January 9, 2012

Europe's Slippery Slope

Posted in Sunday Business Post · 174 comments ·

One of the many advantages of advising a large Italian company – apart from getting paid on time – is that every now and then, you get invited to symposiums in lovely parts of Europe’s most beautiful country. This year, the company – a proper manufacturing company that has specialised in design excellence, so that it can charge more than its peers and thrive – is having its shindig in the Italian Alps.

So yesterday, after a discussion on how the European economy is going to fare in the next few years, I decided to try this skiing lark. Needless to say, Paddy isn’t a natural on the slopes either athletically or aesthetically – but neither is the Mayor of London. One of the oddest meetings I have had in many years was sharing a gondola at 2,000 metres with Boris Johnson.

Sometimes you have got to love the English toffs. While the rest of the piste was head-to-toe in the newest, flashest gear (particularly the Russians, who could ‘out-bling’ any self-respecting rapper), yer man Johnson was in a huge old tweed overcoat, a woolly red hat and a pair of cords.

We chatted for a while and then met again in the mountain-top cafe. What interested me most was that the views on Europe of the classically eurosceptic Johnson were almost verbatim the views I had heard earlier that day delivered by profoundly pro-European Italian businesspeople.

There is a sense on all sides that the balance sheets of the European banking system are wrecked. Johnson, a clear supporter of the City of London, was in no way triumphalist about the difficulties that the European financial system faced; quite the contrary. He feared, as the Mayor of London, that the biggest threat to London was chaos in Europe because, as he pointed out, England is in Europe, whether semi-detached or not and whether the UK Independence Party likes it or not. He seemed to think that the political machinery could eventually crank up to address the issue of bankrupt banks, although he seemed pretty vague on how this might happen. Ever the politician.

As the upper-class Englishman in the hilarious red woolly hat and greatcoat bade me farewell and hurtled down the mountain, the contrast between his hopeful attitude and the pessimism of the Italian manufacturers couldn’t be starker.

The core of Europe’s economic problem is not manufacturing, but banking. The easiest way to explain what is happening is that bankrupt governments are guaranteeing bankrupt banks, which are in turn buying up the bonds of these bankrupt governments.

So let’s think about it for a second. The European governments – all running deficits – are using the European Central Bank (ECB), of which they are all exclusive shareholders, to buy the bonds of European banks, and the bankrupt banks are then using this money to buy the debt of the bankrupt governments that lent them the money in the first place.

While this scam is trumpeted as a success by some of our politicians, it is obvious that the bankers themselves don’t believe that this carry-on can go on indefinitely. How do you know that the bankers don’t believe this is sustainable? Well, just look at what they are doing, rather than what they are saying.

Banks here are so nervous about another big bank going under that they don’t trust each other enough to lend to each other. This is the financial proof of the economic pudding. Interbank lending has all but dried up in Europe. Instead of lending to each other, they are putting increasing amounts of your cash and that of other Europeans – close to €500 billion – on deposit at the ECB. So the European banks, the only vehicle the ECB has to finance the bankrupt European governments, are in turn lending money back to the ECB when the ECB wants them to do precisely the opposite – which is to lend the money to us, the citizens, to get the economy going.

Now consider that these banks are lending money to the ECB at just 0.25 per cent. This is below the rate of inflation, which is running across the eurozone at 2.8 per cent. This means that Europe’s big banks are actually willing to lose money rather than lend it into the system. They must calculate that now it is better to lose modest and quantifiable amounts of money on an ongoing basis than risk the whole lot in a ‘European Lehman’.

The likelihood of a European Lehman – or at least the fear of such an event happening on the continent – is probably more acute in Italy than anywhere else right now. A lot of the chat in Milan last week centred on Italy’s largest lender, UniCredit. It is an enormous bank and most of the manufacturers at last week’s symposium banked with it. This is why they were worried.

Most of these companies have been around for generations. They have in many cases survived two world wars, fascism, years of state corruption and they are still exporting and generating enormous profits. Yet the very bank into which they are depositing their cash can’t raise money.

Last Tuesday, in an effort to get more cash in, UniCredit priced a rights issue – an invitation to existing shareholders to buy new shares in a company – at a massive 43 per cent discount to its closing share price. Yes, you read right, a 43 per cent discount. This move sent shares tumbling 37 per cent in the last three days.

No one wants to touch it. We are not talking about some small-time mortgage outfit; we are discussing Italy’s largest bank, the main player in Europe’s largest bond market and the main bank in Europe’s third-largest economy.

As the snow comes down on the pretty alpine village of Champoluc and the light twinkled inside the cosy cafes, the risk of a massive European banking crisis this year seemed closer than ever. Not because this economist says so, but because a banking crisis is exactly what the behaviour of the banks themselves is suggesting.

When a British Eurosceptic in a woolly hat and suave Italian pro-European industrialists are worrying about the same thing, then it is time to pay attention.

David McWilliams offers independent economic advice through

  1. Deco

    At the heart of the problem is risk.

    We have spent a decade where there was no appreciation of risk. Instead the ECB has subsidized our fear of risk, and made us immune to it – by mans of absurdly low interest rates. And after a while of living with a subsidy from the EU, the US Fed, the BoE etc. concerning risk, we find risk hits the scene with a vengeance.

    Whatever we might say about Boris Johnston, he knows what his duty is as Mayor of London – his duty is to London. Basically, he knows what his job. With an impending tranche of 1.25 Billion euro of your tax money being handed over to the gamblers in Seanie-Bonds, our government is behaving like an obedient collection of servants. Actually, there is a precedent for this. The original gombeen class – the rent collector who collected rent for absentee landlords who were wining, dining and gambling in Dublin and London in previous centuries. Well, here we go – come around full circle.

    • Deco

      We are living with the consequences of the ECB subsidizing rick, between 1998 and today. And the ECB are still subsidizing risk. It gave a “unification dividend” to Europe. Except all that this subsidy for risk has done, is driven us to a scenario where we no longer have any natural defense mechanism to risk. The need for a defense mechanism against risk has itself been absolutely villified by our media culture. This is exmplified by the chant in 2002, “we must not talk our way into a recession” from IBEC’s voice at the cabinet, Sumo Harney. Instead there was to be relentless optimism and celebrationist cheerleading. And this resulted us talking ourselves into a Depression. The natural scepticism and caution was smashed by the establishment. Classic “New Era” propaganda.

      We talked ourselves into a depression, with a pervasive media commentary that pronounced risk as either dead, or the unfashionable sign of a loser.

      “Sittin on de fence, cribb’n an moanen is a lawst opportunity.” B. Ahern.

      There are massive overtones between this and the way that the bling-bling Russians behave on the slopes. We had a media that “celebrated” excessive behaviour like that of the Russians. It also threw derisory abuse on behaviour like that of the English upper class who behave with so much self assuredness, that they don’t even make an effort to be fashionable on the slopes. Well, any sense of self assuredness that Ireland’s middle income 80% subsection might have felt at the end of the last recession had to be undermined persistently by the media. And we are going through the same conditioning process again. The entire “I cannot afford to buy the latest bling, therefore I am miserable” message is being bombarded into us continually. Like as if human existence finds meaning in consumerist bling excess.

      In a consumerist urban society, advertising is propaganda.

      Boris Johnson, is telling us that he above all of it to such a degree, that he can be assured of himself to the point of appearing very ordinary on the slopes. A bit like the fact that he uses a bike. It turns a lot of stuff that we are being told on it’s head.

      • Deco

        Let’s see if we can have a counter culture, that says we can be self assured of ourselves as individuals if we live modestly, and rationally, and not as some herd of lemmings directed by the media.

        • Lyndon Jones

          Well said Deco lets adopt austerity at home as well as in government . Ireland is like a fat kid hooked on fatty foods , its time for a diet .
          I plan to cut my spending by 30% this year and pay off the mortgage instead , we must all deleverage and the faster we do it the better . Gone are the fags and drink , gone is the car which I never used anyway .
          Its cool to be thrifty , its ugly to be a big spender.
          For governments the first thing to do is to cut the deficits , thats the right thing to do …so its austerity for the foreseeable future . Thats the thinking of every government in the EU , cut and tax .
          Now lets see if the Irish have the backbone to pass the referendum or will they bottle it .

          • Colin

            And won’t your job be on the line if everyone including business customers and consumers stop buying what your company produces? How will you pay the mortgage then?

          • Realist

            “And won’t your job be on the line if everyone including business customers and consumers stop buying what your company produces? How will you pay the mortgage then?”

            How will his company produce the product you need to buy if the owners of the company do not reinvest the money ?
            You see, the consumption is not the only thing driving the economy. Looking just GDP and not bothering about the production structure is wrong.
            For each euro you spend on a product (excluding simple services) you need at least 3-4 euro, dependant on the product complexity, to be saved and invested.
            How do you think the product comes along ?

            So, I agree with Lyndon that we need to deleverage, start saving and for me getting rid of fractional banking system :)

          • Colin


            It is quite remarkable you quote my question in full, and then neatly avoid answering my question. Perhaps you could answer it now, seeing as you latched onto it?

          • Realist

            The economy is not driven by just consumption.
            Just over-spending money on products brought us into this mess. Banks printed trillions that were spent, and the economy is still in ruins.
            To say it clearly, we should all be doing what we want to do, spend, save or invest, but without any influence of government.
            The government should save money and shrink to miniscule, while people should do whatever they want to do, save, spend or invest, it is their choice.
            We cannot just overspend money that banks frauded us by printing it from the thin air.

