Soros Thinks The Unthinkable About Europe

Tyler Durden's picture

In a lengthy, honest, and somewhat gloomy op-ed in The New York Review Of Books, George Soros follows a similar tack to our post yesterday with regard to the current crisis and its origins in and similarities to the 2007/8 subprime crisis in the US. He then steps into discussing possible resolutions and does what any and all Keynesian-clowns are unable to do - think the unthinkable in order to reach a tenable solution.

In just four steps, he outlines how the unthinkable could be possible but critically (as we are well aware) explains the German-centric nature of any resolution (and the change of heart required to get there). A bona fide taxing-and-borrowing central treasury under a new treaty seems the approach-du-jour for Mr. Soros and while it may have merit as an 'unthinkable' idea, he ends with the threat that [his approach] "is the only way to forestall a possible financial meltdown and another Great Depression".

The Start

The euro crisis is a direct consequence of the crash of 2008. When Lehman Brothers failed, the entire financial system started to collapse and had to be put on artificial life support. This took the form of substituting the sovereign credit of governments for the bank and other credit that had collapsed. At a memorable meeting of European finance ministers in November 2008, they guaranteed that no other financial institutions that are important to the workings of the financial system would be allowed to fail, and their example was followed by the United States.

 

Angela Merkel then declared that the guarantee should be exercised by each European state individually, not by the European Union or the eurozone acting as a whole. This sowed the seeds of the euro crisis because it revealed and activated a hidden weakness in the construction of the euro: the lack of a common treasury. The crisis itself erupted more than a year later, in 2010.

 

The Current

Risk premiums that must be paid to buy government bonds have increased, stocks have plummeted, led by bank stocks, and recently even the euro has broken out of its trading range on the downside. The volatility of markets is reminiscent of the crash of 2008.

 

Unfortunately the capacity of the financial authorities to take the measures necessary to contain the crisis has been severely restricted by the recent ruling of the German Constitutional Court. It appears that the authorities have reached the end of the road with their policy of “kicking the can down the road.” Even if a catastrophe can be avoided, one thing is certain: the pressure to reduce deficits will push the eurozone into prolonged recession. This will have incalculable political consequences. The euro crisis could endanger the political cohesion of the European Union.

 

There is no escape from this gloomy scenario as long as the authorities persist in their current course. They could, however, change course. They could recognize that they have reached the end of the road and take a radically different approach. Instead of acquiescing in the absence of a solution and trying to buy time, they could look for a solution first and then find a path leading to it.

 

The unthinkable (and just four steps)

To resolve a crisis in which the impossible becomes possible it is necessary to think about the unthinkable. To start with, it is imperative to prepare for the possibility of default and defection from the eurozone in the case of Greece, Portugal, and perhaps Ireland. To prevent a financial meltdown, four sets of measures would have to be taken.

 

First, bank deposits have to be protected. If a euro deposited in a Greek bank would be lost to the depositor, a euro deposited in an Italian bank would then be worth less than one in a German or Dutch bank and there would be a run on the banks of other deficit countries.

 

Second, some banks in the defaulting countries have to be kept functioning in order to keep the economy from breaking down.

 

Third, the European banking system would have to be recapitalized and put under European, as distinct from national, supervision.

 

Fourth, the government bonds of the other deficit countries would have to be protected from contagion. The last two requirements would apply even if no country defaults.

 

The Problem

All this would cost money. Under existing arrangements no more money is to be found and no new arrangements are allowed by the German Constitutional Court decision without the authorization of the Bundestag. 

 

[Any solution] would presuppose a radical change of heart, particularly in Germany. The German public still thinks that it has a choice about whether to support the euro or to abandon it. That is a mistake. The euro exists and the assets and liabilities of the financial system are so intermingled on the basis of a common currency that a breakdown of the euro would cause a meltdown beyond the capacity of the authorities to contain. The longer it takes for the German public to realize this, the heavier the price they and the rest of the world will have to pay.


The Solution

There is no alternative but to give birth to the missing ingredient: a European treasury with the power to tax and therefore to borrow. This would require a new treaty, transforming the EFSF into a full-fledged treasury.


The Alternative

...a possible financial meltdown and another Great Depression.

 

Read the full article here.

 

While it does seem apparent that our European brethren are pricing (sovereign debt and the entire capital structures of European financials) for the kind of scenario that we, Jefferies, Bass, and now Soros are concerned with, US equity market participants remain calmly aloof to the unfolding quagmire - if only they could look back and consider how Lehman impacted the rest of the world.

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Peter K's picture

The ultimate ASSCLOWN talking his book.

i-dog's picture

Exactly! It's TPTB's wet dream to have a european central bank with unlimited printing ability, too.

