JPMorgan Private Bank On The "Quixotic" End To Europe's Latest (Failed) Grand Experiment

Tyler Durden's picture

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More Critical Thinking Wanted's picture

The “Irish Bailout” is more a bailout for Ireland’s lenders (European banks and the ECB) than for Ireland itself, as Irish taxpayers are stuck with the bill.


So the theory here is that the Irish have borrowed a lot of money but have not spent that money and it went up *poof* in thin air?

Wow! :-)

Really, ring-wing ideologists need to come to terms with reality: the 'Celtic Tiger', the state with super-low tax rates and sparse government regulations, the austerity musterchild who implemented the quickest and most savage austerity measures after the financial crisis is one big walking failure.

Here are a few simple questions:

  • If 'austerity' reduces productivity as much as it did in Ireland, how are 'austere' nations supposed to pay back their debts?
  • If the shrinking Irish economy is having such a knock-on effect on housing prices and on bank assets, why is it good to have austerity to begin with?
  • Where exactly was the advantage of their super-low tax rate, if they are in such a big mess now? Should they have taxed higher, to build a sizable sovereign fund in the 'good times', which would act as a cushion for the 'bad times'?
  • How come that high-tax, active government, no-austerity keynesian stimulus countries like Germany are growing and are expected to pay the bill now? How come they have the money ... while the conservative economic model wunderkind Ireland is on the brink of the biggest bank run in history?

Enquiring minds want to know.

Arthur Two Sheds Jackson's picture

You need a baby bottle to go along with your pedantic blanket statements.




trav7777's picture

this is easy...the "core" EU members used their superior banking system clout to run mercantilist policies within the EU to the peripheral lower-clout nations.

I mean, it's German and French banks on the hook for all this bad debt all over the EU

hardcleareye's picture

Trav I don't think your abbreviated answer covers all the questions posted above, give us a little more detail.... please ;)

More Critical Thinking Wanted's picture

[...] the "core" EU members used their superior banking system clout to run mercantilist policies within the EU to the peripheral lower-clout nations.

Oh, that's new - so you need 'clout' to implement a low-tax regime and to implement savage-austerity measures? I.e. the 'Celtic Tiger' was in fact clueless?

Had they instead implemented a fool-proof keynesian stimulus policy like Germany, saving up in prosperity and spending in times of need (instead of the wrong way around suggested by monetarists: spending in good times and saving in bad times), they'd be off just as good today as Germany?

That indeed answers my questions although I'm not sure you wanted to affirm them ;-)

More Critical Thinking Wanted's picture


[...] the "core" EU members used their superior banking system clout to run mercantilist policies within the EU to the peripheral lower-clout nations.

Btw., this statement is funny in itself. Do you realize that mercantilism mainly works by restricting imports while encouraging exports. Do you also realize that the EU implements a shared (no restrictions) marketplace for goods and for banking? That makes mercantilism towards other eurozone countries rather ... hard ;-)

Mercantilism is certainly done by most economic zones, such as China and the EU - towards external partners. The main tool of mercantilism in the case of China is to use government capital control to set the FX rate of the yuan artificially low - this keeps their trade surplus positive towards all developed nations and keeps their wages low - while suppressing imports as well. The EU engages in weakening their currency (and subsidizing EU-internal production) as well - but in a less state-controlled manner than China does it. (To a lesser extent import tariffs are used for mercantilism as well.)

Considering that there are no import tariffs allowed between EU states, and that the FX rate between Germany and Ireland is fixed at 1:1 (both are using the Euro as a currency), how do you fancy is Germany able to effect 'mercantilism' against Ireland? :-) [1]

Inquiring minds want to know.

