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Guest Post: EU - A Flawed Foundation, But Brilliant Strategy?

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Submitted by Gordon T. Long

EU - A Flawed Foundation, But Brilliant Strategy?

It was the perception of getting something of value without any meaningful sacrifice that initially fostered the EU Monetary Union. Though the countries of Europe were fiercely nationalistic they were willing to surrender minor sovereign powers  only if it was going to prove advantageous to them.  They were certainly  unwilling to relinquish sufficient sovereignty to create the requisite political union required for its success.

After a decade long trial period it is now time to pay the price for Monetary Union.  I suspect that the EU membership is unwilling to do so. Though they likely will see the price as too high to do so, the price to not do so has become even greater.  They have unwittingly been trapped by a well crafted strategy.

Never has a monetary union functioned without a political union with which to control Fiscal Policy. This was well understood by the strategists but not the salivating sovereign leaders looking for cheaper money to finance election candy and avoid unpopular, pressing economic realities.

It was expected that the obstacle of political union would  inevitably give way when the pre-ordained and unavoidable political crisis forced the issue. We are presently at the cusp of this crisis in Europe.  As we just experienced the Arab Spring we are about the experience the European Summer on an unavoidable path to the American Autumn and World Winter in an unfolding "Age of Rage'.

The initial resolution of sovereign debt defaults by the bailouts of  Greece, Italy, Ireland, Portugal, Spain (GIIPS) will eventually be the creation of a Eurobond, in my measured opinion.  It is the next move on the strategic chessboard being carefully orchestrated.

A Eurobond will allow the ECB to issue debt. With the ability to issue that debt, the obligatory abilities to pay for it will come. Paying for a Eurobond will mean giving up gradually increasing levels of sovereign taxation.

The current political impediment to political union is that never has a ruling political regime been willing to surrender the golden jewels, specifically public taxation. But this will happen because it is the hidden strategic goal now operating in Europe.

To understand the real European Strategy you need to appreciate the history of Europe and its cultural diversity. Ever since the Roman Empire and Charlemagne, leaders have dreamed of a single Europe. No one in modern times from Napoleon to Hitler has been successful.

The one thing the European nations understand and for a time were successful at, was Mercantile Colonialism. They were the ones that invented it.  When I say 'they', I refer to Kings and their financiers. The Kings may now be gone, but the financiers are even more powerful today than ever before.

The colonies are no longer on the other side of foreign seas to be conquered, but rather part of the Euro zone.

The essence of Mercantile Colonialism is to create a need for debt, then finance that debt and eventually exchange that debt for the collateral assets that are the underlying wealth producing assets.

In the Austrian School of Economics, this exchange of printed paper for real assets, is called the Indirect Exchange.  It is well understood and well documented but like usury is avoided in polite conversation. Eventually the colonies worked as slaves to pay the debt to their European masters.

Gold is the Money of Kings, Silver the Money of Merchants and Debt the Money of Slaves

The European banks are slowly but surely, through a tactic of Financial Arbitrage, moving more and more sovereign debt to the ECB and EU. Someone must pay for this debt and that will eventually be the entire European taxpayer base. That is the goal.

In the initial stages of the Euro dream everyone was benefiting.  Like an initial user of drugs the early stage is euphoric before the issues associated with the addiction surface. This stage fostered tremendous growth in debt - never ending Corniche housing villas in Spain and Portugal, embarrassing pensions and social benefits in Greece, tax advantages for off shoring corporations in Ireland or unjustifiable and hidden local government spending in Italy.

It has been a captive market for the Asian Mercantile Strategy and a financial retail market boon for US financial instruments created from the never ending supply of freshly minted US fiat paper.

I was living in Europe during the debates on the viability of a European Union. I remember only too well what everyone eagerly wanted and fantasized gaining from a European Union.


  1. They saw and wanted employment. The EU meant they could  go anywhere the jobs were.
  2. It meant cheaper goods because tariffs were to be removed,
  3. It meant cheaper cost of financing because of a single currency with as Germany the 'anchoring credit'.

None of which have turned out to be as advertised by those wanting the EMU 
(except cheap goods which they don't have the jobs nor disposable income now to afford)


  1. To the sovereign governments it meant cheaper debt since they effectively received German Mark backed debt.  Like free liquor to an alcoholic or free drugs to an addict, the politicians couldn't sign up fast enough as long as they kept sovereignty over precious taxation.
  2. To make the deal happen, countries were allowed to maintain fiscal sovereignty, though everyone quietly understood that separated Monetary and Fiscal Policy was a flawed concept and eventually would doom anyone attempting it.

Government spending & brazen consumption masquerading as GDP started exactly with the retail launch of the Euro.


  1. As pushers of debt, the banks  acquired a whole new cadre of addicts.  
  2. The EU financiers understood only too well that with the free flow of Labor & Capital, came the free flow of Credit and Financialization.
  3. To the financiers it was the creation of an immensely profitable fixed currency regime with a known outcome.

"The way to make a lot of money is to invest in a known & predetermined outcome. "
Joseph P Kennedy, (father of President JFK and one of the richest self-made prohibition bootleggers in America).

It was obviously a flawed approach where Monetary Policy would be disconnected from Fiscal Policy. It was expediently swept under the carpet as something to be avoided and left for future political operatives to craft the public response.

Question:  "Why would we implement a flawed system?"

It is exactly the same question as why did US banks make liar loans?

Answer 1:  Someone else would carry the liability.

 .... and the tax payer has.

Answer 2:  Because there was a lot of money to be made!

