Ollie Rehn – Depositors To Take Hit If An EU Bank Fails Under Planned Law

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Hey, here’s a great idea, let’s make the Cyprus solution official. Ollie Rehn has disclosed that the EU plans to make it official in law for governments to steal your money when banks go bankrupt. Looks like the Dutch Finance Minister wasn’t alone in thinking this was a great idea after all.

(Reuters) – Big bank depositors could take a hit under planned European Union law if a bank fails, the EU’s economic affairs chief Olli Rehn said on Saturday, but noted that Cyprus’s bailout model was exceptional.

“Cyprus was a special case … but the upcoming directive assumes that investor and depositor liability will be carried out in case of a bank restructuring or a wind-down,” Rehn, the European Economic and Monetary Affairs Commissioner, said in a TV interview with Finland’s national broadcaster YLE.

“But there is a very clear hierarchy, at first the shareholders, then possibly the unprotected investments and deposits. However, the limit of 84,890 pounds is sacred, deposits smaller than that are always safe.”

The European Commission is currently drafting a directive on bank safety which would incorporate the issue of investor liability in member states’ legislation.

To secure a 10 billion euro EU/IMF bailout last month, Cyprus forced heavy losses on wealthier depositors. Initially it had also pledged to introduce a levy on deposits of less than 84,890 pounds – even though they are supposedly protected by state guarantees – before reneging in the face of widespread protests.

Source: Reuters

 

Solution To Banking Crisis

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It can only get better from here 😉

bankers solution

George Soros: Euro T-Bills Solution

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 George Soros proposes his temporary solution for the euro, until the EU goes for a full fiscal and political union. Of course he uses the dramatic line that the EU has only 3 days before the sky falls in and the whole world will end or words to that affect. He also sees Greece must exit the euro, but then again we all knew that.

What you need is a European fiscal authority that will be composed of the finance ministers but would be in charge of the various rescue mechanisms, the European Stability Mechanism, and the one that preceded it and it would be empowered to issue treasury bills, to set up a debt reduction fund and actually buy up the excess stock of that that has accumulated in the hands of particularly Italy and Spain and finally combine issuing treasury bills. Those treasury bills would yield 1% or less and that would be the relief that those countries need in order to finance their debt.”

Click for full interview on Bloomberg.

Who Is Crashing The System

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Its long been the solution in the current global financial system that instead of letting it collapse to sort out the debt, the printing press is turned on and another bubble created until the next crisis. On and on it goes creating a bigger bubble of debt. Now we are  at a point that the debt bubble is just to big. Robert Fitzwilson wrote this exclusive piece for King World News outlining his view that rather than kick the can further down the road the PTB are about to finally collapse it.

“We know that the world’s debt-based, fiat money system can only be revived and sustained by the combination of more debt creation and consumption.  We have arrived at a critical point in history.”

“It has been a common belief, ours included, that there are two alternatives, print more fiat money or risk a catastrophic global depression.  A sane person will only choose the ‘print’ option that leads to the avoidance of an economic Armageddon, even if the effect is just temporary.

But, what if this is a flawed scenario and set of assumptions?  What if there is another path, and that path is to effectively crash the system?  We all know that the accumulated and accrued obligations cannot be repaid and paid, respectively. 

We are in a destructive feedback loop in which new fiat money is created to pay for current and growing expenses, effectively creating even more obligations for future taxpayers.  Individuals are told that other people will be taxed to pay for their entitlements when the reality is that they are creating future obligations for themselves.

While not a prediction, it is wise to consider another alternative….

Collapse it now rather than money printing.

Any thinking person with a calculator knows that the current global monetary system is going to fail given enough time.  Rather than going through the charade of more quantitative easing, what if the central banks, the collaborating Western governments, and the financial elites decide to let the system fail now?

We know that the stock market has risen on the supportive hands of the U.S. Federal Reserve.  This has been a publicly stated policy designed to engender a ‘wealth effect’ making consumers more likely to ramp up their spending.  We know that Treasury bonds have also benefitted from the Fed’s largesse.

We also suspect that the markets for paper gold and silver have been ‘massaged’ by the same institutions.  Not wanting to see high gas prices for the coming election, we also suspect that the recent decline in the price of oil and the jawboning from Saudi Arabia are not coincidental.

….

 We also found out last week that cracks were appearing for the players in the derivatives game.  Greece is threatening to renege on their outstanding obligations to European banks.

New dollar to preempt other countries attempt to undermine the dollar’s reserve status.

