EU CRISIS BOMBSHELL: HOW THE EUROZONE PLANS TO SELL US OUT TO THE BANKS

Yes Wolfie, we can smell it too.

Ever so quietly, with the acquiescence of Berlin, Brussels is planning to let the bankers off.

Scared by market attacks on northern Europe, and still lacking any bazooka money, the EU’s key players are secretly putting together a plan to ensure the electors pick up the debt-crisis tab. The plan – which first emanated from Paris – is being scoped out and sold to the major member States by Wolfgang Schauble. It will be discussed at the ESM summit this week.

When I was first given this lead last Friday, my initial reaction was that it was unlikely to be true – because none of the majors had picked it up. But I’ve been fooled that way before. If you hunt hard enough, both Reuters and Bloomberg have reported it: but I don’t see any sign that they’ve grasped its full significance.

The spin technique has been to smother it with what appears to be this morning’s ‘big’ story – that Merkel and Sarkozy have agreed to set up an ‘instant austerity pact’ between all eurozone members….including themselves. Bild Am Sonntag pre-released it onto the wires last night, billing the idea as, basically, bringing the ESM bailout mechanism forward from 2013 and applying it de facto right away. In fact it’s nothing of the sort: it’s just another “look we’re applying discipline” stunt. More disturbing than the ham-fisted cynicism of this is that yet again here, we have a clear sign here of how Merkel is completely misreading what the markets are trying to get through her dull Osti head: they want action now on guarantees, not more signs of the dominatrix wielding her leather whip. But others are addressing this with a cunning approach to getting the markets off their backs.

Basically, the nugget that has gone largely undiscovered is this: although a number of sources know and have reported about tighter lending discipline being forced upon all the banks operating in the euro area, Brussels is secretly dangling a quid pro quo in front of investment bankers – who should be scoring loans properly as part of their commercial duty anyway.

Staggeringly, the deal is this: agree to these new banking rules in full, and we’ll let you off taking any haircut when it comes to ClubMed debt.

I understand the ClubMeds are all for it. Imagine that. The northern Europeans are less keen, because they see this for what it is: looney lender forgiveness as well as sovereign debt forgiveness. The exception (and why are we not surprised?) is German Finance Minister Woflgang Schauble.

The way this would span out, the fat guys in the tall buildings – who have not suffered at all in the past – will not suffer anything at all in the future either. Those who have wound up sleeping on the streets because of their foolhardy agreement to the cheap loans pushed their way will be let off….courtesy of the EU taxpayer. In a phrase, the banks would be off the hook. As always in Wonderland, however, there is the small matter of who picks up the tab.

I suppose one always imagined it would end up like this…but somehow I’d hoped that this time, the banks might get theirs. That now looks more doubtful than it did a week ago. Also unsurprising is that I am reliably informed the idea came from….France. Having knocked at the doors of the EFSF, the ECB and the IMF, Sarko is now knocking on our doors. If this thing flies, we the People will be bailing out the banks all over again.

I suspect that quite a few folks have missed the significance of the leaks and briefings because they are couched in the usual obfuscation about ‘private sector involvement in the region’s permanent bailout fund’, ‘preconditions for deeper integration among euro zone states’, ‘changing the statutes of the European Stability Mechanism’, ‘restructuring debts that undermine market confidence in the currency zone’ and other related bollocks. But the bottom line, I am assured, is exactly as I’ve described it.

Now of course, this is far from being a done deal – and if we get this news around the blogosphere (especially on the European mainland) as quickly as possible, it might turn into a self-denying prophecy. The disturbing element is how attractive it is going to look to all those about to be pardoned for their arrogant idiocies – even Berlin. It is, let’s face it, a piece of lateral thinking: we can stop the lenders looking for a last-stop Sugar Daddy by letting them off the haircuts, and using the bailout mechanisms to pay the money back. And then we can quietly sneak through a 100 million small tax changes and personal allowance mechanisms, while upping everything from parking charges to healthcare contributions.

It is much easier to convince the distracted citizenry that they’re not really going to pay for this mess than it is to fool a bunch of hard-bitten lenders – whose allies in the markets can hound you unto death’s door if they don’t get what they want.

And bear in mind anyway, to remove the ESM Statutes about lender involvement in debt reduction would require only a majority vote of the eurozone countries.

“There are a few pointers here and there suggesting some movement in Berlin on the question of banks taking their full share of responsibility,” a trusted Parisian source told me yesterday afternoon. (As it happens, this source is on the outer fringes of DSK’s circle. Given that he thinks Sarkozy is an arse and Merkel is mad, I think we can rely to some extent on the provenance of the information: this is very bad news for all those French Socialists expecting the banks to get at least some comeuppance. More to the point, Sarko will without doubt use this scam – if it comes off – to present himself as the man who saved the French banking system.)

So then, surprise surprise – in the end, the europols take the easy way out. But it doesn’t end there.

Germany is also under pressure to soften its opposition to the European Central Bank (ECB) playing a more direct role in combating the debt crisis. It would be a simplification to say that the ECB capital and liquidity which isn’t junk bonds and parked bank cash belongs to us. Technically it doesn’t, because we paid for that through another million hidden taxes. But morally, central banks are there to ensure that the viability of citizen savings and currency valuation remains intact, and free from the machiavellian short-termism of the private financial sector.

So it will be our money that’s at risk. Still not convinced that we’re being sold out? Well, there is yet more: Reuters reported on Friday evening that ‘The European Commission will publish rules on state aid for lenders that may dilute the effect of turmoil in the euro area on the fees that banks have to pay for guarantees on their loans and bonds’. It’s another sweetener: call off your dogs guys and, one way or another, we’ll make it easy for you.