          • Lyndon Jones

            The Irish have an arsed way of looking at money , they believe saving, deleveraging , being thirfty and generally tight with money is a bad thing.
            Stupid people spend money foolishly, clever people generally are cute with money and rely on the ignorance of others to make money .
            Germans would think it odd the way the Irish think about money.
            In this world the more you have the more you want the less you spend, its the difference between being clever and stupid ( a Colin )

          • Colin

            Realist, consider Lyndon Jones is a baker, one of many in a particular bakery. For everyday in 2011 and the 9 days so far, the bakery bakes 100,000 loaves of bread a day. Consider from tomorrow onwards, they are only able to sell 70,000 loaves due to 30% of their customers deciding to cut back on their calorie intake by not buying bread. Now, as you know, the bakery has fixed costs and variable costs. From tomorrow onwards, they only need to order 70% of raw ingredients, so they make a little saving here. But, they have all these bakers who now have 30% less work. And now you know what happens in Ireland when a company begins to have less work, they reduce the numbers of people working, not the number of hours people work. So, Lyndon now has a 30% chance of being out on his ear tomorrow. Let’s say he was chosen to be left go due to his cantankerous and beligerent attitude he displayed at work in the past. For the third and final time, how will he continue paying his beloved mortgage?

          • Colin


            “Stupid people spend money foolishly, clever people generally are cute with money and rely on the ignorance of others to make money.”

            You’re a comedian now as well as a wind up merchant. Ah, you must come from a long line of gombeen men. So, its survival of the most cunning then, eh Jones?

            Well, answer me this then you cunning so and so, are you in negative equity? Do you know when you die, you won’t be able to take your beloved house and mortgage with you to the afterlife?

          • Realist

            That means they might or might not get rid of 30% of workers in that particular bakery if they think the future will not improve neither.
            But it also means that the money is shifted from the baking industry to something else that people desire more. E.g. money we save by not buying bread we either save or invest further into other businesses. In the first case when we save, it is for the future consumption, and somebody will start the business predicting that in 3 years time money I saved might use to buy his product. the same happens to the investment money.
            Your example is flawed as you do not consider the time dimension, nor proper economic principles.
            Businesses are not created to deliver the product instantly nor is that possible.
            Imagine the car industry where you need to invest a lot of money and other resources, labour and land, and that your first car is out in to say 3 years from now.
            How do you think this is possible if there is no consumption for 3 years ?

          • Lyndon Jones

            Colin , Colin look at Germany they are notorious savers they never spend their hard earned money they just save and they are the wealthiest people in Europe maybe the world.
            Colins logic is that fat is good, skinny is bad.
            I am not in negative equity far from it and when I die I can leave my mortgage free house to my nearest and dearest.
            As for the Gombeen remark , you my friend are my typical idea of an Irish Gombeen , your logic is clearly wrong as are your economics.

          • Colin



            No! Read it again. I never mentioned cheese for fCUKS sake. The consumers who stopped buying bread did so to reduce their calorie intake, something Lyndon is anxious to see happening. Cheese has calories. Now, go and read it again without dreaming up scenarios. Just accept the money these people saved on bread was now been used up in the form of higher VAT, property tax, higher petrol costs, the money that was used for bread has been taken by the government in higher tax, OK?

          • Colin


            Don’t start putting words in my mouth now.

            First off, you said you gave up the drink and the fags and the car. Now, do you not know that Smoking is bad for your health in the first place? Its not very ‘clever’ to pay good money for something that kills you and makes you unhealthy. Its also not very ‘clever’ to have a car when you never needed it. Ditto with drink. So, you see, you’re not clever at all.

            And, with house prices continuing to fall, it won’t be long before you are in negative equity. The clever people didn’t buy, or if they did they sold in 2006-2007. Why didn’t you sell in 2007 if you are so clever?

            p.s. I suppose your nearest and dearest will suck up to you for a bigger slice of the house when you pop your clogs, just ask yourself if you didn’t have a house to bequeth, do you think they’d tolerate you half as much as they do? I guess that’s your bargaining chip eh, if they don’t visit me when I’m in the nursing home been spoonfed, they’ll get nowt, if there’s anything left after the nursing home seizes your assets for payment of care provided.

          • Realist

            I agree with you that if money is transfered (or better say frauded) from the private sector to the public sector and the government to fill the hole of all previous malinvestment projects and all future wasteful (not all) public spending, it is bad.
            I was somehow thinking that the way to go out of economic crisis for you is to start spending more and if that is not true sorry about it.
            In essence I am for free economy where we all decide what to do with the money, to spend it now or save it and spend it in future.

          • 33square

            “clever people generally are cute with money and rely on the ignorance of others to make money”

            lyndon knows the price of everything and the value of nothing. the logic you promote there lyndon is that of a parasitic upper class that believes in infinite growth. good luck with that.

            “backbone to pass the referendum or will they bottle it”
            you are most definitely a troll.

        • CitizenWhy

          To educate on an alternative economy in a fun way you may want to purchase the board game Coopoly and form groups to play it and discuss cooperatives. The game is based on the actual practice of a number of worker-owned coops in the USA. It involves much more problem solving and social interaction than Monopoly.

          The game is available by doing an internet search for Toolbox for Education and Social Action.

    • molly66

      The lucky ones are the people who have left Ireland to find a new life in other countries .
      Why I say this is because I believe it is true.
      Europe was good for us up on till 2008 it has Gond down hill at ninth miles an hour,the current government who are way out of there league are playing a game of let’s try and look good and at the same time turning the screws on the poor ,the working class,and the new working middle class.we need complete change and not the chancer change we are getting from a bunch of fools who can’t run a country.l
      Real change is coming but it’s not coming fast enough to save this country.

      • Deco

        Europe up to 2008 was an elabourate con job, sustained by a subsidy on risk – via low interest rates. Low interest rates sustained ponzi schemes, and growth via borrowing and confidence via asset bubbles.

        When the veneer cracked it all ended.

        And the EU’s political elite decided it was not the EU’s fault. As the local leader of the Irish part of European Group of Liberals commented “It was all Lehmans’ fault”. It was not. It was the idiots in charge of the EU who set interest rates at levels that caused cathastrophe to be inevitable.

        • molly66

          Why does it feel like it’s every man for himself as a friend said just look after yourself and your family.
          I just feel this government is one big con job don’t do as I do do as I say and Europe is an even bigger con job.
          I feel like I am on lift support And someone just turned the machine off.I remember I got a bang of a socket in the house and I got stuck to the wires I could see my hole life flash in front of me ,I was luckey to survive ,in some way what’s happing to our jobs our wages of standard of living is being taken away from us ,I feel like i am fool in some way because the school bully is risen from the dark past and like my life was made a he’ll in the 1970s buy the school bully but now the bully is the government and eu .
          We have to stand up and say enough is enough you can’t have the shirt of my back.

          • Colin


            You are right. And I don’t agree with this ‘mind yourself and your family’ ideology that some people here advocate. That is just the selfish gene coming to the surface, looking for the next generation of selfish shysters to continue living in, albeit in a different but similar body. It is wholly anti Christian too. Community came first in Christ’s eyes, not groups of people with similar genetics.

    • Pedro Nunez

      T.S. Eliot –’The Waste Land’ “Little Gidding” (the last of his Four Quartets

      “We shall not cease from exploration
      And the end of all our exploring
      Will be to arrive where we started
      And know the place for the first time”.

      • Malcolm McClure

        Pedro Nuñez, +1 –You have just quoted my all-time favourite quotation.

        I like it because it brings together so many ideas relevant to everyone who has lived in other countries, then returned to reallyunderstand the reality of Ireland.
        I like it because it provides intending emigrants with a solid reason to live abroad for a while, knowing that when they return they, too will see the country through new eyes, hopefully for the benefit of us all.
        I like it here because DMcW has the makings of an explorer.
        I like it particularly because I am an explorer.

  2. Peter R.

    I wonder if history is going to repeat itself – think of the failure Creditanstalt in Austria in 1931 and the type of damage that did. And Unicredit is owner of Hypovereinsbank – there could be trouble ahead ….

    • Realist

      Fractional banking system, sponsored by central banks is the coolprit of this and all previous economic crisis. Just nobody wants to start fixing it as to political and banking establishment means less privileges and money to them. Who really want propserity nowdays :)

    • bonbon

      Exactly! 1931 in Europe and the well known results.
      FDR in the USA, 1933, passed the Glass-Steagall Act,
      while Europe went to hell.
      This time around Obama veto’s and stops Glass-Steagall – which could mean the world goes to hell.

      The solution is clear. Any other “small-steps” ala Zikzak Merkozy Transaction Tax, or “Ring Fencing” cannot and will not work.
      The entire mess is only prolonged because of Obama and a EU-wide proposal alone cannot work if London and Wall Street escape.

      • Realist

        Both proposals, Obama and EU-wide, are bad as not tackling the main root cause of business cycles and that is credit expansion due to the fractional reserve banking and other bad laws.
        return to 100% reserve banking and real money related to gold is the way to remove booms and busts.
        Of course money is also not to be wasted on inefficient monopoly public services as the government should shrink to a shrimp size from the current whale one.

  3. Colin


    I don’t think this is one of your best articles. You ask us to pay attention to the European Banking Crisis. All of us here are doing that, and even your ordinary Sean Citizen is aware of this.

    What we want to see is an end to dithering on a political level. We want decisive action. We want an end to the absurd Austerity for the little guy, and Socialism for the big earner with the big house and the big property portfolio (like Frank 40 gaffs Fahey) and the big box of shares.

    This problem is an opportunity for fairness to triumph over cronyism.

  4. StephenKenny

    As Deco says, Boris Johnson is just doing his job, and his bobble hat and hair are a part of the image that enabled him to become mayor of London.
    There is clearly something very very nasty on the UK’s horizon, and they’ve launched a spectacular PR offensive, see for example, http://www.ianfraser.org/economist-losing-plot-with-shallow-pro-city-propaganda/.
    The difficulty that the UK has is simply that The City is the beneficiary of a global application of Gresham’s Law, that bad money drives out the good. Given their almost non-existant financial regulatory environment, certainly in terms of larger organisations, banks from all over the world open branches there, so that they can operate under these UK rules.
    When something goes wrong, as we saw with UK’s reaction to the Icelandic banks, responsibility is deemed to lay with the so-called ‘home country’. So Boris Johnson’s London get’s the benefit, and the ‘home country’ carries the risk. Are you surprised that the UK is so desperate to keep that part of the status quo, and reject any and all regulations that might interfere with this?

