The Euro crisis continues, with no positive end in sight. As we posted before, this more and more looks like nothing more than moving the pea around in a high-stakes game of Hot Potato. Richard Fernandez makes this observation:
The problem as Nigel Farage and Daniel Hannan point out in the videos
below is that everybody is bust. Nobody is in a real position to help
anybody else out. The bailouts aren’t real because the problem is simply
being recirculated through an organism settling into toxic shock.
Farage is that kind of clear-thinking, straight-talking leader that appeals so much to the OC. He doesn't give you the sugar coated version; he hits you upside the head with undeniable truths. Too bad that he's not running against Obama this year.
Stole that title from Richard Fernandez, along with links for this post. So read his full analysis.
Anyhow, it seems that huge bailout for Spain wasn't the answer after all.
MADRID (AP) — Euphoria over a lifeline of up to €100 billion ($125
billion) to rescue Spain's hurting banks morphed into a financial
markets rout in a matter of hours Monday, as investors digested the
still-undefined plan and became concerned the country may be unable to
repay the new loans.
"Plenty of risk still remains in place, with question marks over the
ability of Spain to repay the debt, especially, if the country fails to
get back on the growth path, the outcome of the upcoming Greek elections
and the perception of situation in Italy," Anita Paluch of Gekko Global
Markets wrote in a note to clients.
So, let's see. The bailout is because the banks have loans outstanding that won't be repaid. So, having made that error, they are now getting bailed out from their folly. But it now appears that the markets are figuring out that, if the original loans can't be repaid, and there are no structural changes happening, how will this new $125 billion be repaid? Can anyone say "throwing good money after bad"? Why is this so elementary to the man on the street (aka OC) yet international finance wizzes think it's something different? I guess it's the number of zeros. I mean in the loan amount, not the people involved.
Fernandez continues:
In the video below Nigel Farage finds that even Red Ken Livingstone
now agrees with him. Godzilla’s footsteps are now audible outside
London. Livingstone says what everyone knew all along. The Euro was
nothing but a set of handcuffs designed to bind countries to a “United
States of Europe” project which Livingstone claims was meant ‘end war’ —
and probably to end racism, stop climate change, foster gender
equality, promote gay rights and all that good stuff as well. But
handcuffs they were and they are pulling the countries towards disaster.
The bitter truth is that the European collapse is simply the
consequence of Leftist fantasy politics. It is what happens when people
realize that the ‘paradise’ they’ve been building is nothing but a
deconstructed, demographically collapsing, hollowed-out and bankrupt
shell of lies.
At some point, the German populace will rise up and say "Enough is Enough". How much damage will it take to their economy to drive home the point that they are being used?
Richard Fernandez has a great line about the financial situation over in Europe:
Perhaps the deep dark secret of the financial crisis is this. Nobody is
bailing anybody out. They are simply moving the debt around like a pea
under a shell, keeping just one step ahead of the crunch. Maybe this
explains why, despite the trillions of dollars in disbursements,
rescues, restructuring packages and bailouts, the water in the European
hold is just as high as it was before. Just as high and rising.
Or is it just a high stakes game of hot potato. At some point, the music stops and someone will be left holding the bag. Of course, the bag will be filled with worthless IOUs, but hell....let's just keep bribing the orchestra to keep playing.
There is just something that bugs the hell out of the OC -- the smug, sanctimonious nature of those of the Entitlement Culture. Especially those at the top of that feeding frenzy. News today of the International Monetary Fund's head Christine Lagarde tells of how it's one set of rules for others and a special set for those who are the "leaders".
It was called her "Let them eat cake" moment. Now Greece will be saying: "Make her pay tax".
The IMF chief Christine Lagarde was accused of hypocrisy yesterday
after it emerged that she pays no income tax – just days after blaming
the Greeks for causing their financial peril by dodging their own bills.
The managing director of the International Monetary Fund is paid a salary
of $467,940 (£298,675), automatically increased every year according to
inflation. On top of that she receives an allowance of $83,760 – payable
without "justification" – and additional expenses for entertainment,
making her total package worth more than the amount received by US
President Barack Obama according to reports last night.
Unlike Mr Obama, however, she does not have to pay any tax on this substantial income because of her diplomatic status.
The OC remembers Leona Helmsley who said that it was the "little people" who pay taxes, not her. As for Lagarde -- nice work if you can get it.
Credit Suisse quote: "The market is currently like a strapless
bra; half of us are wondering what is holding it up and the other half
are waiting for it to drop so they can grab the opportunity with both
hands".
The flight (or non-flight) of money from Greek bank accounts continues to befuddle analysts.
The amazing thing about the Greek banking system since 2009 is not
just the 25 to 30 per cent of deposits that have left, but the 70-75 per
cent which have stayed. They have stayed through two years of Greece
transparently getting closer to leaving the euro and turning these
deposits into drachma. We’re being serious. It’s a real challenge to prospect theory. Up to €170bn remained in banks at the end of March.
Although deposits clearly do respond to politics — the Greek
President made that fairly clear this week — they have tracked the rate
of Greece’s economic decline since 2009 pretty closely too. Maybe that
says something about general pressure on Greek household wealth, as a
driver of deposit flows. In any case, depositor flight has been
what Gabriel Sterne, an economist at Exotix, has previously called a
‘bank jog’. Something to think about. What it becomes now with a month
to go before fresh elections is another question.
Over the last four
years, almost all of the news about the shaky European Union has been
financial, with some attention paid to southern Mediterranean tabloid
attacks on Germany and the German media counter-stereotyping of
irresponsible siesta-loving sunny Mediterraneans.
But as Greece falls apart, and as panic spreads to other debtors, we
are starting to see a stage II political crisis, with socialists and
extremists, both left and right, revolting over “austerity” — or rather
over the mere taste of austerity that has never been really swallowed in
whole. But all the defiant nationalist showboating and whipping up of
domestic constituents will not bring salvation, just more polarization
outside their borders. (Witness Greek “nationalists” damning Germans as
Nazis as they use war-guilt and conspiracy theory to beg Germany for
more money without ever acknowledging why it is that they are in need of
it.)
So what’s next? Unless there is some sort of miraculous political
fix, the bankruptcy and internal volatility will start to transcend
domestic politics and manifest itself, as it always has in Europe, in
blame-gaming against “them” (pick your foreign bogeyman). Then the
question will be not just a common currency but the very viability of
the European Union itself, and perhaps of the NATO alliance, such as it
is in its present eroding state.
Not since 1940 has Europe found itself so weak and incoherent in
comparison to a unified and solvent Germany. And the present disconnect
of nations that did most things wrong publicly demonizing Germans for
doing most things right — while privately begging them for more bailout
cash and guarantees — simply is politically untenable. If this
continues, I would not be surprised to see a Mediterranean Franco,
Salazar, Mussolini, or Metaxas emerge soon, albeit in pinstripes and
with a tasteful villa on the Mediterranean.
The lead-from-behind U.S. is of little or no help. While private
consensus grows in Europe that the entitlement state got them into this
mess, we in America are racing to embrace the old failed EU paradigm of
exploding unfunded entitlements, vast deficits, high taxes, bigger
government, and class warfare. And as our first “Pacific president”
turns toward Asia, and cuts back on defense, the message is that the
U.S. has neither the will nor the resources to offer any financial,
military, or political guidance to Europe. We simply are no longer a
credible alternative model or a reliable partner for Europe, either
materially or financially. In Thursday’s column I will suggest that the
long-term political worry may not be the present cheap demonization of
Germany — but just how long Germany is going to put up with it.
Hanson is, by training and experience, a historian. One who can look at the past and see into the future. And a wise one at that.
