Jul 122012
 July 12, 2012  Posted by at 11:42 pm Finance

Adolphe-Alexandre Dillens – Capture of Joan of Arc

The yields on Spanish and Italian 10 year bonds have been falling lately, though not by much (Update: they're rising again already, even with a "good“ Italian auction). Why? Mainly because the Eurozone promised to ship €30 billion to Spain's banks. And partly because Spain got another year's time to comply with EU budget demands. And also partly because Spain announced its (hard to keep count) fourth – restructured – austerity package in a year (?!). There is a problem with all this. A big problem.

One thing is for sure: the ongoing and ever stricter austerity measures guarantee 100% that the economies of the austerity-hit countries will deteriorate. It might be possible to cut some costs here and there in a still relatively healthy economy without causing too much pain, but when you take a nation that already has 25% unemployment, with youth unemployment over twice that, measures such as raising sales taxes and cutting government jobs can only possibly lead to further trouble.

And that means Spain (and Greece, Portugal) will need to ask for more aid down the line. The financial markets don't care about that, at least not today. They were fed another €30 billion, and that's what counts in the short term. They can – and will – put back on the pressure tomorrow or next week, and expect another €30 billion, rinse and repeat. The pattern has long been set: press on the sore spots and they will pay up.

More money from the Eurozone for Spain's decrepit banking sector will mean more austerity for its people. Because that's how it works, step by hurtful and unjust grinding step: that is, despite recent EU summit "deals", there are still no direct bank bail-outs (and probably never will be), and the €30 million is still added to Madrid's sovereign debt.

The people pay for the bailouts of their banks through increased taxes and lost jobs. The total €120 billion or so needed to save Spanish banks, which is good only until there's the next step down, likely to come sometime later this year, might be better invested in jobs for the unemployed, but that's not how it works. Not in Europe, no more than in the US.

The political/financial mantra remains unchanged and one-dimensional: restructure the bailouts, not restructure the banks. Which it should be, and eventually will, there can be no question about it.

The way things are going now will inevitably lead to two insurmountable problems. One at the bottom and one at the top.

First, entire societies are now being actively "restructured". That is, ever more privatization, lay-offs, pension cuts, wage cuts, in other words and down the line, total break-downs. There is no way that can end well. Health care services in Greece, Spain and Portugal are already under enormous pressure, with drug companies refusing to supply essential medications, hospital staff going on strike to protest wage cuts, you name it.

With four austerity restructurings in a year in Spain, it should be obvious that health care is but one of many fields that have no time to ease into new and different circumstances under which to work. It's shock doctrine and disaster capitalism in every sense of the word. Yesterday it was miners fighting in the streets of Madrid, tomorrow it will be the next angry destitute segment of society. And someday soon they'll be in one square or another together.

Second, in a potentially even harder issue to overcome for the political class in the shorter term, entire constitutions may need to be "restructured". The German Constitutional Court this week announced it will take its own sweet time deciding whether the ESM, without which all future bail-outs become awfully painfully shaky, is legal to begin with. Despite pleas by Angela Merkel and her finance minister Schäuble to speed it through.

It may take well into autumn just to make that decision. Angela Merkel always counted on this to happen, so it was easy for her to make promises she knew the court would not allow her to make good on.

Similar constitutional challenges may well pop up in a few more of the 17 Eurozone countries. Giving up sovereignty, be it political, fiscal or cultural, is not a popular thing these days. But a negative judgment by the German court might by itself be enough to derail the whole thing.

90% of the votes would normally be enough to start up the ESM, though constitutions can be legal bitches, pardon my French. However that may be, since Germany's share of the ESM is supposed to come to 27%, there's no deal without Berlin. And that's without considering that if Spain and/or Italy need bail-outs, and therefore can't pay their share, Germany's will rise significantly.

The present way of tackling the crisis does nothing to relieve the effects of the crisis for the people. Quite the contrary, the idea is solve the crisis over the backs of the people. The issue with that, apart from the obvious moral ones, is that the people simply can't bend over steeply enough to solve it; the debts are simply too high. But that will only become clear once we know exactly how large the debts and losses are in the banking and sovereign sectors.

