|
Unfortunately the People
own the Foundation & Banks the Strategy!
 It was the perception of getting something
of value without any meaningful sacrifice that initially fostered the EU
Monetary Union. Though the countries of Europe were fiercely nationalistic
they were willing to surrender minor sovereign powers only if it was going to prove
advantageous to them. They were
certainly unwilling to relinquish
sufficient sovereignty to create the requisite political union required for
its success.
After a decade long trial period it is now time to pay the price for
Monetary Union. I suspect that
the EU membership is unwilling to do so. Though they likely will see the
price as too high to do so, the price to not do so has become even
greater. They have unwittingly
been trapped by a well crafted strategy.
Never has a monetary union functioned without a political union with
which to control Fiscal Policy. This was well understood by the strategists
but not the salivating sovereign leaders looking for cheaper money to finance
election candy and avoid unpopular, pressing economic realities.
It was expected that the obstacle of political union would inevitably give way when the
pre-ordained and unavoidable political crisis forced the issue. We are
presently at the cusp of this crisis in Europe. As we just experienced the Arab Spring
we are about the experience the European Summer on an unavoidable path to the
American Autumn and World Winter in an unfolding "Age of Rage'.
The initial resolution of sovereign debt defaults by the bailouts
of Greece, Italy, Ireland,
Portugal, Spain (GIIPS) will eventually be the creation of a Eurobond, in my
measured opinion. It is the next
move on the strategic chessboard being carefully orchestrated.
A Eurobond will allow the ECB to issue debt. With the ability to
issue that debt, the obligatory abilities to pay for it will come. Paying for
a Eurobond will mean giving up gradually increasing levels of sovereign
taxation.
The current political impediment to political union is that never has
a ruling political regime been willing to surrender the golden jewels,
specifically public taxation. But this will happen because it is the hidden
strategic goal now operating in Europe.
To understand the real European Strategy you need to appreciate the
history of Europe and its cultural diversity. Ever since the Roman Empire and
Charlemagne, leaders have dreamed of a single Europe. No one in modern times
from Napoleon to Hitler has been successful.
The one thing the European nations understand and for a time were
successful at, was Mercantile Colonialism. They were the ones that invented
it. When I say 'they', I refer to
Kings and their financiers. The Kings may now be gone, but the financiers are
even more powerful today than ever before.
The colonies are no longer on the other side of foreign seas to be
conquered, but rather part of the Euro zone.
The essence of Mercantile Colonialism is to create a need for debt, then finance
that debt and eventually exchange that debt for the collateral assets that
are the underlying wealth producing assets.
In the Austrian School of Economics,
this exchange of printed paper for real assets, is called the Indirect
Exchange. It is well understood and well
documented but like usury is avoided in polite conversation. Eventually
the colonies worked as slaves to pay the debt to their European masters.
Gold is the
Money of Kings, Silver the Money of Merchants and Debt the Money of Slaves
The European banks are slowly but surely, through a tactic of
Financial Arbitrage, moving more and more sovereign debt to the ECB and EU.
Someone must pay for this debt and that will eventually be the entire
European taxpayer base. That is the goal.
In the initial stages of the Euro dream everyone was benefiting. Like an initial user of drugs the
early stage is euphoric before the issues associated with the addiction
surface. This stage fostered tremendous growth in debt - never ending Corniche housing villas in
Spain and Portugal, embarrassing pensions and social benefits in Greece, tax
advantages for off shoring corporations in Ireland or unjustifiable and
hidden local government spending in Italy.
It has been a captive market for the Asian Mercantile Strategy and a
financial retail market boon for US financial instruments created from the
never ending supply of freshly minted US fiat paper.
I was living in Europe during the debates on the viability of a
European Union. I remember only too well what everyone eagerly wanted and
fantasized gaining from a European Union.
Citizens:
1.
They saw and
wanted employment. The EU meant they could go anywhere the jobs were.
2.
It meant
cheaper goods because tariffs were to be removed,
3.
It meant
cheaper cost of financing because of a single currency with as Germany the
'anchoring credit'.
None of which have turned out to be as advertised by those wanting the
EMU
(except cheap goods which they don't have the jobs nor disposable
income now to afford)
Governments:
1.
