18
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18
Rising US Home Prices and Falling Sales - 8th Dec 18
Choosing Who the Autonomous Car Should Kill - 8th Dec 18
Stocks Selloff Boosting Gold - 8th Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

Europe Moves Closer to Banktatorship

Politics / Eurozone Debt Crisis Jun 03, 2012 - 11:55 AM GMT

By: Mike_Whitney

Politics

Best Financial Markets Analysis ArticleYields on 10-year Treasuries plunged to a record-low 1.56 percent on Thursday morning as panicky investors stormed out of European financial assets into German and U.S. government bonds. Deteriorating credit conditions, a flurry of ratings downgrades, and bank runs in Spain and Greece have triggered a flight-to-safety which has pushed the benchmark 10-year below its previous all-time low of 1.67 percent. Falling yields indicate that investors have lost confidence in the ability of EU policymakers to resolve the ongoing debt crisis, particularly as it relates to growing troubles in Greece and Spain.


The present crisis, which is largely the result of excessive credit expansion and poor risk management by EU banks, is being used by the European Commission and the ECB to establish a euro-wide ”banking union” and to impose savage cuts to social programs, health care, and pensions. The response by EU policymakers is a social counterrevolution designed to transform the 17-member monetary union into a permanent ”austerity zone” ruled by corporate elites and big finance. Here’s more from Reuters:

“The eurozone must boost growth and cut debt to regain investor confidence but it should also move towards a banking union, consider eurobonds and the direct recapitalisation of banks from its permanent bailout fund, the European Commission said on Wednesday as it laid out year-long recommendations.”

“A closer integration among the euro area countries in supervisory structures and practices, in cross-border crisis management and burden sharing, towards a “banking union”, would be an important complement to the current structure” of Europe’s economic and monetary union, the Commission said.

“In the same vein, to sever the link between banks and the sovereigns, direct recapitalisation by the European Stability Mechanism (ESM) might be envisaged,” the document said.” (“EU calls for eurozone banking union, direct bank recapitalisations”, IFR, Reuters)

The eurozone’s permanent bailout fund, the ESM, has not yet been ratified by all 17 members and already the European Commission wants to change its mandate to include direct bailouts to banks. The direct funding of underwater banks is a blatant power-grab, an attempt to establish the primacy of banks in the same way that the TARP was used to create Too Big To Fail in the US. TBTF means that the banks have merged with the state and that taxpayers provide blanket guarantees for their survival. Europe is moving fast towards this same model.

German chancellor Angela Merkel is opposed to allowing the ESM to recapitalise Spanish banks, but she’s likely to capitulate if the crisis worsens. If she does give in, then the mismanaged banks will not be required to restructure their debt, wipe out bondholders and shareholders, remove bad assets, and replace management. All of the costs for such a bailout would fall on taxpayers, which is exactly what leaders of the European Commission and the ECB want. At the same time, the deepening crisis will be used to impose more fiscal reforms, which have already pushed unemployment to 20 year highs while submerging most of the south in a severe recession. Here’s more from Reuters:

”….ministers in private are clear about their wish to see European-wide bank deposit guarantee measures put in place quickly to avoid the risk of what could be a catastrophic event. There are signs the European Central Bank favors deposit guarantees.

Problems are mounting on other fronts. With the cost of borrowing heading rapidly towards 7 percent and most foreign investors already shunning Spanish debt, the government will find it increasingly difficult to refinance 98 billion euros of debt and find another 52 billion euros to fund its deficit this year.

Local banks are barely lending, or offering loans at prohibitively high rates, squeezing companies and increasing the risk of a chain of bankruptcies which could send the economy into a nosedive. The banking system’s total loans to the business sector were 44.6 billion euros at the end of March half of what they were at the end of the boom in 2007, and the contraction continues almost every month, according to Bank of Spain data.

Consumers are postponing big purchases and cutting back spending. Spain’s soaring borrowing costs have become a national obsession since the crisis….The government acknowledges that the situation is critical.” (“Spain cries for help: is Berlin listening ?”, Reuters)

The EU Commission and ECB are allowing the crisis to grow to achieve their goal, which is the creation of a fiscal union controlled by banks that has unlimited access to funding and the power to impose policy (“austerity”) through coercion. Here’s a clip from economist Mark Weisbrot who sees the political motive behind the debt crisis:


”I have argued for some time now that the recurring crisis in the eurozone is not driven by financial markets’ demands for austerity in a time of recession, as is commonly asserted. Rather, the primary cause of the crisis and its prolongation is the political agenda of the European authorities – led by the European Central Bank (ECB) and European commission. These authorities (which, if we included the IMF constitute, the “troika” that runs economic policy in the eurozone) want to force political changes, particularly in the weaker economies, that people in these countries would never vote for.” (“Europeans’ economic future has been hijacked by dangerous ideologues”, The Guardian)

It’s all politics. Right wing politics. 100 percent of the reputable economists that have commented on the debt crisis have criticized the way it has been handled, particularly in regards to austerity measures. Do you really think that Merkel or Draghi think that they’re smarter than Stiglitz, Krugman, Reich, Eichengreen, Thoma, Weisbrot, Galbraith, Baker, Roubini, etc. etc?
 
No. Merkel has no background in economics at all, and Draghi was formally an investment banker for Goldman Sachs.

These people are not interested in fixing the EZ economy. They are engaged in a stealth campaign to radically restructure EU society, to unravel to welfare safety net, to roll back the progressive gains of the last century, and to reduce much of the continent to 3rd world poverty. A banking union will further solidify the power of big finance over the individual states, and that is the main objective.

By Mike Whitney

Email: fergiewhitney@msn.com

Mike is a well respected freelance writer living in Washington state, interested in politics and economics from a libertarian perspective.

© 2012 Copyright Mike Whitney - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Whitney Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

bobberesford.com
13 Jun 12, 08:57
Mike Whitney

Excellent article from Mike WHitney . The megabanks - via their traditional fronts , like IMF and ECB , are putting the squeeze on Europe , and the world , to divide and impoverish society and create conditions for a dictatorship to form.

Inevitably , the currency crisis / unification is used to force political and social union . Divide and conquer.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules