Thursday, November 03, 2011

Dissing Europe's Flawed Bailout Scheme

Dissing Europe's Failed Bailout Scheme - by Stephen Lendman


Heavily indebted Eurozone countries face insolvency. Adding more can't save them. Nonetheless, policy makers repeat past mistakes, compounding failure with more of it.


Banker occupation corrupts Europe and America. They decide what's best for them. Wrecked economies follow. So do mandated austerity measures, including public sector layoffs, wage and benefit cuts, tax hikes on workers, cuts for corporate crooks, and unrestrained economic freedom to pillage.


Selling out to bankers, Eurozone leaders pledged an "ambitious and comprehensive" debt crisis solution. Knee-jerk market euphoria greeted it. Second thoughts perhaps know what's so far revealed falls far short of resolution. In fact, crisis conditions will worsen, whatever short-term gains are achieved.


On October 30, Bloomberg headlined, "Europe Blowing Last Chance to End Crisis: View," saying:


"The euphoria over Europe's latest rescue package faded quickly. Now the question is whether European leaders will ever agree on measures needed to end the sovereign debt crisis, and whether they will get another chance."


Fixing it depends on hoisting bankers on their own petards. Otherwise, economies can't recover. None held hostage to bankers ever do. Resolving that issue is job one. Whether or not it's possible isn't known. So far, it's not even mentioned.


When economic shysters run nations, economies and ordinary people suffer. That condition plagues Europe and America. Instead of addressing dire conditions responsibly, policy measures so far adopted exacerbated them.


On November 1, London's Telegraph contributor economist Liam Halligan headlined, "Why the latest eurozone bail-out is destined to fail within weeks," saying:


Last week's Eurozone deal is more smoke than fire. It "made Western Europe's grotesque debt crisis even more acute, sowing further infectious spores of confusion."


Bond vigilantes signaled what equity investors should have known. Debt liabilities can't be resolved by more of it. A bad situation gets worse. In addition, other important issues remain unresolved. Details so far are sketchy.


Cooler heads know taking on water faster than removing it means eventual sinking. Economies are like leaky vessels. When they're big enough or interconnected like in Europe, trouble and contagion follow, and nations aren't supplying life boats, at least not to their working classes.


What's needed "urgently is a clean, transparent Greek default - allowing this (failed) economy to leave the eurozone, reestablish a" devalued drachma, manage its own monetary and fiscal policies, and start down the road of recovery.


The same holds for other troubled Eurozone countries. Entrapped in its straightjacket's killing them. Combining 17 dissimilar economies under rigid euro rules failed. It's just a matter of time until the entire alliance crumbles. Troubled Greece should act first. Others can then follow.


Describing all "non-solutions" so far as "extend and pretend," Halligan ended saying he gives last week's deal "two weeks" to fail.


On October 31, Naked Capitalism headlined, "Europe's Economy is Falling Apart," saying:


Besides troubled Portugal, Italy, Ireland, Greece and Spain (so-called PIIGS countries), Belgium's now in trouble. Cyrus looks worse. Stagnation, deterioration, and economic decline threatens one country after another.


Predictions are that Germany, Europe's economic engine, will stall next year. France also has problems. All of them look to China and Japan for help. They have their own domestic issues to resolve, and won't throw good money after bad without getting lots in return - assets bought cheaper perhaps than European nations will sell.


Economiccollapseblog.com called the deal a Greek default in disguise. At best it buys a few months. However, it'll hasten collapse of other troubled Eurozone countries.


"Instead of being a solution, the European debt deal has brought us several steps closer to a complete financial meltdown in Europe."


Others may agree. Economist Sony Kapoor said "(A)ny deal impresses people (until) they start deconstructing it and parts start unravelling."


According to economist Ken Rogoff, "It feels at its roots to me like more of the same, where they've figured how to buy a couple of months."


VT Capital's Neil MacKinnon said much the same thing. So did others, dissing a rotten scheme, making a bad situation worse by buying time, and not much of it.


Eurocrats may claim resolution. In fact, they bought worse trouble ahead for countries teetering on insolvency.


On October 31, the Daily Bell headlined, "Latest EU Bailout Deal Not Meant to Work? saying:


Last week's deal "is already falling apart and, as a result, the entire process is ever more publicly suspect. (The) dominant theme (is) hope."


The smartest guys in the room came off looking dumb. "(D)isaster is being stage-managed to ensure that when Europe does fall apart, no one shall be to blame. The Eurocrats will be able to spread their hands, palms up, and say in unison, 'Don't blame us.' "


The IMF will then step in as global central banker, masking its loan shark of last resort role. Perhaps that's "the REAL plan" or one of them "as it looks more and more as if the euro is going the way of the Dodo."