.... and it has been made.

Prior to Greece exploding and knowing the strategy in play,  I was prompted to initiate writing two series of articles laying out the levels of hidden debt being rapidly and insidiously created in Europe

EURO EXPERIMENT Series:  Detailed the flawed underpinnings of the EU.  An experiment that would foster:

a - Extensive use of SWAPS to hide public debt at all levels of government,
b - The broad use of Off Balance Sheet Contingent Liabilities,
c - The epidemic use of PPP-Public Private Partnerships

"All of which is NOT discussed in these public viewed bailouts."

SULTANS OF SWAP Series:  Detailed the financial game of Regulatory Arbitrage.  A strategy of passing debt to taxpayers through:

a- Bailout,
b- Guarantees,
c- Monetization of Private Losses,
d- Sweetheart, Crony Capitalist deals


a- Extensive use of SWAPS to hide public debt at all levels of government,
b- Broad use of Off Balance Sheet Contingent Liabilities,
c - Epidemic use of PPP-Public Private Partnerships

"The EU is built on a FLAWED FOUNDATION but a brilliant STRATEGY ……
…. Unfortunately the People own the foundation & banks the strategy!

Like Colonial Mercantilism the real money in Europe KNEW going in what the debt strategy was.

They also had another card up their sleeve. They knew there was a structural advantage that would predetermine the eventual outcome.
They knew that the core countries, where the financiers were resident, had a competitive structural advantage over the GIIPS that could not be overcome or at least would highly unlikely be overcome.   

The core countries had:  

1.    Higher Export Volumes (a size advantage)
2.    Higher Productivity (Labor & Capital Advantage)
3.    Dominant Banking Control  and therefore cheaper cost of capital

The flawed EU experiment was more like a family father who is responsible, but his kids have unlimited use of Credit Cards and the hapless father is not allowed to police them. The outcome is perfectly predictable.

Do you really believe that major banks would put themselves in a position where they lent endlessly to the kids knowing they would  be left holding the bag? They knew the outcome and who was going to be left holding the bag. 

It was certainly not going to be those with an army of lawyers, lobbyists, campaign contributions and most importantly, a strategy.

Now the EU has hit a wall. The gig is up.

It is time for the next phase of the Mercantile Strategy, the demand for collateral and the family silver.

As is currently being exposed in Greece, the financiers will now demand the ports of Piraeus and Thessaloniki, Hellenic Transportation, the Greek Telephone company, the Greek Power company, the Gambling  ...... and eventually the Parthenon and Acropolis, if the people don't refuse and take a stand similar to the people of Iceland.

There is an old ADAGE that;

When you owe the bank a $100,000 and can't pay it you have a problem.

When you owe the bank a $1 Billion and can't pay, the bank has a problem.

The message here is that at some level the bank is responsible for having made a serious lending error - after all, assessing RISK  is the raison d'être of their business.

Though I believe Greece should never have been allowed into the EU, their debt never been accepted by the ECB as collateral and should have been sent to the IMF much sooner, I need to say, what I am now witnessing is what I effectively see as the 'Date Rape' of Greece.

It is not just a matter of Greece being forced to surrender their most precious assets which belong to future generations of Greek children. It is about assets being sold by a Belgium centered fund - whose interests are those of the financiers, not the Greek citizens.

This is the equivalent of having your house sold by the potential buyer's real estate agent with you just seeing the accepted deal. Or maybe more appropriately, the same way a repo happens when they just take it and sell it - you may or may not get any residual equity back. In the case of Greece, they may or may not get what they thought their asset were worth. It is highly unlikely it will be anywhere near the expected price and highly likely to be an exceptional bargain for the politically powerful and connected.

This is the old tried and tested Mercantile Strategy that European financiers know so well.

While Americans are turning to "Strategic Defaults" in waves in the US, if I was living in Greece I would be demanding my government default.  It is time for Greece to strategically default like the hapless American homeowner stretched beyond their means and crushed by a shrinking disposable income. This is a direct result of the money printing that is flowing to the banks to engineer this racket that the Gambino's and Gotti's would have simply called a 'lawyered'  version of loan sharking, extortion and racketeering.

It must never be forgotten that the banks create their money from your money.  It is only time, therefore before as  in a children's monopoly game, they own the whole board.

Also it must never be forgotten that this is why banks fight so hard against Tier 1 Capital requirement changes. This is the money they have previously extracted that is now actually at risk.

Be aware that the mercantile financiers are so opposed to risk that operating as the secured bond holders of the banks they make the profit from the banks - not the shareholders. The financiers get first distribution of profits and are always kept whole.  The public typically attacks the bank owners, not those who insidiously control and profit from its operations - the senior secured bond holders.  It is the senior secured bond holders who must take the Greek 'haircut' but as part of the strategy they have their political mouthpieces vehemently opposing it.

Maria Damanaki, a European Union commissioner and a Greek said publically that “the scenario of removing Greece from the euro is now on the table.

Forcing the Greeks to sell all that's left of the family jewels is now seen as a key part of the political solution. But who will want to buy them when there is every possibility of Greece leaving the euro? 

Capital is already fleeing Greece as fast as it can; what's the chance of attracting it for Greek assets?

Someone is going to get real fire sale prices. 

It's easy as a bookie to make money on a sure thing when the horse race is fixed!



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Tue, 05/31/2011 - 20:28 | 1327139 High Plains Drifter
High Plains Drifter's picture

the first thing this makes me think of , is germany. if i was a german i would break out my steel pants and grow eyes in the back of my head......

