Now the European/Greek economic/credit/debt crisis/crucifixion has been concluded to the satisfaction of all concerned (media billionaires) the runaway wealth is starting to trickle back towards the continent. Consequently, the targets of European capital flight — the dollar, gold, Treasuries, Swiss franc, etc. — are experiencing ‘corrections’. If this keeps up much longer the US stock market will be effected and the Federal Reserve will have to step in and buy more Netflix shares.
ECB edict leaves Greek banks reliant on emergency aid
Paul Carrel
The European Central Bank announced on Tuesday it would no longer allow borrowing against Greek government bonds, a temporary move that will force Greek lenders to turn to their national central bank for emergency funding.
While such downgrades were expected, S&P moved before the euro zone could activate a deal to offset the impact of the ECB’s obligation to temporarily suspend the use of Greek bonds as collateral in its funding operations.
The plan is for Greece to receive 35 billion euros ($47 billion) worth of support from the EFSF, the euro bloc’s rescue fund, to back central bank lending against Greek government bonds and other assets underwritten by Athens.
But with this arrangement not yet in place, the ECB said on Tuesday national central banks would have to help banks through “emergency liquidity assistance” (ELA) until the 35 billion collateral enhancement scheme is activated, at which point Greek bonds would again be eligible in principle.
“This is expected to take place by mid-March 2012,” the ECB said in a statement.
A senior Greek banker said the only access for banks during this period will be the Bank of Greece, which will expand the ELA facility to accommodate liquidity needs until the European Financial Stability Facility money is available.
The ELA or Emergency Liquidity Assistance is a set of rules that allows individual Eurozone members to regurgitate euros in the event that other means of financing are unavailable. This is certainly something to generate a lot of controversy or be swept under the rug, after all it is hated ‘money printing’.
We cannot have that, it goes against God! Print money = go to Hell.
Believe it or not, the European countries and others can simply use printed currency to retire their debts. This isn’t original or earthshaking in concept. Sovereign nations have always been able to issue their own currencies at will without taking on specific liabilities. President Abraham Lincoln issued greenback dollars during the US Civil War. By his doing so, the Union was able to finance what was up to that point the world’s most expensive war without having to borrow from banks.
Greece is a 4,000 year old grown-up sovereign nation that can issue euros on its own. It does not have to borrow from any central bank including the Bank of Greece. It doesn’t need anyone’s permission: the issuance of currency is the duty of the state when circumstances require it to do so. Without going further into debt, a sovereign can simply use currency it creates out of thin air to extinguish BOTH the currency AND the debt at the same time which is what happens when debts are repaid.
The bankers do not like this at all.
Bankers pimp for all they are worth The Holy Sacrament of Money. They squeak about the need for ‘honest’ money and ‘honest’ accounting as if these terms mean anything. They whine about ‘monetization’ and ‘hyperinflation’ as if these are failures of character. Perhaps they are but there are more immediate issues to be addressed.
Extinguishing debt by way of fiat runs against the rules instituted by big businessmen which allow them ascendency over everyone else. It is an outrage for anyone to use money in ways outside of making bankers and their industrialist clients richer than they already are. It is far too simple a thing for a country to create currency in order to extinguish its own debt, too damned easy, it has that ‘deux ex machina’ quality! It’s cheating.
Q: How is ALL debt created? [ … dead silence … ]
Creating currency to extinguish debt is absolutely no different from the creating of the debt in the first place! It is far easier to create €100bn or €500bn in debt out of thin air with a pencil and a piece of scrap paper than it is to raise that same amount in taxes from a shrinking pool of circulating currency! It’s just as easy to extinguish that debt but the governments of the world are run for and by bankers who need the debt to remain for their own selfish purposes.
As a consequence, money is sanctified above all other things, as is presented by interested ‘useful idiots’ such as Chris Whalen (and Sylvain Raines).