Officials in Berlin were yesterday calmly denying any involvement in a ‘Big Deal’ to solve the debt crisis. But as Bloomberg reported late last night GMT, ‘officials in other euro zone capitals, including Brussels, say such a deal is taking shape and suggest Berlin will move when it has the commitments it is seeking’. As I’ve now had the initial lead from Brussels, and a convincing confirmation from Paris, I have to believe that the talks are for real. In fact, I know the issue will be discussed at the Tuesday/Wednesday ESM meeting in Brussels this week. And I know that Schauble has been persuading reluctant Finns and the Dutch to buy into it.

The Dr Strangelove look-alike might yet have to persuade Chancellor Merkel to go along with this. But as always with unser geliebter Wolfie, yesterday he was using the cover of the Merkel-Sarkozy ‘pact’ to get some hints out there into the environment. This remark was, for me, something of a clincher:

“Basically, we agreed on the principle for the ESM already in July,” he said, “If we now manage to move toward a stability union, we’ll see how one might possibly adjust responsibilities within the agreement.”

——————————————–

You don’t really need me to sum up what all of the above means. And to be frank, even when the truth comes out, a lot of EU citizens will accept the solution. So brainwashed have we all been over the last decade into believing that damage to the banking system means the planet will explode, it won’t be hard to bamboozle, cajole and spin this ‘answer’ to the electorates concerned. It is, in all senses except those involving morality and ethics, a very clever idea indeed.

The ClubMed debtors have welcomed the scheme with open arms, and I don’t doubt their peoples will too. The obvious ethical flaw in the idea – that the banks win again – will appear esoteric to the Spanish estate agent whose credit line stays in place. But the ethical bombshell is nothing compared to what is once more being kicked down the road: how to get the real economies of Europe going again. The higher taxes and falling living standards that must follow the enactment of this grubby plan will turn a depression into a slump. I no longer have any real idea whether this bothers the banks, but I very much doubt it: their activities seem to take place more and more in a nether world far away from the rest of us – be that socially or economically.

Update/Corroboration: Some Sloggers seem to think I’m either making this up or making it too complex. Either way, there is an eminently clear version to be read here at Mish’s blog.

As you know, I rarely ask Sloggers to do my marcoms for me, but this is probably one of the most important posts I’ve ever done at The Slog. I would ask all who agree with the analysis – and fear this plan coming to pass – to broaden awareness of it as quickly as possible. As you know, the Guardian and the US are particular problems for me, as my comments are largely banned there. But any help anywhere with anyone to get this scam out there would be good. Thanks in advance.

Learn more about The Slog here

Related posts: The vulnerability of the banks.

The closed mind of the Europhile

113 thoughts on “EU CRISIS BOMBSHELL: HOW THE EUROZONE PLANS TO SELL US OUT TO THE BANKS

  1. The other day you were arguing that Germany should put its hand in its pocket to back the Eurozone in a sort of joint and severally liable scheme to prevent Euro destruction.

    Now you’re saying that a joint and severally liable Eurozone to protect the banks is a bad idea.

    I need more explanation.

    • me
      Governments are not taxpayers. They are funded by taxpayers, and their performance is then decided upon at an election.
      Eurobonds are issued by a central banks indirectly funded initially by taxpayers. Governments, not taxpayers, are then responsible.
      Under that plan, the banks would have to accpet part of the blame. Under this scam, they won’t have to.
      If you really need that explained, then I’m sorry but there’s nothing more I can do for you.

      • Government money is taxpayers’ money.

        To everyone else, as mentioned below, this is more clearly explained at Mish’s blog.

        This is ludicrous, but so are Eurobonds. What I was objecting to was your feather spitting response to this nutty plan when you seem to favour something just as bad.

        Whether it’s Eurobonds debauching our currencies or governments using taxpayers’ money to indemnify banks we are screwed.

        The only answer is to write off debts. We can do that now in an orderly way, or later via default and chaos.

        Thanks for your efforts.

    • Yeah, I saw that earlier this week too. Also, US, France, UK and Israel severed all financial and diplomatic ties with Iran.
      I showed the articles to some friends and they just think it’s sabre rattling, not so sure though.
      Not been able to pick up anything further though, and certainly not a thing in the MSM.

  2. The intra-eurozone ESM treaty signed by the governments of the 17 eurozone states on July 11th is not yet in force.

    And it can’t come into force unless and until the necessary EU treaty change has come into force, and that necessary EU treaty change agreed by EU leaders on March 25th:

    http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:091:0001:0002:EN:PDF

    can’t come into force unless and until it has been ratified by all 27 EU member states.

    And it can’t be ratified by the UK unless and until Parliament has approved it through an Act.

    So if you want to do something practical to try to stop this in its tracks, lobbying MPs to block the Bill, and maybe insist that the treaty change should be put to a UK referendum, is the obvious option.

    I’ll repeat that sequence of legal steps:

    UK Bill to approve EU treaty change agreed on March 25th -> UK Act -> UK ratification of EU treaty change -> EU treaty change can come into force -> ESM treaty can come into force.

    • Denis
      I agree. But the first priority is to GET THIS OUT THERE AND EXPLAINED.
      The EU (and Westminster) functions on the principle that time starvation + frightened electors + spin obfuscation = we can avoid democracy and keeping our word forever.
      The way to sink any process is to make it stink before it gets going.
      You have your way of doing it, I have mine. I don’t have the time to go through all you suggest. Perhaps, if you do, you can persuade others to do it with you.

      • I am explaining it, and have been for many months.

