Believe it or not the euro zone and European Union crisis is still in the formative stages.
The bailout packages arranged for Greece and Ireland are not to bail out those two countries, but to bail out the European banks that lent to them and bought their bonds when it was imprudent to do so. They knew, because they control the governments that the public of the solvent governments would bail them out. Thus, the governments of Ireland and Greece with Portugal and Spain to follow will be showered with an Anglo-American style bailout.
As you know $1 trillion won’t be enough to make the banks happy, so $3 trillion will be needed. Germany says no we are not going to do that. Well, we’ll see just who the real masters of Germany are. Such policy flies in the face of German culture. It shows you though how close to the edge Europe and its euro zone really is. Germany understands, but the rest of Europe, particularly the PIIGS are in denial. The IMF has its nose under the blanket. It will lend and participate, so that it can serve its masters by keeping these wayward states completely in austerity and bondage for the next 50 years and in that process relieve them of their sovereignty. As all of Europe belatedly understands, one interest rate can never fit all.
We can assure you that the euro zone is on the edge of collapse. It’s just a question of when. Nothing has been contained nor can it be contained. Like in the US the taxpayers of the solvent countries must bail out the banks and other financial institutions of Europe. The monetary policy created by the European Central Bank and the bankers has failed. Whether this was deliberate or not, we do not as yet know, but the truth will eventually surface. Currently the scapegoats are the citizens of these beleaguered countries, when in fact the real malefactors reside at the ECB and the European Parliament. These same players still do not have solutions other than destroying the Greek and Irish societies in the name of repaying the bankers. Whether you realize it or not, it has been a year since this odyssey began in Greece. We now have Ireland and they will be followed by Portugal and Spain and perhaps even Italy.
It is a lengthy article but well worth the read
It concludes as follows.
http://www.marketoracle.co.uk/Article24944.html
If all of this is not going to work eventually then why do it? Why not do what Iceland has done and restructure debt, allowing bondholders to share losses. This, of course, is a form of partial default and in all probability it will work. This is also called a managed default similar to what happened in the early 1970s at the Smithsonian talks, at the Plaza Accord in 1985 and the Louvre Pact in 1987. Due to the contagion that would be caused by such unilateral policies, such attempts have to be done with all nations participating. This is the only fair way to solve the overall dilemma. There is no nation without quilt. They have all participated in cheapening their currencies, have created far more debt than they should have and have all engaged in excessive creation of money and credit. The notion that Germany, China and the US can produce capital to solve the problem is ludicrous. They all have their own problems. There can be no bailout, or the appearance of some savoir this time. Every nation has to bite the bullet simultaneously. This means that nations have to understand that quantitative easing will have to end and that a deflationary depression has to be accepted. The system has to be purged of its excesses in the creation of capital and its allocation. Banks and other financial institutions have to accept the blame for what they have done in their quest for excessive profits and power. This approach is the only way to avoid social chaos. After three years of recession and depression the world public is in no mood to play games. They have to be told the truth and what to expect. The blame game can be dealt with later. Either this happens or the world goes down in flames economically and financially.
We cannot afford more stress tests, which are nothing less than a game of fraud. Bank tests have to account for the risk of sovereign default. Most nations do not want their public or the rest of the world to know that they are financially on the edge of the abyss.
It is important to understand the concept of European government default and the potential inability to bailout banks. In the end there isn’t enough money to bail them out, even if they print it. The flipside is inflation, hyperinflation and deflationary depressions. As a consequence very few people have much confidence in their bank, or its ability to survive. As a result, credit default swaps linked to 25 banks and insurers continue upward, which means confidence and perception are worsening. In addition, investors do not believe banks’ assets are worth what they say they are.
The bottom line is the stress test does not work. How can it when they are allowed to keep two sets of books?
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Originally Posted by Cassandra Syndrome
The more astute, independent freelance economists have been proven to have accurately predicted this crisis and to illustrate the fallacy of the global financial system. One of the earliest oracles of the impending doom has been the American, former CIA agent turned social scientist and successful investor Bob Chapman.
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