Angela Merkel is Latest Casualty of Global Uprising

Austerity is not popular anywhere.

REUTERS | MAY 13, 2012

Chancellor Angela Merkel’s conservatives suffered a crushing defeat on Sunday in an election in Germany’s most populous state, a result which could embolden the left opposition to step up its criticism of her European austerity policies.

The election in North Rhine-Westphalia (NRW), a western German state with a bigger population than the Netherlands and an economy the size of Turkey, was held 18 months before a national election in which Merkel is expected to fight for a third term.

She remains popular in Germany for her steady handling of the euro zone debt crisis, but the sheer scale of her party’s defeat leaves her vulnerable at a time when a backlash against her insistence on fiscal discipline is building across Europe.

According to first projections, the centre-left Social Democrats (SPD) won 38.8 percent of the vote and will have enough to form a stable majority with the Greens, who scored 12.2 percent.

The two left-leaning parties had run a fragile minority government for the past two years under popular SPD leader Hannelore Kraft, whose decisive victory on Sunday could propel her to national prominence.

Merkel’s Christian Democrats (CDU) saw their support plunge to just 25.8 percent, down from nearly 35 percent in 2010, and the worst result in the state since World War Two.

“This is not a good evening for Merkel,” said Gero Neugebauer, a political scientist at Berlin’s Free University.

“The SPD is strengthened by this election, which will stir things up in Berlin.”

The blow comes only two days before France’s new president, Socialist Francois Hollande, is due to visit Berlin and press Merkel for a shift away from austerity and more emphasis on growth-oriented measures in Europe.

Other big countries like Italy also want Merkel to take a more balanced approach to the debt crisis and an election in Greece last week showed massive public resistance to tough austerity.

SPD MOMENTUM

Hollande’s victory, coupled with the NRW result, is bound to give the SPD, which still trails Merkel in national opinion polls, new momentum before the federal vote in the autumn of 2013.

The chancellor needs the support of her rivals to pass a new “fiscal compact” that is meant to anchor budget discipline across the EU. The SPD is already pressing her to delay a parliamentary vote on the pact, keen for her to commit to new growth measures beforehand.

Many in her party will blame the result on regional leader Norbert Roettgen, Merkel’s environment minister in Berlin, who bungled his campaign early on by refusing to commit to staying in the state in the event of a loss.

Roettgen ran on a platform of budget consolidation in a state that, with 180 billion euros in debt, is Germany’s most indebted. Kraft, on the other hand, advocated a go-slowly approach to debt reduction, emphasizing the need to invest in cities, education and childcare.

In that sense, the result will be seen by some as a double defeat for Merkel. Voters in NRW not only rejected her party but also the austerity measures that she has forced on struggling southern states like Greece, Spain and Portugal.

The Free Democrats (FDP), a pro-business party that rules in coalition with Merkel’s conservatives at the federal level, scored 8.6 percent to make it back into the state assembly. The party hailed the result as proof of a comeback after a collapse in support over the last three years.

The upstart Pirates, a new party that campaigns for internet freedom, continued their strong run at regional level, making it into their fourth straight state parliament, winning 7.6 percent of the vote.

NRW, a diverse state with struggling cities in the rust-belt Ruhr region and home to one third of Germany’s blue-chip companies, has a history of influencing national politics.

Seven years ago, a humiliating loss for then-Chancellor Gerhard Schroeder’s SPD in the state prompted him to call early elections, which he subsequently lost to Merkel. ($1 = 0.7726 euros)

Anti-Austerity Protests Grow in Europe

By PATRICK DONAHUE | BLOOMBERG | APRIL 30, 2012

A recession in Spain and forecasts of rising unemployment in the 17-nation euro area are amplifying criticism of the German-led austerity agenda in election campaigns this week in France and Greece.

With Spain’s largest unions leading marches involving thousands of protesters in 55 cities yesterday, Prime Minister Mariano Rajoy’s government battled to prevent Spain from becoming the next country to seek a bailout. In France, where the presidential-election runoff is set for May 6, Socialist frontrunner Francois Hollande pushed back against German Chancellor Angela Merkel’s focus on deficit reduction.