        At this rate the Bill will have been introduced and passed before 99% of the population know anything about it.

    • Probably more chance that the East Central European Awkward Squad will make life difficult for the EU Elites and their ESM Treaty than any British government ever will.

      All British governments have greater allegiance to the Banks than they do to the People – been like that for a long, long time.

      The UK MSM might take notice if Irish have a referendum & say no, again.

  3. You have not explained at all clearly what you are talking about and nor what is new in your great discovery.
    Are you saying European QE or are you saying austerity measures? What are you talking about

      • John: Maybe I’m being thick but I really don’t understand what is being proposed other than the banks will be bailed out (a la TARP as suggested by Timmy?). Furthermore, as you note, this solves nothing for the Club Meds since they have the full weight of the debt and no devaluation or inflation through QE. It’s really a case of the degrees you get at an American university: B.S., M. S., Ph.D. Bull shit, more shit and Piled higher and deeper.

      • OAH you forgot about the last bit

        B.S., M. S., Ph.D. and MBA – Bull Shit, More Shit, Piled higher and Deeper and Masters of Bugger All”,

        I don’t get it either, but given I failed alfabet and times tables at school its not surprising.

      • @RP
        I am sure that you could find the study – but it stated that a company’s profits were inversely proportional to the number of MBAs they employed …

      • @Gemz – no need to find a study – I’ve had the misfortune to work alongside them – I’ve seen them in action – see earlier comments about men with templates and those that talk like Jimmie Murdoch.

  4. JW
    All the way through this piece I was thinking about Britain’s own attempt to do precisely what you argue the EU is doing in this instance. The Bank of England printed GBP 275 of funny munny, all of which at some point will need to be paid back. If you look at what Wikipedia says about QE, Britain is doing everything it should not do with this money. In short, it is going straight into the banks and not coming out again.

    As is important here is that the banks having gotten their paws on this money are somehow not lending it out in the way that you accuse the European banks of not doing.

    In short, the private concerns are not playing fair. That they never have and do not now, and will not in the future should not surprise anybody. Their job is not to be fair or anything else, but to make money. How they do this is entirely their affair.

    If you have ever come across one of these kindly concerns when you cannot pay your bills, you will find out just how nice they can be. At their most charitable they will accept all answers that end in “I pay” and will accept no other. Their generosity is being immovable on this point and arguing with them is like arguing with my ex: either he wins, or you lose. The choice is how long you take to reach either of these conclusions.

    Listen: I am not anti-Britain. I am anti-corporation. Britain has too much vested in its corporate banks for its own good, and not enough in small enterprising businesses that employ real people who live in real streets. What is more, it felt like Britain was actively discriminatory against the SME sector. Moving to the Netherlands was like the sun coming out for me. You still have to pay taxes, but to have an authority that not only is kind but eager to help makes a huge difference.

    • Hi Gemz
      I think we are all agreed that the individual must be allowed to prosper as much as the corporate beast. The problem right now is that the working people have become serfs to the corporate beast with no escape.
      Capitalism right now is broken and it is in desperate need of resetting, politicians and banks are incapable of seeing this because of vested interests.
      Right now is not the time to tinker around with peripheral nuances, right now is the time to get to the heart of the matter, which is debt. And of course this is where JW’s and other like minded peoples thoughts of debt forgiveness must be implemented.
      Here is Prof Steve Keens quick summary of debt forgiveness ( BBC news 3mins 26sec)

      http://news.bbc.co.uk/1/hi/programmes/hardtalk/9641873.stm?mid=5381

      • @Trevor
        Thankyou for your response. I am totally in agreement that debt forgiveness is the only sensible solution here, and that Steve Keen’s ideas follow up on this.

        I have been chasing his blog and the Centre for Economic Stability website too. It is a start for me; the concept of forgiveness is the single most important concept in terms of debt and indebtedness that the human can wield.

        There is no fairness in our world, and we are not created equally. What we can do is respect each other as though we were equal – which is an entirely different proposition. I say this in respect of the Germans and peripherals. The Germans have paid them for a long time now without complaint: what they do not want to do is pay for private institutions and corporations that will effectively harbour the money and not use it effectively (= at a human level).

        It matters not who wins and loses in this corner of forgiveness. What it does is allows all of us to get back on our feet. The alternative is a complete wipe-out where everybody loses. Humans have free will, and this allows us to forgive the debts of others – yes it will cost you, but if it will free you, is it not a price worth paying?

      • I quite agree.

        Except that we do have the opportunity to escape. We can starve the beast be withdrawing our custom from all corporations, wherever possible.

        Examples:
        * Close all accounts in global banks (e.g., Lloyds, RBS) – instead use local Mutual.
        * Boycott the supermarkets (e.g., Tesco, Lidl) – instead use Mom & Pop stores. They can do with the business, because the government is killing them.
        * Pay down debt (e.g., credit card, mortgage) – ASAP and *never* take on more.
        * Reduce consumption and buy only goods that last, preferably from neighbours, car boot sales, other non-establishment outlets.
        Pay cash wherever possible – foil their tracking systems which enable them to target taxation finely at the middle classes, based on data mining info fed to them by the banks.
        Grow your own food. Who needs the toxins in the nutrient-deficient junk that the supermarkets sell, anyway! Else, buy from a local farm and pay cash. I bet he could use the money.

        No doubt, people can come up with ever more ways of starving the beast. The more ways we use, individually, the better.

        If we could cause the profits of the corporations to drop by 10%, we might force a few out of existence because some of them have relatively low profit margins.

        Worth a shot?

