David, when you find yourself parroting Berlusconi — one of the most contemptible plutocrats to run a modern nation — you may want to re-examine your suppositions.

WB, do you actually read any part of David’s posts, or do you just automatically attack him because he (and every sane economist in the world) wants the ECB to do what it should do instead of being worried about a non-existent inflation threat?

In other news: David, guess who besides Evil Silvio agrees with you on an issue? Yes, Paul Krugman:

Bloomberg today has an interesting twist: U.S. Futures Decline on Concern Supercommittee Won’t Agree on Budget Cuts. In reality, US rates are down, suggesting no increase in debt concerns whatsoever.

But if you read the Bloomberg piece carefully, what it actually says is that market players fear that the absence of a debt deal means no stimulus. So the actual fear is not that spending won’t be cut enough, it is that it will be cut too much — which actually makes sense, and is consistent with the action in stock and bond markets.

Oh noes! Paul Krugman also agrees with Silvio Berlusconi that the ECB needs to get off its money!

Let me single out in particular the European Central Bank (E.C.B.), which is supposed to be the ultimate technocratic institution, and which has been especially notable for taking refuge in fantasy as things go wrong. Last year, for example, the bank affirmed its belief in the confidence fairy — that is, the claim that budget cuts in a depressed economy will actually promote expansion, by raising business and consumer confidence. Strange to say, that hasn’t happened anywhere.

And now, with Europe in crisis — a crisis that can’t be contained unless the E.C.B. steps in to stop the vicious circle of financial collapse — its leaders still cling to the notion that price stability cures all ills. Last week Mario Draghi, the E.C.B.’s new president, declared that “anchoring inflation expectations” is “the major contribution we can make in support of sustainable growth, employment creation and financial stability.”

Have you actually read my comments or do you just reflexively attack me bc I disagree w DDay? If you had read my comments you would know that I don’t believe for a second that the ECB/German focus on “austerity” will “solve” the problem. Nor, however, will throwing the German People’s money down the rathole “solve” the problem either, much as Silvio, Timmy, Obama and the rest of the Global Financial Elite urge. The Global Financial System is crashing and I see no reason to save it again as we did in 2008 with the American People’s money. All that will do it burn up more real money from real people and it will gain nothing bc the GFS is insolvent. Not illiquid as the money-burners suggest, but insolvent. Sorry if you can’t understand my view but that is hardly my fault.

Have a nice day.

The problem is that I have read your comments, and apparently you think that getting the ECB to behave like a real central bank is all just another bank bailout. It’s not.

It’s about keeping Europe — and the US — from collapsing into civilization-destroying chaos.

Why do you think the stock market’s plummeting? Certainly not because of the supercommittee’s failure.

And if you think you’re going to be riding high when/if civilization collapse, well, there’s nothing I can do to help you there.

If Germany insists on having its way, it opens the door to more violent actions. The people of Europe will not forever tolerate the insane austerity that has driven up unemployment to as high as 22% in spain.

“getting the ECB to behave like a real central bank is all just another bank bailout. It’s not.”

In this case, yes, it is. Because the money is going to prop up the sovereigns only to pay the Eurobanks only, in turn, to protect the derivatives players on Wall Street. Just like what we did in 2008.

“It’s about keeping Europe — and the US — from collapsing into civilization-destroying chaos.”

Oh, please. The Global Financial Elite must be crushed and we must rebuild a Global Financial System that serves the 99% rather than the 1%. You have to break a few eggs to make an omelette.

“Why do you think the stock market’s plummeting? Certainly not because of the supercommittee’s failure.”

I suspect it’s both. BTW; do you think it a coincidence that the U.S. is catastrophically ignoring Krugman’s Keynesian analysis? It isn’t. Austerity is being mandated by the Global Financial Elite, which is centered in London and the DC-NYC corridor. Do you honestly think they are going to stop once they steal the German People’s money? Did they stop after they got our money, or were they just emboldened?

“And if you think you’re going to be riding high when/if civilization collapse, well, there’s nothing I can do to help you there.”

The end of the world. Again?

Germany will not get its way. Eurozone countries will default. The Euro is going to collapse. The Global Financial Elite will be crushed bc there are TRILLIONS OF DOLLARS in Wall Street CDSs betting against Euro default.

Works for me.

It’s about keeping Europe — and the US — from collapsing into civilization-destroying chaos.

What civilization the MIC, the banksters the hedgefunders ?

Good, no more money for endless slaughter or raping the earth for one more dollar.

These clowns collapsed civilization already, this is the beginning of their deserved backlash.

it will gain nothing bc the GFS is insolvent.

