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The amount of theft going on these days is
immense. I thought I would
catalog at least a few ways in which it is happening in Europe. This
is not supposed to be a comprehensive list. I hope that some Matt Taibbi will compile some sort of record of these things. Real journalists are as
rare as unicorns these days. Plus, they have a tendency to die suddenly.
Sovereign bailouts:
This is billed as
"saving governments"
and, by extension, entire nations. Actually, the governments are worse off than before. They not only have just as much debt, they
have more, all of which must still
be paid. So where's the bailout? The bailout is of the banks. If Greece's government defaulted, and restructured with a 50% haircut (i.e. they promised to pay back €0.50
for every €1.00 of principal), then a lot of banks and private institutions would take a loss of €0.50 on their Greek government
debt. The "bailout"
is not just a way to add more new debt, it is
a way to roll over existing
debt that matures. Every month that
passes, a little more Greek
debt matures. The bankers
get paid back €1.00
instead of having their debt default, as it certainly would have if not for various
"bailouts." Greece's
government owes just as much money, but now it owes
the money to, essentially, German
taxpayers rather than bankers. So who takes the loss when Greece
later defaults? Why, German taxpayers! Who didn't even
own the stuff until a little while ago. The same applies for Portugal, and now Italy and Spain.
This is all standard "economic
hitman" operating procedure.
The very same thing happened in Latin America in the 1980s and in Asia
in the 1990s. I wrote about it
in my book.
July 1,
2008: Privatize the Profits. Socialize the Losses.
Bank bailouts: Ireland's
government and people got
such a gang rape -- in
full public view with all
the world's media standing by -- you just have to laugh.
Ireland
To Spend More Than 50% Of GDP To Bailout Banks (But Bank Bondholders Will Not
Lose A Dime!)
The Irish government's debt/GDP
ratio was 25% at the end
of 2007. 25%! At the end of 2010, it was 99%. Projections are for
it to rise to 111% in 2013. How did that happen? It looks like pretty much
the same thing: Ireland's government takes the hit so that the banks' lenders get paid
back 100%. Remember how banks
work:
March
23, 2008: How Banks Work 7: the Lender of Last Resort
March 16, 2008: How Banks Work 6: Liquidy Crises and Bank Runs
March 9, 2008: How Banks Work 5: Selling Loans
February
24, 2008: How Banks Work 4: Banks and the Economy
February
17, 2008: How Banks Work 3: More Elephant Poop
February 10, 2008: How Banks Work 2: Shitting Like an Elephant
February 3, 2008: How Banks Work
What should be happening here is a debt/equity
swap. A large portion of the banks' debt gets converted
to equity. This solves
the insolvency problem instantly, and doesn't cost the taxpayer a dime. You just take a
red pencil to the balance
sheet, mark it up a little bit, and all is well again. This is how capitalism is supposed to work. Why don't
governments do this? Interesting question.
October
12, 2008: Effective Bank Recapitalization 2: Three Examples
October 5, 2008: Effective Bank Recapitalization
I think it is funny that
people then get upset about "bankers' bonuses." As if that mattered, when crime of this magnitude is happening in
front of your eyes.
"You killed my mother and my brother and my sister, so I think you should
wear less expensive shoes." This is the talk
of slaves.
Asset Sales: Once you've
corrupted governments to this degree, you might as well go whole hog. Sovereign debt, for the most part, is unsecured. If it defaults, the lender has no recourse. So why is Greece's government
being forced into "asset sales"? Because, when you've already got them bent
over, you don't just stop halfway. When you get
mugged in an alley, does the mugger only take half
your money?
Greece Will Accelerate State Asset Sales to Stem Debt Crisis as Bonds
Drop
Central Bank bailouts: Since
taxpayers have pretty much been sucked dry, the bailout parade has moved on to
central banks, who of
course have the printing press. Read this:
http://www.iie.com/publications/pb/pb11-13.pdf
This talks about something
I've heard a little bit about, but didn't understand in full. Actually, it is not well
described in the paper
but there is enough of an outline that I think we can make
out what is happening.
What basically appears to be happening here is something
like this:
Let's say that IrishBank borrowed $1 billion from GermanyBank, for a period of 90
days. Ninety days pass, and it's time for IrishBank to pay the money back to GermanyBank.
However, IrishBank doesn't have the money, and nobody
will lend IrishBank the money because they are a bunch of losers. Now GermanyBank faces taking a loss on its loan to IrishBank.
GermanyBank says to the
Bundesbank (which apparently
still has a function as a
payments clearinghouse),
"we have a big problem. If IrishBank doesn't pay us back the money, then we too
will face a solvency crisis just like IrishBank,
and nobody will lend money to us either!" What in effect happens is that
the Bundesbank pays GermanyBank, but nobody has yet paid the Bundesbank. In effect,
they are owed the money from the Irish Central Bank. This creates
the "cross-border payments netting
claims." The numbers are big
-- €326 billion owed to German
banks! In effect, the
"GIIPS" have been suffering a bank run, and this is covered
up by the central banks saying
that IrishBank paid GermanyBank, when in fact they didn't.
This is only a brief outline of some of the larger avenues of banker theft. There are many, many other
things going on, from HFT front-running on the stock markets
and other forms of market rigging, to piracy via the bankruptcy
courts, to stuffing Fannie and Freddie with losses, and on and on and
on. Rob Kirby has done an
excellent job of investigating some
of these more arcane avenues.
http://www.kirbyanalytics.com/
Lehman's Bankruptcy
and the Hidden $138 Billion Bailout
of JP Morgan
Amaranth Kill Shot: 78 Trillion Dollar Derivatives
Book Compliments of J.P. Morgan Chase
Nathan Lewis
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