March 3, 2014

Who will tear up the EU rule book?

Posted in Global Economy · 80 comments ·
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I am in Kilkenny this evening, planning some events for this year’s Kilkenomics festival. Kilkenomics is a strange hybrid of economics and comedy. It is not your usual economics conference because the stand-up comedians tease out the logic – warts and all – of what the economists are saying. In addition, the comedians shear away the jargon behind which many economists hide. As a result, there is more clarity delivered in Kilkenny than in many other economic set pieces.

Tomorrow, I head to the Gulf for a much more traditional economics and finance conference at the National Bank of Abu Dhabi. It’s not every day that I find myself speaking on stage just after Larry Summers and just before Ben Bernanke – but that’s where I’ll find myself on Tuesday.

It will be Bernanke’s first speech since leaving the Fed last month and as such, it should be particularly interesting. I just have to come up with something plausible to say – no pressure there so!

And while I’m there, I’ll ask them to come to Kilkenny too. You can only ask; and as the Americans say, ”if you don’t ask, you don’t get.” I’d pay to see one of our top comics grill the former Federal Reserve chairman in Langton’s or the back of Cleeres’s bar, wouldn’t you?

One interesting aspect of both these titans of the US policy world is the different angles I expect them to come at.

In recent months, Larry Summers has been banging the drum for the fact that the West is in secular stagnation. We are passing the baton over to emerging countries and a combination of technology, demography, globalisation and price competitiveness from the East and ultimately Africa, is going to eclipse us in the same way the Americans eclipsed the British Empire the in early 20th century.

To put that in an us and them framework; ”us being the West, ”them being the Rest, what he is saying is there will be more success for ”them – they will have better technology, they will work harder for longer for less cash and we will let them.All told they will get richer faster and we will get poorer quicker. And not only that, but many of us will get a lot poorer a lot quicker than others.

This path of argument is likely to bring him onto the buzzword for the policy elite these days: inequality.

I say ”these days, because for years when inequality was rising, it was seen as an unpleasant but unavoidable by-product of the new economy. Today, even those on the right acknowledge that when the top 85 richest people in the world own more than the bottom 3,500,000,000 people, something is seriously wrong.

Summers may also go on to say something very radical, which is that in the absence of a massive jolt to productivity here or a surprise baby boom in the West, the West needs financial bubbles to push the growth rate artificially upwards for periods in order to get unemployment down to tolerable levels. For example, in Ireland the only period in my life when unemployment fell to record low levels, when anyone could get a job of some sort, was when we experienced the mother and father of all property/credit/banking bubbles.

This is the implication of what he is saying, but I am sure that would be a step too far for the man who was both Clinton’s and Obama’s chief economic thinker.

The other man, Ben Bernanke, is likely to cover his tenure as the head of the Federal Reserve. His record, although it may be too early to set in stone, is, I believe, an extremely positive one. Bernanke tore up the rulebook in the US and unveiled the most unorthodox policies to combat the 2008 recession, preventing it from becoming a Depression.

By identifying that when the bubble burst so too did the personal balance sheets of tens of millions of Americans and by doing something about it, Bernanke deserves huge praise.

Most likely he will talk about what is the best policy when there is a liquidity trap. A liquidity trap is when there is so much debt around that the people have too much ”personal debt and they don’t want to borrow and the banks have so much ”bad debt that they don’t want to lend. In such circumstances, cutting interest rates alone is ineffective. Someone has to come in and spend and invest.

If it is not companies or people, it has to be the government. Otherwise as we see in Ireland, unemployment rises to double-digit levels and emigration becomes rampant. Also, lots of companies that close down don’t re-open and initial unemployment can become long-term unemployment very quickly.

Bernanke’s genius was that he could see that with no demand there would be no inflation and he could print as much money as he felt was necessary, buy as much government debt as he needed to and there would be no increase in interest rates. This is exactly what happened in the US and as US unemployment heads, albeit fitfully, to 6 per cent, it is hard to argue with diagnosis and medicine.

This brings me to the wagon we are hitched to, Europe.

In the eurozone the liquidity trap that Bernanke identified is far, far more dangerous. Bank lending has been falling for years now. Inflation is non-existent and worse still, most of the €1 trillion that Mario Draghi lent to the banks at the height of the crisis, to lend out to the economy, has been repaid to the ECB.

If ever there was an example of a liquidity trap, it is the European banks paying money back to the ECB when companies and people are starved of credit – as is the case here, Italy, France, Spain and Greece.

Yet rather than have a Summers or Bernanke – public intellectuals who are prepared to take risks – we have faceless bureaucrats who read from pre-written scripts and misdiagnose Europe’s problems, allowing the rate of unemployment in the EU to rise relentlessly.

Whatever you think of the Americans, they will not tolerate unemployment at European levels and are prepared to throw everything they have at the problem. True, there may be unintended consequences, but better to have tried and failed than never to have tried at all.

Is it any wonder that mainstream party candidates are likely to get hammered in the European Parliament elections in the coming months?

I will keep you up to date on what these giants of American economics and finance say via twitter @davidmcw, but in the meanwhile, I’d better head off and write that speech.