“Watching Spain now is exactly like watching Ireland around October 2010 before Ireland was forced into its bailout,” Megan Greene, a senior economist at Roubini Global Economics LLC, told Bloomberg Television’s “Street Smart” on April 27. “The government can’t win no matter what it does.”

Spain’s economy shrank in the first quarter as the nation officially entered its second recession since 2009. Gross domestic product contracted 0.3 percent. Joblessness in the euro area probably to rose to 10.9 percent last month, the highest since 1997, according to economists surveyed by Bloomberg.

As Spanish joblessness reached almost one in four of the working-age population, Hollande demanded that euro-area leaders move to promoting growth from cutting budgets, as agreed by 25 European governments in the so-called fiscal pact. Merkel drew the line at re-opening talks on the fiscal treaty, though she said growth could be boosted with labor-market reform and European Union funding.

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Big Government: It’s Coming to Take It All

By LUIS R. MIRANDA | THE REAL AGENDA | APRIL 26, 2012

If by now you are not familiar with the stated agenda from international government — working through national and local agencies — to effectively take humanity back to the stone age, I suggest you pinch yourself. The number of initiatives established to sequester our way of life and to reduce it to having to cook, shower and live as people used to do back in the Dark Ages continues to pile up. The proponents of these de-industrialization policies are no longer limited to crazy environmentalists who request that we all commit suicide in order to save the planet, but is it is preached on us by accomplice politicians and heads of NGOs who are worried about the consequences of development and a higher living standard for the third world.

The latest example of the lunacy with which politicians and bureaucrats want to impose their radical agenda on everyone else comes from an official at the United States Environmental Protection Agency (EPA). Al Armendariz, an EPA regional administrator was quoted by US Senator James Inhofe as saying how much he and his agency intended to “crucify” oil and gas companies. Don’t take me wrong, big oil and gas companies are undoubtedly some of the largest polluters on the planet joined by a selected group of corporations from the agroindustrial and medical-pharmaceutical establishments. In fact, governments around the world do very little to safeguard the public from production practices that endanger everyone’s lives.

Take for example the case of the genetically modified organisms that are put in almost everything we eat or use today. Governments refuse to properly label GMOs excusing themselves and the corporations that produce them by saying that there is not difference between naturally conceived products and those made in a lab. This couldn’t be further from the truth, of course. One would not have enough time to cite the number of studies that have unequivocally found a direct relationship between GMO consumption and sterility, cancer, and other diseases. Only studies conducted or sponsored by large industrial conglomerates continue to show that GMOs are safe.

Another case is the oil and gas industry which has played its game off the hook for decades. This resulted in the deliberate mass pollution of the environment around the globe without any kind of accountability. Big Business is the Biggest Polluter of the Environment, however, Big Government continues to blame small farmers and self-sufficient folks for the direst damages caused to mother nature. Sadly, the ‘greenies’ that want us all to live in caves are nowhere to be found when it comes to defending ourselves and the environment from the irresponsible industrial production practices used by the largest polluters. The reason for this is, as you many already know, that ‘greenies’ are by and large bought and paid for by Big Business. Every re-known environmental organization — from government and otherwise — is directly or indirectly funded by corporations or by the government itself. These organizations are charged with the responsibility to make us think that we humans are all bad; that we have brought onto ourselves the wrath of mother nature because we have been selfish and greedy. But ask yourself now, in case you haven’t done it before, who are the largest polluters?

Government cannot let the people off its leash, so efforts are on the way to restrict energy and food independence. The war that Big Government is waging against our way of life is not meant to control Big Business so it doesn’t abuse consumers. Rather, it is to ensure that Big Business becomes the sole regulator and provider of everything any human being requires to stay alive. That is why it is common to hear bureaucrats speaking about savagely attacking oil and gas companies, locally managed water companies, independent farmers, ‘prepers’, those who choose to have a garden in their backyard, or even people who sell vegetables or raw milk to neighbors or relatives. For this attack to be successful, government enlists cowardly snitches who enjoy the power trips provided by a badge and a gun. The EPA, for example, is not interested in keeping the environment safe and clean; otherwise they would have already remediated the oil spill disaster in the Gulf of Mexico — instead of spraying Corexit –, they would not allow BPA to be used in plastics, they would have prohibited the sale of products that were not properly labeled for their ingredients, and so on.