And to find that out we need something that hasn't happened at all yet, opening the books. Again, quite the contrary: in fact, the deeper the crisis gets, the less transparency there is. Nobody has any idea how bad things really are, since almost nothing is marked to market. And there are no signs in political or financial circles that this will change for the better and the clearer anytime soon.

In that sense, German President Joachim Glauck telling PM Angela Merkel that she should explain better to her people what she does with regards to the crisis, could be a sliver of light. Then again, he's a purely ceremonial guy.

It is a strange thing to realize that even as Barclays, and soon a dozen other banks, admit to Libor manipulation, we still won't see their books opened. We will instead see more of our money transferred to them, be it directly or indirectly (where do you think the € 30 billion Spanish bank bail-out money will end up?).

Banks settle illegal slash immoral acts, mostly without admitting wrongdoing, for a fraction of illegal slash immoral ill-gotten gains. Barclays was fined half a billion for its Libor role, US banks paid $25 billion to get rid of an entire series of mortgage-related (semi-)criminal acts. The New York Fed knew by 2007 at the latest that there was a Barclays related Libor issue, it even had meetings on the topic in early 2008, but still a few moths later threw close to a trillion dollars in bail-out loans at the bank. Without any Libor related come clear conditions.

Europe is burning from both sides, either of which will be sufficient to burn it down to the ground in its present state. And Europe is rotting at the core, gutting its societies for the benefit of the stakeholders in its banking sector, the majority of whom are global financial institutions.

Europe, like America, is stuck on a one-dimensional dead end highway to nowhere at all. A handful of so-called systemically indispensable institutions and their wealthy all-powerful owners can incur unfathomable losses, hide these losses, and instruct their bought and paid-for political lackeys and henchmen to hand over whatever public funds they need to make good on them.

That's all that is happening out there; all those stories about trying to save some country or another, or even the entire union, is but a sideshow. They all know that is a lost cause. There's only one thing really going on: public money is being transferred to the private sector, tens of billions of euros and dollars at a time.

It hasn't just not helped us resolve the crisis, it has made it worse every single step of the way. Take a good look and you can't miss the fact that this is inevitable.

So where are we going to go from here? It should be just as inevitably obvious that the only place we have left to stop it, before it buries us all in debt and misery, is the streets. Our democratic voting rights have become meaningless, they have been usurped, bought, sold and squandered. There's nobody left elected to represent us who has our interests at heart. And when that happens, it's time to once more represent ourselves. Basically, that's why the US constitution includes the right to bear arms.

Europe doesn't just risk sliding back into its own past, it is sliding back there as we speak: sharp divisions along multiple and impossible to predict internal borders, just this time with a big bunch of additional baggage piled on top of what was already there prior to the time the European union was so tremendously botched. Throw in a whole lot more people, a substantial part of whom have non-European origins and skin colors, and boy, are we in for a party. Ripped apart by the logical culmination, bred in the distorted minds of the ultimate power- and money hungry among us, of the same greed that drives us all.

It's really simple, everyone can understand this, provided they're willing to think it over. We either start restructuring the banks, take the pain associated with that as real men, and regain control of our own lives, communities, politics, and ultimately our lives, or we withdraw in fear and prepare for bashing each other's skulls in once again.

Differences between Europe and the US, in case you're wondering, will be in details only. Because it’s the same one-dimensional road we're all on, and it's the same nowhere we’ll all end up in.

Maybe Europe will feel more like the Middle Ages when all’s said and done, with people fighting each other, and the US will feel more like 1984, with people fighting a large state apparatus, but the essence will be remarkably and entirely equal: people battling for dignity, equality, peace, and a bit of human kindness thrown in, all the things we have taken for granted to such an extent that we've ended up giving them up.

It only took a little over 50 years. Some things you need to fight for every single day.


Home Forums Europe Is Sliding Back Into Its Own Past

  • This topic is empty.
Viewing 16 posts - 1 through 16 (of 16 total)
  • Author
  • #8473

    Adolphe-Alexandre Dillens – Capture of Joan of Arc The yields on Spanish and Italian 10 year bonds have been falling lately, though not by much (Updat
    [See the full post at: Europe Is Sliding Back Into Its Own Past]


    Good insights as usual, Ilargi.

    In my more philosophical moments, I realize that it’s Europe and the rest of the world returning the the normal, after 60+ years of abnormality. The periods of peace and prosperity over the last 2000 years have been few and far between.

