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Other • The Tequila Crisis: The Prelude To Europe’s Economic Storm
The Tequila Crisis: The Prelude To Europe’s Economic Storm
SATURDAY, MARCH 30, 2013 AT 4:13PM
Contributed by Don Quijones, a freelance writer and translator based in Barcelona, Spain. His blog, Raging Bull-Shit, is a modest attempt to challenge some of the wishful thinking and scrub away the lathers of soft soap peddled by our political and business leaders and their loyal mainstream media.
“That men do not learn very much from the lessons of history is the most important of all the lessons of history.” Alduous Huxley
In its recent daylight plunder of the accounts of uninsured Cypriot (and Russian) depositors and its ruthless steamrolling of all political and social opposition in its way, the Troika has displayed, for all to see, its blatant disregard for personal property, democracy and the rule of law – arguably the three cornerstones of modern European civilization.
Even the most blindly trusting and optimistic of Europeans are finally beginning to see through the Troika’s grandmotherly countenance to its wolfish core. By contrast, to many Latin Americans, the international banking institutions’ lupine nature is all too familiar. Through painful experience, they have learned that when the real men in black come calling, bad things tend to happen.
During the lost decade of the 80s and the tumultuous first half of the 90s, many Latin American economies, including the now rising global superpower Brazil, were torn asunder and bled dry by a fatal cocktail of political ineptitude and corruption, and financial fraud and abuse – all of it facilitated and overseen by the IMF, now one of the leading protagonists in the Troika’s asset-stripping pillage of Europe.
In 1994, decades of economic mismanagement reached their nadir in the Mexican Tequila Crisis, an event which should have served – but patently didn’t – as a portent of the financial storms now buffeting Europe.
Act I
In the early nineties, Mexico’s central bank adopted a low-interest-rate regime that helped attract a surge of foreign speculative capital, primarily from U.S. investors and banks.
The consequences were all too predictable: with cheap money flowing as freely as bootlegged liquor at a Chicago speakeasy, the country’s banks – like those in pre-crisis Spain, Portugal or Ireland – drastically eased their lending standards. In time-honored fashion, the financial press applauded from the sidelines, dubbing the country’s spectacular debt-fuelled growth the “Mexican Miracle.”
U.S. investors stampeded southward, drawn by Mexico’s attractive interest rates and bullish investment returns. This speculative rush created its own momentum. The more investors shifted dollars south, the higher Mexican stocks climbed and the easier it became for Mexican companies and their government to borrow seemingly endless sums of dollars.
However, as with all easy-money-fuelled booms, the good times were short lived. By 1992, strains were already beginning to show as Mexico’s current account deficit more than doubled in the space of just a few years. It took just two more years for the bubble to pop, helped along by a confluence of political and financial forces.
On Jan. 1, 1994, a group of Zapatistas led by el Subcommandante Marcos launched a short-lived revolution in the country’s southern province of Chiapas. Added to that, the assassination, months later, of two of the country’s most prominent political figures – then-President Carlos Salinas’ anointed successor, Luis Donaldo Colosio, and Ruling Institutional Revolutionary Party (PRI) Secretary General José Franciso Ruíz Massieu – began sowing serious doubts in investors’ minds as to the country’s political stability.
Fears were also growing that Salinas’ government would devalue the currency – which is precisely what his presidential successor Ernesto Zedillo Ponce de León did on taking office in December of the same year.
With the country fast hemorrhaging foreign funds – many of which moved north of the border to chase rising U.S. interest rates – Zedillo announced a 13 percent devaluation of the peso. Over the following months, the free-floating peso would lose almost 50 percent of its value against the dollar, wiping out the savings of much of the country’s middle class and raising fears that collapsing asset values would push Mexican banks over the edge.
Act II
So far, so normal – just another one of those sordid boom and bust tales to which we have become so enured these days. However, it was the events that directly followed Mexico’s fall from grace that stand out and which, in many ways, paved the way to what is happening in Europe today.
Clearly panicked by the potential ramifications of the Tequila Crisis for U.S. banks, the Clinton Administration quickly assembled a huge package of funds, ostensibly to bail out the Mexican financial system. After all, it was the least it could do to help its struggling neighbour.
