{"id":16898,"date":"2011-11-14T12:14:57","date_gmt":"2011-11-14T01:14:57","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=16898"},"modified":"2011-11-14T12:14:57","modified_gmt":"2011-11-14T01:14:57","slug":"the-hypocrisy-of-the-euro-cabal-is-staggering","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=16898","title":{"rendered":"The hypocrisy of the Euro cabal is staggering"},"content":{"rendered":"

\t\t\t\tAs they say in the classics – “some of my best friends are” … and in my case I might have added German. The Euro crisis – that is, the crisis that has arisen because the creation of the Euro stripped member nations of their capacity to defend their economies against negative private spending episodes – is being worsened because of the incredible resistance by Germany and the Troika (EU, ECB, IMF). The Brussels-Frankfurt consensus – which claimed the creation of the Eurozone would engender stability and growth is shattered – irretrievably humiliated one might venture to say – yet the cabal that hides behind that “consensus” maintains power and influence. The hypocrisy that the cabal engage in is staggering. Their narrative is almost totally dislocated from the reality. They regularly disregard their own rules to favour the vested interests that keep them in power. And meanwhile, they are overseeing a collapse of all the ideals they claimed their system was designed to achieve.
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\nThis article in the UK Observer (November 13, 2011) – There is only one alternative to the euro’s survival: catastrophe<\/a> – talks a little about “blinkered Germans”. It was written by Will Hutton.<\/p>\n

I agree that the crisis is marked by “an insupportable burden of private debt created by oversized, undercapitalised banks” which is a common problem across the globe and constitutes “a crisis in contemporary capitalism” but the EMU crisis is different again.<\/p>\n

The US and the UK have a way out of their crisis should they choose to use the capacities that are intrinsic to their fiat monetary systems. Their treasuries and central banks can cooperate to ensure that growth is strong enough to create enough employment to eliminate their unemployment.<\/p>\n

Such growth in national income would provide the capacity to the private sector to save and it would also see what are now toxic or difficult loans to the private sector become performing loans. The strain on banks would be significantly reduced.<\/p>\n

This is not to say that the credit binge overhang would be eliminated speedily. Far from it. This “balance sheet” recession will take a decade or more to resolve but that resolution could be quicker and less painful if governments used their fiscal capacity to support growth. That should be the priority.<\/p>\n

Unfortunately, under pressure from my corrupt profession and the media lackeys who take the ideas of mainstream economists in to the public sphere and the competing vested interests (in the financial markets) who actually profit from the crisis, our governments are not exercising those choices and so the crisis drags on.<\/p>\n

But the EMU situation is a step removed from that. There is no elected government that has the capacity to stimulate its own economy.<\/p>\n

Why? They signed away their currency sovereignty and now operate in a foreign currency – the Euro. And in doing so they agreed to make their public spending reliant on their tax bases and their capacity to access funds from the private bond markets. Once their tax bases shrunk as a result of the crisis and the bond markets worked out that insolvency was a real possibility, public spending opportunities declined.<\/p>\n

You will note that I have been saying that the ECB could rescue the European economy should it use its fiscal capacity (the fact that it has the monopoly rights to issue the currency). But consistent with my tastes for democracy that should only be done through the elected governments (via funding their fiscal decisions) and that is not happening at present.<\/p>\n

The ECB is bailing out the system – but only as it descends more or less into its death spiral. The ECB – as part of the cabal that runs Europe – aka The Troika – is forcing its member nations to adopt anti-growth policies which just worsen the financial ratios and prospects and damage the citizenry – while keeping the bond markets out of the picture. This ridiculous and myopic strategy is based on some notion that they don’t want a government to announce insolvency.<\/p>\n

Presumably they are delaying that inevitability while they organise all the vested interests and minimise their losses. They are prepared to attack the living standards and opportunities of the unemployed, the pensioners, the elderly, the sick, the small businesses, etc while they preserve their own hegemony and that of their mates.<\/p>\n

Hutton, however, doesn’t support the break up of the Eurozone. He seems to think that Britain’s interest “lies in the survival of the euro” and rattles out all the usual stuff about “seismic bank runs in Ireland, Portugal, Spain and even Italy as citizens and companies, fearing the same could happen to them, moved their cash out of their countries” and folding banks, etc. Apparently, the ECB “would be overwhelmed” and the “European economy would slump – and Britain with it”.<\/p>\n