‘Valuation is not the most important problem in finance; valuation is not the most interesting problem in finance; valuation is the only problem for finance. Once you know value, everything happens. Cash moves for value. If you do not recognize the difference, the fundamental difference between price and value, then you are doomed … The Chicago School of Economics has been telling us for a century that price and value are identical, ie, they are the same number. What this means is that there is no such thing as a good deal, there is not such a thing as a bad deal, there are only fair deals.
The role of new era concepts such as fair-value accounting in fueling the crisis is just part of the story. The other symptom of a lack of real economic growth in the G-20 nations is the rise of cash settlement OTC derivatives and complex structured securities. From leveraged ETFs to currency swaps, the global financial markets are polluted with all manner of speculative instruments with no basis in the real economy.’
It is impossible to see how the product of cunning thieves has anything other than aggravation ‘value’.
The economists and the analysts and the finance apologists insist upon one way or other ways of determining worth … as if any of this nonsense matters. Here is the sanctity of money, holy money that must be put in the highest place against all other things at all times. Raines and Whalen insist that the hems on the dresses of the fairies flying in the corner be measured correctly. Meanwhile, there is the fatal plunge in the amount of available fuel: the establishment obsesses about debt-money fairy-tales while the reality of resource bankruptcy is ignored.
– There is no such thing as a ‘real’ or productive economy: our shambolic assembler of junk is entirely the creature of debt- and endless energy and resource subsidies. The productive economy cannot exist without these subsidies. This is a big reason why the debts, banks and the status quo are so important. It is also a big reason why the debts, banks and the status quo are all breaking down.
– There is no such thing as economic growth, either, it’s another fairy-tale. Yet, growth is the institutional currency of all economists, including those economists who would seek to bring an end to it. Growth has never existed: from the beginning of history and the use of tools there has never been growth other than the (growing) belief in a growth fantasy. How could growth ever be? It is an artifact of pop culture and nothing else.
Come on! It isn’t that hard.
The economist cries out: “Look at a tree, it has more leaves every year, look at my child who becomes taller and larger, surely there is growth in this world. Certainly the economy grows. There are more people, the cities which become larger, there is the increase of man’s works, there are more things and more funds. If nothing else there is the increase in debt. There is indeed economic growth: what is needed now is more of it.”
Growth itself cannot take place on our finite world without larger destruction or reductions elsewhere: the all important ‘net out’ is a negative real number. We see growth because we purposefully strip the other important things of value. The ‘economy’ does not grow so much as everything else shrinks whether these things outside the economy are measured or not, acknowledged or not. Consequently, our activities are not productive but reductive. Our works do not multiply, they concentrate: they hollow out. Our products do not enrich us but impoverish us, what is increased on our ledgers is decreased in the real world: greater increases threatens to leave us with nothing.
What does the economist choose to ignore? The answer determines the limits of economists’ credibility: everything! Here is physics: entropy and thermodynamics, the rape of the real by a monstrous and abominable lie. Here is Hell unleashed on Heaven for thirty pieces of silver: our industrial ‘growth’ is the widespread ruin of every last tree, rock, lump of coal, bit of grass or ounce of oil, every last item, good, idea, bit of beauty, wildness, resource however dilute or fleeting the capitalist and the entrepreneur has put or can put his hands upon … to strip mine then distill into money.
Some sanctity, that.
The same fantasy-money is then rented at breaking rates to the ordinary people so that their thrall might give form and substance to it. It is the shortage of money to the poor man that gives the rich man’s money worth. The rich man’s surplus does not do this. The poor man who desires money above all other things to the end his own life transforms colored paper and metal trinkets into money. This is why the poor are purposefully deprived of it, why wars are fought, why the world is ruined, to give weight to a stupid idea for the benefit of a few thousand people.
Poverty is the artificial shortage of money, the shortage itself serves the interests of the rich by defining in the negative what ‘rich’ really is.