“I was in a meeting once and I gave an analogy to my staff about my philosophy of enforcement, and I think it was probably a little crude and maybe not appropriate for the meeting, but I’ll go ahead and tell you what I said: It was kind of like how the Romans used to, you know, conquer villages in the Mediterranean.  They’d go in to a little Turkish town somewhere, they’d find the first five guys they saw and they’d crucify them. Then, you know, that town was really easy to manage for the next few years.” These statements in bold summarize what Big Government, in cahoots with Big Business, intends to do with us.  They want us to be slaves to them and their policies. I do not need to repeat Monsanto’s idea of the future of food supply, but I am going to. “No food shall be grown that we don’t own”. How much have governments done to assure the people that this will not happen?

When Barack Obama opposes the exploration and extraction of oil and natural gas or the construction of a new pipeline, this doesn’t reflect his interest in keeping the environment clean. Instead, it means he will assure Warren Buffet’ ability to maintain control of the transportation of such resources, a scenario that would end should Obama support the construction of such pipeline system.

When Big Government invests trillions of dollars in new energy sources by providing taxpayer money to dubious enterprises that go bankrupt soon after without producing a single piece of technology that achieves such a goal, it does not mean that government intends to make a country independent from fossil fuels, but that it needs to pay back the thousands of contributions received during the political campaign and to close backdoor deals negotiated during private meetings with campaign contributors and monopoly men.

Big Agra is another example of the ironic world we live in. Because people are now realizing that they need to be self-sufficient, that it is necessary to detach themselves from government and corporate welfare, those two entities are doing everything possible to restrict people who seek economic, health, nutritional and intellectual independence. While only a handful of corporations control the food supply, for example, more people are working hard to put together their own food garden and raise chickens or cows. But in a world where governments are more out of control than ever before, being self-sufficient is a crime. That is why law enforcement, at the behest of Big Government, burn down fields, charge people with crimes for selling raw milk, confiscate food, kick  folks out of their properties and ultimately threaten them with long jail terms all for the sake of a saving the environment. In summary, Big Government does everything possible to make us fail; it is coming to take everything we own, everything we’ve earned.

They come to schools and indoctrinate kids to make them believe that it is better to be dead in order to save the environment, they take private lands and ‘protect them’ under the guidance of the United Nations. These lands are, in most cases, later handed to contractors who develop them into large elite-ran facilities for their own enjoyment, instead of conserving them for future generations, which is what they tell us they’ll do. They create policies to manage the food and supplement choices that people have, banning natural treatments while imposing Big Government mandated healthcare that pushes deadly medications on everyone. This in turn will guarantee that more people will become patients of the pharmaceutical industry by having to use their toxic products for the rest of their lives. Some of them don’t even get to use them for that long, as the chemicals in those products kill them before they reach their golden years.

Big Government and Big Business are assuring themselves that we will all need to come to them for anything and everything. Their plans include creating a failed society, where people will follow their corrupt leaders as supposed to holding them accountable. They want to reduce or completely eliminate prosperity and kill people’s dreams of growth, comfort and development. Their policies intend to keep the cost of living so high, through energy monopolies and speculation, that people will beg for action to get cheaper energy or to attack countries to rob them of their resources. At the same time, they will make us feel inadequate for having hot water and electricity in our homes and a car to drive to work. They artificially make energy prices high, so that unreal new proposals for cheaper energy find fertile ground to fall on. They indoctrinate the population to make them believe that progress is responsible for global warming, so that people restrict their needs of traveling, feeding, clothing and leisure. They tell the kids that humanity causes the weather to cool off and to warm up, so we all need to stop driving, flying, feeding and having fun. Then, they call any natural disaster climate change and blame it on all humans.

