Four more myths that benefit the euromobsters:
*That the ECB’s solvency is at risk
*That Germany stands to lose money
*That the eurozone has nothing to fear from Greek default
*That ClubMed bailouts cost member States money
Having pointed out for some five weeks now that Grexit is neither probable nor possible without EU Treaty change, The Slog explodes another myth forever: that of national and taxpayer liability for a member’s default. Further, I expose clear and obvious motives for the insistence of Schäuble’s obsession with Greece staying in ‘the programme’, and why Draghi’s QE splurge won’t cause him any sleepless nights.
Picture the scene: you’re in a smart, clean, air-conditioned and completely legit looking casino. All the staff of the casino – especially the head croupier – are strict about obeying the rules. There is to be no dealing off the bottom, the roulette wheel will be perfectly horizontal and demagnetised – and even if you lose, the house will extend credit for as long as you keep paying the interest. It’s all one big happy family of people who like a harmless little flutter. No mobsters allowed in here, no violence, and there’s enough to go round for everyone…because directly below the casino, there is one of the biggest and most reputable banks in the world. And that bank cannot go bust. It’s a house rule. Even better, once you’re a member of the casino, it’s for life: no annual subs or renewals required. You’ve made it….you’re in the élite forever.
It sounds like an inveterate gambler’s wet dream. But it’s real, and it’s called the eurozone.
I’m sure most of you spotted that from a few lines in. But coming up are some things you perhaps don’t know about some of the motives for apparently insane behaviour.
The key to understanding is the deconstruction of economic, fiscal and political issues deliberately woven together by the Troika’s main players to confuse and obfuscate what ECB/German policy really is.
When I grow up, I want to be a central banker
All the politicians and central bankers in all the so-called ‘western democracies’ are hard at it, telling us there will be only bailins from now on. The equity holders and creditors will cough up first, period. And if the bank goes bust – tough: taxpayers will not bail it out. The bank will be insolvent, and fail.
Except when that bank is a central bank. Because with a central bank – ever since the world went off the gold standard – all the accounting rules are null and void: not a penny of the liabilities are secured by any other charges.
What’s more, if the bank loses trillions on useful things like QE or buying square peanut futures, the equity holders in that central bank will not have to pay a red cent. The CB will simply carry on with a capital basis that’s negative…this being carried forward in the obvious certainty (natch) that one day it will become positive capital.
No matter how huge the negatively knackered balance sheet gets, if the equity holders in that bank are Sovereign States, the only thing they lose is the interest payable on loans, and the profit shares. As far as invested money is concerned, they have nothing to lose.
You thought ordinary banking accountancy was a licence to win and never lose? Well, a central banker’s book-keeping makes their task look like an away game against Chelsea by comparison.
Now the more sharp-eyed among you may have noticed that the myth of national bank insolvency contagion and taxpayer losses in the eurozone is one that continues to be pumped out day after day by the media, leading politicians, and above all, the German Bundesbank….and Wolfie Schauble the wannabe Fiskalunionfuhrer. Wolfgang Strangelove in particular is keen to tell us that only FU with him at the helm can stave off the spendthrift disaster that is ClubMed. And that the only way for market confidence to be maintained in European debt bond issues is for ClubMed to keep on paying back the unrepayable.
And it’s all – every last word of it – complete bollocks.
The financial and political motives behind ClubMed debt slavery
But here’s the twist: the longer ClubMed stays in the programme of infinite bailout – with added austerity to ensure no escape – the more money Germany earns….more, in fact, than any other eurozone country.
Because Germany is a 27.1% equity holder in the ECB which cannot become insolvent. Nice work if you can get it, nicht?
The following is a real example of the system in relation to the ECB buying €1bn of Spanish Bonds at a 4% annual coupon.
The ECB collects €40m in interest, and of that roughly €10m goes straight into the German coffers, pro rata to its equity holding. The longer ClubMed keeps on paying, the more money Germany, France and Holland keep on making.
Tot up the total bailout interest paid so far, divide it by four, and then work out that the Germans aren’t insane after all. The number is a whopping €235bn. Germany’s ‘cut’ is €60m.
By far the biggest Greek creditor today is….the ECB. Schäuble fudges this one again by referring to the need “to include the lenders” in eurogroupe outcomes. It’s pure, timewasting poppycock: they’re the same people.
But the weighted Roulette Wheel starts to list severely to starboard the more one delves into QE. If Draghi is buying the bonds of one country, he is supposed to recompense pro rata the countries whose bonds he doesn’t buy. So not only is Draghi illegally keeping Greece out of bond-buying (which would of course dramatically reduce it future liabilities) he is equally illegally depriving Hellas of its legal entitlement to compensation.
And it gets even worse. The first country to have loads of bonds bought under the QE scheme is….well ping my blog, none other than Germany. Which also just happens to be the biggest shareholder in the ECB….and the richest nation in Europe. And has spent every day since the euro was launched benefiting from a rebranded ‘cheap’ Mark called the euro.
