Bailout for Spain & Italy is a Prelude to ‘German Empire’

Topher Morrison
PurpleSerf.com

The London Telegraph’s Bruno Waterfield breathlessly reported as many other news outlets had that “On Thursday night, Italy and Spain plunged an EU summit into disarray by threatening to block “everything” unless Germany and other eurozone countries backed their demands for help.

 

How much “disarray” there in fact was is debatable.  Whether the “threat” to “block ‘everything’” had any real teeth or motivation is similarly – dubious.  The cynicism is due to the fact that in Europe all boats rise and fall together.  The German economy relies heavily on exports of which 60% comes from the Eurozone, conversely the Eurozone relies on a growing and healthy consumer base in Germany to buy their exports.

While German Chancellor Angela Merkel and her finance minister Wolfgang Scheauble have balked at mutualization of debt across the eurozone they have signaled it could become more palatable if stricter controls and robust accountability were imposed on individual countries’ spending and borrowing.  Who will decide those controls and regulations will undoubtedly be heavily influenced by Europe’s largest and most healthy economy why any centralization of power may lead to a new “German Empire”.

Motivating factors, however, have seemingly come into play and begun to melt German resistance to common borrowing and other similar proposals and may even lead Germany to rethink their own constitution, which precludes them from such activities.  Fox News reports many analysts:

“…think a downturn would force more Germans to recognize how much they depend on other European nations to buy their goods and support the German economy. They could become more willing to jointly accept the risks of backing weaker countries’ debts.”

Indeed as German business optimism fell in June due to a slowing in manufacturing, at the heart of their export led growth, look for more capitulation like the agreement reached on Friday to save Italy and Spain.

According to the Telegraph:

"Under the deal [reached at the EU summit on Friday], Spanish banks will be recapitalised directly by allowing a €100 billion EU bailout to transferred off Spain’s balance sheet after the European Central Bank takes over as the single currency’s banking supervisor at the end of the year."

The decision detailed in a seven-page document by the “Gang of Four” EU presidents aims at putting the Eurpoean Central Bank (ECB) at the center of a “effective single supervisory mechanism.”  The summit rationalized the move: “We affirm that it is imperative to break the vicious circle between banks and sovereigns.”  How yielding sweeping controls and expansive powers over to a central bank will address the underlying problem of competition, innovation and growth is not addressed in the document.

Relief for Spain was accompanied by promises to purchase Italian bonds using EU bailout funds in order to reduce Italy’s borrowing costs and to “examine the situation of the Irish financial sector” offering possible relief to Ireland by relieving the government balance sheet debt burden.

 

Herman Van Rompuy, the president of the European Council of EU leaders and one of the Gang of Four who crafted the European Federation document to be formally presented in December, lauded the agreement as an important step “to reassure markets and to get again some stability around the sovereign bonds of our member states.”

He did, however, warn the new aid measures would be reserved for “countries that behave themselves” by abiding by the EU’s fiscal rules and austerity measures, but without sticks so far and bailout after bailout seemingly without end these milquetoast threats have had all the credibility of a spoiling mother.   Considering the clear interdependency in the eurozone and the propensity to kick the can down the road one must wonder what “controls” and “accountability” will be incorporated later this year.  But if the economic conditions worsen, especially for Germany look for more bailouts and “draconian” control measures of which all will color the character of this new economic empire.

Gang of Four’s Plan to Enslave Europeans Under Economic Empire

Topher Morrison

PurpleSerf.com

 

“The euro is a protection shield against the crisis.”

—European Commission President, José Manuel Barroso, 5 February 2010

On Thursday and Friday EU leaders will meet to discuss the future of the Europe.  While some compelling speculations would suggest it is merely the beginning of the end for the Eurozone, arguing that ultimately “the wealthy nations of Europe [will be] unwilling to pay for the poorer ones” it is also important to note the summit may play midwife to the birth of an abomination.  It is, after all, forgivable to allow the rabble a place at the table if they pledge their financial subservience.

