European banks face a €600bn tsunami of debt coming due in 2012 (mostly in the first quarter) and many simply can't pay up because the usual source of refinancing, wholesale money markets, are refusing to lend them any more. Sound familiar? One Northern Rock-style collapse after another would have reverberated around the eurozone over the next three months if the ECB hadn't stepped in with unlimited cash costing 1pc. Almost certainly there would have been a euro-Lehman moment too as a once mighty lender, probably in France, fell over. Draghi has had to ignore any sense of moral hazard and agree to fund weak banks at the expense of strong. He has opened a quantitative easing (money printing) exercise of enormous proportions. Weak banks unable to fund themselves on the open market are now hooked on cheap ECB money. Clearly, the fault for this chaos lies with the architects of the eurozone, who claimed to believe, all evidence to the contrary, that the productivities of seventeen countries would move in lockstep because the politicians demanded it. The Bankers loaned to Greece, Portugal, Italy etc. because the same politicians promised that the creditworthiness of all the parts stood with the whole, and that the whole would stand behind the parts. In the result, productivity in Greater Germany far outstripped productivity in Club Med, so that Germany ended up with a wildly undervalued currency, whilst Club Med now have a similarly overvalued currency. The essential problem is not the Club Med governments, nor the Bankers, but the architecture of the eurozone itself. The current situation was widely predicted, here and elsewhere, but the architects were and are driven by a megalomaniac mission to create a European superstate, and the consequences for the peoples of Europe are beneath their contempt. It is now impossible to see an evolutionary solution to the current impasse - at some unpredictable point, the solution will happen in the streets.
Access Investments-Building Awareness - European Union-ROMANIA
Thursday, December 22, 2011
Far from reassuring markets, the scale of Wednesday's bail-out for eurozone banks by Draghi's European Central Bank (ECB) should simply confirm fears
European banks face a €600bn tsunami of debt coming due in 2012 (mostly in the first quarter) and many simply can't pay up because the usual source of refinancing, wholesale money markets, are refusing to lend them any more. Sound familiar? One Northern Rock-style collapse after another would have reverberated around the eurozone over the next three months if the ECB hadn't stepped in with unlimited cash costing 1pc. Almost certainly there would have been a euro-Lehman moment too as a once mighty lender, probably in France, fell over. Draghi has had to ignore any sense of moral hazard and agree to fund weak banks at the expense of strong. He has opened a quantitative easing (money printing) exercise of enormous proportions. Weak banks unable to fund themselves on the open market are now hooked on cheap ECB money. Clearly, the fault for this chaos lies with the architects of the eurozone, who claimed to believe, all evidence to the contrary, that the productivities of seventeen countries would move in lockstep because the politicians demanded it. The Bankers loaned to Greece, Portugal, Italy etc. because the same politicians promised that the creditworthiness of all the parts stood with the whole, and that the whole would stand behind the parts. In the result, productivity in Greater Germany far outstripped productivity in Club Med, so that Germany ended up with a wildly undervalued currency, whilst Club Med now have a similarly overvalued currency. The essential problem is not the Club Med governments, nor the Bankers, but the architecture of the eurozone itself. The current situation was widely predicted, here and elsewhere, but the architects were and are driven by a megalomaniac mission to create a European superstate, and the consequences for the peoples of Europe are beneath their contempt. It is now impossible to see an evolutionary solution to the current impasse - at some unpredictable point, the solution will happen in the streets.
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2 comments:
Markets appear stupid because they are ignorant.
They are ignorant because company directors deliberately keep them ignorant to avoid responsibility and accountability for personal gain.
These people need to be sorted out so they cannot engineer secrecy so making the markets ignorant and prone to stupid booms and busts.
Poor control of information is caused by out of date corporate law undermining the effectiveness of the marketplace.
Possible solutions?
Collective responsibility for all board members for corruption, theft, fraud and gross mismanagement.
Criminal secrecy for attempts to cover up fraud, corruption, theft and gross mismanagement
Compulsory whistleblowing for all public sector employees right to the top.
What ideas do you have?
The E.C.B., making an offer too good for Europe’s banks to refuse, reported Wednesday that it had doled out almost half a trillion euros in low-cost three-year loans to keep credit flowing at a time when European banks are finding it all but impossible to finance their operations through normal market channels.
The lending reduces the “risk of a Lehman-type situation, where banks go into the new year facing a wave of refinancing and are unable to access the market,” said Jacques Cailloux, the chief euro zone economist at Royal Bank of Scotland.
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