But for once, this isn’t really about the munneee
Now of course, those of us steeped in German culture have long been aware of their capacity for sanctimony. But in the greater scheme of things, Germany making a bit of walking around money by keeping ClubMed in penury is merely the icing on the cake for this nation of upright oops sorry, I mean downright hypocrites.
We have to get this clear: Schäuble whining his pointy little lying head off about lazy Greeks putting German finances at risk is just a smokescreen. Wolfie Wheelchair is calling the Greek problem economic, and telling whoppers about the fiscal risk to the eurozone. But this is just a thick veil behind the smokescreen wrapped in a tirade of distractional loincloth about the need for discipline.
It is not economic or fiscal contagion Schäuble fears, because he knows perfectly well that is just another myth on a scale even bigger than the possibility of Grexit. His fear is one of political contagion. His fear is his beloved FU power never getting off the drawing board.
As I said at the outset, Greece really does hold all the cards
If Syriza, one day soon – and as The Slog posted yesterday, it has got to be soon – tells the eurogroupe (and thus by definition the ECB) where to stick it, the myth of invincibility is gone forever. Next will be an Italian departure and default, then a Spanish one via Podemos…and then a French one as the two founders finally fall out on the deficit issue….and the idea of a control-freak spook like Schäuble in charge of it.
This is what ties Schauble and Draghi – however temporarily – together: their naked, unhealthy desire for absolute power. Draghi works for globalism and the mighty Dollar; his aim – outlined in secret session during a 2014 FinMin session – is to create a low-wage ClubMed serf economy to compete with Asia. Schäuble wants his hands on the eurozone national member purse-strings, and another crack at turning every European into a Good German.
Sadly Wolfgang never paid any attention to the old German family command: sei nett zu einander –
be nice to each other
Which leaves us with the last prong on the Troika that no longer dare speak its name haha: the IMF.
Why Varoufakis is giving Lagarde the five-star treatment
A few days back I was speculating on Syriza’s small re-entry into the bond markets. From what I can glean, most if not all of the money raised will go to paying off the IMF tranches due. That is happenstance, but only up to a point: I still think that the Athens Government’s policy may well be to impress upon Christine Lagarde its desire to be a trusted debtor to the US. Or, if it came to it, Moscow. For Greece, the prime goal has to be to prove independence from the euronauts when it comes to fiscal stabilisation.
The fact is that, as a left-wing Party determined to destroy oligarchies, I have to believe that Wall Street, the EC Commission, the ECB and the German elite would all be on their ideal Christmas list of things for Santa to destroy. An alliance with Italian 5-Star and Spanish Podemos to rebalance financial power in Southern Europe must (surely?) still be their preferred option.
As a medium-term stepping-stone to that goal, paying off the IMF (and then defaulting inside the eurozone) gives the remaining ezone pitchfork prongs an insoluble problem. Athens can’t be thrown out, but can whip up the maximum trouble in Italy, Spain and France…and very probably borrow money from the Russians (in return for Med bases) and other selected Asian markets.
Breaking news from the front in this tedious and time-wasting trench warfare supports my argument that the Troika is bluffing: the European Stability Mechanism confirmed late yesterday that it has been forced to give Greece a €500m bridging loan to tide it over in March. But nobody from Athens forced them to.
Meanwhile, German media yesterday were openly calling upon Schäuble to stop kicking the small kid and start work on the big problem: France.
Only time will tell, but my view remains that Troika2 and its agents will go for maximum distraction, threat, and confusion…and some Greeks now really are nervous. The only things that can scupper Greek independence from here on are lost electoral support, Syriza collapsing into squabbles, or its two leaders lacking the balls to pull the trigger.
Big fleas have bigger fleas upon their backs to bite ’em
Meanwhile, Vlad the Lad lies offstage, watching the drama – and thinking of chess moves. And the Black Dude in the White House (along with State) knows what Putin would like. And that in turn suggests that, when push comes to shove, the US will tell the eunatics to tone down the Greek Untermenschen rhetoric.
POSTSCRIPT: I think regular Sloggers would accept that I try to keep viralising appeals to a minimum in these columns. This one, however is a special case. The self-styled “elite” may be outnumbered, but they own 90+% of the media power. The pro-EU/anti-national independence lobby is in the hands of an unrepresentative Establishment: both UK large political Parties, almost all the papers apart from the Express, the BBC and the Daily Telegraph daily hose down all reason with a non-stop bollocks-stream over what is really going on here.
With due respect to Greece, the issue here is much bigger: it is one of whether the euro or the EU are anywhere near worth liberal democracy being ground into the dust. I vote no, no, no, no. But we live in a dumbed-down world. For instance, I believe the Greek dilemma should be a much bigger part of UKip’s electoral campaign in the UK….because one day soon, the gangsters will be running Westminster permanently if they aren’t stopped here.
I would ask all those who agree with the viewpoint I express here to R/T, email, share and Facebook everyone to whom they think it’s relevant…especially the senior bods in UKip.