Unless you can offer a good description of the 'mercantilistic' conspiracy of 'core Europe', I'll offer another, much simpler explanation: Ireland was stupid by using low taxes to attract economic players and not saving enough to cushion future shocks in a keynesian manner - like Germany did it. They also did not build up enough high quality domestic production with qualified domestic workforce - a big portion of their 'growth' was in fact mobile foreign players like Microsoft or Google who used Ireland as a jump point in the 'Double Irish' and 'Dutch Sandwich' accounting schemes to evade US (and 'core Europe') corporate taxes. The Irish financial sector also grew disproportionately as a result of this - a malinvestment. Then in 2008 Ireland got caught with pants down (no sovereign funds) by a big financial crisis, and implemented a second stupid policy: 'savage austerity now'. That really killed their ability to pay down debt - and further depressed asset prices in Ireland, squeezing their banks.

Germany and France will bail them out of course, at the cost of Ireland having to eliminate their corporate tax loopholes (which siphoon funds away from Germany/France) - while this is a windfall for the Irish who spent on stupid things in prosperity and did not save, the hands of Germany and France are forced as their own banking systems have too much Irish exposure. So the german and french taxpayer will pay the costs of these bailouts - not the Irish taxpayer, as this article posits.

So it is kind of ironic that a keynesian countries are bailing out austrian economics countries ... again.

[1] Arguably when weak economies like Estonia join the eurozone then the initial phase can be considered advantageous to 'core' EU countries - and can hence be indeed mercantilistic: as the strong Euro (and integration laws) forces wage rises in the periphery country while hurting exports of these less established players in the eurozone. Countries that join the eurozone still generally consider the benefits to far outweigh the costs. There's also a reverse process: german and french production flows to lower-wage peripheral countries - and does so without resistence and without Germany or France being able to enact protectionarist measures. In the case of Ireland this initial phase of eurozone integration, if it ever existed, is long over.

Freewheelin Franklin's picture

So it is kind of ironic that a keynesian countries are bailing out austrian economics countries ... again.


Austrian economies? Where? The core of Austrian economics is "honest money, and sound banking", or "sound money, and honest banking". What country has that?

More Critical Thinking Wanted's picture

Austerity is a fundamentally austrian concept (as you imply it via 'sound money' - supposely referring to a fixed monetary base), and Ireland has gone for it lock, stock and barrel.

Or are you claiming that an austrian approach would be for the Irish government to grow the monetary base and enact big stimulus spending? :-)

Freewheelin Franklin's picture

It seems, in my experience, the biggest critics of Austrian economics, and libertarianism, in general, are those that do not know what it is. But that's just my personal experience FWIW.

doolittlegeorge's picture

for me the answer is simple to these actually..."very well thought out questions."  it is "a blanket gurantee of all bank deposits no matter the limit."  So just who are the "euro-landers" bailing out?  apparently "it's the depositors and not Ireland."  Needless to say "those depositors are overhwhelmingly from outside Ireland" and "they're pulling they're money out of the banks" and "Bringin' it on Home." In the USA "they did raise the insured limit" although I believe the failure on Indy-Mac did result in massive and immediate losses for some very wealthy families and institutions.  I will say "since they refuse to allow actual bank failures in the US" where depositors actually lose their savings above the insured amount "how is what the USA doing any different" for "it save's the State" whereas in Ireland Euro-land is throwing the Irish State and by extension its Government under the bus." 

More Critical Thinking Wanted's picture

So just who are the "euro-landers" bailing out?  apparently "it's the depositors and not Ireland. [...]

Certainly - but you have to consider that Ireland has borrowed those funds and has spent them (i.e. it owes them), and that a large part of the debt is also internal to Ireland and a bail-out will help both external and internal creditors.

So by bailing them out (see my other posts above) the german and french taxpayers are bailing out Ireland. Clearly out of self interest (they'd let Ireland default otherwise): partly because their own institutions are affected, but in larger part because bank runs are contagious and they dont want them to spread to Portugal, Spain or (the big elephant in the room) Italy. (They also figure that right now the bailout is cheaper than the reintroduction of the Deutschmark, the Frank, the Peseta, the Lira, etc.)

So to suppose that the only beneficiaries of the bailout are external creditors and that the Irish will 'pay for the bailout' is naive at best - of course they will pay, they borrowed the funds (and most of them at very low rates) to begin with ...

