Global Economic News
As Ireland Burns, the Arsonists Call for More Fire
Aug. 26 (EIRNS)With the banking meltdown expanding as LaRouche forecast, the British are calling for more gasoline for the fire.
Standard & Poor's downgraded Ireland's credit rating from AA to AA- because S&P believes the recapitalization of the banks will cost, not EU30 billion, but EU50 billion. This would bring the cost of the bailout to at least EU90 billion. More immediate, according to Bloomberg, is the fact the banks have to roll over EU30 billion in debt in September alone. The only place they will get the money, is from the ECB's printing presses. It now costs close to EU600,000 to insure EU10 million worth of five-year debt, a 6% loss. Close behind Ireland are obviously Greece, Spain, Portugal, and the rest. City of London mouthpiece Ambrose Evans-Pritchard reports that the crisis is pushing funds into the Swiss franc. The yield for Swiss 10-year bonds is at a record 1.2%, even lower than the record lows of German bonds of 2.11%.
Arnaud Mares, an executive director at Morgan Stanley, a former senior vice-president at Moody's, and former official at the U.K.'s Debt Management Office, wrote that sovereign insolvencies are now unavoidable. "Governments will impose a loss on some of their stakeholders. The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take." The sovereign-debt crisis is global "and it is not over," said the report, as quoted by Bloomberg.
However, the sovereign debt crisis is in reality a banking crisis. This is what lies behind the desperate calls for bailouts, coming today from George Magnus in Britain's Financial Times and Carlo De Benedetti in Italy's Il Sole 24 Ore. Magnus, who is a British economist working for UBS, writes: "Better to print money and be damned than tighten policy and be damned." De Benedetti, who rarely writes in prima persona, but is usually interviewed, says: expansive "monetary, fiscal, and regulation policies must be distributed immediately and in the right doses. The time is now, the amount must be massive."
Magnus stresses the importance that "the usually hawkish" Bundesbank President Axel Weber "acknowledged the ECB will have to keep open the emergency liquidity pipeline to European banks until 2011." Don't be afraid of inflation, he says, as long as banks' reserves are held at the central bank and cash on corporate balance sheets. De Benedetti hopes that "hyper-regulatory mania" does not take over in the U.S.A. (Glass-Steagall anyone?)
London School of Economic Hit Men on Greece
Aug. 26 (EIRNS)Three London School of Economics types bearing Greek names, have proposed, in the Aug. 24 Financial Times, that Greece be killed off, in order to pay what the authors themselves describe as an unpayable debt. The three are Costas Meghir, Dimitri Vayanos, and Nikos Vettas. Their point is that, with "radical pension, health-care and tax reforms," Greece can "yet stave off default." They face the "pessimists' argument" that to service a debt soon to reach 150% of GDP, it will require "huge cuts in government expenditures which have to be impossible politically." This is not true, the three stooges say, because if Greece deregulates, there will be growth in the GDP.
They write: "Public healthcare is one of the most dysfunctional and corrupt sectors. A drastic restructuring based on mandatory private insurance with subsidies for the poor and on the management of public hospitals by the private sector will bring high-quality healthcare to all and remove an important source of tax evasion and corruption. Large gains are also possible by moving to a pension system based on individual savings."
If it sounds like Obamacare, it isbecause it comes from the same prompter, the City of London. Will London School of Economics alumnus, Greek Prime Minister George Papandreou, assisted by banker Tommaso Padoa-Schioppa, follow the orders of his masters and slaughter the Greek population?