Silence Is By No Means Golden ~ The Risk Averse Alert

Saturday, July 28, 2012

Silence Is By No Means Golden

Following are a couple reports on a European debt crisis rapidly spiraling out of control. These should give you a better sense of a looming battle provoked by Team Fraud aiming to further a supra-national banking dictatorship whose purpose is to sustain the system of virtual slave labor camps otherwise called "globalization." Of course, this arrangement is meeting a formidable challenge with increasing calls for reinstatement of Glass-Steagall. Yet there is no guarantee reason will prevail. A weak U.S. Congress and a corrupt Executive, both sold out to an imperial system, are an impediment to just resolution of a crisis threatening the very foundation of the American Revolution. One thing certain is no matter which way the impending battle turns, many a wildly mis-priced "asset" will be marked down, if not obliterated. Thus, there is no good reason for any American to tuck tail and simply trust those in positions of power will do the right thing. Silence is by no means golden when so called "leaders" fail to fight for truth and justice while crime after crime disgraces our time with a blind eye turned upon a swindle of historic dimension that is the trans-Atlantic banking system.

First are excerpts from Doug Noland's Credit Bubble Bulletin of 7/27/2012 titled, "Monetary Madness." (Emphasis added is mine.)
Today, because they now lack creditworthiness in the marketplace, Spain and Italy no longer have the capacity to inject sufficient new Credit into their economic systems. This is a potentially devastating dynamic, as the lack of sufficient ongoing monetary inflation is illuminating deep structural economic impairment following years of Credit excess and attendant maladjustment.

Earlier this week, with Spanish and Italian yields spiking higher and their markets turning illiquid, the European debt crisis was again spiraling out of control – only months after the ECB implemented its latest $1.3 TN liquidity facilities. And, once again, acute financial stress has provoked tough talk. ECB president Draghi Thursday morning stated, “…the ECB is ready to do whatever it takes to preserve the euro… Believe me, it will be enough.” German Finance Minister Schaeuble said he supported Draghi’s statement, while Chancellor Merkel and President Hollande came forward Friday with their own “bound by the deepest duty” to do everything to protect the euro. And then there was this afternoon’s unconfirmed report that Mr. Draghi is prepared to present a “game changing” multi-prong plan at next week’s European Central Bank governing council meeting that will include ECB bond purchases and a banking license for the ESM.

Shifting 180 degrees from earlier in the week, rather than fearing Credit collapse the markets moved quickly in anticipation of yet another crisis-induced bout of monetary inflation. And, seemingly, only the Bundesbank remains capable of taking a measured approach. Friday morning (before afternoon reports of a Draghi’s “game changer”), from a Bundesbank spokesperson: “There haven’t been any changes in our positions on bond purchases of the Eurosystem, bond purchases by the EFSF, or giving a banking license to the ESM… The Bundesbank has repeatedly expressed in the past that it views bond purchases critically because they blur the line between monetary and fiscal policy… The Bundesbank continues to view the SMP [securities market program] in a critical fashion. The mechanism of bond purchases is problematic because it sets the wrong incentives… A banking license for the bailout fund would factually mean state financing via the printing press and would be a fatal route, which therefore is prohibited by the EU treaty.”

No doubt about it, the Bundesbank is increasingly isolated. They are at odds with most European politicians and they are at odds with other central bankers. They are clearly not on the same page with Mr. Draghi. And no group of government officials anywhere more clearly appreciates myriad risks associated with monetary inflations. The German/“Austrian” view of economics just has a very different perspective, and it goes way beyond some fixation on Weimar hyperinflation. The focus is on how real wealth is created and how wealth is destroyed. Monetary inflations are powerfully destructive. And as a deepening European crisis applies incredible pressure on politicians throughout the region – certainly including Germany's Merkel and Schaeuble – I suspect the Bundesbank will hold its ground. They are both right on the analysis and have the support of the German people. They understand that the German economy cannot support the massive debt of the entire eurozone.

A report posted today at LPAC titled, "Collapse of Euro, Return of Peseta Discussed in Spain," only the more confirms Noland's suspicion that, the Bundesbank will not back down. (Again, emphasis added is mine.)
In recent days, Spanish media have been portraying scenarios of a collapsing euro, and of Spain then being forced to return to its old national currency, the peseta. Jose Luis Gomez, a leading columnist at the news daily El PaĆ­s, wrote yesterday in his blog that a total failure of the euro and a return to the peseta cannot be excluded.

Today, the media (including Spanish ones in Ibero-America) report about a brand new survey done by the research department of BBVA (Banco Bilbao Vizcaya Argentaria), one of the biggest banks of Spain, investigating the total collapse of the euro, and the "return of each country to its original currency." Other big international banks active in Spain have done calculations as well, on a return of the peseta: Japan's Nomura believes the Spanish currency would depreciate against the euro by 35.5%; Switzerland's UBS, Citigroup, and the Dutch Rabobank expect depreciations in the range of 40 to 60%, during the reintroduction period of the peseta.

El Periodico del Aragon reported (07/22/12) under the headline "From the Euro to the Peseta?", that Kai Konrad, Chairman of the Council of Scientific Advisors to the German Ministry of Finance, told some 200 Spanish bankers and businessmen a week ago, that "we cannot guarantee that the Eurozone will be sustainable." Konrad, invited by the Aragon businessmen's association, ADEA, said that a break-up of the euro would be costly, but people overestimate what Germany, with its own debts, can do financially, and there will be no bailout of Spain like that of Greece or Ireland. Hence, El Periodico's headline.

This just shows that whereas leading politicians like German Chancellor Merkel, French President Hollande, and ECB President Draghi are still launching big propaganda for the "rescue of the euro," bankers and others are already preparing for the failure of the euro, and beginning to think about something else (some of them even warming up to the idea of bank separation now).

These two reports suggest further hyperinflationary bailout of the hopelessly insolvent trans-Atlantic banking system, rather than a slam dunk, fairly appears a long shot.

Our treasonous Treasury Secretary will be traveling to Europe next week to coax the Bundesbank's surrender. Yet with Geithner's credibility at an all time low on account of facilitating the LIBOR scandal, his European intrusion could prove fatal to the EMU. One should recall that, it was the U.S. Treasury Secretary who first proposed the ESM be made a "bad bank" with capacity to absorb $2 trillion of Europe's garbage — the so-called "Geithner Minimum." Given that Germany still is steadfastly resisting this fraud, what then could a criminal incompetent whose part in bankrupting Europe is no longer beyond suspicion possibly bring to the table other than resentment and rage?

As noted yesterday, one could reasonably conclude the Obama administration is in serious trouble judging by the Treasury Secretary's empty defense of Dodd-Frank in the face of financial fraud continuing unabated. Unlike Congress, though, German authorities are not captive to the American spin machine propping up a hopelessly insolvent banking system. So, a serious leadership challenge unlike anything he experienced this week before Congress could await the Treasury Secretary in Europe. Indeed, if Geithner was "deeply offended" by Barofsky's indictment of the Treasury Secretary's "leadership," Germany could make him apoplectic and send him off the deep end.

It seems Germany has little to lose maintaining its hardline stance in opposition to the insane hyperinflationary schemes Geithner endorses. Likewise, more than any other nation on the front line today, Germany at least appears willing to bite the bullet. Could the time for doing so be at hand? There is no denying the walls have been caving in with increasing ferocity over recent weeks on Team Fraud's boy at Treasury. This could be the week he and the swindle he was put in place to defend are buried in an avalanche.

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