Collectivist statists from America to southern Europe are singing a familiar tune: The private sector is to blame for the economic nightmare that they have created. The Obama administration began complaining that businesses with cash were not instantly using that cash to hire employees, whether market conditions made that a prudent decision or not. Now the Greek government is issuing more bonds and, according to the condition of their second proposed bailout by the European Union, is being required to convince private investors to acquire the vast majority of the new debt of the Greek government.
The feedback that the Greek government is getting over its sovereign debt crisis is more than just from the private sector. German Chancellor Angela Merkel, whose own job hangs by a thread and who has just been limited by Germany’s Constitutional Court in using German assets to solve the Greek sovereign debt crisis, is now acknowledging that it was a mistake to admit Greece to the European Union. Merkel remained committed, however, to keeping Greece in the union, provided that no more help is needed from nations with stable and sound fiscal policies, and the Chancellor also warned the rest of the "PIIGS" nations to expect no more bailouts. European Central Bank President Jean-Claude Trichet echoed Merkel’s sentiments, and warned that the purpose of the ECB was to maintain the stability of the euro and not to protect nations that incurred debt far beyond the nations’ ability to repay those debts.
In his talk on Thursday to the Economic Club of Minneapolis, Federal Reserve Chairman Ben Bernanke warned the Congressional Supercommittee not to cut government spending by too much, and that if the economy continues to slide into another recession, the Fed has tools to meet the challenge.
Speaking over the heads of his audience directly to the Supercommittee, Bernanke warned that “while prompt and decisive action to put the government’s finances on a sustainable trajectory is urgently needed, fiscal policymakers [i.e., you members of the Supercommittee] should not, as a consequence, disregard the fragility of the economic recovery.” In other words, it’s OK to do a little nibbling around the edges of government spending, but anything that would cut such spending seriously needs to be avoided altogether, at least until the economy gets back on its feet.
And that’s the problem. With the economy stalled, consumer spending slowing, factory production dropping, job growth at zero, 14 million Americans unemployed, jobless claims increasing, 42 million on food stamps, and consumer and investor confidence at its lowest levels in years, jumpstarting the economy is going to be a Herculean task even for the Fed.
Following the announcement by the Italian Cabinet of additional austerity measures to include plans to combine all 1,963 towns in Italy with populations of fewer than 1,000, some mayors protested by turning in their honorary keys to the city while others began developing marketing plans inviting immigrants to their towns in order to raise their town’s population above the 1,000 minimum and remain independent.
Luca Sellari, mayor of Filettino, had different ideas: he decided to create an independent monarchy with himself as prince, and a new currency, the fiorito (which means small flower) with an exchange rate of two fioritos to the Euro (about 72 cents each).
The austerity plan would eliminate the jobs of 54,000 elected officials and save some money. Sellari wants to remain independent, however, and is moving to take Filettino (population 598) private.
Those who are hoping for a more optimistic report of the global economic future should probably not read on. According to a report released by the Union Bank of Switzerland entitled “Euro Break Up-The Consequences,” the death of the euro is inevitable and the long-term effects of such an event will potentially include civil war, the collapse of international trade and sovereign default.
The report lays the foundation of its assertions by declaring, “Under the current structure and with the current membership, the Euro does not work. Either the current structure will have to change, or the current membership will have to change.”
It goes on to reveal that the Union Bank of Switzerland has virtually no faith in the system to which they are ultimately connected. What makes such an assertion so frightening is that the UBS has a “hegemonic influence over the world economy,” notes The Blaze:
The global economy is facing a meltdown, according to World Bank President Robert Zoellick. “We are moving into a dangerous period,” Zoellick said to Bloomberg Television at a Singapore interview. The likelihood of an American recession is made increasingly likely by the danger of an economic implosion in the euro zone.
“I believe the U.S. will have slow growth, I don’t believe it will move to a double dip, but these things are very hard to predict because if you have events trigger uncertainty in Europe, that will flow back to the U.S.,” Zoellick noted, mentioning that the success of the euro zone “depends on the political decisions moving forward.
He added: “Sometimes people hope that you can muddle through by providing financing and liquidity, in the case of Europe, from the European Financial Stability Facility or the European Central Bank.
Information cited in a leaked 2009 diplomatic cable from the U.S. embassy in Beijing shows the Chinese regime knew about American and European suppression of gold prices to maintain dollar hegemony, but that it was buying more of the precious metal anyway. The purpose of increasing its gold reserves, according to report cited in the document, was to encourage other nations to do likewise while making China’s currency more appealing internationally. Another effect of the strategy, analysts noted, would be to weaken the U.S. dollar’s status internationally.
Gold-price manipulation by Western central banks — and the Federal Reserve in particular — has been somewhat of an open secret for decades. But the cable released by WikiLeaks triggered significant interest among metals investors and analysts, some of whom expected the news to cause another surge in gold prices.
The announcement by the Federal Reserve of an “enforcement action” against Goldman Sachs for engaging in “a pattern of misconduct and negligence” in its handling of home mortgage loans was entirely predictable. Charges of such misconduct go back for months when it was first discovered that mortgages and other mortgage-related documents had been “robo-signed” and foreclosure documents hadn’t been properly reviewed and that Goldman’s Litton Loan Servicing unit took actions “without always confirming that documentation of ownership was in order.”
The ruling requires Goldman to write down some mortgages that it holds, pay an unstated restitution, and provide “remediation” to homeowners who were hurt in the collapse. The ruling doesn’t preclude other enforcement actions from state banking regulators who are continuing their investigations into the matter, either, so additional sanctions may reasonably be expected soon.
In banking, few values count more than consistency and integrity. The sovereign debt crisis in Europe, however, appears to have watered down those values in the case of some banks. The International Accounting Standards Board has stated that some European banks used the value provided by the Greek government in determining how much value Greek bonds should be counted in the assets of the bank. That would mean the bonds would be worth about 21% less than than the original valuation.
Those bonds on the open market, IASP Chairman Hans Hoogervost wrote in a letter to the European Securities Markets Authority — the organization responsible for regulating securities valuation — have much lower values than that. “This is a matter of great concern to us” the August 4th letter, which was made public on August 29th, warned. “It is hard to imagine that there are buyers willing to buy those bonds at the prices indicated by the valuation models being used.”
Punch and Judy Show continues — this time in South Africa.
Former Federal Reserve boss Alan Greenspan made headlines this week when he said gold is indeed a currency and noted that the euro was falling apart, contradicting top officials on both sides of the Atlantic.
“Gold, unlike all other commodities, is a currency,” he told attendees at a conference in Washington D.C. on August 23, saying he did not think the precious metal was in a bubble despite recently reaching a new record above $1900. And a flight to safety amid inflation fears is what’s causing soaring gold prices.
“The major thrust in the demand for gold is not for jewelry,” Greenspan explained. “It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating.”