David McWilliams explains every day what’s going on the global economy at globalmacro360.com


  1. Yanis Varoufakis would be a good guest David, have you ever considered him?

    Looking forward to the next Kilkenomics, one of the highlights of the year.

  2. ps200306

    The vastly increased gap between rich and poor caused by Bernanke’s QE money pumping the stock markets is a high price to pay for a few per cent improvement in unemployment. Was there a way that could have been avoided, and might Europe yet avoid it when it eventually wakes up to the danger of deflation?

  3. atchman

    Not sure I can agree with your ‘Bernanke is genius’ comments. The 6% rate you tout as a symbol of his success gleefully ignores the labour participation rate. Also, where has the QE money gone? While the monetary base in the US has exploded under Bernanke the velocity of money has sunk to new lows.

    All of these CB schemes amount nothing more than bailouts for the rich further compounding the inequality gaps across the globe. What about good-ole fashion defaults instead? The financial industry simply grew too big and while its becoming a tired old cliche now to even say so, ‘too big’ should have been allowed to fail. Instead, we have now kicked the proverbial can down the road with far graver consequences ahead.

    • cooldude

      I have to agree. Bernanke was simply a pawn who was used by the insolvent commercial banks to transfer money from the US taxpayers into their coffers. Under Bernake’s watch the labour participation rate fell, the real income levels of workers fell, the amount of people in FULL time employment fell and the only statistic that seemed to rise was the number of people using the modern day soup kitchen system known as food stamps. This figure is now over 47 million and is hardly the sign of an economy that is doing well.

      If Bernanke really wanted to get the economy going why didn’t he simply send the newly created money to every household in the US and let them spend it. Surely this would have got the economy moving way more than simply giving it to insolvent institutions who were guilty of reckless gambling. The reason he didn’t do that is because he was just a lackey for the big banks and never really gave a damn about the employment rate or wages. His only interest was in protecting the interests of the shareholders of the Federal Reserve bank and they are the large commercial banks. The banking industry is a parasite which is consuming it’s host which is the real economy and he was simply a facilitator in this process.

      • markodxb

        Absolutely Cooldude, your no jargon nonsense free comment is the best input i have seen on this site for a long time.

        High praise D.McW on the slot between summers and bernake, but i think they have enough Sycophants/back slappers without you/us/the irish joining in.

        if you want to say something meaningful on your speech you have got to break with tradition and really challenge why large corporations still control wall street/federal reserve (since regan times) and why the equivalent banks/institutions in europe are bailed out by the tax payer and yet are giving nothing back. The point is when will they stop bleeding the ‘ordinary man’, there is not much left. This is not an accident it is part of a well executed plan to continue a transfer of wealth to the Elite.

        finally i am fearful of what will happen to currency collapse in the US and elsewhere… will that be the final nail in the coffin for anyone who still has deposits? i dont fully know why i am fearful but i am.. the constant printing of money is a concern… Gold anyone?

      • michaelcoughlan

        “The banking industry is a parasite which is consuming it’s host which is the real economy and he was simply a facilitator in this process”

        Spot on. Brilliant. Liquidating fingers style one company and country after another.

      • Grey Fox

        Exactly what should have happened here with Mortgage Crisis, Billions that was given to the Banks to address the problem should have been given to them on behalf of individual mortgage holders, thousands of them, the money ends up with the Banks and ultimately the ECB anyway you slice it at least we would have gotten something for the money, and I know we would have had all the naysayers booming on about debt forgiveness and free rides and all that but so what! the same happened with Tax Amnesties in the 70′s and 80′s and we survived, nobody died! but people are dying now! through ill health predicated in debt worries and of course Suicide.
        All these Billions were wasted and that is all the more reason for not paying this Odious debt back, it was never our debt and if they wanted us to take it on we should at least got something for it, as the old saying goes ” if I am going to get Fcuked, I like to at least get kissed first”

    • Jimmy Cummins

      Inclined to agree. Increasing money supply (printing money) only devalues assets further and stretches negative equity overall. While it may keep things moving, to me it delays real action e.g. Balance Sheet recognition (devaluations), writing off toxic assets, writing off toxic debt, in other words a complete truth in the re-balancing of economies, not “kicking the can down the road”, delaying the inevitable so the rich can divest the poison to the poor. Just my thoughts.

  4. peterm

    “Also, lots of companies that close down don’t re-open and initial unemployment can become long-term unemployment very quickly.”

    I am missing something here, your last artical stated people are better off on the dole and this is causing people to not look for a job, now its because of the above statement, so which is it?, or do you flip flop your logic to suit your agenda all the time?

  5. Bamboo

    Well done David! And thanks for the article.

  6. pauloriain

    David, surely it’s too early to tell if Bernanke is a genius. Your argument does sound good, but is it not time to link economics and nature……. because humans are part of nature. Nature demands balance and what has been done to date is not balanced, it is just more of the same.
    Isn’t it a little simplistic to really just look at this from a ‘fix this crisis point of view’ instead of acknowledging the stupidity which happened up that point and to think about how developed world economies progress from here, because more of the same doesn’t sound good. Essentially what Bernanke and a lot of the others involved have propped up the cretins. The cretins are back being cretins and at some stage they bring the whole thing down again.

