In Europe over the past few days, two seismic events have happened which are related but at first glance appear not to be. First, Mario Draghi, the Italian man who, as president of the ECB, controls your money, said that he would keep printing cash for as long at it takes to get prices in Europe to rise. In Europe, prices have been falling or rising very modestly. This is because the economy is weak, unemployment is high and debts are steep.
The second event was the huge success of Marine Le Pen’s Front National (FN) in the French regional elections. It won 28pc of the national vote, its best performance yet. Strikingly, Madame Le Pen gained 40pc of the vote in Nord-Pas de Calais. (Hopefully, Ireland will be based in this region for Euro 2016, as it is the region closest to us and the easiest to reach.)
What might French – and by extension European – politics look like by the time the hoards of us arrive with our inflatable leprechauns, sun-burned faces and stretched overdrafts?
If Madame Le Pen manages to maintain this surge in popularity, she will be a major threat to the French establishment in the presidential election in 2017. Quite apart from the issue of immigration and Islam, she appeals to the Frenchman who feels left out, who feels he is going backward, who wants more protection from the state and who feels the rich are getting richer and, as a result, that his stake in the society is under severe threat.
One of the factors driving this insecurity is the fact that the gap between the rich and the poor in France has been rising rapidly since the financial crisis. The top 10pc of real incomes in France increased by 2pc per year during the crisis (compared to an average annual drop of 1pc throughout the OECD), while the incomes of the bottom 10pc decreased by 1pc each year (compared to an average annual decrease of 2pc).
In addition, asset prices in France, such as the stock market and Paris property, have been going through the roof, and guess who owns stocks/property in France? Rich people own assets so they have been getting richer, both in terms of income and wealth.
And this is where the ECB and Mr Draghi come in: the European establishment is undermining the French establishment, to the benefit of Madame Le Pen and the anti-establishment Right.
The ECB has reacted to the crisis by printing money and reducing interest rates to zero. At first this was called Zirp, the zero interest rate policy, then it was called LTRO, then there was the explicit promise to do “whatever it takes to save the euro” and now, it is called quantitative easing. All these are fancy ways of saying they are printing money.
What happens when a central bank prints money? Interest rates fall to zero and this pushes up the value of all companies. The excess liquidity sloshing around the economy looks for a new home because deposit rates are so low that investors don’t want to keep money in the bank. This too creates a demand for other assets, pushing up their prices.
So we get the strange situation where stock prices are rising even though the underlying economy in France is faltering. Over time, all this money printing pushes a wedge between the market value of companies and the actual value of those companies. This can go on as long as the money is being printed.
However, what this does is enrich the people who hold assets such as stocks. But what do you need to buy these assets in the first place? You need wealth. As a result, the already wealthy see the value of what they own go up. In truth, the vale of the most risky asset goes up when interest rates are zero. And who holds risky assets? The rich guy does!
In the meantime, what is happening to the nest egg of the average person?
Normally, the average person tries to put a bit aside every month and usually puts this on deposit in the bank. Because they don’t normally know too much about stocks or bonds and the like, they keep their money there. So they are being penalised for being prudent, while the risk taker is being rewarded for taking a risk.
All this means that both the income and the wealth of the richer person is going up as a direct consequence of the financial engineering orchestrated by the ECB.
What the ECB is hoping for is that the rich guys will feel wealthier, they will spend and some of that spending with “trickle-down” to the average guy. But this, even if it does happen, takes ages and in the meantime all the average guy sees is that the rich guy is getting richer. This makes him feel excluded.
Once people feel excluded, they can become disillusioned with the mainstream and they look for other political solutions. In time, some fall into the arms of Madame Le Pen.
So it is not difficult to see how the policies deployed by the establishment in Frankfurt are undermining the establishment in Paris, as we saw in France’s election on Sunday. The ironic part of all this is that Madame Le Pen sees the ECB as a problem and has vowed that if she wins the presidential election,she will take France out of the euro and return it to the old French franc.
If this were to happen, in the same year that Britain votes on Brexit, the EU is in for a massive crisis and it would have no one to blame but its own institutions. When you follow the money, you can see what is driving the growth wealth and income gaps in France and these are feeding into general discontent.
At the moment, a Le Pen presidential victory is still a long-shot, but you can’t rule it out and 30pc of the electorate is a lot of French people who want change – wherever that change may take them.