    When I’m feeling more realistic, I think, “Wow, this is going to suck big-time.”


    Pointing toward violence (to receive: “the streets”, or give: “the right to bear arms”) misses the simpler, less confrontational, and more permanent option of ending the use of money. No need to fight, just stop playing the game. Absent money, greed would have much less leverage and would likely fade over time as a mental construct.



    “In this country, you gotta make the money first. Then when you get the money, you get the power. Then when you get the power, then you get the women.”


    Ending the use of money only means that those with power and influence will find another means of exchange to put their feet on our throats.

    Money simply allows us slaves to believe that we are not slaves. We buy the stuff that our masters make for us, giving them more and more money and power. They even make us sick, so they can peddle their drugs to make us ‘better’.

    The best we can do is opt out. But even that is getting more and more difficult. And maybe even one day will be illegal.

    We are toast.

    Otto Matic

    It’s anecdotal but I witnessed a bizarre spectacle in the garden the other day.

    We have a bumper crop of chipmunks. They are usually busy racing around like cartoon characters on methamphetamines.

    Because there are too many of them for the ‘carrying capacity’ of the neighborhood’s natural resources, they have depended on ‘bailouts’ and subsidies from bird feeders and backyard gardens and ornamental trees and shrubs.

    This has caused stress among themselves and with the gardeners in the neighborhood. One guy down the street shoots them with a .22 pistol from his bird feeder but their numbers are huge and even culling them like that does not seem to touch their reproductive rate. There are not 7 billion of them but I’m confident they would be contenders with humans if given enough resources.

    Their desperation is showing. Some now have half a tail from having it bit off by other more aggressive chipmunks. Fights are now constant from sun up to sun down.

    I knew they were omnivores and aggressively hunted for bird eggs but was unprepared for what happened next.

    I came out last morning and rounded the bend to see a baby dove about a week or two out of the nest which could fly a limited distance land on the ground about 10 feet from me only to be pounced on by two chipmunks and quickly killed, They then began to devour the poor little dove with manic gusto.

    In decades of observing nature, I had never seen something so utterly violent from chipmunks. Another friend said he had seen them attacking and eating frogs and snakes close to their own weight, yikes.

    It made me think of what is commencing in the EU now. Desperate creatures do desperate things, shocking things.

    The thin veneer of Civilization morphing into Lord of the Flies

    Alexander Ac

    Fighting for a peace? Seems like oxymoron, but I get the point Ilargi.. excellent overview, if optimistic:

    “We either start restructuring the banks, take the pain associated with that as real men…” – no way for that.

    We are too busy with our own lives. The more debt, the lesser time to think about OPP (ours/others peoples problems)… however, there is one solution we know all about..

    yeah, and I remember a recent e-mail exchange with an slovak economist that the problem are *people saying that we have too much debt.* Huh, only roch people (nations) have debt, not poor ones. The notion that the debt bubbles the prices is not well accepted. So what… who cares?



    “The best we can do is opt out. But even that is getting more and more difficult. And maybe even one day will be illegal.”

    deflationista, opting out individually has little impact. I’m referring to a tipping point change in which the game is ended due to lack of players. You correctly note that it’s not just money but exchange that is at the root. We can end even that. It’s just as arbitrary and unnecessary as money.


    The astounding thing is, It’s like they think they will be immune from the violence. Hardly. If Civilization breaks down, by way of a liquidity freeze, all those protectors with those big guns are going to turn those guns on their paymasters.

    But what is most astounding is, here in America, we know now they have been stealing from us to the tune of trillions, above and beyond what they have demanded outright, like thief’s in the night. And America has reacted to the same degree they have reacted to the Hegemon Obama eviscerating the Constitution, claiming Absolute Power, and preparing for a full-on federal takeover of America by way of Martial Law. 450 million hollow point rounds for DHS? Ho hum.



    Americans have been conditioned for many years to not speak-out nor protest, because it usually doesn’t do any good. Besides, I’ve been told, that ‘we’ have already fought for our rights and freedoms, and we have laws and regulations to ‘protect’ us.
    Then I’ll say something about all that fraud and corruption, and our money being stolen.
    I’ll be told that goes on all the time, there is nothing we can do about it, and then these people go back to buying stuff with credit cards.