To the
sovereign governments it meant cheaper debt since they effectively received German
Mark backed debt. Like free
liquor to an alcoholic or free drugs to an addict, the politicians couldn't
sign up fast enough as long as they kept sovereignty over precious taxation.
2.
To make the deal happen, countries were allowed to maintain fiscal
sovereignty, though everyone quietly understood that separated Monetary and
Fiscal Policy was a flawed concept and eventually would doom anyone
attempting it.
 
Government spending & brazen
consumption masquerading as GDP started exactly with the retail launch of the
Euro.
Financiers:
1.
As pushers of debt, the banks
acquired a whole new cadre of addicts.
2.
The EU
financiers understood only too well that with the free flow of Labor &
Capital, came the free flow of Credit and Financialization.
3.
T o the
financiers it was the creation of an immensely profitable fixed currency
regime with a known outcome.
"The way to make a lot of money is to invest in a known &
predetermined outcome. "
Joseph P Kennedy, (father of President JFK
and one of the richest self-made prohibition bootleggers in America).
It was obviously a flawed approach where
Monetary Policy would be disconnected from Fiscal Policy. It was expediently
swept under the carpet as something to be avoided and left for future
political operatives to craft the public response.
Question: "Why would we implement a flawed
system?"
It is exactly
the same question as why did US banks make liar loans?
Answer 1: Someone else would carry the liability.
.... and the tax payer has.
Answer 2: Because there was
a lot of money to be made!
.... and it has been made.
Prior to Greece exploding and knowing
the strategy in play, I was
prompted to initiate writing two series of articles laying out the levels of
hidden debt being rapidly and insidiously created in Europe
EURO EXPERIMENT Series: Detailed the flawed underpinnings of
the EU. An experiment that would
foster:
a - Extensive use of
SWAPS to hide public debt at all levels of government,
b - The broad use of
Off Balance Sheet Contingent Liabilities,
c - The epidemic use
of PPP-Public Private Partnerships
"All of
which is NOT discussed in these public viewed bailouts."
SULTANS OF SWAP Series: Detailed the financial game of
Regulatory Arbitrage. A strategy
of passing debt to taxpayers through:
a- Bailout,
b- Guarantees,
c- Monetization of
Private Losses,
d- Sweetheart, Crony
Capitalist deals
PLUS
a- Extensive use of
SWAPS to hide public debt at all levels of government,
b- Broad use of Off
Balance Sheet Contingent Liabilities,
c - Epidemic use of
PPP-Public Private Partnerships
"The EU is built on a FLAWED FOUNDATION
but a brilliant STRATEGY ……
…. Unfortunately the People own the
foundation & banks the strategy!
Like Colonial Mercantilism the real money in Europe KNEW going in
what the debt strategy was.
They also had another card up their sleeve. They knew there was a
structural advantage that would predetermine the eventual outcome.
They knew that the core countries, where
the financiers were resident, had a competitive structural advantage over the
GIIPS that could not be overcome or at least would highly unlikely be
overcome.
The core countries had:
1.
Higher
Export Volumes (a size advantage)
2.
Higher
Productivity (Labor & Capital Advantage)
3.
Dominant Banking
Control and therefore cheaper
cost of capital
 The flawed EU experiment was more like a family father who is
responsible, but his kids have unlimited use of Credit Cards and the hapless
father is not allowed to police them. The outcome is perfectly predictable.
Do you really
believe that major banks would put themselves in a position where they lent
endlessly to the kids knowing they would
be left holding the bag? They knew the outcome and who was going to be
left holding the bag.
It was
certainly not going to be those with an army of lawyers, lobbyists, campaign
contributions and most importantly, a strategy.
Now the EU
has hit a wall. The gig is up.
It is time
for the next phase of the Mercantile Strategy, the demand for collateral and
the family silver.
As is currently being exposed in Greece, the financiers will now demand the ports of Piraeus and Thessaloniki, Hellenic Transportation, the
Greek Telephone company, the Greek Power company, the Gambling ...... and eventually the Parthenon
and Acropolis, if the people don't refuse and take a stand similar to the people of Iceland.
There is an old ADAGE that;
When you owe the
bank a $100,000 and can't pay it you have a problem.
When you owe the
bank a $1 Billion and can't pay, the bank has a problem.
