August 7, 2012

Something's Gotta Give

Posted in Sunday Business Post · 94 comments ·

In the past few days, financial markets have become obsessed with whether or not the central banks of the world will cut interest rates, and print more and more money. This obsession was obviously heightened by the comments of ECB president Mario Draghi last week, when he said he would do “anything” necessary to save the euro.

“Anything” was taken to mean that the ECB would buy the bonds of Spain, and possibly Italy, directly. In short, it would do what the Germans feared most: monetise sovereign debt simply by printing money to buy the IOUs of peripheral governments. As a result, traders thought that they had been given a type of insurance policy because they knew the ECB would buy bonds of countries like Spain and Italy. This pattern is not new.

Over the past year, every time there is a word from a central banker about cutting interest rates, the financial markets rally. This is what has come to be known in the market as the ‘risk on’ trade. In other words, the trader can take risky positions if the central bank is behind him. The risk is ‘on’.

If the central banks don’t deliver, the financial markets sell off. This is known as the ‘risk off’ trade.

We are getting to a stage where the financial markets are now addicted to the central banks’ infusion of money. But we are also in the position that the central bankers are looking over their shoulders at the reaction of the markets all the time. If the markets sell off, the expectation is that the central bankers will react and the expectations are heightened which, in turn, has the effect of backing the central bankers into a corner, as Draghi saw last week.

Draghi said he would do “anything” to save the euro. Then he did absolutely nothing, bar a ham-fisted press conference last Thursday which made things worse. Now the crisis in Spain and Italy has been exacerbated by inaction. And we start the game again at lower prices and higher bond yields.

This game of cat-and-mouse has come to dominate the eurozone landscape. But it’s not fixing anything because, all the while, the euro – or at least the operation of the euro in different countries – has become more and more dysfunctional. Member countries face vastly different interest rates – a situation which can’t go on.

What is the point of a central bank of a currency zone that can’t set interest rates in that zone properly?

But due to the political nature of the project, it looks like the euro will limp on with totally different monetary conditions in the various parts of the union. These will amplify the recessions in the periphery and could well lead to, wait for it, property bubbles in the core. Yes, property bubbles.

The prospect of a property bubble in the core fuelled by incredibly low interest rates should make us consider the point of all this central bank credit, and whether it is a viable long-term solution. As a short-term tactic, it may make sense in a crisis, but longer-term rising asset prices – whether they be real estate, bonds or stocks – can only be sustainable if the underlying economy generates a robust growth rate, which in turn drives profits.

Can this be achieved by the central banks printing money? In other words, can central banks eliminate risk? And if central banks can eliminate risk at will, then what’s all the fuss about?
The idea behind the markets’ central bank obsession must be that printing money can obviate market risk. It cannot.

Consider what is happening in Europe now. There are two primary reasons we’re seeing so much attention focused on the Draghi debt monetisation ‘solution’ to the economic crisis.

The first is that austerity doesn’t work. It makes an economy shrink, and therefore undermines that economy’s capacity to service its debt. Spain is a very good example of this right now, as is Greece. All over the periphery, each time an economy splutters because of cutbacks, the reaction of finance ministers is to promise deeper cuts. This reinforces the crisis, growth stalls and default risk rises, propelling bond yields higher.
The second reason for stubbornly high bond yields is that policy-makers are refusing to countenance default. This default option burns bondholders, but is much more effective at getting economies back on their feet again. The reason it is more effective in getting the economy back motoring is that, after a default, new capital is no longer sucked into subsidising old mistakes, as is the case now.

Because of austerity, which isn’t working, and the “there’ll be no default” position (with the exception of Greece), there is only one solution to the European debt crisis – and that is to print more and more money, buying up more and more debt directly.
However, such a policy of opening up the balance sheet of the ECB directly puts the ECB on a collision course with the Bundesbank, its most important constituent member. The Bundesbank believes that central banks can’t obviate risk. In fact, the German view is that, the more money that is printed now, the more risk is built into the system in the guise of potential inflation.

It also believes that all this money will need to find a new speculative home, which in Germany looks likely to be a property bubble. The Financial Times recently reported that a house in Munich which cost €3 million six years ago, changed hands last month for just over €6 million. Remind you of somewhere?

If Draghi wants to preserve the euro, urging governments to stick with austerity while not countenancing some sort of default in Spain, he will have to buy peripheral bonds. This sets him directly against the Germans.

The reason he backed down last Thursday, and didn’t do what he had promised, was because he couldn’t bring the Germans with him. The markets, which are used to instant gratification, sold off – and the risk trade is off.

Over the next few weeks, we are going to see a battle for the heart and soul of the euro, in which there can only be one winner. Who said central banks could eliminate risk?

  1. padser

    The Markets, Financial Institutions etc.etc.etc. right down to joe soap, are succumbing to the idea, like everyone else in this global financial mess that if they “react” – then nobody wins!

  2. Lius

    So David, you are not going for the conspiracy theories, you seem to agree more with the greedy voter – stupid politician explanation.

  3. Nono

    This article is very much in line with this one from Stratfor. The angle they chose was the inability for today’s investors to adapt to the “new” political intrusion in economic affairs, forgetting that this was the norm up until the 1990′s. They view the interference of Germany in the European affairs as non condusive to investment making because these decisions are too unpredicatble. The article explains that in fact, the econony and the politics have always been inter-dependent and the last 20 years were a blip in the usual norm, they just forgot about it. It goes on to explain that, far from being unpredictable, Angela Merkel’s actions are everything but. She is cornered and therefore has very little room for manoeuvre.
    Here is the article in full:

    • Halo Effect

      “Financial Markets, Politics and the New Reality”

      Oh! NO, NO! Nono,

      It is not a new reality,Politics is old Reality that some try circumvent,some are not interested in, and more, but it has not gone away you know, David Ignores politics all to often.

      I agree with some of the article that you link to,
      Angela Merkel is well and the aware of the lessons of history and the importance of the Euro to Germany.

      Money is a tool of politics not the other way about but of course it gets mixed and often becomes more important but it is a mistake to forget politics is in control.

      The downfall is when some see it as the only tool that is why we are were we are but Merkel gets this, more that most but other in the EU do too, I HOPE they don’t forget.

      I am not sure the public understand the politics and history of the EU/Euro and it’s reason for being and our commentators are not helping.

      But the rightful anger of the bust has subsided and hopefully the reflective grey cells are will come to the fore…

  4. cooldude

    When Draghi said he would do “anything to save the Euro” what he really meant is he would do anything to save the banking system. As an ex Goldman Sachs man his main goal is to look after the banking elites and stuff everyone else. There is too much debt throughout the EU. This debt was handed out willy nilly in the early 2000′s to all the periphery countries without proper due diligence to see if they could ever pay it back. Well they can’t and the only solutions are either outright default or restructuring. Everything else is just avoiding reality which is what Mr Draghi is at. He refuses to face the reality that this debt will never be paid back and instead buys up more bonds which will never be paid back either. Avoiding reality seems to be the main response from central bankers but the reality still remains that this debt problem cannot be solved by adding more debt. The only reason he is doing this is to keep the insolvent banking sector afloat.

    • padser

      Money doesn’t necessarily have to be paid back as long as we keep signing the treaty’s!

    • Deco

      + 1
      Correct assessment.

      The European economy is based on repeated ponzi scheming. EU unemployment is on a persistent upward climb in Western Europe, while state systems are persistently becomming more inefficient.

      The EU is a fraud. The Euro is a low interest rate environment as a means to stimulate growth to cover up policy failure and rot.

