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Europe’s Banks Afloat on Dwindling Credibility
Sometimes it’s impossible to tell whether the financiers and politicians who carry water for the central banks are bad liars or just clueless dolts. A bureaucrat from the U.K. surfaced in the Wall Street Journal over the weekend, exhaling what seemed to us an ostentatious sigh of relief over the supposed success of the European Central Bank’s latest loan program: “[It provides] a very significant degree of breathing space to banks.” Yeah, sure. A very significant degree — as though the banking system’s terminally decaying colossus were not in danger of imploding tomorrow — and for no greater reason, possibly, than that some hapless bank clerk erroneously misplaced a decimal point.
The bureaucrat’s remark appeared, with unintended irony, in a story about how European banks are in a quandary over how to redeploy a torrent of digital cash that has recently come their way from the ECB’s magical credit-infindibulator. Recall that the banks sucked up €489 billion ($641 billion) in a matter of weeks after the ECB made that sum available to them in December for three years on super-easy terms. But what to do with it all? None of them are in the mood to lend to – heaven forbid! — businesses, and that leaves only two bad alternatives: using the digital money to buy government bonds from the
sordid likes of Greece, Italy and Spain; or hoarding it at a loss. A loss? Well, it turns out that although the ECB is charging commercial banks a nominal rate of 1% to borrow as much as their greedy little hearts desire, the central bank is paying them only 0.25% on overnight deposits. Call us cynical, but we can’t see how the growing asymmetry of this relationship will produce a solution to Europe’s debt problems. In fact, it reminds us of the old joke about the rent-to-own furniture store whose prices were so low that it would have been impossible to make money. Actually, the owner was said to have lost a little money on every transaction. What was his secret? “Volume!”
Last Ounce of Credibility
So, here we have Europe’s banking overlords piling up untold sums of virtual cash, only to concede that the sole “safe” place they can find for it guarantees an annual loss of 75 basis points. At that rate, Europe will be bankrupt before anyone can figure out where the money has gone. Oops, we forgot: Europe already is bankrupt. (Ditto for the U.S.) And, okay, we were only being facetious about figuring out what happened to the money. As any fool could see, it is manifestly not flowing into the economy. In fact, hundreds of billions of dollars – trillions of dollars, if you keep a running total – are floating in the financial ether, unable to find their way into the world of real goods and services. Only a liar or a dolt could assert that this all-too-transparent, economically valueless shell game will continue to provide “breathing space” to the banking system for much longer. Nor is it the huge sums of cybercash that are keeping the game going, but rather what remains of the political establishment’s credibility. One of these days – it could happen tomorrow, or in six weeks, or six months – when that credibility is entirely spent, fiat money will cease to contain the unimaginably destructive forces that have been quietly gathering strength in the bond markets. At that point only disaster seems possible. But certainly not a scenario in which the global economy continues to muddle along while public debt — already many more tens of trillions of dollars than anyone can count — goes parabolic.
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Clueless idiots make very bad liars...just look at our politicians in Congress.
Another great post Rick, Thank You.
The CB- -commercial bank- -government paper, loop is just a form of vendor financing where the taxpayer picks up the ever increasing interest burden. Blaoted government is temporarily sustained and banks make magical risk free `profit`
Vendor financing is all the rage, even decent companies like BMW are now reliant on it to shift product in Europe. What I see in the UK is that companies who rely on it, die from it.
( for execessiv demand on safe deposit boxes swiss banks rent hotel safes)
http://bazonline.ch/ausland/europa/Wegen-abnormer-Anfragenflut-mieten-Sc...
I love the Euro trashing, not that its not merited. But this whole show began where? And who is orchestrating the beggar thy neighbour of one Oligarchy set to temporarily enrichen the other?
Don't cry for Eurozone burnout as its the road to UK burn out and it leads to US burn out. So when thieves fall out they love to tear each other's guts out forgetting they are signing their own inevitable cop out. This system is on Costa Concordia route.
The only guys with sense in their heads are those using the current meltdown to prepare the alternative frontier of paradigm shift away from hyper consumption model and further down the road, the carbon free energy economy, whenever it comes, as it will come. Its the Gordian knot of this age, as fiat bubblenomics now enjoys its last gasps trying to defend the old pax americana construct. We are in transition and the move to gas based energy prefigures the decline of liquid oil age, and the resurgence of alternative energy production and economic storage at grid parity. The race is on. Meanwhile the Bric nations chug along using their trade surpluses to play catch up ball and take over the world dialogue from decadent first world; more fool those same Oligarchs now digging their own graves at the expense of their sheeple, as their home territories become NO COUNTRIES for RICH MEN. Run baby run, will soon be the dominant song. But where...to SYstem D land?
Over and out.
Who is more foolish, the fool or...
"We are in transition and the move to gas based energy prefigures the decline of liquid oil age, and the resurgence of alternative energy production and economic storage at grid parity. The race is on."
hear, hear.
"...the Gordian knot of this age..."
could not agree more - though I see the eurozone better equipped for this possible future
And the band played on
"Sometimes it’s impossible to tell whether the financiers and politicians who carry water for the central banks are bad liars or just clueless dolts."
Both !
I fail to see apart from political puppets being in thrall to their banker puppetmasters why New Lending Institutions were not created. It would have been so easy to harness cash from corporations like Apple into New Lending Vehicles specifically prohibited from lending for anything but SMEs and banning speculative loans and LBOs and Hedge Funds. It could have recycled Cash Deposits and revived areas of the economy neglected by BIg Banks. At the same time Credit Card Loans could have been rendered unenforceable or subjected to a haircut instead of subsidising HOme Owners willy nilly with ZIRP. In the Uk there are very affluent households with big mortgages subsidised by pensioners whose savings income is rendered worthless and whose capital and annuities are expropriatyed to fund bank deposits.
