News & Analysis
Latest EU Bailout Deal Not Meant to Work?
Will Europe Rescue China? ... All eyes will be on China at this week's G-20 meeting in Cannes. The expectation—or at least the hope—is that Beijing will contribute to Europe's bailout fund, the European Financial Stability Facility. The Greece-rescue plan announced on Thursday in Brussels calls for an increase in the size of the EFSF from 440 billion to a trillion euros. At the press conference announcing the deal, French President Nicolas Sarkozy said that the EU would like support from Beijing, and he called his Chinese counterpart, Hu Jintao, to ask for help. – Forbes
Dominant Social Theme: We've been trying hard and look at all we've done. Don't blame us when it all goes to hell and we have to create a global currency.
Free-Market Analysis: The latest Eurocrat deal to salvage the euro (and perhaps the Union itself) is already falling apart and, as a result, the entire process is ever more publicly suspect. Is the idea to make the West so desperate that global governance becomes an attractive solution?
The dominant social theme is, of course, one of hope. The EU's wise leaders have once again Saved the World. But we have expressed the idea previously that the disaster is being stage-managed to ensure that when Europe does fall apart, no one shall be to blame. The Eurocrats will be able to spread their hands, palms up, and say in unison, "Don't blame us."
Then, you see, the conversation shall turn to the IMF's SDR currency-in-waiting and how the IMF should serve as global central bank, dishing out its incomprehensible basket-fiat currency to all and sundry. This is perhaps the REAL plan – or one of several plans, as it looks more and more as if the euro is going the way of the Dodo.
It is nonetheless an emphatic defeat for the Anglosphere elites who are determined to create a one-world currency as part of a new world order. Regional agglomerations of nation-states are supposed to be stepping stones to this structure and they are in place around the world – from South America to Asia to Africa. But the main ones that count the most are (1) the European Union that is falling apart before our eyes and (2) the North American Union, which is in such bad odor that even Bilderberg Boy Rick Perry has to deny its evident and obvious reality.
Blame it on the Internet Reformation that has informed residents of both Europe and America of the elite's deeply laid plans and their determination to have their global government no matter the cost. As predicted, the tribes of Europe are fighting back. And for all the false-flag protests now taking place in the US, there is a growing, stubborn antipathy to what the powers-that-be are trying so hard to accomplish.
Eurocrats in aggregate do not even have the strength of their own convictions. They voted for a trillion-dollar bailout package but then refused to fully fund it. Instead, they have declared that the G20 and China should think about coming to Europe's assistance.
Once the money has poured in, the fund is reportedly to be leveraged up to US$5 trillion, as if borrowing more money ever helped anyone get out of debt. The only salvation to be had is to allow the European Central Bank to print euros at will, as the US Federal Reserve prints dollars endlessly.
Of course, the US, having the world's reserve currency, can print dollars fearlessly because it has forced the Middle East at the point of a gun to exchange oil only for dollars. This is laughingly called the "dollar reserve system." Europe doesn't have an army (yet) and even if it did, the US has gotten there first. The petro-dollar is a US invention and has allowed US leaders to be even more profligate than European ones.
And thus the Eurocrats go begging. China is already making noises of resistance, however, and the G20 is a rather unwieldy collection of countries to count on when it comes to a half-trillion dollar bailout. It may come down to the US printing money, or Eurocrats reaching down further into the pockets of their constituents, but we'd be somewhat surprised if either of these options are actually viable.
Here's the official word from the Xinhua News Agency: "Amid such an unprecedented crisis in Europe, China can neither take up the role as a savior to the Europeans, nor provide a 'cure' for the European malaise." Doesn't sound very promising, though perhaps the ChiComs are merely playing coy to sweeten the pot.
Forbes, in one of several articles on the deal, is even more dubious than Xinhua. Like the Telegraph, in an article over the weekend that claimed the deal with fall apart in weeks, Forbes' commentators seem increasingly skeptical that this bailout will provide a lasting solution. Here's some more from the article excerpted above:
There are many reasons for Beijing not to support Europe. First, Thursday's plan is obviously just another temporary fix. There were "comprehensive" and "final" plans announced this March and July, and it may be only months before European leaders will need to come up with still another one.
