21 aprilie 2011

The E.U. Cracks Up



Political upheaval has hit Finland, and it’s merely a foreshadowing of bigger changes ahead. The core issue is whether Finland ought to be paying for bailouts for other EU states. In reaction to establishment support for the bailout, voters ousted the pro-bailout ruling party and gave an upset victory to the bailout-critical conservative party. Against every expectation, the eternal rule of the social democrats is at an end.

But most striking of all are the gains made by a previously invisible party called True Finns. This is the only party to take a hardcore position: no bailouts at all. It also so happens that this party is predictably nationalist on issues of trade and immigration. But that’s not the source of the appeal. The bailout is what is on everyone’s mind. And you know that the anger must be palpable if it fired up the usually sleepy world of Finnish politics. 

In the sweep of history, few issues are as politically volatile as tax-funded bailouts of foreign countries, especially during difficult economic times. It’s a policy that provokes dramatic political change. The 20th century’s most famous case was in interwar Germany, when nationwide resentment against payments to conquering allied nations ushered in National Socialist rule.

It should be no surprise that over-taxed Finns have no interest in sending their tax dollars to bail out the banking industry of Portugal, a country that is 2,500 miles and two days travel away. Even governments should have learned long ago that it is never a good idea to enact these sorts of policies. In this case, however, every EU nation is bound by a political contract to bail out any other; the bailouts are embedded in the very structure of how the political, financial, and monetary sector is currently structured. 

The entire EU system is afflicted with the paper money disease. It creates a boom that balloons the banking sector, allows politicians to spend wildly, and encourages private enterprise to expand operations in an unsustainable way. Then the bust comes and everything falls apart. Government revenue crashes, banks are threatened with insolvency, and mass bankruptcies are apparent everywhere. 

There is a fork in the road, one branch labeled liquidation and the other bailout. When the fiat money is available—and with their favorite interest group, the banking establishment, warning of the end of the world—guess which way the politicians choose? This is why member states are being told that they must cough up $129 billion (it will be more) to save Portugal from its own problems. 

It’s not that politicians all over Europe (and the US) love Portugal so much that they are glad to lavish it with more paper money. The real fear is contagion. If Portugal goes, Spain and Italy are next, and then the whole shaky system comes down, first in Europe, then in the UK, and finally in the US. This is the scenario that allows politicians once again to paper over the problem rather than confront it. 

Wasn’t the invention of the European Central Bank supposed to control credit expansion in Europe? Philipp Bagus, in his book The Tragedy of the Euro, identifies a fatal flaw. There is nothing that the ECB can do, even if it wanted to, about sovereign state finances or the fractional-reserve banking system that feeds on government-created debt. The ECB can control money injections, but it can’t stop debt creation or the banks that thrive on it. 

This debt creation generates its own unsustainable boom. A country’s finances then correct to reflect reality and the banking system comes under pressure. Then the bailouts begin. What ends up happening is that the (relatively) frugal states in the European Union subsidize the less frugal ones. There is moral hazard embedded in the very structure of the entire system. 

Nothing is going to fix it. Bailouts are only temporary aids until the next round of credit-fueled profligacy. And there is absolutely nothing that the ECB can do to stop it. Every profligate country knows that it is too big to fail, and that it enjoys presumed access to the financial resources of every other state in the EU. So the result is ongoing and worsening bailouts, leading to total bankruptcy. 

For this reason, everyone knows that there is far more at stake than just Portugal. The entire system of European finance and monetary arrangements is broken. It can’t be repaired with patchwork bailouts. At some point, the flaw in the system will have to be fixed (via a hard currency) or there will be a reversion to sovereign paper currencies and the Euro will be chalked up as yet another failed experiment in monetary and regional planning. 

Keep in mind that this is the third country to be bailed out recently. Ireland and Greece came first. And those bailouts barely worked. Once we plough through the smaller countries, we will move on to the larger countries. And there is not enough money, absent hyperinflation, to bail out Spain, much less Italy. 

The European Central Bank, which has been less irresponsible than the Fed in recent days, is the first world central bank to do what should have been done three years ago. It is raising rates with the intention of tightening money. The Fed should and must do the same thing. But there is a problem. If real interest rates reflected financial reality – with no presumed bailouts and no power to create new money – they would be sky high. 

The Portugal case and the Finnish reaction should serve as a wake-up call. All these bailouts and stimulus packages cannot hide the fact that the governments and banking systems of the US and Europe are fundamentally bankrupt, sustained only by the power to create money out of thin air. Each intervention is working to buy time but not to deal with the fundamental problem. And each time when the problems return, they are worse than before. 

It doesn’t take a True Finn to recognize the injustice of bailouts for foreign governments. Neither nationalism nor bailouts will fix the real problem. We will eventually find our way back to sound money. But it is going to be terrible slogging, and real convulsions, along the way.

http://www.marketoracle.co.uk/Article27638.html

10 comentarii :

Crystal Clear spunea...

Pas cu pas se prabuseste UE :

"The entire system of European finance and monetary arrangements is broken. It can’t be repaired with patchwork bailouts. At some point, the flaw in the system will have to be fixed (via a hard currency) or there will be a reversion to sovereign paper currencies and the Euro will be chalked up as yet another failed experiment in monetary and regional planning"

Crystal Clear spunea...

