The Bankers Want a Taxpayer Bailout the World Over

Update: The Greece situation is in turmoil. The Greek bondholders took a large haircut for new bonds and the payment on those bonds is iffy. Some Germans want Greece out of the Eurozone. SocGen says there is danger in this, but others say there is little danger. No one knows what is the ultimate outcome and US banks are already lessening their exposure to Greek debt. China is no longer buying Greek bonds. Stuff is in flux for sure!

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The problem with the Eurozone is that a little known administration, the IIF, or the Institution of International Finance, has refused to allow bondholders of PIIGS nations, mostly the Euro banks, to take a haircut on the value of those bonds. It is a scam in order to place full responsibility of the bailout upon the taxpayers.

The banks have all the power, and they have the threat of just doing business in the City of London, the financial district free from the UK Parliament and free from the influence of democracy, if these banks feel too constrained by the Eurozone rules.

The Eurozone rules would have been better than nothing, with a Tobin Tax on transactions and churn of contracts, and trades. But even that will no doubt be watered down because of the lack of committment of the City of London to allow any regulation to be placed upon that hell hole of speculation and tax dodging.

With regard to the Eurozone sans the UK, it is one thing for the ECB, the European Central Bank, to become the lender of last resort, and another for the governments of the Eurozone to require bailouts by the taxpayers, direct from their treasuries. Just providing liquidity in the system buys time for the banks. But, taxpayer bailouts are just a direct blow to the budgets of the Eurozone.

This is why Finland is prepared to lend money to the Eurozone through her central bank, but will not just bailout the Eurozone through taxpayer transfers.

Of course, the banks should not have gotten themselves into trouble through the freewheeling of the City of London and the easy money loans by Euro banks to the PIIGS nations and the housing bubble in the United States, an infection that came from the City of London deregulation. Had they not gotten themselves in trouble through their shadow banking easy money and speculation, there would not be a need for a lender of last resort, the central banks, or taxpayer bailouts.

Here is the crux of the matter, the libertarians wanted all this deregulation in the UK financial system starting with Thatcherism. It bled over into the US with Reaganism. The deregulation in the US spawned the S&L crisis, but it was contained with bankers going to jail.

What we have now though is bankers being immune from prosecution in the US, the UK and the Eurozone. We have bankers who are determined to use the taxpayers for bailouts, with no provisions for those taxpayers to share in future profits. This is a scam. It would be different if the taxpayers shared in the profits from trading.

The Tobin Tax was to be a sure way for taxation of trades as these banks churn contracts in speculation. But the UK refused to subject the City of London, the financial district which makes up a staggering 10 percent of UK GDP, to be put under that regulatory umbrella. With the City of London free from regulation, the Tobin Tax will just drive these unscrupulous bankers to other places of trade and safe havens from deregulation.

The failure of the governments to protect citizens from these tax cheats is just appalling. The providers of capital have now become more powerful than the businesses in real world economy that they were supposed to help!

The problem with forcing the taxpayers to bailout the banks is that the Eurozone budgets are already out of whack. When countries have budgets that are out of whack, they print more money and the inflation makes the debts less costly. That is a scam in and of itself, but it works.

The Eurozone has no such mechanism, because the Euro countries are not allowed to devalue their currencies as they all have the Euro as a shared currency. So any more debt to bail out the banks is going to be a problem as the problems with rolling over massive debt coming due will require IMF help and you know what that means: no growth and more austerity.

Without growth of the Eurozone economies, handling both the bank bailouts and the rollover of debt will be very difficult. Investors are running scared as the ECB refuses to be the lender of last resort, and the governments of many Eurozone, countries, like Finland, do not want their taxpayers bailing out the Eurozone like a bottomless pit.

The answer, of course, is for countries to restructure, default on the debt and banks to be unwound. But with the trillions of dollars of massive default swaps betting on success of the Eurozone, mostly made by big banks in the Eurozone, defaults are magnified in their failures due to the unwinding of these swaps. The banking crisis could actually get far worse if default is permitted. Yet not permitting necessary default is pure insanity!

CDSs, the default swaps that have the entire world in a straightjacket, are problematic going forward. We will see if governments win or if the banks win. I am betting that the banks will threaten to implode themselves in order to get what they want. And the New World Order will just do it's dirty work. But we will see how it plays out.

The central banks being lenders of last resort is one thng. But central banks giving banks loans that they do not have to pay back is quite another, as that means the taxpayer has to take the loss if the loan is not paid back.

But I believe that the plan going forward is clear: bailout the banks, let the banks buy sovereign bonds and lend little so that the economies of the world are in slow growth mode. This will, of course, lower the risk of inflation and the need to raise interest rates. This will cause savers to get nothing on their bonds or bank accounts.

How long the Fed will be in this mode before allowing more economic bubbles remains to be seen.

For Further Study:

http://www.businessinsider.com/euro-zone-another-debt-crisis-another-backdoor-taxpayer-bailout-2011-12

In the US, nationalizing the Fed would go a long way toward returning the sovereignty of the nation to the people and away from the bankers. With nationalization, taxpayers would benefit from the successes of those companies bailed out by the Fed. The Tobin Tax would be helpful as well, as it would allow the transactions of the banks to be taxed, a fee for trading, if you will.

But the Libertarians, at least the UK libertarians and probably many US libertarians as well, supported deregulation, the Reagan Revolution and Thatcherism. Yet the result was a massive scam to take power from the people and deliver it to the banks.

So now the libertarians want the banks to fail massively. That would be a disaster, because of the swaps and because of the lending needed by businesses that deliver goods and services to the people daily. Yet the libertarians, who wanted the deregulation don't want to impose regulations going forward to slow down the speculation by the banks! What is wrong with these people!

I hate libertarianism because it is two faced rot.

But the idea of nationalizing the Fed is a good one, as the money created would be free from debt. Otherwise, the money created is saddled with debt that the taxpayer must pay out in interest. As the debt goes up, the danger of inflation becomes greater. In order to stop the potential inflation, the Fed stops banks from lending and those banks collect interest money off of the treasuries they buy and become zombie banks. Austerity becomes the way of life, and there is no way that the economy can grow to create wealth. We see this happening even more so in Europe.

And all the easy money that we saw from the housing bubble, and in Europe would not be so easy if we nationalized the Fed and other central banks. However, if we got rid of the Fed, the fixed 30 year mortgage would go away. So nationalization of the Fed is better than getting rid of the Fed. I support sound lending, but not the absence of lending and abnormally tight money that would be the result of ending the Fed.

For Further Study:

http://theeconomiccollapseblog.com/archives/14-reasons-why-we-should-nationalize-the-federal-reserve