      But, I reckon the next shoe to drop is the UK. The Con-Dem coalition have not cleaned up any of the mess from New Labour. The Debt overhang is enormous. Compared to the Irish state system, the UK state system looks inefficient. Compared to Britain’s economic predicament the UK state system is expensive and ineffective. Britain is simply accumulating debt, while Mervyn King prints money and pretends that he has inflation under control.

      In the medium term Mervyn King’s strategy is nonsense.

      • Deco

        I meant to say that compared to the Irish state system, with all it’s quangos, and layers, the UK state system looks efficient.

        This makes me realise that the Irish people simply cannot afford the Irish state system.

        But then people are slowly realising this.

        • molly

          By the time the slow people in Ireland realise this it will be to late,what people want to believe is in time things will sort them selfs out and there are quite a lot of Irish people who believe the Irish government are doing a good job and they will save Ireland.
          Might I add the ones that believe this must still believe in the tooth fairy.
          Any one with half a brain knows the Irish government is simply going to get us into further debt to keep the banana republic and all who feed out of the big state trough happy.

      • padser

        I don’t believe the “EU is a fraud” – (any more or less than any political entity) but it does have a mandate. For long time non EU super economies have questioned the EU’s legitimacy as a quasi-federal entity. It HAS to be one or the other!

  5. mediator

    +1 Cooldude

    David it looks like you are back on the kool aid.
    Draghi is a bullshitter who has links with many elite
    organisations – bilderberg etc blah blah blah.

    His raison d’etre is to institute the subjugation of the nation states of europe to an unaccountable unelected
    group of people who seek control over our lives and futures.

    “Super” Mario is another.

    All of these people have form David which you seem incapable of understanding or making the links.

    • bonbon

      It seems you are incapable of making the link – Draghi is a knulcke-dragger for the dying financial empire, merely a hitman, dangerous, but a lying thug.

      His owners like to say Super, to take the heat off them.

      The Troika are paid nation killers, mass killers.

      Get it?

      • cooldude

        Don’t you worry bonbon I get it alright. As mediator has mentioned this is all part of a coup by the unelected technocrats over the sovereign nations of Europe. Here is a quote from Professor Carroll Quigley from his 1966 book Tragedy and Hope.
        “In addition to these pragmatic goals the powers of financial capitalism had another far reaching goal, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalistic fashion by the central banks of the world acting in concert by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was the Bank of International Settlements in Basle Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations. The growth of financial capitalism made possible a centralization of world economic control and use of this power for the DIRECT BENEFIT OF FINANCIERS and the indirect injury to all other economic groups.”
        There you have it this is the system the financial elites use to control governments for their own ends. Carroll Quigley was very close to these people and was allowed study the system closely in the hope he would join up. When he realized that their goals were to eliminate all nation states he rejected them and wrote his book. The key to this control is control of the money supply and they use this to create asset bubbles which impoverish people and eventually nations. The key to halting all of this is to allow choice in the type of money people can use. This takes away their exclusive franchise on the money supply. Ron Paul has submitted such a proposal but as usual very few peole want to know.

        • cooldude

          Here are some details on the currency proposals Ron Paul is looking at in case anyone is interested which I doubt

          • bonbon

            Still not making the connection. When nations are destroyed, and I include the USA under Obama, cui bono? Empire of course, a word even Stratfor is afraid to whisper. So we are dealing with Empire, imperial economics, and especially imperial finance. Ron Pauls of the Austrian School simply does not realize he is promoting imperial finance.

            To counter this imperial surge, we have Hamilton, the Credit Clause of a sovereign republic. Applying this brings Glass-Steagall.

            Now the irony of all this, which is lost upon dogmatists, is a very significant imperial faction cold-sober realizes this cannot survive so penned the Financial Times Editorial on July 4 2012, for a return to Glass-Steagall. In other words a return to non imperial finance before it destroys us all.

            No conspiracy, simply a message delivered without warning, the British way. Ron Paul is promoting a dropped policy, and Obama is now being dumped.

          • bonbon

            A poignant reminder that Ron Paul is right about war :

            “MOVING TOWARD WAR IN SYRIA” is the title of a statement released Monday by Ron Paul. Referencing the recent House bill supporting sanctions on Syria and Iran, Paul uses the legacy of Libya to demolish the idea that sanctions make us safer. Obama has issued a “finding” that the CIA should aid Syrian rebels, just as Bush did against Iran. Now, with evidence of Al Qaeda in Syria, we see how those plans backfire. “Are we supporting Al-Qaeda in Syria?” Hillary Clinton once asked.
            “That is a very good question,” says Paul.

            This is to point out how the imperial faction’s grip on finance is bolstered. I hope the game is clear.

          • Tony Brogan

            “Now the irony of all this, which is lost upon dogmatists,”

            Mr glass-Steagall calling others dogmatists!!

            G/S is a red herring solving nothing of substance. It addresses a symtom not the cause.

            The cause is the central banking system and the use of ponzi scheme paper money. debt money designed to enslave and pauperize the people until they are submerged in debt.

            Ron Paul knows this and is why he calls for people to have a free choice in the money they wish to use.The freedom to choose will liberate from the fiat enslavement scheme.

            but little will be done and the edifice will implode and collapse from its own corruption leaving all with a major problem.

            Out of the ashes will come a more stable system if the Ron Pauls of the world can maintain influence and if we can adopt a sound money system.

            Use of the words empire and imperialist leave the impression that the oppressors are related to political structures. It is the monied elites working through the banking system who are the enslavers. They control the political system through the power of unlimited finances.

    • You guys are awake today. Very interesting discussion. Careful mind you. You don’t want to be labeled as conspiracy theorists!

  6. Konfewsion

    I think if we read my caption it tells something without trying to make myself clear enough.The respondents are trying to hack it for us as this is a message in David’s article .

    Confusion will REIGN for the rest of this month .It will be significant more than ever before .

    And WHY ?

    BLUE Moon WOBBLE commences on 15th August and will continue for rest of month and will peak on 23rd August ( MARK IT )…….and Explodes on 31st …..

    Merkle is a Cancerian . To understand her better watch movies of Myrrl Streep ….Devil Wears Prado ….and….Mama Mia …and more
    She being water will be Moved by these events like never before …just watch her Tears

  7. Deco

    …Brussels edging towards the inevitable ?

    Who gets stuck with the bill ?
    The working people. Not the banks.

    “Europe” will not punish the banks. If the people are being ignored, it is inevitable that they will be abused and deceived. The people have been ignored for twenty years. And deceit follows.

    We can expect some new terminology…there will not be a “default”…instead a “financial reassessment”…

    The Draghi Docrine….Print-Baby-Print.

  8. Adam Byrne


  9. Halo Effect

    I predict a riot;

    but schools out for summer and their is no one to organise the riots, but maybe when rag week comes around someone in the students union will organise a riot, lads it will be bit of crack we can get loads Buckfast it great gear, it’s their right of passage…

    Fat cats don’t hunt;

    I just can’t see it, I just can’t imagine the Irish people storming the Bastille to protest over having no Coco to sprinkle on their shinny Latte;
    What are protesting about now! Enda, they say they have no coco, well Gilmore give them Vanilla and lace it with sugar, right boss, but, but boss, Yes Gilmore! what is now, their very mad there trowing paper coffee cups and then there is the by-election and more of Burton’s death by thousand cuts to come, boss, we will have to go all out, Oh Shite Gilmore, just do it! use the emergency pink slime that we ordered from Obama that will keep them fat.


    what was that?


    realy, Gosh, oh my, here use my brolly, it look it might rain..

    It destroyed any chance of any meaningful attempt for change.

    They were asking the people who took is to were we are to make changes, there was no focus, no leadership no conviction.
    Protest for the sake of protest.