      • @Faustie
        Always the best way: start with yourself and work outwards. I support most of my local shops – they are more expensive but the sheer pleasure of being able to shop locally (and not have to drive 10 miles to the nearest one … ) is worth a lot to me.

      • Sorry to be pedantic but Keen is not advocating Debt Forgiveness aka known as a Jubilee. Keen is advocating a System (in his view that’s what’s broken) Reboot that doesn’t restart with Freidmann’s “Monetarist Capitalism” but with Schumpters “Capitalism of Creative Destruction”.

        System Reset would give everyone the same handout, the indebted MUST use it to pay their debts, the unencumbered can use their handout as they see fit. Laws would be put in place to prevent the re-emergence of what we have now. With a System Reset there’s less moral hazard and because the money is pushed in from the bottom it will bubble up and benefit the intermediate zone, I’m not sure what happens when it floats to the surface – evaporation comes to mind.

        But my message is Keen is NOT advocating Debt Forgiveness, listen to what he says not what Kirsty Wark says he just said – bloody journalists. There’s a better, but older, interview at KayEmmOs blog.

      • @Right Paddock
        Sorry. I have only just come across his ideas, and they are not properly assimilated yet. You are wholly right that he does not propose forgiveness.

        Whatever else, it is the most sensible, workable and doable set concepts that have been put forward. If it works, it does not matter what you call it, for we will have an economy afterwards.

        I have been reading his blog last night and his work with fractals is astonishing. I am getting to grips with the mathematics too, which given that it is pretty basic won’t be much of a problem. He goes a long way to explaining a number of things I was looking at through the lens of Fibonacci numbers in economics – but he does it from the other end, through the structure of fractals. It is extremely interesting!

    • Hi Gemz
      Thanks for reply, indeed now is not the time for finger pointing but to rally together as one to fix a system that has and is failing humanity on a global scale.
      Is it the human psyche that leads us to destruction before we can put things right?
      It seems to be the fear of collapse and, self serving interests over the interests of the masses, that makes the politicians to cling onto the path of destruction.

      “the concept of forgiveness is the single most important concept in terms of debt and indebtedness that the human can wield.”

      That truly is an empowering thought which would enable, strengthen, and free the masses: And the *system*

      • @Trevor
        Thankyou. it is interesting that there are two kinds of people: those who analyze situations, and always find the problems and become pessimists. There are those who analyze situations, see a bigger picture, find answers and become optimists.

        I can agree with your statement about people (not only politicians!) clinging to the path of destruction. It is more that they cannot see beyond their own desires.

    • Gem you are very obviously anti Britain, no point in denying it. Q E causes many ills but it is not in the same league as the ESM. Our banking sector got to big, but the idea that we don’t have a small business sector is nonsense 60% of our work force is in small/ medium business.

      • @Soap
        thankyou as ever for a most constructive response. I will add that if said SME sector was doing the job properly, why do you need QE and not just raise taxes instead?

        We do not need more bare facts: we need solutions and that goes for Germany as much as it does for Britain. Anyone can read a book – it is reading it and gaining an insight that is necessary.

      • Gem we need Q E because of our phenomenal debt and some liquidity problems in our banks. It has nothing to do with our sme. I await the day that we have a constructive comment from you about Britain, claiming to be constructive is not being constructive. You hate us, we get the message, I for one don’t really care, but the idea that your failed attempt to run a business in our country and general distaste for us gives you an “insight”, is laughable. Almost every post contains some inaccuracies about the true situation here.

      • @soapy

        thankyou for your kind words. I appreciate your applause at “my” failure in business – actually it was “our” business. We ran it together, and thankfully he was a little more generous in his comments than you are, though not by much I am sorry to say.

        So: let us have some constructive suggestions shall we? Let us kick off with some taxation suggestions for the UK. I have suggested them before, but I guess they went unheeded. Small businesses are struggling, so give them a break? The sort of thing I discovered when I moved to the Netherlands would make a nice change for many SMEs in Britain – which would be around the GBP 20 000 mark. Oh, and perhaps a tax service that answers the phone and responds to letters might be useful. I believe that is what the Inland Revenue does?

        As to the banks, they are part of the problem and not part of any solution that I can see. The money that was raised and spent on QE – which I will remind you will come out of YOUR taxes at some point – did very little save to make your currency weaker.

        Which leads me to another solution for you (which I guess you took as an insult again? You seem to assume anything I say is an insult) – SMEs should not export on price. Sell on quality, for Britain has it in shovelfuls. Why are you not exporting the sort of specialist machinery that it takes a German a great deal more money and effort to fabricate? Germans are good at production line engineering.

        Over to you now: and I want some suggestions (and not the sort that start with “go home” or “shut up”). Positive, practical suggestions. So far, you have been very quiet on this front.

      • Gemz,
        Ok so to start off let me say my comment about your business probably was a bit below the belt, so apologies,- I did not read my own post before sending and thought as I read it, it was a but harsh. I can’t ever remember telling anyone to “go home”, or to “shut up”.
        Firstly before some solutions, which I’m sure we will disagree on, let me state that I think your assessment on Britain not exporting anything is simply incorrect. We do export a lot of manufactured goods, and although ignored through the credit bubble we are again increasing in this regard. You post about this a lot, and I and many others have pointed out this misconception to you, but you do choose to ignore us. That sector of our economy is being focused on anyway as all agree it should be so you are providing a solution that is already happening.