The industrial economy is robbery made rational and given the synthetic virtue of ‘efficiency’ and ‘scale’. The victims rob themselves, the exquisite cleverness of the robbers’ invention convinces the victims to be grateful for having been victimized, that the crime presents opportunities for victims to someday become robbers themselves. Tomorrow, always tomorrow …
Finance has negative value, what is attached to money is also a negative value. Both finance and money are substitutes for value which is consumed by the industrial activities that are enabled by money. Capital (resources = value) is destroyed for no gain, the residues in the form of debt ‘assets’ accumulate in the accounts of the destroyer. What happened in Greece is this process in action. It works well, it is efficient, it is the ‘market economy’ in action. This process is underway everywhere in the world with an industrial economy. Without any changes at all this grand folly will consume itself.
Here is the iron boot on the West’s neck: its energy insolvency and ongoing de-industrialization/conservation by other means.
There is nothing sacred about money, it is a tool to be used (as a shovel is used to dig graves for the bankers and industrialists.
It is past time for useful money-printing to emerge from the euro-maelstrom. The ELA can be used when a fixed number of EU nations determine there is an emergency (although this appears to have been intended for non-European nations as recipients).
Right now, the Greeks have run out of euros, there is no money within the country to allow ordinary business. According to the accursed rules, Greece must borrow euros and must do so from financiers outside of Greece. Nobody will lend euros to Greece, any agency that does so adds to Greece’s massive burden of unpayable debt. At the same time the agencies wag fingers at Greece and insist that the debt is why there will be less loans in the future.
Greece is expected to starve or have another bloody civil war/revolution. If Greece prints she meets redemptions — which is capital flight out of Greece. The debt problem exists in the first place because the European establishment is run by criminals. The ECB should have been recycling flight capital back into Greece at near-zero rates since the beginning of the crisis. This is what central banks do, that is their JOB. The bank is not a safe haven for flight capital or a wealth-management firm for European billionaires. Both ECB and Target 2 systems are dysfunctional because their managers do not address the matter of intra-EU capital flows directly. As a consequence, flight capital flows increase, including flight out of the euro itself.
Gold, Treasuries, dollars and stocks all go up. Petroleum goes up for other reasons that have nothing to do with flight capital.
It is the capital flight/slow motion bank runs that is destroying the European economies alongside the waste-based nonsense that cannot pay its own way. Stemming the flight of capital would leave some resources so that waste can be dealt with, rather than the current trend of a Europe stripped completely of capital resources unable to manage any sort of shift to a conservation economy.
Greece should guarantee all deposits remaining in Greek banks and be done with it. Not the bondholders or other liabilities, but deposits only. That would be a shot across the bow of Rehn, Schauble and Draghi and the other thieving bankers as the guarantee would be in euros and Greeks would be clear that there are some Greek interests denominated in euros that they will defend.
By doing just this, the Greeks would defend the euro across the entire Continent! Sacre Bleu!
The Greeks also could (if they had a government) re-constitute enough banking in the country to manage capital @ €500 billion as a start. (they would need €25 billion or so to capitalize a couple of ‘New Banks’) That would be the second shot across the establishment’s bows. At a trillion euros the Greeks could shoulder the ECB aside and liquify the entire EU because the ECB and union’s Target 2 banks refuse to do so! They could also use the printed euros to extinguish debt as it matures, to meet redemption demands.
The Greeks can do this because Greece has a treasury whereas the ECB does not. Greece has/is a balance sheet, liabilities can be taken upon Greece’s own account if they choose to take them. The alternative to Greece taking liabilities (at this point who cares?) is Germany being fixed with them as a matter of consequence. This would be annihilation of Germany by way of these EU liabilities.
Germany could do the same thing as Greece, print euros and end the immediate crisis, but they are cowards, caught up in the idea of the sanctity of holy money which must be preserved at all costs.
Up until this point everyone in Europe has been playing defense, being pushed to the end of the gangplank. Maybe the financiers will now wake up and ditch the sanctity of money shibboleth once and for all.
Here then is the first outline of the class war to come. Stripping debt from the economic system to destroy industrial capitalism, with the industrialist unable to stop it.