Tue, 05/31/2011 - 20:46 | 1327184 Doña K
Doña K's picture

Just a minute.. There is a theory out there that the US wants to financially break and then plunder Europe. Then after that the US defaults and blames the EU..

How about that? Maybe that's why China is buying Porto Bonds.

Or is it that China and the US are dividing the world pie into two? By engaging in financial war. Come guys start thinking like they do.

Comments please

Tue, 05/31/2011 - 21:03 | 1327221 Orly
Orly's picture

Start here:


Tue, 05/31/2011 - 22:26 | 1327395 Doña K
Doña K's picture

Okay...I am not into numerology.. but that thread shows lots of creative thinking.


Tue, 05/31/2011 - 22:56 | 1327465 Orly
Orly's picture

Actually, it's not really about numerology so much.  Oh Regional Indian is like a seer who gets "signs" but he either doesn't like to put things together or he simply leaves it to me to do it.

He points out some pretty amazing signs, as he says and I can extrapolate them into the dynamic I understand as the Western world since before World War Two.  Of course, these ideas sound insane but, as Mr. Spock said, "My cousin from long ago had a saying: once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth."

These creative ideas are the only ones remaining, I am afraid.


Wed, 06/01/2011 - 04:22 | 1327790 Michael
Michael's picture




Wed, 06/01/2011 - 05:56 | 1327841 margaris
margaris's picture

Because if Zerohedge was mainly interested in the FED, their name would have to be





but Zerohedge is bigger then that.


Tue, 05/31/2011 - 21:46 | 1327299 Mec-sick-o
Mec-sick-o's picture

Sounds like promiscuous debt.

I think that they will just entangle everybody so much deep into debt that people will accept ANY new financial scheme just to start fresh out of debt.

A big reset must be coming.

Wed, 06/01/2011 - 00:33 | 1327639 Clay Hill
Clay Hill's picture

Doña K

The Elites do have that in mind. They feel justified in doing so, balanced as they are against the other players in the game. They think it is for our own good that they subjugate us, and see no reason to turn back until they succeed , or lose all. 

An interesting conversation between East and West begun here.


Summarised with a conservative spin here.

Wed, 06/01/2011 - 16:37 | 1330215 el-greco
el-greco's picture

Thanks for the links. there was an interesting assertion of Mr Dugin's which I copy/pasted here

In Dugin's view America is the champion of a hyper-materialistic ethic, based on radical individualism. It is subversive of traditional human values. As an empire of "frenetic consumption,"


Funny, the most extreme hyper materialistic ethic circulating in Western Europe is Russian by nationality and outstrips by a country mile anything its materialistic/hedonistic US counterpart can rustle up. 

Tue, 05/31/2011 - 20:32 | 1327152 chump666
chump666's picture

Hey Europeans and Germans. Asia is slowing down (re:WSJ report), now they just have to sneeze to knock out your growth markets.  Not only is Greece going into a hellish stagflation, but the German taxpayers are going to suffer heavily i.e strong EUR and oil price.


Tue, 05/31/2011 - 20:34 | 1327158 legal eagle
legal eagle's picture

The UK and Switzerland are looking pretty clever for staying out of Euro.

Tue, 05/31/2011 - 21:38 | 1327269 css1971
css1971's picture

The UK and Switzerland are already owned.


Haven't you noticed the centres of finance?



Tue, 05/31/2011 - 22:22 | 1327387 disabledvet
disabledvet's picture

don't forget Sweden.

Tue, 05/31/2011 - 20:39 | 1327162 Coke and Hookers
Coke and Hookers's picture

I'm not sure I've seen a better article on the subject than this one. Very impressive bitchez!

Tue, 05/31/2011 - 21:12 | 1327239 Orly
Orly's picture

Agreed 100%.  Concise and without hyperbole- just telling it like it is.

Excellent piece.

Wed, 06/01/2011 - 02:05 | 1327702 edotabin
edotabin's picture

Indeed !

Tue, 05/31/2011 - 21:46 | 1327247 ??
??'s picture

I was thinking that myself, this article deserves top of page position on ZH - one of the very best (but a bit of the Ron Paul effect - good message but the delivery  - see his site for more)


his writing reminds me of Jim Quinn over at Lew Rockwell

Tue, 05/31/2011 - 20:37 | 1327166 Bearster
Bearster's picture

Where does Gordon T Long get off putting "never ending Corniche housing villas in Spain and Portugal, embarrassing pensions and social benefits in Greece, ... unjustifiable and hidden local government spending in Italy." with "tax advantages for off shoring"?

Can he not see the difference between:
1) looting some and giving the loot to others
2) not taking as much loot?

Tue, 05/31/2011 - 22:27 | 1327390 disabledvet
disabledvet's picture

Well...."he is part of the Madelbrot set"--a wild bunch so I hear.  "They got off on all sorts of things"

Tue, 05/31/2011 - 20:38 | 1327168 Atomizer
Atomizer's picture

An old ZH (blog) contributor has some insightful thoughts. Take the time to review.

Concentration, Manipulation and Margin Calls 

Periodically, I'll post Steve Keen's debt watch link from downunder. Keep your eyes peeled. 

Prof Steve Keen YouTube Channel in business again

Hope this helps you see things full circle.