    • bonbon

      London put Iceland on the terrorist list! So the City coopts the U.K. gov’t. Will debt collection be done by gunboat again?
      London is the center of the international financial system, now imploding. This is their system. How far will they go to “save” it? How far will Obama go for them?
      London sent a clear message a couple of years ago to D.C, that any attempt at a Glass-Steagall would be considered a “hostile act”. I would very much like to hear Boris comment on that.

    • Deco

      Fair point.
      Assymetric or one-sided intervention. “Do as I say, but you are not permitted to do as I do”.

    • bonbon

      That Economist piece is very revealing. The cat is out of the bag and what a Katerjammer – tomcat choir! Howling un-reason. They are going berserk!

      But precision is required. What is collapsing is the Inter-Alpha banking operation since 1971, the real hardcore center of the financial system. The timeline of this group and its associates, lodges, meetings, acquisitions is the real history of recent finance.

      It is finished. Real madness is asserting itself. The phone calls to elected officials must be unbelievable! Monti’s Unicredit is not the only problem and it grids with Inter-Alpha – it bought HRE.

      In this kind of environment expect tripping over shadows. And war, assassinations. Democracy is already the past.

  5. Realist

    Get rid of fractional-banking system and central banks. Of course do this gradually as Huerta de Soto proposed in his excellent book on Money, Bank Credit and Economic Cycles.
    Minimize the government and public spending as central planning is not possible in economy, it is an utopia as all information available is not possible to aggregate and summarize through statistics, as it is done nowdays in economics.
    Leave money to people to decide what to spend on and what to do with it.

    • bonbon

      We did that – and the “people” created the biggest bubble in history with other people’s money.
      The “people” lobbied to repeal all regulations – Bretton Woods in 1971, Glass-Steaqall in 2000, which got in the way unpleasantly.

      Funny that you propose more of the same…

      • Realist

        100% reserve banking dissapeared in 18-19 century almost all together.
        Last well known 100% reserve banking was Amsterdam bank famous across the world that brought the rgeat prosperity to Dutch.
        In 20th century banks were always operating under fractional reserve banking, printing money in enormous proportion, especially when the gold standard was removed. Reserve requirements are now bare minimum (in UK is 0%, so not bother why there is a lot of banks there), as banks could earn a hell of a money based on the credit expansion.
        E.g. BOI and AIB might have at the moment in a range of 5-10% of real money available, while they printed 20x or 10x times. you gues what will happen if we are to withdraw our money from them and our bunkrupt state is to recoupe it :)
        Such money was used mainly for construction business and mortgages so to prop up the building industry (and banking too).
        Such malinvestments caused many projects to stop, money is wasted and we are in a big debt hole now.

        This cannot happen (or very hardly) with 100% reserve banking, where people really saved money for the future investments and where regular deposits cannot be invested or used as basis for credit expansion.

        We should tackle the root problem of business cycles and that is fractional reserve banking + huge public spending on so called societal useful projects (like they know what people wants, rather than entrepreneurs who posses more information and knowledge where money should be used most efficiently).

        • bonbon

          I begin to believe you are pushing the British Gold Standard?

          • Realist

            Is there more gold standards than just one using the gold to back paper money while also making sure we are on 100% reserve so not frauding the deposits ?
            The idea is to not allow the economy to be without the thight relationship between consuming, saving and investments like it is now, so preventing the business cycles due to incredible and not constrained credit expansion.

          • bonbon

            Just to be clear because this discussion is not new. It is the British monetary ideal opposed to the US Hamiltonian National Banking enshrined in the Section 1/8 of the constitution :
            “The Congress shall have power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

            To borrow Money on the credit of the United States;”

            This is the key to recovery – restore Hamilton banking. The British Gold Standard was introduced to oppose this in the 1800′s. The Federal Reserve of Teddy Rooseveldt actualy usurped this constitutional issue.

          • Realist

            Are you joking about restoring Hamilton banking ?
            Hamilton is the architect of most of today’s failed economic policies: protectionism, central banking, and debt. His core principle is that government should be used to benefit the rich and privileged, mostly through its power to print money and run financial scams. He devised a national banking system that imposes boom-and-bust cycles on the American economy. He saddled Americans with a massive national debt and oppressive taxation.

          • bonbon

            Ah, so this is the issue, at long last out in the open. Fine, about time. British Gold Standard Monetarism v. US Hamiltonian Credit System.
            This is not a joke – it is a war that has been going on since Hamilton’s First National Bank was destroyed. It runs through the entire history. It boils down to the essential difference between a Credit System and the ancient Monetarism expressed today by the British Central Bank system with roots via Amsterdam, Venice.
            This was the issue at Bretton Woods.
            It is the issue today. Glass-Steagall is all about this. Arthur Griffith understood it quoting Frederic List’s “American System of Political Economy” in the United Irishman.

          • 33square

            bitcoin/nfc standard is MUCH more likely… you think the bacefook crowd give a t@ss about glass steagall/gold standard etc? they ONLY care about convenience and street cred. tech appeals to the base instincts. it looks nice and is “more secure”. just don’t be a dissident with that phone of yours ; )

  6. Deco

    An article by Der Spiegel on Ponzi schemes, and the entire Western Financial situation.

    The grafitti by London grafitti artist “Banksky” says a lot about what we have become in the West, and where it has got us.


    • bonbon

      That report fails to mention Inter-Alpha, no surprise for Spiegel. The Economist page linked above is more, surprisingly, truthful. Interesting that 2 anglophile publications so gloriously contradict one another.

      Ponzi was an amateur, laughable, nothing like what modern derivatives achieved, a $10**15 ($14 quadrillion) scheme – no laughing matter indeed!

    • wills

      Thanxs for link Deco.

    • Pedro Nunez

      When positioned precariously at the top of a slippery slope to use the ethicist John Harris’s phrase, if there is a slippery slope, legislation would apply crampons rather than skis.

      Crampons please,

      • Malcolm McClure

        Pedro Nuñez: Problem is we are not faced with rational equipment choices at the top of the slippery slope.
        We are stranded on a moghul half-way down a black slope. In a blizzard, sans wooly coat, sans bobble hat, sans floppy hair, sans ski-poles and with just one ski. The German hordes are descending around us and we’d feel much safer if we were a fallen jockey in front of Bechers Brook.
        At least we’d be in our element and the Irish horses would hopefully avoid us.

  7. redriversix

    its too late……

  8. BiggyWiggy Rogers

    Nail on the Head in this article David – Perfect explanation of how this rotten bankrupt banking/government circuit is doomed

  9. CitizenWhy

    “”The core of Europe’s economic problem is not manufacturing, but banking. The easiest way to explain what is happening is that bankrupt governments are guaranteeing bankrupt banks, which are in turn buying up the bonds of these bankrupt governments.”

    There you have the beginning of it.

    The real problem is that the governments, that is, Merkozy, are determined that the irrational process summarized above can be made to work and that it will lead to economic growth. The Italian manufacturers know that this process cannot work, and they feel the politicians are incapable of abandoning this failed process (partly because they have been ordered not to by Obama and Tim Geithner). The London conservative mayor knows this process does not work, but somehow he maintains faith that the politicians will abandon it.

    That’s Europe today.

    • CitizenWhy

      P.S> In fairness to Obama and Geither, they want to EuroZone to also start some stimuluses and to go easy on the austerities to increase employment. But Merkel says no.

      I have a vision of Merkel, cheerful for once, dancing outside my window, liltingly chanting “No, no, no, no, don’t do it.” Then she dons an EU flag and dances like an American football cheerleader belting out “Austerity Austerity, Way to Go, Austerity!” and “Cheer for the home team, cheer for the banks, shove that money to the banks, let’s go, let’s go, EU all the way.”

      • redriversix

        British and french warships sailing for straits of Hormuz.Russian aircraft carrier docked in Syria today.

        Cancel all your debt now

        talk is cheap


  10. bonbon

    “The likelihood of a European Lehman — or at least the fear of such an event happening on the continent — is probably more acute in Italy than anywhere else right now.”
    Lehman was not a US phenomenon – it was SYSTEMIC, and nearly brought the entire system to its knees, like LTCM before, and Freddie Mac/Fannie Mae, AIG. A EU version is also exactly the same looming threat to the entire system. So Geithner is just as worried now as then, explaining Bernanke’s Euro rescue. It is inevitable, as nothing was done to handle the system other than suicidal bailouts. They will try to blame some bubble again.

    • Deco

      The Norwegian Krone by itself is a very stable currency.

      One wonders if it could be damaged by the serial incompetence in the ECB, and responding to the fallout of a crack up boom, or the willingness of the BoE to inflate the supply of sterling. But if that we to occur, then at that stage everybody would be wishing they held NK instead of Euros.

  11. wills

    David writes …

    ‘The European governments — all running deficits — are using the European Central Bank (ECB), of which they are all exclusive shareholders, to buy the bonds of European banks, and the bankrupt banks are then using this money to buy the debt of the bankrupt governments that lent them the money in the first place.’

    A classic ponzi scheme that has run out of track like Wiley Keyote and is suspended in thin air looking to camera to the viewer for the next sight gag – fall to earth!!

    • Juanjo R


      This pledged debt is mainly to pay bondholders, big players and the genius bankers at the centre of this themselves.

      Thing is this money does come from somewhere and it has to be accounted for somewhere.

      That somewhere is the people at large, the taxpayer, now and in the future.

    • Deco

      Correct Wills.
      The whole system is now one elabourate Ponzi scheme.

      What was it that Madofff said, after being prosecuted for running a ponzi scheme ? That he was by no means the worst offender.

      • AnnieD

        HOW THE European Central Bank SOLVED THE European Bank’s

        When Tweedledum(EB) asked Tweedledee(ECB)
        To bail him out, thus answered he:

        For Heaven’s sake, dear Tweedledum,
        That’s not how ECB is run.
        Now don’t go making heavy weather
        We’re all of us in this together.