Meanwhile, the Banking elite blames the nonexistent free-market for the economic crisis and call for a world government to help standardize fiscal, financial and monetary policies, much like they did after World War II, when the United Nations was formed to avoid criminal wars. This elite blames the same prosperity they’ve enjoyed for decades for the warming, the cooling, the crisis and the conflict, so people believe that it is prosperity what needs to go. Many of those people, who’ve never seen prosperity are now strongly condemning it and calling for a global socialist system that helps spread ruin and misery worldwide. They of course, see it as spreading the wealth and as an opportunity to get what they deserve; even though they haven’t earned it. The strong opposition to development the elite finds in the massive ignorant public emboldened them to create regulations that favor their monopolistic control-mad agendas while eliminating their competition; the innovative small and mid-sized businesses. They create and impose globalization as a way to bring about progress, but globalization only brings poverty, environmental destruction and underdevelopment. Globalization and the so-called free trade are indeed the new faces of Feudalism applied on a global scale.

Big Government’s intent is to change our goals and dreams to own a home, raise a family and educate our children. The bureaucrats want us to believe those things are privileges, just as they did with driving and are now doing with free speech and self-defense (owning a firearm). Big Government, under the command of Big Business works hard to make it impossible to live in peace without being bullied for wanting to raise three kids, instead of one, to produce what we eat or to mine the resources we need to build and improve the lives of those who haven’t seen what human ingenuity is capable of. And when they allow people to access high quality goods and services, they do it with a double intention to turn them dependent on those products. Through their hubris filled behaviour, regulators empower themselves to support laws that only the corporations that wrote them can understand and that they can be interpreted vaguely enough to leave open doors for more corruption. They invent unreal conditions and products to rip consumers off, to steal their life savings as they invest their hard earned social security monies into artificial financial products that are as ephimerous are the air. They reward companies that send jobs abroad, or that pay slaves to create the toys and distractions we all waste our time on while they become ever more powerful. They subsidized Big Corp, to eliminate competition and to turn healthy economies into labor camps. They created a financial crisis, and are now charging taxpayers for the costs of getting bailed out.

They’ve now transformed people’s legitimate concern to keep the world we live in clean and healthy, into an agenda of environmental suicide, by allowing toxic products to pollute the air, water, and soils, while banning all forms of creative entrepreneurship that may bring cleaner, simpler, environmentally friendly forms of production. While we the people need to go through austerity in order to ‘save the global economy’, the elite continues to spend our money and our resources in their lavish palaces and large properties. We the dependent and ignorant need to curb our footprint, while theirs grows uncontrollably. The elite-controlled Big Government preys on the decent and honest people, brainwashes their children and bribes their pastors to make them believe that all its corruption and oppression is for the best; that they are the only ones who can deliver us from doom, even if that means that we humans need to learn to hate ourselves.

Two Million British Strike over Pension Fund Looting

AFP
November 30, 2011

Up to two million public sector workers in Britain went on strike Wednesday over changes to their pensions, after the governmentresponded to slashed growth forecasts with fresh spending cuts.

In what unions said was the biggest walkout in decades, thousands of schools were shut, hospitals operated with minimum staffing levels and local authorities were paralysed.

Thousands of workers marched through central London and Manchester, northwest England, during the 24-hour strike.

However, fears of long delays at London’s Heathrow airport, one of the world’s busiest air passenger hubs, failed to materialise as most immigration officials turned up for work.

Ferry ports and cross-Channel rail services linking Britain to continental Europe, also operated largely as normal.

The strike is the biggest test so far of Prime Minister David Cameron’s Conservative-Liberal Democrat government, which sparked the unions’ fury by making public sector workers pay more into their pensions and work longer.

Anger rose further on Tuesday when finance minister George Osborne targeted the pay of teachers, nurses and soldiers and revealed plans to cut an extra 300,000 public sector jobs as he sharply reduced Britain’s growth forecasts.

