The ECB’s Spanish Inquisition might yet do for President Obama
Having lied his Presidential head off since last October about unemployment and economic growth inside the US, Barack Obama is now looking to delay every possible factor that might find him out before election day….and any scam he can invent to create some feelgood among the voters beforehand.
One good start for an economy trying to recover would be cheap energy, right? And Ben the Banana is about to go all QE3, right? And Obama wants to get elected by flooding the US with cheap oil, right? Yippee! Cheap petrol prices!
Er, no actually. Because demand for gas at the US pumps is low, thanks to not many people having any money….as a result of the spectacular but mythical recovery of the US economy….despite two previous QE-hoses having been turned on.
Soooo, QE has no effect, but we’re doing it again. The markets know that: but they’re too dumb to learn, so they’re running oil futures very high. Sometimes this can be self-fulfilling, but whatever happens the incumbent White House suit isn’t going to get low gas prices.
You see, this is how neocon globalist bourse-dependent capitalism works – ie, badly. But the Black Dude needn’t turn to his Xanax supply just yet: Romney slipped a few points over the weekend, and seems to have even less to say than Obama.
In turn, a very fat German bottom is sitting on the EU’s Vesuvius. She isn’t doing this for Barry’s benefit, by the way: she’s doing it (a) because she can’t decide what to do and (b) she wants all those little Deutschmark notes and bank firewalls ready and in a row just in case things turn bad. But with Spain and Italy on the sick list now, she isn’t going to expel Greece.
The Troika doesn’t report on Greece until the first week in October, but time lies heavy on the EU supertanker: the EU leaders won’t have their summit again until October 18th. With a press conference full of bromides on 20th, that leaves just 17 days before the US Poll. Hardly enough on its own to knock Obama off course.
But what of Spain? Well, it’s already clear that a combo of disguise, spin, euphemism, printing and Andrexaghi paper will be used to try and plug the hole in that dyke. But such remains a narrow and slightly cock-eyed way of looking at things.
For the last few weeks, the focus has been very much on sovereign insolvency. However, eurobank liquidity (including in the UK) remains critically clogged up…and exposure to debt potentially armageddonouddahere. When Spain negotiated ECB approval for a bank liquidity programme in late June, Reuters noted caustically: ‘An economy ministry spokesman told Reuters to ask the EC where the money would come from. A press officer at the Commission said to ask Spain.’
This was a prescient observation about buck-passing, which is something the eurozone does when can-kicking has begun to pall. The overwhelming provider of liquidity to Spanish banks right now is the European Central Bank. But Mario Notadraghimyfeet wants to make this a sovereign concern and shift the responsibility back to the Spanish government. It’s a vain hope this one, because the Spanish government is broke and its economy – having gone with the Troika’s neocon austerity bollocks – is halfway round the S-bend.
The recurring theme you may have noticed in this piece is that the current model of capitalism is AFU, and as that’s not unusual, we can safely conclude that it is SNAFU. Now the irony here is that Obama – who the gullible thought would deal with the madness once and for all – didn’t…of course. So his policy emptiness – ok let’s call a spade a spade, cowardice, just might be about to leap right up and smack him in those gleaming teeth.
If the focus returns to private bank collapses, it could indeed do that. I sense that Mario might be too clever for his own good at times – and this may be one of them. Aside from the ECB (and as we’ve seen, Draghi wants this to be a finite arrangement) the only other rescue vehicle for private Spanish banks is the €100 billion bailout that the eurozone and Madrid have agreed in principle.
But rather than simply hand over the bailout money – Greece has been a salutary lesson – Mario and all the other Goldman accolytes want to ensure that Spain ‘restructures’ its banks…aka, cheats its creditors by having a national bad bank for toxic assets, and crewcuts for those creditors. The ECB is playing hardball on the issue. It is yet another impasse; but this one could explode without ringing to warn the media beforehand.
The key factor here (it seems to me) is the threat to Franco-German banks…and Britain’s glitch-Queen RBS. Some of the exposure to Spanish property among this august group is not only too horrible to contemplate: it involves a sector whose recovery could be a decade away….and far too much real money for any firewall. Further, I’ve yet to find a banker anywhere (or an analyst, or a credit dealer) who can explain exaxctly how a firewall might work, the world outside the walls being full of Joshuas just a-leapin’ an’ a-hollerin’ an’ a-blowin’ dem horns.
So let us all beyond the UK this Monday morning (where it’s a Bank Holiday) pray that Mario and Herman and Geli and Wolfpack know WTF they’re doing in this game of poker. The Obamas and the Kings and the Weidmanns and the Sloggers should kneel for a few moments and fire off a message up to Whoever might be out there. And let us also pray that the British, French, German and European central banks have a critical crisis path in place, just in case.