        There’s not a snowball’s chance in Hell
        Those Irish banks will get a smell
        Of billions lent, the silly bowsers,
        They’ve far fewer people there than houses.

        So, let’s pretend I write a Draft
        And even though they’ll know it’s daft
        We’ll tell those bods to whom you lent
        That virtual cash already spent
        That this new Draft’s another loan
        To save their bankrupt banks at home.

        Their costs will spiral to the sky,
        They’ll hang their people out to dry,
        And when too late they shout ‘default’
        They’ll find they’ve nothing in the vault
        But one old rusted tin of beans
        For they’ve bailed the banks beyond their means.

        Then Tweedledee and Tweedledum
        Will march right in and we my chum
        Can claim their forests, ports and towers,
        And all they have will then be ours.

        So, pass the parchment and the pen
        How many billions? Just say when.
        Do join my pals and me for lunch -
        That Irish Bank Bondholder Bunch
        Have jetted right back into town –
        It’s Champagne/caviar all round!

  12. Malcolm McClure

    The domino sequence seems to be
    1. Greece
    2. Italy
    3. Portugal
    4. Ireland
    See: http://gu.com/p/3376g/tw

    It could all happen over a long weekend.

    • Juanjo R

      Some points for you all on this;

      The defict chart is out of date by a year.

      When did Spain become a goodie two shoes? It missed its budget decifit by two percent last year. The regions are up ametaphorical creek without a paddle and unemployment is the worst in the EU.

      Plus the figures here in the graphs only show government debt. Throw private debt in and Irelands away in league of its own. The domino effect isn’t going to be restricted to government debt.

      6% x lots of debt ( Italy/Spain ) = lots of extra money on interest repayments = unbailout-able.

      8% on smaller debts (Portuguese /Irish) = much smaller amounts = posible to bailout.

      Who holds the debt that of the first defaulter is key. The dominos might work this way. I think France and Italy hold most Greek debt. So France could be in the frame. (Maybe I’m wrong).

  13. Deco

    Life in Greece.

    This is a case of university educated professionals going back two generations to farm the land for a living.

    There is a surplus of certain trained professionals in Greece. Not sure if this will attract investment into Greece yet, which might assist the Greek population in getting an improvement to their condition.

    • Realist

      Very nice article Deco.
      The flexibility of labour market is one of the most important thing to fight crisis like this.
      If these people are given social welfare money to sit in their homes and do nothing, or being prevented to work due to the minimum wage laws or other trade and prohibitive laws it will be a much worse disaster.
      Labour that can shift from one (usually malinvested) sector to another, find and change work is the way to show how healthy is the labour market.
      I know that I will do the same, any job, even that I am highly educated. If the society does not need my labour in what I know the best I will move to anything else available to earn money for my 3 boys (bearing in mind I do not want to move to another country).

      These Greek people recognized that people do not want public servants and food is in more need, so they tried to work things out.
      I do not think that Irish market is overly flexible and dynamic, nor that is Greek one yet.

    • 33square

      this will happen here

  14. CitizenWhy

    This is typical of what we are reading in the US on the EuroZone.

    How Austerity Is Killing Europe


    • Realist

      Austerity have 2 things, 1 bad and 1 good.
      Good one is to cut public spending.
      Bad one is to increase taxes.
      If they are to decrease taxes and cut the government spending it will be perfect.

      But the governments are thinking that to be better off we should have fatter governments as they know what to do with our money, so increasing taxes or printing bonds/money.
      Economic information cannot be centralized, aggregated and summarized into GDP and other nonsensical terms coming from the central banks and statistics offices.

    • Realist

      Cannot believe people are still writing about Keynes utopian views.
      No bother why we are still in this big mess in 21st century while following his advices.
      “But this is pre-Great Depression economics. How could the EU so misread history and treat with contempt the teachings of John Maynard Keynes, who argued that during recessions governments must expand economies through spending and tax cuts, not the opposite?”

      • bonbon

        Keynes was repeatedly muzzled at the Bretton Woods Conference by FDR’s Dexter White, thus enabling a stable fixed-exchange rate system and post-war reconstruction, until Nixon killed it in 1971.

        Keynes is the originator of the Bancor, the world currency idea and model for the Euro and BRIC. And Keynes is revered in various circles still today.

        That is truly amazing.

        On top of that Keynes was outspoken treasurer of the Eugenics Society for more than 30 years.

        • mediator

          Harry Dexter White was a communist spy within FDR’s administration. Anything he had his hand in is suspect
          (at least its suspect if you disavow communism)

          • bonbon

            McCarthy is back! Trumanism too!
            In 1944 the USA and Soviet Union were allies defeating not only fascism but British monetarism (Keynes and the Gold Standard). Wall Street was, understandably, extremely upset by FDR’s 1933 Glass-Steagall, the New Deal, Reconstruction, and lost it completely when Bretton Woods muzzled them yet again. Britain’s Wall Street got its revenge, the 2000 repeal of Glass-Steagall and the utter hell that wrought on all people.
            President Higgins clearly refers to this – Ireland is in the maelstrom.

  15. piombo

    Good morning all,
    Whilst I understand David’s thesis, I preceive here that despite the tension surrounding the banks Unicredit and Monte Paschi di Siena, there is no chance that either of these banks nor any other within Italy & EZ will be allowed to fail. Allow me to breifly explain my rationale.
    Three weeks ago the ECB pumped a €500 billion three year swap at 1% allowing the banks to re-establish the normal “contango” on the yield curve by allowing them to earn circa 5%-7% on government bonds or commercial lending for the next three years. This move alone will guarantee pre-tax earnings of almost €100 billion to the banks over the next three years. This is a repeat of the Paulson doctrine of 2008/2009 through TARP. The earnings allows Bnaks to rebuild their capital.
    A few days before this €500 billion three year swap, the ECB in unison with the BoE, Federal Reserve, BoJ and the Swiss Central Bank executed a joint purchase of US dollars to come to the aid of a major French bank who was unable to borrow on the overnight US$ interbank market.
    The above two are examples of the “tools” that the ECB will use whenever and whereever necessary to prevent a bank blowout. In my opinion, there is a third instrument in the ready and that is the “moralsuasion” of convincing weaker banks to be taken over by stronger ones.
    Finally, I would not be so worried that the “foreigners” are after our forests, oil/gas etc.,Ireland is not so resource-rich and we will need the US/UK/EU big players to do the E&P anyway if viable reserves are discovered. The best we could hope for would be a Petroleum Revenue Tax such as is in place in the UK.

    • bonbon

      The “swap” actually refers to an illegal FED rescue of the Euro, getting around Congress.
      So the Eurozone is simply incapable of saving itself and its banks.
      The swap will for sure boomerang. The tool of using the FED by Bernanke and Geithner will come under scrutiny. Geithner must be half crazy because his failure to coerce Merkel (using Sarko as well) drove him to this.

    • Morning Piombo,

      Interesting take and I believe that you are right on the unlikely channces of a Lehman in Italy, but the people who are major clients of these banks are very worried!



    • bonbon

      The way the system functions now, it does not matter where the “Lehman” occurs. These are systemic events spreading instantly across boundaries.
      People are instinctively worried knowing this. Seeking refuge behind a national boundary when all sovereignty has been erased is self-delusion. Hard-nosed industrialists realize this, financiers maybe not.

    • bonbon

      Nigeria, one of the largest Petrocarbon producers must import gas for transport! It had 2 refineries which 1 by 1 were wrecked for whatever reason. Imagine Eire importing gas, while exporting the raw material. Absurd.
      This is called looting.
      Anyway it is much better to generate power by modular 200MW+ nuclear reactors, than burning a useful fossil.
      South Africa pioneered the Jülich design, but recently stopped funding.

  16. redriversix

    I have come to believe the entire crisis is a scam , So the primary goal moving forward is self-preservation.

    Protect yourselves now

  17. mediator

    Don’t be silly bonbon. “Alliance” between US and USSR was convenience. Real point of WWII was to spread communism – if you’re in doubt just look at pre and post WWII map of world. To the victor the spoils. USSR spread all over the place both East and West after WWII. Only left Austria by the grace of God. Plenty of communists still with us in different form ie wolves in sheeps clothing, ref EU commission etc…

    Communism taking alternative route to direct conflict, this stuff has been choreographed and planned and well in advance too. Next stage is total financial meltdown followed by a “save us” stage where people will accept anything to tackle the chaos and that anything will not be in our best interests

    PS are you a white or pink bonbon

    • bonbon

      Marx’s Communism is after all a British Imperial project executed in London under the tutelage of David Urquhart.
      Strangely enough fascism is also of British Imperial Fabian notoriety.

      Knowing this look again at the EU Commission. We are dealing with Empire, not simply some spin-off like Red or Brown.

  18. piombo

    @Bonbon, redriversix,
    My focus is finance informed by economics and not jurisprudence. Neither the swap nor the US dollar move are illegal in the EZ nor can they be mocked as scams. These measures are the baby-steps toward a monetising of sovereign debt throughout the EZ and are key in allowing credit to commence flowing again, and thus, enabling the EZ economies to achieve stability and ultimately growth. The €500 billion swap wrong-footed the speculators bur steadied the sovereign yields. Expect a lot more of this in the next seven weeks.

    • bonbon

      The swap is illegal in D.C, who careas about the EZ. That’s illegal enough for me. And be sure Geithner has nightmares of hearings.
      Monetizing this synthetic debt is hyperinflation and can lead to only one result, a mega Weimar. Berlin fully understands this.

      • redriversix

        I am now going to put my hard neck on the line and declare we are heading for a major military incident / escalation within six months and believe me…I hope to God I am wrong….

