http://www.zerohedge.com/contributed/2012-07-27/war-central-banks
Submitted by testosteronepit on 07/27/2012 19:31 -0400
Submitted by Tyler Durden on 07/27/2012 12:56 -0400
War Of The Central Banks?
Wolf Richter www.testosteronepit.com
The coordinated confidence-inspiring words from the Eurozone’s fearless leaders yesterday and today about doing whatever it would take to save the euro wasn’t about Greece anymore. Its life support may get unplugged in September. Politicians have apparently given up. The tab isn’t that dramatic: default and return to the drachma would cost Germany €82 billion and France €62 billion (Ifo Institute PDF). Survivable.
The fearless leaders were afraid of Spain, whose vital signs were deteriorating.Unemployment hit 24.6%, worse than Greece’s 22.5%. In the southern region of Andalusia, it rose to a mind-boggling 33%. Youth unemployment (16-24) set a sobering record of 53.3%. Even more worryingly, in a country where family solidarity and multi-generational households are the norm, the number of households where no oneworked climbed to 1,737,000. So, in the first half of 2012, over 40,000 Spaniardsemigrated—up 44% from last year. Instead of consuming and producing in Spain, they took their education that society had invested in and sought their fortunes elsewhere.
Despite repeated assurances that Spain would not need a bailout other than the €100-billion bank bailout, Spanish Economic Minister Luis de Guindos flew to Berlin to meet with German Finance Minister Wolfgang Schäuble ... to discuss a bailout. For €300 billion. And hours beforehand, “sources” told the Spanish media that if Spain didn’t get its wish list, whose top item was a massive bond-buying program by the ECB to force Spain’s borrowing costs down, Spain would consider “more forceful measures.” Because Spain had no money to meet its obligations in October, it would have to default! The D-word made into print. A scary message for the fearless leaders of the Eurozone [for that whole debacle, read... The Extortion Racket Shifts to Spain].
It worked! Thursday, European Central Bank President Mario Draghi caved: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” Emphasis on believe me—as in “I beg you, please believe me”—because the other part of his pronouncement, within our mandate, is controversial. It’s where the ECB had clashed with the German Bundesbank and others who stubbornly clung to the notion that the treaties governing the ECB gave it only one mandate: price stability. Not propping up stock and bond markets.
Draghi outlined a way around that single-mandate limit: if high borrowing costs for certain countries “hamper the functioning of the monetary policy transmission channels, they come within our mandate,” he said. In other words, every time yields go up somewhere in the Eurozone, the ECB is free to “do whatever it takes” to force them down.
On Friday, with the D-word still hanging heavily in the air, German Chancellor Angela Merkel and French President François Hollande talked on the phone—for the first time? A call that was ballyhooed to the media. They were “fundamentally attached to the integrity of the Eurozone” and were “determined to do everything to protect it.”
Then it bubbled up that the ECB might take concerted action with the States to lower the cost of borrowing for Spain and Italy, though it might take a few days or weeks to finalize the mechanisms. According to “sources,” the ECB could re-launch its program of buying Spanish and Italian bonds in the secondary market. The EFSF bailout fund and its successor, the ESM, could be used to buy Spanish or Italian debt in the primary markets. And the ECB could take Fed-like action if the ESM were given a banking license. It would allow the ESM to borrow from the ECB and then buy debt in the secondary and primary markets. There would be “no taboos,” Draghi said. Debt crisis solved.
He’d thrown down the gauntlet. The ECB’s moderate bond-buying program last year caused a stir in Germany. ECB President Axel Weber, who’d been overruled, resigned over it. ECB chief economist Jürgen Stark retired in protest. Politicians launched attacks against the ECB, among them Frank Schäffler (FDP) who’d said, “If the ECB continues like this, it will soon even buy old bicycles.” In March, the ECB stopped the bond buying program.
A restart would be “problematic,” a Bundesbank spokesperson said dryly. On the other hand, the Bundesbank considered it “not problematic” if the EFSF bought Spanish debt. Hurdles remain. Such action would have to be approved by the Bundestag’s “Group of Nine” whose representatives are on vacation. And Spain would have to formally request a bailout before the EFSF could buy its bonds—but Spain is still denying that it’s even discussing a bailout. It would be the sixth of seventeen Eurozone countries to be put on life support.
In June, Cyprus had held its nose and requested aid. Now, European technocrats are swarming once again over Cyprus to find out how much it would need. And each time they do, billions are added. How can such a small country blow through so much money? Well, read.... The Ballooning Cyprus Fiasco.