Osborne infuriated the unions by announcing a new two-year, one-percent cap on public sector pay rises.

Cameron was scathing about the strike, telling parliament it had been a “damp squib” and lambasting unions for calling the action while negotiations on pensions were ongoing.

The prime minister insisted that reforms to public sector pensions were “absolutely essential”, and accused Ed Miliband, leader of the opposition Labour Party, of being “irresponsible, left-wing and weak” for refusing to condemn the strike.

The Unison union said two million workers had taken part in the stoppages, and claimed they had wider support.

Brendan Barber, general secretary of the Trades Union Congress (TUC), said the government had put the public sector “under attack” and the strike was fully justified.

“There comes a time when people really have to stand up and make a stand,” he told ITV television.

“With the scale of change the government are trying to force through, making people work much, much longer and get much, much less, that’s the call people have made.”

In Salford, northwest England, around 30 refuse collectors manning a picket line outside their depot dismissed claims that their pensions were “gold-plated” compared to those in the private sector.

Neil Clarke, a union organiser with Unite, said: “The government is attacking our pension schemes — they are looking for public sector workers to contribute more, work longer and receive less in pension benefits.

“The average public sector pension comes in at £3,000 ($4,650, 3,500 euros) a year. Could you live on £3,000 a year?”

BAA, the operator of Heathrow Airport, said queues at border control points were “normal”, despite prior warnings that delays of up to three hours were likely.

“Due to the effective contingency plans we put in place with airlines and the UK Border Agency, immigration queues are currently running at normal levels for Heathrow,” said BAA chief executive Colin Matthews.

A giant union rally took place in Birmingham, Britain’s second city, and unions said 300,000 workers downed tools in Scotland.

British diplomats abroad were also involved in the strike, with the United Nations, Washington, Paris and all major capitals affected.

Under the government’s proposals — which form part of its efforts to slash the budget deficit — public sector workers will have to work until they are 66 and increase the amount they pay into their pensions.

But staff face a lower pension payout, which will be based on their average salary as opposed to the final salary schemes to which they are currently tied.

The Next Stage of the European Debt Crisis; Towards Global Financial Collapse?

Bob Chapman
International Forecaster
November 3, 2011

Those who believe the European crisis is over are mistaken. The dislocation will continue as their economies slow and political, social and economic events converge into further crisis. The most glaring problem is the banks only taking a 50% loss on Greek bonds. The loss should have been 75% or even 80%. There is absolutely no way Greece can overcome that burden in a slowing European economy and an enraged population. They are still striking and demonstrating and they will continue even under a new government.

Some of the best economists in the world have been saying for almost as long as we have been saying that the weaker and smaller countries have to leave the euro at least temporarily. In our eyes that really means permanently. If Italy falls out it will take France with it and the euro edifice will fall. Very quickly it will be found that Greece cannot and will not recover. It is one thing to set recovery in motion in good times, but it is another to attempt to do so under austerity. These politicians in Europe have been self-serving. They are quickly going to find what they have done is not going to work. Greece should have never been saved, as we said from the beginning. They will need more and more money just to exist and you cannot have perpetual funding. Then you have the overriding social factor. It is simply impossible and once Greece goes, the other 5 will have to cut loose as well. Again, it will be called temporary, but their exists will be permanent. It simply cannot be any other way. Political hot air is not going to change anything. We have no details and bankers who refuse to face the music, and what is attempted to be achieved is impossible.

The concept of a tighter union with a new constitution won’t work either. We can go back to 1991 when these issues came forth and we stated the Europeans are doing this backwards. You need a strong constitution first, only nations involved that can meet the criteria of public debt of 3% GDP. Smaller nations cannot be allowed to falsify their balance sheets and above all you cannot use one interest rate for all. Just about everything that has been done has been done incorrectly. Unfortunately, the US and world economy hang in the balance as well. This euro, European and UK problem is not going to go away. By February it will again be front page news. There is an 80% chance that Greece will leave the euro in the next six months.

