Yesterday the European Central Bank (ECB) announced that it will hand out $645 billion in three-year loans to European banks, which the ECB printed out of thin air, like Monopoly money! The interest rate will be 1 percent per year.
The ECB will not be lending this money to the government of Greece, even though that government is running a budget deficit of just under 10 percent of GDP -- and the Greek GDP dropped by 5 percent this year. The government of Greece is now paying 37 percent per year on its 10-year bonds, when it can borrow anything at all.
The ECB will not be lending this money to the people of Spain, even though official unemployment in Spain is now at 23 percent. Spain's Economy Minister said recently that "Spain faces its deepest recession in half a century." Tough luck; their Christmas tree has nothing under it.
And when the European banks get this $645 billion, to whom will the banks be lending? Anybody, or nobody. No strings attached. They can borrow from the ECB at 1 percent, lend it back to the German government at 2 percent, lock in that profit, and take the next three years off.
I just have one question: why?
The world continues to face the greatest economic crisis since the Great Depression. Unemployment throughout Europe is over 10 percent. Entire national governments are on the verge of going broke. Why would anyone think that the thing that we have to do right now is hand out $645 billion in more funny money to the banks? In Europe or anywhere else?
The ECB is a public institution. How can it possibly justify yet another bailout for selfish private interests while the public is sent straight to hell?
If a Martian were to land in Paris today and just read the headlines of the newspapers, he could reach only one conclusion: that there has been a coup in Europe, that the banks are now in charge, and that they're grabbing everything that they can get their hands on.
Mark my words: at some point, people are just not going to take it anymore.
Courage,
Alan Grayson
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Greece can't sustain the current interest rate, so quit send money out the door, period. Hold it strictly for use to (hopefully) straighten out the country's financial problems. Sure this would be a major hassle for all the other countries and the "calls" for payment on the swaps will multiply like mad. But bottom line, who's going to get hosed in this if they stop paying. Primarily the banks and Wall Street that caused this mess. Let them die.
No matter what, we can be sure of two things. First, a default will occur that requires payments on the swaps if they continue as they are. Second, there's no way to pay off all of these swaps. It's strictly a lose-lose situation for everyone. Every country needs to protect its citizens and tell the banks "good luck". Save your taxpayers money, for the taxpayers benefit. It's that simple.
Buying some time for the banks. They're being required to add capital and they don't have much to work with. The over leveraging has put them into a serious corner. So, the ECB basically is providing them with capital to cook their books for a while longer. Here are my thoughts.
Credit default swaps are toast. So, given some time, the US banks that made a killing on them are trying to unwind their liabilities. The numbers are staggering. So they need time. And they have to keep the defaults from occurring until they can unwind some of this liability. They'll sell off their liabilities to others, as insane as that sounds, with the idea that there are only two real choices. Either they have to off-load these liabilities to someone else, or they will get nailed when the first default occurs. They can't just declare them as insurance fraud, even though that's exactly what they are. That would collapse too many of their "buddy banks" who's books are seriously flawed, because of all of these hedges against their potential losses. It's layers and layers of fraud being hedged with.....more fraud.
Taking the liability off the banks and off-loading them onto some one else (mostly likely the American Dollar) would save the banks and destory who ever purchases these liabilities.
Who should be left holding the bag?
A: Monkey see, monkey do.
If the US 1% can get away with 'no strings attached,' why shouldn't the 1% in the rest of the world get away with it too? It's the 'no strings attached' part (& the house of cards element) that's hurting the rest of us the most.
I too, have just one question: 'Cui bono?' ("To whose benefit?", literally "as a benefit to whom?")
Because the bankers haven't fleeced the public enough. Or maybe they're getting ready to finance another war/conflagration that will encompass the ME, a large part of Europe, Russia and the Caucasus in which the most likely winner will be China for staying out of it.
There's nothing like a good old fashioned WW to get economies jump started.
It is like watching a train wreck in process in super slo-mo.
This constant one-sided type of analysis ("it's all Wall Street's fault ( or banks etc)) ignores the responsibility of government and citizens in the mix. In the US 1/3 of home owners do NOT have a mortgage. They did not take on unrealistic debt and instead are paying the price for the abuses of all three other parties.
Then the Banksters blew up the World Economy with their gambling.
It doesn't just print money and loan it to the people of the US at 0.01%, it just does that for the banks.
Who's in charge again?
While I disagree with just about everything Ron Paul stands for.......I agree with him on the FED issue..... I think we made a mistake when we let a privately owned central bank (the FED) replace our own government public bank!
All they do is loan us what should be our own money and keep us indebted to them!