    I wanted to support there efforts but I did not know what I would have been supporting, it was just groups of people moaning.
    It started about banks, then in Dublin they had signs up about”Fracking”

    (I might be imagining this,but I think one of them was protesting about why there was no free healthcare for their moggy after all that year they ‘HAD’ to spend 600 euro for an operation on their cat , it was the bankers fault that they could not afford pet health care insurance, I think in Egypt they have solved that issue,I heard fried cat is nice but don’t tell your Mummies they may curse you)

    It seemed surreal a protest to tell the bad people they were bad but there was no alternative offered.



    May be we have little to complain about, after all we are not hungry like the Egyptians who live on two dollars a day or worse like others who scratch in the dirt for worms.

    A cynic wrote this or an optimist maybe?

  10. Deco

    Zerohedge makes an assessment about Germany…

    Zerohedge reckon that the German economy is contracting. Despite the ECB’s low interest rate policy which was supposed to whip up a real estate euphoria to bring in taxes to help bail out the mess the ECB created with low interest rates in the last decade…..

  11. bonbon

    So Super Marion Draghi promised financial nuclear Wunderwaffen, or Bazooka as The Economist like to call it, from the Bunker, and as usual lost. This time around the bluster fizzled.

    Now the German Constitutional Court is out for deliberations, with perhaps an injunction ruling in September, and a final ruling in 2013.

    I think pundits now have to wait. I’m amused at the rising blood pressure.

    Notwithstanding that really insane “philosophers”, Habermas et all, are penning incredible tracts about the stability of the Euro.

    Time for a jolly laugh!

  12. lar

    Outlawing the gambling in currencies would go some way to solve some of the problems, the financial, so called markets,are totally non productive.

  13. Translation

    Markets are obsessed with the word of God Almighty and one word from God Almighty affects everyone

    God Almighty will do as he pleases and hang the consequences and when he snaps his royal fingers the loyal herd veers course fast like unthinking slaves. This is why he is God Almighty and economists are his slaves

    Yes David. You are a slave of your own ‘success’. Haw haw. But maybe the truth is that all economists are personal failures and know it deep down inside where I am authentic and true to my spirit. The rest of us can be free the more we decouple from the madness and seek out our own philosophy. Haw haw again

    Everyone is addicted to illusions (nothing new there) and this includes the
    central banks and the markets. Both are illusions and we would do fine without
    them. Most people want to believe in fairytales and illusions. The psyche can’t cope with reality and mass cognitive dissonace is the way of the masses. Just check the evening viewing schedules of TV3 if you don’t believe me. Planet zod

    Like hamters in a Monsanto experiment (prob somewhere near Ballina) the rats are trundling hell for leather to certain death in an eternal game of cat and mouse and such is their sensory deprivation they are screaming for the lights to come on and for the wheel to stop. Poor fucking bastards. I pity them and the mental torture they are experiencing. Needlessly

    What is the point you ask? You know this as well as I. It’s all a gas where dog eats dog. To deny this is intellectual, philosophical and spiritual suicide and you know it. You know the answers but I suspect you are not at liberty to write about it

    It seems that you see it as a political problem now and politics will always over ride economics and it’s fancy theories in the cold light of day. This is the real world are living in now and economic theories are not worth jack. It’s politics that counts now

    If the core wants to print money and create a housing boom then many paddy’s with cash to spare will be delighted at your prediction and will join in and spout that europe is the best thing since sliced bread. Some of them have cash to burn and can’t stay away from the roulette tables of the property speculation where they can feed their addiction. Desctructive whores without shame

    We think na on the lang Scots miles,
    The mosses, waters, slaps and stiles,
    That lie between us and our hame,
    Where sits our sulky, sullen dame,
    Gathering her brows like gathering storm,
    Nursing her wrath to keep it warm.

  14. Tongue in cheek for all you big balled Paddy marauding capitalists

    Oh, wheel of fortune
    I’m hoping somehow
    If you’ll ever smile on me
    Please let it be now

    • Now you might appreciate the absurd. Welcome to the warped reality of air brushed 1950s ads and movies like Reefer Madness. And to think all this was but 50 years ago. Madness! (see Bridge on the River Kwai) aka anyone over 30

      After the death of oor Meave the nation is crying for something that never existed and even Mr MyArse is lamenting the passing of someting that was ‘a natonal treasure’ when in fact some of us had never heard of her as we were too busy elsewhere and doing more important stuff, like living rather than living in a fucking fantasy world

      It’s a very sad little country.. So sad that you can’t help but love it in a perverse kind of way

      A land where Dev was the man and priests were purer than white. What utter night!

      Laugh today and feel good if even for a minute

      Be existential and learn to accept and laugh at the absurd Irish bros

  15. bonbon

    With Politicians Like Germany’s Soeder, Europe Is Certain To Head for a Real Disaster

    Typical of the worsening political situation in Europe, where leading politicians go at each other’s throat as the euro system becomes more and more untenable, is Markus Soeder, Finance Minister of Bavaria, who in a newspaper interview today rightly denounced ECB President Mario Draghi’s plans to resume purchases of sovereign bonds from troubled states.

    But Soeder’s presumed alternative to Draghi, is merciless austerity conditions and paying of the debt for debtor states: Over the Aug. 4-5 weekend, Soeder attacked the Greek government, saying that b the end of 2012 at the latest, Greece should exit or be expelled from the euro. This, he said, would also be a clear warning to the address Italy and Spain what they could expect if they did not pay their debts and reformed their finances. “We must make pose an example of Athens, that this Eurozone can also show its teeth.”

    Having people like Soeder trumpeting xenophobia, also provides a welcome target for anti-German propagandists, and not only those in Greece, Italy and Spain.

  16. bonbon

    Italy’s Bailouter Monti Considers Parliaments an Obstacle

    In an interview with Germany’s {Der Spiegel}, Italian Prime Minister Mario Monti says he “can understand that they [governments] must show consideration for their parliament. But at the end of the day, every country in the European Union has a parliament as well as a constitutional court. And of course each government must be oriented according to decisions made by parliament. But every government also has a duty to educate parliament. If I had stuck to the guidelines of my parliament in an entirely mechanical way, then I wouldn’t even have been able to agree to the decisions that were made at the most recent (EU) summit in Brussels.”

    “Why not?” Spiegel asks.

    Monti replied: “I was given the task of pushing through Euro-bonds at the summit. If governments let themselves be fully bound by the decisions of their parliaments without protecting their own freedom to act, a breakup of Europe would be a more probable outcome than deeper integration.”

  17. bonbon

    Reports of a housing bubble starting have appeared in Germany, with Regensburg singled out. All the signs are there. Funny how each bubble is claimed as our very own bubble, by each state trampled on by a berserker financial system?

    Like a traffic victim saying those tire tracks over him are his very own personal property!

    • Tony Brogan

      That’s why the central banking system as a paper ponzi scheme should be closed down. This is your beserker financiers trampling on the backs of the people.
      Bankers that can print or digitize unlimited amounts of script can enrich thenselves at the expense of all the rest.
      The tried and true montetary system through the ages has been gold and silver.
      one of the reasons that is so is because within very limited amounts(newly mined at great expense) the volume of the money is a fixed supply. no more central bank printing. no more contrived boom and bust. governments must balance budgets and people live within their means.
      Restict or outlaw fractional reserve banking and the banks will not get rich at our expence by loaning out what isn’t theirs.
      There would be no debt based credit and capital would be acquired from genuine savings. Such is the basis of a sound economy
      We have been deluded for a 100 years by the liers and cheaters. It is time for a return to sanity and honest money.