Dismantling the German Constitution (again)

On Tuesday the London Guardian obtained a shocking seven-page document drafted by the “gang of four” — a quartet of European presidents: Herman Van Rompuy of the European Council, Mario Draghi of the European Central Bank, José Manuel Barroso of the European commission, and Jean-Claude Juncker of the 17-country Eurogroup.

Within the seven pages there was not one mention of freedom, liberty or law, but no less than 25 times did it mention – “strength,” “strong,” and “stability.”   It should be clear this federation is not meant to free the people of Europe, but to enslave it.

Ian Traynor writing for the Guardian calls it a:

“…Radical plan to turn the 17 countries of the eurozone into a full-fledged political federation within a decade in an attempt to placate the financial markets by demonstrating a political will to save the single currency in the medium-term.”

The plan quickly establishes a new European banking union, giving the European Central Bank (ECB) authority over EU banks, proposes common resolution funds for “winding up bad banks” funded by a banking levy to spare EU taxpayers and a common deposit guarantee for Europe’s savers.  The EU’s new pemanent bailout fund, the European Stablility Mechanism (ESM), would provide a “fiscal backstop” for the proposed federation and recapitalization of troubled banks.

German Chancellor Angela Merkel on the eve of the summit echoed her fierce resistance to “mutualize” this liability across the Eurozone.

“Apart from the fact that instruments like eurobonds, eurobills, debt redemption schemes and much more are not compatible with the constitution in Germany, I consider them wrong and counterproductive.”

The question is then what conditions would need to arise that would force Merkel to undermine her constitution or change it.  As Europe’s leading economy the Germans have a lot to gain were this political federation to come to fruition.  Considering the rebuff is coming from a leader who backed bailouts for many nations in the first place it sounds as if Merkel is merely saving face, thereby avoiding a sticky political situation back in Berlin, but perhaps she’s just dutifully biding her time.

At the weekend Germany’s finance minister Wolfgang Scheauble proposed Germans should vote on a new constitution and argued it should be sooner rather than later.  To be sure, the rest of Europe agrees with billionaire financier George Soros that action needs to be taken immediately to save the union.  When Germany seizes the role it is destined to assume Soros has predicted “a German empire with the periphery as the hinterland” ahead.  In order to do that, however, they'll need to abandon their constitution.  The last time the Germans did so, it didn't work out that well.

Sweeping and Expansive Powers May Grow the Eurozone not Break it Up

While some are anticipating the European Union to crumble under its own weight, this author included, it may not happen now or in the near future if the central planners have their way.  In fact the proposed European federation may even become larger as the “gang of four’s” draft proposes that it should extend beyond the Eurozone.  Rather than spreading the wealth it seems all the One Europe crowd wants to spread the liabilities.

“An integrated financial framework should cover all EU member states, whilst allowing for specific differentiations between euro and non-euro area member states on certain parts of the new framework that are preponderantly linked to the functioning of the monetary union and the stability of the euro area rather than to the single market.”

The proposal further addresses Merkel’s mantra: “no liability without controls.”  As financial, budgetary and economic frameworks come under the dominion of Brussels the powers of the EU are magnified enabling the central authority to dictate and enforce a “robust framework for budgetary discipline” subordinating national decision-making on a wide range of issues previously excluded from the EU’s purview.  Changes in labor markets, taxes, budgetary allocations and civil services, will ultimately be approved by Brussels as well as control Military of the EU which eclipses in active military personnel even the United States.

Words Mean Nothing 

For all of the posturing and nay saying it is prudent to remember the persistent flip flops of the European Union’s leadership.  Here is a series of now ridiculous statements compiled from Open Europe by The Daily Capitalist:

“The Community shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project.”

—Article 104b, Maastricht Treaty, 1992.

“We have a Treaty under which there is no possibility of paying to bailout states in difficulty.”

—German Chancellor, Angela Merkel, 1 March 2010

“[Greek Prime Minister] Papandreou has said that he didn’t want one cent. The German government will not give one cent, anyway”.