        Best RR6

      • bonbon

        The situation is extremely dangerous, as long as Obama is not impeached. This, from Tel-Aviv :

        Jan 8. Avi Perry, who “served as an intelligence expert for the Israeli government,” hints in the Jerusalem Post magazine today, that an attack on the U.S. Navy, not in Iran’s interestbut blamed on Iran, would serve as the pretext for a war against Iran.
        Perry writes, “The encroaching [sic] war with Iran will not be initiated by the U.S. or Israel…. Iran… will … help the U.S. president and the American public make up their mind by making the first move, by attacking a U.S. aircraft carrier in the Persian Gulf.
        “The Iranian attack on an American military vessel will serve as a justification and a pretext for a retaliatory move by the U.S. military against the Iranian regime…. The U.S. would retaliate by attacking Iran’s navy, their military installations, missile silos, airfields. The U.S. would target Iran’s ability to retaliate, to close down the Strait of Hormuz. The U.S. would then follow by targeting the regime itself….
        The greatest irony behind this … is that the Iranian regime would effect their own demise. Attacking the U.S. Navy in the open seas is equivalent to carrying out a suicide bombing….”

      • coldblow

        From a recent piece by Michael Hudson:


        “The Clinton Administration balanced the U.S. Government budget in the late 1990s, yet the Bubble Economy was exploding. On the other hand, the Federal Reserve and Treasury flooded the economy with $13 trillion in credit to the banking system credit after September 2008, and $800 billion more last summer in the Federal Reserve’s Quantitative Easing program (QE2). Yet consumer and commodity prices are not rising. Not even real estate or stock market prices are being bid up. So the idea that more money will bid up prices (MV=PT) is not operating today.

        “Commercial banks create debt. That is their product. This debt leveraging was used for more than a decade to bid up prices — making housing and buying a retirement income more expensive for Americans — but today’s economy is suffering from debt deflation as personal income, business and tax revenue is diverted to pay debt service rather than to spend on goods or invest or hire labor.

        “Much more striking is the travesty of German history that is being repeated again and again, as if repetition somehow will stop people from remembering what actually happened in the 20th century. To hear ECB officials tell the story, it would be reckless for a central bank to lend to government, because of the danger of hyperinflation. Memories are conjured up of the Weimar inflation in Germany in the 1920s. But upon examination, this turns out to be what psychiatrists call an implanted memory — a condition in which a patient is convinced that they have suffered a trauma that seems real, but which did not exist in reality.

        “What happened back in 1921 was not a case of governments borrowing from central banks to finance domestic spending such as social programs, pensions or health care as today. Rather, Germany’s obligation to pay reparations led the Reichsbank to flood the foreign exchange markets with deutsche marks to obtain the currency to buy pounds sterling, French francs and other currency to pay the Allies — which used the money to pay their Inter-Ally arms debts to the United States. The nation’s hyperinflation stemmed from its obligation to pay reparations in foreign currency. No amount of domestic taxation could have raised the foreign exchange that was scheduled to be paid.

        “By the 1930s this was a well-understood phenomenon, explained by Keynes and others who analyzed the structural limits on the ability to pay foreign debt imposed without regard for the ability to pay out of current domestic-currency budgets. From Salomon Flink’s The Reichsbank and Economic Germany (1931) to studies of the Chilean and other Third World hyperinflations, economists have found a common causality at work, based on the balance of payments. First comes a fall in the exchange rate. This raises the price of imports, and hence the domestic price level. More money is then needed to transact purchases at the higher price level. The statistical sequence and line of causation leads from balance-of-payments deficits to currency depreciation raising import costs, and from these price increases to the money supply, not the other way around.

        “Today’s “free marketers” writing in the Chicago monetarist tradition (basically that of David Ricardo) leaves the foreign and domestic debt dimensions out of account. It is as if “money” and “credit” are assets to be bartered against goods. But a bank account or other form of credit means debt on the opposite side of the balance sheet. One party’s debt is another party’s saving — and most savings today are lent out at interest, absorbing money from the non-financial sectors of the economy. The discussion is stripped down to a simplistic relationship between the money supply and price level — and indeed, only consumer prices, not asset prices. In their eagerness to oppose government spending — and indeed to dismantle government and replace it with financial planners — neoliberal monetarists neglect the debt burden being imposed today from Latvia and Iceland to Ireland and Greece, Italy, Spain and Portugal.

        “If the euro breaks up, it is because of the obligation of governments to pay bankers in money that must be borrowed rather than created through their own central bank. Unlike the United States and Britain which can create central bank credit on their own computer keyboards to keep their economy from shrinking or becoming insolvent, the German constitution and the Lisbon Treaty prevent the central bank from doing this.”

        • bonbon

          The key issue is hyperinflation – the laws were after all agreed by all to avoid this. Lawless behavior is evident. To imply some pseudo-psycho reasoning for 1923 is ridiculous. It happened because the economic base could never under any circumstance be looted to pay Versaille. Today under no circumstance can the entire transatlantic economic base be looted to pay off unbelievable derivative (not mentioned of course above) casino side-bets. QE is only printing money. We know where it leads.

    • redriversix

      with respect Piombo

      your out of your mind,these are merely financial products,tools or weapons
      This Crisis has moved on considerably over the last 48 hours

      In financial and Military circles,a speed that I was even spooked at..

      Do not mean any disrespect piombo,but their is no a far bigger picture hiding in plain sight

      Best RR6

      • redriversix

        typo …….”now a far bigger picture hiding in plain sight”

        • piombo

          Hi RR6,
          I don’t discount an attack on Iran, but it is very unlikely with the Chinese having a veto etc.,
          Even if a full attack were to be launched say by Israel and Saudi Arabia together the only financial consequences would be to spike oil and the dollar and the other commodities. The Euro would fall but it is doing that already.
          I know it is very cynical but wars are good for business generally and the US Dollar in particular.
          No point being a hypocrite when it comes to Finance and Business.

        • bonbon

          In the real world of the 21st century the old geopolitical claptrap of McKinley and Haushofer can only have one result in the modern age of thermonuclear weapons. To remind you of what this means look up the Zara Bomba of 1958 fired at only 30% of its full potential. Any conflict in Asia leads very quickly to this. Our entire species would not survive.

          The “good for business” is from a cellar where the sun never shone. It looks like Obama’s mind is there with his provocations.

  19. george


    Nature has given us the invoice, and the globalise economy, and political structures, put in doubt whatever hope we had about an intelligent evolution of the human race. The only thing we have to see is how the transition will be, and what and if, there will be a new paradigm worth waiting for. In the meantime we are going to see a lot of destruction, desolation, and dead, some via natural catastrophes, and some via the financial meltdown, but all man made, as a consequence of over-industrialization, over-population, and over-consumerism.

    EUROPE-USA-And CHINA and the Globalise World

    EUROPE was the only hope of a World where the needs of human beings, had a role to play at the moment of deciding the political and economical structures that govern us…but a Euro without fiscal union, and with such a disparity from Country to Country, of social assistance and salaries within the EU, made of the dream a total nightmare.

    CHINA: Is where multinationals got around the issue of slavery and environmental pollution, and made it look like it’s legal. So now we are consuming in a massive way, goods produce in China, under conditions that no government of the Western World, can allow under just laws, to take place.

    USA: God bless the American citizens that have universal values close to their hearths, because they’ve been fooled by most of their own political class, no matter what Party they represent, in believing that God was other that the omnipotent power and might of big Corporations.

    IRELAND: Is where some grown up people behave like children, and do like to play, hidding behind the Constitution. And where some grown up people specially politicians, high civil servants, and professionals, think they should get paid more than in other EU Countries, and have better conditions than the rest of the population. And can get away with it, screwing the little people with taxes. In Ireland “low tax economy” means, that the rich and the Corporations don’t want to pay, and the low middle class has to pay for all. And where Banks own the Political Infrastructure of the Republic, and where most of the Politicians are afraid of them.

    • George,
      there is no global over population, granted some urban areas have too high a density but the world is under populated if anything.

      Malthus was wrong!!!

      Are for man made global warming…another con, it’s the Sun baby!!!

      • george

        Josey so green house gases are a myth, and are not trapping heat close to the earth?
        And genetic modified crops to feed a growing population are not having a negative effect through the extensive use of herbicides in air and water quality?
        And nature doesn’t need empty spaces to regenerate itself. So how far do school children from Dublin or any big city in England, have to walk to see a centenary forest of native Irish or English Oak?
        And then why China, a Country that is using one million hectares a year of excellent agricultural land for building apartment blocks and other infrastructure, needs to import Soya beans from South America, a crop of which they were up to 20 years ago net exporters?
        And why the Arabs, Koreans and Indians entrepreneurs among others are with the baking of their own governments, grabbing land in Africa and in South America to feed their own people?

        They say that if you put a frog in a pot of boiling water it will jump out of it, but if you put the frog in a pot with cold water and then turn the heat on, the frog will died in it. We are in the pot thinking that all the answers will come from an economic fix.
        How we ca have a smart economy without having first smart citizens?

        • bonbon

          I really believe now you are either quoting Al Gore, claiming no difference between humans and frogs, likely frog populations, or Prince Philip.
          Modern maize is a genetically modified plant, created originally by very smart Indians from the primitive Teosinte – it is a man-made plant.
          China’s hybrid rice is a world beater. Hybrid wheat also a world feeder. Using these foods for bioenergy is a crime against humanity. 30% of the entire US crop goes to gas tanks. Brazil’s sugar etc go to EU gas-tanks!
          China will green the Gobi, no frog could ever do that.

          • george

            I’m no Al Gore or Prince Philip’s sympathizer, nor a member of the Green Party. I grew up in a part of the South American jungle, that was took over by cowboys, and the need of the industrialise world to feed their children, and that is more concern to reach the moon that to take care of the earth that sustain live.
            China will green the Gobi using aquifers that cannot be replenish… and after that let me guess they’ll open the biggest fun park in Asia with a mega Shopping Centre attached to it, so kids can be brainwashed in thinking that technology will solve all the problems and create none.

