NHS to become centre of US battle of Collectivism vs. Individualism?

Just as I suggested last Saturday, Paul Ryan's nomination as running mate for the Republican Party, in the coming Presidential Elections, is likely to propel Obama into the White House for a second term thus creating complete economic collapse in the USA under the massive extra debt that will inevitably arise. Voters in the USA seem unlikely to voluntarily opt for reality.

President Obama yesterday, as reported in the Daily Telegraph this morning, could mishandle this scenario by focusing the public's attention on the true awfulness of socialised medecine by offering the Republicans the opportunity to use the example of the widely known failings of the NHS in their campaign. Note this passage from the linked report:

Writing in the Wall Street Journal in 2009, Mr Ryan said that universal healthcare made citizens "dependent" on the state and unwilling to back necessary cuts to government spending.

"We need only look to Great Britain and elsewhere to see the effects of socialized health care on the broader economy. Once a large number of citizens get their health care from the state, it dramatically alters their attachment to government," he said.

As the further evidence of the state of Britain's socialism inspired failings develop over the coming months, the rail fare rise this morning being but one example, it is possible that this could be a sufficiently stark warning for US voters that the Republican Presidential team could win through, particulalrly if that same socialism finally brings the euro to break-up before polling day, as now seems evermore likely!

The Looters and Moochers (as defined by Ayn Rand,) are rampant and run everything in Britain, further evidence of which was adequately provided in the State Controlled Displays in the Olympics opening and closing ceremonies, what a terrifying prospect for any typical free-thinking US elector!

The Slog report on a possible halt to building work on the new ECB HQ in Frankfurt, giving one further straw in that wind this morning.

My comment to John Redwood this morning - Cameron's resignation and the ECB.

Martin Cole

Posted August 3, 2012 at 5:46 am | Permalink

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Conservative MPs in my view should be using the recess to develop ways of ridding their Party of the Cameron influence which is set to destroy all in which they presented themselves to the nation as their core beliefs.
A light legislative programme following the recess is anything but what the nation requires with the legal consequences from the EU’s deliberate self-destruction to be shortly dealt with.
The earliest possible start to prepare for such an event will become obvious as soon as the Coalition Agreement, which presently makes the necessary preparation impossible, is abandoned.
Cameron, to be seen daily strutting around Olympic facilities and interviewed on sporting matters, while the ECB becomes an international laughing stock as occurred yesterday, seems surely ready to depart with only the minimum of pressure, he clearly senses he is inadequate for the duties and responsibilities he has taken on!

Dangers of outvoting the BuBa by the ECB Board

The structure and members of the Governing Council of the ECB is linked here. (A paper on the problems likely to be caused from the Eastern Enlargement of the EU is interesting in that it also discusses present problems, pdf file is here). In theory German interests, as recently explained by the Bundesbank (BuBa) could be outvoted

Public statements by Mario Monti, Eurocrat and EU appointed PM of Italy, lead me to believe that a trap is being set to force Germany to meet the bill for the past profligacy of the Southern Euro Group member states and France. I see that as extremely dangerous.

Under the war guilt clause of the Treaty of Versaille of 1919, included at the insistence of France, these Reparations were set in gold and totalled 50% of all the gold ever mined through history. The effect on the German economy was disastrous.

IMO Germany, soon to be the last triple A credit rated country within the Euro Group, (Finland will remain AAA but purely as a result of its refusal to join in further bailouts except with matching collateral) EVEN IF IT INITIALLY AGREES to abide by and honour such an ECB vote, will not for long be prepared so to do, as the burden upon its own citizens will quickly, once again, become intolerable. 

The most recent market view is here.

Jörg Asmussen, the German ECB member driving the case for an EU Fatherland

The Irish Times today has coverage on the plans for pretty wide-sweeping changes to the concept of the EU as now being put forward by the German Board Member of the drowning ECB, Jörg Asmussen.

EU break-up as strongly favoured by this blog based on the anti-democratic and unworkable institutions and procedures of the existing EU, is never going to be achieved without a struggle. Naturally therefore those who have been driving this model forwards would inevitably end by propounding even worse extremes. That is a refreshing development, so far things have reached their present desperate straits by the deceits, lies, evasions and secretive corruption of the EU which we all can witness today.

To correct the inefficiencies, incompetence and criminal waste of the existing EU will require some brutal measures and very distasteful medecine on a pan-european basis. Naturally increased authoritarianism will thus be required. It will be sold only as the cure, to treat the symptoms which naturally are becoming increasingly plain and dire.