Second, the Europeans are not pledging their own resources. After all, they merely said that the EFSF would be "leveraged," in other words, eurozone leaders will be looking for others to chip in 560 billion euros. They refused to commit their own cash or even issue sovereign guarantees.
Third, Europe does not need China's money. The continent is capital-rich and a net exporter of capital. "The reason peripheral European governments cannot get financing is not because there is a lack of capital or liquidity," explains Peking University's Michael Pettis. "They don't need Chinese capital. They need someone foolish enough to lend money to countries that probably won't repay."
The Forbes article concludes that Chinese leaders are looking for a way out but probably will eventually end up "buying rubbish bonds" because China simply can't afford to let the EU unwind. And why is that? Because the ChiComs "diversified" China's holdings over the past few years and now hold nearly US$1 trillion in euros!
China holds $3.2 trillion in foreign exchange reserves – mostly in euros and dollars and is therefore as much a party to the world's failing fiat currencies as the West. Good job, China. We've written in the past that China is the third leg of the stool. America is struggling with its Greater Recession, Europe seems on the way to shattering and thus only China is now propping up the world's economy.
We'll see how long that lasts. China's problems are manifold and deep. They're just not being properly reported by an Anglosphere mainstream media that has its marching orders: Pretend all is well with the world until the entire system simply collapses.
Conclusion: It is perhaps a kind of "shock and awe" strategy. The idea is that everything goes to hell at once and as people panic the great central banking families step in with a new currency and a new system waiting in the wings. So here is our question: Who is to be the next John Maynard Keynes?
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Posted by nithsdale on 11/02/11 12:16 PM
I hope you all are reading the USA Today report re the Chincoms and Buddhism, in particular the Han Chnese youth now flocking to Tibet.
Even the most committed socialists amongst you should begin to realise that you are witnessing the end of socialsm... .not capitalism. The doctrinaires among you should realise that the transference of capital from the entrepreneur to the workers of the world is crashing. As the "workers" smoke pot, loll in tents crying out ridiculous slogans, are joined by the other leaches, the public sector workers who never knew how to give a days work (which is why when dealing with government, it takes so many contacts just to get a signature,) note that business closes its doors, many never to open in that area again!
Welcome to a new world that none of you will ever be part of, namely rebuilding what sloth has destroyed!
China's youth knows it and they are decamping to the Tibetan monasteries before the killing tide rolls in!
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Posted by Strangelove2 on 11/01/11 05:57 PM
The unfortunate fact the PE will have to deal with at this point is; after having the existing global currency regime of fiat exchange currencies fail, the next regime based on fiat SDRs will sink as well about 5 minutes (relatively) after it is introduced.
The unfortunate reality for them is that they bought into their own lie that a fiat system works. At least, it works for much less time than I suspect they thought it would. The delay tactics in all markets are being implemented while they scramble to figure out the next large scale plunder scam.
However, I think they outsmarted themselves this time. The whole system is going down and there's no real way for the PE to stop it, only delay it for a short period of time. It's "all baked in the cake," as they say. We will see the concentration of wealth shrink more dramatically than ever in history at the end of this.
The Internet Reformation will take over from there to provide the answers of distributed hard-asset-exchange systems, competitive regional currencies and any model that fills the gap and provides the services the people need outside of largely centralized control of any type.
The PE lost control more a couple decades ago and don't yet realize it. Their systems of control (and governments) are virtually all "deadmen walking." At least, that will prove true in the US. The one statistic that will make that happen is; 85 million gunowners, 300 million firearms. In the US that statistic automatically draws certain lines they will never cross there.
In contrast, the rest of the world will find out what failing to allow, or to effect, free ownership of firearms means to their individual sovereignty.
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Posted by AlephNull on 11/01/11 05:15 AM
Yes it is IMO.
I was amazed when even a German MSM TV News "extra" explained the ESFS concept to the German public .. the 20% insurance idea , now 25%.
My first thoughts were .. "are they kidding ?" .. and it seems China agrees .