Thanks for the ariticle.
What happened to the other article David? “Get ready for an avalanche of election giveaways that will put santa to shame” That was also very interesting. Hope you post it again as that promises as lot of feedback.
The title is the same but with different content now. Anyway, another interesting article from David.
“In Europe, prices have been falling or rising very modestly. This is because the economy is weak, unemployment is high and debts are steep.” In Europe, prices have been falling or rising very modestly. This is because debts are unsustainable and as a result the economy is weak and getting weaker due to the cannibalisation of the wealth of every single citizen who has no access to zero cost money for gambling in the stock market or on property resulting in higher and higher unemployment. “One of the factors driving this insecurity is the fact that the gap between the… Read more »
The trouble with the French is that for decades France has used the EU to further its own interests – protecting and funding its farmers and forcing everybody else to accept massive costs for businesses so that France can carry on with its expensive and stifling “social model” whilst setting itself up as the Leader of Europe so that it could challenge US hegemony. That was fine when competition was from within Europe, but the world has changed, and the EU can no longer protect the French. So now what? Holland, Germany, the UK and perhaps even Italy, are no… Read more »
“Hopefully, Ireland will be based in this region for Euro 2016, as it is the region closest to us and the easiest to reach.”
Have they moved Britanny ?
Thanks for elucidating all that David. It seems to me the intention behind QE is not to enrich the rich guys, although that is a collateral effect; the intention is to prevent the collapse of the big banks and financial institutions. In other words, to keep the speculative casino of the financial markets going; because not only can it not be stopped, it cannot even be allowed to slow down too much without disastrous consequences. Consequences which would not only affect the institutions involved in the financial markets scam, but would literally collapse the physical or real economy we all… Read more »
It would seem like a prudent time to remind people of this:
https://www.youtube.com/watch?v=PTUY16CkS-k
The fundamental error in the drive for inflation is the reason for the drive in inflation. ie, it’s to bail sovereigns out of their excessive debt and worse to allow them to continue to increase debt. When I bought my home and took out a mortgage, every month I paid an amount that covered the interest and reduced the principle sum owing. Why exactly should sovereigns behave or be allowed to behave differently. Borrow for capital spending (the house) but not definitely not for consumption and pay down the borrowings. Increasing sovereign borrowing is a ponzai scheme. I asked the… Read more »
This is just naked political opportunism David. You accurately describe the evils of central banking in the global financial system but you attribute all such evils to the European Central Bank, as if it alone had them. You ignore the fact that other central banks such as the US Fed and the Bank of England are equally responsible for the distortion of wealth in their respective countries. Selectively blaming the ECB for this global phenomenon is simply part of your incessant drumbeat of denunciation against the Euro currency. That is political opportunism, not economics. Leaving the Euro Zone will not… Read more »
The global financial world, including the sovereigns, need a reality check in relation to inflation and what their misguided understanding of inflation. Inflation is a bad, bad thing thing. It robs people of their future. Every year prices should be cheaper that each previous year. The simple explanation for this is that technology is continuously giving us more for less. More efficient, cheaper manufacturing methods with better quality so the prices of goods should be coming down not going up. Ah I here you say if demand rises then this will push up prices. Wrong again, more demand gives you… Read more »
As for the price of gold things could get very interesting in the not too distant future. http://phys.org/news/2015-12-space-law-interplanetary-gold.html There are reasons why the price of Oil is being kept low. Some of them are no doubt political but technological developments in solar energy are making PV cells more and more competitive each year. Solve the energy storage problem in an economic way and the oil industry would be kaput. OR go stellar – http://phys.org/news/2015-12-german-physicists-landmark-nuclear-fusion.html Sure this is only a test rig. The thing that is most noticeable in technological discoveries in recent years is the ever increasing ability to measure… Read more »
In 10 days time the Spanish general election will be held, where Podemos and Cuidadanos are likely to take a combined 30% of the vote from the two traditional parties of the left and right there, the PSOE and PP. A coalition between the PP and Cuidadanos seems the probable outcome. This is in addition to the recent win for the anti-austerity left wing three party alliance in Portugal won 51 % of the vote there in the general election two months ago, and of course Syriza, a relatively new party themselves, winning 35% of the vote in recent consecutive… Read more »
Tony, how are things in Nelson down under?