—German Economy Minister, Rainer Brüderle, 5 March 2010

Who and what to believe at this point may be a futile exercise, but it is clear the European elite wish to keep markets as “stable” as possible and their dream alive.  To address fundamental issues for the long term at the expense of a few years in agony is out of the question.  Equally as abhorrent to them is abandoning their failed experiment in order to do so.  In the new inquisition of Europe it is heresy to speak of small states – to govern locally not globally.  The fact that Greece should be the first to possibly exit the euro is nothing short of poetic justice; Western civilization owes itself to Greek city states not grand unions.

Perhaps it is something more esoteric passed down from millennia of European struggle.  If in fact this modern monstrosity is achieved, albeit guaranteed to fail, and a European Superstate is constructed.   German, France, Spain, Italy and possibly England in their rotating roles as Presidents of the EU will experience a kaleidoscope of empire their predecessors could not achieve through centuries of military conquest.  Empowering the European people is not discussed in these machinations of ancient pedigree.

The Fed Wants to Twist Again, Until the Election

Topher Morrison

PurpleSerf.com

Fed Chairman Ben Bernanke and the Federal Open Market Committee.

The once arcane strategy – “Operation Twist” – is evidently becoming a trusty financial tool as much as a screwdriver is to a repairman.  The Federal Open Market Committee (FOMC), charged with overseeing the buying and selling of US Treasury securities, is to meet this week and it looks like another round of Operation Twist is on the table.  The FOMC’s decision whether to inject more liquidity into US markets, in an attempt to inoculate them from European debt crisis, or proceed with other more temperate measures will help influence the financial trajectory of America and with it the rest of the planet for the remainder of the year and beyond.

Operation Twist, selling short-term treasuries in order to buy longer term ones in an effort to bring down long-term yields, is one of many tools available to the Federal Reserve.  In general it is more palatable than firing up the printing presses or plugging fresh zeros into the digital currency supply and then purchasing billions (or potentially trillions) in assets, which is how quantitative easing (QE) is employed and what the Wall Street Oligarchy and Gold Bugs hope occurs.  It may, for the time being, be sufficient for markets to feel the Fed is doing something and therefore Twist 2.0 may be just the ticket.

In previous rounds of QE benefits were double edged, as one can never fool the markets. There was ‘good’ inflation (high prices for equities, corporate bonds, remember: will the Dow hit record high in 2011?) making the rich richer, so to speak, and then there was the collateral damage – ‘bad’ inflation via surging commodity prices – making the poor poorer.  This is of course how the Fed steals for the 1% and the logic, which explains how the Fed triggered the Arab Spring.

While both QE1 and QE2 became intensely controversial Operation Twist, aside from the dubious name, looks to become the preferred method of intervention.  Forbes reports on the upcoming FOMC meeting with regard to the latest limping economic numbers:

“Barclays Capital called Operation Twist ‘the most likely outcome,’ saying it would give the Fed more time to sort out whether recent softness in data is mainly ‘payback’ for hiring during a warm winter or a more prolonged slowdown. ‘If the latter is the case, then more outright asset purchases that expand the balance sheet (QE3) would become likely,’ Barclays said.”

To be sure, as the frequency of crises increase moves like Operation Twist allow the financial engineers to manipulate the economy without having to deal with the underlying causes of addicting entitlements, long term debt and growing corporate malfeasance (got Zucked lately?) and without addressing public concern over persistent and reckless intervention.  But again, nothing changes, Operation Twist is a shell game as much as everything else the Fed attempts. 

The political calculation here, however, is important.  Should Ben “Bubbles” Bernanke go on a printing spree, say by injecting a cool $500 billion, look for Obama to win in November.  If the Fed doesn’t it may harm him according to Gary Dorsch writing for Seeking Alpha:

“Without the artificial life support of QE3, the U.S. stock market could sink ahead of the upcoming election and torpedo Mr Obama's chances. On the other hand, a $500 billion printing operation could lift the Dow Industrial above the May 1st highs, and tilt public opinion in favor of the president over his Republican challenger.”

