Greece-ing the Skids

Recently
by Bill Buckler: Is
Ron Paul 2012’s Black Swan?

Ever since
the US government got its own debt and budget deficit debacle out
of the headlines last August, Treasury Secretary Tim Geithner has
been telling Europe that it needs more “firepower” to
address its own version of the same. The US-based ratings agencies
have been unrelenting. On January 13, Standard and Poor’s reduced
its list of European AAA rated nations to four, with only Germany
retaining its “stable” status at that level. Christine
Lagarde, the IMF’s managing director, has been warning of a “1930s
moment” if Europe in general and Germany in particular do not
come “on board” with more money for the Greek rescue effort.
Ms Lagarde does not refer to this as a larger yoke hung on the neck
of German taxpayers. She prefers to describe it as a “strong
leadership role” from Germany.

The IMF’s “sister
organization”, the World Bank, has come on board in warning
of a potential global financial crisis with the focus squarely on
Europe. On February 3, the Organization for Economic Co-operation
and Development (OECD) warned that the latest tranche of bailout
funds aimed at Greece is not big enough. The pressure is still on
for Germany to “do more”, for the European Central Bank
(ECB) to be allowed to “lend” Euros to the IMF, and of
course for the introduction of “Euro bonds” so that Europe
can join the US, UK and Japan in papering the whole mess over with
their own version of QE.

To understand
the urgency in all this, all that is necessary is to compare the
methods used in the “1930s moment” of late 2008 and the
potential “1930s moment” of today.

Keeping
It Off The Books:

When the global
credit system froze up in late 2008, it had to be “thawed”.
There were two alternatives. Either the financial entities all over
the world which stood with bank-issued paper and derivatives of
all descriptions could sell these for whatever they could get on
the markets and attempt to “re-liquify” themselves. Or
the paper could be taken into the “safekeeping” of the
central banks and the myth of “face value” maintained.
The second alternative was, of course, the one chosen. With the
exception of Bear Stearns and Lehman, the financial entities concerned
did NOT have to face what is called a “haircut”.

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the rest of the article

February
7, 2012

Bill Buckler
[send him mail] is the
captain of The
Privateer.