Tue, 05/31/2011 - 21:27 | 1327251 ??
??'s picture

thanks for posting that link, LB is one of the greatest in the blogosphere but became flakey when he got a day job (flakey as in erratic posting i.e. this is his first post in 6 weeks) but it's worth the wait - thanks again



Tue, 05/31/2011 - 21:36 | 1327264 Atomizer
Atomizer's picture

Your welcome. I was just a reader on the old zerohedge blog site. LB was always one of my favorite posters.

Wed, 06/01/2011 - 02:14 | 1327706 defender
defender's picture

TD, could you cover that first link?  Lots of info that puts the financial crash in a very different perspective in there.

Tue, 05/31/2011 - 20:46 | 1327178 Segestan
Segestan's picture

'Gold is the Money of Kings, Silver the Money of Merchants and Debt the Money of Slaves'..... There can be only one KING, and with a small merchantilist class. The rest will beg to be debters.


 This is why the Farmer was the center of civilization.The citizen soldier.Why a Republic was formed giving rights to the Freedman.

Tue, 05/31/2011 - 20:57 | 1327197 Manthong
Manthong's picture

We all hear the squealing of stuck PIIGS.

Maybe their only hope of escaping enslavement is to go all wild boar over the financiers.

Oh, and the original version of that idiom I found to be:

Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves.

Money and Wealth in the New Millennium, by Norm Franz, copyright © 2001, Whitestonepress, page 154.

Tue, 05/31/2011 - 23:05 | 1327495 Ahmeexnal
Ahmeexnal's picture

To squeals of the PIIGS, you need the ears of a butcher.

Tue, 05/31/2011 - 21:00 | 1327198 mynhair
mynhair's picture

EURUSD sez the EU hasn't hit a wall hard enough.

Suppose it's just 'transitory'.

Edit:  Ooops, Rosanne Rosannadanna.  Never mind.

Tue, 05/31/2011 - 22:08 | 1327346 Orly
Orly's picture

You forgot to calculate in that the Australiam economy contracted by 1.2%, silly.  The Euro and the Aussie dollar popped on the news...

Of course.

Makes sense.


Tue, 05/31/2011 - 21:01 | 1327209 topcallingtroll
topcallingtroll's picture

Any foreigner stupid enough to buy greek assets will be taxed and regulated to bankruptcy. Then the greeks will get it back.

Tue, 05/31/2011 - 21:40 | 1327263 DoChenRollingBearing
DoChenRollingBearing's picture

NICE observation there top!

Rynak, Sudden Debt and top are invited to send me a gmail to look at my blog.  I am interested in the fate of Europe (we have visited numerous times), but I am not an expert like Rynak and Sudden Debt.  Everyone else invited too, as long as you tell me you will play nice.

top, I just want you in on the fun!  "110 ZH-ers can't be wrong."

Tue, 05/31/2011 - 22:52 | 1327450 mynhair
mynhair's picture

You want the crazy potato?  Kewl.

Tue, 05/31/2011 - 21:02 | 1327219 Rynak
Rynak's picture

I don't know what is so "brilliant" about assuming that a bunch of "peasants" will always pay the debt, no matter how high, no matter how painfull.

As i see it, it simply is a bet on poverty and slavedom NOT resulting in revolution. It is a bet on centralized ownership winning over decentralized anger. In principle, it precisely is FORCING revolution, and hoping that the target of that revolution, can defend itself against the masses. How often has THAT worked in history?

It only has worked, for 3rd world countries, where the centralized power interests were backed by a majority of 1st world countries. What happens if you try the same among 1st world countries?

Short version: This is not "brilliant" - it is totally stupid.... it is a conscious bet on winning a war against 1st world country populations.... not gonna work. You have just overestimated your leverage..... better get back to enslaving 3rd world countries.

Tue, 05/31/2011 - 21:10 | 1327233 HamyWanger
HamyWanger's picture

No. This is brilliant. Because the masses will never revolt. 

You're betting?

I'm ready to sign a contract where I promise to pay you 2 kilograms of gold if there is a significant anti-bankers, anti-power elite revolution in a first-world country before 2050. 

Tue, 05/31/2011 - 21:22 | 1327234 Rynak
Rynak's picture

They are already revolting. Junked for fun. Not expecting any gold in case the bet goes my way.

Again, the way you keep peasants in check, is to ENSURE their survival and non-poverty. You keep them in check by NOT pissing them off the the point where individual survival is threatened. You keep them as slaves, NOT dead people! Once you ensure that people have nothing left to lose, you lose. You keep them in check with bread and games - fail on any of both, and you're toast.

Tue, 05/31/2011 - 21:31 | 1327257 Coke and Hookers
Coke and Hookers's picture

The question is whether the revolt will ever amount to anything more than banging on pots and pans. This will not stop until Brussels is knee-deep in the severed heads of eurocrats and bankers. I'm not sure that will happen before the masses have been turned into permanent peasants, stripped of the will to rise up. Remember that the European feudal system persisted for 600 years or so without any serious problems for the elite - apart from some insignificant revolts. I see no reason why a new system of debt-feudalism couldn't persist for a long time. The masses have no clue what's going on. There's only an isolated group that reads stuff like Zerohedge. The mainstream media NEVER tells people what's going on. That has become the main purpose of the media it seems; to put the masses to sleep while neofeudalism is instituted through the abolition of the nation state and personal freedom - and the total stripping of people's assets, both public and private.

I'm not sure I would bet against Hamy there - but one can always hope.

Tue, 05/31/2011 - 22:13 | 1327351 Rynak
Rynak's picture

While i do not consider it impossible that it will work, from what i have seen so far, banksters simply have become too greedy. So, i do consider it probable that at least one central EU country will not play according to the supposed rules, simply because the demands will be too high. And it takes only one central EU country to start the forest fire.