          • bonbon

            The Gobi will be greened by piping water north from where it is plentiful. Man does not wait for rain – we move rivers make canals, irrigate. NAWAPA will move massive Arctic runoff to the Great American Desert with massive pumping and reservoirs and so doing will modify the climate both in the Arctic and West Coast.

            We will green Chad again with Transaqua, drain the Sud, Jordan and Palestine with the Oasis Plan (nuclear desalination), Aral with the Russian Canal project.

            Talking about jungle, Ankhor Wat was reclaimed after man stopped maintaining the massive canal system. And part of the Amazon was actually planed by a civilization with no remembered name (the black earth found by oil explorers).

      • george

        The facts are contrary to what you say… people is waiting for rain, or most of the maize crop and some of the wheat and soya bean crops destined to feed millions of people and animals in Europe and Asia will be lost in Argentina, this year. And many more animals will die on account of an unprecedented drought, the second in four years, with temperatures of 40C in some parts of the Country. And the cost of some food products could have a serious effect in small farmers’ and peoples’ lives next year.

        • bonbon

          Interesting you omit that 30% of the crop is going into gas-tanks. Sustainable renewable genocide.

          Praying for rain is for, or rain-dancing is a spectacle to be expected for sustainable Greenies.

          NAWAPA is the solution for the Texas drought for example. To suppress this is genocide, simple as that.

          • george

            Even when you are proven wrong and have the evidence in front of your own eyes, you deny it, with childish and hysterical arguments. I’ve better things to do, so keep talking to yourself.

    • bonbon

      That mantra, that nature decides we are over-populated is exactly Prince Philip’s statement that “if re-incarnated he would like to be as a deadly virus to do something about population”. In other words a pandemic from the founder of the WWF, the original Greenie.
      That same hatred of the human species is reflected in Al Gore’s books and films. Add in Merkel’s “scientific” advisor Schellnhuber, CBE, who with sheer genocidal lunacy he pompously says 1 billion is “optimal”.
      How could someone become so insane as to espouse this?
      Here is a hint :


      • george

        Bonbon the two main breeds of sheep in Spain are called “churras and merinas”…and a good farmer never mix the two together. I think you are doing exactly that!

        • bonbon

          “In the meantime we are going to see a lot of destruction, desolation, and dead, some via natural catastrophes, and some via the financial meltdown, but all man made, as a consequence of over-industrialization, over-population, and over-consumerism”.

          You after all did write this. I admit the rest seems disconnected, but as a preamble it defines the tone, no?

          • george

            Bonbon listen “whatever sets the tone” can be in your mind not in mine. I express my opinion according to what I think, without hatred towards humanity, as you seem to suggest, without attributing blame to anyone, I’m talking about changes we ought to do to evolve as intelligent beings.

            But let me tell you that I think we are acting like fools, if we think we can carry on with this rate of procreation, industrialization, and consumerism, without it having a catastrophic effect, on the foundation over which all life depends, and that we are quite ignorant, if we think that our children are not going to have to pay, in one way or another, for our stupidity, if we carry on like this>

          • bonbon

            There’s that tone again. You set the tone. I hear it clearly. To attempt to dictate population, not blaming anyone but the human species itself is Al Gore’s theme. Herr Schellnhuber has also this academic tone exactly, and in fact does speak German with a very English accent, cultivated I am sure. Dry academic hatred for the human species hidden with truthy statements.

            It’s clearly in fashion now it seems and spreading.

      • george

        First you tried to qualify my opinion as “against humanity”
        After it, you tried to qualify my affiliation as based in the belief of Al Gore and Prince Philip.
        And now you try to qualify my tone and my accent as of a certain kind.
        It seems to me that it’s easy for you to kill the messenger than to deal with the issue, so you can push it out of the way.

        • bonbon

          The issue is genocide. I deal with it directly, not coded is some message. To suppress necessary progress hits the relative potential population density, and life expectancy of our species.

          • george

            You love punting labels…this must be the fourth or the fifth. Everything goes back to the fact that as you can’t deal with the message, your only option is to kill the messenger. We are not any more in times when the Inquisition wanted to silence and to incriminate people, by presenting false evidences. And as this is the only thing you seem to know, I suppose you’ll continue inventing lies.
            I’m not going to accompany you in your own downwards slippery road.

  20. Philip

    By David’s reckoning, we are days away from a mega collapse in Italy and …. then what?

    I am not interested in the morals/ lunacy/ history of cockups anymore. I would just like a view of what’ll happen next without the bull$hit armageddon histrionics. My concern is a major halt in logistics with consequential hits to energy. Governments will need to flip to protectionist mode and I suspect plans are already in plan…there I have just engaged in bull$hit histrionics.

    • bonbon

      I understand you are concerned with the physical economy pile up. Transport and energy being essential components along with healthcare, water…
      This is almost impossible to discuss in an economics blog today where money always becomes the topic.

      Very good to mention this.

    • piombo

      Hi Philip,
      I live and work in Italy. I speak with Italian banks, customers, suppliers etc., I read the newspapers and watch the news every day here.
      THERE IS NO COLLAPSE on the way and this is further evidenced by the EURIBOR Overnight rates at 0.372 while the 3week swap stands at 0.376. We are still in contango. Only when the interbank rates go into backwardation should we start worrying. Backwardation is when the price curve is higher now rather than in the future and denotes an immediate shortage of whatever the underlying asset is.

      • bonbon

        By the press and statistics accounts, Lehman could never have happened, neither LTCM, AIG, ENRON. Does that not make you slightly suspicious?

        The Irish press was gone fishing – the crash just could not occur?

        DMcW has over years countered exactly this.

        • piombo

          Hi Bonbon,
          I am wary by nature, but also realistic. Whilst there are plenty of illiquid banks on the brink of insolvency in Europe, because of the ECB’s and EU determination to prevent even one disorderly bank insolvency/bust a Lehman Brothers event will simply be not allowed to happen. This is the simple reality here in Euroland and while DMcW’s analysis is empirically correct, it is Finance and Politics in the driving seat with the twins of classical Economics and free-market liberalism safely secured in the back with the soothers and rattlers to keep them quiet

          • bonbon

            Those in the driving seat have crashed the truck then? Who else? And you feel secure as a passenger?

            Driver and Co-driver Merkozy have achieved perfect union, as I report below, so the ship of fortune is on track?

          • molly66

            It does not matter what they do would you fix a truck puncture with a bandaid.so all the window dressing they do it will be a waste of time.

  21. CitizenWhy

    Theory no more. China is coming to Ireland. Is this a good thing for Ireland, for Europe?

    Here’s an article about the Chinese trading zone in Athlone.


    • bonbon

      I reported activity in Portugal in the last theme. China has no interest in “saving” the Euro, but is interested in investing in the physical economy and outstrips World Bank credit right now with no idiotic “appropriate technology” Greenie incantations. Let the WB disappear then.

    • Deco

      As shown by what is happening in Pireaus in Greece, Beijing regards the weakness of the Euro as an opportunity to sell more Walmart type merchandise to Europe, and continue the hollowing out of manufacturing here.

      We should be wary as to the needs of our own society.

  22. bonbon

    A Hilarious report on a Guardian piece-
    Austerity, le vice anglais is the fetish-du-jour!

    Merkel and Sarkozy Achieve Utmost Unity in Berlin Summit

    Jan. 9 –The heads of government of Germany and France met in Berlin today, to discuss how in the world to try to save the utterly bankrupt Euro system–which is of course a physical economic impossibility. So when they announced that they had, yet again, achieved “unity,” one is properly incredulous. More likely, it had to do with what London {Guardian} economics editor Larry Elliott described today as “the masochistic sexual preferences of upper-class Brits” spreading to continental Europe.
    In a piece headlined: “Angela Merkel has the whip hand in an orgy of austerity,” Elliott begins: “The notion that economic pain is the only route to pleasure was once the preserve of the British public school-educated elite, now it’s European economic policy.” He notes that the French frequently refer to “{le vice Anglais}, the derisory term given by the French to the masochistic sexual preferences of upper class Brits,” and then cites novelist Anthony Burgess explaining that the British public school system creates “a kind of bond of shameful-shameless intimacy between the members of the ruling class those schools were concerned with turning out. To have beaten, been beaten, witnessed the same beatings is a red badge of something.”
    Elliott says this has now spread across Europe: “{Le vice Anglais} is no longer confined to these shores, but has become the fetish du jour across the whole of Europe… `Mario, you have allowed the Italian budget deficit to rise above 3% of gross domestic product.’ `Yes, mistress Angela, I deserve to be punished for my lack of fiscal discipline. Please do not spare me.’”

    Elliott clearly knows whereof he speaks–even if London’s strategic purpose is to use such arguments to wipe out any possible German leadership of a post-euro Europe.

    • bonbon

      I have long suspected this “intimacy” has spread to some in the Dail. Have we modeled some schools on the Brit system? This “unity of purpose” overrides any kind of dedication to the general welfare and gets close to explaining the irrational dedication to the Euro.

    • StephenKenny

      The Guardian is the left of centre UK newspaper. At the moment, therefore, it will take any shot it can at the rich (loosely, the toffs) and continue this interesting nationalistic diatribe – shooting at the foreigners.

      This piece of unutterable nonsense is no exception. Trying to draw presumed sexual proclivities into the argument is more ludicrous than it is possible for an ordinary person to conceive of.

      These are signs of a hysterical desperation on the part of the UK media and establishment. Short of sending in the army to execute ‘covert actions’ in European countries, to make them look like dangerous places, I cannot think of anything more desperate.

      It is clear that the problems in the UK economy are very considerably more serious than are being admitted to. A run on sterling seems quite possible.

      • bonbon

        I think Elliot “bared all” in a revealing review. Embarrassing indeed. The Economis piece is even more raw nerves!

        • StephenKenny

          His books are an interesting read – ‘Fantasy Island’ and ‘The Gods That Failed: How the Financial Elite Have Gambled Away Our Futures’. Both of which he wrote with the business editor of the Daily Mail.