Investors need to consider the possibility that people in control are not simply trying to scare the public as they have done during the last 8 trading days, but a larger plan might be afoot.  That plan could be to accelerate the emergence of a new dollar.

Other countries are taking actions that are designed to dethrone the dollar’s dominance.  Some of these actions are making headway, perhaps too much headway.  If the threat of success becomes too great, a preemptive strike to bring down the financial and commodity markets before strong rivals emerge is a possibility to consider.

It would not be the end of the dollar as the king of currencies, just the end of the current dollar as we know it.  The new dollar could be realigned not only against other currencies, but would allow for the effective repudiation of the massive piles of debt and derivatives.  Interest rates would be allowed to return to more normal levels and all assets would be re-priced in terms of the new dollar.

It might seem crazy to sane people, but to insane people running global government and finance, it might seem rational to them.  Their constituencies will not care.  They vote for a living and will not care about the colors and digits on their checks.  It will sound Utopian, a return to fixing the problems of the past and restoring functioning markets at the same time.  Debts go away as does the dreaded austerity.  Wealth will be destroyed, but the vast majority of people have no wealth to preserve.

Precedence to crashing the system.

There is precedence for crashing the system as a technique.  It was the leaking of information about the financial condition of AIG in 2008 that sent markets into a tailspin.

We will see.  Portfolio allocations should continue to over-emphasize assets where the prices have been suppressed and avoid assets where prices have been manipulated higher.  The latter could prove quite dangerous until the question of whether the original path of more QE or the hypothetical situation above is known to investors.”

Marc Faber Sees 1987 Style Crash Ahead

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Marc Faber gave an excellent interview on Bloomberg regarding Europe, US, QE3, stock markets and state of global financial economy. Source of article is from ZeroHedge, but video of interview can be see on Bloomberg.

Faber reflects on the US (slowing of revenue growth and the real linkages to European stress) noting that unless we get a huge QE3, there will be “a crash, like in 1987 noting he believes we have seen the highs for the year; on the likelihood of QE3 (agreeing with us that the Fed won’t act unless asset markets plunge first); on Greece’s exit of the Euro and whether policy-makers can manage the exit properly “bureaucrats in Brussels and the media are brainwashing everybody that if Greece exited the euro, it would be a disaster. My view is the best would be to dissolve the whole euro zone“; on the difference between investment markets and economic reality (thanks to financial repression); and on the global race-to-debase “I do not have a high opinion of the U.S. government, but the bureaucrats in Brussels make the government in the U.S. look like an organization consisting of geniuses. The bureaucrats in Brussels are completely useless functionaries“.

On whether the Fed will issue QE3:

I think that QE3 will come, but it depends on asset markets. If the S&P dropped  here another 100-150 points, I think that QE3 will occur.  But if the S&P bounces back and we are above 1400, I think the Fed will essentially be waiting to see how the economy develops. The economy in the U.S. consists of different economies, some of it is very strong. I was in southern California and there the economy is doing fine. In other places, it is not doing fine. It is not universally bad. Compared to other countries, it is actually doing relatively well.”

On whether Greece will exit the euro:

 “There is a very good chance they will exit the euro and it would have been desirable if the euro countries had kicked out Greece three years ago. It would have saved a lot of agony. As a result of the bailout, the problem has become bigger and bigger and bigger”.

On whether policymakers can manage the exit properly:

“I think it would be much better for Greece and the entire euro area if Greece were kicked out. Spain kicked out. Italy out and even France should be out. At the end you just have Germany with the euro. The other countries can have their own currencies and still trade and use the euro as an international currency.”

 “The bureaucrats in Brussels and the media are brainwashing everybody that if Greece exited the euro, it would be a disaster. My view is the best would be to dissolve the whole euro zone and that the countries would go back to their own currencies and still use the euro as an international currency the way you travel through Latin America and with a dollar you can pay anywhere you with. In my view, that would be the best. These countries that have financial difficulties, you will have to write off their debts and make it difficult for them to access the capital market in the future. Just to keep bailing them out will increase the problem. It will not solve the problem.”

On how economic catastrophe can be avoided if the euro is dissolved:

“Explain to me why there would be an economic catastrophe. Many countries have pegged currencies have given up the peg to another currency and it was not a catastrophe. The public has been brainwashed that the breakup of the euro would be a complete disaster when in fact, it may be the solution.

On whether there will be a race to the bottom among various countries to devalue their own currencies if the euro is dissolved:

 “I do not have a high opinion of the U.S. government, but the bureaucrats in Brussels make the government in the U.S. look like an organization consisting of geniuses. The bureaucrats in Brussels are completely useless functionaries and they want to maintain their power. They always talk about austerity being bad but if you look at the government expenditures of the EU, in 2000, it was 44% of GDP. Since then, it has grown by 76% under the influence of the Keynesian clowns and now it is 49% of GDP. That is the problem of Europe — too much government spending and lack of fiscal discipline.”

