Banks Are The Dictators Of The West

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Robert Fisk writes for the Independent in the UK of the dominance of Bankers in Western countries. In light of the dominance that they appear to have on policies on TARP in the US and their influence on Sovereign debt not be allowed to be restructured in Europe its not hard to see Roberts point. In fact it would be very difficult to argue against the point that they appear have a strangle hold over decisions that cleary go against the interest of taxpayers.

The banks and the rating agencies have become the dictators of the West. Like the Mubaraks and Ben Alis, the banks believed – and still believe – they are owners of their countries. The elections which give them power have – through the gutlessness and collusion of governments – become as false as the polls to which the Arabs were forced to troop decade after decade to anoint their own national property owners. Goldman Sachs and the Royal Bank of Scotland became the Mubaraks and Ben Alis of the US and the UK, each gobbling up the people’s wealth in bogus rewards and bonuses for their vicious bosses on a scale infinitely more rapacious than their greedy Arab dictator-brothers could imagine.

Funny how the rating agencies backed all dodgy securities as AAA during the good times. This enabled banks to leverage up to extraordinary levels. These massive debts would normally be restructured in bad times but are sovereign nations are being asked to bail out these banks and recapitalize them where required. It is only now that the rating agencies appear to be doing their job, in fact a little too well.  It appears that they are being used as a tool. Clearly Robert is not a big fan of them.

I didn’t need Charles Ferguson’s Inside Job on BBC2 this week – though it helped – to teach me that the ratings agencies and the US banks are interchangeable, that their personnel move seamlessly between agency, bank and US government. The ratings lads (almost always lads, of course) who AAA-rated sub-prime loans and derivatives in America are now – via their poisonous influence on the markets – clawing down the people of Europe by threatening to lower or withdraw the very same ratings from European nations which they lavished upon criminals before the financial crash in the US. I believe that understatement tends to win arguments. But, forgive me, who are these creatures whose ratings agencies now put more fear into the French than Rommel did in 1940?

In the case of Ireland, the Irish Taoiseach during his address of the nation last week claimed that while the Irish people didn’t cause the banks to over leverage themselves, the Irish taxpayer will damn well pay for it. As Fisk points out, no explanation has been given as to who was responsible.

The Irish Taoiseach, Enda Kenny, solemnly informed his people this week that they were not responsible for the crisis in which they found themselves. They already knew that, of course. What he did not tell them was who was to blame. Isn’t it time he and his fellow EU prime ministers did tell us? And our reporters, too?

In fact the CEO of Anglo Irish Bank, the main cause of Ireland’s debt has still not being charged or brought to justice despite being arrested for the second time but was left go again. As stated below in the Independent yesterday, which just about sums up how the bank elite get away with it;

Sean FitzPatrick may have breezed through the last three years on golf courses and foreign holidays since the collapse of Anglo Irish Bank


What Happens When Euro Breaks Up


What happens if the euro zone breaks up. In an interview on KingWorldNews, Felix Zulauf, of Zulauf Asset Management talks about the reprecussions of such a move.

“I expect next year one country, probably three, will exit the euro.  That will make 2012 very interesting because there are no rules on how to exit the euro.  A country exiting the euro means the next day, when they exit, their banking system is bust.  That means the banking system has to be immediately nationalized in a new currency.

 They introduce a new currency, they nationalize the banking system, and then, of course, the government is also bust.  Then the government will default.  That’s what you have to expect next year.  I think Greece will do so and Portugal and Ireland are candidates also.

 Then it will depend on how that crisis is managed as to whether the crisis can be turned around and terminated or whether it will intensify and drag on into 2013 and force Italy and Spain out of the Eurozone as well.  (This will have the effect of) creating turmoil in the financial markets and weakening the European and most likely the world economy (even) further….

“…Let’s go back to what I said, one country exiting (the euro) and then you have chaos.  Obviously that country will default.  Not only the government, but also the private sector will default to a large extent.  That means the banks in the remaining European countries will have to take huge losses, much more losses than the recent stress tests used.

That would mean you have to expect more nationalization of banks in several of the European countries to stabilize the system.  This means the governments that have to nationalize banks, they don’t have the money.  They have to go into debt and that means the debt levels go even higher.

So you can expect the bond markets will not be very quiet in their trading next year.  It will be a very wild situation that I see coming for next year.”

Merkel And Sarkozy Letter for Fiscal Union.

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Click here for the letter sent by Merkel and Sarkozy to Van Rumpuy regarding details of the new fiscal union.

yeah, now trying getting a referendum passed in Ireland. They are all waiting in the long grass 😉 

Source: Reuters

Global Debt Spiral Downwards

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So Merkel and Sarkozy have achieved agreement on a fiscal union, provided no referendums trip it up, but what does this mean for the Euro and the global economy. A fiscal union while nice in theory is a bit late to solve the crisis. For a start it does not deal with the growing sovereign debt and the current austerity measures have only intensified the problems. In fact countries that are fined for breaching the 3% deficit target are most likely to borrow to pay the fine which will exasperate the problem.  The EFSF has so far proved itself incapable of raising the funds required to bail out the larger nations such as Spain and Italy. As far as China coming to the rescue, they have problems of their own and don’t appear to have any appetite for risky European sovereign debt. Stronger European countries are finding their cost of financing increasing and as of the week S&P issued a warning that it is reviewing the ratings of a number of euro zone countries.  

 So can Merkel and Sarkozy really clap each other on the back and say well done? This crisis has just lurched forward clumsily one more step to global financial ruin. European banks are required to increase capital to cover losses and may need to sell assets or reduce lending. On the other hand sovereign nations require to rollover debt. To make bonds attractive the European Central Bank will reduce interest rates further as the Federal Reserve has done in the US. Of course there comes a point where rates will go no further and we are not to far from that point.

The knock on effect to the US of a collapse of the euro zone is huge. For a start Europe accounts for a large part of US exports. Indeed some of the US exports to China eventually make their way to Europe and traditionally if one economy does badly it affects the other. US banks are exposed to Europe through sovereign debt, derivatives etc. Pension funds have invested in Europe and many US companies have subsidiaries there which will affect profits. China has over $800 billion in Euro currency reserves and losses here would mean less available to purchase US treasuries. Any move by the ECB to print would devalue the Euro and strengthen the dollar. This would affect the US competitiveness and would also force the Fed to print and devalue the dollar.   

So the debt spiral continues downwards. We are putting off the final day of reckoning and when it comes it’s really going to hurt.

Related:Eurozone leaders deluded if they think this ‘sticking plaster’ treaty can solve the debt crisis

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