A soverign nation that issues its own currency (like the US) can never be insolvent with respect to debt in its own currency. The individual members of the eurozone can be insolvent but only if they or Germany, more exactly, refuses to allow the ECB not to be the lender of last resort.

I agree it very well could collapse, but only if the inmates allow it to.

Sounds a little like a mutual suicide pact. I don’t want to join.

The SYSTEM is insolvent. There is more debt than can ever be repaid. Wall Street made billions buying and selling debt that it pretended was risk-free. And now we’ve learned otherwise and the debts cannot be paid. I don’t care if you take every last Euro from German pensioners there is not enough money to bail out Wall Street this time. And why bother anyway?

I certainly agree that the world wide austerity meme is causing severe unemployment. But what is going on in Europe now– the severe austerity – could end in collapse as you agree. That is not something you really want to happen. It could indeed end in violence.

Gotta agree with wbgone.
Why prop up this corrupt and rotting system that rewards the 1%?
Let the Fer burn and watch their fantasy money disappear. Because it wasn’t real in the first place.
More taxpayer money will be required to pay for the mistakes of others? No way.
Let their “wealth” disappear.
It’s not real. It’s all a scam. All those mortgages that went under are being paid 100%, or marked as 100%, by taxpayers. Even though they are completely worthless.
Let the corruption fail. This is the next bailout in the making. They’re using fear to foist even more of their debt on us.
And it would certainly put a damper on their wars. And force us to focus on issues at home. And their “wealth” would disappear in a nano-second.

I for one have no idea why some people are falling for this second bailout.
How many more trillions must be stolen before people finally say no?

A smart economist (not me)ought to be able to model this catastrophe as a kind of prisoner’s dilemma. It is impossible to believe that the smart traders and their bosses at the TFB’s do not understand the implications of the ECB not stepping in and the wider implications of austerity for bank balance sheets. For this not to be the case, one has to assume (unfortunately plausibly) exceptional myopia on the part of the banks, in which short-term trading profits dominate long-run solvency.

The point is that if you set aside the hacks at the WSJ and other propaganda outlets for the rich, the people in the know surely know what is happening. Since they have outsize influence on governments, one has to assume that there is some deeper structural reason for inaction. What is it? As someone has already noted on this topic, the whole business is eerily like the period between the assassination at Sarajevo and the outbreak of World War I. Policy makers were frozen.

Governments with printing presses have two ways to respond to insolvency. They can default or monetize their debt. Honest people can differ as to which is least evil. But honest people cannot pretend that a solvency problem is a liquidity problem. Which is what we are supposed to pretend rather than face the truth.

They’re really acting on behalf of wealthy interests who, for one reason or another, don’t want to see any inflation.

The only reason is so what they steal from the 99% retains it’s value. It also doesn’t hurt to keep their borrowing cost’s low so what isn’t pilfered from us is basically given to them by government.

Europe is in deep crisis, no doubt. But that problem can be fixed. The US has no such problem. Wall street takes both sides to this. There are them that bet the thing will fail and them that take the other side. If you are on the wrong side you can lose all your money.

There is an idiot Harvard economist on TV now on ratigan. Listen to the nut/

The Euro experiment is a failure. A lot of countries should leave the Euro, followed by debt writedowns/repudiations.

Using the ECB to prop up yet another failed experiment in financial engineering makes no sense. Any ECB intervention will only serve the banksters, and would come with demands for more austerity.

I think you are mistaken. It is, in fact, Wall Street that is ultimately on the hook and, no, its bets are not hedged bc there is no one to hedge them. Somebody is going to lose really big and it is Wall Street. The jig is up. We can keep throwing money at the banksters but why should we?

Sigh

Where is Echan? It’s time for us to reserect our People’s currency talk again.

I did. He really, really, really didn’t want anyone to hear what Dean Baker has to say!

I suppose you can let the euro debt go under and whoever holds the debt. But I am not sure what you fix by doing that. Do you figure the people of Greece and Spain and Italy will somehow be better off? How so?

This crisis is not the same as we had here in 2008. The US gov was never under any danger of going bust – and never will be. Now you have governments who cannot finance themselves. I don’t know what happens in that event.

The euro can be eliminated but there needs to be an orderly exit. I heard this morning the idea is gaining strength.

I do hope we are not bailing out those guys but we are talking about the ECB buying the debt of its member nations. I suppose that has a knock on effect of helping anyone who owns those countries debt but it is not aimed at the banks, it is aimed at the soverign.

They are only propping up the sovereigns to pay the Eurobanks and protect Wall Street. Let them fail. Let’s start over.