    • baffled

      to call those responsible for the purposeful worldwide devastation of economies ,mere cretins,is a serious mistake.By calculating design and with murderous intent,the elite (with Bernanke playing his role) have orchestrated aggressive takeovers of all economies and the citizens’ freedoms ! i wonder if DMW might drop in a ‘logic bomb’ during ‘proceedings’ and casually mention the so called ‘consolidation’ of Graam-Leach-Bliley Act ,or is it the case that our much loved and number 1 economist, is the events’ comic relief between two so called “titans” ?

      even President Clinton admitted he was wrong about deregulating the financial sector and their ‘complex’ instruments ,which led to the plague like phenomenon of $14+ Quadrillion of “too big to fail/bail/manage” … Might L.Summers now admit to the same ‘error’ in torpedo-ing this law ,that was in place primarily to PROTECT the citizen?

      http://www.youtube.com/watch?v=cs3Z2Z2WMJk

      President George Washington understood the principles of the Physical economy and the physical scientific methodology of creating a future,for humanity’s common good ,as did his Treasury Secretary Alexander Hamilton

      remember David,when u dance with the Devil,the Devil doesn’t change,the Devil changes you !

  7. BoCualain

    When Greenspan was testifying before congress in 1997 he said that one of the bases for the “economic success” (of neoliberalim) was imposing greater worker insecurity. If workers are more secure that is healthy for society he intoned. How creating a system where 80% of the populous is scraping by without any hope of a secure future is healthy I don’t know but then again I’m only a simple member of the 80% precariat. Maybe you as an economist who is going to meet his successor will be able to find out how turning the west into and economic version of a Mad Max movie is good for us.

    In the recent ongoing tussle in Ukraine a Russian protestor said “In Russia we are all brothers but in Europe they are slaves”. I think he hit the nail on the head in terms of how the neoliberal project has brought us and dovetails nicely into your title “Who will tear up the EU rule book?”

  8. CorkPlasticPaddy

    Certainly not the crowd of ‘gobshites’ who are running the EU now. It’s their rules!!! It’s true for what Nigel Farage said the other day about him being hopeful that Ireland might elect some Eurosceptic MEP’s and the comments made by one of our MEP’s about the fact of there being a possibility that a few ‘looneys’ being elected to the European Parliament shows that some of our own MEP’s are quite literally scared shitless that this might happen!! It would be no harm whatsoever if it did happen, because the shower who are there at the moment are a complete bunch of tossers, except for one or two of them.

  9. The word ‘Obfuscation ‘ denotes much of what is written in this article .It moves between heads of Fed , of States , bank and personal debts , USA and EU , main street politics and dissenters .

    In all of this I am thinking what is fools gold and the real stuff and why does it slip between my fingers like a siv .After all both are yellow .

    That brings me to Abu Dhabi then I ask myself does the ruler drink tea or whiskey . Both colours are the same .

  10. Bernanke & Paulson were genius-level at propaganda:

    ““Bernanke deliberately misled Congress to help pass the Troubled Asset Relief Program (TARP). He told them that the commercial paper market was shutting down, raising the prospect that most of corporate America would be unable to get the short-term credit needed to meet its payroll and pay other bills. Bernanke neglected to mention that he could singlehandedly keep the commercial paper market operating by setting up a special Fed lending facility for this purpose. He announced the establishment of a lending facility to buy commercial paper the weekend after Congress approved TARP.” (“Ben Bernanke; Wall Street’s Servant”, Dean Baker, Guardian)

    It doesn’t take a genius to follow the money and find out the real history of the crisis, just investigative journalism:

    “Gretchen Morgensen (NYT financial reporter) picks up an important point in the Fed transcripts from 2008. The discussion around the decision to allow Lehman to go bankrupt makes it very clear that it was a decision. In other words the Fed did not rescue Lehman because it chose not to.

    This is important because the key regulators involved in this decision, Ben Bernanke, Hank Paulson, and Timothy Geithner, have been allowed to rewrite history and claim that they didn’t rescue Lehman because they lacked the legal authority to rescue it. This is transparent tripe, which should be evident to any knowledgeable observer.” (“The Decision to Let Lehman Fail”, Dean Baker, CEPR)

  11. Mike Lucey

    Bernanke said ‘NO’ to Senator Sanders when asked where the money went. He was being asked about $2.2 Trillion.

    From my perspective, his ‘NO’ answer shows what the FED is all about and I think its definitely not about transparency.

  12. michaelcoughlan

    Hi David,

    If my posts are going to be declined please let me know by email for what reasons.

    • michaelcoughlan

      Hi All,

      When I first read this article in the SBP My feeling chartered the following course; Gob smacked incredulity, wondering if a shadow writer wrote the article, despair at the realisation that it was written to be taken seriously, contempt for the column and resignation that my time here is coming to an end not that Ill be missed much. This article is the greatest load of nonsensical contradictory load of nonsense I have ever read on the forum so let me explain.

      The article is such a load of nonsense McWilliams I’m going to take myself out of my post altogether and reference other peoples opinions on the status quo. First of all look what Jim Rogers of Quantum fund fame with Soros thinks of Bernanke;

      http://www.zerohedge.com/news/2014-01-04/jim-rogers-warns-bernanke-has-set-stage-feds-collapse

      I suppose whatever way US Central Bank destroyed even if is self inflicted that’s a good thing especially since the previous two central banks in the US failed.