The fact that Clinton’s then Treasury Secretary Robert Rubin was also a former co-chairman of Goldman Sachs, the vampire squid of recent lore, which just so happened to have aggressively carved out a niche for itself in emerging markets, especially Mexico, is obviously mere coincidence.
According to a 1995 edition of Multinational Monitor, Mexico was “first and foremost among Goldman Sachs’ emerging market clients since Rubin personally lobbied former Mexican President Carlos Salinas de Gortari to allow Goldman to handle the privatization of Teléfonos de México. Rubin got Goldman the contract to handle this $2.3 billion global public offering in 1990. Goldman then handled what was Mexico’s largest initial public stock offering, that of the massive private television company Grupo Televisa.”
But it wasn’t just the U.S. government that seemed determined to lend a helping hand to Mexico’s banks and, indirectly, their all-important creditors. The IMF also extended a package worth over 17 billion dollars – three and a half times bigger than its largest ever loan to date. The Bank of International Settlements (BIS) – the central bankers’ central bank – also got in on the act, chipping in an additional 10 billion dollars.
With such vast sums flowing in and out of Mexico, one can’t help but wonder where the money went and who ended up having to pay for it. In answer to the first question, Lawrence Kudlow, economics editor of the conservative National Review magazine, asserted in sworn testimony to congress that the beneficiaries were neither the Mexican peso or the Mexican economy:
“It is a bailout of U.S. banks, brokerage firms, pension funds and insurance companies who own short-term Mexican debt, including roughly $16 billion of dollar-denominated tesobonos and about $2.5 billion of peso-denominated Treasury bills (cetes).”
So, just as happened with the bailouts of Greece, Ireland and Portugal, money lent by the IMF and national governments was speedily channeled via the recipient country’s government and struggling banks to the coffers of some of the world’s largest private financial institutions. The money barely touched Mexican soil!
Financial institutions recouped all – or at least most – of the money they had gambled on Mexico during the boom years. So began the modern era of “no risk, all gain” moral hazard in global finance.
Yet although the Mexican bailout was, to all intents and purposes, a mere balance sheet trick, by which funds were transferred from U.S. taxpayers to U.S. banks and investors, via the Mexican financial system, the Mexican people were still left on the hook for the resulting debt (plus, of course, its compound interest). After all, someone has to pay for the banks’ generosity!
After unveiling a minimalist austerity plan in January that the markets dismissed as insubstantial, the Zedillo administration imposed a shock plan on March 9 that amounted to an all-out assault on Mexican businesses and consumers (sound familiar, fellow Europeans?)
With the stroke of a pen, sales tax increased from 10 to 15 percent, fuel prices by 33 percent and residential utility rates by 20 percent. The government also limited minimum wage increases to 10 percent, which, set against a backdrop of 50 percent inflation, inflicted a huge decline in the buying power of minimum wage workers. Government action also pushed interest rates on consumer credit up to 125 percent.
Act III
Even today, 19 years on from the onset of the crisis, the country continues to pay its pound of flesh for the toxic debt generated during the “miracle years.” According to recent estimates, between 1976 and 2000, the buying power of the country’s average minimum salary fell by a staggering 74 percent, and has since risen by a pitiful 0.5 percent. As in post-crisis Argentina, the country’s middle class has been decimated. And what little remains of it is on the tab for the more than 3 billion dollars of annual interest payments on the country’s debt.
For the big U.S. banks that helped fuel the Mexican miracle, the last 19 years have been somewhat kinder. Following their recent takedown of the U.S. economy in the sub-prime debacle, they are quite literally “too big to fail” and have their sights set on much larger prey.
It seems, with the benefit of hindsight, that the Mexican Miracle and Tequila Crisis were merely a test run for the end game now playing out in Europe. The question is: will the Europeans play along? Contributed by Don Quijones, of
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Statistics: Posted by yoda — Sun Mar 31, 2013 2:12 am
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Portugal May Become the First of Europe’s Bankrupt Welfare States to Stumble upon a Genuine Recovery Formula: Less Spending AND Lower Tax Rates
Daniel J. Mitchell
There aren’t many fiscal policy role models in Europe.
