Banks Rotten to the Core !

July 9, 2012

You put money in a bank and get paid interest on it, or you borrow it from the bank and you pay interest on it. You believe this interest is fairly based on future market values regarding the money supply and the fair running cost of the banking system. But suppose the interest rate can be rigged and vast profits can be gained on insider information and the ability of the banking system to manipulate the money supply itself?

The libor(London Interbank Offered Rate) scandal in England is but the tip of the iceberg. Everybody is manipulating the money supply and ripping off taxpayers across the world to feed banking and financial speculator trading.

Suppose banks are becoming less interested in the traditional model of banking based on saving and lending customer deposits and are now becoming more like the Bank of America where this profile represents only 10% of their business, the rest is based on financial speculation in the financial services industry.

Suppose economics and trading is less based on exchange of goods and services, capitalism, but more to do with the manipulation of the means of production of the money supply, which in turn is based on casino, investment banking and manipulation and distortion of the financial services industry, then “Houston, we have a problem”.

Add in the component of funding banks through taxpayer bailouts with powerful political and economic private interest groups benefiting from the heist while the middle class disappears, distortions between rich and poor increase, public services traditionally funded by taxpayers are cut and democracy is replaced with socialism for the banks. In the US, 77% of JP Morgan’s income comes from government subsidy.

This blog has previously expressed deep concern re the possible manipulation of ESM’s €800 tr by unelected and unaccountable private interests sealed with immunity from prosecution and above the law, in particular, relationships between the committee and the Bundestag.

“There are no restrictions in Fed rules on directors communicating concerns about their respective banks to the staff of the Federal Reserve. It also said many directors own stock or work directly for banks that are supervised and regulated by the Federal Reserve. The rules, which the Fed has kept secret, let directors tied to banks participate in decisions involving how much interest to charge financial institutions and how much credit to provide healthy banks and institutions in “hazardous” condition. Even when situations arise that run afoul of Fed’s conflict rules and waivers are granted, the GAO said the waivers are kept hidden from the public.”

In order to appreciate the full absurdity of Ireland’s debt position you need go no further than to examine this announcement:

“It has now emerged that ministers gave the green light to the European Commission to develop concrete proposals in relation to Ireland in September, with a final deal due to be done in October.

Euro area finance ministers also agreed early on the terms of a bailout for Spain’s troubled banks, saying that €30bn euro can be ready by end of this month.”

Ireland has failed through its bank guarantee, its subsequently badly designed and unconscionable bailout at penal rates to solve its banking crisis.

Adopting a serf like mentality to troika, the EU commission, the ECB, the IMF and currently shadowy interests behind the ESM and the EFSF, Ireland has lost its sovereignty having reduced its role in Europe to almost that of dominion status, perhaps Lucky’s role to that of Pozo in Beckett, a better metaphor.

Propaganda, bluster, and absurdity characterize the Irish negotiating position.Consider “green light to the European Commission to develop concrete proposals”; one would imagine a crisis rumbling on for four years would steal the minds of Ireland’s negotiators to have a plan, a bottomline position involving burden sharing and debt write down, that would provide focus to such negotiations. Its merrily left to European Commission to offer
debt relief in the form of charity as opposed to justice.

The only ameliorative reckoning in any of these debt relief equations that may force a just outcome are the forces of market capitalism breaking up the euro. Whatever solution to europe’s debt crisis must be bought by the markets and Europe is finding it very hard to convince the markets that any solution sofar is worthy of the paper its written on.

In truth the European debt crisis is worsening at every move the EMU makes to relieve its burden of debt. ITs not hard to understand that the original fault lines in the euro have been exacerbated and worsened in any of the solutions proposed to end the crisis. The troika has even raised the concern of the IMF in its judgement on Irish debt. The markets downgrading of Ireland to junk bond status have noted the ‘praying mantis females who devour their partners’ style of Ireland’s debt burden relief.

At its heart an uneven distribution of wealth, competitiveness and productivity between the inner core led by Germany and the outer core led by countries such as Greece and Spain and including Ireland and Portugal, was meant to be dampened by availability of cheap credit to the outer core.

This allowed Germany and its euro to remain competitive having the euro fall in value at a rate far below its Deutschemark value; Germany sold into the periphery its goods and services at the cheap euro rate further benefiting Germany from the euro arrangement.

But a combination of property bubble speculation, corruption and bad investment alongside Germany’s competitive advantages, has bust the periphery. Germany’s approach has been to provide ‘bailout’ and demand austerity from its satellite states in a manner that evokes memories of the doomed USSR and its rouble satellites.

The problem is that without debt writedown the previous problems that have led to the current debacle are exacerbated rather than ameliorated. Austerity combined with the obligation to feed growing debt burdens have become a dual reinforcing of a debt spiral downward for peripheral states in the euro.

In order for these countries to outgrow their debt, they need to grow their economies; but the burden of austerity and redactive reformulation of their debt burden, as in Ireland’s case, means countries such as Ireland notwithstanding a healthy export sector, are dragged more underwater.

That is why the markets do not believe the euro crisis is over.

Moody’s has now downgraded Italy two notches and may downgrade Italy more. The euro has hit a new dollar low. Spain is slumped into recession and no one trusts its banks in spite of direct bailout promises. Ireland is Europe’s poster boy of procrastination and incompetence: promise of a deal on debt is meant to suffice an actual deal on Ireland’s debt.

Der euro ist fertig! The only question is when it will finally sink into oblivion. Meanwhile Ireland has yet to agree to a proper investigation of its banking, political and civil service system that has allowed its problems to develop in the first place. Until we get such an investigation instead of coverup, we remain in financial and political and economic Tír Na N’Óg.



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