Vom foarte repede un soc teribil
Oare T.Basescu stie ceva ,citeste lucrurile astea atunci cand ne baga in EuroPlus?

"Neither nationalism nor bailouts will fix the real problem. We will eventually find our way back to sound money. But it is going to be terrible slogging, and real convulsions, along the way."

Riddick spunea...

UE vrea să bage România în faliment, să fim la mâna lor:

http://economie.hotnews.ro/stiri-finante_banci-8518851-pachetul-guvernantei-economice-amenzi-0-5-din-pib-pentru-tarile-care-isi-falsifica-datele-financiare.htm

http://economie.hotnews.ro/stiri-energie-8520070-romania-nu-grabeste-respecte-cerintele-oficiale-ale-comisiei-europene-privind-liberalizarea-preturilor-energie.htm

http://media.imopedia.ro/stiri-imobiliare/comisia-europeana-incurajeaza-romanii-sa-ia-credite-ipotecare-si-din-alte-tari-16031.html

Despre EuroBăse mi-am cam format o părere, care cred că se va confirma când va veni cu propunerile de modificare a Constituţiei. Nu cred că ungurii au trecut în a lor euroregiuni sau limită de deficit bugetar (am să verific, eventual cu Google translate).

Crystal Clear spunea...

Incearaca sa verifici cum a in Constituatia Ungariei.

Si eu sunt convinsa ca vor sa ne bage in faliment.Se vede clar ce presiuni fac ca sa ridice pretul la energie.La combistitbili deja au reusit.
Vor sa ne aduca exact in situatia Portugaliei care are cel mai avansat nivel de "energie verde" si care e in faliment.Urmeaza Spania, Italia etc..

Crystal Clear spunea...

Pe de alta parte sunt ingrijorata de numarul imens de locuinte noi si goale .Sunt cartiere intregi ,ex "Rezidentz" facut de Tiriac care parca asteapta locuitori noi.
Ieri Basescu a confirmat ca primeste cateva sute de emigranti din Africa.

Acum vreo 2 ani Patriciu a afirmat intr-un interviu luat de C Dragotescu ca nu-i nimic daca emigreaza romanii pentru ca vor aduce emigranti din Africa.
Acum vor sa puna asta in practica.

Acestor emigranti li se vor oferi apartamente cu chirie mare ,sau pentru care vor lua credite de la banci pentru care vor munci pe branci.

Deja am inceput sa le recunosc planul....

Riddick spunea...

Am s-o fac chiar azi, spre seară cred că pun o postare scurtă pe tema asta.

Riddick spunea...

Este un centru de refugiaţi pe la padurea Băneasa şi unul pe lângă Timişoara, cred ca acolo îi vor duce, asa s-a întâmplat cu somalezii şi cu albanezii din Kosovo. Nu sărăceste România daca ţine cu masă şi casâ câteva sute de inşi. Unele firme chiar le oferă joburi plătite (pt cei care vor un ban în plus în perioada azilului). Altceva este imigraţia masivă, ca în Italia, Franţa, Olanda, Marea Britanie, pusă la cale chiar de guvernele de acolo.

Crystal Clear spunea...

Important este sa nu acceptam emigratie masiva

Un Amateur Professionnel spunea...

cred ca mai cacacios exemplu decat robia cetatenilor din MD nu exista - 4 clanuri conduc teritoriul si baga copiii copiilor in mari datorii, numai ca paradoxul e ca oamenii ii voteaza continuuuuuuuuuuuuuuuuuuu :(

iziumsiplastilina.blogspot.com

Riddick spunea...

Sper să le vina mintea la cap. După câte văd, vine, dar mai încet... ;-)


Citate din gândirea profundă a europeiştilor RO

Călin Popescu-Tăriceanu, 2008: "Vom da astăzi, în Parlamentul României, un vot istoric - votul pentru ratificarea Tratatului de reformă al Uniunii Europene. Pentru România este mai mult decât un moment festiv. Ratificarea Tratatului de reformă marchează o etapă. Spun acest lucru din două motive. Pe de o parte, este o primă etapă pe care noi am parcurs-o în cadrul Uniunii Europene, după aderarea de la 1 ianuarie 2007. Am avut şansa să contribuim la negocierea şi la construirea acestui Tratat, beneficiind de aceleaşi drepturi şi având aceleaşi obligaţii ca oricare altă ţară europeană. Este cel dintâi tratat european semnat de România, în calitate de stat membru al Uniunii Europene. Simbolic, este primul document al Europei extinse, negociat şi semnat în format UE 27. Pentru toate aceste motive, odată cu ratificarea de către Parlament, putem spune că este cel dintâi tratat european pe care România îşi pune efectiv amprenta, conform intereselor sale, nemaifiind în postura de a prelua ceea ce au negociat şi au decis alţii. Doamnelor şi domnilor senatori şi deputaţi, în urmă cu trei ani, prin votul dumneavoastră, România a ratificat Tratatul constituţional ["Constituţia UE", caducă], odată cu ratificarea Tratatului de aderare la Uniunea Europeană. Aşa cum ştiţi, Tratatul constituţional nu a putut intra în vigoare. Din fericire, aşa cum noi am susţinut în timpul negocierilor, inovaţiile din acest document au fost preluate în Tratatul de la Lisabona. Aceste inovaţii sunt un pas înainte faţă de tratatele europene în vigoare acum."

 

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