In fact, I regarded it as an insult to China's ( and other investors's ) intelligence.
Only politicians could some up with an idea so far removed from reality.
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Posted by amanfromMars on 11/01/11 02:10 AM
" ... . in essence pushing Europe into an even deeper hole, forcing Golum Van Rompuystiltskin to say he was only kidding about the 4-5x EFSF leverage: he really meant 45x. ... " … Posted by AlephNull [quoting from a Zero Hedge article] on 10/31/11 04:20 PM
Is not any such leverage, evidence of a Ponzi trade solution ….. and the abiding Achilles Heel vulnerability/systemic fault to be exploited, that will always collapse the system?
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Posted by nithsdale on 10/31/11 11:26 PM
The game is obvious. When problems arise on one side of the Atlantic, the other has new ones to steal the headlines. The Dollar is on fire... No, now it is the Euro! No,now its the Dollar again!
Funny, but it is working. The markets go down, go up, time is bought. More meetings held, more confidence, people on both sides of the Atlantic get their monthly stipends, some still by check but most from banking machines or cards. Business goes on, a little wobbly because most businessmen know the game. They have played it all their lives with creditors, especially suppliers, bankers and governments.
What you are watching with the Chinese in Europe is the intro of another diversion, the famed miracle China! Peking bought all that US Debt and now that will be employed. Talk about the guy with the peas and the cup on Broadway! GOOD Old US Debt paper will cover for Greek, Spanish, Portuguese, Italian et al bad, new Euro paper. Hooray, Hooray!
It's a great ploy and should go down with all the so educated Americans since they all buy into virtual reality shows, commentary et al. If its a photo or on paper it must be real!
Peking, China's officials love a good show. Chinese know all about magic lanterns, illusions... they invented it all. Marco Polo took it to Europe; it was part of their great heritage before Mao and company erased it to build a new China Socialist Society.
Today, there is a great urgency to their attraction to Europe; they must establish a connection with the socialists there, brothers so to speak. China doesn't have a farthing now. It "bought" those US Teasuries because the only way they could get the Overseas Chinese to come and help propell China Mainland into the 20th Century and then the 21st, get all those western educated engineers, accountants, MBAS, those sons and daughters of the OC, was to pay before work with cash... dollars on deposit in any place but China.
Hell, Great Britain ceded Hong Kong ten years earlier than it had to, just to facilitate that deal! It didn't work too good because most of the cash exitted immediately from HK to Singapore, San Fran, Vancouver and a host of other cities too numerous to mention here but it did initial the contract! Those Treasuries were the only way to facilitate such a massive transfer of dollars all over the world where the OCs wanted them put!
China got those treasuries et al by "buying" all those old factories the USA had no further use for,; they were useless for robotical assembly. The US Government extended credit to accomplish the transfer but that soon became paper since the Chinese Communists had no credit set up and needed cash in hand to re-assemble them. American debt paper was a demand for dollars so the OC took it. As fast as China got it, it went out to pay the OCs and the Americans who came to watch the process, and the shipping across the Pacific on other nation's ships! That's how the transformation of China began.
The rest is the new and novel financial transference systems, we are still learning about, the monetarizing of paper "good as gold"! It is also why Peking now wants gold not more paper. The OCs have too many USApapers and gold will entice them back!
Or will it? Italy may hold that answer. Unbeknown to most Americans, the Italians got tired of working in those family atteliers making all those tailored, hand detailed clothes, leather goods, jewelry and industrial parts so needed even by its car industry. It was time to relax, enjoy the new world, go to concerts in the great antiquities and enjoy what the rest of the world called cuisine! They sold the family businesses in almost every city in the country, even the distribution and guess who bought it?
The Overseas Chinese, with so many dollars to spare that even Gucci and family went wilder than ever and all the rest too. The workers got what they wanted too. Mussolini had socialized the country with 10 cents a week wages and it had grown with every election since. The Italian government welcomed the new owners, then gave Italian workers early pensions that kept pace with the new leisure.