Kayman's picture


When you boil it all down, it is the "something for nothing" syndrome. The one European currency dream resulted in small, non-competitive countries eating more candy than they could afford otherwise, and now they have one hell of a belly ache.

The solution, naturally, is let them have more candy.  The same process is happening in the U.S.

Central Bankers and their Puppet Masters created this mess, and these very same schemers (by default) are "fixing" the mess. The solution to central bank created asset bubbles is more asset bubbles.  Inflation is rampant, exceeded only by the propaganda that we are in disinflation.

Blame not the Irish, blame the academics and dreamers in Brussels.

Rather than helping to ensure a " peaceful "
Europe, the one-currency Euro policy has doomed Europe. Thatcher was right all along.

More Critical Thinking Wanted's picture

The solution, naturally, is let them have more candy.  The same process is happening in the U.S.

If you look at unemployment in Spain (well in excess of 20%(!), and for youth (who have no prior debt 'sin' at all) it's in excess of 40%(!!)) they are certainly not having any candies there.

See the unemployment stats comparison (source: Eurostat):

It's an absolutely non-funny situation and certainly not a 'lets continue with eating candy as we did before' situation.

bugs_'s picture

"Where exactly was the advantage of their super-low tax rate?"

This was implemented to expand an export based (mercantilist) economy.  It worked well initially as long as the target market was doing  well.

Once the target market ran into trouble - ooops it doesn't matter how much they subsidize their mercantilist operations they are dead in the water.

More Critical Thinking Wanted's picture

Well, there are certainly examples of export oriented countries that are doing well: Germany for example.

It was hurting when demand was drying up, but it cushioned it with big 'automatic stimulus' spending for a year until the worst of the storm was over, and then it was able to produce cars, machines etc. for China with a fully working and fully employed industrial sector - while the US and other developed nations let those sectors go bankrups, downsize, etc.

It's very risky if a demand slump is permanent - but it works very well for temporary shocks such as this one. Check how well Germany did wrt. unemployment, compared to other EU countries:

That difference was mainly due to automatic stabilizers and due to strong labor laws and organized labor (90% of the german workforce is in unions).

The US might have managed to pull this off as well - except that the US stimulus was not automatic (built-in to scale to the industry in question) and was undersized.

(China might be another example of an export oriented country doing well after the 2008 crisis - albeit it's hard to tell how well they did because all the data out of China is controlled so heavily.)

Aristarchan's picture

The Germans have a problem of being the economic engine of the EU, and being a people universally hated in the EU. Ultimately, though, Germany will decide the fate of the EU.

snowball777's picture

They also have banks which are knee-deep in peripheral doo-doo, leaving them rather conflicted about the current state of affairs.

Aristarchan's picture

You are right....but as the 800 pound gorilla in the room, they can dictate their own terms as to how that doo-doo is ultimately dealt with. Remember, they are all under one currency, but a currency the germans can devaulate if they so desire by purchasing Dollars. A currency devalue in the EU drives their debt down.

scaleindependent's picture

Gold, Silver bullish, I deduce.

Azannoth's picture

Funny enough German unemployment is at a 18 year low, things in Germany could not be going better now

BurningFuld's picture

I'm going to bet they actually have rules in Germany regarding bank lending to it's citizens.

masterinchancery's picture

Could well be--Germany had NO real estate bubble, almost alone in the world.

Herd Redirection Committee's picture

The bankers from Germany helped inflate the bubbles everywhere else.  Regulation too effective in Germany for them to try it there,  I guess.

I found the one comment in the report interesting, they  JP Morgan Private Bank, are purchasing NON-performing corporate loans.  Hmmm, like the ones backed by collateral which you are looking to seize?  This whole crisis has conveniently resulted in the banking industry getting their hands on A LOT of collateral, in exchange for digital 1s and 0s, created out of nothing, at the moment the 'loan' was agreed.

We need to come up with a new word.  'Loan' sounds like you are giving something YOU ALREADY HAVE.  Bankers don't ALREADY HAVE the money they lend you, it is created out of nothing!