          In the introduction they explain that what they write for their respective newspapers is not necessarily in line with what they actually believe. Reading the books makes that abundantly clear.

          • coldblow

            I read Fantasy Island and it was, as you say, very good. I hadn’t realized this was by the same man. The piece quoted by Bonbon is drivel. Even the ‘young wans’ on the Sindo team could do better (well, some of them).

      • bonbon

        And the ordinary people in the street after all do not make these policies. Elliott refers to those that do, on their behalf. It does get close indeed!

        • StephenKenny

          It’s the sort of absurdity I would expect to see in USA Today, or on Fox.

          • bonbon

            The “elite”, “toffs” (not to say Boris is one of these) of Elliott do indeed forward absurd policies. We all know that in this blog.

            Why then the protest when it is made explicit?

          • StephenKenny

            Because it’s success would do terrible harm to all but those few who benefit, and people, for reasons not based on past performance, often take parts of the UK media seriously.

  23. bonbon

    Anyone who follows the Economist “Schumpeter” column in the should check where “creative destruction” comes from – Sombach. A quick google check should make one wonder if the editors are simply insane?

    London {Economist}: `We Should Be Nervous’

    Jan. 9 The financial oligarchy exposed its psychotic feudal mindset yet again in a Jan. 7 {Economist} “Schumpeter” column headlined “The Dangers of Demonology / Hatred of Bankers Is One of the World’s Oldest and Most Dangerous Prejudices.”
    “Hurling brickbats and bankers is a popular pastime,” it starts. “…Anger is understandable….
    “But is the backlash in danger of going too far? Could fair criticism warp into ugly prejudice? And could ugly prejudice produce prosperity-destroying policies? A glance at history suggests that we should be nervous.
    “Scorn for moneymen has a long pedigree. Jesus expelled the moneychangers from the Temple. Timothy tells us that the love of money is the root of all evil. Muhammad banned usury. The Jews referred to interest as nesheka bite. The Catholic church banned it in 1311. Dante consigned moneylenders to the seventh circle of hell–the one also populated by the inhabitants of Sodom and other practisers of unnatural vice….
    “In a diatribe against the Rothschilds, Heinrich Heine, a German poet, fumed that money is more fluid than water and less steady than air.
    “This prejudice has proven dangerous….
    “Railing against the 1%–particularly when so many of them work for companies with names like Goldman Sachs and N.M. Rothschild–can unleash emotions that are difficult to cage…. The crisis of 2008 showed that global finance requires tough medicine…. But demonising bankers will not solve these problems and may well, if unchecked, bring a lot of ancient ugliness back to life.

    • gizzy

      insane or from another planet

    • bonbon

      Correction to above : Sombart, the originator of “creative destruction” popularized by Schumpeter of Economist Magazine column notoriety.
      To give an idea of the sheer schizoid economics of this publication, Sombart picked this from Nietzsche, the Nazi “philosopher”, and Schumpeter popularized it in the Anglo world. So we have the Economist worried about “ugliness” openly propounding a Nazi economics doctrine!
      The Economist is read all over, by many on this blog for sure, and “respectable” economists.

      This policy of “creative destruction” is running company actions all over, touted as “innovation”.
      Thankfully this wiki shows more and more of this.
      Just look at the list of “experts” there propounding this insanely destructive economics.

  24. Philip

    David’s artcle says we have a banking problem in Europe. I would qualify further. We have a political and governance problem which is manifested in the increasing instability of the banking system. I appreciate Piombo’s view, but I am not as confident about the level of control the EU/ECB has.

    My next question: How come the first place for banks to put money is in the ECB? Why not in Chinese assets or Indian or Brazilian? Investment is falling globally. Global commerce is in trouble. the outlook is seen to be poor.

    I think the whole thing will break and there is nothing M Geitner, Barrosso, LaGarde etc can do about it.

    • bonbon

      It might be better to use China instead of the World Bank for credit right now, as apparently Athlone is doing as posted above by @CitizenWhy. Untill the transatlantic banks are surgically excised by Glass-Steagall this might be the only viable option.

  25. Deco

    Leading bank economist thinks that the bondholders will have to effectively get burned.


    But the clowns in Kildare Street still stick to the official Brussels dictum on the matter.

    • bonbon

      I think Mr Buiter should be given a full-Irish Glass-Steagall for breakfast. This guy from Citi knows his bank is sitting on the largest of 5 derivative time-bombs, and little Eire could trigger it at any moment. Add Hungary, Portugal to the explosive mixture, and call his bluff.

    • gizzy

      They will be strung along until after the French and German elections andwill not rock the both as their main aim is to make sure their own salaries and those of the civil service are paid without a blip. Ruari Quinn stated on the news that we would comply with the Troika otherwise salaries and he said yours and mine (do not know who the yours is) would not be paid.

  26. CitizenWhy

    Be,ow is presented a budget for the United States that solves its problems but you never hear about from the media. Many Democrats are afraid of it because the defense industry has spread itself out to all 50 states, becoming an important source of good local jobs and local tax revenues. In the state of Rhode Island (the smallest state) the defense industry accounts for 4% of its economy (which is in serious decline) at an average salary of $70,000, considerably above RI and national average incomes.

    Surely some serious, socially democratic group in the Irish Dail and the EU parliament could come up with a progressive solution to the crisis in Europe. Why is everything left to Merkozy?

    The Progressive Caucus/Congress – The People’s Budget To Produce a Balanced Budget


    Budget of the Congressional Progressive Caucus
Fiscal Year 2012

    The People’s Budget eliminates the deficit in 10 years, puts Americans back to work and restores our economic competitiveness. The People’s Budget recognizes that in order to compete, our nation needs every American to be productive, and in order to be productive we need to raise our skills to meet modern needs.

Our Budget Eliminates the Deficit and Raises a $31 Billion Surplus In Ten Years 
Our budget protects Social Security, Medicare and Medicaid and responsibly eliminates the deficit by targeting its main drivers: the Bush Tax Cuts, the wars overseas, and the causes and effects of the recent recession.

    Our Budget Puts America Back to Work & Restores America’s Competitiveness
- Trains teachers and restores schools; rebuilds roads and bridges and ensures that users help pay for them
- Invests in job creation, clean energy and broadband infrastructure, housing and R&D programs

    Our Budget Creates a Fairer Tax System
- Ends the recently passed upper-income tax cuts and lets Bush-era tax cuts expire at the end of 2012
- Extends tax credits for the middle class, families, and students
- Creates new tax brackets that range from 45% starting at $1 million to 49% for $1 billion or more
- Implements a progressive estate tax
- Eliminates corporate welfare for oil, gas, and coal companies; closes loopholes for multinational corporations
- Enacts a financial crisis responsibility fee and a financial speculation tax on derivatives and foreign exchange

Our Budget Protects Health
- Enacts a health care public option and negotiates prescription payments with pharmaceutical companies
- Prevents any cuts to Medicare physician payments for a decade

    Our Budget Safeguards Social Security for the Next 75 Years
- Eliminates the individual Social Security payroll cap to make sure upper income earners pay their fair share
- Increases benefits based on higher contributions on the employee side

    Our Budget Brings Our Troops Home
- Responsibly ends our wars in Iraq and Afghanistan to leave America more secure both home and abroad
- Cuts defense spending by reducing conventional forces, procurement, and costly R&D programs

Our Budget’s Bottom Line
- Deficit reduction of $5.6 trillion
- Spending cuts of $1.7 trillion
- Revenue increase of $3.9 trillion
- Public investment $1.7 trillion



    President Bill Clinton … “The most comprehensive alternative to the budgets passed by the House Republicans and recommended by the Simpson-Bowles Commission” … “Does two things far better than the antigovernment budget passed by the House: it takes care of older Americans and others who need help; and much more than the House plan, or the Simpson-Bowles plan, it invests a lot our tax money to get America back in the future business”

    Paul Krugman … “genuinely courageous” … “achieves this without dismantling the legacy of the New Deal”

    Dean Baker … “if you want a serious effort to balance the budget, here it is.”

    Jeffrey Sachs … “A bolt of hope…humane, responsible, and most of all sensible”

    The Economist … “Courageous” … “Mr Ryan’s plan adds (by its own claims) $6 trillion to the national debt over the next decade, but promises to balance the budget by sometime in the 2030s by cutting programmes for the poor and the elderly. The Progressive Caucus’s plan would (by its own claims) balance the budget by 2021 by cutting defence spending and raising taxes, mainly on rich people.”

    The New Republic … “…something that’s gotten far too little attention in this debate. The most fiscally responsible plan seems to be neither the Republicans’ nor the president’s. It’s the Congressional Progressive Caucus plan…”

    The Washington Post … “It’s much more courageous to propose taxes on the rich and powerful than spending cuts on the poor and disabled.”

    Rachel Maddow … “Balances the budget 20 years earlier than Paul Ryan even tries to”

    The Guardian … “the most fiscally responsible in town… would balance the books by 2021“

    The Nation … “the strongest rebuke…to the unconscionable ‘Ryan Budget’ for FY 2012.”

    Center for American Progres … “once again put[s] requiring more sacrifice from the luckiest among us back on the table”

    Economic Policy Institute .. “National budget policy should adequately fund up-front job creation, invest in long-term economic growth, reform the tax code, and put the debt on a sustainable path while protecting the economic security of low-income Americans and growing the middle class. The proposal by the Congressional Progressive caucus achieves all of these goals.”

    The Washington Post … “The Congressional Progressive Caucus plan wins the fiscal responsibility derby thus far.”

    Rolling Stone … “This is more than a fantasy document. It’s sound policy.”

    Forbes … “instead of gutting programs for the poor like Medicaid and Medicare, food stamps, and the new healthcare law, the People’s Budget focuses on cuts in defense. It also doesn’t scrap new financial regulations designed to at least partly stave off another massive financial collapse like the one that put us in this mess in the first place.”