As i said, i wouldn't say "impossible", but from what i have seen until now, my intuition says "odds stacked against th EU becoming a supernation".

Tue, 05/31/2011 - 23:13 | 1327507 Ahmeexnal
Ahmeexnal's picture

What most fail to comprehend is the fact that the power elite are also dental hygienists highly concerned about the sheeple's teeth.

That's why the fluoridation in potable drinking water has been increased in most of the eurozone. That's why the sheeple will welcome slavedom calm as hindu cows.

Tue, 05/31/2011 - 21:31 | 1327254 ??
??'s picture

I'll see your 2 and raise you 2 and extend the time to the next century - the masses are sound asleep and if or when they awake they will be in digitized shackles (as will most of us)

Tue, 05/31/2011 - 21:46 | 1327293 knowless
knowless's picture

it's a slow march, generation by generation mentally sterilized to accept the new reality, each itteration a slight abberation. any shock will be mitigated, and quickly explained away to those whose "education" was in the first placed carefully handled.

i'm always saddened to admit that the majority will never understand that the freedom to choose beyond reebok or nike isn't what is meant by "freedom".

humans are easily manipulated once they hold a common understanding of reality, breaking that common understanding destroys the capacity to control.


Wed, 06/01/2011 - 15:25 | 1329844 thriftymost
thriftymost's picture

Very astutely observed, Rynak.

Europe is auto-colonizing, ie, cannibalizing its own.

Tue, 05/31/2011 - 21:13 | 1327241 Bob
Bob's picture

Excellent analysis, Gordon!

Tue, 05/31/2011 - 21:28 | 1327256 Pepe
Pepe's picture

Yeah, Outstanding article.

Tue, 05/31/2011 - 21:38 | 1327280 Mentaliusanything
Mentaliusanything's picture

To Think - Two World Wars, tens of millions killed or displaced, Billions spent and massive amounts of finite real resources used up.

And all it takes is bankers with access to paper, a printer and knowledge of human greed to take a country down. 

Weapons of mindless destruction.

Top article - thank you

Tue, 05/31/2011 - 22:02 | 1327333 alien-IQ
alien-IQ's picture

proving once again that the pen (or now binary code) is mightier than the sword.

Tue, 05/31/2011 - 22:30 | 1327397 David449420
David449420's picture

"And all it takes is bankers with access to paper, a printer and knowledge of human greed to take a country down. "

Let me rephrase that for you.

And all it takes is bankers and lampposts.  Sooner or later it is going to happen.

You might think that that is a pipe dream.

Or is it?

Tue, 05/31/2011 - 21:56 | 1327305 buzzsaw99
buzzsaw99's picture

Feb. 24 2010 Sultans of Swap was brilliant imo. I have some catching up to do.

Tue, 05/31/2011 - 21:52 | 1327310 chump666
chump666's picture

The markets are acting really weird (Asia) just saying...something is up. Worst GDP (Aussie) for 20yrs, China PMI 50% = slowdown, Korea PMI = slowdown.

Just strange trading going on...

Anyone else seeingg this?

Tue, 05/31/2011 - 22:18 | 1327366 Mentaliusanything
Mentaliusanything's picture

Yes - forseen and waited for.

World Wide downturn baked in.

Who's going to save you? 

Tue, 05/31/2011 - 22:22 | 1327374 Orly
Orly's picture

You mean besides the fact that the Aussie dollar pops 50-pips* on the wonderful news?

No, no at all.

Nothing to see here.  Move along.


*Correction: about a hundred.

Tue, 05/31/2011 - 22:39 | 1327417 chump666
chump666's picture

a short squeeze re: goldman saying a 2.00% is in order aust economy.  they were probably on the money.

asian stocks volatility = something is up

Tue, 05/31/2011 - 23:35 | 1327546 Orly
Orly's picture

Looks like the Australians aren't going to have to lower rates for another forty years or so...

Tue, 05/31/2011 - 22:53 | 1327452 Gunther
Gunther's picture

I looked at the chart for gold and found it looked weird too.

Maybe a big player enterd the market or liquidity dried up.

Tue, 05/31/2011 - 23:38 | 1327550 chump666
chump666's picture

Markets are looking confused on Asia slowdown stats (weak PMI's).  US housing market double dip, Greece bailout knee-jerk meltups.

Just look at Aust, worst GDP in 20yrs and market meltsup even with thin liquidty. 

Gut is saying something is wrong.

Tue, 05/31/2011 - 23:44 | 1327561 Orly
Orly's picture

Think they're holding out the bags, looking for suck- erm... investors?

Tue, 05/31/2011 - 23:54 | 1327576 chump666
chump666's picture

could be...goldman does it all the time, they caused the AUD short squeeze.  i think it's a big bulltrap.  have to watch europe's open. you cant even hedge in this market asia is just sitting there.

Wed, 06/01/2011 - 00:05 | 1327590 Orly
Orly's picture

Could be the calm before the storm.

Be careful trading!  I hope you make a killing in this one.


Wed, 06/01/2011 - 00:18 | 1327615 chump666
chump666's picture

could be...


Tue, 05/31/2011 - 22:03 | 1327326 alien-IQ
alien-IQ's picture

Wonderful article available here. Really worth reading for those interested, here's the link:

Offshoring has destroyed the economy

A Nobel Economist Says Globalism Is Costly For Americans

Tue, 05/31/2011 - 22:17 | 1327376 gwar5
gwar5's picture

I wish our government would reward companies to keep jobs here instead of penalizing those who stay.  