Exposing the Oligarchy, one Psycho at a time.

apberusdisvet's picture

History has shown that when delusional and/or corrupt politicians and banks fail to find remedies for their delusion and corruption, they start wars.  Now all we have to figure out is who is going to war with whom, or do they just let Pakistan enable Iran to Nuke the Saudis; now that would get everyone's mind off the global economic chaos.

beastie's picture

Paging Dork of Cork!


Paging Dork of Cork!

It really is time for the Irish people to say fuck it! Let the banks pay their own bills. If the French, German and UK banks don't like well that's too bad. It's not Ireland defaulting it's failed businesses defaulting. Only the idiot politicians turned it into sovereign debt. A change of govt. can change that policy. 

Ireland stood on it's own hind legs before the EU. They can do it again. It cannot be any worse than what's on offer right now. Ireland will default on it's current trajectory.


masterinchancery's picture

Too bad the Irish people are such sheep, but they are.

Kayman's picture


I bet you would pee your panties if you stood on your hind legs and shouted that out on any street in Dublin.

Herd Redirection Committee's picture

Not to be cheeky, but maybe it is time someone took  a megaphone onto a street in Dublin.

Probably better if they are Irish, IMO.

Oh regional Indian's picture

If one thinks about it, the canary in the coal-mine for the EU has always been the strange position of the UK.

They got all the supposed "benefits" but got to keep their own currency?

To me, that makes it obvious that the EU is just another game, played by the play-book of THE CITY OF LONDON.

Like all experiments coming out of that cess-pit, the EU came with a use-by date, which is clearly fast approaching. And Germany, the other great Empire pretending to be a democracy, is as much a part of the planned de-construction of the EU.

Nothing changes. UK/Germany/France and possibly the bumbling Italianos, still at the heart of the scrouge currently ravaging us all.

Throw in the Dutch Bilderbergers, The Vatican, hoe of the Pon-stiff (y) and "neutral" switzerland (should be called Swindlerland) and you have the recipe for a mass deception of staggering proportions.


desgust's picture

You are sooo right!

I can't sleep when thinking of our future (continental EU)....

Oh regional Indian's picture

Desgust, If you're not being sarcastic, it is quite frightening. 

Just the Islamic/immigrant issue, with deep, deep colonial roots is such a tinderbox for the EU.

Like most COL experiments, it will not end well.

But then again, well is relative and we're all in it together.


Alienated Serf's picture

yup, economic depression and non-integrated muslim immigrants (many of whom depend on the state) are not a good combo.

desgust's picture

I was VERY serious!

I spend hours and hours reading, trying to learn more about the system and what my understanding makes me sick, sick, sick! I became another person in the last years.

Hook Line and Sphincter's picture

A flexible and fluid NWO must be. Experiment after experiment, realigning, scheming, finding the snake winding way to achieve a particular goal. A planned and purposeful deconstruction of their EuroShack must be frustrating. But for what reason? A single paper or gold fiat currency to replace the euro and FRN?

I can hear J Lennon singing;

"Imagine all the people, exchanging debt notes in the EU and NAU... yoohoo oooo... you may say, I'm a dreamer...

but the nightmares just begun...

i hope someday you can join us

and not be 1 of the 100 million that will see the gun"

Hey ZH'r, this was a sing along, come on, get into it!

Herd Redirection Committee's picture

I sincerely doubt the Globalists are planning a return to sound money (not by free will, any way).  Obviously their hand will be forced if people lose all faith in their fiat currencies and start using precious metals.  So they will probably try to keep PM markets quite volatile, even if they can't possibly depress the price forever.


So that means a global fiat would be the 'ideal solution'.  You would want all the benefits (printing money, bitches) of the current system, with more global control, and LESS national sovereignty (the global currency would answer to no one, but pretend to be doing what is best for everyone, naturally)

Personally, I think they want these fiats (Euro, USD, Pound, Yuan, Yen) to all be on the deathbed at the same time, and all of those countries in severe economic difficulty.  Best way to do that would be collective currency devaluation, the slow road to hyperinflation = loss of faith in fiat. 