    When people have no money, no credit cards, nothing to eat, then they will wake up.


    “When people have no money, no credit cards, nothing to eat, then they will wake up.”


    Maybe. Some of them. Many others just might continue to look to the government to protect us, by way of total control. Others might just lay down and die. A few saw it coming, and took steps to prepare. Will they cherished, or will they be perversely blamed in the way of making scapegoats, for “causing” the problems?

    Viscount St. Albans

    Welcome to the Austerity Woodshop.

    The sharp file of austerity grinds down the rough nubby stubs of consumer expectation. I look at the wood-work and smile. Gasoline consumption stumbles to multi-year lows and then continues falling. Good or bad? Oil refineries are shutting down production and closing-up shop. Good or bad?

    Back and forth, back and forth, the austerity file works its magic. Little flakes of desire drift downward with gravity, toward the shop floor. Less meat more potatoes. Fewer light bulbs means we see the nighttime stars more clearly.

    I say: Let the sharp file continue to grind. How else would you make man and his stuff part ways?

    TAE Summary

    * We are toast; We are chipmunks writ large; Only hunger pangs will wake Americans

    * The last 60 years were abnormal but the abnormality will soon end. Normality sucks big-time. BTW, BigTime was Dick Cheney’s nickname while VP.

    * Debt is the opiate of the masses; Without money greed will atrophy; Real men take the pain; Opting out is not an option

    * Money leads to power; Power leads to women; Where women lead, productivity improves; It’s all good

    * Obama is full of hollow point promises. He has evicerated the Constitution. No guts, no glory.

    * Americans are conditioned to accept what they can’t change, change what they can and look to Fox to tell them the difference.

    * Austerity files down consumers. The bastard.

    Otto Matic

    “Obama is full of hollow point promises”

    Instead of a PowerPoint presentation, we will get a HollowPoint presentation Point Blank.


    One could argue that defending the broken Euro is part of the problem or that the banking system is broken too and is in a deflationary spiral but that still leaves the sovereign debt problem and that is simply another way of saying many nations are consuming more than they produce and there is no way to ‘fix’ that problem without a reduction in living standards.

    At first glance that shouldn’t be that big of a problem. Afterall a reduction of GDP by 10 or 20% shouldn’t mean a return to the stone age just living at the same GDP per capita of a decade or so ago which didn’t seem harsh at all to anyone alive then. But GDP maybe a phantom statistic cooked up by economists and governments to give the illusion of economic progress when all it is measuring is money circulation not real wealth. I grew up in California. That state was genuinely rich in the 1960’s. 18 million people had a functioning and affordable university system, modern highways, generous welfare system and affordable housing. In fact, my stepfather built houses in Palo Alto and Marin county that cost about $35000 and were bought by middle middle class people that can no longer come close to buying those exact same houses.

    Despite more than 40 years of GDP growth all we’ve really gotten are better consumer electronics, a bit better cars and marginally better medicine. What we lost was a functioning society. What in the hell happened?


    Viscount, It’s worth remembering that petroleum consumption has gone down only in the developed world, Demand has increased enough in the rest of the world to maintain both prices and consumption. It only makes sense that refinery capacity will follow the consumption.

    BTW, this is one of the things that makes me a tad skeptical of the TAE predicted nominal price crash. The relative worth of a gallon of gas to pump water for your family and livestock (intead of doing it by hand) is much higher than that of a gallon of gas for a second trip to the mall this week.

    plumb local

    We know the system as is will implode. The careful descriptions of the slo mo crumbling can be mesmerizing. I love reading them here. The danger is that we’ll assume a helplessness before them, a resignation or cynicism or isolationist stockpiling.

    We’re a smart species and we’re smart individuals.

    We evolved through striving for local advantage in a world of competition for resources. Now survival means something different but we’re still in the old mindset that worked for so long – “us” vs “them”. There’s only “us” now imho.

    Can we develop new models and for those of us who can see the writing on the wall, do something locally? There are lots of “new models” and Alex Anton provided a beauty on this site very recently . . .

    Something’s dying and something’s being born. Things are bad, but there’s lots we can do to help the baby.

Viewing 16 posts - 1 through 16 (of 16 total)
  • You must be logged in to reply to this topic.