None of that bears scrutiny when you understand the options that each nation would have with its own currency. There might be bank runs but we have already seen a great number of banks nationalised in 2008 and still functioning.<\/p>\n

Each nation would be able to fully capitalises its banks and protect deposits in its own currency.<\/p>\n

Each nation could immediately announce large-scale public employment programs and restore incomes (in the new currencies) to their citizens who are now facing no or little income.<\/p>\n

Each nation would immediately be able to pursue domestic growth strategies which would spill over into increased import demand which would help their neighbours.<\/p>\n

At present, all those avenues of growth and stability are being thwarted by the manic austerity bias in Europe.<\/p>\n

Hutton claims the only two options for Europe are debt forgiveness or inflation. He supports the former with the ECB acting as the “lender of last resort everywhere in the eurozone” – bailing out private banks, governments etc.<\/p>\n

It could do that given its capacity. But then what happens when the next negative aggregate demand shock hits? And if you stick with a system that forces governments to issue debt to net spend, how will governments be able to underwrite growth if they are being forced to reduce debt, even if the ECB is bailing them out as they do delever?<\/p>\n

Hutton notes that Germany appears to be the sticking point – “consistently blocked making the money flow”:<\/p>\n

\nIt has said no to the European Central Bank operating as a lender of last resort across the eurozone; no to creating a genuine European Monetary Fund on the scale needed; no to the creation of single euro bonds. Ireland, Greece and Italy are all doing their part. Germany must now do its – or the euro will buckle.<\/p>\n

Germany’s phobias are well-known – inflation and then slump led to Hitler. What’s more, the German constitutional court has ruled that the EU is a Staatenbund (a group of states). This means that Germany can only constitutionally make fiscal transfers to other members if each one is agreed by the German parliament. But phobias and constitutional courts cannot trump the agonising choice facing Germany and Europe.\n<\/p><\/blockquote>\n

Before I come back to that, I conclude that Hutton also doesn’t really get to the nub of the problem – of loss of currency sovereignty.<\/p>\n

He claims his aim is to promote policies that are in Britain’s best interests – but then says that if “Germany were to act responsibly” and help the EMU out of this crisis then the British Prime Minister should announce that:<\/p>\n

\nBritain would peg sterling to a reformed euro and in the long run even consider joining the regime. Moreover, Britain would do this either way, he could argue – eventually joining a single currency in which Germany accepted its responsibilities or a single currency without Germany.\n<\/p><\/blockquote>\n

That would just add another economy to those who risk insolvency and would ensure that Brits no longer had much say on what government policies were followed.<\/p>\n

Britain would become another domain for the EU cabal (which includes the IMF) to rule over.<\/p>\n

This article in the UK Guardian (November 13, 2011) – These bailouts aren’t democracy. What’s worse, they aren’t even a rescue<\/a> – touched on some of the anti-democratic developments in Europe that have intensified as a result of the crisis.<\/p>\n

Heather Stewart writes:<\/p>\n

\nThe deeply undemocratic nature of the euro project had already been laid bare in Cannes by the European elite’s outraged response to George Papandreou’s announcement that he would hold a referendum on the latest “rescue” package for his country … [and] … Italy’s neighbours to be demanding the departure of its democratically elected leader was hardly a shining moment for European democracy … In case there was any doubt that Italy faces joining Greece, Portugal and Ireland as closely monitored protectorates of Brussels, economic and monetary affairs commissioner Olli Rehn wrote to the Italian finance minister last week, demanding details about each one of the 39 reform measures Italy has promised to take.\n<\/p><\/blockquote>\n

The article also notes that a report (published November 9, 2011) by the Centre for European Reform – Why stricter rules threaten the eurozone<\/a> – reminds us that “Germany and France haven’t themselves always embraced the reforms they are now recommending”.<\/p>\n

I will consider that paper in another blog later. It has its own issues.<\/p>\n

But the hypocrisy of the core EMU states which are now turning on Italy is manifest.<\/p>\n

Remember the Stability and Growth Pact (SGP)<\/a> – aka (The “neither stability or growth pact”) which was adopted in 1997 after the Maastricht Treaty was formalised? It said that:<\/p>\n