Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Cypriot Chaos Assists E.U. Centralization

Politics / Eurozone Debt Crisis Apr 08, 2013 - 07:05 PM GMT

By: John_Browne

Politics

Remarks by members of the European Union's elite suggesting that banking deposit seizures may become standard practice appear to have heightened the risk of a European bank run and perhaps even a catastrophic collapse of the euro. Any threat to the euro is a threat to the European public's conception of the Union's manifest destiny. As such, I believe members of the EU elite may be purposefully leveraging the crisis to push for a centralized European banking system to cement the political framework of an EU superstate.


Don't be fooled by the haphazard developments of the ongoing eurozone crisis; anyone with an economics background can see how this crisis will broadly play out. But rather than pursue policies to restore fiscal sanity, the EU leadership has made moves to continue its policy of the past two decades: bring as many Europeans as possible into the sphere of a centralized EU superstate. Under the pretense of democracy, the EU has expanded to 27 member nations, mostly through democratic referendums (though not without considerable backlash from wealthier, northern European nations). Some may wonder why so many countries would yield their sovereignty to a remote body of bureaucrats in Brussels.

The truth is that many of these countries (especially the ones on the periphery of Europe, with relatively little experience with democracy) received vast so-called "development" funds upon joining the EU, mostly provided by northern European nations like Germany, Great Britain, and the Netherlands. The German Constitutional Court referred repeatedly to the "democratic deficit" within the EU even as membership grew, and last year it urged the German government to make German taxpayers increasingly liable for the economic shortcomings of fellow member states.

This is unsurprising, given the fact the German citizens never even had a referendum on the EU constitution. They are thus more subjects than citizens of the EU.

When it came to the euro, Germany only accepted the currency provided it was run as soundly as their steadfast Deutsche Mark. While the euro did quickly prove weaker than the Deutsche Mark, Germans were somewhat assuaged by the boost to their exports. However, for countries like Portugal, Italy, Spain, or Greece that had been used to endless currency devaluations, the relative strength of the euro highlighted severe problems.

For years, member-states papered over these problems by borrowing money based upon the credit rating of the EU. But some of the EU banks that bought government debt became far too over-leveraged, so that in the financial meltdown of 2007-08, both European central banks and their host governments began to suffer from the toxic debt. This has continued as a serial crisis in the intervening years, and with each subsequent incident, the European Central Bank (ECB) stepped in at the eleventh hour with a solution that strengthened its grip over not only the eurozone, but every member-state of the European Union.

Ultimately, it appears the EU would like a controlling influence over the Treasuries and taxpayers of all member-states within its purview. To the frustration of the EU elite, citizens of the productive northern member-states have repeatedly resisted this subjugation. In my home country, for example, Prime Minister David Cameron has long grappled with an unhappy parliament clamoring for a referendum on EU membership.

This struggle seemed to be turning against the power-mad of Brussels... then along came Cyprus. What better way to unite the EU than a potentially catastrophic collapse of the euro?

Cyprus is small, but it has a banking system nearly five times the size of its economy. Many of its deposits are suspected of being owned by the Russian mafia, and so losing 60-100% of these deposits would cause little resentment outside Russia. However, the simple fact that such a seizure could be approved by central banks has engendered a fear of bank runs throughout Europe.

In the midst of all this, the world was astounded when Jeroen Dijsselbloem, president of the Eurogroup consortium of finance ministers, declared publicly that the Cypriot solution of making depositors and bank bondholders liable would become a "template" for future bank bailouts. After a quick and fierce backlash, Dijsselbloem officially back-peddled. But the damage was done.

In spite of Dijsselbloem's recantation, a significant amount of smart money was scared out of eurozone debt. While the Cypriot crisis appears to have been held in check, a lot of capital was transferred into US dollars and banks. You see, today, major bank runs happen for the most part not on the street, but electronically and often within minutes. They attract minimal public attention, are easily kept quiet, and the aggregate amounts transferred are known only to finance ministries and central banks.

The true magnitude of any run on Cypriot or eurozone banks is hard for outsiders to clearly ascertain. This can be used as a major weapon in cajoling EU leaders into accepting greater banking "unity" in both the eurozone and the greater EU.

Should the Cypriot crisis prove an inadequate threat to further centralize the EU banking system, then there are a number of brewing crises that might do the trick. Both Slovenia and Luxembourg have disturbingly vulnerable banking sectors worth about 130% and 2,200% of GDP respectively. And then there's the recent report from the IMF showing major selling of euros by central banks in emerging markets, where euro holdings have dropped to 24% from 31% in 2009.

All of these threats to the euro have two major impacts. In the short-term, they boost the US dollar in spite of its shockingly weak fundamentals. In the bigger picture, they become a cudgel to beat the last vestiges of sovereignty from the member-states of the EU.

In the mid- to long-term, both reserve currencies are risking losing their status to alternatives - notably gold and silver.

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, John Browne, and other Euro Pacific commentators delivered to your inbox every Monday!

Pre-order a copy of Peter Schiff's new book, The Real Crash: America's Coming Bankruptcy - How to Save Yourself and Your Country, and save yourself 35% off!

By John Browne

Euro Pacific Capital
http://www.europac.net/

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John_Browne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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