When the new investors complained about labor shortages, they got permission to bring in Chinese, most of whom came, willing to work in the Italian sweatshops just for a chance to get out of China, and maybe become a legendary OC! Recently, the Italians, having spent their windfall profits on good living, have been complaining about the guest workers, not for their jobs, but for more money to let them stay! OCs are not good dealing with governments. Peking rushed its trade delegation to Rome. Here was their chance to show they were with the OCs. You can take it from there. It might explain how Burlesconi survived the so called Italian distaste for his brutish behavior. He is a powerful enforcer.
Peking may be able to play in the shell game as the third cup. That should buy at least five more years for this Euro/Buck dance. The OCs may decide Chincoms are a dead specie or have changed their spots. Don't write off those crazy empty cities in China yet. Israel built many empty dwellings before half its population arrived and the OCs, like the diaspora Jew, still hankers to show the expeller of so many that a big mistake was made a long time ago!
Those exiting "Chinese entrepreneurs" are not exitting Chin a because of economics. They are leaving because they know the Chincoms are still Chincoms and need to be taught a good lesson!
Reply from The Daily Bell
Those exiting "Chinese entrepreneurs" are not exitting Chin a because of economics. They are leaving because they know the Chincoms are still Chincoms and need to be taught a good lesson!
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This statement seems to undercut many points you have made in other recent feedbacks.
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Posted by Pete 8 on 10/31/11 08:52 PM
When the structure is fixed, the problem is also.
Click to view link
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Posted by NAPpy on 10/31/11 06:42 PM
"... Bilderberg Boy Rick Perry... "
Best phrase of the article. Thanks!
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Posted by AlephNull on 10/31/11 04:20 PM
Acceleration of events :
From the ZH article : Three Out Of Four: Spain Joins Ireland, Portugal With A Gun To Its Head, Demanding Concessions
... . in essence pushing Europe into an even deeper hole, forcing Golum Van Rompuystiltskin to say he was only kidding about the 4-5x EFSF leverage: he really meant 45x. ...
Click to view link
ZH always keeps you amused while the world drowns in debt.
My guess (yesterday) was that if the ECB has it's 700 Bio$. Paulson moment and has to speed up the printing press ...
( see John Mauldin's "European Summit: A Plan with No Details", section "Dear Mario" Click to view link )
... where a letter written to Mario Draghi basically said "ignore Germany if you have to , do the right thing for Europe" ... . may just give Germany the excuse the leave the Euro , saying "Our Supreme Court forbids the ECB printing endless money, and BTW we did agree it wouldn't happen didn't we ! ... and of course , many would probably (want to) follow.
Also, the ISDA statement of "50% Haircut" is NOT a default, means - to me anyway - that bonds will get sold off as the CDS insurance has effectively doubtful if not null and void ... that is of course , unless there is a 100% "unwilling" default.
FWIW
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Posted by runderwo on 10/31/11 04:06 PM
Click to view link
Last weekend, at an ODS party congress, Prime Minister Petr Necas demanded a referendum on whether the country should join the eurozone.
"The conditions under which the Czech citizens decided in a referendum in 2003 on the country's accession to the EU and on its commitment to adopt the single currency, euro, have changed. That is why the ODS will demand that a possible accession to the single currency and the entry into the European stabilisation mechanism be decided on by Czech citizens," the ODS resolution says.
Prime Minister Necas also floated the idea in case Germany gets it way on another treaty change bringing about more economic integration and tougher sanctions for deficit sinners.
"In the event that there is a change to fundamental rights that would result in powers being transferred from national organs to European organs, this government is bound to ratify this step with a referendum,' Necas told reporters in Brussels on Sunday evening.
Bohuslav Sobotka, leader of the Social-Democratic opposition, accused the ODS of diverting attention from domestic issues "with attacks on the eurozone." More than 3,000 had taken to the streets of Prague on Saturday to protest against "anti-social" austerity measures.
"There's a danger that, thanks to Necas, we will end up on the edge of integration and we will lose all influence in Europe,' Sobotka said.
The referendum call is also criticised by Brussels experts. "It's completely wrong, it's purely populist to call for a referendum when losing popularity," Piotr Kaczynski from the Centre for European Policy Studies told this website.