      Jim Rogers “Bernanke has never been right”

      http://www.youtube.com/watch?v=Z9NpreXG3V8

      “Bernanke’s genius was that he could see that with no demand there would be know inflation and he could print as much money as he felt was necessary”

      First of all no one gives a care how much money he prints it’s what he does with it is that counts and a huge amount of it wound up in the banks. You are right the banks didn’t lend it they speculated with it on stock markets where runaway inflation is driving new highs in stocks and commodities to such an extent the current charts for the last two years in the DJIA almost mirror the same two year period up to the 1929 crash;

      http://www.marketwatch.com/story/scary-1929-market-chart-gains-traction-2014-02-11

      Ask anyone in the real economy McWilliams about the price of materials and they will tell you they are skyrocketing.

      You say that Bernanke used the newly printed money to buy government bonds but you don’t say to what end the US regime did with the money but we know it was used to fight wars or bail out insidiously corrupted banks that are the prime movers in all the problems. In other words McWilliams; did the ordinary Americans get a sniff of stimulus? No. Because the intellectuals knew that in order to be proved right the real world had to be distorted to their pre conceived ideas and ensure that official figures reflect low inflation and then of course its all backslapping and nonsense all round in the Universities another insidiously corrupted set of institutions.

      You speak of a liquidity trap being when people have too much debt and don’t want to borrow and banks are too afraid to lend but you NEVER identify that the banks may have decided that why should the BOTHER lending when the know the head bangers in the US central bank will keep the balloon in equities inflated. This will keep the profits rolling in from speculation (driving inflationary bubbles in stocks) rather than the banks doing their jobs of placing capital to facilitate the wealth creation process.

      Instead we have the current exploit everyone policy of wealth ACCUMULATION/ASSET STRIPPING and sure if anyone has a problem with that they can take it up with the US Army. Well guess what? Putin won’t roll over in the Ukraine which ostensibly is a row about wheat and transit rights for oil and gas pipelines. He is deploying thousands of troops to the area to call Barrack Embarrassments’ bluff. It will be interesting to see if the Yanks cut off the oil and gas flow in that area like they did for the Japanese prior to getting hit at Pearl so what you could be looking at is the start of the third world war and I don’t say that lightly.

      As for Summers and Bernanke being intellectuals prepared to take risks imagine if like Summers case we could re inflate the housing bubble here to get all the misfortunes about to declare insolvency and bankruptcy out of their troubles what would happen? You yourself would wax lyrical about housing bubbles which shows up your contradictory commentary.

      Finally McWilliams what I conclude is that you see yourself as an intellectual who likes to be right ALL the time but no one is of course right all the time which is why there is so much inconsistency in your posts. Only a couple of weeks ago you identified that inflation in Ireland is much higher than official figures and you say in the article above there isn’t a hint of it in Europe. NO ONE is right all the time which is why people like Soros guard against themselves by constantly looking for their own errors unlike an idiot like GWB who when asked the same question about how he compensates for his mistakes he said he doesn’t make any.

      This article really is a dreadful load of nonsensical drivel.

      Michael.

      • michaelcoughlan

        In fairness David you have breath taking courage. Thanks for not deleting this post. Delete the others as i was trying to figure out which words offended and had to be moderated.

        Michael.

  13. Not much agreement on the blog for the position taken by Mr McWilliams which I am glad to see. McWilliams is a part of the problem whereas the majority of the educated thinking folk see the truth.

    • baffled

      gold has nothing to do with Truth!most thinking folk here have discovered that an economy will not can not and will never, grow from any metal

      with a future orientated mind ,a growing Economy is the only goal

      Glass Steagall ASAP!!
      then,Hamiltonian Credit Principle
      then,Reconstruction of our Physical Economies

      thats a future

      let’s tear up the rule book !!!!!!!

      dump serfdom

      • You will remain baffled with this sort of response which has no relationship to the thread above. Sounds like whatamess and bonbon in unison.

      • michaelcoughlan

        Hi,

        The other posters constantly referencing these points were banned for diverting the board. Most people here including me think GS is a good idea. Don’t fall into the same trap as the other guys or McWilliams will ban you for the same reason.

        best regards,

        Michael.

      • michaelcoughlan

        Hamilton coined gold and silver.

  14. Laurence Summers co-authored a paper in 1998 that suggested a correlation to the price of gold and to Interest rates.

    He theorized that if the price of gold were kept down that it would be possible to maintain low interest rates.

    Thus continued a determined effort to manipulate both the price of gold and interest rates.

    Part of the process was to release as much gold as necessary to the market to lower prices (Alan Greenspan–We stand ready to lease gold into the market in any quantity to maintain the price level).
    This leased gold was then sold by government agents (chosen bullion banks)into the market. This lowered the gold price and simultaneously provided a pool of cash to invest in US government bonds.

    This action succeeded in increasing the value of the bonds and driving interest rates lower.

    Thus we have an artificial low price of gold and an artificial high price of bonds and an artificial low interest rate.

    today the demand for physical gold is outstripping the supply and the price is being driven upward by the physical market. Western governments are no longer willing to lease gold and there is in fact insufficient gold in the vaults to meet demand. Germany has been unable to repatriate its gold because it simply does not exist.