We have the highest corporate taxes in the world, government sponsored unionism, and government sponsored eco-fanaticism with regulations driving all the job creators out of America. We are not even allowed to use our own considerable energy resources to be energy independent and stay solvent.

Tue, 05/31/2011 - 23:02 | 1327421 alien-IQ
alien-IQ's picture

have you considered the possibility that it is not really a government policy that you describe but rather the result of corporate lobbying to put those restrictions in place to give corporations the justification and cover they need to exploit the cheep labor "globalization" provides them with?

after all...who benefits from the "obstacles" you mention government creates for corporations?

Tue, 05/31/2011 - 22:02 | 1327334 css1971
css1971's picture

In order for them to gain maximum benefit, they need a bout of deflation. I find it depressing that the game hasn't changed in hundreds of years but is still just as successful.


Tue, 05/31/2011 - 22:07 | 1327340 gwar5
gwar5's picture

Agree with others who said that said article said it all.

What a great description of an economically engineered coup in progress. Or, rather, the end result of one that already occurred. 

No need to forensically reverse engineer this to undo it -- just default, string up the traitorous politicians as an example, and then let the masses make their way to the door steps of the mysterious 'senior secured bondholders.' 

This is why I am so opposed to socialism. There's nothing humanitarian about it. Always known it's just a tool by the elites to sell to the suckers as a stepping stone for authoritarianism and control.

The surprise to me here is that there are more men, behind the men, behind the men -- those mysterious financiers, behind the bankers, behind the politicians. Those shadowy blameless figures who orchestrate things like Russian Revolutions and Kennedy assassinations. Tin foil hat is firmly in place.

"Who are those guys?" -- Butch Cassidy to Sundance Kid

If any of those guys happen to have last names like Rothschild, or any of the Bilderberg clan, I guess it would cease to amaze me.  Anybody know any current real names? Be nice to know some contemporary names and bios of the NWO string pullers. Besides Soros & Kissinger who are too public already and maybe relative small fries.

Tue, 05/31/2011 - 22:17 | 1327360 Orly
Orly's picture


how 'bout the granddaddy of 'em all: Bush


Tue, 05/31/2011 - 22:31 | 1327399 Vic Vinegar
Vic Vinegar's picture

Don't forget about Queen Liz.  That ____ is pure spun evil.

Other peasants may say she has no power, but that ____ is still eating food you and I don't have access to, among other things. 

You and I know that genetically-modified Ruffles have ridges - she does not :-)

Tue, 05/31/2011 - 23:21 | 1327529 Orly
Orly's picture

All the usual suspects.  The Grand Cabal.

Tue, 05/31/2011 - 23:36 | 1327547 TBT or not TBT
TBT or not TBT's picture

And the Loomynaugties. Don't forget them. They haven't forgotten you. You know, Them, and They.

Tue, 05/31/2011 - 23:43 | 1327554 Vic Vinegar
Vic Vinegar's picture


By the way, Orly, I see you are a mother and a genuniely good person.  Not to mention, you have been bringing a lot of really nice insights to this site over the last week.  They have been appreciated.

Perhaps it seems as though I am speaking in generalities, but I would argue that the key to the 'good guys' winning is getting enough good people out there to achieve Orly's level of understanding.  Will that happen?  I suppose it is TBD.

(Anyway, enough of the seriousity :-)

In It's Always Sunny, Charlie danced to this song on his prom night.  For the rest, it's a song of realistic hope.  Goodnight y'all:


Tue, 05/31/2011 - 23:50 | 1327572 Orly
Orly's picture

My level of understanding?  Well, not to take anything from your kind words but I am still looking for whatever it is I am looking for.  I know there is some level of peace and tranquility to be had in this place and I am actually quite a patient and spiritual person...but...I don't know.  There's just something missing.  I feel like there is an answer waiting for me right under my nose but I am looking too hard to see it.

I guess my "level of understanding" is that I know I don't know everything but I am always willing to learn.

Thank you, though.  I do appreciate it.


Tue, 05/31/2011 - 22:36 | 1327419 Cone of Uncertainty
Cone of Uncertainty's picture

6 Stars Bitches!

I'm going out on a limb and predicting that Greece pulls an Iceland.

I know it is remote, but I have a feeling in my fucking bones that the people are about to rise up.

Tue, 05/31/2011 - 22:43 | 1327436 chump666
chump666's picture

the is FT pieace floating around saying German, Finnish and Dutch will oppose new bailout. 

Tue, 05/31/2011 - 23:19 | 1327531 Reptil
Reptil's picture

Yes, IF they come to their senses. The politicians of these nations have been obfusciating the facts from them, since day one. Not only on this issue but also on the issue of state souverignity, as stipulated in the Treaty of Lisbon (which passed without being read). Undoubtedly because these individuals have been in bed with the senior bondholders.

Basically it's a coup d'état, with the promise to become "rulers of europe" for these politicians (which of course isn't the case).

I'm all for a european monetary and fiscal unity, but there must be accountabillity first. Instead of the perifery (including Belgium) adopting sound budgetary measures, the countries that entered the union with balanced books now have adopted cronyism. This is rather saddening because they've corrupted what was a profitable deal, free trade, without government or banking intervention. I suppose they saw this as an incentive.

As an anecdote; it's always telling what is going on by looking at the architecture. Take one look at The Hague before 2001 and after, and you know.