      Handing the monetary policy and savings of a country to bankers unaccountable to goverment is handing sovereignty to a stranger.

      At the present money is politicized whereas the best policy is to privatise money and allow people to use what ever they find best for themselves. Allowing the use of money of choice an expansion to liberty.

      Here is an excellent account on just such a subject.

      • bonbon

        We are moving to a non-monetaristic Public Credit system along the lines of Alexander Hamilton’s First US National Bank. The outdated monetarism of both Keynes and von Hayek is just not suited to re-construction and rapid economic expansion with major infrastructure programs, water management, transport, near space integration, and more.

    • Deco

      The ECB = Euro, Cause of Bubbles.

      The ECB is a bubble maker. Or specifically the low interest rates of the ECB.

      Corrupt political and business establishments in the PIGIS need low interest rates, to prevent the collapse of the ponzi scheme, and to prevent the banks who loaned to such ponzi schemes from taking the hit.

      So now the ECB’s low interest rate policy is creating an asset price bubble in Germany, Finland, and perhaps even the Netherlands.

      The ECB is not a sound money regime. We can see this, because of the speculation that it’s policies are causing. It set interest rates too low in the last decade and this caused housing bubbles in Spain and Ireland. And now it is doing the same in the core.

      The best thing would be that we never joined the Euro. In fact the best thing would be that nobody ever joined the Euro. Because it is inherently schitzophrenic.

      There is a principle called “Ephermalization”. It means that something gets bigger and bigger and then it starts to sunder and head towards obsolescence. Well, the entire project of EU power centralization has gone beyond that point. And this is manifested in the economic sphere. The EU is dependent on low interest rates to stimulate growth. This is necessary because the entire EU project has censured growth and development. It has overreached itself.

      Yet, the media will not cover this obvious story. The media is paid up fully to the fantasy. The media that fed us with bull about various treaties being good for everybody, never bothered to tell us that it was a lie.

      All the Euro enthusiastic Irish media told us was that those who were sceptical of the centralization project, were reading the wrong newspapers. Now, that is evidence of intellectual bankruptcy of EU centralization.

      Chile and Brazil have lower unemployment rates than the EU, and much higher interest rates. The entire Brussels/Frankfurt way of economic management is failing. Everything from nobbly carrots, to diesel engine regulations, to interest rates, to “bailouts”.

      And when a Canadian journalist asked Barrosso why North American taxpayers whould be asked to bail out the PIGIS, Barosso refused to answer the question. Instead he blamed it all on Wall Street – insulting the journalist, and the EU taxpayer. He never covered the issue of the ECB interest rate policy. The PIGIS did not need Wall Street – they had the ECB to cause the bubble.

      This is the same sort of bull that we seen when Bertie Ahern came out with the one liner “it was all Lehman’s fault”. Now, you know that is rubbish. Well, Barrosso is effectively doing the same thing. He is refusing to accept any responsibility for the mess. And the media is even more intellectually bankrupt because it refuses to countenance that the EU is responsible for the PIGIS.

      The interest rate policy has been the source of all the problem. It has functioned as a subsidy to speculate wrecklessly. Sure, banks have greed as a core value. But the interest rate is lowered to the point that it never restrains the banks.

      And then when the mess becomes apparent, the first thing that you hear is “our risk model proved inadequate”. The interest rate is underpinning all risk models. And if it is too low, then you get a lot of risky behaviour.

      And this is what we are seeing now in German real estate. Low interest rates, a lowering of risk as a factor, and a flood of money into the German banking system because that is perceived as a “low risk”.

      Bonbon – the EU is led by amatuersm and lazy thinkers. And mostly, they are lawyers. Lawyers don’t fix problems. They prolong them, as long as possible. “Yes, we can”. (Except, actually – you didn’t).

      And media coverage of this is abysmal – apart from David McW. As long as you know what you are paying your hard earned cash for, then you can avoid being misinformed. The worst thing that could have happened to anybody in the last decade was to take the IT property supplement, or TV property programs, seriously.

      There is nothing more soul destroying than leading oneself on the path to ruin, and enjoying the ambiance and the positive feedback from the auctioneering “profession” and the bankers along the way.

      • bonbon

        Amateurs and lazy thinkers do not lead – an oxymoron. They may posture and even have moments of leadership, quickly passing. Those that lead the financial system are London based, the Euro their plaything, now considered a part of a failed system. These, neglecting to inform the posturers, and pundits, informed the world that Glass-Steagall is the only way to go with the FT July 04.
        This means they have had a major re-think – and discovered nation-states! It took about 200 years.

        Anyway we will use the constitutional power as FDR did to put the banking system in order to start the reconstruction. I am 100% sure the U.K. has plenty of ideas, and Continental Europe as well as the USA leading this. Eire fits nicely into the Eurasian Landbridge, and the Arctic trade route opening up right now.

  18. In general, the difference between coincidence and causality is that coincidence has no intention.

    Personally, I do not subscribe to probabilistic explanations, even chaos is deterministic in some ways, and of course, there is also synchronicity, but this would likely go too far here in the realm of a blog comment. I am just very sceptic on the principle of “coincidence” and find it an unsatisfactory explanation.

    In context, the markets act with intentions, the events that unfolded 2007-2012 were highly predictable in many ways. Ultimately it is intentional social engineering and the markets are the means to achieve this.

    David said something a few years ago that really nailed it when all this started to unfold, and it is really worth remembering, in my own words, you have a choice to make here, you can not safe both, society and the banks, you can safe societal peace and freedom or the banks, and a choice “they” made.

  19. Tony Brogan

    “What is the point of a central bank of a currency zone that can’t set interest rates in that zone properly?”

    i would ask the question. Why have a central bank artificially setting interest rates that are differnent to those suggested by the market place.

    such rates are causing such large distotions in the ecomony that it is doomed to disaster. it is what the federal reserve is doing, what every other CB is doing until it is a joke. But no laughing matter.

    Better to leave the market to set the rates and then we have to get on with life.
    There would be no core region housing bubble, or any other regonal bubble.

    Don’t you get it David, it is what caused Irelands problems in the first place. A centralized interest rate.Artificially low with excess printed money. and you think the ECB could solve the problem in 10 minutes by going on a printing bing. Madness, give your head a shake.

  20. …the story of the Stiglitz commission underlines the responsibility of western media to undertake more independent investigation rather than parrot the views of representatives of western states as their own.

    • Halo Effect

      Excellent, bring back a FREE press and Journalists that Question not just on the above on all things press releases are for the most part advertisements
      What went in Rio was a disgrace lets have g20 summit to override the UN mandate and distract form it and who was that could not be arsed to turn up the idiot “yes we can” Obama and Cameron but the Irish turn out on mass to support him when he visited Ireland awestruck no doubt this ma Obama openly admits to murder and smiles as he says it..

      • Yeah really! That show was unforgettable, first the Obama deception, then the representative of the British banking monarchy, and the herds were cheering baaah baaah Obaaaama and while Kenny made the monkey on stag with a, copy-cat speech and bathed in his own vanity….


        • Halo Effect

          Yep, I read somewhere David McWilliams tried get to see Obama not sure if he got past the Barriers but I think it was him He must be a fan maybe he had one those tee-shirts that depicts Obama as The Ché

          Obama the revolutionary now that’s funny…

          I got attacked for saying to people that I not to sure about him as I don’t know what he stands for other than he says “yes we can” this was just before he was elected the response was ‘ah yer just racist its great he going to change everything’ yea really what do you base that on I asked ‘he just is’ Ok he was Jesus Christ apparently.

          He was beyond criticism at that time maybe it was understandably coming as he did after bush but bush kept prison, Obama Just shoots them, that way there can be no complaints that was one bushes mistake but that was a good thing.

