Posts tagged Europe
Posts tagged Europe
Florida congressman Alan Grayson laughs in Ben Bernanke’s face!
I don’t really know who can believe this guy. I really like this Grayson guy, might look into him.
Honestly . . . would you consider even buying a used car from Ben Bernanke? Or as they say now, ‘a pre-owned vehicle?’ Everything gets whitewashed in our glorious New Age.
Beware the Coming Bailouts of Europe
Tuesday, December 20, 2011 – by Ron Paul
The economic establishment in this country has come to the conclusion that it is not a matter of “if” the United States must intervene in the bailout of the euro, but simply a question of “when” and “how.” Newspaper articles and editorials are full of assertions that the breakup of the euro would result in a worldwide depression, and that economic assistance to Europe is the only way to stave off this calamity. These assertions are yet again more scare-mongering, just as we witnessed during the depths of the 2008 financial crisis. After just a decade of the euro, people have forgotten that Europe functioned for centuries without a common currency.
The real cause of economic depression is loose monetary policy: the creation of money and credit out of thin air and the monetization of government debt by a central bank. This inflationary monetary policy is the cause of every boom and bust, yet it is precisely what political and economic elites both in Europe and the United States are prescribing as a resolution for the present crisis. The drastic next step being discussed is a multi-trillion dollar bailout of Europe by the European Central Bank, aided by the IMF and the Federal Reserve.
The euro was built on an unstable foundation. Its creators attempted to establish a dollar-like currency for Europe, while forgetting that it took nearly two centuries for the dollar to devolve from a defined unit of silver to a completely unbacked fiat currency note. The euro had no such history and from the outset was a purely fiat system, thus it is not surprising to followers of Austrian economics that it barely survived a decade and is now completely collapsing. Europe’s economic depression is the result of the euro’s very structure, a fiat money system that allowed member governments to spend themselves into oblivion and expect that someone else would pick up the tab.
A bailout of European banks by the European Central Bank and the Federal Reserve will exacerbate the crisis rather than alleviate it. What is needed is for bad debts to be liquidated. Banks that invested in sovereign debt need to take their losses rather than socializing those losses and prolonging the process of adjusting their balance sheets to reflect reality. If this was done, the correction would be painful, but quick, like tearing off a large band-aid, but this is necessary to get back on solid economic footing. Until the correction takes place there can be no recovery. Bailing out profligate European governments will only ensure that no correction will take place.
A multi-trillion dollar European aid package cannot be undertaken by Europe alone, and will require IMF and Federal Reserve involvement. The Federal Reserve already has pumped trillions of dollars into the US economy with nothing to show for it. Just considering Fed involvement in Europe is ludicrous. The US economy is in horrible shape precisely because of too much government debt and too much money creation and the European economy is destined to flounder for the same reasons. We have an unsustainable amount of debt here at home; it is hardly fair to US taxpayers to take on Europe’s debt as well. That will only ensure an accelerated erosion of the dollar and a lower standard of living for all Americans.
A VERY SUBTLE FORM OF THEFT
Say what you want about him, but Bernie Madoff was a guy who knew how to keep the party going. For years, he ran one of the largest private-sector Ponzi schemes in history and always heeded the golden rule of financial scams: make sure your inflows are greater than your outflows.
He was finally done in when redemptions exceeded new investments. He didn’t have enough cash to pay out investors, and he wasn’t able to scam more people into paying in to the scheme. As a result, Madoff finally had to admit that the whole thing was a total fraud.
Governments around the world are in similar situations right now with their own public sector Ponzi schemes. Faced with failed auctions, declining demand, and rising yields, politicians are having to resort to desperate measures.
Like any good scam artist, they’re appealing to the masses first; all over Europe, governments are sponsoring new marketing campaigns suggesting that it’s people’s patriotic duty to buy government debt.
Somehow you just know we are all going to be paying for this debacle . . . and soon.
Major central banks around the globe took coordinated action Wednesday to ease the strains on the world’s financial system, saying they would make it easier for banks to get dollars if they need them. Stock markets and the euro rose sharply on the move.
The U.S. Federal Reserve, European Central Bank, Bank of England and the central banks of Canada, Japan and Switzerland were all taking part.
"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the central banks said in a joint statement.
As Europe’s debt crisis has spread, the global financial system is showing signs of entering another credit crunch like the one that followed the 2008 collapse of U.S. investment bank Lehman Brothers. Banks are afraid to lend to each other, since no one is really sure what institutions are holding how much bad government debt.
Greece, Ireland and Portugal have all been forced to take international bailouts, and Italy, Spain and Belgium are seeing their borrowing costs rise sharply. Banks already had to agree to forgive 50 percent of the value of their Greek debt holdings — and many fear that other struggling European countries might also demand a so-called “haircut” on bonds.