    The scam/manipulation will unwind leading to a shock of lower bonds, higher interest rates and a surging price of gold to market levels.

    http://www.gata.org/files/gibson.pdf

  15. “If one looks at what EU bureaucrats have done to Southern Europe, specifically Greece, Spain, Italy, Cyprus and Portugal, it seems incredible that Western Ukraine citizens would want to punish themselves by joining such a dysfunctional club. Additionally, Ukraine is in bad shape financially and was depending on a huge loan from Russia to continue to function. The IMF, meanwhile, has already indicated that strict austerity is going to rule the day for an EU-centric Ukraine. – See more at: http://www.thedailybell.com/news-analysis/35075/Washington-Post-Military-Maneuvering-is-Putins-Fault/#sthash.wmIAwBpd.dpuf
    –The Daily Bell

    http://www.thedailybell.com/news-analysis/35075/Washington-Post-Military-Maneuvering-is-Putins-Fault/

  16. Here is a good topic for today’s speech

    http://www.gold-eagle.com/article/economic-growth-isnt-what-it-used-be

    Economic growth ain’t what it used to be! That is, it is not as it is reported by such as yourself. Those who refuse to “go there” , who report current stats as a truth when you know all are manipulated to a fiction as decerned by the bloggers herein.

    “The day is coming when Mr Bear is going to do what he was born to do – take out the trash from the financial system. You can say goodbye to “economic growth” and hello to soaring interest rates when he comes back to work. The best way to survive what is coming is to own assets with no counterparty risks; gold and silver bullion come to mind.” Mark Lundeen

    Those with a mind to do so will read this attachment and get a valuable insight to an economic reality so missing in our host.

  17. “If one looks at what EU bureaucrats have done to Southern Europe, specifically Greece, Spain, Italy, Cyprus and Portugal, it seems incredible that Western Ukraine citizens would want to punish themselves by joining such a dysfunctional club. Additionally, Ukraine is in bad shape financially and was depending on a huge loan from Russia to continue to function. The IMF, meanwhile, has already indicated that strict austerity is going to rule the day for an EU-centric Ukraine. – See more at: http://www.thedailybell.com/news-analysis/35075/Washington-Post-Military-Maneuvering-is-Putins-Fault/#sthash.wmIAwBpd.dpuf”
    –The Daily Bell

  18. Adelaide

    There was a great quote (Bishop Tutu) from this evening’s BBC Panorama “Hungry Britain”.
    “When you have fished enough dead bodies from the river THERE COMES A POINT when you go upstream to find out why they are falling in.”
    Cause and effect.

    This an apt analogy for the destruction and impoverishment wrought by our woeful economic and monetary model, the downstream experience you could say, the effect being too many people with too little money, but when oh when oh when will the public discourse move upstream, to the cause, which is the methodology of the money’s issuance in the first place.

    I respect David but his articles are all downstream. The same for Mainstream media/experts/commentators/politicians, every blockhead jabbing his finger at a scapegoat. On and on and on about the effects.

    After a few years waiting for an informed public debate to move upstream, to the primary cause, as in THERE COMES A POINT moment, still waiting, one loses patience. Downstream it’s all chaff. Nattering. Ignorant wailing. It’s pointless and tiresome.

    Has the general public the wherewithal to move upstream or is there truth in the Chinese saying, “Men do not desire freedom, they desire a Master.”?

    • baffled

      i like what u wrote Adelaide

      but can i say “the monetary model” “the money’s issuance” are not as such the cause of the problem,but what was created with all those trillions – 95% of it is used to prop up zombie banks – non productive debt.a scientifically unsound economic model and not in the slightest modern and created nothing but bubbles.the real cause,as most here know ,was the willful and strategic detonation of the GLB Act and deregulating the Inter Alpha banking jackals

      cause and effect and deductive reasoning have their place but we need leaders and the public too, to have a vision of a future and creatively “move upstream” to a place where we burn the rule book and burn Wall.St and discover a new path

      • You continue to be baffled as to how the money system works. You appear to not know or perhaps not care that 97% of all money is issued as a loan. That is as a debt. The interest on the loan is not issued. Therefore the interest paid by any individual must be taken from some elses cash. That leaves the person with less than they started and so another sucker must be found to lend cash to so the earlier borrowers can pay their interest.

        This is the Ponzi scheme of our currencies. More and more loans must be made in ever increasing amounts at a greater and greater frequency or the currencies implode and the economy with it.

        All economies are laden with more and more debt and increasing volumes of interest to pay. Everyone is at the point of exhaustion and the method of the issue of our money is not an issue? You do not look upstream far enough.

      • cooldude

        I would imagine that any prominent economist, and DMcW is one, who starts to write about “moving upstream” to the actual source of all these problems we are experiencing right across the globe would stop getting invited to all these fancy gatherings where everyone simply praises each other on the phantom recovery and nobody asks any hard questions about what is really going on. This is something David himself will have to deal with because it is obvious for anyone who wants to look at the real facts that the traditional Keynesian approach has run out of road and the newly created money is no longer creating any kind of meaningful growth in the real economy. It might be creating bubbles in the equity markets but it is completely failing the real economy.

