Report on the Euro for November 10, 2011
1) … L-Pap Is Named New Greek Premier and vows to stick with the Euro.
AP reports Banker Lucas Papademos Named New Greek Prime Minister Senior banker Lucas Papademos has been officially named as Greece’s new prime minister, after four days of intense talks to form a coalition government. And AP reports New Greek PM Vows To Stick With Euro
2) … Angela Merkel calls for a community of a New Europe with a federal government, as a EU ECB IMF Troika rises to power at the Euro core, and new leaders rise to power in Greece and Italy.
EurActiv in article Eurozone Breakup No Longer Taboo, relates that Angela Merkel, speaking at the “Falling Walls” argued that it was time for “a breakthrough to a New Europe”, in which member states would integrate further. EurActiv quotes Merkel saying, “A community that says, regardless of what happens in the rest of the world, that it can never again change its ground rules, that community simply can’t survive.” and quotes her saying, “Because the world is changing so much, we must be prepared to answer the challenges. That will mean more Europe, not less Europe,”
And European Commission President José Manuel Barroso warned about the financial cost of a breakup of the Union stating, “In the upcoming discussions regarding the deepening of European integration, including through possible changes to the European Union treaties, the Commission will steadfastly uphold its role as guarantor of the interests of the European common good, the general interest of Europe, including of course the interest of all our member states. And we will defend the integrity of the single market and the integrity of the single currency”. He went to state “The EU as a whole and the euro area belong together and should not be divided,”
EurActiv relates, German and French officials have discussed plans for a radical overhaul of the European Union that would involve setting up a more integrated and potentially smaller eurozone, EU sources say. In the meantime Commission President José Manuel Barroso warned about the financial cost of breaking up the Union. France and Germany have had intense consultations on the issue of setting up a smaller eurozone over the last months, “at all levels”, a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions. “We need to move very cautiously, but the truth is that we need to establish exactly the list of those who don’t want to be part of the club and those who simply cannot be part,” the official said. The discussions among senior policymakers in Paris, Berlin and Brussels raised the possibility of one or more countries leaving the eurozone while the remaining core pushes on toward deeper economic integration, including on tax and fiscal policy. The change has been discussed on an “intellectual” level but had not moved to operational or technical discussions, the EU official said.
EurActiv continues, Eurointelligence, an internet-based service providing commentary and analysis of the eurozone, pointed to the rising spreads on Italian, Spanish and French bonds, and said even a leveraged EU bailout fund will not be enough to stop the contagion from spreading. “The eurozone’s latest ‘comprehensive solution’ collapsed yesterday, as all the technical quick-fixes did before. We have now reached the bifurcation point in the crisis where the eurozone will, within days, have to make a choice between debt monetisation, which is hardly feasible without a political commitment to a fiscal union, and a break-up. The latter will happen if no decision is taken.”
A EU ECB IMF Troika rises to power at the Euro Core. Fraser Nelson, in The Spectator, Europe’s Hit Squad, writes critically against diktat “The idea of a prime minister chosen by foreign power brokers will be no more popular in Rome than it would be in Berlin.” … And The Telegraph asks Eurozone Crisis: Who is Pulling the Strings in Europe? As the escalating eurozone crisis has toppled governments in Italy and Greece, decision-making is increasingly being driven by France, Germany and a powerful group of Brussels officials. And Dean Baker in The Guardian relates EU ECB IMF Troika Crushes Greece. Greek Prime Minister George Papandreou touched off a firestorm last week when he proposed putting the austerity package designed by the “troika” (the I.M.F, the European Central Bank and the European Union) up for a popular vote. The idea that the Greek people might directly be able to decide their future terrified leaders across Europe and around the world. Financial markets panicked, sending stocks plummeting and bond yields soaring.
However, by the end of the week things were back under control. The leaders of France and Germany apparently laid down the law to Papandreou and he backed off plans for the referendum. While the government is in the process of collapsing in Greece, the world can now rest assured that the Greek people will not have an opportunity to vote on their future. This is unfortunate since it means that Greece’s future will likely be decided by politicians who may not have the interests of the Greek people foremost in their minds. By their own projections, the austerity package designed by the troika promises a decade of austerity, with high unemployment, falling real wages and sharp reductions in public services and pensions. And, their projections have consistently proven to be overly optimistic
The chance to bring the Greek people into the discussion was quickly nixed. We are back to a conversation among the bankers and the politicians. There is not much room for democracy in this story.