We in Europe can seek our own national solutions by democratic means, which means abandoning the EU as presently constructed, and thereafter find a better way of working alongside one another towards some common prosperity, or we can submit ourselves to pan-european rule by the likes of Jörg Asmussen.

The latter would be a Popperian Tyranny, on which I commented at the start of my blogspot blogging over nine years ago!

More reports on Jörg Asmussen from Irish Independent, here and his ECB profile here.

Draghi of the ECB says Euro Zone inflation will average 2.0%

The headline is direct from the ECB press conference I listened to with my own ears and watched with own eyes on TV this afternoon. No kidding - such is the target and while inflation is presently 2.6% in the Euro Zone, Draghi asserts it will moderate to the price stability target, the ECB's number one mission in life, of 2.0% next year.

OK so far so good, it is still merely a target after all, but now comes the real lulu - none of the Euro Group countries, according to Signor Draghi, will vary from 2.0% at all. In other words it is not an average - more an absolute.

Now look at this chart on present Euro Group inflation from Acting Man, linked here:

If the ECB can apply standard inflation of 2% across the Euro Group from next year, you might think they would exercise their apparently magical powers to ease the unemployment crisis represented in the chart above, actually happening this very day - where in Greece a 77 year old pensioner committed suicide in front of the Parliament controlled by an EU appointed puppet PM, himself a VP of the ECB!

Target2 what Germany thinks it holds at the ECB

Another startling chart courtesy of Acting Man, linked here.

This one tells a story as well:

TARGET2 Claims on Bundesbank & 2 potential Doomsday Charts

 

 

H/T

Acting Man Blog

As Ironies Too has been pointing out for years, there ain't nuthin behind the ECB!

When it starts acting like it is a real Sovereign Central Bank (with taxpayers it can sacrifice) watch out, for disaster looms!

That's what the EU Fiscal Treaty is all about, but it might have been sensible to have got the German taxpayers signed up before incurring such grotesque commitments!

Are ECB TARGET2 risks equivalent to a "bank run"?

The following is from an article in Der Spiegel this morning, on the inherent risks of what is essentially the ECB's own QE programme, due for a massive increase tomorrow, in one sub-section titled as being "Like Free Heroin for Junkies" all linked from here, and from whence I quote this:

When, say, a Greek auto dealer pays for a German car, the money flows from his home country to Germany. When a Greek bank receives a loan from a foreign investor, the money flows back.

However, since banks in ailing countries like Greece are no longer receiving money from private investors and the ECB is helping out instead, the TARGET2 deficit of these countries has soared in an alarming manner. Italy, for instance, now owes the euro system €180 billion -- compared to just one year ago, when it had a deficit of only €20 billion. "This is a bank run," says Ansgar Belke from the German Institute for Economic Research (DIW). "Investors have basically withdrawn their money from Italian financial institutions from one day to the next."

Germany, on the other hand, is currently owed around €500 billion within the TARGET2 system. In an interview with the center-right Frankfurter Allgemeine Zeitung newspaper last week, ECB head Draghi played down the significance of those imbalances. "There are no risks in a cohesive monetary union," he said.

But what happens if one or more countries actually default on their loans and leave the euro zone? Ifo head Sinn has no doubt: "Then the deficits would have to be balanced out." Germany would have to shoulder enormous costs as a result.

Is Mario Draghi now the most dangerous man in the world, and indeed is he still within anybody's control?

ECB exchange their Greek Bonds to avoid losses.

The rather startling, certainly eye-opening report is from the Wall Street Journal and is linked from here.

Update Euro strengthens on the news see Bloomberg report, here.

ECB Bond Purchases & Spanish Exposure to Portugal

Two interesting charts this evening from Acting Man, linked here.

ECB should hand its discount on bonds to Athens, Lisbon & Dublin?

An iteresting discussion on the horrendous mess in which the ECB has landed itself and us, is on Acting Man blog this morning, linked here. A taste of the matters considered comes from this quote:

What this once again demonstrates is that the fate of interventionist policy as a rule is that it provokes a slew of unintended consequences. Once these rear their head, it is held that new interventions must be implemented to fix what the original ones have broken.