          Question should be always be asked, he needs to be taken task on allot of issues in the EU media but no can seems to be allowed offend touch him.

          There are no idols, no I am sorry to say humans are fallible, EVEN ME at least once but just, so all people need to questioned.

          • bonbon

            Come on be truthful. Obama has earned the ‘stache, the hatchet man in D.C. 2 meter high placards with the mustache greet him now wherever he goes. His healthcare (death panels) earned him the “stache.

            Obama is the only obstacle to Glas-Steagall – there is no getting around this factor in any discussion.

            Who was it that had a pint with this guy in Ireland again? To say as Gaeilge “Is fedir lin” means vicious killer austerity in Irish.

            He deserves the ‘stache !

          • Deco

            American politics are show business. The whole thing is a show. In fact the media has reduced democracy to a show.

            “Yes, we can” – I thought that used to be Bob the Builder’s line.

            Maybe Bob the Builder would do a better job ?

          • bonbon

            Obamacare “death panels” are no show. Next you will declare EU politics are show, Greece a mere sideshow?

            Or are EU politics “serious”, seriously murderous?

  21. DC

    Capital must protect itself in every possible way, both by combination and legislation. Debts must be collected, mortgages foreclosed as rapidly as possible.“When, through process of law, the common people lose their homes, they will become more docile and more easily governed through the strong arm of the government applied by a central power of wealth under leading financiers.“These truths are well known among our principal men, who are now engaged in forming an imperialism to govern the world. By dividing the voter through the political party system, we can get them to expend their energies in fighting for questions of no importance.“It is thus, by discrete action, we can secure for ourselves that which has been so well planned and so successfully accomplished.”- Montagu Norman, Governor of The Bank Of England, addressing the United States Bankers’ Association,

  22. redriversix


    not really much more to say,same debate different day.

    nothing changes

    Watch out as budget 2012 strips us have been warned.

    peace,goodwill & happiness to all you folk.


  23. michaelcoughlan

    Hi David,

    You got it right. The thing that has to give is us the people and that is more of our salaries. The Taoiseach responded to a statement in the Dail recently that 2m people in the state have only 100 euro left at the end of the month to spend and 1m have nothing by saying he still had to get 3.5bn out of the economy (internal). That’s 200m of a float. Not nearly enough. So where is the 3.3bn gonna come from? Ans: 1.8m people still working in the state say average salary 30k PA is total wages for the country is 54bn PA. This will have to be reducedd pro rata by the 3.3bn. That’s just this year!

  24. Philip

    Reading an interesting book by Norbert Elias on the process of civilizing (Genesis of the Naval Profession)and you can see how we moved from Feudalism to what we have now because it was the only way a Monarchy could survive against an increasingly powerful set of Noblemen. Survival usually means ensuring no one group gets too powerful to take you out.

    Fast forward to the 21st century. The new groups are now – Government (Monarchy), Professionals (Lawyers, Doctors, Civil Servants – aka technocrats), Media and Bankers (all are the Nobility) who lord over working classes & highly in-organised middle classes) – who sometimes have the ability to wander into any of the other groups. Now, what has become very apparent is that there is an increasing gap between the Monarchy/Nobility as I has defined them and the rest of the peasants. This very same set of conditions existed in France in the 1700s and was responsible for the revolution which destroyed the Monarchs and many of the Nobility but kept in those structures which allowed an empire to evolve.

    In Ireland (and in many other countries) I can see how people are utterly disconnected from the goings on of the upper groups. No one understands or feels represented any more. This makes for revolution of some sort and usually the resulting empire will only preserve those technocracies which preserve it long term…dear me, it sounds like a conspiracy – but there is historical evidence of sorts that it could fall that way.

    The trouble with all these systems of super power is preserving the middle. It will require the involvement of the peasants sooner or later or it’ll just collapse again – the range of cultures and habits are just too vast to manage globally.

    Yes, something will give soon. One or more of the professions has to be rebuilt – perhaps its banking or law or media. It cannot stay as it is because we are just barely hanging on to being safely governable at the moment.

    • Halo Effect

      Yes Philip, to a point but the people are as much to blame for not maintaining an interest you don’t sit back after a revolution and say, that’s it, the jobs done the guy in charge will always do the right thing, it’s never done, you just have keep pushing. it lazy people want other to stick there necks out for them.

      So keep pushing just keep pushing as a famous maths dude once said but he also said others stuff such as, its a nice day, hello, goodbye, whats for breakfast,
      Oh, and he said this too , “I think therefor I am” I think but I not quite sure I am thinking ….

      • Philip

        I am not saying we will necessarily fall into revolution. But I recognise enough to know that saying people are to blame is a pretty useless thing to say. People do what people do…stay comfy and survive. They mostly do not understand. We are all muppets in our own way at all levels in society and the consequences are not that difficult to figure out.

        • Halo Effect

          I didn’t pick up that you suggested we would fall in to a revolution.

          There is this saying that come up in pubs it goes something like this ‘don’t talk religion and politics in a pub’ Arggh!

          We are to fat at the moment for a revolution and the slowness of cuts would stall a shock that would initiate a new zeitgeist but there needs to be serious changes and if the mood of the people changes in the direction I favor I will be there with them as there is much that need changing.

          I have minute sense that there is an awareness within the politicians and technocrats in the EU that changes need to be made regarding the banking system and the power that markets have over sovereign/EU sates / EU state and I believe they will man up to the challenge?????
          but we must keep pushing, and hard.
          I think the EU techno heads may, ‘however strange this sounds’ hold things together but I can’t type that well to explain nuances of that and what think on it.

          Will I see at the revolution I bring the sandwiches…

  25. michaelcoughlan

    ‘But due to the political nature of the project, it looks like the euro will limp on with totally different monetary conditions in the various parts of the union.’

    This is a very important statement in the article because it’s the first time I am aware that David has contrasted his view on economic matters with the real politic of the system as it stands. You really are lifting heavy weights now David. This article re highlights what you said before. The bonds markets have decoupled from the economy rising or falling based on their interpretation of whether the bailout is on or off. I agree 100%. What no one seems to see though is that because everyone is walking on egg shells regarding what the markets will and won’t do it also includesnour politicians. Our representative democracy is totally undermined by the slavish deference shown to such markets.

    • Philip

      This slavish deference will become more and more apparent as people come to realise their rights and what they have come to expect are no longer valid. It’s like Ryan Air service when there is a cancellation – you get no comeback and you realise that the ground staff are just shrugging their shoulders saying they are just the messengers and know nothing. That ticket your holding is no longer valid and you might just have heard on the faulty intercom that there might be seats on the next flight if you rush to reception now…and so it is with Euros and your assets….

  26. Tony Brogan

    Sorry, I can not get a link without requiring you to sign up a subscription!!

    Jeff Neilson echos my recent posts on the effects of the central banking cabal

    The Toulouse-Lautrec Table
    World Markets
    Topic du Jour


    Crime of the Millennium

    Jeff Nielson

    As few people in our societies even know, all of the world’s governments have (foolishly) granted exclusive monopolies for the printing of all the world’s currencies (our “money”) to a cabal of privately-owned corporations called “central banks” — given that name because it is a cabal exclusively owned/operated by bankers.

    Understand that the monopoly to print money is nothing less than a license for economic rape. These private banks lend us all the paper that they print out of thin air (at zero cost to themselves). The result is that after roughly 100 years of this economic rape we have (collectively) paid these banks $trillions in “interest” for nothing, and currently owe them $10’s of trillions for nothing. History’s single greatest act of legal theft.

