Sunday, March 24, 2013

When The ATM Runs Dry?

For me, blogging is a form of self education. I want to know and by researching and writing, I gradually absorb and collect material which allows me to understand and be able to explain it. I have had a basic, rudimentary knowledge of economics, but dealing with the evolution of the World financial crisis has led me in many different direction. As a European/American, I am directly affected by the Euro Zone crisis on many levels. On a temporal immediate level, the problems with the Euro as a currency work to my advantage. A weak Euro makes my American income worth more here. When the dollar was weak a few years ago, there was a period when the exchange rate was 59 centimes to an American dollar. That hurt. Now with the stronger dollar, the exchange rate is almost 82 centimes to a dollar. But it's a double edged blade. Food prices steadily rise and the per liter price of diesel for my car is 1 Euro 40 centimes. I also have bank accounts here in French banks. I feel I have to understand this mess to be able to deal with the future. I'm sure you are following the Cyprus Bank crisis, but do you have any idea as to how it will affect you? Do you understand the difference in financial policies promoted by the American Republican fiscal conservatives and the British? And why we have to resist them in every way we can? Because as in Britain, Conservatives can't seem to see beyond austerity born on the backs of the middle classes as a way to protect the banks and the wealthy who stash their money in them. You just have to look at Britain to see how that is working out for them.
There are many reasons for the Cypriot debacle, but a major one stems from a 2010 meeting in Deauville, Normandy, during which Merkel persuaded former French president Nicolas Sarkozy that private bank creditors in Greece should take a "haircut" as part of the Greek bailout.
That triggered a long fight between Berlin and Frankfurt, the German government and the ECB. As usual, Merkel prevailed, though privately she has conceded it was a mistake not to be repeated. Last year, when Greece's private bank creditors were forced to take losses as part of a new bailout, Cypriot banks, heavily involved in Greece, suffered hugely, making a Cypriot bailout inevitable.
But this was like a pebble dropped into a pond, creating a ripple effect. A Pebble? More like the side of the cliff sliding into a pond that was already rippling from the steady erosion of the slope. Why do we refuse to regulate financial institutions? Why are they untouchable, when you see them commit the same crimes of greed over and over again? 
The so called  "Treasure Islands"are the very weak link in the worlds economy. Treasure Islands, like The Caymans, like Iceland and Cyprus were. Read the great book, Treasure Islands by Nicholas Shaxson to really understand how this all works and the inevitable disasters they create.
"Not only do they bleed revenues from cash-strapped governments and enable corruption; they distort the flow of capital, helping to feed ever-bigger financial crises." ...Paul Krugman,NYT
So now breezy warm Cyprus is just another edition of Iceland.  Iceland meant real trouble. Fortunately for the Icelandic population, it was the rude awakening that made them realize they had to take matters into their own hands by prosecuting bankers and rewriting their own constitution. They took their lumps but rejected the austerity bailout loans from the IMF. Iceland is small enough and has a Democratic Constitutional Government which allowed them this flexibility to change. Cyprus is much more serious. 
Officially, 37 percent of the deposits in Cypriot banks come from nonresidents; the true number, once you take into account wealthy expatriates and people who are only nominally resident in Cyprus, is surely much higher. Basically, Cyprus is a place where people, especially but not only Russians, hide their wealth from both the taxmen and the regulators. Whatever gloss you put on it, it’s basically about money-laundering, but this fact in itself goes vary far in explaining why Russia is making the threats it is making today regarding the Cypriot reaction to the bailout proposals.
And the truth is that much of the wealth never moved at all; it just became invisible. On paper, for example, Cyprus became a huge investor in Russia — much bigger than Germany, whose economy is hundreds of times larger. In reality, of course, this was just “roundtripping” by Russians using the island as a tax shelter.
"Unfortunately for the Cypriots, enough real money came in to finance some seriously bad investments, as their banks bought Greek debt and lent into a vast real estate bubble. Sooner or later, things were bound to go wrong. And now they have". ...Krugman,  NYT
The beat goes on.  There are Icelands and Cypruses the world around.  And we're being told by the Republican party that our deficits are the main problem.  Is it possible that Republicans are trying to do what they did regularly during the Bush administration:  use wars and other crises to keep us from turning our attention to what's really going on?  And the real problem is how the top 10% -- not just the top 10% of America's economy but the entire world's economy -- are bleeding the rest of us dry.
Everyone has seen the damage that runaway bankers can inflict, yet much of the world’s financial business is still routed through jurisdictions that let bankers sidestep even the mild regulations we’ve put in place. Everyone is crying about budget deficits, yet corporations and the wealthy are still freely using tax havens to avoid paying taxes like the little people.
"So don’t cry for Cyprus; cry for all of us, living in a world whose leaders seem determined not to learn from disaster". ...Krugman,NYT
Being on the ground in Cyprus is not easy these days.  Here's a report on what life is like now in Nicosia and beyond.
How much longer is the world going to be able to tolerate these parasites sucking the life blood out of humanity? Extractors of global wealth. Rent-seeking, tax-dodging , me me me muther fuckers. And they've got nearly half of western civilization fooled into thinking the problem is the people they keep poor, hungry, and ill but the other half is waking up. Greece, Spain and now Britain...when is America finally going to get THE MESSAGE? Don't Push Me 'Cause I'm Close To The Edge!


Patricia said...

I have been following the Cypriot "problem" pretty closely, but leave it to a blogger to get to the truth. I guess the Keating 7 was the last time we prosecuted banksters. The only way America will change is to go Iceland on it and re-write the Constitution and the Bill Of Rights. Unfortunately it's going to take some kind of revolution to stop the Republicans AND Democrats from raping the American people.

Ol'Buzzard said...

Austerity works for Republican politicians and their rich supporters because it doesn't realy effect them.

near zero percent interest means why should they fork out their cash when buying something.

The stock market is great.

They do not invest in bonds and saving accounts which now pay almost nothing.

Their income taxes are low and if they have their way they will go lower.

Austerity only hurts the middle calss and poor.

the Ol'Buzzard