    • bonbon

      2 points stick out – why “balance” at all? There is no balance in nature, never mind human economy.
      Second hitting R&D is inane, exactly the wrong thing to do. We need more R&D, especially into energy, food, that the national labs have led.
      Thirdly, to use the Army as an engineering base to implement NAWAPA needs defense investment. Remember major projects like the Mississippi flood control, just to mention one, are Army originals. West Point started as an engineering school, and JFK’s address there makes it clear the proper role of the Army. The USMC should have been used by Obama to rescue Haiti – - the sheer scale is a military problem.

      So there is a fundamental physical economic “san-andreas” fault-line running through this budget.

      • CitizenWhy

        The Army Corps of Engineers has done great environmental harm in the US. Its latest huge botch job, rebuilding the anti-flood system in New Orleans, has been described by EVERY reviewer as totally useless against a big storm, even storms smaller than Katrina.

        R&D by private companies should continue but R&D can be done independently at universities, with government assistance. Much R&D by private companies – pharmas particularly – is totally corrupt and does not produce really good medicine. Dr. Jonas Salk, a university researcher, did not earn a dime from his discovery of the polio vaccine.

        Military research – a huge expense – primarily produces horrible weapons. The production of all sorts of frightening guns and weapons has led to the belief that the solution to every problem abroad is primarily military, not diplomatic or economic. The fetish for new and better weapons, combined with a belief that force solves problem (including military coups to install regimes friendly to the US and EU corporations), has made the US an evil empire. Just visit some poor countries.

    • bonbon

      The very fact that Jeffrey Sachs praised this disqualifies it immediately.
      This guy is the “Shock Therapy” nutcase who ruined Russia via Yeltsin. I believe he wants Shock Therapy for the USA now. Putin has at least dumped the Yeltsin baggage. It would be really dumb to adopt this here!

  27. Deco, John, Paddy and the rest of ye.

    This is my contribution being a Mayoman.
    Namawinelake has ( and God knows who or she is) has and is producing some fantastic stuff about the reality of the economy.
    David McWilliams has consistently exposed himself to systematic abuse from those who foolishly believe they have got the inside track to a derailed train.
    God Love them. They know not what they do.

    Yer man below in Limerick, Lorcan Roche kelly, is sadly missed here from the olden days when this blog was pretty much factual. In other words, you didn’t blog unless you had half a clue what in the name of Jasus you were talking about.
    In the early days that was me so thank you all for the forbearance, and in particular, our host who always takes the time to scan what is said here.

    Anyway, I’m going to see Diarmuid in Ballyhea next Sunday. At least he and his people have the guts to get off the sofa and make some effort.
    And Effort is what is needed now folks,
    Talking is done.


    Little Acorns and all that.

    • Correction.
      Meant to say in the early days I hadn’t a clue.
      Apologies to all those who had the patience to teach me.
      When all this kicked off 4 years ago, a rake of us listening to our host copped on to what was going to happen.
      We were all full of ideas.
      Yer man here was way ahead of the posse.
      I remember getting a personal email from David McWilliams at the time. Sure I was like the rest of them, but I was dead chuffed to get it.
      I knew nothing.
      Whats more worrying now, is that I know less.


      • It is scary , the more we learn the less we know .Its mighty frightening and whats worse the speed of ‘change’ is mind boggling .

        Correlating this mystery to the art of astrology is best understood under the guise of ‘ the age of aquarius’. This element is ‘Air’.

        This is best understood by gathering in your kitchen the following :

        vacuum cleaner ( dryson )
        electric fan
        mobile phone
        pc & skype

        In all these cases you do not see the air yet it moves mountains and changes the landscape of knowledge and herein lies ‘Power’.

        Money is a medium of exchange not a commodity this closely relates to the element ‘Air’.

        Fort Knox is a location where once inside you cannot leave and air is known for its uncanny ability to manipulate phychology on any victim . The IMF is the new Fort Knox and its mantra will be the dose of phychology it will feed us for an eternity.

        • bonbon

          On Air.

          To quote the Economist below :
          “In a diatribe against the Rothschilds, Heinrich Heine, a German poet, fumed that money is more fluid than water and less steady than air.”

          Berman’s 1987 “All That is Solid Melts into Air: The Experience of Modernity” has a chapter “Innovative Self-Destruction” straight from Marx.

          I am wondering if Aquarius means this :

          • redriversix

            noonan claims second bailout “ludicrous”…………..which translated means its already organised…

      • Up Ballyhea

        I might join you Sunday and it would be great if others will follow. Moriarty might consider this event too if he can manage too vacate the fields of chalices in his local Ardagh .

      • Furrylugs,

        And I still do reply to your posts! Yes shame about Lorcan. We worked togther for the past four years but now he has moved onto much better and bigger things which is brilliant for him. he now works for some Yanks.

        All the best,


    • coldblow

      Well, Lorcan was obviously economically literate. But if I want to hear from economists (which I do too) I go to irisheconomy.ie, but read-only only. But this venue has always struck me as for the man in the street (hopefully thinking man in the street). I think there’s a place for that. In them days I felt daunted by the entrerpreneurs and business-savvy types who dropped in. That gave me some insights. They’re probably fully occupied trying to keep their ships afloat at present. What happened to MK (lance the boil) by the way?

  28. Deco

    The Mafia are now Italy’s largest business.


    Of course we have our very own maFFia in this country, and they were doing a roaring trade in the construction trade in the reign of Il Berti….or Bertosconi as he was also known….

    • Realist

      Mafia is the black market answer to the state prohibition or inability to provide certain services.
      Think of alchohol prohibition in early 20th century.
      Somebody needs to bribe the officials too as it is a very useful service in now days democratic society.

    • bonbon

      This is hilarious – to quote from the article :
      “It seems the average mobster is no longer a gun-toting hoodlum but a savvy businessman in a sharp suit with a smart phone and a sophisticated knowledge of finance.”

      Aha, so the mafia are amateur banksters. What an admission, not intentional!

      Barosso, Monti, Papademous, Geithner, Bernanke are of course too sophisticated to be called mafia, but it seems the mob is closing in!

      • StephenKenny

        “The best way to rob a bank is to own one” William K. Black. Professor and ex-US bank regulator.

        • bonbon

          “Give me control over a nation’s currency, and I care not who makes its laws.”
          - Baron Rothschild
          This marks the switch from British gunboat colonialism to financial imperialism. This is the Bancor idea of Keynes, implemented as the “Euro”. With the FED now forced to bailout the Euro, who controls the Dollar?

          What is in fact robbed, looted, is the economy.

          Only problem is it does not work!

    • bonbon

      Now that we are talking about Italy, this article reminds me of Boccaccio’s Decameron rich on the hills above Florence observing the plague rage below, thinking it would never reach them. This is Dark Age stuff!

  29. bonbon

    Euro Banks Are All Insolvent

    Jan. 10 — The European Central Bank (ECB)’s money printing burst of Dec. 20, when some 523 banks borrowed 489 billion euros ($625 billion) in 3-year money at 1%, has now come to its hyperinflationary, illiquid, and insolvent full circle. This money printing was equal to 5% of the GDP of the whole Euro zone, in a single day’s central bank outburst. But as of Jan. 9-10 overnight, the big banks’ reserves on deposit at the ECB (earning only 0.25%) hit another record 481 billion euros, or 98% of what the ECB lent them.
    The phenomenon is now deceptively being called by financial commentators, using Keynesian language, “a Europe-wide classic liquidity trap.” But in fact, these banks are functionally insolvent, and bank lending is in a complete breakdown across Europe; multiple financial reports say that at least for terms of 3 years or less, it no longer exists. The banks’ Greek assets are about to fall to 50% of their nominal value or less (to be finalized by the end of this week, insist Merkozy); and this will quickly lead to the collapse in the book value of their Irish, Portuguese, and probably Spanish and Italian debt holdings.
    The affair of the banks’ reserve deposits at the ECB since Dec. 20 is an exact repeat of what happened in U.S. banks throughout 2009, after huge Fed money printing to “save” them. U.S. banks’ “excess reserves” at the Fed exploded then from $2 billion to about $900 billion in a few months, ballooning the {monetary aggregate} while actually reducing the amount of {credit} available. And mass unemployment exploded to over 25 million in real terms.
    As Obama and Geithner have pounded on the Europeans for the past six months: “Follow the U.S. model.”

  30. Philip

    The sooner the european/bric/transatlantic banking nonsense blows up the better – cannot see it going any other way. No one will get their money back – bondholders/ hedge funds etc are all going to get a 100% haircut – if they are lucky. I suspect within 1 year we will all be at the same level…ZERO. May I sincerely hope we all will be looking at one another when the smoke and dust clears.

  31. Adam Byrne

    Deco -

    George Monbiot on David Cameron:

    “David Cameron’s proposals for addressing executive pay have the same function: they are designed to be as ineffective as possible while creating an impression of action(8). Yesterday he announced that he wants to scrap the top rate of income tax, making the people who caused the economic crisis even richer and the poor poorer(9). Those who contest the destructive practices of the feral rich, by contrast, are harried by draconian laws and paranoid policing.”


    My suspicions may have been correct. It’s all bluff and bluster from Cameron – no substance.

  32. [...] budget Greece told to restructure its debt Independent Scotland would struggle for AAA rating Europe?s Slippery Slope Tremors from Australia?s crash will reach our shores Hungary’s debt downgraded to [...]

  33. Peter Atkinson

    Would just like to send my warmest congratulations to the staff at La Senza for their victory over those vulture liquidators.From what I hear support was given by many people throughout the world.The staff who held the “sit-in” have proved that direct action is the only way to beat these buggers.The staff gave them the fingers and said KNICKERS to them.

    The Vita Coretex staff are still holding firm and I sincerely hope that they win the victory that they justly deserve.

    Now lets all sit up and take note.It appears that 45% of the householders have accepted that they will be paying the water charge and only 15% have refused point blank.A rollover I fear.If this fight is lost it will open the floodgate unabated for further stealth charges which no doubt are already in the pipeline.

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