    Indeed, these bankers have stolen such unimaginably huge sums of wealth from our societies that the Thieves now voluntarily return most of the additional amounts they steal each year. There are two reasons for this act of pseudo-remorse. To begin with, with the Little People drowning in debt individually, and with our nations drowning in debts collectively; the Thieves were/are worried that their Victims might actually notice them sitting on top of their mountains of (stolen) money.

    However the second reason — the real reason — is that the countless $trillions that these central banks have stolen from us are literally just the tip of the iceberg during their reign of legal-crime. This private cabal of central banks has not only been given monopolies to print money out of thin air for their own benefit, but thanks to the abominable euphemism which they call “fractional-reserve banking”; they are allowed to delegate their License to Steal to other private banks.

    Specifically, for each dollar that the central bankers lend to their other banker-friends (at zero/near-zero interest rates); these private banks are allowed to print ten more dollars out of thin air, and lend them to the Little People (at higher rates of interest). Thus the central banks don’t mind returning most of the additional money which they steal each year, since their own thievery only represents 10% of the total banker-plundering of the wealth of all economies.

    What is the inevitable result of a capitalist system where every new dollar that is used to fuel the economy is lent into existence? Debt Slavery: the ultimate goal of every (paper) fiat currency system.

    There is now somewhere in excess of $200 trillion in debt sloshing around the global economy, most of that debt being totally fraudulent, in that it is interest paid to bankers (literally) for nothing. Somewhere around 25% of every dollar earned by all of our Western economies is now paid to these banker-parasites as interest on their fraudulent debts. The bankers would like to steal even more, but already all of our economies are teetering on the verge of bankruptcy.

    Greece was already forced to default, and the U.S. (the world’s largest Deadbeat Debtor) is only able to ward-off debt-default by fraudulently maintaining its own interest rate at zero percent. Put another way, if U.S. interest rates had ever reached the same level as those which were inflicted on Greece by Wall Street’s economic terrorists; the U.S. would have defaulted even faster than Greece. It would have required the U.S. government to quadruple tax revenues just to pay the interest on its own (fraudulent) debt.

    Having enslaved us all with debt thanks to being granted their License to Steal, history’s greatest thieves are also history’s greatest hypocrites. Whenever one of our (subservient) governments has the audacity to actually suggest taking a closer look at the bankers’ Theft Monopoly; the Thieves look down their noses, point their fingers at us, and accuse of us “threatening their independence.” Yes, there is no one who places a higher price on his own freedom than the Slave Master. What about our independence?

    The latest example of this supreme hypocrisy comes from (surprise, surprises) Benjamin Shalom Bernanke. Feeling especially pleased with himself after his two-day love-fest with the banker sycophants of the U.S. Congress; B.S. Bernanke chose that moment to launch yet another attack at Rep. Ron Paul — and his “Audit the Fed” bill.

    Bernanke’s specific accusation? As paraphrased by the Corporate Media, Bernanke whined that “the ability to review monetary policy decisions…could compromise central bank independence.” This is by no means a new argument. Indeed, it is the Big Lie which the banker-thieves have hid behind for a hundred years — since it has never had a shred of validity.

    The Big Lie is based on the artificial/arbitrary distinction of all economic policies as being either “fiscal policy” (the realm of government) or “monetary policy” (the realm of private bankers). The obvious fiction here in attempting to create some invisible wall between the two groups of policy-makers is that there is only one economy.

    Pretending that the fiscal policy of an economy can act “independently” of monetary policy (or vice versa) is precisely as absurd as suggesting that a car’s transmission could operate “independently” from the engine. Indeed, this metaphor is very useful since the analogy of the fiscal and monetary policy of an economy and the engine and transmission of a car is precisely parallel.

    As with a car’s engine, fiscal policy “powers” any/every economy, since it represents the physical economy itself. Conversely, monetary policy is merely the throttle (or “transmission”) which regulates the speed of the economy. Obviously neither of these elements can ever possibly be fully “independent” of the other. It is equally obvious in both these pairings which must be the dominant component and which must be the subordinate component.

    With every car, its transmission is clearly subordinate to its engine. It is transmissions which are designed to optimize engine performance, and not engines being designed to optimize any particular transmission. Similarly, it is monetary policy which must naturally/automatically be subordinate to fiscal policy, rather than fiscal policy being designed to cater to the whims of private bankers (i.e. the Thieves). The Tail cannot be allowed to wag the Dog.

    Thus when B.S. Bernanke claims that central banks “must maintain their independence” he is not uttering some profound truth. Rather, he is merely repeating the bankers’ Big Lie, a vacuous fiction which as a matter of simple logic never could have any validity. It is a Lie with one very obvious purpose: to minimize scrutiny as a small cabal of bankers perpetrate the Crime of the Millennium.

    With our nations (and most of their citizens) drowning in fraudulent debts while the bankers sit on their mountains of ill-gotten money, it literally adds insult to injury for these bankers to arrogantly maintain we (the ones who granted them their License to Steal) have no right to take a closer look at how they have been robbing us blind for the last century.

    This would probably be a good time to remind the Thieves how History tends to (eventually) reward them for their deeds. Less than a week after a news item appeared out of Iran reporting that the Iranian government had executed several bankers for a multi-billion dollar act of serial fraud, an interesting article appeared (ironically) on the blog for the Wall Street Journal itself.

    The writer of that article notes the following:

    The Code of Hammurabi, more than 3,700 years ago, stipulated that any Mesopatamian who violated the terms of a financial contract — including the futures contracts that were commonly used in commodities trading in Babylon — “shall be put to death as a thief.”

    …In medieval Catalonia, a banker who went bust wasn’t merely humiliated by town criers who declaimed his failure in public squares throughout the land; he had to live on nothing but bread and water until he paid off his depositors in full. If, after a year, he was unable to repay, he would be executed…Bankers who lied about their books could also be subject to the death penalty.

    In Florence during the Renaissance, the Arte del Cambio…made the cheating of clients punishable by torture…

    But financial crimes weren’t merely punished; they were stigmatized…

    Contrast that with our modern societies where “punishment” for so-called white-collar crime is (at worst) nothing but a slap on the wrist in comparison to punishment handed out for blue-collar crime: the crimes of the Little People. The entire basis of this two-tier justice was the presumption (never supported with evidence) that the rich did not require as much deterrence from crime as the poor — and thus the sentences for their misdeeds did not need to be as severe.

    Today, as the bankers now openly confess to a single act of fraud which they themselves estimate is roughly $350 trillion in scope, well over 90% of all crime in the world (by dollar value) is now white-collar crime. Meanwhile, we just had 25% of Wall Street executives confess that crime was a way of life in banking (and presumably the other 75% were lying).

    In short, never in all of human history has white-collar crime required such maximum deterrence. I suggest to all these Thieves that they not only study their history books, but (for those based in the U.S.) that they also take a glance toward Death Row, and contemplate what “maximum deterrence” means in the 21st century U.S.A.

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    William J. Murphy III is the Chairman of the Gold Anti-Trust Action Committee and owner of A graduate of the School of Hotel Administration at Cornell University in 1968, he went to become a starting wide receiver with the Boston Patriots of the American Football League. Mr. Murphy, who now resides in Dallas, Texas, spent much of his business career in the Futures Industry with such firms as Drexel Burnham and Shearson Hayden Stone. Today, he writes gold market commentary for his financial web site that features the precious metals and contrarian economic analysis.

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    • bonbon

      No need for death penalties, or torture or Austrian School dogma. The General Welfare applied with Glass-Steagall breaking up banks by function as follows, is all that’s required :

      Hoenig Says Separate Banks by Function, Not Size

      Aug. 7, 2011 (LPAC) — Scores of bank economists and financial journalists have leaped into action, post Citigroup chief Sanford Weill, to speculate on the idiotic question of whether particular financial firm A or B would have gone bankrupt without Glass-Steagall’s repeal.

