Mario Draghi's Diabolic Spiral


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    Viscount St. Albans


    How would public street protest address any of the situations you’re describing?

    It’s not 1989. There is no good guy to help John Doe and Mary Jane tear down The Iron Curtain.

    One wall is smashed, and the flying debris is rapidly collected and reused to build new fortifications — often quardoning off previous freedoms.

    There’s a reason that Bloodletting is one of the oldest medical practices.

    John Day

    When democratic institutions have been captured by the oligarchs, and provide only a sham appearance of democracy, the only way to vote is with one’s actions. Massing in the streets is feared by the elites, because when people do this, they gain a new mass identity, and it is in opposition to the vested interests. When people gain a new mass identity, it does create change. There is agreement that the old way is no longer valid, and that the group has defined what has killed it. Some new way which meets the needs of the mass group, must be agreed upon.
    At this point, the elites will seek to divide and conquer the group(s). Look at what has become of Nasser’s Pan-Arab-Nationalism. Groups of people fighting each other is more desirable to the elites, than a large group demanding a new deal, which meets their needs.
    What the elites really want is a large group of compliant workers. Cheap energy allowed for that to be bought for a period, but parasitism of that system, and increasing scarcity and cost of resources have created a new crisis. Massing in the streets is necessary for change in human societies. It’s a characteristic of the kind of animals we are.

    Viscount St. Albans

    @ John Day

    I enjoyed reading your post — An interesting incorporation of historical movements like Arab Pan-nationalism and later the divide and conquer reaction.

    My reaction:
    The oligarchs have always run our institutions. The only thing that changes is our receptiveness to the advertising — and that’s merely a function of the credit cycle.

    Without question, massing in the streets in sufficient numbers can promote change. I don’t see much evidence it has ever provided lasting change that benefited the protestors. The crowd is too easy to control, and no more logical than your neighbor Barney — the guy who gets his thrills wandering the local mall and running his outboard motor on an otherwise pristine mountain lake.

    And a united global Elite is very much in the interest of the man on the street. I’m all for a deflationary global squeeze.

    How else does one hope to align global wants with Earth-bound realities?

    It’s when the interests of the elites diverge, that’s when the common man really feels the pain.

    Alexander Ac

    Hey Ilargi, you are optimistic here – most people were NOT thinking at all. They are/were bussy with feeding their families and children, and fullilling the not so basic needs (yet).

    For me, a was too young to think about the european project – I thought it is a good idea though – but that was all. In my younger times I was bussy with climate change, and later on with peak oil. Now finances, thank you. That is the story.



    Only those who do not need to spend most of their time/energy/money for their basic need can have the luxury of contemplating issues affecting our society.

    Formerly T-Bear

    Did I just see the Spanish debt is now nearly 100% of GDP?

    Rajoy has been in office about 6 Months, his predecessor Zapatero left office with a debt ratio of about 64% but with later information that has gone to about 66%.

    GDP of Spain is about €1,500 Billions but falling now about 7% per year (€105 Billions). 33% of €1.5 Trillions is about €500 Billions added to the country’s debt in just 6 months. Just to whom does Rajoy have allegiance? Is anybody keeping score, other than the troika bankers? This will not end well, Spain will be the bridge too far for the EMU.

    The value of the Euro in the EMU was the proof that a common unit of accounting could be adopted across national boundaries and accepted by those various populations. The failure of the experiment may cloud this happening again if the elites do not exercise great caution, when the Euro fails so too will be any postulated world currency and may blow-back against the US dollar in its role as reserve currency given the US inability to govern itself in a stable manner. If that is the case, the passing of the Euro will be a dear disaster of epic consequence.


    Ilargi – people are too split. The poor who receive welfare and food stamps aren’t going to complain too much; it could be worse, they think. The people living in homes without paying their mortgages aren’t going to say much because they’re benefiting from the elite not wanting to write off the loss. Speculators buying homes want to see the ponzi kicked back up again so they can unload like they did before. The traders and Wall Street scum certainly don’t want to see any change. The gold bugs are just itching for calamity/inflation, anything to make their play pay off.

    The middle class who are living pay cheque to pay cheque are definitely being squeezed, but their life is so filled with raising children that they barely get a chance to lift their heads above water.

    The populace have been fed so much propaganda that they don’t know “up” from “down,” and the elite make sure everything is good and confusing. The media is bought. Divide and conquer tactics are being used.

    Right now there are too many groups of people “getting by” and no cohesiveness between them. Besides, when they do step up, the jackboots are there to kick them back into place.

    Only great pain will unite them. There needs to be more suffering before they get off the couch.


    Wow, market desperation never ceases to amaze. I did watch the entirety of Draghi’s press conference, and I was not surprised when markets tanked–he offered nothing in the way of the much hyped “we’ll do anything it takes” to stabilize the Euro. And then lo and behold markets rally. The business press attributes the rally to a suddenly different take on the meaning of Draghi’s words. Again, something doesn’t add up.

    Hey, maybe it really comes down to what Robert Prechter says: markets react to endogenous mood swings that are, ultimately, unrelated to external forces like press conferences (i.e., the markets might have a minor reaction at first to something like a government announcement, but then just do what they’re going to do anyway). Nevertheless, this is how Business Insider explains the market up-tick in light of Draghi’s circular, infinitely vague “guidance”:

    Draghi set forth criteria that EU political leaders must abide by in order to receive monetary policy assistance, while at the same time promising that EU countries like Spain and Italy won’t fail in the short term.