Granted I know more about the timing of a 68 Camaro RS/SS than about the euro but it seems that there may be no other alternative. How do you “split up” the pot when the “pot ain’t right”???? Does somebody take home the leftover chips and guacamole???

You should be biting your fingers for ever having let them type that headline.

Or to put it another way: the sovereigns are merely conduits for the money, which will go straight to the banksters. So the German People’s money will be transferred to the banksters just like our money was in 2008-09. To what end? No wonder Germany doesn’t want to follow our example.

Perhaps we should note that some economists predicted this flaw in the euro about 20 years ago. You can read about it at Pragmatic Capitalism in an article by Cullen Roche. Now if you had been a smart feller you may have made a few bucks, maybe a lot.

There are certainly some who want to either (1) fix the flaw or (2) exit the euro. If I were king of Greece, I would be planning my exit. I am afraid this is the kind of thing that can cause conflict. There is a treaty behind it. And I have no idea what sort of disruptions will happen if it is all unplanned.

The banks, who cares? Hard to really feel bad for them but I reckon they will not want to loan money to those who default real soon.

I am afraid this is the kind of thing that can cause conflict. There is a treaty behind it. And I have no idea what sort of disruptions will happen if it is all unplanned.

All true. Hardly an ideal situation.

Not quite. These countries borrow the money to finance their economies. And that is the problem. They didn’t think it through. Once we got into that recesssion back in 2008, the banksters wanted more interest. So they all went to austerity, which is self defeating. The vicious cycle began. Fewer taxes, lower ratings, less money to pay off the debt, and so on, just like a home owner. BUT, not like the US.

The ECB can fix it by buying the debt and loaning money directly but they are not allowed.

Argentina.
Iceland.

I agree with you re the history of the Eurozone. And it is also true that Greece, for example, needs cash to pay its bills. My point is that nobody really gives a shit about Greece or even whether Greece goes bankrupt. All the Global Financial Elite care about is that a “default event” occurs that will trigger billions in derivatives. From Greece’s perspective, sure going bankrupt and getting kicked out the Eurozone will suck, but it is inevitable anyway. Everyone knows that Greece can NEVER repays its debts. So this isn’t being done for Greece and certainly not for the Greek People. So who is the real beneficiary? The Eurobanks who loaned the money to the sovereigns like it was risk-free and the Wall Street banskters who insured them pretending default was impossible. The cycle must be broken. It won’t be pretty but neither is how the world is now operating. So I say fuck it. Let’s give it a try. Besides, it isn’t up to you or me or anyone but the Germans and they ain’t gonna do it. We should be planning for a post-apocalyptic financial system right now but I suspect our heads are buried in the sand thinking the Germans will save us. My greatest fear since the beginning was Obama trying to come after American money. I wouldn’t discount that possibility.

You hit the nail on the head. The system of risk evaluation is completely off, and has been hysterically wrong for at least 6 years now. The chips are down, and most parties are counting those bets, to hold other bets, to cover bets still further. You cannot let this go on because there is no way to build out of the hole while you’re expanding it. It’s pretty sad people don’t see this.

Also, the ECB is responsible for Berlusconi getting sacked. There’s a lot of backdoor dealing we are not seeing. Bunga bunga was willing to fight it till the end to stay in power, even if you don’t agree with his positions or actions, he was still in power. That is until the ECB stopped intervening in Italian bonds…. Once he finally agreed to bow out the turned on the jets again trying to hold down their yields. The fire is spreading.

Iceland is part of euro. Argentina had a sad history, pegged its currency to the dollar, changed the currency and had a hyperinflation. ?????

The Germans want a financial transaction tax instead of providing money to buy bonds. Wouldn’t this stop the speculation on failure, and consequential money flight?

From what I understand, wbgonne is right, there is not enough money in the universe to cover the highly leveraged bets, or to buy the bonds to keep the rates down. It’s enabling the speculation game to continue, where no downside exists.

That the ECB is installing new leaders as countries fail, and that they only care about keeping inflation pegged, I believe this is EU/US coup by bankers. I’m amazed that leaders don’t recognize this as war by another means and that bankers are terrorists. It’s like they are pod people with earworms.

Please correct any misperceptions I have.

No I would not discount a US hand in this, Even China may get in. If the banks go down the market goes with them. We saw this once before and we still have 16% unemployment. So I hate to help banks, but helping the PIIGS is not the same. And I would hate our own situation to get worse.

We’ve pretty much dragged this one all over.

Iceland is sunk. The bankers got in through the back door, because they stupidly asked for advice from the IMF.

“The Germans want a financial transaction tax instead of providing money to buy bonds.”