Switzerland surely is at the top of the list. The burden of government spending is modest by European standards, in part because of a very good spending cap that prevents politicians from overspending when revenues are buoyant. Tax rates also are reasonable. The central government’s tax system is “progressive,” but the top rate is only 11.5 percent. And tax competition among the cantons ensures that sub-national tax rates don’t get too high. Because of these good policies, Switzerland completely avoided the fiscal crisis plaguing the rest of the continent.
The Baltic nations of Estonia, Lithuania, and Latvia also deserve some credit. They allowed spending to rise far too rapidly in the middle of last decade – an average of nearly 17 percent per year between 2002 and 2008! But they have since moved in the right direction, with genuine spending cuts (unlikely the fake cuts that characterize fiscal policy in nations like the United States and United Kingdom). Yes, the Baltic countries did raise some taxes, which undermined the positive effects of spending reductions, but at least they focused primarily on spending and preserved their attractive flat tax systems. No wonder growth has rebounded in these nations.
The situation in the rest of Europe is more bleak, particularly for the so-called PIIGS. To varying degrees, Portugal, Italy, Ireland, Greece, and Spain have lost the ability to borrow, received bailouts, and been mired in recession.
The silver lining is that the fiscal crisis has forced them to finally cut spending. All of those nations implemented real spending cuts in 2011 according to European Commission data, bringing spending below 2010 levels. Final figures for 2012 aren’t available, of course, but the International Monetary Fund estimates that spending will drop in every nation other than Italy (where it will climb by less than 1 percent).
That’s the good news. The public sector finally is being subjected to some long-overdue fiscal discipline.
The bad news is that politicians also imposed very significant tax increases on the private sector. Income tax rates have been increased. Value-added taxes have been hiked, and other taxes have climbed as well. These penalties on productive activity undermine potential growth.
The politicians say that this is a “balanced approach,” but this view is misguided, First, as Veronique de Rugy has shown, it generally means lots of new taxes and very little spending restraint. Second, it is based on the IMF view of “austerity,” which mistakenly focuses on the symptom of red ink rather than the underlying disease of too much spending.
What Europe really needs is a combination of lower spending and lower tax rates.
Portugal may actually be moving in that direction, according to a report in the Wall Street Journal.
The Portuguese government is seeking to cut its corporate tax rate for new businesses to one of the lowest in Europe as part of a plan to attract investment and revitalize ailing industries, the minister of economy said. The government is in talks with the European Commission’s competition agency in Brussels to get approval to cut the tax on corporate income for new investors to 10% from the current 25%, the minister, Alvaro Santos Pereira, said in an interview. …”We want to make Portugal one of the most attractive countries in Europe for new investment,” Mr. Santos Pereira said. “We believe that by providing very strong fiscal incentives to new investments we will safeguard the budget side and at the same time become a lot more competitive,” he added. …While wealthy euro-zone countries and the IMF are beginning to recognize the need for measures to boost growth in austerity-hit countries, they have been reluctant to endorse tax cuts in countries under bailout programs. If implemented, the proposed tax cut would be a departure from a series of tax increases that countries including Portugal, Greece and Spain were forced to take as part their bailout conditions.
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Before getting too excited, it’s important to note that the Portuguese proposal is a bit gimmicky. It’s not a corporate tax rate of 10 percent, it’s a special rate of 10 percent for new investment, however that’s defined.
But at least it might be a small step in the right direction. As the article indicates, it “would be a departure from a series of tax increases.” And Portugal definitely has been guilty in recent years of raping and pillaging the private sector.
To be fair, though, this chart shows that government spending in Portugal did decline last year. And the IMF is projecting that it will fall again this year and next year.
But the key to good fiscal policy is reducing government spending as a share of economic output. And if tax increases keep the private economy in the dumps, then the actual burden of government spending doesn’t change much even when nominal outlays decline.
A pro-growth policy is needed to boost economic performance. Portugal’s corporate tax rate proposal, by itself, won’t make much of a difference. But if it’s the start of a trend, that could be significant.
By the way, it’s amusing to see that one of the bureaucrats from the European Commission is pouring cold water on the plan, implying that a decision to take less money from a company somehow is akin to government assistance.
“We would want to be sure that anything proposed would help the competitiveness of the economy,” said spokesman Simon O’Connor, “but at the same time it would have to be in line with state aid rules,” referring to EU regulations that limit the assistance governments can give to the private sector. “There really isn’t any scope for them to reduce revenue,” he added.