Tue, 05/31/2011 - 22:41 | 1327425 JR
JR's picture

The Kings may now be gone, but the financiers are even more powerful today than ever before. –Gordon T. Long

Nonsense. Of course there has always been the dream that there could be a United Sates of Europe, a powerful economic force blending into a political dynamo.  Alas, the dream is dead.

It is fragmenting like never before.  The cultural differences are finally coming to the front and the banker swindle, the political union without benefit of referendum support, is turning sour to the taste of Scandinavians and Germans and in the South as well.

The EuroZone is a corporate, banker, politician created union.  The people did not want it – and now we know why.

Government should be something the people design, not the bankers. What kind of a chance would America have had if, like the EU, its Constitution and purpose had been crafted by the bankers?

Tue, 05/31/2011 - 22:46 | 1327441 Cone of Uncertainty
Cone of Uncertainty's picture

Exactly, we are already seeing border control policies adapt to the new eventuality.

Tue, 05/31/2011 - 23:18 | 1327519 Ahmeexnal
Ahmeexnal's picture

The People's State of Europe.

Tue, 05/31/2011 - 23:34 | 1327552 TBT or not TBT
TBT or not TBT's picture

Yup. Note the row between France and Italy over France closing its border with Italy to stop Libyan refugees the Italian government had helped to send north.

Tue, 05/31/2011 - 23:03 | 1327483 Reptil
Reptil's picture

Good article!

To add; if the citizens of the indebted nations that are insolvent object and don't pay, the taxpayers of the nations that are not insolvent will have to pony up the money. Thus the the senior bondholders (who knowingly have allowed the debt to run up) have played different people (with slightly different culture, language) against each other, and tried to make a unified call for default impossible.

It is therefore a flaw of the governments in the solvent countries, who have been mesmerised by a promise of more power through Brussels, to allow the senior bondholders to run up the debt, and a FATAL mistake to not have these take responsibillity for a deal gone wrong. In doing so, they have corrupted their role as public representatives.

The strategy backfires if the citizens of the solvent nations demand a bank default. This will also lay bare the political run up to a fiscal union has failed: The accountants of the EU budgets didn't want to sign off on these for years, this warning remained unheeded.

There is only one way out: Senior Bondholders and those that profited from diverting money streams into their own pockets must take the hit. And it will happen, or else Europe will become a very different union than was proposed to all citizens.

Tue, 05/31/2011 - 23:05 | 1327488 williambanzai7
williambanzai7's picture

The Bankstas made a killing privatizing Central Europe, now they want to pillage the periphery.

You are  right to depict this as a big game. That is what it is.

Tue, 05/31/2011 - 23:06 | 1327498 disabledvet
disabledvet's picture

great piece but "who gets the f-16 fighter jets" exactly?  this is the critical difference between "the country still known as Greece" and the et al.  "They have an Army and a cross."  Seems kind of minor i know but "it's what Drew me to the place in the first place."  Who truly wants to kill these people?  What we realized today is "not the Germans" who "even had the temerity to claim they wanted to help" and "just did.  again."  i say "game over for those expecting default and the citizens of Greece becoming a mass of refugees" and it would appear the euro and German debt agree.  Was the Bernank assisting?  "Certainly saw an equity rally in the US, too" -- but perhaps this is just "banker prerogative."  who knew?  "a banker saving a country"?  anywho..."there's no way of knowing how a market will respond once a decisive act has been made."  should we be surprised that "the markets like it" without really even knowing the details?

Tue, 05/31/2011 - 23:31 | 1327540 Reptil
Reptil's picture

It's far from over. The easy part is "informing" the citizens of the insolvent countries: they already knew their government was corrupt. The hard part is to break the news of paying to the citizens of the solvent countries. They're still the backbone of the banks here, with savings, and support of the banks, on the basis of fairness principles. This is different from the situation in the USA, where the population doesn't actively engage in these matters, but relies on credit instead for living beyond their means for decades.

Wed, 06/01/2011 - 00:05 | 1327584 sgorem
sgorem's picture

As long as there are a few rightly pissed off Europeans in general, and crazy Greeks in particular, with access to AK's and sniper rifles, there's still hope..........

Wed, 06/01/2011 - 00:09 | 1327594 lookma
lookma's picture

FOFOA makes basically the opposite argument, explaining the likely success of the Euro in a largely Mengerian/Misesean light -

But either way, how can you talk about the Euro without reference to its defining feature -( - its MTM link to gold?





Wed, 06/01/2011 - 01:31 | 1327681 BlackholeDivestment
BlackholeDivestment's picture

''Trapped!''~ Are U Sirius? Lets dance around ''why''. Why do you think there is an image of ''Entombment'' sealed upon the world ''Reserve'' currency mark with the words ''Debt Note''?

It's Larry Summers time in the fallen Citi of Euro Babylon. theory? How about mapping failure, like some evil suicide bastard?

Wed, 06/01/2011 - 01:38 | 1327686 iPood
iPood's picture

How effing smart is Gordon Long? This is just another brilliant piece from a man who sees the big picture and puts it all in perspective for guys like me! Bravo!

Wed, 06/01/2011 - 01:37 | 1327688 Orly
Orly's picture

Haven't seen you in a while.


I'd forgotten how much that eyeball creeps me out.


Wed, 06/01/2011 - 11:16 | 1328746 iPood
iPood's picture

I've been busy...watching you with that eyeball !


All the Best Orly!

Wed, 06/01/2011 - 02:28 | 1327711 -273
-273's picture

Video from barcelona protests (REVOLUTION?)