New leaders are rising to power in Greece and Italy. Bloomberg reports Italy Senate Speeds Vote That May Lead to Monti Government. And Robert Wenzel provides profiles on Europe’s New Leaders, Mario Draghi, Luca Papademos, and Mario Monti.
Mario Draghi has become president of the European Central Bank as of November 1. He was vice chairman and managing director of Goldman Sachs International and a member of the firm-wide management committee. He was the Italian Executive Director at the World Bank. He has been a Fellow of the Institute of Politics at the John F. Kennedy School of Government, Harvard University.
Lucas Papademos takes over today as Prime Minster of Greece. He was an economist at the Federal Reserve Bank of Boston. He was a visiting professor of public policy at the Kennedy School of Government at Harvard University. And, he was previously a vice president of the European Central Bank. He has been a member of the Trilateral Commission since 1998.
Indications are that Mario Monti will succeed Silvio Berlusconi as prime minister of Italy, within in days. Monti completed graduate studies at Yale University, where he studied under James Tobin (see the Tobin Tax). He is a member of the European Commission. He is European Chairman of the Trilateral Commission and and member of the Bilderberg Group.
3) … Angela Merkel calls for a new paradigm and a new regime in Europe.
The goal of leadership is to provide economic security via greater political union. Such a goal is the effective working of the Clarion Call of the Club of Rome for regional economic government.
Three hundred of the world’s elite were convened in Rome in 1974, to provide a paradigm for a new economic, political and social order for chaos that would come result out of chaos stemming from sinking currencies, that is competitive currency devaluation, that would come at the end of the Milton Friedman Free To Choose floating currency regime. Their collective call is for regional economic government. Angela Merkel and Nicolas Sarkozy have heard and heeded the elite’s call. In their joint August 2011 comminique they called for “true European government”.
Dr. Worden in The Essence Of Leadership writes, All that a leader must necessarily do as per the essence of leadership is satisfy a follower’s instincts for sense-making (satisfied by meaning) and feeling something as important in some way (satisfied by values). The sense-making itself may be viewed as a duty due to the human need for it (regardless of the particular content of the meaning). The ethical implications may simply be that humans have a hard-wired instinct for sense-making that can be satisfied by a social reality (or paradigm) being proffered by a leader.
Angela Merkel is providing a vision that makes sense as a resolution of the European sovereign debt crisis, which is in reality the failure of sovereign power, that is the failure of sovereign nations, Greece and now Italy.
Greece lost its debt sovereignty in May 2010, and has been receiving seigniorage aid ever since. Now Italy has lost its debt sovereignty, as its interest rate has soared above seven percent and is no longer truly able to sell government bonds. Its bonds were purchased, but not genuinely in the world government bond market, as Tyler Durden relates, they were purchased via indemnity by the ECB Snap Reactions To Italy’s €5 Billion Bill Auction, Which Reeks Of Illegal ECB Intervention.
Fate is operating to pass the baton of sovereignty from failed sovereign nation to sovereign leaders and sovereign bodies. A coup is underway in the EU, where a EU ECB IMF Troika, and globalist bankers are rising to power: “a breakthrough to a New Europe” is underway, and the new regime will be a Federal Europe with a fiscal union, a common treasury, and the ECB empowered as a bank. Austerity measures, structural reforms, pension overhauls, bank nationalizations, and debt servitude will be de rigueur.
Milton Friedman established the prior economic paradigm, where one was free to choose, and the regime was Neoliberalism, underwritten by the seigniorage of freedom, consisting of floating currencies, ponzi financing of all types, such as the China shadow lending on collateralized commodities scheme, carry trade lending by the Bank of Japan and banks in Austria, and Federal Reserve credit liquidity, ZIRP, and quantitative easing I, and II.
The Club of Rome and Angela Merkel are establishing the new economic paradigm, where sovereign leaders and bodies rule via diktat, and the regime is Neoauthoritarianism, underwritten by the seigniorage of diktat, that is the moneyness of diktat. Leaders meet in summits and announce regional framework agreements, which waive national sovereignty, and establish working groups and edicts, which establishes regional economic government.
Freedom and choice are mirages on the Neoauthoritarian desert of the real. Silvio Berlusconi’s People of Liberty party, also known as People of Freedom party, is an anachronism in the age of diktat.
A totalitarian collective is forming in the Euro zone: totalitarian collectivism is the EU’s future.
4) … The US Federal Reserve Banking system commenced “Inflationism” beginning in 1913; now the failure of the Milton Friedman Free To Choose floating currency regime is giving rise to “Destructionism” and the Beast System Of Neoauthoritarianism.