      FDIC Commmissioner and Glass-Steagall advocate Thomas Hoenig, in a CNBC interview Aug. 3, attacked this foolishness and, more importantly, the “anti-Wall Street” countergang to Glass-Steagall: {Shrink} the too-big-to-fail banks. This is put forward in new banking legislation by Sens. Sherrod Brown and Bernie Sanders, Rep. Brad Miller in the House, and others intimidated by Obama and Geithner against supporting the Glass-Steagall restoration they know is needed.

      In Hoenig’s discussion with three CNBC anchors, nobody mentioned the Glass-Steagall legislation in Congress. But Hoenig argued strongly against “breaking up banks by size”, and against “higher capital requirements”, as solutions that will not work. He also insisted that with current banking policy, massive bailouts of big banks WILL be done again in another wave of crisis, Dodd-Frank notwithstanding.

      The only effective policy, Hoenig said, is to break up the banks “by lines of business; break them up by function, not by size”; and secondly, strictly restrict the “bank safety net” to the commercial banking function, leaving everything else on its own – let it “win-lose”, as he said, as opposed to commercial banking’s “win-win”. These two policy pillars characterize Glass-Steagall.

      After discussing the superiority of the U.S. 20th-Century model of commercial banking, to the European model of universal, or “concentrated” banking, Hoenig dismissed the CNBC interviewers’ usual arguments about AIG, Bear Stearns, etc., saying that the banking system as a whole is the subject.

      By breaking down separation, he said, all financial institutions were allowed to “leverage up” and speculate with much higher risk. And since the collapse, claims of higher capital ratios are largely bogus, he argued. The big banks are using their “bailout borrowing discounts” to pile up contingent capital, Hoenig said, while their real tangible capital remains no more than 5% of assets (20:1 leverage) whereas “through most of the 20th Century” it was 10%.

      • Tony Brogan

        Get rid of the central banks–They are the central problem as elsewhere described. Ban fractional reserve banking, and let banks fail if they make mistakes ie get rid of moral hazard.
        simple all else is addressing symptoms and not causes.

        • bonbon

          Ths is like the homeopathic method. Incorrect identification of “cause and effect”, or rather as its founder explained, Emanuel Kant’s “unknowable cause” must be addressed with medicine whose action is also unknowable. von Hayek uses this argument – since economic growth is so “complex”, it is unknowable, therefore applying “sound money” medicine, whose action is not possible to know, we have healing?

          Weird to say the least. But this is the Austrian School prescription.

          Glass-Steagall removes the rotten functions from banking. A surgical intervention. It is now clear to anyone which functions are to be precisely targeted. Killing the entire banking system is, well, simply inane.

          • Tony Brogan

            Killing the entire banking system is, well, simply inane.
            It is the central banking system that needs to go. That is where the control is. Out of control policies more like. Little or no oversight by government on a national currency. no control over monetary policy. The handing over to the banks, the accumulated national wealth, to act as custodian. Putting the thieves in charge of the jail.

            That is not inane. It is insane.

      • Tony Brogan

        Glass/Staegall does not address the debt slavery problem inherent in fractional reserve and central banking. It’s sudden popularity is a ruse to divert attention from the real issues.

        Jeff Nielson
        “What is the inevitable result of a capitalist system where every new dollar that is used to fuel the economy is lent into existence? Debt Slavery: the ultimate goal of every (paper) fiat currency system.”

        • bonbon

          We are not on the Road to Serfdom, von Hayek’s thesis. We will use Public Credit based on National Banking when honest laws keep bankers honest. So do not worry about von Hayek’s Austrian School – it has become irrelevant.

          • Tony Brogan

            And Glass Steagall may be more irrelevant.
            And Hamilton’s bank was an early effort to issue debt backed currency. All paper currencies ever issued so far have resulted in inflation and the collapse of the economy. you seem to be adovating more of the same. Public credit is the issue of phoney money whose value has to be mandated by fiat in order to exist.
            given a free choice people will opt for real money not monopoly money issued by the state. And credit money which is a debt to boot. Commodity money has no counter party risk and while it may fluctuate in value it never goes to zero as does all paper currency.
            Why not allow people to choose? What are you afraid of? That they may not choose paper money chits issued as a debt.

          • Tony Brogan

            “We are not on the Road to Serfdom”

            There are many unemployed who disagree with this statement. Many who are working just trying to survive and failing to pay the bills.
            Economic serfdom and financial ruin have already arrived for many and there will be more yet to follow.

  27. lar

    In today’s world, a handful of people have enormous wealth, influence and freedom, while the vast majority are burdened with debt, labour and poverty; with little or no say in world affairs. This imbalance is clearly unfair and can no longer just be accepted as normal.

    Millions of people every year are born into a life of poverty and starvation, even though we have the resources and technology to feed and shelter everybody if we want to.

    Wasteful manufacturing drives an insatiable appetite for limited natural resources like oil, copper, gold etc. Since these scarce resources are only found in certain countries, exploitation or cross-border conflicts inevitably result.

    Some areas of the world suffer extreme weather conditions and a lack of arable soil or drinkable water, yet are largely forgotten by richer nations as they have nothing of value to contribute to the world economy.

    Money, by definition, creates inequality and injustice

  28. Dilly

    off topic but unteresting

    I wonder how would our lads have coped not that they will ever get the chance.

    • StephenKenny

      The 2012 olympics are very telling, in how they are being presented. Just as in the financial markets, the UK is playing an extremely effective game of public relations.

      In the financial sphere, they endlessly talk the talk of austerity, making very small cuts to those sectors most likely to cause loud criticism, while doing U-turns on everything else. WIth all this talk of ‘Austerity Britain’, they are getting treated by the markets as if their debt problems are being brought under control. In truth, the exact opposite is the case. In the mean time they are bailing out the major property developers, and subsidising the housing market directly. The hope is clearly to ‘reignite’ the property market and get everyone borrowing again, and thus save the economy.

      WIth the olympics, having spent almost £30m on the opening ceremony, everything else within and around the games is done purely of TV and pubic relations. The ticket shortage is a part of that, as are the outrageous prices. Everyone knows that it’s impossible to get tickets, and they are absurdly expensive – which gives an impression of total success in every event, in all stadiums, at all times.

      Just as with the economy, which has a bigger debt problem than Spain, in spite of the spectacular hype, many of the events are sparsely attended, and tickets are being quietly given away to try and fill seats. For the same reasons that you can get a seat in any theatre in the West End of London, officially, if quietly, for £2-£4 – their ‘sell-out run’ continues.

      This olympics is really just X-Factor ion a ‘Texan’ scale. A made-for-TV event, designed to attract people not to sport, but to the spectacle. The financial services sector is a made-for-consumer process, designed to impress people not by performance, but by the spectacle: Give them your money, and you’ll very impressed by their professionalism, sincerity, and reputation, until you realise your pension is just all gone.

  29. bonbon

    Monti’s Attack posted above at

    on Parliaments Draws Prominent Criticism in Austria and Germany

    Aug. 8, 2012 (EIRNS)–In a harshly-worded statement issued in Vienna yesterday, Ewald Podgorschek, financial policy spokesman of the Freedom Party of Austria (FPOE), denounced Mario Monti’s disrespectful remarks on national parliaments, in a newspaper interview, as an attack on democracy. The division of power, giving parliaments political control over governments, is a core aspect of democracy; therefore, Monti’s remarks have to be rejected in the most categoric terms, Podgorschek said, adding that one may pose the question of whether Monti’s loyalty still is more with his former employer, Goldman Sachs, than with Italy and its people.