But I guess that’s not too surprising. Along with their tax-free colleagues at the Organization for Economic Cooperation and Development, the European Commission has been trying to undermine tax competition and make it easier for nations to impose bad tax policy.
Returning to our main topic, what’s next for Portugal?
Your guess is as good as mine, but Portugal’s leaders already have acknowledged that Keynesian fiscal policy is ineffective. Perhaps they’ve gotten to the point where they realize punitive tax systems also are destructive.
View full post on Cato @ Liberty
Europe’s Crisis on PBS
By David Boaz
If you’re looking for something scary to do on Halloween, check out Cato senior fellow Johan Norberg‘s documentary, “Europe’s Debt: America’s Crisis?” on PBS stations across the country.
It’s been running for awhile, and will be seen in Maryland and Michigan on Sunday night. But it will be seen in many markets, from Tampa to Fairbanks, next Wednesday, October 31.
The Free to Choose Network, which produced the film, describes it this way:
Four investigative reports, shot on location in Greece, Brussels, California and Washington DC, highlight this in depth examination of Europe’s current debt crisis and its connection to the U.S. economy. Narrated by Swedish author Johan Norberg, and George Mason University professor, Don Boudreaux, the investigative reports ask: “Where did Europe go wrong” and “is the United States now repeating the same mistakes?”
Participants include Cato friends Jacob Mchangama and Tanja Stumberger, as well as such key players as former comptroller general David Walker, former European Commissioner Frits Bolkestein, and Ann Johnson, mayor of Stockton, California.
For broadcasts in your area, check the listings here.
For Johan Norberg’s books and articles, click here.
Europe’s Crisis on PBS is a post from Cato @ Liberty – Cato Institute Blog
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Gold and Silver • Profiting from Europe’s New Gold Rush
Profiting from Europe’s New Gold Rush
Posted on 20th July 2012 by Administrator in Economy |Politics |Social Issues
Casey Research
Profiting from Europe’s New Gold Rush
By Jeff Clark, Casey Research
Europe owns a sizable chunk of the world’s natural resources.
Over the past few decades, however, EU countries have mostly imported their resources.
Outlandish? Maybe.
But it was simply easier, cheaper, and most importantly it avoided most environmental conflicts.
Getting through government regulation and facing off eco-friendly groups is a time-consuming and outrageously expensive business… a fool’s errand.
When you can simply import and let other countries deal with all the hassle, it made a lot of sense. But things change.
When no one’s got a job, it truly focuses the political agenda.
Europe’s job market is a mess. Demonstrators are crying out for action, for opportunity, for jobs.
And mines employ a lot of people.
The trend is reversing because of Europe’s sluggish economy and the real benefits of the increase in local jobs and the leap in tax revenue that mining projects bring.
Of course, local economies benefit. Hotels are full of transient engineers and specialists, grocery stores feed the workers, and bars serve liquor to quench their dusty throats.
Then, of course, the government got involved…
Brussels, 2011.
Seeing the benefits of the jobs, income-tax revenues, and all-around political advantages, a “Raw Materials Strategy” was initiated in 2008, then revised and updated in 2010, and again in 2011.
The aim was to encourage sustainable supplies of raw materials from within the EU.
It calls for policies in support of domestic mining.
So far, so good…
In September 2011, the European Parliament adopted the “EU Raw Materials Strategy,” a generally pro-mining document, though it’s sometimes criticized by the industry for being “too bureaucratic.”
“It’s positive, of course, that the political climate in Europe is at least in theory becoming more supportive of mining”
So on the one hand, the government says, “Sure, go ahead,” and spends years (and no doubt millions of euros) coming up with a plan, while the other hand slaps down a bunch of rules that stifles initiative, adds massively to production costs, and once more makes mining companies think twice before they put down the millions it takes to get started.
Driller killers, indeed.
Yet the gold mining sector in Europe represents 16,000 direct and indirect jobs as of 2009, and that is surely growing.
So for the gold, the tax, the jobs, and for more than a few political careers, mining is right up at the top of the political agenda.
And despite the regulation stranglehold governments put on mining companies, they are still reopening abandoned mines and are exploring entirely new areas.
For investors, that’s very positive, exciting news.