With the mood against the EU and the euro on the rise among Czechs, Kaczynski says that such a referendum would certainly result in a No. "Czechs observe Slovakia closely, where they may see the benefits of euro membership, but the costs are much bigger," he said, in reference to the government collapse earlier this month over the eurozone's bail-out fund.
"It's a clear illustration of a new disease manifested in the UK and the Czech Republic: that of introvertism and isolationism. If these countries believe they can do on their own, I wish them good luck," Kaczynski said.
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Posted by runderwo on 10/31/11 02:50 PM
Austerity = recipe for dictatorship?
Click to view link
Italian Prime Minister Silvio Berlusconi said he alone can deliver the country's promised deficit cuts as European leaders ramp up demands that his government do its part to combat the region's debt crisis.
Berlusconi ruled out early elections and said the current legislature in Rome will last until 2013, according to an interview published yesterday in Corriere della Sera. He said the European Central Bank's support will only be maintained if his administration follows through on the pledged measures.
'Only I and my government can achieve this reform program for 18 months, which is why there is no way for me to stand aside,' the Italian leader told the newspaper.
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Posted by rossbcan on 10/31/11 02:20 PM
DB: "Latest EU Bailout Deal Not Meant to Work?"
Of course it is meant "to work", from the perspectives of and to the advantages of those who are "tolerated to make the choices". It cannot possibly "work", from the perspectives of those who are "decreed to pay". That is the whole point, to have "private profit, socialized loss".
What else can be expected when "predators are in control" and, foolish people have been mis-educated to believe that words and "reason" can stop them?:
Click to view link
Simple, strategically denied former solution:
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Posted by R on 10/31/11 11:48 AM
I am very busy running in the "wheel" in order to be in a position to pay for the numerous forms of government sanctioned extortion. This leaves me without much time to comment, so I thought I would just drop you a note to confirm that I am enjoying every minute of reading your fine website.
Reply from The Daily Bell
Thanks for taking the time.
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Posted by budwood on 10/31/11 11:40 AM
When continental governance becomes unworkable, do rational people truly believe that global governance can become an attractive solution?
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Posted by laceja on 10/31/11 11:14 AM
China has been calling for a world currency to replace the dollar for years. This is no surprise. They are simply trying to position themselves to be in the cat bird seat. The advantage the Chinese have is "patience". Something western education has insured we do not have.
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Posted by Hoss on 10/31/11 09:44 AM
If the shock and awe work as intended and a single currency is implemented, then all deficit financing will need to be approved by the New World Order. The new printing press will then become a commons, akin to land or sea. History seems to demonstrate that commons like this become the object of contests for domination of the resource.
Inflation by the rule of central authority will not work for long with competing tribes. One will be favored, and the disfavored ones will simply quit agreeing to be the patsies. So the New World Order money is likely to suffer the same fate as the Euro, only faster.
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Posted by Abu Aardvark on 10/31/11 08:31 AM
Ah, and then there's this from the Daily Mail:
"As Merkel says euro meltdown could endanger peace, a historian's imagination runs riot...
German troops storm Greece. Putin's tanks crush Latvia. France humbles the British Army. Unlikely, yes, but as Angela Merkel says euro meltdown could endanger peace, a historian's imagination runs riot... "
Click to view link
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Posted by Abu Aardvark on 10/31/11 08:26 AM
DB: "So here is our question: Who is to be the next John Maynard Keynes?"
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Brilliant analysis, DB!
NOT so brilliant, but yet remarkable:
WSJ: "Four Reasons Keynesians Keep Getting It Wrong"
Quote: "most of the government spending programs redistribute income from workers to the unemployed. This, Keynesians argue, increases the welfare of many hurt by the recession. What their models ignore, however, is the reduced productivity that follows a shift of resources toward redistribution and away from productive investment. Keynesian theory argues that each dollar of government spending has a larger effect on output than a dollar of tax reduction. But in reality the reverse has proven true. "
Click to view link
Reply from The Daily Bell
Ha, we saw that piece on Keynes ... Thanks for the link.