A ratings downgrade by Standard & Poors for six major U.S. banks on Tuesday added to fears that Europe’s woes would hurt the entire financial system. If one or more European governments default, that would unleash a shock to the world’s financial system that at the very least would lead to recessions in the United States and Europe, severe losses for banks and a global stranglehold on lending.
The central banks agreed to reduce the cost of temporary dollar loans they offer to banks — called liquidity swaps — by a half percentage point. The new, lower rate will be applied to all central bank operations starting Monday.
Read more: World’s Central Banks Act to Ease Market Strains
This article talks about the history and current practice of saving in the US and in Europe. Here’s an excerpt:
Few Americans appreciate that the prosperous economies of western and northern Europe are among the world’s greatest savers. Over the past three decades, Germany, France, Austria and Belgium have maintained household saving rates between 10 and 13 percent, and rates in Sweden recently soared to 13 percent. By contrast, saving rates in the United States dropped to nearly zero by 2005; they rose above 5 percent after the 2008 crisis but have recently fallen below 4 percent.
As I was reading this, I got to thinking about why we don’t save more, and did a couple quick google searches.
First I searched “high yield savings account” and found a page that offered a listing of savings accounts available from various banks, with interest rates ranging from a high of 1.30% APY to 0.90% APY.
Then I searched for inflation, and came up with a site that says the current annual inflation rate is 3.53%.
Comparing those numbers might give a hint about why people are not super-eager to save right now.
by Harris Kupperman November 27, 2011
Lately, I’ve been less focused on the global markets because I’m so focused on Mongolia. However, it’s hard to ignore what’s going on in Europe as it affects all of us. Let me put it bluntly, they have about a week to figure this out, or they’re going back into the Dark Ages. They really have three choices; let the banks fail and destroy their currency, print massively and destroy their currency or find a leprechaun that can conjure up a better solution. I don’t see how this can go on much longer. Unfortunately, the Europeans seem to still favor the leprechaun approach. That didn’t work for Ireland, and they’re the country of leprechauns. Does Germany have a chance?
What amazes me so much about Europe is that the European leaders don’t seem to understand the enormity of the problem. They’ve adopted a blasé attitude that blames Greece, yet they don’t bother to look internally at their own banks that lent to Greece. They refuse to understand that the whole thing will collapse unless they are aggressive. The time for small tweaks was ten years ago when these problems were building up. Now, only shock and awe will save Europe.
By David Galland 10/18/11
Given the role the US dollar plays as the world’s de facto reserve currency — with all major commodities priced in dollars, and dollars forming the bulk of reserves held by foreign central banks — the dismal shape of the US monetary system spells trouble for the global monetary system.
Making matters worse, following the lead of the United States, governments around the world long ago adopted similar fiat monetary systems. You can see the deficit contagion in this next chart. It is worth noting that the dire condition of the United States now leaves it in the same muddy wallow as Europe’s desperate PIIGS.
This morning we woke to learn of the predictably worsening situation in Greece, Europe’s poster child for hopeless insolvency. Reported one newswire:
“Greek ships were harbored and garbage rotted in the streets of Athens on Tuesday as angry workers built momentum for ‘the mother of all strikes’ expected to bring the country to a halt in protest against a new package of tax hikes and wage cuts.”
The “mother of all strikes” is due to begin, at the behest of unions representing roughly half of the country’s 4 million workers, on Wednesday. It is scheduled to last just 48 hours, although we can hardly imagine protesters punching the time clock on Friday, right in the middle of what would otherwise be a sweet, 5-day weekend. Always keen to get on with the job of getting off the job, some workers have already begun downing tools; rubbish collectors, journalists and port hands among them. And can you believe this, Fellow Reckoner? Tax officials (tax officials!) are getting in on the inaction too. Some have even been spotted in recent days not stealing from people!
Of course, without access to tax “revenue,” there’s no way the Greek government can make good on the many and varied welfare promises it made to all those people pretending to work. How can a state redistribute stolen property when the thieves themselves go on strike? Short answer: It can’t.
* * *
. . . Greece will likely be the tip of the iceberg. With a GDP of approximately $320 billion, the Greek economy is less than one quarter the size of Spain’s ($1.4 trillion) which, in turn, is only about two-thirds the size of Italy’s ($2.1 trillion). France weighs in at $2.65 trillion. Germany stands at $3.3 trillion. All are in trouble.
Just this morning Standard & Poor’s downgraded 25 major Italian banks and financial institutions, citing renewed “market tensions” and lower economic growth prospects. Meanwhile, Moody’s yesterday warned it may “slap a negative outlook on France’s Aaa credit rating in the next three months if the costs for helping to bail out banks and other euro zone members stretch its budget too much,” according toReuters.
To where does this debt-sodden path lead us, Fellow Reckoner? “No man is an island, entire of itself,” wrote the English poet, John Donne, “Each is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less.”
The passage, of course, is taken from Donne’s “For Whom The Bell Tolls”…and as we recall, it tolls for thee.