Sideshow Bob I think the thread that’s running through politics in France the USA and elsewhere is that voters are gearing up to ditch anyone associated with the political establishments of the left and right. They see the tag team left/right gravy train for what it is and they’ve had enough. Trump might be crass but he’s a Wharton graduate who was somehow smart enough to conveniently avoid serving in Vietnam. Trump was of draft age and got college and medical deferments. It’s almost a law that those who are cheerleaders for wars have never fought in one (Thatcher, Reagan,… Read more »
Le Pen is also very strong in PACA ie Nice another location where Ireland may play off in . So should that happen Ma Nolans pub in Nice will be the rendevous point for all to discuss the possible outcomes in the matches that matter .Weather would be better too .
[…] in November – The Telegraph Gold and currency market rigging controls the world – GATA Le Pen V Draghi – Will France Leave Euro? – David McWilliams Corporate Insiders Are Dumping Their Stock – Dollarcollapse.com […]
I decided to take my time and translate excerpts from an interview with Madame Le Pen for the Polish daily Rzeczpospolita. Sadly, I won’t be able to do much commenting (time-wise) or a proper translation as I will virtually translate as a speed-type… In an interview for the Polish daily Rzeczpospolita (5 December 2015) Madame Le Pen said, “And finally people are beginning to understand that the euro is a German, not an European project! It was established by Germany for Germany. This currency is absolutely not adapted to the French economy. And so far, Germany is the only beneficiary… Read more »
EU CANNIBALISING MORE THAN ESTABLISHMENT
http://www.breitbart.com/london/2015/11/11/watch-anti-migrant-video-going-viral-across-europe/
http://www.express.co.uk/news/world/625525/Germany-crisis-Angela-Merkel-refugee-promise-backfires-EU
‘And 30% of the electorate is a lot of people who want change – wherever that change may take them.’
True, nobody knows but the ‘change’ of government they want has to be set against the profound changes which have been forced on the people by previous governments over a long period (I assume, like here and everywhere in concert with, a likeminded press). Who was it who said here the other day ‘Embrace Change’?
Nobody else writes the same way as David, and the same applies to Hitchens. Here he is visiting St Denis’s Cathedral in Paris, gives his thoughts on the French Revolution and ends up in Chichester Cathedral at the memorial to Bishop George Bell whose name has been blackened by an anonymous abuse allegation made (originally) 37 years after his death. Bell had spoken out, in the House of Lords, against Churchill’s bombing of German civilians in WW2. He is at his best in this kind of article.
http://hitchensblog.mailonsunday.co.uk/2015/12/the-joy-of-cathedrals-and-what-happened-to-my-flowers-a-21st-century-mystery.html
Power in the EU is centralized in one powerful mechanism called the EU Commission.
That is the source of misery in Europe.
Good article , David, and well written with your usual flair. All the results of the EURO policy, The central bank policy, and the multicultural policies reach the logical conclusion of the separation of the ultra wealthy from the average person. “When you follow the money, you can see what is driving the growth wealth and income gaps in France and these are feeding into general discontent” But you do not yet reach the final conclusion of the examination of the money supply. You do not follow the money far enough. Who actually benefits from the insane policy of issuing… Read more »
Here is an account of significant changes to our money system. http://www.opednews.com/articles/Reinventing-Banking–From-by-Ellen-Brown-Digital-Technology_Public-Banking-151212-197.html “Global developments in finance and geopolitics are prompting a rethinking of the structure of banking and of the nature of money itself. Among other interesting news items: — In Russia, vulnerability to Western sanctions has led to proposals for a banking system that is not only independent of the West but is based on different design principles. — In Iceland, the booms and busts culminating in the banking crisis of 2008-09 have prompted lawmakers to consider a plan to remove the power to create money from private banks.… Read more »
Keep an eye on Rand Paul. Perhaps the only real conservative that few give a chance.
“Rand is on the main stage at the CNN debate.
This is a huge moment, proving that Rand is a top contender in this race.
All of the polls agree. CBS shows Rand ahead of Kasich, Bush, Fiorina, and Christie and the latest Fox News poll has Rand in 5th place in Iowa.”
Bitcoin is being cannibalized by government. Suspected bitcoin originator under investigation by Australian tax department.
http://www.gata.org/node/16028