        Until this column is prepared to look upstream at the real causes of our problems we will continue to have these disjointed articles which are not connected in any way and are really going nowhere. I don’t expect any change but you never know. The ECB will soon join in the QE game and when it does an episode of extreme or even hyper inflation is inevitable.

        • baffled

          a very well crafted post cooldude

          hyperinflation is with us already of course tho – the evidence is simply observed in the U.S. printing 85 billion per month but i understand what youre saying i.e.hyperinflation when a Hershey bar ends up costing u 4 euro,a can of Pepsi sets u back another 5 euro and a full fill at the petrol station that cost 70 last week and in a moment later costs you 200+ – indicative of entropy increasing ..energy lost increasing in our closed economic model( that also tends to disorder)

          The real economy is the physical economy and talking economics and not in the very same breath discussing technology as the science driver of national policies is a fraud

          • michaelcoughlan

            looks like the virus got in again David.

          • baffled

            The Americans’ insane policy of QE continues to prop up the 4 Wall St TBTB and their derivative contracts (ie futures -spread betting, options ,swaps and their hybrids) and US derivatives are now ‘valued’ *at least* 20 times Global GDP!!!)and US is now going to double its Q3 purchases of US treasuries and toxic assets! just more casino economics with a nonchalant attitude to risk and the consequences for the serfs! “Overconfidence” indeed !!

            This financial system of empire is on a knife edge and is now imploding and any small tremor now will detonate us all !!

            It’s time for Change!!

            tax revenue is linear and debt is exponential,right…the difference :

            “Let’s say you’re at a party in a small apartment that’s about 500 square feet in size. Then suddenly, at 11pm, a pipe bursts, starting a trickle into the living room.

            Aside from the petty annoyance, would you feel like you were in danger? Probably not. This is a linear problem– the rate at which the water is leaking is more or less constant, so the guests can keep partying through the night without worry.

            But let’s assume that it’s an exponential leak.

            At first, there’s just one drop of water. But each minute, the rate doubles. So by 11:01pm, there’s 2 drops. By 11:02, 4 drops. And so forth.

            By 11:27pm, there’s only six inches of standing water. Yet by 11:31pm, just four minutes later, the entire room is under nearly 8 feet of water. And the party’s over.

            For nearly half an hour, it all seemed safe and manageable. People had all the time in the world to leave, right up until the bitter end. 11:27, 11:28, 11:29.
            Then it all went from benign to deadly, in a matter of minute”

            signing off

      • michaelcoughlan

        “but we need leaders”

        What we need to demonstrate is personal leadership not wait around for the next strong man to come around as we know from history where the rail roads lead to in such countries.

    • pauloriain

      Totally agree with this post.

  19. Eric Sprott on the domino effect, of the European banking system.

    http://usawatchdog.com/

  20. Maybe Putin in Ukraine will tear up the EU play book

  21. “I was also fascinated by Egon von Greyerz’s comments over the weekend that we are headed for a hyperinflationary depression. Most people can’t grasp this. They think that inflation is connected to strength in the demand in the economy. But, as I have said, it is strictly a currency event. A weakening economy is going to lead to a depression, which will lead to even more currency creation, and that will lead to the hyperinflation that Egon talks about.”–John Embry

    John Embry talks about the black swan event that can blow the lid off world finances never mind the EU rule book

    http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/3/4_Ukraine%2C_Russia%2C_Putin%2C_A_World_On_The_Edge%2C_1914_%26_Gold.html

  22. …. a Summers or Bernanke – public intellectuals who are prepared to take risks – ….

    Sometimes these articles allow to understand much more about the writer than the subject that he wrote about.

    Summers, who forced out of Harvard as a president after he suggested that women lack aptitude for math and science, now becomes a public intellectual in the writers hands here.

    Bernanke, his TARP scam where he and FDIC together with Paulson stated that the nine leading banks were healthy institutions and were taking the cash only to enhance the overall performance of the U.S. economy, now magically turns into a genius in DMcW hands.

    How convinient.

    • Really, I mean come on folks…

      Hahahahaha!

      Someone being sandwiched by Summers and Bernanke, comes here with his chest swollen with pride, eyes all sparkling for jabbering on the same venue, and calls the public intellectuals….

      Really, how convenient in deed!

      To remove that thick, sticky and mucous substance from a fish to be canned would appear as an easy task compared to…

      Awww, well… ROFLMAO

    • Remember Bill Cullen? The Apprentice?

      DMcW would have been an excellent contender for the show, he would have had all the skills required to win the contest and become Cullens bitch.

      Quick, someone give him a green jersey, or even better, give him a permanent facial, ahem, a green facial makeup I meant. LOL

    • michaelcoughlan

      Excellent insights.