If Ireland and Portugal do not receive equal treatment, followed by Belgium, Spain and Italy, then they will all be forced to leave the euro. If you think for one minute that these nations can stand more than a year or two of austerity you are mistaken. The whole approach is wrong. They should all be allowed to leave the euro. The only reason Greece has been temporarily saved is to keep Greece in the euro. These one-worlders cannot bear to see their dream of world government fail. It has already failed. Do you really think Germans are going to give up their sovereignty? Wait for the next German election. You are going to see a house cleaning in the Bundestag that will be staggering. The German people are outraged at what these politicians have done to them. If anything the move in the EU’s strongest economy will be away from further consolidation, not toward it.

The magic number to keep the euro from collapsing over the next two years is $6 trillion that solvent European countries do not have, and using derivatives in place of cash is a prescription for disaster. Debt may be addressed, but the core economic and financial problems that were responsible for these problems are still not being addressed. That is a glaring lack of economic progress. Where is the capital needed for growth? Countries in the EU are going to have to increase money and credit and suffer the incumbent inflation; that is if they can even raise those funds and rollover old debt. Either that or China will lend $3 to $500 billion and we don’t think they are willing to do that. If China prints the money to lend, the value of the yuan will fall, the Chinese will take more market share and there will be more inflation. Their goods sold to Europe, the US and elsewhere will rise in cost as well. The Chinese will have to use cash euros or sell euro bonds. Such moves could be really upsetting to China. If aid comes it will be in much smaller amounts.

This past week the swaps association said the failure on 50% of Greek debt does not constitute failure, because it was voluntary, so the NYC legacy banks do not have to pay up on their derivative bet. That could all change, because Fitch says it does constitute default. We will now have to await the decisions of S&P and Moody’s.

What Europe has done is pull a page from US bailouts, which reduce debt starting in a few years, which would extend over 10 or 20 years. It reminds us of the two sets of books banks are currently keeping. They intend to write off bad debt over 50 years, like it really didn’t exist. This plan allows further current increases in debt over the short term. That is no solution at all. Again, it only throws the debt and service into a future that could include deflationary depression. Recovery is not a given.

Fitch has really opened a large can of worms in calling a 50% debt default a payable derivative event. We are talking about hundreds of billions of CD’s, credit default swaps OTC derivatives, which just happens to be an unregulated market. Our view is Fitch is correct and the ISDA, the derivatives information agency is wrong. What isn’t made an issue of is that banks have been asked to raise $150 billion they are offside on this issue. We projected this number long ago. The official number is $3.7 billion, which is laughable. About a month ago the players admitted to $75 billion, so we are making progress toward truth and reality. We wonder what the French bankers are saying, who bought the insurance? If NYC banks do not pay off the ECB will have to create the $150 billion and lend it to the banks in France, so they can survive. Could this be a renege? We think so, and that would ultimately allow citizens of the EU to pay the debt. These bankers are crafty buggers they are.

We also question why banks are writing off 50% of their debt and the sovereigns are not. Isn’t this strange? Why are they not writing off 50%? Could it be that if they did they would be insolvent? Could it be to deceive their taxpaying citizens and pop the question several years from now? Could this be they are just trying to extend the timeline into the future? Time has a way of revealing everything. Incidentally, none of that Greek debt will probably ever be paid off. It should also be noted that of the $140 billion lent by the IMF, US taxpayers are on the hook for about 30%, or $42 billion. We are sure that will make Americans very happy.

The difference between $516 billion allocated by EU members, half of which comes from Germany, and $1.4 trillion will come from the sale of bonds by the EFSF, the European Financial Stabilization Fund. The question is who is going to buy this tranche of some $900 billion in bonds? Nations will receive greater taxes from a phantom recovery and buy the bonds. How can this be when those economies barely have even GDP growth? All this in the midst of austerity. We do not get it. We must be missing something. Does Italy really believe that raising the retirement age from 65 to 67 is going to bring any real immediate relief? As you can see the case is terminal.