        Your two other points taxation and QE. Well in a perfect world QE would never happen. I don’t like it and don’t think it’s good, but once we had the ’08 crash and the resulting debt, I have not heard of a different or better solution. Yes it causes inflation, which we all hate, but it has made our debt more manageable and our products cheaper. That is a fact. The best analogy I can draw is to say under normal circumstances jumping into an icy cold sea is a dangerous and bad idea, but doing it if you are on fire, well it might be your only option. As to taxation, well in your previous post you suggested taxation instead of QE and to then you say we should provide tax incentives to stimulate business, both can’t happen and that pretty much sums up the problem. Tax cuts are great, but not if it just increases the debt drag on the wider economy.

        So my solutions? Well here they are:

        firstly Pull out of the E.U. then stop all the offshore wind farms which we are at the moment spending more money on then the U.S. does on NASA. the savings here would immediately slash the costs of our energy, dropping general inflation and putting a enormous injection of cash into our economy and also make doing business here much cheaper. Then build nuclear stations so we are self sufficient and can export energy (like the French).

        Next step. devolution of all parts of the UK. The Scots can balance their budgets the English theirs. That will lead to a lot of savings. Also slash quango’s etc. Every penny saved would go straight into tax breaks for the priva e sector business’s.

        Also regenerate our fishing and agriculture which would at last be free from the E.U. policies. Self sufficiency should be the goal. Probably not achievable but if we aim for it we may get close.

      • @Soap
        Firstly a thankyou for your kind apology which was as unexpected as it was appreciated. I will add that I was proud of what we had achieved with our business in the UK, and was appalled to find it unwound in the space of six months due to an accounting error in the Government planning department (half a million Poles not the anticipated 10,000 or how ever many there were). I say this not because of the Poles themselves, but because of the catastrophic speed of our demise – our business went from full orderbooks to empty ones in the space of some four months. Having worked steadily to build up to this point, it was a real slap in the face for both of us. I was, and still am, p**ssed off about it. I think you would understand my having some grouses about the British government!

        I do know that Britain exports stuff – but please realize that I have some experience of several European countries, and speak the languages fluently (even if my German is now rather rusty). I have seen British salesmen mess up sales pitches because they are selling to a British audience – the problem is that they are selling to Dutchmen who found it difficult to appreciate the deals being offered since none of them applied to their businesses. In short, if the Brits knew the markets to which they were selling, they would be able to sell very easily indeed given the quality of many British products.

        (1) Energy – whatever happens with this, what is certainly needed is a firm and sensible plan. Whilst nuclear power plants are great, it would be another 15 years before they came online, it would need patience. Whilst the wind-farms may be expensive, they could provide jobs if the machines were made in Britain – and why are they not? If fuel costs continue to rise, then it may be that wind is a sensible alternative especially in remote areas.

        (2) If Britain wants to leave the EU, that is fine by me. Just do it!

        (3) Taxation – this in any case for the Government is difficult. If you lessen the burden on SMEs will they pay more because they become more productive? What Britain needs is capital generating industry. To my mind taxbreaks are a risk worth taking, given that if it does not work you can use QE again.

        (4) QE – Britain should not have followed everybody else and bailed out the banks in 2008. It would have hurt, but it would have been a lot less pain than now. You would also have a clean balance sheet. As to further QE it is not doing what it was supposed to do, it has merely given the banks an extra puff of air in their life-jackets. If the last round of QE had gone into stimulating the economy and the industrial base of the UK and its exports, that would have been a different matter. The fact is that it clearly has not. The jobs that would have created would have been worth their weight in gold.

        (5) Devolution – give it a try. Just make sure that the government is smaller to compensate for this

        (6) No problem with agriculture. For the farmer, a lot of the problem is centralization, and super-picky supermarkets. A lot of otherwise edible food is wasted because it “isn’t the right shape” and that is not the EU but the purchaser saying this. In short, more farmer’s markets!! Farm shops and that sort of thing. Then they could sell their oddly shaped carrots at half price and still make the profit that they would have made selling to the supermarket chain.

    • Old Asia
      At the last count, the sum of lucre in the bazooka was £00.00, to the nearest nought.
      However, Germany’s borrowing cost was more than ours – and Italy’s had leapt again to 8%.
      Further, the banks were due to be taking somewhere from 35-60% haircut. (Which some of them genuinely can’t afford).
      Under this proposal, the banks will have long hair a la 1967, and the ClubMed debts will be paid off NOT forgiven.
      The only people with the kind of money to make this work are….you, me and all of us who had little or nothing to do with it.

      • “The only people with the kind of money to make this work are….you, me and all of us who had little or nothing to do with it.”
        As prof Steve Keen said it is the system that has failed and, not the people within it.
        Therefore the risk has been taken by the banks and, it is they that should take the consequences of that risk, so dictates the fundamental workings of capitalism.

      • Of course it won’t work. The countries cannot service the debt and they need to devalue plus we all need inflation. I’m afraid Steve Keen’s ideas are for a decade from now, not today, since they are too radical. But it’s only the EZ paying directly not us. We only pay because the recovery is delayed till 2020 or 2030 and we will have been engaged in a major war by then.

    • You are not anti-Britain but you are an idiot. They are using QE to buy government bonds. That’s why the price of UK government bonds is staying as high as Germany despite us having an absolute mountain of debt.

      Basically the BofE is writing off the UK government debt in batches of about £250bn. Give it 7 years and it will have written off the whole lot. It has to do this because the alternative would be to actually pay off the debt we as citizens owe because we democratically elected a profligate Labour government yet again having not learned any lessons from previous occasions when Labour screwed up an otherwise functioning economy. We don’t want to pay off that debt directly because the middle class would have to pay the whole lot in taxation since they are the only ones generating real wealth. So we are printing the money. This will cause inflation, but not so much inflation as you might think because [1] stuffing loads of government debt into the economy causes inflation itself and actually its the deflation of paying down the debt you need to worry about [2] The £ happens to be a major reserve currency, so there’s more out there already than you might think.