    • Dorothy Jones

      Yo Georg! Volltreffer :) D

  23. SMOKEY

    Actually what the Americans say is, “the squeaky wheel gets the grease”.
    No one will tear up the EU rule book because “Paddy” hasn’t said he is displeased with it.
    Example is the Pylons scam, we will march in Dublin next month in huge numbers, I am very pleased about this. Of course your electricity rates will go up, not because of the cost of going underground, but another, bend over so the Govt. can f@#k you in the ass without any lube moment, with regards to ultra high utility prices.
    If Paddy would only protest against the current economics being wrought on the citizenry, we wouldn’t be having this discussion.
    But Paddy has his Man United jersey, Facebook obsession, GAA distraction, Paddy Power on every corner, head buried in his iPhone and Arthurs day to keep him otherwise occupied.
    All the while trying to book his next Ryanair “hollier” instead of paying attention to the state of his union.
    JIFFY’S are the ones David once referred to and the still are the Wans who populate the working class, which most of us are, and unfortunately they just don’t have a clue.
    So go on and worry about that stupid boring, infantile kick into the back of the net. Seems watching overpaid creeps on a “giant flat screen” is what Paddy is really all about.

  24. redriversix

    UKRAINE

    Today EU FINANCIAL MINISTERS SHALL IMPOSE A BAN ON FINANCIAL TRADING WITH RUSSIA.

    eh no you wont we need their money

    OH OKAY !

    TODAY EU MINISTERS SHALL IMPOSE A TARIFF ON ALL RUSSIAN EXPORTS

    ehhh can’t do that either..

    WHY NOT ?

    eh we,the EU do 100 billion euros worth of trade with Russia every year……

    RIGHT !!

    eh and Putins actions cost him 100 billion yesterday so he doesn’t seem to mind the cost

    eh and we import almost 40% of our energy needs from Russia……….

    TODAY WE EU MINISTERS SHALL DEMAND RUSSIAN REMOVAL FROM FUTURE G8 [G7] MEETINGS…..

    NEIN NEIN FRAU Merkel Says NEIN

    FOR FUCKS SAKE WHAT NOW ?

    VE hav big business vith ze Russkis & ve vill protect this at annnnny Kost

    RIGHT WHAT CAN WE DO ?

    well Sssiir we were thinking of a letter of support to several of Crimea’s Residents Associations

    EXCELLENT IDEA

    WE , E U FOREIGN MINISTERS SHALL ISSUE A STRONGLY WORDED LETTER OF SUPPORT TO ALL [ SOME] OF Crimea’s RESIDENTS ASSOCIATIONS.

    THANK YOU

    [end of press conference]

    • michaelcoughlan

      Still laughing 30min later. You have a brilliant talent there for satirical comedy. I’m not messing. If you write a sketch I’ll go visit you in the international bar in Dublin.

      • redriversix

        Thank you Michael. .

        We shall have Mr Obama’s press conference tomorrow

        your too kind

        have a wonderful day

        • michaelcoughlan

          “We shall have Mr Obama’s press conference tomorrow”

          You are the maiestro barry. The satire is so sutle I almost missed it. Hillarious.

  25. Mike Lucey

    Wow! This thread is really hotting up ;-)

    I am now wondering if David’s post was simply a ‘toe dipping’ exercise for possible ideas on what he is going to talk about in between the ‘big guys’. Looks like he is getting plenty of ideas.

    A couple more!

    Like many, I am concerned about how the US will eventually react to Putin’s (some see as not totally unjustified) actions in the Ukraine. Paul Craig Roberts makes a certain amount of sense in his assessment of the situation. ‘Washington’s Arrogance, Hubris, and Evil Have Set the Stage for War’
    http://www.paulcraigroberts.org/2014/03/03/washingtons-arrogance-hubris-evil-set-stage-war/

    On a more hopeful note in relation to the topic heading, ‘Who will tear up the EU rule book?’. Maybe its the World rule book that should be re-written? Yesterday, on the NET, I came across what I consider an ingenious newly launched barter system which uses an algorithm to make things ‘go around’, which after all is what currency is suppose to achieve.

    The system is called ‘Swapdom’ and this article explains how it works, ‘Let’s have a 5-way!’ Swapdom’s peer-to-peer algorithm helps you trade stuff in a circle

    http://www.treehugger.com/culture/lets-have-5-way-swapdoms-peer-peer-algorithm-helps-you-trade-stuff-circle.html

    I have visited and studied the site and think it will be a big player in the future when the swap categories are broadened to possibly include services and such.

  26. BoCualain

    Is anyone else sick of the tired old cliched us vs them responses to this whole thing in the media. Lets not forget that the us that the media refer to were the us who reneged on the promised made to Gobachev when we said that Nato/EU would not attempt to co-opt the former soviet republics. Now that we have engineered regime change in Ukraine (which method of implementation would never be accepted by us in the “free” world) we expect that Russia will just roll over. And what the hell does Obama mean by being on “the wrong side of history”. Is it a version of the “either with us or against us” threat but without the balls to back it up? Of course what the media chorus really shows is that in the main they are fully signed up to the neoliberal agenda which will use any means including regime change and mass murder in order to subjugate all nations. Greenspan said that worker insecurity is good for society so if all the negative effects that that entails is bearable for our own people (slaves) then an engineered regime change or a mass murder for those others is surely just as bearable. After all half a million children under five dying in Iraq was well worth it according to Clinton’s state secretary. If what we have in the “free world” is on the “right side of history” I would love to see what being on the wrong side is. The EU rule book is a bankers rule book, nothing more.