And then, there’s the ultimate questions.....But Who The Heck Is Going To Do All The Bailing Out?
and.......
http://www.zerohedge.com/news/guest-post-bernanke-and-draghi-are-dangerous
Guest Post: Bernanke And Draghi Are Dangerous
Submitted by Charles Hugh Smith from Of Two Minds
Bernanke And Draghi Are Dangerous
What is being sacrificed to maintain the euro and the E.U./U.S. banking cartel? Everything of value: liberty, democracy and sovereignty.
Today we present the culmination of the previous entries ( Global Crisis: the Convergence of Marx, Orwell and Kafka andAre You Loving Your Servitude Yet?): A brief commentary by longtime correspondent Harun I. on Mario Draghi's market-moving statement: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Nice, Mr. Draghi, but at what cost? And who will ultimately bear this cost? It is already far beyond the measure of mere money; democracy, truth and sovereignty have all been destroyed to prop up the central bankers' Status Quo. We can presume Mr. Bernanke and the Federal Reserve are in on the propaganda campaign, and so we need to examine the words and promises of these two central bankers, as well as what they have not said.
Is talking about printing money as good as actually printing money? It would seem so. Is promising to "do whatever it takes" as good as actually doing whatever it takes? Once again, it seems so; global markets leaped at the "news" that the financial Status Quo was going to be "saved" yet again.
What if it is beyond saving?
What if the cost in treasure, blood, liberty, sovereignty and truth is not worth the 'saving" of a broken, unsustainable, corrupted, parasitic, predatory system? Do we get to choose, or are we just passengers on the train as the central bankers accelerate toward the chasm ahead?
Here is Harun's commentary:
Words have meaning and people should choose them carefully. Nigel Farage commented that what he saw in the faces of EU officials was "madness". We should not underestimate his assessment.At some point these individuals have to be viewed as dangerous. If we peer beyond terms such as QE, printing money out of thin air, stimulate, etc, and understand their effect, they begin to appear not so benign.What if central bank officials came out and said, "We are going to raise your taxes", or "we are going to reduce your purchasing power", or, down to its essential point, "we are going to take money out of your pocket"? We know that there would be an uproar.So, what did Draghi just say? He said he is willing to destroy the purchasing power of the Euro in order to save it. But let's go deeper than that. These people are willing to see countries rip themselves apart, property destroyed, and most importantly, people dying, to preserve some frivolous ideology called the Euro. If on the other hand this is about maintaining the power of the elite, it is much worse, because if this were the case then we are seeing an attempt at totalitarian rule by what you call the "stateless state".But of course, the markets cheered. At least that is how it is interpreted. I interpret it as people reacting to prevent the confiscation of their purchasing power by someone they cannot un-elect.Who elected Draghi and endowed him the authority to tell Europeans that they will suffer and die before the Euro? How much violence is ready to be endured and how many lives is the EU body willing to sacrifice upon the alter of the Euro or any monetary system?Not one official has declared that they will "do whatever needed" to preserve liberty, democracy and sovereignty. Does this imply the Euro has a higher priority? Does the end of the Euro or the present monetary system mean the sun will stop spinning and all of its planets will be sent hurtling through the cosmos?The callousness and detachment from reality in an effort to save a nonessential thing makes them dangerous. The more desperate they become the more dangerous they become.If just one of them would publicly muse aloud that perhaps a mistake has been made, and perhaps a rethink of the structure of the EU is appropriate, I would feel better. But they are willing to confiscate your labor through monetary chicanery, deny liberty, destroy democracy, ignore sovereignty, and even witness violence and death, not just in Europe but in the US as well, to maintain a system that is horribly and irrevocably broken.Lastly, much is being made over whether the German Constitutional Court will ratify the ESM. The German High Court is wasting its time or willfully participating in a charade. A fund that will be used to bailout the very people who must provide funds to the fund is as ridiculous as this sentence sounds. Mind you that the countries that are suppose to provide funding to the ESM must borrow to do so and then must turn around and borrow from the ESM, effectively borrowing the same non-money twice -- at interest.(If the money is "borrowed" from the ECB, which has no "money" and then "borrowed" from the ESM, the ESM will not owe a debt to the ECB. Therefore, the sovereign will owe a debt to the ESM and the ECB.)All that has really been accomplished over the past hundred years is the establishment of elaborate transfer mechanisms, each destroying wealth one order of a magnitude faster than the previous.I never thought I would witness such collective madness. But the worst part is that it is anything but benign, and, it is only just beginning.Thank you, Harun. Let's enjoy the central-bank inspired market rally while it lasts. It comes at an unbearable cost that will have to be paid some day, and perhaps not as far in the future as the worshippers of the Federal Reserve believe.
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