The whole plan is absurd, stupid and unworkable. These problems are going to last for years as Europe, the UK and US wallow in negative growth and eventually in deflationary depression. Greece will collapse; it is only a question of when. The ECB will continue to create money and credit, just as the US and UK are doing. It won’t take long for investors to figure out they have been bamboozled again. They will flee stock markets probably just after the Fed’s latest QE 3 is announced. Some will buy US Treasuries and lose about 10% of their purchasing power annually. Some will flee to commodities and many will use the flight to quality to purchase gold and silver coins, bullion and shares. Modes of investments are going to change dramatically, so you had best participate, or you may end up losing most of your wealth.

What you are witnessing is financial chicanery at its best. Wait until the citizens of Europe discover they are going to have to pay all these bills, just so they can be enslaved in a one-world government. They are not going to be happy.

We always tend to be ahead of the curve and the crowd. This time the time frame for discovery may be very short, because once investors understand what we have written here they will want to get out. Gold, silver and commodities will rise for different reasons, along with the flight to quality. Incidentally, this time the gold and silver mining shares will soar.

Reflecting back on our comments the second Greek bailout does not solve the EMU’s fundamental problem, which is the 30% competitiveness gap between the northern and southern countries and Germany’s giant-EMU trade surplus at the expense of the south. Unless a way can be found to rectify that there cannot be a recovery. The south has been forced into austerity, which limits their chances of being competitive. As we pointed out over and over again the end product will be a deflationary spiral and eventually deflationary depression. What the IMF and EU members are imposing on the six countries is very destructive.

A fiscal union would perhaps work, but that means the end of individual country sovereignty, which would eventually lead to authoritarianism, which would not like to see. The entire union is unnatural and should be ended. It has been a failure and just leave it at that.

All this program is going to do is buy time. It is not a long-term solution. Current debt holders are going to be incensed, as they will be forced in before sovereigns, but will banks really take a 50% haircut? We don’t really know. Is this really a fig leaf, a wholly inadequate alternative to the ECB, which cannot provide endless liquidity?

This rescue effort is really too dependent on high-risk deals, such as what caused this crisis. Four times leverage is outrageous. In the end the European public could get caught holding the bag.
At the same time we are seeing monetary contraction in Portugal, which mirrors that of Greece as it spiraled out of control. Bank deposits are off 21% over the past six months and that could well be a precursor of a weak economy and monetary trouble.

Another question that arises is due to the treatment accorded to NYC legacy, money center banks. Will those using credit default swaps continue to do so. There is a default and because it was voluntary the derivative writers do not have to pay off. Give us a break. It looks like contract law no longer exists.
In very late breaking news we find something we warned about is happening. The German High Court, the Bundesgerichtshof, has issued an express order that the nine-member committee dealing with dispersing the rescue funds is not allowed to do so. The plug has been pulled on the EU and German politicians on money releases. If the Germans and the EU are lucky they’ll have a constitutional decision by Christmas. We predicted this would happen.

Uncertainty revolves around the deal reached with Greek bondholders to face a 50% haircut on the face value of their bonds. This has not been negotiated as yet.

At the same time France needs to raise $11.2 billion to keep its AAA rating. Sarkozy says 2012 GDP growth will be about 1%, about the same as Germany, but no one mentions it would be -2% with inflation.

Switzerland’s State Secretariat for International Financial Matters said the Swiss were interested in investing in a special investment vehicle proposed by the euro zone bailout fund, but we see a real fight brewing. The Swiss People’s Party, which was against franc devaluation and the sale of Swiss gold, will be after this move by the Swiss government. They do not want closer ties to the EU.

This past summer we warned that European banks would have to increase their reserve position to 9%, because both the BIS and IMF said it was absolutely necessary. You might call the EU’s laxity of not forcing Greece to implement its austerity agreement as part of a socialist mindset. There was no way to move Greece into line. For not living up to their commitment they could have cut Greece off, because then they would default and leave the euro. Thus, they continued to fund Greece. The truth is they have to do so irrespective of what Greece does or doesn’t do.