  27. Bernanke’s genius…………………..could print as much money as he felt was necessary, buy as much government debt as he needed to and there would be no increase in interest rates. This is exactly what happened in the US and as US unemployment heads, albeit fitfully, to 6 per cent, it is hard to argue with diagnosis and medicine.

    THe Fed buying up government bonds is simply printing more money (as increased debt)to monetize the deficit and add it to the national debt. (1 trillion in 2000 to 18 trillion in 2014).
    By increasing the demand for government debt interest rates were artificially driven down. Deliberate distortion of the economy to encourage people to further indebt themselves using cheap credit.

    This was and is a bankers tool to bail out the banks. The Fed RES share holders are banks. The Fed looks after its own. Bernanke oversees this action on behalf of the central bankers.

    McWilliams was a central banker and and acts as if he is a part of the club. McWilliams is part of our problem, and advocate of central banker excesses.

    As well there is the constant use of manipulated statistics.
    True US unemployment is way north of 6% but 23%
    Inflation is not 2% but closer to 8%
    See http://www.shadowstats.com

    The whole article uses manipulated and inaccurate data. Both Summers and Bernanke are masters of this dark art.

    • McWilliams was a central banker and and acts as if he is a part of the club. McWilliams is part of our problem, and advocate of central banker excesses.

      On occasion, you do talk sense.

      LOL

      • High praise from the master.
        I’ve never wavered Georg.
        Plain as can be as to what is going on.
        Feather your nest it is called. To hell with the neighbour.

        • Colin

          ‘to hell with your neighbour’, or its handmaiden ‘look after yourself and your family’, we have others advocating that here, but they get applauded?????

          …it got me thinking, and I remembered Keith Floyd remarking about the Irish way of life, which was good back then, when people did look after their neighbour.

          http://www.youtube.com/watch?v=Z9vexxS0hl8

          Whatcha think Tony? Keep up the good work.

  28. Adelaide

    Hi Tony
    Talking of manipulated data there was an economist earlier on the radio discrediting today’s press release “Central Bank shows 3.3% decrease in mortgage arrears” baloney re https://www.rte.ie/news/business/2014/0304/600041-central-bank-arrears/

    What the CB failed to mention was that 3.3% decrease was due the banks offloading non-performing mortgages to third parties from their books, yes, the true headline should read “Central Bank shows 3.3% of mortgage arrears were removed the banks’ books”.

    To imagine that there are now 33,589 mortgages in arrears of 2-years-plus and how many properties were repossessed in the previous quarter? 168. A whopping One hundred and sixty eight.

    Socialism for mortgage holders, capitalism for renters.

    • Look upstream far enough and one sees the Spring/Well head is poisoned.

      The construction of our money system is fraudulent. It is a Ponzi scheme. Dishonest money leads to dishonest actions which lead to corruption and lies and manipulation.

      Another great topic to present between Summers and Bernanke.

      The mortgage arrears problem you outline is the sort of result one gets in the modern age.

  29. Above addressed to Adelaide, :)

  30. Talking about corruption and manipulation. JP Morgan fine 20 billion but no one goes to jail, Just like the 20-30′s mob fines are just a cost of doing business

    http://wordpress.us7.list-manage1.com/track/click?u=8829ce026276832f7fc66a1a9&id=cbceffa20c&e=8d9bb34a85

  31. redriversix

    Right……now. look here

    everything is fine. …we are gonna have almost 3% growth this year.

    Ireland has exited the bailout programme

    We have excellent banking , a well educated population willing to work zero hour contracts to help their employers

    A fine health service..Excellent support for the sick , elderely & infirm.

    A social insurance system which is their for people who lose their jobs & contributed to from their taxes.

    The E.U loves us..Germany learns from us..Amerixa can only look on at us as a fine example of Nation building in admiration.

    The sacrifice that Banks , their Leaders have made for us is astonishing …with no fuss.

    Ireland is booming & once again the World shall look upon Dublin as a shining City on the hill.

    Really….

    you lot..sicken me sometimes

    tut tut

    Barry

  32. cooldude

    Here is what that “genius” Bernanke had to say in Abu Dhabi. Doesn’t sound too clever to me and definitely not worth his $250,000 fee. Wonder what David got to lick up to him?

    http://www.zerohedge.com/news/2014-03-04/bernanke-finally-reveals-one-word-why-financial-system-crashed

    • michaelcoughlan

      His fee was €250000. Nice work if you can get it.

    • Wonder what David got to lick up to him?

      You are not really astonished, or are you?

      • cooldude

        I am actually. Thats an awful lot of wedge for one speech. It does explain however why we never get any “upstream” analysis on this blog. If supporting the central bank ponzi scheme pays that well it does explain a lot.

        “Rock the boat, don’t rock the boat baby

        Rock the boat, don’t turn the boat over.”

  33. Mike Lucey

    On the subject of Central Bankers, this makes for interesting reading.

    ‘Should dual citizen of US/Israel be vice chair of our Federal Reserve Bank?’
    http://mondoweiss.net/2013/12/citizen-federal-reserve.html

    Israel Moves To Take Control Over the Federal Reserve
    http://www.paulcraigroberts.org/2014/03/05/israel-moves-take-control-federal-reserve/

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