We can only hope that we can prompt the collapse of the EZ (and EU) back to sovereign nation states, and national currencies, to deny them their 'base camp'.

Fiat2Zero's picture

I love his approach "it is unthinkable, but you know, we really need to do this or DISASTER.  Oh and by the way it will be Germany's fault if it doesn't happen."

Fucking dark sith lord.

Someone pull the pin on the EU grenade already, I'm getting tired of hearing these bozos talk.  Let's get to the Greater Depression.

TheEmperor's picture

ECB: "This is a crisis!  We must vote the ECB emergency powers to deal with these issues"

Palpatine: I love the ECB, I love democracy, the power you grant me will be returned once this crisis is abated!

<incessant cackling>

Palpatine to ECB:  I am sending you my apprentice, Darth Bernanke, he will instruct you in the power of the printing press.  He is your new master!

mkkby's picture

It was obvious to most ZH readers that this is what would happen.  The people may resist, but they will be voted down by their own politicians.

I would just add that the Fed will be bailing out Europe until this is put in place.  The same bankers that own Europe own the Fed and have been wanting this political "solution" in Europe all along.

The only question remains, can we make money on it?

Snidley Whipsnae's picture

Soros has taken a page from Paulsons book... 'give us the $700 billion or their will be rioting in the streets'...

Screw the azz hat... Maybe a melt down will rid us of the banker parasitic scum.

theMAXILOPEZpsycho's picture

I don't fear a depression, nor do the public - where already there. We fear more powers given to the bankers. Mark my words: europeans will not stand for this without blood on the streets.

wandstrasse's picture

nobody can give bankers more power. they have already all power the world has to offer. population is check mate.

stewie's picture

I'm not sure about that.  Sheeples will be sheeples.  

Belarus's picture

Mark my words: europeans will not stand for this without blood on the streets.

Germans. So expect it to get noisy as the DAX starts to free-fall again. 

Oh regional Indian's picture

But perhaps the base camp is intended to be US/Canada/Mexico?

I think this is meme planting from the memers.

Overall, i think they will not be denied unless one of two things happen:

1) Massive with-drawl from the system by a mass of people (60-70% of first world)

2) Something even more radical like the world turning vegetarian overnight. That will leave them no death energy to feed off. Of course the meat-lovers here (of which there are plenty) will junk this to death, but, just for a moment....think... ;-)

ORI

Tipping points

Idiocracy's picture

Soros is a huge Michael Bolton fan

Doofer's picture

Don't trust that sucker...

Drag Racer's picture

I bet glen beck will say the same thing on his next show on fox... oh wait, never mind.

english serf's picture

Although the uk is not in the euro, if you let the voters here anywhere near a referendum, it will be a crushing vote to leave the euro area. The banksters and the Elite know this, and are frantically running around trying to protect the status quo.

 

gojam's picture

Atleast Soros is proposing a solution. Only one problem, it's not going to happen. The EU, and the Eurozone specifically, are almost designed not to be able to act quickly.

It's rather like an oiltanker, it'll take it a long time to stop, let alone about face.

As my fellow countryman english Serf has said above, the distrust of the EUtopian plan in the UK has spread across Europe. The people of Europe no longer believe that an integrated Europe is afair Europe.

If Governments try and impose an undemocratic solution, they'll be more civil unrest and possibly revolution.

reload's picture

Which is why Cammeron has broken his pre election promise to hold one. I for one will not forgive or forget.

On a lighter note, the last paragraph of the article from `The Independant` may make you spill your coffee.

http://www.independent.co.uk/news/world/europe/angela-merkel-undermined-by-outspoken-mps-2354986.html

DirtMerchant's picture

Go Silvio! that friggin funny!

CEOoftheSOFA's picture

I guess good old fashioned austerity is out of the question. 

CEOoftheSOFA's picture

I guess good old fashioned austerity is out of the question. 

mc_john's picture

" he ends with the threat that [his approach] "is the only way to forestall a possible financial meltdown and another Great Depression".

Soros is arrogant and talks as if we are all ill-informed idiots. anyones with two working brain cells know we have been in a meltdown and great depression for three years. besides being a shoe-polisher for the illuminatti, soros is just a usless eater.

Fiat2Zero's picture

Soros excelled at turning in his Jewish neighbors to the Nazis.  No shit.  In his own words, this was one of the most "exciting times" of his life.

The guy actually likes having a dog collar on and sniffing out his friends to the Nazis.  Unbelievable.

Fucking-dark-sith-lord.

UGrev's picture

No shit.. I can't wait to read the headline "Maniacial 'Sith Lord' Billionaire Found Dead from Aparent Feltching Experience Gone Awry".. 