      Meanwhile this policy means there will be plenty of liquidity in the system so the technicalities can sort themselves out without causing a lack of cash in the real economy. Which is a good thing if you are an engineer and want to use cash to buy milk, for instance, as barter isn’t really an option.

      And yes, all this isn’t exactly ideal but we really should have thought about that when we sat on our fat middle-class asses and just whinged when Labour looked like they might win another election when what we should be doing is cutting their friggin’ Marxist heads off and sticking them on spikes outside the Tower of London. So we can just sit back and whinge again while we get our asses kicked by inflation but hope the Marxists don’t get their own way with their scorched-earth plans to foment revolution with mass strikes of the useless public sector and camping parties outside a prominent church.

      Finally Gemz, I’m glad you’ve found a new home you like in Holland that you are happy with. God knows you never seem to tire of telling us and God knows Britain is better off without you. But remember the fact remains you are British, and therefore a sad pathetic loser and the whole of Europe thinks you’re a sad pathetic loser like the rest of us and nothing is going to ever change that.

      • @Ryan
        Thankyou for your kind words. “A sad, pathetic loser”. Well, if that is the best and most positive thing you can come up with, I can do without any more.
        I may have lost a few times, but I will be back in business next year, you can be assured of that. There is room enough, and I have learned a few valuable lessons in the last six months. Sadly, not from you.

  5. JW
    I pray that the blind ignorant politicians wake up and implement a form of debt forgiveness rather than continue down this debt spiral that will result in riots and misery for everyone.
    If only they could be brave and implement Radical Realism.

    • The whole charade of late on German Media about “Neonazies”
      is a deception campaign from this genocidal Banksters overtake.

  6. Sorry, NO sympathy whatsoever for indifferent euro citizens without vision or attitude who just love to be walked over by their masters.
    They need to WAKE UP.

    • @saucyboy
      This argument could also be laid at the feet of the Scandinavians, British and Americans. You do not need sympathy to forgive, only foresight. If you have that, then you will understand how these people come to be walked over.

      What is more, you cannot wake people up to the dangers they face without showing them first some respect. If you do not, they will assume you are part of the problem.

      • @Gemz
        It really is overdue to be said publicly that I think your regular devil’s advocate contribution is particularly irritating and lacking in loyalty to the UK.
        I for one would prefer you commentate in the German press and Blogs and build them up for the wonderful beings you think they are.

      • @saucyboy
        if that is the best you can come up with, you deserve all you get!!

        At least I can come up with a few solutions in the mean time.

        I will add that shouting at people in the way Brits do just leaves Europeans shaking their heads and wondering why all Brits are deaf.

      • I think you have to live outside the UK to see it as it is. The population of the UK is in general too insular for a trading nation and too brainwashed by the print and electronic media. And they like it like that!

      • @Gemz “What if they can’t have it like that?”

        To deprive them of “it” would be require the occurrence of undemocratic event such as a few years under a Napoleonic Tyranny or a Washington Revolution – after which they’d at least have a written Constitution.

  7. And then we can quietly sneak through a 100 million small tax changes and personal allowance mechanisms, while upping everything from parking charges to healthcare contributions.

    So what happens when fewer people are paying tax then or are not using the car and thus not paying parking. Does the whole house of cards fall over and how soon is that likely to be
    The supposed freeze on the fuel duty increase won’t help here either

  8. If some people here are struggling to get their heads round what JW is saying, then maybe there is an issue about what should be communicated and how. It would appear he is getting a bit tetchy with those who want clarification, rather than taking it that the blog contained a lot of information that would baffle 95% adults.

    This is a shorter version from Mish

    http://globaleconomicanalysis.blogspot.com/2011/11/latest-idiotic-plan-no-losses-for-banks.html

  9. I guest it goes all the way to the end-game then.
    The end-game is, they can have no elections (ever); nor referenda, nor plebiscite. If they even dream of giving us a chance to state our objections, it is all over.
    So all we can do is withhold our labour or our taxes. I love my work, so they can say bye-bye to my taxes; and they can say bye-bye to the rule of law over the rest of us. They broke the system, they can pay for it. That’s the message I’m telling people. I am no longer a citizen of Europe, or the UK.

    Small is beautiful.

  10. Honestly, if we didn’t have people explaining it to us like you do John, we’d blinded by the bloody jargon they use. It defies belief that after all that’s happened, they’re going to land taxpayers with the bill again. How poor do they want us?

  11. Ok there seems to be some confusion as to what exactly we are talking about here. I think I get it but want to make sure I’m on the right track. Basically Europe is going to use the ESM mechanism, where Brussels can demand as much money as it wants from European taxpayers to pay of the bondholders. So all European taxpayers are now liable for piigs debt, and it will be funnelled through the ESM mechanism so we nor our national governments will have any control of how much is paid or by who. Am I getting this right?

    • Is that much different from what a lot of us think they were doing anyway in one form or another (CAP etc) except this time the banks get it as opposed to the “allotment holders”

      Time for Barters and Swaps I begin to think

    • McSoap
      Pretty much correct. The Sun headline is that Brussels, Berlin & Paris lack the spine to stand up to the banksters.
      So they’ve decided we should pay instead.
      This gets the markets off their back.

    • @soap – The ESM doesn’t exist – 27 countries have yet to ratify the treaty, including Britain and the Coalition of European Awkward Squad – East (CEAS-E) states.