On the one hand it seems almost blindingly obvious that the ECB as a public institution should be prepared to forego a profit it will make on the backs of Greece's citizens who are already faced with unbearable economic conditions and a plethora of new taxes. Alas, it is equally clear then that it can not treat Greece as a 'special case'. Portugal and Ireland are no less deserving of getting a break – if anything, they are more deserving, as they at least did what the Greek government to this day has failed to do, namely meet the targets set out by the bailout program.

There is an interesting and quite elegant solution to the problem however due to how the euro-system of central banks is structured:

 

“The ECB doesn't need to take formal action to alleviate Greece's bond burden. National central banks hand their profits over to their respective governments, although they keep some for capital buffers. The Bundesbank distributed €2.2 billion to Berlin in 2010. It was twice that the previous year. Governments could simply decide that profits they receive from Greek bonds be earmarked for Athens. "The ECB could say is it's up to the shareholders on what to do with the profits," said Mr. Schulz.”

This blog continues to believe that in the long (if not even the short to medium run) the real problem for the ECB will not be the matter of profits on all its worthless pieces of paper it has bought or stood behind during the crisis, but rather which of its shareholders will eventually be stuck with the very real losses.

The above discussion therefore is included for its very surreal nature to provide some much needed early morning amusement amongst the bitter cold and generally gloomy news!

Monti & Draghi propose lumping unused EFSF funds with ESM

The two Italians, whose country of birth faces a debt mountain of indescribable proportions and a system of economic governance akin to some of the worst economies of the third world, have this afternoon come up with a new cracking idea to get their hands on outside cash, according to the Telegraph, linked here. A quote:

Doubling the European Stability Mechanism's (ESM) firepower would reassure markets while driving down borrowing costs for the debt-wracked countries of the eurozone, Mr Monti is said to have argued.

Mr Monti had won backing for the proposal from European Central Bank President Mario Draghi, who proposed using unused money from the EFSF to boost the size of the new fund to about €750bn, according to reports in German weekly Der Spiegel, which cited unnamed sources.

Bundesbank Board Member Thiele states ECB bond buying is illegal.

The report is linked here, and the following are significant quotes regarding the first public admission that this blog's assertion over many months that the ECB is at risk of incurring huge unplaceable debts have been fully justified:

Thiele recalled that the decision to buy Greek government bonds had found no support from German ECB Governing Council members. "Germany was over-ruled on the Council," Thiele said.
"These buys were a violation against the prohibition of monetary financing, that is the basic principle that a central bank should not give credit to a state," Thiele said in a speech text provided by the Bundesbank.
Thiele also appeared to argue that the ECB does not actually buy government bonds of Spain and Italy to ensure the monetary transmission mechanism, as the bank always asserts, but simply to lower the borrowing costs for Madrid and Rome.
The decision to buy Italian and Spanish bonds "in my view, was taken because the majority of the ECB [Council] thought interest rates of these countries too high," Thiele said.

These complaints, raised in Open Europe's daily news email today, add to the disquiet arising from the letter written by the ECB's former Chief Economist, Juergen Stark,  and revealed in Der Spiegel yesterday, linked here.

If the German member of the ECB Board and other officials opposed against the bond buying programmes and have all subsequently resigned as appears to be the case, where does the liability for the amounts on the face values of these bond purchases fall as one by one the issuers, led by Greece, begin to default? I suggest that Germany will argue it is not with them, what will that do for the credit ratings of the remaining members?

Present ECB risks from the coming Greek default.

Der Spiegel has a good analysis of the unfolding problems this weekend for the ECB, linked here, of which this is a small quote:

Since May 2010, the ECB has purchased sovereign bonds from crisis-stricken euro-zone member states worth €213 billion. An estimated €55 billion of that are Greek bonds. Such widespread bond purchases have resulted in sharp critique from financial experts.

But the ECB is also carrying much higher risks. They stem from the collateral that banks must post when they borrow money from the ECB. Often, that collateral consists of sovereign bonds from the countries where the banks are located. As such, when Greek banks borrow from the ECB, they post Greek sovereign bonds as collateral. Increasingly, however, they are taking advantage of the ability to issue bonds themselves, which are then guaranteed by the Greek state. Those bonds too are accepted by the ECB as collateral.

In the last three-and-a-half years, financial institutions from debt-stricken euro-zone countries such as Greece, Portugal and Ireland have borrowed extensively from the ECB. Since the peak of the financial crisis in 2008, the ECB has provided euro-zone banks with unprecedented amounts of liquidity. In December, the ECB flooded European banks with additional capital with unusually long loan periods of three years -- an influx of fully €500 billion. The loans were processed by national central banks in the euro zone.