But obviously you (Oligarchy controlling Mainstream Media) would want to misdirect people all the way, and not making it about replacing fiat currency, just about 'global economic co-ordination' or new 'global tools', or ending the global recession, etc.  This would provide the ideal platform to implement a new reserve currency.  Of course a(nother) war would help, too.

PsychoNews: Exposing the Oligarchy, one Psycho at a time.

ZackLo's picture

I don't know about that one, the brits I don't think care much about they're membership for the eu well at least their eu election results show it...

for instance...Nigel Farage laying the smack down on rompoy...

Non Passaran's picture

First, the UK is not the only one that kept their currency and even if they didn't, why would that be bad for the City? The elite would surely be capable of getting what they want anyway. As for the benefits, taxpayers of the UK send money to the EU at a rate of about $50 million per day, IIRC (according to Farage). And the conspiracy rant about Germany, Switzerland and others is insulting and unworthy of discussion.

The EU may not last long, but the first half of your post is totally wrong.

Oh regional Indian's picture

NP, if you were a sovereign nation, would you rather keep your currency or join a group of other nations and lose said sovereignty? Rothschild said, and i paraphrase... give me the power to control money and laws can be damned, etc. The UK retained it's sovereignty. For whatever is coming. The 50 mill is the price to pay for all the other benefits that accrue from being a part of the EU (and there are some, bad as they may be in reality).


As for the rant, you might want to read up some real history and differentiate truth from conspiracy. Plus, if what I said counted as a rant, well, you clearly ain't read a rant yet.

How much do you know about the Vatican and the role of Jesuits in world history, just for starters? Or of Swindlerlands role, their purported neutrality, the Red Cross...

You probably believe Lee Harvey Oswald assassinated Kennedy too.


RobotTrader's picture

Why do you guys even trust any research report that comes out of JP Morgan or Goldman Sachs?

Especially proprietary reports distributed to Zero Hedge?

This must mean that an explosion of positive economic news out of Europe is imminent.

Let's see....

Europe not looking too bad right now.....


AccreditedEYE's picture

I wouldn't bet a small fortune on that chart Robo...

ZeroPower's picture

Robo wtf?

The research areas of most banks (im not talking sell side equity reports) are usually half decent. This one comes from the PB group of JPM which is less bullshit then elsewhere - after all they manage rich people's money. If they do poorly, the rich people walk away and go to any other Swiss private banker..

And this wasn't especially distributed to ZH, these are widely available if you are a client of the firm or have access to firm research.

beastie's picture

I think most people on this site don't even trust their grandmothers. 

But you are right Ireland will take some sort of bailout. Everyone will go back to sleep for a few months and we will start the hysteria all over again. 

It doesn't matter Ireland is fucked no matter what way you look at it.

Bail out / no bail out.

Really fucked/ fucked.

Spitzer's picture

The Euro will out-live the dollar. Its a fact.

The Euro is the first non nation state currency and it marks its gold holdings to market every quarter. The paper Euro has risen 60% against the dollar since its inception and we all know what the gold side of the Euros balance sheet has done since its inception.

The EU has more gold then the US and it is China's largest trading partner.

I just laugh when I see somebody write that the Euro is a failed experiment.




chrisina's picture

The Euro will out-live the dollar. Its a fact.

Not a fact but a prediction. Facts and predictions are two different things.

NB: I don't disagree with your prediction  :-)

ZeroPower's picture


Let me know when the EUR becomes the reserve currency. Then we'll talk.

I suppose you believe in the Amero for America?

i-dog's picture

"somebody write that the Euro is a failed experiment"

That depends on what the experiment was trying to prove!

It has certainly been a success in proving to the central planners that a single currency managed under the spending patterns of a variety of governments is doomed to failure. Who coulda known that German manufacturers and taxpayers would ever get upset with having to subside French farmers and English hospital patients?!

They won't make that mistake again! "Single Central Government, or Bust!" will be their campaign slogan next time around.

That's also why they now won't introduce an 'Amero' to a North American Union. It's also why they will definitely shoot for a single world government when/if they succeed in implementing a single global currency.