And guess who opposes it? Obama and Cameron. DC/NYC and London. Bankster central.

Great discussion. Later all.

Yes, it is a kind of war. Some even say it is the third time in a hundred years europe is on the way.

Of course, it’s at least somewhat likely that the banksters will crash the economy again regardless of the ECB’s actions. So there’s that.

The European ‘crisis’ ‘is’ the banksters crashing the economy again.

From your link;

While the Treasury has been at pains to say that direct U.S. bank exposure to European countries now receiving bailout aid — Greece, Ireland and Portugal — is moderate, once the debt of Italy and Spain, plus credit default swaps, and U.S. bank indirect exposure through European banks are added, the potential sum could exceed $4 trillion.

We have to get it through our thick skulls that the narrative being pushed by the banksters, through their captive financial news sources is pure BS, the risk to the world economy is not centered in the debt of sovereign nations, it is centered in the banks themselves, they have never figured out how to de-leverage the spectacular house-of-cards they built in the bubble years, and face the same precarious situation now that they faced in 2008.

The banksters are committed to trading their gambling IOUs worthless swap contracts for something of real value, like real estate.

Crashing the economy is a tactic, not something they are trying to avoid.

You make the case to break up these banks — again.

And as DD says:

Of course, it’s at least somewhat likely that the banksters will crash the economy again regardless of the ECB’s actions. So there’s that.

I think he is right.

I hope you’re right. We need a fucking reset. Argentina and Iceland seem to be dong just fine post-default. It’ll suck for the people for a bit, but they won’t be carrying the burden of the massive debt and the bankers pushing for austerity indefinitely. They can start fresh. The US needs a reset as well, but it’s in no man’s land, BTBTF (Beyond TBTF).

On a VERY RELATED front;

From Naked Capitalism;

The Financial Times gives prominent play to a story that I suspect will go largely unnoticed in the US, that of the way that the Switzerland’s bank regulator, the Swiss National Bank, has forced its two biggest banks, UBS and Credit Suisse, to shed risk in a serious way and shrink.

So let’s ask ourselves why we won’t hear about this story from our FCM (fawning corporate media)?

As long as we’re asking hard questions, let’s ask why the Swiss are the only country to require their bankers to report how they got themselves into the trouble that required the bailout;

Link to UBS’ Transparency Report;

(Please note that the link goes to a page which is further linked to a PDF of the report)

PW got to go with wbgonne on this one. you should check out the doc money masters for how this ponzi scheme works. If you have already, great

Bottom line you can not solve a debt crisis by printing more debt.

The problem is the leaders enabling this are part of the problem, not clueless or victims. Sarkozy is a center-right dude, Merkel is center-right, Obama is center-right when it comes to the economy. They trust the banks first, they consult the king bankers for advice, appoint them into powerful positions. If a truly center-left politician/party gains power, at that point the banks can use their power to keep the government from doing the right thing.

wbgonne has it exactly right. The top 5 US banks are the biggest ultimate backers of the bad EU debt. Let them crash and burn already. That’s capitalism, folks. There will always be someone to step forward and lend money.

FDL folks should stop getting their economics views exclusively from Paul Krugman. Here is a man who says that he agrees with Larry Summers on fundamentals and only disagrees with him on whether one should be pessimistic or optimistic. (See the recent Munk debates video, but I don’t think it is worth the time.) Here is a man who still can’t bring himself to use the “fraud” word when talking about the financial crisis. Here is a man who never seems to address the effects “financial weapons of mass destruction”; one can only speculate why–perhaps the gap between theory and practice is far too wide at that point? Dunno. Here is a man who went into economics so he could be some kind of super-hero saving the world. Lol.

Really, giving out Nobel Prizes in economics has been a disaster. It is not a science. It is not even an art. It is 10% common sense, 10% higher math, and 80% ideology.

Here’s some advice: Do your own thinking. Stop relying on the NYT. It’s embarrassing to watch.

Iceland doesn’t have the Euro. If it did, I wouldn’t have gotten tricked into that baby lobster dinner!

Right. That is why Cameron is having a hissy fit. They can tax the guys down at the race track when they gamble. But can’t tax the guys in the City of London when they do it.

And as far as Germany is concerned, one should be very very careful in gleefully piling on with Krugman and saying that they should let the ECB print. It didn’t work out very well for them last time and maybe just maybe they are taking a much more historically informed view of the matter than the politicians and pundits du jour.

Sounds right to me. It is the obsession with austerity in response to criminal actions by the international finance industry that is bringing us further down. THis can only lead to revolution…or starvation.

Yo. Agreed.