Follow the bouncing Ponzi, and sing along .... "I owe you, you owe me, we're one flat broke family ...."
http://georgesblogforum.wordpress.com/
And now back in the USA let's hear from David Stockman, head of OMB under President Reagan and multi-decade Wall Streeti nvestment banker extraordinaire. In just a few minutes he does an eyeopening and devastating critique of the Washington/New York axis of self-enrichment. Nobody does it better:
http://billmoyers.com/segment/david-stockman-on-crony-capitalism/#.TyW1Ub3lhtg.
Dolts with clues: Papa President Bush and his son Jeb met in private with Obama at the White House this week. Bad clues.
Nah. Jeb's the next President after Obama. Jeb was just taking measurements of the new crib.
Janice...I can't begin to describe how much it sucks that you're probably right.
All they are doing is delying the inevitable and it's almost here.
The ratings agencies have no balls, otherwise they would be rating all these central banks and revealing the truth which we all know anyway.
It would have been far more honest and effective to take 10% of everyone's bank balance four years ago and write-off the bad debt rather than keep on paying depositors peanuts in interest and pouring taxpayer funds into a bottomless pit.
The rating agencies still have the US rated as AA...once again they have no crediblilty as they will be found sleeping at the wheel when the tide goes out again on this Sovereign crisis just like the housing crash too!
No - no no: you are all wrong.
This time it's different !
Everything is as they say.
We're fine. It's juts a little financial hickup caused by the bad speculants !
and .. and.. Gold ?
Just a four letter word. Don't touch this. It's only metal. Cant even be used for something useful...
And:
Clueless dolts must be good liars - they need to cover up their ignorance - so it's part of their instinctive repertoir.
Watch Angela Merkel or Mr. Schäuble. (select your country's local favourite pol here)
Does anyone have the impression - they know what they are doing, except for , maybe .. errr annexion of Greece ?
Hurrah. We we really need that barren dried up patch of land for our Lebensraum.
Really !
But: been there, done that -- actually a greek king was bavarian in the not so past history:
Otto, Prince of Bavaria, then Othon, King of Greece, 1 June 1815 – 26 July 1867
So what do you complain about annexcon ?
Ridiculous. We had them sacked already.
Oh by the way:
Fiat Money Inflation in France (1933), first written in 1896
http://mises.org/resources/3041
Looks like this sh*t happened back then, looks like a chronology of the Euro.
Hopium anyone ?
They are getting rich aren't they? What more do you need to know?
Don't you know that banks are now vaporizors?
Look no farther then the nearest vapor cloud to find the missing money.
Question is - who owns the condensor? Since vapor eventually condenses back to form.
It's all very complicated. Banking is now in the realm of, not only mathmatics, but physics to?
What will they think of next? My oh my!
Banking is to neither science. Banking is 100% bullshit.
Synthesis is not science, get a clue.
...what's next? Drive it down the black hole ...all the way down. http://www.youtube.com/watch?v=cJzV0_SaV-k
OK, so there are 3 types of people (potentially with subtypes).
1. Those who are in on the scam and benefit from it (or think they do). These are the "service to self individuals", but there are only a limited number of (let us call them) Sith ... so many of the sycophants will be deceived.
2. Those who are are unaware of anything. (unfortunatly this encompasses the vast majority of the NBA/dancing with the stars throng.
3. Those who are aware of the scam and oppose it. These are the "service to others individuals", and there can be an infiite number of (let us call them) Jedi... so virtually anyone can join. It is an "inclusive" club, not an exclusive club.
Unfortunately for the so called Sith, more people from the "unaware" are waking up ... and by either their inherent nature or abhorance to the service the self's principles, they are excluded from joining the Sith, so they naturally turn to the Jedi regardless of what the media propaganda tell them they should become.
George is a genius ... as were many others.
I vote for clueless dolts
Clueless dolts can't be bad liars, too?
So long as this worhtless paper buys physical assets, I am going to be damn sure to keep converting as much of it as possible. Whheeeeeee!
“[It provides] a very significant degree of breathing space to banks.”
Why didn't the crone just say it was "kicking the can down the road" as is its proper socially accepted description?
Chucklefest, enjoyed the article :)
http://www.youtube.com/watch?v=qmf9RMWNrDo&feature=related
Zero G, ...that is a great name for a new tune.
''Chucklefest''
It's an instrumental
Performed By The Vapors
I couldn't have said it better RA!
You'd be a good speech writer!
..and you'd make a good sock-puppet SD ;)
+ 1 for the kurt vonnegut reference
I want to name names...
The British bureacrat quoted in this article is Adair Turner, head of the British Regulatory Body, the Financial Services Authority.
I think a quote from Private Eye is in order:
Lord Turner's unstinting criticism of the regulatory system shouldn't have surprised too many. After all, he was never going to blame the bankers, having been one of them himself until not too long ago. - quoted from Private Eye, No. 1231- 6–19 March 2009.
edit: http://en.wikipedia.org/wiki/Adair_Turner,_Baron_Turner_of_Ecchinswell
The man who is supposed to head the regulatory board is its greatest critic... now that is "regulatory capture" of first magnitude by the reigning Oligarchs. Its like Henry VIII replacing Thomas More by successor Cromwell, all attained to naming King head of new Anglican church that More could not accept. Game changer by regulatory capture. ENgland never looked back. Cromwell fell later as well, just like More, showing servants of Oligarchs are ephemeral slaves of power. Sic transit gloria mundi, Berlusconi and company!