The message here is that at some level
the bank is responsible for having made a serious lending error - after all,
assessing RISK is the raison
d'être of their business.
Though I believe Greece should never
have been allowed into the EU, their debt never been accepted by the ECB as
collateral and should have been sent to the IMF much sooner, I need to say,
what I am now witnessing is what I effectively see as the 'Date Rape' of
Greece.
It is not just a matter of Greece being
forced to surrender their most precious assets which belong to future
generations of Greek children. It is about assets being sold by a Belgium centered fund - whose interests
are those of the financiers, not the Greek citizens.
This is the equivalent of having your
house sold by the potential buyer's real estate agent with you just seeing
the accepted deal. Or maybe more appropriately, the same way a repo happens
when they just take it and sell it - you may or may not get any residual
equity back. In the case of Greece, they may or may not get what they thought
their asset were worth. It is highly unlikely it will be anywhere near the
expected price and highly likely to be an exceptional bargain for the
politically powerful and connected.
This is the old tried and tested
Mercantile Strategy that European financiers know so well.
While Americans are turning to
"Strategic Defaults" in waves in the US, if I was living in Greece
I would be demanding my government default. It is time for Greece to strategically
default like the hapless American homeowner stretched beyond their means and
crushed by a shrinking disposable income. This is a direct result of the
money printing that is flowing to the banks to engineer this racket that the Gambino's and Gotti's would
have simply called a 'lawyered' version of loan sharking, extortion
and racketeering.
It must never be forgotten that the
banks create their money from your money. It is only time, therefore before
as in a children's monopoly game,
they own the whole board.
Also it must never be forgotten that
this is why banks fight so hard against Tier 1 Capital requirement changes.
This is the money they have previously extracted that is now actually at risk.
Be aware that the mercantile financiers
are so opposed to risk that operating as the secured bond holders of the
banks they make the profit from the banks - not the shareholders. The
financiers get first distribution of profits and are always kept whole. The public typically attacks the bank
owners, not those who insidiously control and profit from its operations -
the senior secured bond holders.
It is the senior secured
bond holders who must take the Greek 'haircut' but as part of the strategy
they have their political mouthpieces vehemently opposing it.
Maria Damanaki,
a European Union commissioner and a Greek said publically that “the
scenario of removing Greece from the euro is now on the table”.
Forcing the Greeks to sell all that's
left of the family jewels is now seen as a key part of the political
solution. But who will want to buy them when there is every possibility of
Greece leaving the euro?
Capital is already fleeing Greece as
fast as it can; what's the chance of attracting it for Greek assets?
Someone is going to get real fire sale
prices.
It's easy as a bookie to make money on a
sure thing when the horse race is fixed!
Listen to FREE Global Insights audio, Every Monday,
Wednesday and Friday
www.GordonTLong.com
Global Macro
Issues for non-mainstream listeners looking
for the truth.
Gordon T. Long
Tipping
Points
Mr. Long is a former senior group
executive with IBM & Motorola, a principle in a high tech public start-up
and founder of a private venture capital fund. He is presently involved in
private equity placements internationally along with proprietary trading
involving the development & application of Chaos Theory and Mandelbrot
Generator algorithms.
Gordon T Long is not a
registered advisor and does not give investment advice. His comments are an
expression of opinion only and should not be construed in any manner
whatsoever as recommendations to buy or sell a stock, option, future, bond,
commodity or any other financial instrument at any time. While he believes
his statements to be true, they always depend on the reliability of his own
credible sources. Of course, he recommends that you consult with a qualified
investment advisor, one licensed by appropriate regulatory agencies in your
legal jurisdiction, before making any investment decisions, and barring that,
you are encouraged to confirm the facts on your own before making important
investment commitments.
© Copyright 2010 Gordon T Long. The information herein was
obtained from sources which Mr. Long believes reliable, but he does not
guarantee its accuracy. None of the information, advertisements, website
links, or any opinions expressed constitutes a solicitation of the purchase
or sale of any securities or commodities. Please note that Mr. Long may
already have invested or may from time to time invest in securities that are
recommended or otherwise covered on this website. Mr. Long does not intend to
disclose the extent of any current holdings or future transactions with
respect to any particular security. You should consider this possibility
before investing in any security based upon statements and information
contained in any report, post, comment or recommendation you receive from
him.
|
