Europe prepares for Pittsburgh G20 summit
Europe is preparing for the Pittsburgh G20 summit with a summit of its own on September 17 to present a united front to the United States on financial reform. Story at euobserver.
France’s Premiere Sarkozy wants to regulate bankers’ bonuses and decertify banks who refuse to cooperate. Obviously this affects all the international banks operating in France. The big bankers don’t like this. The U.S. reaction is at Bloomberg. Bloomberg seems to think Obama can be persuaded to support Sarkozy’s modest initiative. This would be one way to signal to an outraged public that the Obama administration is doing something about bankers’ greed while really doing nothing to curb bankers’ greed.
It’s not easy being a European leader these days. Your economy is in the tank, you have high unemployment, support for the EU is eroding even as the global leaders put more pressure on you to agree to increased global integration and control. You are spending your country deeper into debt to support bankrupt banks, and you are running out of funny money to spend. Communist unions control the streets and threaten the public. Thank goodness the New Right is so poorly organized or you would actually have to govern in the interest of the people of your country.
At the end of July, France injected the bulk of its stimulus package into its economy.
Just a reminder that the French unions play hardball to get what they want.
England raised personal income tax rates on hedge fund parasites. Many are fleeing from England, mainly to Switzerland. Closing tax havens in Europe and forcing account disclosure from Swiss banks is making it more difficult for the big looters to stash their cash. The IRS negotiations with Swiss Bank UBS to disclose previously secret accounts, combined with a tax amnesty offer that expires soon for U.S. tax cheats, is putting pressure on the wealthy looters and criminals. The noose is tightening around the wealthy who shelter income abroad in tax havens. The noose is not tight enough around the bankers, however. Sarkozy’s measure is half-hearted compared with the power of the Federal Reserve and other central banks to act in the interest of the bankers.
Michael Hudson examines Iceland as a test case for the failed economies of Europe. The IMF is imposing budget spending restrictions on Iceland and requiring Iceland to raise taxes to pay its foreign debts. But outmigration and a failing economy may endanger the planned repayment plans. Iceland needs to increase its exports to gain cash to pay its debts, but there is little possibility of increasing exports. Iceland real estate is mortgaged to the max. No new loans are available, and Iceland is unwilling to sell national assets to pay the debt. The pressure is so intense, the squeeze is so dramatic, that Iceland could default on its debts and become a failed state. The world is keeping its eye on Iceland to see if the pressure-to-repay tactics will work. If so, they will be applied everywhere.
“The past two years have seen its (Iceland’s) status plunge from having the West’s highest living standards (debt-financed, as matters turn out) to the most deeply debt-leveraged.”
Iceland and Eastern European membership in the EU are hanging in the balance over the debt repayment issue. Hudson points out that debt is sanctified, a moral obligation of the highest order in the minds of most ordinary people. But this sanctity may crumble as more people realize that the creditors were predatory. If Iceland’s people get to the point of favoring debt default, Iceland may spin out of Europe’s orbit. The key question is, will resentment against European and globalist lending policies crystallize into political opposition, or will the Icelanders knuckle under to decades of debt peonage?
The global financial controllers seem unable to model how much living standards must fall, how many more mortgages must go into default, and how much governments must cut back on spending to service the debt they are owed. Thus they are unable to provide a soothing plan and a promise of an ultimate bottom to shore up debt repayment sentiment.
The details are a bit complicated, but Gordon Brown is responsible for shifting debt repayment responsibility onto the IMF rather than relying on normal contract settlement laws. Brown’s impulse now seems to be becoming encoded into the global regulatory scheme, putting the IMF in charge as global debt enforcer. This shift away from normal bank recourse to legal remedies allows some insider bankers to escape with large, unpaid loans from their own banks.
Despite attempts at media censorship, Iceland’s populace became enraged when they realized that bank bankruptcies were caused by bankers making huge unpaid loans to themselves. We interpret Sarkozy’s deferment of bank bonuses in this context, as a signal to revolting debtors and unhappy citizens that banker greed has some limit.
If Iceland is able to restructure its debt obligations based on ability to pay, it may preserve its economy, its population, and its government. If Iceland is pressured to pay regardless of the state of the economy, Iceland’s future becomes an open question. It may cease to exist as a nation.
Meanwhile, the chief economist of the IMF is calling for a withdrawal of stimulus and higher tax rates to pay off the debts incurred by government borrowing to prevent Depression. Olivier Blanchard characterizes the present situation as a “delicate balancing act” as nations withdraw stimulus yet hope for economic growth that is strong enough to prevent more unemployment. Despite hype in the media about China’s growth rate and recovery in the Asian economies, no nation seems poised to increase demand enough to encourage industrial recovery for export elsewhere. If there is no extra production for export, how does a country raise the cash to service its debt? Higher taxes and lower living standards are the only alternative to increasing GDP.