On whether it’s a mistake to short the euro:

“I want to make this very clear — the investment markets may move in different directions than the economic reality because if you print money. That’s why in the Bloomberg poll, Mr. Bernanke is viewed so favorably because fund managers and analysts and strategists, they are only interested in having stocks up so their earnings increase and their bonus pool increases. But in reality, the economy can go downhill and stocks can go up just because of money printing and in Europe, the ECB has proven now that they are very good money printers.”

On where to invest in Europe:

“Actually, usually when socialists come in or there is a crisis such as we have in Greece, it occurs usually near market lows. If someone really wanted to take speculative positions, he should look at quality non- financial stocks in countries like Spain, Italy, France, and Greece. I think rebound is coming. The market on a short-term basis is oversold. But if you look at the market action — first of all, we made a low on the S&P last October at 1074. We went to 1422. The market is down from 1422 to less than 1360. The whole world is screaming we’re in a bear market. This is a minor correction. I think it may become a more serious correction as the technical picture of the market has deteriorated very badly and as the S&P made a new high this year on April 2nd, all the European markets are lower than they were a year ago.”

Faber on whether he still thinks that profit margins will shrink and record profits seen will be no more for U.S. corporations:

 “Yes, if you look at the statements by corporations, it is very clear. Earlier on, you had a commentator who said the exports to Europe from the U.S. are irrelevant. I agree with that. What is relevant are the businesses of American corporations in Europe and the earnings they derive from these businesses. That is definitely slowing down. The revenue growth is slowing down and, in my view, you will have more and more corporations that report earnings that are actually good but they do not exceed expectations…The bottom line is I think the market will have difficulty moving up strongly on less we have a massive QE3 and if it moves here and makes the high above 1422, the second half of the year could witness a crash.”

“A crash, like in 1987…because the market would become technically very weak. I would expect the market making a new high. If it happens, it would be a new high with very few stocks pushing up and the majority of stocks have already rolled over. The earnings outlook is not particularly good because most economies in the world are slowing down. People focus on Greece but Greece is completely irrelevant. What is relevant are two countries — China and India — 2.5 billion people combined. They are a huge market for goods and these economies are slowing down massively at the present time”

Video source: Bloomberg

Maastricht Treaty was a suicide pact

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Steve Keen was on Vincent Browne Show last week and gave his views on Euro and Ireland. ZeroHedge reported on the show as follows:

Economic Debunker Steve Keen is interviewed by outspoken Irish journalist Vincent Browne and no holds are barred as he describes the Maastricht Treaty as a suicide pact of critically poor central-planning design of a supposed market-economy, based on financial crises never occurring, locking European governments into an austere path when stimulus is required. “Ultimately the Euro has to fail and the longer we continue the farce of believing we can make it function the larger the ultimate crash will be” is how Keen portrays the situation and describes the foreign-exchange, fiscal policy, and monetary policy shackles that have created and exaggerated the situation. This leads into a longer discussion of the state of the World and its inability to ‘export into the ponzi’ like Japan could from 1990 to 2010 since the entire developed world is trying to do the same thing and “there is no ponzi scheme on Mars that we can export to” leaving the globe without Japan’s initial way out. The must-watch 10 minute interview goes on to discuss the endgame (a break in the political compact based on austerity pressures and military or political coups) as Keen sums up “it’s amazing to see us repeating the same mistakes that were made during the 1930s but we are doing just that.” ending with some potential solutions noting that there is no easy way out of this.

“You need to have accelerating debt forever to have rising asset prices forever and not even debt can accelerate forever”

 

Check out the solution that Steve Keen has backed.

Ireland – New Currency Solution

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Steve Keen has proposed a solution to Ireland’s debt problems with a new currency IRP which be issued on a 1:1 basis with the euro. Over time for every euro spent will be taken out of the economy to pay off Ireland’s debts and change given in the new IRP. This would be done until eventually the debt is paid off, and then the IRP can be given up and traded back to euros afterwards. check out the full proposal below. Of course its radical ideas like this that can sort out this problem but will our banker owned politicians go for this. The answer lies in how well-informed our electorate are and how politically active they want to become. My opinion is “Normalcy Bias” will win the day as usual.

An excellent idea which could be used for other eurozone countries.

 

 

Source: A plan for economic recovery

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