Europe’s New Gold Rush
In Casey Research’s BIG GOLD, we’ve been talking a lot lately about the three main zones of metallogenic significance for gold in Europe: the Iberian Pyrite Belt; the Carpathian Arc; and the Baltic Shield.
The first crosses from Portugal through southern Spain.
The second stretches from the Czech Republic through Hungary, Slovakia, Bulgaria, Ukraine, Romania, Serbia, and into Turkey.
Number three, the Baltic Shield, traverses from western Russia through Finland, Sweden, and Norway.
Europe’s gold mining contribution is approximately 1.2% of global mine production (though demand from the EU is roughly 15% of worldwide totals).
Sweden, Finland, Spain, and Bulgaria are currently the largest gold producers in Europe. They mine about 640,000 million ounces of gold annually.
Other countries with operating gold mines are Greenland, France, Greece, Romania, Portugal, Slovakia, and the UK.
Among the gold companies operating in the region are Eldorado Gold (EGO) in Greece and Romania; Agnico-Eagle (AEM) in Finland; and Gabriel Resources (T.GBU) in Romania, as well as other majors and juniors across the continent.
Europe’s New Frontiers
2011 was a banner year for European mining.
Exploration expenditures were estimated to reach approximately €400 million (US$490 million), an all-time high. The largest share of those exploration dollars was concentrated in Sweden, Finland, Norway, and Greenland.
These countries, together with Poland, accounted for €288 million or two-thirds of total exploration expenditures last year.
This is even more impressive when put into historical perspective.
As you can see in the chart below, Nordic exploration spending has grown by almost four times in just ten years.
Both local and international companies are active in this region.
Further, junior companies that we look at in detail in BIG GOLD are expanding rapidly; Euromines reports that in Sweden, for example, juniors account for some 50% of total exploration dollars being spent.
Why has the attractiveness of the Nordic countries increased so dramatically?
The area is largely underexplored, and its geological similarity to Canada, Australia, and West Africa makes the Baltic Shield a highly prospective place for new discoveries.
Miners know what to expect and they already have the technology in place, so profitability for them and their investors comes that much sooner.
These countries have well-developed infrastructure (roads and railways) and telecommunication.
They have access to highly educated, trained, and experienced staff to support projects during all phases of mining is widely available.
The attitude of both the public and politicians toward exploration and mining is generally positive, especially in the northern parts of the region, though anti-mine protests still take place. Since the area is not densely populated, the NIMBY (“not in my back yard”) factor is largely absent.
Keeping the green lobby happy means keeping the mines open, operating, and creating a robust, investment-worthy business.
Europeans tend to be very concerned about ecology, so environmental issues are closely watched and strictly regulated.
Though most responsible miners make concerted efforts to reduce their impact on the environment, miners in Europe focus on this to a high degree.
The divide between miners and environmentalists has shrunk over the past few decades due to advances in technology.
But a bigger reason for the cooperation is the eroding economic situation. To a certain degree, politicians have been forced to find a more reasonable balance between conservation and the economic benefits mining can bring.
Spain, for example, has its economic back to the wall, starting with a record unemployment rate of more than 24%.
Astur Gold (V.AST) is working on getting the Spanish Salave gold deposit into production (which a previous company failed to do in 2005). The jobs it will bring no doubt add to the appeal; the company has received over 6,300 job applications.
Management has received two of three environmental permits and hopes to finalize the third by year end. If the project is fully permitted, the economic impact on the area will be both immediate and dramatic.
Will the Driller Killer Return?
The biggest threats to mining in Europe are resource nationalism, significant skills shortages, and infrastructure access in certain areas (see first news item below).
However, even on these issues, Europe is in a better position than many other areas.
The continent has a strong tradition of transparent and stable laws, along with respect for private property, leaving few in support of outright nationalization.
Western European countries also usually have well-developed infrastructure and an educated and skilled labor force.
On the other hand, bureaucratic procedures, overregulation, and a dense population outside of the northern countries have worked to keep massive mine development across Europe from accelerating as it has elsewhere.
Still, the carrot dangled by the mining industry looks awfully juicy…
If Romania approves Gabriel Resources’ Rosia Montana gold mine, for example, the project is estimated to bring some US$30 billion of economic benefits to the country.