The heart of the problem was banking incompetence followed by sovereign stupidity. Banks and solvent sovereigns never should have made the loans in the first place. All the greedy bankers, politicians and bureaucrats could think of was the euro zone and the euro being the template for one-world government. The interconnectivity of banks within nations with banks of other nations is the lynchpin that will eventually take all of them down. It’s caused by central control such as that embodied in the European Central Bank. The bottom line is if a state like Greece, partially defaults, then the banks within Greece default as well because these banks are holding large amounts of federal bonds and loans. Thus, the edifice collapses. This relationship exists all over Europe and as we are seeing six countries are in trouble and if the European economy continues to slip into recession or depression other countries will join the six. In addition in many countries supervision is all but non-existent. A perfect example of such a relationship was with France, Belgium, and the Dexia bank, which they created. As a result the taxpayers of Belgium and France have acquired all the bad assets of Dexia.

Adding to such problems is that usually half of the debt of any country is held by foreign banks and sovereigns, which means failure becomes contagion. France’s holding of 8.5% of GDP of debt from these six countries will eventually cause France to lose its AAA rating. If that is the case we venture to ask how can France be party to a commitment to bail out Greece or anyone else? They simply cannot and they are the number 2 player. You would think French citizens would elect someone who was not involved in such stupidities, such as Marine LePen of the National Party. The banks and business interests, such as the Rothschilds, couldn’t have that – could they? If France financially fails we could see 1789 all over again. This sovereign debt is widely held by other nations including the US, UK and Japan. European banks have controlled European society for a long, long time and they are the catalyst for the new world order.

We hear over and over again there will be recovery, we will grow our way out of it. That won’t be possible for Europe, the UK and the US. The number of young people who do the largest part of consumer spending in their 20s and 30s today have a hard time making ends meet, never mind spending. On top of that many are unemployed and may be for some time to come. If you have noticed unemployment has risen or stayed the same in the regions we have spoken of. Accumulation has only occurred among the upper-middle class and the wealthy. This also means borrowing has fallen and the ability to access loans and capital are limited, because so many prime age borrowers do not qualify.

One of the reasons Germany does as well as it does is because they have an abundancy of inexpensive capital available for loans and credit, which allows expansion, creates jobs and brings profits. The cost of labor is low or in the form of growing productivity and people pay their bills.

One interest rate fits all became a disaster. The weak participants borrowed at 4% instead of 8% and the result was an orgy of spending that ended up in today’s insolvencies. We said 12 years ago this would destroy the euro zone and it has. These low rates also allowed a massive influx of imports into the six problem countries, which caused major balance of trade deficits. This also brought about borrowing in foreign currencies, which turned into a nightmare, particularly in Eastern Europe.

European banking and politics are very closely intertwined. In other words the banks overtly run these countries. The same is true in the UK, but in the US it has been subtler due to ignorance of how the banking system works and that has been deliberate. In Europe the stress test used 5% as a guideline, instead of the normal 10%. This shows you the power and control banking has over EU government making the margin for error extremely thin. Considering the exposure cash reserves were increased to 9%. This means capital has to be raised and that is not easy in today’s recessionary environment. Two-thirds of European banks are currently under 9%. The worst exposed are RBS, Deutsche Bank, Unicredit, Bank Paribas, Barclays and Societ General. Hundreds of billions of euros are needed and the question is where will they come from? In addition how many banks are shuffling assets between trading, deposit, and banking sectors, such as Dexia had been doing until they had to be taken over by the French and Belgium governments? The banks need $270 billion that is readily available. If funds are not available then that means governments will have to supply the capital from out of thin air, which is very inflationary.

The EFSF, the European Financial Stability Facility, which was set up to aid Greece, Ireland and Portugal, now aids banks and European governments, such as the Fed does. An EFSF if allowed to dispense $1.4 trillion based on a $900 billion derivative structure would take months to move into action. Then there is the question will the German High court allow leveraging. We do not think so. The Court had already told the Bundestage you cannot do that, but they did it anyway.

As we can say is stay tuned for the next episode in this saga. It could end up taking down the entire world’s financial system.

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