Ambrose Evans Pritchard writes New Recession Threatens The Globe As Debt Crisis Grows Europe’s escalating debt crisis has cast a black shadow over the world’s fragile recovery, threatening to tip large parts of the global economy into a deep downturn and even outright recession.
The Telegraph reports Italy is Sinking into Depression, and That is Before Any Act of Default. Here we go. The European economy seems already to have gone over the edge of the cliff, and that’s before any of the eurozone 17 has technically defaulted. This morning’s industrial production figures from Italy were a disaster, with output down a staggering 4.8pc in September.
Financial Times reports Subprime Loans Come Back to Haunt HSBC. For a bank that is keen to trumpet its global footprint at every opportunity, HSBC is struggling to shake-off one very parochial issue. Almost three years after it began to wind down its US consumer finance business, the bank is facing another severe bout of losses linked to subprime mortgages in the country (Hat Tip to Between The Hedges)
5) … Italian banks hemorrhaging cash are on ECB life support and are likely to become targets of short selling as Italy fails to renew short selling ban. The only result of this will be nationalization of Italy’s banks.
John Glover and Elisa Martinuzzi of Bloomberg report Italian Banks Borrowed 111.3 Billion Euros ($152 billion) From The European Central Bank At The End Of October, Up From 104.7 Billion Euros In September And 41.3 Billion Euros In June, Bank of Italy data show. The five biggest lender, UniCredit SpA (UCG), Intesa Sanpaolo, Banca Monte dei Paschi di Siena SpA, Banco Popolare SC and UBI Banca ScpA, accounted for 61 percent of the country’s use of ECB resources in September, almost double the share in January. The slump in Italy’s bonds, which sent the 10-year yield soaring to as high as 7.48 percent Nov. 9, is reducing the value of fixed-income securities held by banks, eroding their value as collateral for loans. “The Italian banks are trapped,” said Roger Doig, a London-based analyst at Schroders Plc, which manages about $58 billion in fixed-income assets. “They are where they are and that’s with the Italian sovereign. The austerity required if the sovereign wants to remain in the euro zone means there’s going to be a recession, which will mean losses for the banks.” (Hat Tip to Between The Hedges) I believe that the ECB is monetizing nation state debt, and this is a contributing factor to the decline in the Euro. Once Italy and Greece are found in default, the ECB will be left with bonds that are worthless? How great will the loss be? Possibly a trillion or more, perhaps so?
Zero Hedge reports Italian Banks Are ‘Free’-To-Trade As Short-Sale-Ban Is Not Extended.
6) … In today’s news
AP reports Storm Of Epic Proportions Hits Alaska. One of the strongest storms in nearly 40 years slams coastal towns with snow and hurricane-force winds.
Business Insider reports The Privatization Of Britain’s National Health Service Has Begun.
Reuters reports China’s Cash For Commodities Gamble Heightens Property Threat. Sitting in China’s copper and steel warehouses is a hidden risk to the world’s second-largest economy — banks’ indirect exposure to a property market that is showing signs of stress. Since late 2010, Chinese entrepreneurs and state firms have used trade loans to import goods such as copper and soybeans, which they have then quickly sold or used as collateral for further loans, skirting government credit curbs. Many lent that cash in informal markets, earning as much as 70 percent interest — a nice return given that bank fees and commissions on letters of credit (LC) can be as low as 3 percent for established companies, and allow payment some six months down the line. With a chunk of their loans business in lockdown after Beijing clamped down on lending, especially for the property sector, banks found such trade financing an attractive alternative as it had not fallen under the central bank’s ever-tightening restrictions. While Beijing has moved to clamp down on the practice, banks are still exposed to an unexpected batch of bad loans should a slump in property prices and sales coincide with another sharp fall in commodity prices. “Banks are already heavily exposed to the property sector and if a chunk of their trade finance books is also exposed to real estate, they could be in for a double whammy,” said Stanley Li, China banking analyst at Mirae Assets. “The end-game may be very nasty if higher financing costs, a property price correction and a slump in commodity prices trigger waves of defaults,” said Li, who has researched extensively into the risk of this cash-for-commodity phenomenon in China
Between The Hedges reports Financial Times reports Pirelli Chairman Marco Tronchetti Provera said the tire producer is preparing a worst-case contingency plan for the possibility that the euro-area crisis will trigger a drop in global car sales of 10% and in truck sales of 20%, citing an interview. Pirelli is also preparing for the eventual further consolidation of trading blocs and protectionist measures should there be “a slowdown and a severe slowdown linked to the crisis,” Tronchetti Provera said.