The company hopes to mine 9.6 million ounces of gold and 51.5 million ounces of silver over 16 years. Eldorado’s Olympias and Skouries mines in the Halkidiki region will produce about 350,000 ounces of gold annually beginning in 2015.
Management is spending €1.3 billion to develop the projects, which will create 1,800 jobs in a country where unemployment is close to 20%.
Overall, the atmosphere for gold mining in Europe appears to be improving. Its importance is recognized in Brussels; even though only a few clumsy steps have been taken, the general attitude is making a positive shift.
With the benefits mining can bring – more jobs and greater revenue – we think there will be fewer objections overall, especially in the more desperate countries. It won’t solve all their problems, but there’s no doubt it would relieve some of the fiscal pressure.
From an investment point of view, it’s a region to watch. We fully expect to find increasing opportunities here.
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Statistics: Posted by yoda — Fri Jul 20, 2012 2:44 pm
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Gold and Silver • Re: Europe’s debtors must pawn their gold for Eurobond Redem
Twice Germany has tried to take over Europe with guns.
This time she will try to do it with gold.
Statistics: Posted by Deo Vindice — Tue May 29, 2012 2:39 pm
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International News • Europe’s ‘New Austerity’ – The Cheesecake Diet
Europe’s ‘New Austerity’ – The Cheesecake Diet
Written by Jeff Nielson
Wednesday, 23 May 2012
Austerity has failed. You won’t see that in any of the headlines from the media propaganda machine, and for a very good reason: our intellectually bankrupt governments have no “Plan B”.
The evidence of the colossal failure of Friedman Austerity is both abundant and unequivocal. Greece was an insolvent economy in steady decline when its own “austerity” was commenced. After two years of austerity it was totally bankrupt, and the economy had been so completely destroyed that even after defaulting on 75% of its debt further default already seems inevitable. Austerity transformed an economic decline into one of the most rapid economic collapses in modern history.
Then there is the UK. It began its austerity campaign shortly after Greece, but its own economic collapse is proceeding on schedule. Its monthly budget deficits continue to widen, with the UK government recently reporting its largest one-month deficit ever for the month of February. Given that the entire raison d’etre of austerity is to shrink deficits, that statistic alone is proof of the complete and utter failure of UK austerity.
However, as an added “bonus” the UK’s people also get to watch their economy being destroyed through this economic masochism. Today the UK government announced the collapse in UK retail sales. Sales plummeted 2.3% in April from March. But keep in mind that number excludes inflation. Factor in double-digit inflation (thanks to “competitive devaluation” and endless “QE”), and the actual rate-of-collapse approaches 40% when expressed as an annualized number.
What was the explanation given by the mainstream media for this austerity-induced collapse in the UK retail sector? It rained in April. Yes, that must have been it. UK residents were unprepared for April showers. Perhaps they all lost their ‘brollys’?
Meanwhile, the newest member of Europe’s Austerity Club, Spain, has already announced that it will miss its 2012 deficit target, and that it will exceed its 2013 target by at least double. More austerity. More total failure.
It should be noted that I predicted from Day 1 that all of this austerity would be a total failure, one of the easiest “predictions” in history, since there were two reasons why there was a 0% probability of success. First of all these economies are already insolvent past the point of no return.
Secondly, the primary structural economic problem faced by these Deadbeat Debtors was not excessive spending but rather insufficient revenues – nothing less than a “revenue crisis”. This was recently explained and demonstrated in a three-part series, where I showed the total collapse of U.S. tax revenues (in real dollars). Meanwhile, government spending in the U.S. has actually been declining (not increasing) for the past quarter century (also in real dollars).
The collapse of Greece’s economy, the imminent collapse of the UK economy, and the obvious failure of Spanish austerity prove that I was right. If a doctor prescribes a diet for an obese person, at worst the doctor would do no harm. The obese person might not be able to lose weight, but a diet certainly wouldn’t worsen his health. Conversely, if a doctor prescribes a diet for someone already suffering from severe anemia it would cause their health to immediately worsen and might even kill them (if they were already frail).
The economic parallel is no different. If these governments had been over-spending (i.e. there was “fat” to be trimmed) then at worst austerity would have done no harm. But because all of the “fat” had already been trimmed (long ago), austerity immediately “cut to the bone”. You can’t solve a revenue crisis by cutting spending.
