Europe is a confederation. Since it was a loose one, it grew tremendously after the fall of the Soviet empire. It began with six members and was 9 members in 1973 after Nixon cut the US gold standard. Today, there are more than twenty states with a host of others pending. This confederation is now collapsing because it is a bubble and not a union. All unions are created with a lot of bloodshed. For some reason, this is how humans operate in general. The EU is going bankrupt individually rather than, like the US, as one entity.
The entire EU is desperate for capital. These disjointed, individual states operating with one currency but no real center of power are going about the planet, begging for sovereign wealth to bail out the indebted portions of this huge non-empire. Desperate for market power, Japan is planning to give IMF $50 bil to ease Europe’s debt crisis ‹ Japan Today
The IMF—which along with the European Central Bank and EU makes up the “troika” of bailout contributors—said in January it was seeking to increase its lending capacity by up to $500 billion to confront the debt crisis…Japan said it expects to pay for the latest contribution by using a refund from the $100 billion it gave to the IMF in 2009 to fight the financial crisis.
So, where is this $500 billion? China and Germany have it. So does Japan. But Japan also has hanging over its head its own government debt which is immense. Note the story above: Japan actually isn’t giving up its sovereign wealth or empty its FOREX accounts to save the EU from its own mistakes. No, they are going to play an accounting trick!
Evidently, scared by the US and EU’s housing bubble collapse, Japan was anxious to keep up its exports so it basically funded the bankrupt Western system so it could pretend to be solvent and capitalized. Then, the Western banks could continue to lend to reckless and stupid borrowers who want more debts, not pay off anything.
So, this cycle, Japan is giving HALF of what it gave before or rather, isn’t asking for its money back from the previous bail out. But this money which is not new money in the IMF will continue to back lending within Europe so they can pretend their system works. This is pure silliness and fools no one. Japan is in very deep trouble now with trade deficits. Their sovereign wealth will melt away as this deficit relentlessly sucks it out of the country.
The prognosis for many EU countries is bad as we can see from my graph above: they are not only not sovereign wealth nations, they are sovereign debt nations with the US being the giant black financial hole, dwarfing all others when it comes to no sovereign wealth and too much debt held by other nations. More on leaked Greek debt report | Brussels blog | News on the European Union from the Financial Times – FT.com
It also notes that Greek banks, which were originally thought to need €30bn in recapitalisation funds, a figure that was later raised to €40bn, will now likely need €50bn.
Then it goes onto note that the €200bn debt restructuring – which involves €100bn in losses for private investors and is known as “PSI” for “private sector involvement” – may also have unintended consequences by creating a new class of investors. The reasons for this are complex, but essentially those who participate in the deal will get new bonds that are backed by both the eurozone rescue fund, the European Financial Stability Facility, and the Greek government. Such a “co-financing structure” between the EFSF and the Greek government makes the new bonds more secure than any other bonds the Greek government are likely to issue – and thus scare off future private investors.
All deals are moved relentlessly from one government entity to the next higher one and the ultimate goal is to shove the entire thing into some foreign entity which then can be cheated by everyone refusing to pay up. Many humans think that it is funny, cheating lenders. After all, they make money out of thin air! But…the money making, until this last decade, had to be based on savings: capital.
In the great 1929 crash in the US, savers lost everything as people using loans to speculate in real estate and stock markets as well as European bonds from WWI. This destroyed our economic base and killed commerce. Banking insurance was created to prevent these sort of losses but what that meant was the government had to take the losses. So, banking lending was very heavily regulated to prevent bad loans!
This was destroyed during the last 35 years starting with Reagan’s bank changes. The EU, Japan and the US decided that insurance by government fiat was enough and let loose the reins. On top of this, AIG was allowed to pretend they, too, were insuring everyone’s lending! This was done with the fictitious creature they created out of thin air: the derivative swap deals. These proved in the end to be as fake as many borrower’s promises to pay off higher and higher and higher debts.