Globalists may lose out on their one world fits all scheme, at least for now. Across Europe and America, anger rages against a broken, deeply corrupted system, sacrificing people on the alter of saving bankers.


Even Eurocrats lacked the power of their convictions, voting for a bailout deal they didn't fund. They want China and other G20 countries to step in. Ahead perhaps the Fed and European Central Bank (ECB) will provide quantitative easing (QE) solutions.


So far, money created to save banks hasn't worked and won't now. Using for it economic growth wasn't tried. Instead, bad solutions compound others creating worse than ever conditions.


China expressed great skepticism. So did Forbes commentators, saying:


  • Last week's "plan is obviously just another temporary fix." Earlier "comprehensive (and) final" deals didn't work. "(I)t may be only months before" another's needed.


  • Europeans aren't pledging their own resources. They want others to chip in. "They refused to commit their own cash or even issue sovereign guarantees."


  • "Europe doesn't need Chinese capital. They need someone foolish enough to lend money to countries that probably won't repay."


In the end, China may arrange its best deal and buy "rubbish bonds" because Europe is its largest market. It already owns up to $1 trillion in euros, and, with America and Europe, it's the third leg of the world economy.


"America is struggling with its Greater Recession. Europe seems on the way to shattering, and thus China is now propping up the world's economy."


The burden may be too great to bear. "China's problems are manifold and deep.They're just not being properly reported." Instead Western media pretend all's well "until the entire system simply collapses."


It may, in fact, be the grand scheme for "a new currency and a new system waiting in the wings" to swoop in and take over.


In other words, everything may change but stay the same with money power consolidated in fewer private hands to make more of it at our expense.


A Final Comment


Troubled Italy has to roll over $425 billion of its $2.7 trillion debt load next year. As bond yields rise in troubled economies, who'll buy what may become toxic junk and at what price? The higher they go, the worse off Italy, Spain, Greece and other troubled Eurozone countries get.


Across Europe, more questions than answers followed the latest flawed deal. Economist David Rosenberg called it "financial wizardry at its penultimate."


The Economist called "holes in the rescue plan...plain to see. The scheme is confused and unconvincing. Confused, because its financial engineering is too clever by half and vulnerable to unintended consequences."


"Unconvincing, because too many details are missing and the scheme is at its core not up to the job of safeguarding the euro." It's the third Eurozone "package this year. It is unlikely to be its last."


Rosenberg asked who'll supply new bank capital? Enough is needed to reduce default risks in troubled countries. The entire scheme depends on voluntary haircuts. Who'll agree to take losses to save others?


Unintended consequences abound. Risks are overwhelming. No one's sure what's proposed won't make a bad situation worse, including planners.


Germany's Angela Merkel admitted "We don't how how this works yet." Others suggest they're flying blind. Who'll supply trillions more when troubled Spain, Italy, and other Eurozone countries need help? Not enough resources exist to solve a problem already too great to handle, short of shutting down and/or nationalizing insolvent banks.


Since 2008, Eurozone planners promised solutions, but didn't deliver. This year alone they had three grand schemes. Early on they said Greece would muddle through. Problems wouldn't spread. Banks were sufficiently capitalized.


They've been out of step, off base, and dead wrong each time. Their latest scheme banks on staving off Greece's default at all costs when it's clear prevention's not possible, just delay.


Moreover, the longer inevitability's put off, the worse final resolution becomes. Prime Minister Papandreou's latest scheme is a referendum on the EU deal. Greeks revile him and his government.


Public anger greeted his plan. A poll showed 15% support, 60% against. Why trust a man who sold them out to pay bankers? Now he says "Let us allow the people to have the last word. Let them decide on the country's fate."


It's not known what choices will be given or how questions will be framed. Clearly Greeks won't accept further sacrifices on already unbearable ones. Taxes went up. Layoffs followed. Wages were slashed 30%. Benefits eroded or were lost, and Greece is worse off now than when crisis conditions began.


Greek law requires government officials framing referenda language. Parliament must approve it, then the president. People get what they give. So far they've been all take. Expect little better now.


Greeks and others across Europe deserve final say. Most want out of euro's straightjacket. Banker occupation followed. Debt entrapment benefits them at public expense. In troubled times, people bear enormous burdens to pay them.


Given a choice, who'd agree to debt slavery? What's ahead is unknown, but sustained rage combined with nationwide general strikes is the best option to get what corrupt politicians won't give.


Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.


Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.


http://www.progressiveradionetwork.com/the-progressive-news-hour/.