Dugald's picture

If this is the truth, why have mossad not taken him off the board?????

chirobliss's picture

Soros ... talks as if we are all ill-informed idiots. anyones with two working brain cells know we have been in a meltdown and great depression for three years. besides being a shoe-polisher for the illuminatti, soros is just a usless eater. 

 

Thanks for the illuminating confirmation of his well held opinion.

JJSF's picture

"There is no alternative but to give birth to the missing ingredient: a European treasury with the power to tax and therefore to borrow. This would require a new treaty, transforming the EFSF into a full-fledged treasury."

 

 Ah Yes.. If only we give more power to a central taxing, banking authority with no allegiences to any particular nation-state (to which these vampires will undoubtedly have back door access) all our problems will be solved.

Religion Explained's picture

Can we say soros needs the osama treatment, complete with burial at sea? or is that over the top?

doomandbloom's picture

these 80 year olds have ruined us...all they are keen to see is perpetuation of their way of working

Mitzibitzi's picture

My mate said much the same thing yesterday.

OK, they probably believe that central global governance is an improvement over what we have now. And it might be, if it was allowed to happen naturally and organically over time (I'd guess that would take at least another century, probably more), instead of being violently forced upon the world to benefit a bunch of sociopaths who want to see it in their lifetimes simply because they desire the power of life and death over the entire human race.

I think the key difference between a good man and an evil one is actually pretty simple;

A good man wants his children to inherit a world that's better than the one he himself inherited, and will try to help the course of that improvement by his deeds.

An evil man simply wants his children to inherit the world. (Though preferably one that he has shaped to his personal design, of course).

agrotera's picture

 "Spookie Dude"  words create expletives in my head.  Don't you just love this guy (NOT)! I guess Obama got his imperative tone from the Spookie Dude--pass this plan now, bail out Europe now, they say.

caerus's picture

the man is a failed philosopher...reflexivity is a joke

baten's picture

[Any solution] would presuppose a radical change of heart, particularly in Germany. The German public still thinks that it has a choice about whether to support the euro or to abandon it. That is a mistake. The euro exists and the assets and liabilities of the financial system are so intermingled on the basis of a common currency that a breakdown of the euro would cause a meltdown beyond the capacity of the authorities to contain. The longer it takes for the German public to realize this, the heavier the price they and the rest of the world will have to pay

Fucking stupid Germans - you dont know whats best for you.

Let Papa Soros enlighten you...

vegas's picture

Classic Soros, only the world is all to aware of this asshat's modus operendi. How long are you George? And, lest we forget that you are the world's foremost expert in forex insider trading, if these ideas are even remotely implemented, how much do you gain?

Radron33's picture

Yeay! New puppet show!

economicfreefall's picture

The politicians refuse to see that their whole European Union project is a disaster and is literally falling apart. Instead of doing the right thing by abolishing the whole idea and making themselves unemployed in the process, they desperately hold on to their newly acquired powers. By understanding history we know what that means. Increasing their powers is the only way for failed leaders to hold things together a little bit longer.

Putting Greece, Spain, Italy and all the other countries with huge debt and fiscal problems under the same fiscal umbrella as the stronger economies of the north is not a solution. It's just a guarantee that the nations with sounder economies will soon join the rest.

http://www.economicfreefall.com/

SlipperyPete's picture

"There is no alternative but to give birth to the missing ingredient: a European treasury with the power to tax and therefore to borrow. This would require a new treaty, transforming the EFSF into a full-fledged treasury."


So is he basically saying that they will have to print their way out?

Fiat2Zero's picture

Doubling down on a closer, more perfect union.  Integration to bring everything under the globalist umbrella.  They are control freaks.

Do not trust the fucking-dark-sith-lord.

ricksventures's picture

You dont get the final picture:

 

here is what he wants:

1. Print until hyperinflation kicks in

2. Once the hyperinflation kicks in, watch it to break apart, riots etc.

3. Create sides, like the southern EU and northern EU

4. Watch them point first fingers, than guns at each other (who is more pissed the greek commie or the german "by the book" employee of the month" ?)

5. Secretly in the middle of the night (Rothschild style) finance both sides, their guns and get ready for blood spilling (blood = new debt, new teritorries etc = new wealth, BUT ONLY FOR THE CHOSEN FEW)

 

ITS TIME TO DO WHAT NEEDS TO BE DONE, send the "bankers" a present, YES they have the power, but the belong nowhere, we know who they are and the final solution will be done, even if half the world was destroyed by nukes, but there will be no more soroses

the tower's picture

I actually heard THE LIST is being made, I wonder when it will start to surface? 

 

I hope it will have photos and addresses on it...

the tower's picture

I actually heard THE LIST is being made, I wonder when it will start to surface? 

 

I hope it will have photos and addresses on it...