So, the banking systems have this gaping wound that bleeds and bleeds: people of all types from top of society to the dregs, unable or unwilling to pay off debts they promised they would pay. I knew a now deceased never-do-well who deliberately piled on as many debts as possible when he knew he was planning to go bankrupt. So he sought out maximum debt opportunities and in less than six months of getting a severe amount of debt on his back, dumped it all and thought he was a very clever guy.
This attitude problem is rampant. What the deep in debt nations wish above all is to go quietly bankrupt and then start all over again, happy as a lark. Greece is in agony right now because they haven’t gone bankrupt, yet. They want the cycle to start all over again with no penalties.
NO banking system can operate for more than two generations in this sort of belief system. The derivative swap game is dead and exists only on banking ledgers as they pretend they, too, are not bankrupt. They can pretend they will bail out each other. The US gave the IMF and EU banks trillions in bail out funds printed up on computers and in turn, the US now has raging inflation while pretending there is no inflation.
To top off everything, the economic war with Iran is butchering the NATO and Asian allies as well as killing the US as oil prices shoot upwards relentlessly. I see stories in the US mainstream talking about high energy prices and not one mentions the Iran oil boycott! How insane is this?
Look at the sovereign wealth nations! Iran…is one of them!!!! Not us! Iran! Iran is RICH like Libya! And unlike Libya, is extremely strong in the military as well as social sense and has a much bigger population that knows very well, the US and Israel work with NATO countries to disarm oil producers in order to control the profits from sales.
The #2 sovereign wealth nation is that country of hard-toiling ants who don’t act like the legendary grasshoppers of ancient Greek fables: In Germany, a Limp Domestic Economy Stifled by Regulation – NYTimes.com
Alongside the export juggernaut, though, is another, creakier economy that operates well below its potential and holds back not only Germany but the rest of Europe, some economists say.
This economy is overregulated, intended to insulate insiders from competition and deeply resistant to change. Though Germany’s chancellor, Angela Merkel, often harangues countries like Spain, Italy and Greece to become more competitive, the German economy features some of the same flaws that they do, including protected professions and zoning laws that favor existing businesses over new ones.
Stability!!!! Yes!!!! This is what amazes me: Germany protects local businesses and helps them be profitable and keeps them alive. I watched in horror as all the businesses in my small rural town vanished one by one as NAFTA and then global free trade ate up everything. Walmart and its cousins then ate up all the retail businesses here. We now have virtually nothing!
I lived in Germany and made purchases there. The NYT article talks about how the police won’t let businesses run 24/7. Well, we have this culture now and workers in retail have ferocious hours that impinge on everything. We saw this year the brutal practice of forcing workers to leave in the middle of Thanksgiving to open stores before midnight! There are no real holidays for retail labor anymore. Everyone is being worked to death.
“Germany has what I would call a dual economy,” said Andreas Wörgötter, a senior economist at the Organization for Economic Cooperation and Development in Paris.
“On one side, we have this very dynamic, innovative, competitive and refreshingly unsubsidized export sector,” he said. “On the other side, there is a much less glamorous services sector which depends on barriers to entry, subsidies and not developing and reaching out for new activities.”
Social stability is expensive but valuable beyond words. It is the #1 thing that keeps the peace, prevents wars, prevents child abuse, stops poverty. Instead, in the US, we have this ‘eat it up and then go somewhere else’ ideology that has left huge swaths of this nation in ruins. My own village of Berlin is over 200 years old. It is now being viciously decimated.
The next sentence is where things get really dire. The analysis suggests that the medicine being fed to Greece – trying to drive down wages and costs through austerity measures to make the Greek economy more competitive internationally – will lead to higher debt levels in the near term that may never be overcome.
They, the internationalists who hate local stability are relentlessly bankrupting the US. They are telling us, we can pile on infinite debts if only it is at ZIRP rates. They are getting our central bank to make trillions in loans to keep their own messed up banks running. They also, that is, our internationalist community, is forcing the US State Department to kill the US public with high oil prices so that Iran can be weakened and then looted.
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