    If the market rally is based on some new-found interpretation of Draghi’s words, well, I guess I’m suspicious no one actually LISTENED to them and investors are just, yet again, running with the herd in hope and desperation. Because the “criteria” that Draghi specifically set out was this: a country MAY receive this life-saving financial assistance IF the country first applies to the EFSF/ESM…but then only IF the country also institutes sufficient budget cutting austerity measures to do the heavy-lifting itself. That’s paraphrasing, but my point is that Draghi is hardly offering anything spectacular here at all. It’s not even new! And certainly not realistic! Basically, it means IF the country makes the formal application to the EFSF/ESM and also thereby commits itself to the stipulations required by such an application (i.e., guts its spending and institutes severe taxation according to external dictates–again entailing a loss of sovereignty over one’s own national budget and tax authority), only then MAY this still undefined liquidity be released to the sovereign.

    This is what Draghi meant when he said the formal application is a “necessary but not a SUFFICIENT condition” of monetary aid. He said that emphatically twice. So making the formal application is a required first step to aid, but only the first step, and not sufficient to trigger bailout money. The country must still do other things, which Draghi intimated include sufficient austerity measures.

    Haven’t we been here before? How is this any different? If a country is capable of cutting its budgets in order to stabilize its own finances, I think it would. But for the Euro-periphery like Spain, the cutting required is so catastrophic that the country can’t do it. It just falls into a depression and you have riots in the street. But Draghi is definitely saying here that severe austerity is also an implicit condition of a bailout. I just don’t see this in any way as a market-positive promise (depressions usually aren’t good for business activity!). And I don’t really see how countries like Greece or Spain are going to do it.

    I think if the ECB was actually serious about bailing out a country and saving the Euro-zone at this point, it would provide the bail-out money NOW and worry about the austerity once order is restored, not the other way around. Wouldn’t you save the patient first and then require that they start an exercise program and eat less deep-fried food? You don’t get them to start their diet as a condition of life-saving surgery as they lie dying in your emergency ward. Given Spain’s bond rates are over 7%, it’s definitely bleeding to death, and quickly.

    So, at best, Draghi’s “guidance” is another tactic to dissolve sovereign powers under a single Euro authority (that could get ugly). At worst, it’s just a tactic to stall the collapse of the Euro zone a little longer with vague promises that can’t and won’t be fulfilled so that the richer countries have more time to cover their financial arses until they must all go home to count their money, washing their hands of the Euro experiment once and for all.

    Maybe the smart money actually comprehended the full meaning of Draghi’s words, as the rush to the Swiss franc save-haven just accelerated in earnest, despite this market upswing:


    Frightening stuff coming. Making the elderly share their pensions and homes maybe inconvenient to them but if those pensions are being paid with debt their grandchildren must pay is it wrong?

    OTOH, how can a society ever hope to recover if half its young can find no work and the half that do work are working on short term contracts or for peanuts? Unlike the other side of the Mediterranean where high youth unemployment has more to do with a demographic bulge from exploding populations, Spain is in a birth dearth. It needs everyone of its young. That they cannot employ them is the true disaster taking place. Starting your working life at age 30 or 35 is something no society has ever tried before because it makes no sense. And that presupposes that, somehow, the Spanish ( or other debt demolished economies) can some how generate enough growth to employ them at that age! Women in particular are facing a situation where their biological clock will run out before they can afford to have a child and in a country where the birth rate is already below replacement that’s a recipe for extinction.

    steve from virginia

    End of Mr. Draghi, except for manipulating the stock markets there is nothing more for him to do.

    He can recycle old loans and pretend they have become new loans. He can cut interest rates but the real rate is always unaffordably high.

    Whatever ‘Mr. Draggy’ does will make matters worse. Just as a battle of ideas cannot be won with bullets, an energy/resource shortage cannot be solved by offering more loans to people who are too broke to borrow … so they can buy more energy/resources they cannot afford to waste.

    Without knowing for sure, it seems the Spanish young people have decided to wait for their luxury jobs to arrive. Nothing is mentioned of Spanish who work with their hands, the Spanish who have no car(s). It seems the youngsters are locked into the past along with their contemporaries in the US and elsewhere.

    Nothing is mentioned about those who simply squat in vacant buildings or ‘scrap them out’ for material they can sell.

    Nothing is mentioned about the Spanish who have decided to get a grip on themselves and deal with real, survival-related problems rather than waiting for Santa Claus to climb down the chimney. Those consumer illusions still loom large in that metaphysical rear-view mirror … but certainly not for everyone.

    Nothing is mentioned of the €3 or 4 trillion Spain needs to ‘get back on its feet’, the funds that have flowed to Germany for useless luxury cars, to Wall Street for ‘replacement credit’, to the Middle East for more fuel for the now-useless German luxury cars, to Germany, France and the UK for more useless military hardware; trillions more for infrastructure ‘improvements’ to make Spain more like Norwalk, Connecticut or Redlands, California.

    The Spanish have gotten screwed by an idea just like the rest of us.


    steve from virginia post=4681 wrote: The Spanish have gotten screwed by an idea just like the rest of us.

    Just too damn true. And why we’ll continue to get screwed. We don’t seem capable of making the changes we need to make…until we’re forced to.


    Hey, not only does Kunstler like TAE, Tyler at Zero Hedge might just read the comments here too. This latest ZH analysis of the Draghi ECB speech looks precisely like the one I blathered on about above:

    Okay, I may well be flattering myself here. After all, I think the conclusion I came to a couple days before Tyler is quite obvious if you actually listened to what Draghi said…but the markets sure don’t think it’s obvious (they’ve ignored the real implications of the Draghi “guidance” completely)! And I haven’t seen anyone else arrive at such conclusion in the financial press either–most continue to herald Draghi’s speech as a window of hope!

    Zero Hedge goes into even more depth than my overly long comment. Time will tell whether this take on market-raction to the Draghi “guidance” is accurate…though one has to wonder how much time this will take. In theory, it could only be days…

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