This means, the IMF is standing as the main obstacle to economic nationalism, to countries producing for their own people rather than rigging their industries toward export. The international bankers will hold their loans over the heads of national leaders as a moral obligation in order to keep the international framework functioning for the bankers.
The best answer: nations should act in concert to repudiate their central bank debt obligations and force the dissolution of the IMF and the World Bank. But nobody thinks about this except the citizens of the worst-affected nations, and NWOU.
Washington’s blog quotes Hudson to the effect that the banker parasites have siphoned off as much wealth from they economy as they can. Having induced governments to bail them out rather than the real economy, the bankers are prepared to jump ship to a safer haven where they can stash their wealth. Again, we perceive Sarkozy as attempting to muster a bit of resistance against this trend. If Sarkozy could build on this small step and gather widespread support, the various nations might be able to block the looting and offshoring. Our fantasy: the banker criminals can’t find a safe haven, get tracked down by some snappy new branch of Interpol, are forced to give the money back, and end up hanged in public. Somebody should make this into a movie. It won’t play out this way in real life.
Berkeley Professor Emmanuel Saez notes that the wealthiest one percent captured two-thirds of the economic growth in this century. He deflates the myth that America is a nation of small businesses. None of the financial problems that caused the present crisis have been solved by advancing bailouts to bankers while restricting credit to consumers and small businesses. The combination of Treasury bailouts and Fed financing acts entirely in the interest of the rich bankers. The rest of us get saddled with debt peonage and higher taxes.
Europe is holding onto its carbon credit scam despite the fragile economy. The EU will force airlines to buy carbon credits or face restrictions on the number of flights that can land at European airports. Green initiatives in this era of increasing debt only serve to shrink the real economy. Demand for alternative power is not increasing significantly. Green schemes must be forced on consumers by governments rather than responding to market forces.
“The West cannot support its gold-plated state structures from an aging workforce and depleted tax base.”
Ambrose Evans-Pritchard takes a look at budget cuts in Ireland. Ambrose argues that stimulus policies have wasted borrowed money without stimulating production or employment. He expects bond markets to blow up as the public begins to boycott low-interest debt paper. Higher interest rates would, of course, choke off any potential recovery scenario and make future financing of debt more costly and longer.
Danny Schechter has a great piece on finding the Depression in New York City. More real estate foreclosures, more unemployment, more banks going bust. People taking their money out of banks and putting it in their mattresses. This piece really gives the flavor of life on the streets. It’s not optimistic. Credit Schechter for noting that neither political party is voicing the frustration of the victims of the crisis. We would hate to be in New York City if the bond market blows up.
If public consciousness against the bankers could be brought to fever pitch, something could be done to restrict their selfishness. We expect to see minor proposals from various quarters to do something about the banks and the bankers in the days ahead. This could sharpen debate on financial TV as pressure mounts on the hedge fund masters, day traders, corporate looters, and parasitic speculators to justify their existence. But one problem is, this debate defaults to Right vs. Left and aids the socialists as the debate becomes an attack on capitalism in general rather on the predatory financial system characterized by Wall Street and banker greed. And, we don’t think an anti-banker movement will grow sufficiently to make a difference.
The future for most of us is debt peonage unless the people gain the will to desanctify debt and repudiate the cohort of lending policies that brought on the crisis. Unfortunately, the masses, as characterized by the conversation of TV reporters and talking heads, remain clueless about the causes of the global financial crisis. Understanding the “cohort of causes” requires people to abandon longstanding habits of false right versus left thinking and recognize the criminal collusion among politicians and bankers around the world.
We expect the conventional wisdom to remain that the Federal Reserve acted responsibly and quickly to head off a crisis that could have led to Depression. Until this story can be dissected and broken, the bankers stay in control. The true interest of the parasitical class is now to squeeze as much out of the host as the host can stand and still remain alive.
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I suggest you make it 501 and take a look at a child’s georgraphy book. You quote from the Wall Street Journal which reports on the UK’s PLAN’s to increase taxes. England is not the UK – it is one of four countries: Wales, Scotland, England and Northern Ireland, which comprise the United Kingdom, or Great Britain as it is otherwise known. All four are centrally governed when it comes to taxation.
Your journalistic expertise leaves much to be desired – one example is the reference to the above article where you report that, ‘England raised personal taxes . . .’ A completely erroneous statement on both counts . As a journo myself, I know that accuracy and lack of bias is crucial for credibility,. Of course, poliitical spin and agenda-driven smoke and mirrors are another issue, particularly when the assertions are so transparently false as to be ridiculous.
We’ve been hoping someone would appear with superior knowledge so we don’t have to write these posts. Finally, you have. Britain is four countries, got it, thanks.