    In Germany, a Frankfurter Allgemeine daily commentary said that Monti’s remark that governments had to “educate” their national parliaments, “tells of a, cautiously formulated, weird understanding of democracy. He is probably right to say that the breaking apart of Europe becomes more likely if governments are totally bound to decisions of their parliaments. What follows from that, however? Europe can only live on, if the national parliaments have the least to say? The Federal Constitutional Court, which is presently deliberating on the ESM, will note these remarks with interest.”

  30. bonbon

    With Enda and Noonan’s “medicine” will Irelands economy go this way?

    Italian Economy Plunges Under Rigor Montis

    Aug. 8, 2012 –Monti’s policy, “Rigor Montis”, is plunging Italy deep into depression, but Monti goes on unchallenged, with more destruction.

    Industrial production has plunged 8.2 percent on a yearly basis (June ’12/June ’11), and 1.4 percent from May to June 2012. GDP has plunged 0.7 percent from Q1 to Q2 and 2.5 percent on a yearly basis.

    Monti has not flinched. He stated to the Wall Street Journal that, had he not replaced Berlusconi, the spread between Italian and German bonds would now be at 1200 points (instead of the current roughly 500). He also repeated his modest aim of “changing the mentality” of the Italians.

    Berlusconi’s PDL protested as it had protested, together with other political parties, at Monti’s previous statements to Der Spiegel, to the effect that non-elected executives should ignore Parliament’s decisions.

    But neither the Speaker of the House, nor the Speaker of the Senate, felt the need to demand an apology for having insulted the institution of Parliament.

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  32. Tony Brogan

    “The first is that austerity doesn’t work.”

    When an individual spends what he does not own he is in debt (or a robber and thief) for what was borrowed.
    Tomorrows earning have already been spent.

    In order to repay that debt the individual must make a sacrifice out of current income and live on the balance. Is that austerity?

    If the individual is prudent and frugel then a lifestyle is lived within means and no debt occurs. A form of self imposed austerity takes place rather than the mandatory austerity imposed by the creditor.

    It seems to me that is the case with the nation state. Austerity may not “work” to revive an economy but it is what is required to repay the debt. If the individual can not repay the debt then it should not have been borrowed in the first place. It is foolish to lend more money to allow a few extra payments to be made. The borrower is further in debt.

    Same for the nation state. Von Mises is correct. There is no way out of a credit induced boom other than by a corresponding bust. Austerity may not “work” but there is no other solution other than default.

    Why should those that borrow rob those that lend, by not repaying? Why would people lend if they have no chance of being repaid? This is a moral question not an economic one.

    The current monetary system enforces credit as a modus operandi and successfully creates the debts that must be repaid. Therefore the system is designed to create austerity as the end result. Austerity creates hardship that a profligate population is unwilling to accept. Social unrest occurs.
    The current banking system is immoral. It entraps.

    Authoritarianism arises to control the unrest. This leads to restrictions and further unrest which will ultimately result in rebellion of a peaceful civil strife or evan an armed insurection and the physical overthrow of government.

    It is imperative that the banking system be changed before the breaking point is reached. The system of the issuance of currency as a debt must be discontinued. It must be replaced with a commodity money of intrinsic value. A morally correct money system. Honest money.

    People must learn to save for what is to be puchased. Savings are also the only legitimate source for the acquisition of capital to invest in the expansion of the economy. Such is the way to increased wealth and prosperity for the people.
    Infusions of extra currency into an economy provide signals that are misplaced and result in the misallocation of capital and the corresponding demise of the economy. A credit based central banking system destroys an economy , as we see at present.
    A savings based or debit based economy will provide correct allocation of capital and resultant prosperity.

    In a way austerity will work as it puts people into the frugal habits required for the sustainable growth of a wealth creating economy. There is something quite agravating about a member of the family being frugal and saving and living within his means and then others of the family arriving for a “loan” who have been spendthrift and dissipated resources and now want a bailout.

    Maybe that is why Germany is less than eager to be involved in bailouts for European brethren they perceive as irrsponsible.

    Individually, I have been relatively frugal during my lifetime. Any borrowings I have done have been for investemnt where I hoped to profit by utilizing the money to do so.

    I did not buy a house until I could afford the payments, and then only if I could see my way clear for at least five years.
    I remember being told how lucky I was to have what I had and I replied with, “no new tv set, no new car, no vacations abroad, no dinners out, no tickets for the latest show, tell me what is lucky about that.
    I have made my mistakes all right, but paid off and recovered.

    So it is voluntary austerity now or imposed austerity later.

    Agreed that there must be a social concern for those destitute, sick, or infirm, but it is a fact that the government “social programs” devised with unpaid contingent liabilities are unaffordable as the liabilities can not be funded by the working populations. There is just not enough to spread around.
    I see a radically different society developing in the next few years as this realiy hits home. Printing extra paper script is not the answer as has been amply demonstrated.

    Austerity will be a fact of life for the majority, with a tighter knit society. If the banking system is changed society will be relatively prosperous and a free.

    If the banking system is not changed it will be economic serfdom in servitutde to the monied elites (there is that word again)and the attendant controls.

    • padser

      Money is borrowed in good faith – we are not thieves r robbers. Who allows you to make money in the first place shall then decide how much tax you pay and how much you can save! You want to be part of a system when all is rosy….

  33. Tony Brogan

    China knows that gold is the ultimate money and financial resource. The state is accumulating and encouring the population to privately by gold too.

    ““Practice,” he says, “has proved that private gold reserves is an effective complement to national reserves, is very important for maintaining the country’s financial security.” Can you imagine an American or European economic policy-maker telling the citizenry to purchase gold as a “favorable opportunity” and characterizing private gold ownership as essential to “the country’s financial security?”

  34. Tony Brogan

    More and more people are thinking strategically about gold. Owning physical gold should not be viewed as a way to make money. Rather, it is way of saving capital that creates optionality for future spending power and investment resources.

    -John Hathaway, Tocqueville Fund

  35. Tony Brogan

    Central banks lend increasing volumes of script to a lesser and lesser effect. Soon it will have no effect and be worthless. Why do you save in fiat currency script. Get something of intrinsic value.
    If the country won’t leave the Euro, do it yourself and look after number one.

  36. Tony Brogan

    Something’s gotta give

    Maybe the Euro and the EU are Fracking

  37. Tony Brogan

    Did some reading on Alexander Hamilton. seems he was an agent for Rothschild. seems that his first bank of America as modeled after the bank of england, the worlds premier Central Bank.

    Read at your leisure

    • cooldude

      Well well the great Alexander Hamilton and his supposedly brilliant system of banking turns out to have not only been a Rothschild’s agent but he was actually married into the family. Andrew Jackson was dead right to shut down this Rothschild owned central bank but future presidents have not been as strong. Bonbon you are going to have to get a new hero. Try Sandy Weill who is just another bankster scumbag who is pretending to have gotten religion. Central banking is the keystone to the system of financial repression which is being fostered on every nation on this planet. Any nation like Libya who doesn’t play ball is simply taken out. Now they are after Syria and then it will be Iran. What a bunch of lowlife warmongering scumbags the leaders of the western world have turned out to be.

      • Tony Brogan

        Nobody cares, Cooldude
        They like a flock of sheep have gone to the next topic.
        another bailout. This time for the individual. I suppose there will be a means test.
        Maggie thatcher was correct “The trouble with Socialism is that sooner or later we run out of other peoples money”
        Seems they have not done yet. Spend, spend, spend. borrower or lender it does not matter. There is a bailout coming to a place near you soon.

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