Wed, 06/01/2011 - 03:17 | 1327740 Reptil
Reptil's picture

See, this is what americans don't "get" (anymore). Sadly I must say.

Instead of drawing a line in the sand, and stick to it, they'll just TALK about their guns (which are obsolete anyway, you might as well throw stones at that Apache Gunship)


Wed, 06/01/2011 - 03:27 | 1327743 THE DORK OF CORK
THE DORK OF CORK's picture

Fiscal rules are a absurdity in a world of non-default of bank credit deposits and bonds.
Correct me if I am wrong  but Goverment bonds are present on the asset side of commercial bank balance sheets.
Liabilities such as seniors are present to take a loss Under Basel as they are defined as risk reserves

However we now know that bank bonds cannot be defaulted on for some reason - they are acting more like goverment assets rather then liabilties.
This means that like goverment bonds the bank bonds are extracting a private tax or rent from economic activities much like Goverment tax but using the mortgage as their prefered mechanism of collection.
(remember if the interest on these bonds, both goverment and private disappear inflation will rise as people will have more money to spend)

But the rewards are privatised !
This explains the housing bubble - huge resourses were expended on construction that was net energy negative for society as a whole but the rent was still extracted as the CB gave a guarantee of a return despite its lack of economic performance.
The ECB is acting as a quasi-corporate/sovergin entity which needs to reduce the size of Goverment debts so that its subjects will have enough money to service its private clients.
In such a economic ecosystem any efforts to reduce fiscal debts will merely transfer more surplus revenue to the new quasi corporate / sovergin indirectly.
Its clients will merely be empowered to take more cream from the formerly sovergin pie.
This deliberate lack of understanding withen “goverment” circles is very disturbing.
Its not the percentage of goverment debt relative to GDP that is the most important metric but the ratio of goverment debt relative to overall debt which substantially consists of private but extremely unproductive credit

Wed, 06/01/2011 - 04:18 | 1327789 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

Why is it always the banks fault, why are the people that CHOSE to take the loans always the poor hapless victims.

Heck, I say, any low wage worker who took a ridiculous loan around 2003 for a house, or houses (many with the objective of loaning them out to other poor workers I might add) deserves everything they've been getting. What I think sucks is that other tax payers have to now pick up the tab as well.

Thu, 06/02/2011 - 07:57 | 1331760 Urban Redneck
Urban Redneck's picture

Because the Greek is by nature an inferior being- utterly incapable of the sophisticated collusion with GS at all government levels required for: Extensive use of SWAPS to hide public debt at all levels of government, Broad use of Off Balance Sheet Contingent Liabilities,
and Epidemic use of PPP-Public Private Partnerships
.  Gordon Long must be a truly racist bigot or truly missing some pieces of the puzzle to arrive at the analysis he proposes.  

Wed, 06/01/2011 - 04:50 | 1327811 THE DORK OF CORK
THE DORK OF CORK's picture


Banks do not loan out money - for that to happen the money would already have to exist , no they create money.

Wed, 06/01/2011 - 05:35 | 1327834 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

Yes, I'm aware of that. What I was venting about was that other people who did not take the loans (or free, invented money) end up paying the price as well through inflation and austerity. So I have little or no sympathy with people losing their homes when they were stupid enough to take out a sub-prime loan (especially, as many of those people wanted to loan out rooms to poor working suckers)

Thu, 06/02/2011 - 08:04 | 1331775 Urban Redneck
Urban Redneck's picture

For the bank to create money in the first place, someone must deposit money at or with the bank.  Since a bank's deposits tend to greatly exceed the bank's bonds- when a bank gambles it is primarily with its depositors' money.

Wed, 06/01/2011 - 05:51 | 1327838 THE DORK OF CORK
THE DORK OF CORK's picture


I am not into morality tales myself but without doubt these people were stupid and greedy - no what I am interested in is the mechanism and who ultimately benefits through this financial engineering.

Wed, 06/01/2011 - 05:59 | 1327842 kaiten
kaiten's picture

What a poor "analysis". He claims to understand the very fundaments of eurozone, yet he doesnt even know the basic difference between EU and EMU. The only word of the article I agree with is "fantasies". Yes, this whole article are just his fantasies about eurozone(EMU!).

Wed, 06/01/2011 - 08:32 | 1328012 P-K4
P-K4's picture

Eurobonds already exist. What fund is going to buy new "Eurobonds" without a source of revenue already in place ? CALPERS ? VEBA ?

"Never has a monetary union functioned without a political union with which to control Fiscal Policy,"   then what is the function of the ECB or ESRB ?

IMO, we are closer to an Icelandic default on Greek debt. The short term "bridge loans" will not lead to surrending the family jewels or the level of austere measures needed.

The music has stopped for Greece and the protests in the streets cannot be interpreted as dancing.


Wed, 06/01/2011 - 08:46 | 1328045 FunkyOldGeezer
FunkyOldGeezer's picture

I thought this was a supposedly brilliant post??

The main purpose of a unified Europe will only come into any form of effectiveness when the oil begins to run out. Having gone through WWII, the leaders of Europe understood that the next World War was likely to be against the USA (but now, probably China). The EU was all about having enough people with enough common ground to fight, when the time came.

Anything else is noise.

Governments have the right to confiscate without compensation and to default without compensation. They also have direct control of Armies, Airforces, Navies, the Police and covert groups. So how come you all think the banksters are totally in control? Bullets beat banknotes any day. Who's playing who, here?

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