Quinny wrote:Could someone please explain to me why the ECB recently lent money to the banks at virtually no interest so they could then use it to buy bonds to support PIIGS debt? These bonds mean that countries are paying high interest rates that screw up their cances of recovery.
Hello Quinny,
Here goes.
The current increasingly indebted state of global capitalism, exemplified by the dilemma faced by supposedly social democratic Europe harkens back to the early days of the Thatcher/Reagan initiatives, largely aimed at neutralising communism as they were by a combination of war and economy.
Economic initiatives included such things as deregulation (which helped gestate the crisis), the inculcating of the culture of yuppie greed (which was the motive force) and of course the inclusion of workers, black and white (who are its unwitting victims), in an engagement with private ownership, almost always via housing. A docile miner is one with a huge mortgage.
Policies were implemented by subsequent administrations globally aimed at extending housing credit to the working class at near null rates. In the process, a housing bubble was blown, a bubble of such mammoth magnitude that it not only overwhelmed and removed the need for mercantilist sourced GDP in much of the English speaking world (setting the stage for China's rise as the capitalists' favourite destination for manufacturing capital), it also gave birth to its secondary market in traded derivatives. These were drafted by the millions, often in haste and invariably with faulty lines of title to the original housing titles, in the process creating capitalism's first truly global fracture point.
They were traded all over the globe including in substantial numbers to the European banks. Of course, when it emerged that these instruments were on shaky foundations, the underlying housing market was headed for an almighty crash affecting GDP sigificantly with a raft of other problems. Governments found themselves hobbled financially, especially the bogus European socialists who are running a ponzi scheme in the continents transition to eventual full blown capitalism.
With the banks and governments on the back foot,...the banks being in need of regular doses of cheap credit to minimise the ongoing losses on their balance sheets, and the governments being dependent on these banks for stop gap financing, the printing presses have been resorted to in a bid to kick the can down the road.
Of course, this combination of as yet unresolved bad assets as well as the synergy between banks and governments, especially in ponzi scheme social democratic Europe (the English speaking world has shielded itself somewhat from this state of affairs with its crude policy of Thatcherite government minimalism) causes a snowballing effect that will have to eventually be resolved by a managed housing crash, the buyback of these derivatives by governments at some cheap price and their write off.
This is the first of increasingly worsening global bubbles as capitalism cannot avoid its internal and contradictory meld of greed and growth.