Now the governments of Europe have all implicitly admitted this, but naturally they won’t say so publicly – since to do so would make it obvious that these spineless “leaders” now have no plan at all. And so get ready for Europe’s “Cheesecake Diet”.
“Europe must balance growth with austerity,” proclaimed the mainstream media propaganda machine, in headlines across North America, Europe, and around the world. In other words these shameless practitioners in double-talk are telling us that Europe is going to “balance” cutting spending with more spending. Officially all of the Deadbeat Debtors are still on their austerity “diet”, but now they have all collectively agreed to look the other way whenever one of these dieters decides to raid the refrigerator for a piece of cheesecake.
In the case of the UK, this involves no change in direction at all – since the UK has been on a Cheesecake Diet all along. While ordinary people in the UK have been punished with month after month of sadistic, suicidal austerity; the Bank of England has been showering its bankers with new money, courtesy of more UK “QE”.
Presumably where this new Cheesecake Diet might differ from the UK’s old Cheesecake Diet is that now some of the new spending might actually find its way into the hands of ordinary people. Then again, perhaps all this “balancing growth with austerity” rhetoric really means is that now all of Europe’s governments will start showering their bankers with more money – while continuing to stomp on ordinary people with Milton Friedman’s Boot?
The true verdict will come when we see the details of these new “growth” policies we’re told are on the way for Europe. If what we see is just more of the UK’s Cheesecake Austerity – showering bankers with money while starving everyone else – then this dooms the governments of Europe to the same fate as Greece: economies destroyed right down to their foundations.
On the other hand, if this “new balance” simply involves injecting stimulus into the broader economy then Europe will be precisely back where it started after the dust settled from the Crash of ’08. It’s nations will have gigantic, structural deficits; and absolutely no mathematical possibility of ever balancing their budgets.
The difference, of course, is that these Deadbeat Debtors have now piled on three more years of gigantic deficits since they first announced their plans to begin “austerity”. As we see with the latest statistics, the crippling size of the interest payments to the Bond Parasites has now made economic growth impossible for Europe.
Either way, the final verdict is clear: the governments of Europe now have no plan at all when it comes to ever restructuring their economies even to the point of solvency, let alone anything remotely resembling prosperity. They are doing nothing but economically treading water until inevitable debt-default takes place.
The question them immediately becomes: if default is inevitable, then why not do it now instead of later? Any/every financial counselor will tell their client that once bankruptcy has become inevitable, the smart thing to do is file immediately – in order to minimize one’s financial destruction.
Though national economies are much larger, the principle of arithmetic is identical. Indeed, we have seen what happens when one of these Deadbeat Debtors delays bankruptcy as long as possible: Greece. By declaring its bankruptcy later rather than sooner its economy is now in total ruin, and even after a 75% default on its national debt, more bond-burning is on the way. Even the creditors don’t benefit from delaying the inevitable.
However this has never been about economics and has always been about slavery. The Bond Parasites – known to each other as “The Pilgrims” – have never cared about the exact size of the debts under which these nations are buried. All that they care about is that these nations remain “mortgaged” beyond their ability to pay.
By having their nations over-leveraged with debt, the politicians become nothing but their banker’s servants. And what do the bankers want their servants to do? Just continue to squeeze the Little People. It’s all in black-and-white in “The Bankers Manifesto of 1892”:
…When through the process of the law, the common people have lost their homes, they will be more tractable and easily governed through the influence of the strong arm of government applied to a central power of imperial wealth under the control of the leading financiers. People without homes will not quarrel with their leaders. [emphasis mine]
Let’s put aside the fact that this premise is fundamentally flawed. People who have lost their homes (and are presumably near/at the point of starvation) will “quarrel with their leaders”. It is obviously the thinking of the bankers that serfs are easier to control (enslave) than citizens, and so their strategy all along has been to impoverish all the populations of Western nations to the greatest degree possible – simply to maximize their own political power/influence.
We see the real reason why the governments of Europe continue along their inevitable path to economic suicide. Europe’s new Cheesecake Diet isn’t a plan to avoid that fate. It’s a plan to ensure it.
http://www.bullionbullscanada.com/intl- … ecake-diet
Statistics: Posted by yoda — Wed May 23, 2012 9:25 pm
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