      And as I read Mish, he seems to think that Schauble along with his counterparts in Ned, Fin and Aut are opposed to the idea of the ESM being used in this way. Its Sarko, Monti, Rajoy and Papademos who are pushing for it. Merkel will give Sarko some political cover, but when push comes to shove she’ll do what Schauble & Weidmann tell/advise/suggest that she do.

      Why are all these EZ instruments within the greater EU anyway?
      Why is it a direct concern for Britain which is even outside the EMU ?

      Thought bubble & rhetorical question – if the EU had a Constitution, as I believe was proposed in the original Lisbon Treaty, then would there have been an EU Constitutional (Supreme) Court – to which countries and individuals could seek remedies to the wrongdoings of others? I think that idea went out the window because the Irish said no.

      • RP, yes I understand the ESM doesn’t exist, but it is the future if the Commission and the federalists get their way. And John seems to be suggesting that it will be used to pay off the bond holders, which is what I was trying to clarify because I find it staggering, even by E.U. standards.

        I don’t know your personal thoughts on the E.U. but I have given up on believing anything but disaster can come from it, not because the idea is wrong but because of the political class we have implementing it.

        The supreme court you speak of. Well honestly what is the point when all E.U. commissioners are exempt from prosecution (for life). According to my MEP all E.U. officials are.

        I think these things do directly affect Britain because at some point we have to make the choice. Do we become part of the U.S. of Europe or do we not. If we do we will have to live by these crazy rules and put up with these awful shenanigans. If we don’t well I honestly think a centralised government in Brussels would do it’s best to make our life very difficult, they won’t like us “little Englanders” having the temerity to go our own way

      • @soap – I think we’re all trying to get our heads around this.

        I’m guessing that what’s being blogged here and elsewhere is what some journalist said someone said, not what someone actually said. See my post in here in response to Trevors post of a 3.5m outake from a 25m interview with Steve Keen regarding Debt Forgiveness.

        I was against Britain joining the EU at the off in ’73, in ’75 when Wilson gave us a chance to get out I voted to get out. Now I’m for moving to the European Customs Union, I think we’d be OK, but it would require the agreement of the other 26. The ECU is not EFTA – Norway and Licht have to contend with most of rules that Britain does today, but they have limited power within the EU. I think ECU members get some or all of the trade block advantages, but without the regulations and no power within the EU.

        I don’t really understand financial services, I’m told they’re important to Britain, but I’m not sure how dependent they are on EU business or whether the Customs Union would provide the same environment as they have within the EU.

        On the Constitution issue, it was just a thought bubble – Constitutional courts aren’t criminal courts, in essence they make findings on whether an Act of Parliament is lawful, or whether a judgement in a lower court is lawful or a regulation is lawful. So the personal immunities may apply but the Laws they make can be struck down. Law makers and regulators don’t like having their stuff being tossed in the bin, hence they act less recklessly if there’s a bunch of constitutional lawyers and a panel of judges watching their every move ready to pounce on any digression. This culture is alien to Britain.

  12. Pretending something is worth par,and making that pretense somehow legal,for banks etc.,when the market indicates otherwise,will not oblige the proverbial Belgian dentist,the king of the market,to buy duff debt, now or in the future.

  13. @saucyboy
    Disagree with your reaction to Gemz. I dont always agree with her but welcome the perspective from outside the UK and as a brit living in NL often
    recognise the view. No need to take her comments to another blog. The SLOG is educative and refreshing and I’m sure can handle these arguments. Makes a change from the “UK knows best” attitude (GB saving the world and Cameron lecturing EU to get house in order) Nothing wrong in UK is there.
    Thanks JW for the great blog and “latest warning”.

  14. As JW points out, increased taxation and austerity will turn a depression into a slump, surely that is an issue for the banks too, as people will be borrowing less and paying down debt and that will in turn hurt the banks who unable to create money as debt? This is surely only letting them off this hook this time, doesn’t solve any underlying issues, does it? And to keep bleeding the taxpayer will only exacerbate matters? It must be a self limiting exercise and will only implode? This keep “putting off the ugly day” cannot last forever eventually they must face up to it?

  15. I suppose that there is one simple solution, nobody has mentioned. Usury.
    Usury is the charging of extortionate rates of %, not 0%, reasonable % rates is fine.
    1] If the Savers of the UK, and possibly the US/USA also were to be paid a reasonable return on their savings, MLR + 2%. They would in turn go out and spend this return and therefore stimulate the economy
    2] If Credit/charge cards had there % repayments set to no more then 3x the MLR + 2%. People with high Credit/charge cards were then to pay off their debts.
    3] If the mortgage rates was to be set at MLR + 4%. it would give mortgage payers a chance to pay of their mortgages.
    4] If the UK/US/EU was to say that all debt repayments on Government debt. Money owed by the taxpayer would only attract % rates at MLR + 1% and any existing and new debt would only be paid at this rate.
    5] All Government expenditure to be frozen at current levels.i.e. Pensions, Benefits, hand out to Businesses [sorry tax breaks] Tax bands to be frozen at current levels. All Government employees to have their pay and expenses frozen [Yes this would include MP’s and the exec’s of Corporations that are in receipt of tax-payers money.
    6] The ceiling for National Insurance payments to be abolished, [ we are all in it together]
    7] A property tax of 0.5% of the value of all property.
    8] The above to be in force for the next 5 years or till the Governments have balanced the books. Just like you and me they only spend what they raise in taxes.
    9] If they spend too much they raise taxes, the taxpayers vote them out of office.
    10] If they cut too much the rest vote them out of Office.
    In either case until the National debt is below the Countries Total Tax receipts. Our elected officials don’t get a rise in their salaries and expenses. Unless of course they wish to see a reduction in the number of elected officials, be they MP’s. MEPs MSPs. Local councillors etc.

