Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
VIX is Reversing, Other Stock Market Indicators are Faltering - 28th Nov 14
Will The Swiss People Resist The Massive Anti-Gold Propaganda? - 28th Nov 14
Dramatic Increase in Gold Flows into China - 28th Nov 14
Britain's Immigration Catastrophe Continues, David Cameron's Impotent Speech on Stopping In Work Benefits - 28th Nov 14
Netherlands, Germany Have Euro Disaster Plan - Possible Return to Guilder and Mark - 28th Nov 14
Russia’s Gold Monetary Solution - 28th Nov 14
British Government Publishes UK, Scotland DevoMax Smith Report Suicide Note - 28th Nov 14
The Price Of Oil Exposes The True State Of The Economy - 27th Nov 14
Brazilian Bovespa Stock Market Technical Analysis - 27th Nov 14
Gold Price Would Soar on Possible Swiss Yes Vote - 27th Nov 14
Crude Oil Asset Bubble Trouble - 27th Nov 14
Thanksgiving and Puritan Geopolitics in the Americas - 27th Nov 14
The Dow Jones Stocks Index - Beautiful Tree in the Desert - 27th Nov 14
The Digital World, The Opiate of The People - 27th Nov 14
Harry Dent's Simple Strategy for Surviving Withdrawals from Markets on Crack - 27th Nov 14
Socialist France Just Cannot Compete Against Google Freedom - 27th Nov 14
A Short Tale About the Grand Manipulation of Crude Oil Prices - 26th Nov 14
China Secret Gold Buying ... How Could It Happen? - 26th Nov 14
Gold Price Spikes to $1,467.50/oz on Computer Glitch? - 26th Nov 14
Gold - So Bad It's Good: Surviving 2014 - 26th Nov 14
TrueShopping.co.uk Real Customer Experience Review - Online Shopping Lessons - 26th Nov 14
Is There A New Global Consensus About Cheating Investors To Reboot Employment? - 26th Nov 14
EUR/USD – Currency Bulls Don’t Give Up - 26th Nov 14
Swiss Gold Referendum A Golden Opportunity for Switzerland - 25th Nov 14
Silver: What COT Analysis Tells Us - 25th Nov 14
Stock Market Big, Bold and Ugly - 25th Nov 14
U.S. Dollar Near Top? Gold and Silver Trading, Platinum Breakout Invalidation - 25th Nov 14
Buy Fear - Easily Pick Up Profits on Stock Market Dips - 25th Nov 14
The Islamic State Reshapes the Middle East - 25th Nov 14
Gold Price Forecast 2015 - 25th Nov 14
The Swiss Referendum On Gold: What’s Missing From The Debate - 25th Nov 14
Clash of Generations - Why Millennials Still Live at Home; Not Jobs, Student Debt, or Housing - 25th Nov 14
Stock Market Reminiscent of Pompeii - 25th Nov 14
Once Upon A Time There Were Philosopher Kings - 24th Nov 14
The 2014 Crude Oil Price Crash Explained - 24th Nov 14
China Stock Investing - Follow the Money! - 24th Nov 14
122 Tonnes of Gold Secretly Repatriated to Netherlands - 24th Nov 14
What Causes the U.S. Dollar to Move? - 24th Nov 14
Stock Market Indexes New Highs - Will Uptrend Extend Even Further? - 24th Nov 14
All Hail the King U.S. Dollar - Trend Forecast - 24th Nov 14
Where Is China Economy On The Map Exactly? - 24th Nov 14
Most of The World Economies Panic - Is The US Next? - 24th Nov 14
Stock Market Exhaustion Gap? - 24th Nov 14
Gold Golden Gains Come After The Pain - 24th Nov 14
Crude Oil and Stock Market Setting The Stage For The Next Recession - 23rd Nov 14
This Publicly-Owned Bank Is Outperforming Wall Street - 23rd Nov 14
Who’s Ready For $30 Crude Oil Price? - 23rd Nov 14
Strategic, Methodological and Developmental Importance of Knowledge Consumption - 23rd Nov 14
Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - 23rd Nov 14
Gold Price 2015 - 22nd Nov 14
Stock Market Medium Term Top? - 22nd Nov 14
Is the Gold And Silver Golden Rule Broken? - 22nd Nov 14
Malaysia's Subsidy and Budget Deficit Conundrum - 22nd Nov 14
Investors Hated Gold at Precisely the Wrong Time: What About Now? - 22nd Nov 14
Gold and GLD ETF Selloff - 22nd Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold Report 2015

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

© 2005-2014 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

Free Report - Financial Markets 2014