The ECB does not publicize official numbers regarding which bank borrowed money, nor do they make amounts public. But Greek banks currently have few options when it comes to accessing fresh liquidity. Other banks have simply stopped lending them money. And Greeks have likewise begun pulling their capital out of Greek banks to deposit it in more secure accounts abroad.

'Immeasurably Large' (read on from the link for worse news)

New Appointments at the increasingly crippled ECB

UPDATE 1830 CET Telegraph reports the Belgian Peter Praet is to become Chief Economist for ECB

Bloomberg reported yesterday as follows:

Joerg Asmussen and Benoit Coeure join the ECB’s six-member Executive Board as the sovereign debt crisis enters its third year, replacing Germany’s Juergen Stark and Italy’s Lorenzo Bini Smaghi, who both departed prematurely. Asmussen, 44, was Germany’s deputy finance minister, while Coeure, 42, served as the French Treasury’s No. 2 official.

The structure at the top of the ECB is as follows (Images and explanation below from Acting Man):

The ECB's board structure. In the ECB's executive board, Lorenzo Bini-Smaghi (a noted 'dove') will be replaced by a French successor (probably a dove as well) and Jürgen Stark will be replaced by Jörg Asmussen (likely to be more pliable than Stark was) – click on image for better resolution.

The ECB has already gone quite far with its recently announced measures, specifically the 36 month LTRO's and the alteration of collateral eligibility rules. As noted before, the full effects of these interventions will only become known once the new year dawns. Should the crisis intensify, we expect that even bigger monetary pumping measures will be implemented. After all, the ECB's own survival as an institution is now at stake – if the euro area breaks apart, there will no longer be an ECB.

Thatcher and the death of democracy from the ECB

Extracts from Maggie Thatcher's final Commons speech, at 2 minutes 30 seconds in to the video, record her contempt for the proposed ECB. Contempt now too clearly proven fully justified!

ECB Balance sheet.

H/T Acting Man

Their conclusion on collateral:
We will soon find out whether the ECB's recent measures on expanding the pool of eligible collateral will indeed have the desired effect. It is clear that for weaker banks in the euro area the decision to allow the pledging of 'other credit claims' held on the balance sheets of commercial banks could be a life-saver. Unfortunately this also means that inefficient institutions won't be weeded out, but instead will continue to be a millstone around the economy's neck.

ECB worth nothing but 2,730,000,000,000 worthless euros. Is this a record for nothingness?

The ECB’s balance sheet soared to a record 2.73 trillion euros ($3.55 trillion) after it lent financial institutions more money last week in an attempt to keep credit flowing to the economy during the debt crisis. Bloomberg

Link to report.

If pounds, dollars and yen are supposedly worth a certain number of euros, can they then be worth anything too? Presumably the answer to that is - only what they are worth after you discount any euros they hold to their real value! Is that what Europe's banks have grasped? (See this blog's earlier questions posted today!)

Is a beach bar called Built on Granite the safest place for your liquid overnight assets?

If the beach bar was of rotting plywood and in plain disrepair, barely standing between the low and high water tidal marks, on clearly shifting sands, angled and tilting above a similarly rotting wooden deck but named "Solid as Rock" and a sign trumpeting  "Under the new management of Signor Draghi" together with further blazoned assurances of previous good management by a Monsieur Trichet formerly of Credit Lyonaise, would you still deposit your valuables, behind the bar for security, before departing inland for the night?

Such is what European banks are reportedly doing in record amounts, see the report from Nasdaq, linked here.

What a strange world we live in when security is sought from what appears to be one of the biggest confidence tricks and clearest charades of all time!

See also my first posting of this morning, beneath this, with a similar pertinent question!

If I was called Mr Fabulously Wealthy, would you lend me all I wished for Luxuries?

Just because the ECB calls itself the European Central Bank does not mean it is good for money it raises. Would other Central Banks, all backed by their long-suffering and serf-like tax-payers, lend funds to the Lunar Central Bank, or given the presence of bacteria on a planet such as Mars the Bank of Mars. We should all hope not!

Why therefore do Central Banks back the ECB, when Europe has neither taxpayers nor demos, and few taxpayers will soon be elsewhere solvent across Europe to be found to be willing to ever back it, as the EU is disbanded and trodden into the dust of history to be  hopefully quickly forgotten and completely unmourned?