    • @Lupulco

      Apologies if I sound picky, it isn’t intended, but how would you propose to get all this put into effect, given that it would require the assistance of those already in power to get started? They of course might see little of advantage to them. Which is what makes it a wizard plan of course. So it’s greatest strength is also it’s terminal weakness.

      Sorry mate, no chance. Pity though, it is much in accord with most of the good ideas posted here and elsewhere many times.

      • In 1997 when the Asian Financial Crisis struck, Malaysia was severely criticised by all and sundry for refusing an IMF bailout, putting a freeze on capital flight and making radical changes its banking practices including a ban on Usury. The Saudi’s sent stability fund money to Malaysia.

        Malaysia apparently recovered (i.e. got back to where it was before the crisis) faster than all of its neighbours, including Singapore, which of course Malaysians never tire of telling everyone.

        The banking regulations as used by Malaysia have been approved for use within the UK by the FSA, in fact there are institutions already using them – http://www.fsa.gov.uk/pages/About/Media/notes/bn016.shtml – you probably wont like it much, but its worth reading just to get an idea of an alternative approach.

  16. It’s not just the UK economy, or the EU economy that’s in a mess, but the world economy. Every country or region is just sitting in it at different stages. They are all in a state of denial about what the mess is, so everyone is sinking deeper while politicians and flat-earth economists preach growth at all costs.
    The entire economic structure of Europe, at least the wealthy northern half, was built on cheap energy. We had lots of coal, and we used it to build cities, grow food, become rich and loot the rest of the world before it caught up with our technology. It all coincided exactly with the cheap energy output of the industrial revolution.
    European wealth, and now the lack of it, can’t be ‘fixed’; because that cheap energy has now become expensive energy. We can no longer afford to burn it to power our machines. That’s why jobs are vanishing and food costs are rising.
    We called global industry ‘GDP’, but in fundamental terms that was digging up fossil fuel and setting fire to it. The more we dug up and burned, the richer we got. The faster we burned it, well…wasn’t that a higher percentage growth? The Ponzi economics of world finance needs that constant growth, or it collapses.
    Face it, there’s no more cheap energy to fire our economic system. The same applies to the USA and the rest of the developed world with ‘western’ style economies. Exceptions prove the point : Australia and Saudi Arabia have booming economies, and what do they have in common? They export energy. China exports the energy of cheap labour. The UK boomed when it exported North Sea oil, now it’s in decline.
    We were all promised utopia, but now the demand for infinite growth has hit the wall of finite resources.

  17. Already on the case, I have seen that ‘soap mct’s’ video on another site, and immediatly contacted my MP. I have tried in vain to explain it to people in very simple terms, but It is fustrating as folks just don”t understand – they think it is just fist waving at banks!

    Anyway, about the Austerity here in the UK. Our Government have announced it is sending 1 Billion, BILLION, to Africa to tackle ‘Global warming’. (manic laughs) The cost of the Team McCanns investigation is expected to reach a few million,( cries with dispair) anyone know the price of a used only once -duck pond? Subsidised food at the Houses of Parliament is still on the menu.Whilst the rest of us are looked down upon for not using our initiative and grabbing as much cake as we can- seeing as we complained about there being no bread! Tsk the peasants are getting restless.

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  19. Bloomberg reports that Schauble has said ““We need only change so-called protocol 14 of the Lisbon Treaty — that is for the members of the single currency to create their own stability union,” Schaeuble said. “We must concentrate on that.”

    I read that as being EMS-Lite which is solely a matter for the EZ members. In my opinion that’s what the ECB, ESFS, ESF etc should have been in the first instance. Given that Hungary went directly to the IMF tells me that the E… institutions are not there for non EZ members – is this 2 speed Europe, you betcha and its what it should have been all along.

    Here is the interview with Schauble on ADF http://www.tagesschau.de/wirtschaft/schaeuble478.html

    Perhaps someone with good German language skills can listen and confirm whether what Bloomberg reports Schauble as saying is what Schauble actually says. My interpreting skills are lousy these days, half deaf and half dead brain.

    Asian Equities are up, Aussie Dollar is up, Oil, Gold is up, not whopping amounts just 1-2%, although Palladium’s up 3%,

    Last week I suggested the Eurozonacrats would have to have it sorted by OOB-Asia, perhaps they have done it. The rumours of an IMF loan to Italy has had wide coverage and seems to have cheered up the markets.

  20. Does Italy need a bail out right now ?

    La Stampa said ao, so must be so, or so everyone said

    My thought was why Italy and not Hungary which I think may have asked for help from IMF. I wonder how much of the €8t is still in Italy, I might have taken a ferry up to Locarno for the day with a few brown paper packages :)

    The interesting thing was how much credence was attached to the story, a number of reputable spokepersons from conservative AsiaPac banks were quoting it as “news that should see markets recover today”, and it was echoed all through the MSM & blogosphere from Auckland to Delhi.

    What about Schuables plan for EMS-Lite any thoughts on that.

    I responded to your chastisement re “Bondi Beach Sheilas” – in my circle “your Sheilas” are known as kewpies or banging doors, see other thread :)

    • @Right Paddock
      Italy has €8 trillion in savings. That would go a long way to sorting out their problems (in the way that the Japanese did it). Even at 4% the bonds would be attractive to home grown purchasers.

      As to any chastisements, it was more of a warning. You may have found yourself at the wrong end of one. Sorry if you thought I was putting you down.

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