This would undoubtedly raise Republican ire like no state recognized gay marriage or stimulus bill could and would likely fuel a harder line conservative (sound money anyone?) to take place of a lukewarm Romney in 2016.  The Federal Reserve doesn’t like attention and especially the pesky kind from sound money conservatives like Ron Paul.  Not doing anything that would help Obama will sap any animosity a resurgent and victorious GOP harbors for the Fed in November.

The alternative is of course, Twist 2.0 or perhaps another series of secret European loans or some derivative thereof.   If the Federal Reserve can lay the economic turmoil entirely on Barack Obama’s doormat, which Republicans will happily aid, Ben Bernanke and crew are as usual in the clear.  Suffice it to say that has always been the magic of the Federal Reserve – out of sight and out of mind of the electorate.

E.U.’s Baltic Tiger, Small is Beautiful

Topher Morrison

PurpleSerf.com

After a quick survey of the world’s economies it is easy to become pessimistic.  The BRICS (Brazil, Russia, India, and China) are all slowing in growth, they account for much of the world’s raw production and nearly 1/3 of its economy.  The first world or OECD hasn’t changed much since the 2008 crisis slugging along at a 2-3% growth depending where you look, anywhere from 8-15% unemployment and together their debt is even more abhorrent, a cumulative 106% of GDP.

The Baltic Tiger Amidst the Bleating Sheep

Macroeconomics aside, there are a few diamonds in the rough, which is to say, low debt, high growth and low or lowering unemployment diamonds.  Estonia, for example, sixteen months after joining the languishing EU bloc enjoys a budget surplus, national debt is at 6% and its economy grew at a neck breaking 7.6% last year, five times the euro-zone average.

We have discussed this Baltic Tiger and its disheartening and tumultuous history before, apparently it was those hard years, which forged a resilient nation.  So resilient in fact that it bounced back from a nearly 18% contraction, an economic hay maker straight to the chin, as a result of 2008 world financial crisis.  How did they do it? “I can answer in one word: austerity. Austerity, austerity, austerity,” says Peeter Koppel, investment strategist at the SEB Bank.

PurpleSerf.com also examined the structural cause last year:

“Estonia features a constitutionally mandated balanced budget, the highest levels of internet freedom, one of the world’s first flat tax systems (the government has just approved to cut income tax from 21% to 20% by 2015), an open banking system allowing for generous foreign investment, and unlike the United States (sitting on unparalleled and untouched oil reserves) Estonia is self sustaining supplying 90% of their energy from local oil shale…

Bam!  Tell me where you can find that anywhere in the EU.

As far as their ethos is concerned, however, it may be that nearly 700 years from agrarian serfs to Soviet comrades has thickened their skin.  While the rest of the EU: France, Greece, Ireland, etc. bemoan trimming government largesse and entitlements, in many cases literally setting their cities aflame in protest, Estonians have stoically borne the harshest of austerity measures.  When it was time to tighten their belt in 2008 many in Estonian society may have already had bored the extra holes.  From Global Post:

“For older Estonians, memories of the grim days of Soviet occupation make it easier to accept sacrifices today. Among the young, there is a widespread awareness that in a nation of just 1.3 million people, the freedom and opportunities their generation enjoy depends on unity in times of crisis.

‘Western Europe has not really experienced a decrease in living standards since the Second World War,’ says Koppel. ‘Historically, austerity is inevitable, but it’s not part of the culture of Western Europe right now. This is what really differentiates us, that we were able to understand that.'"

Small is Beautiful: More Governments, Less Governance

Perhaps, it isn’t just historical frugality, which produces this type of serenity in the face of the vicissitudes of life.  Perhaps it’s the “1.3 million,” the size of the polity, we should be taking a look at.

As we mentioned before there are diamonds in the rough and as such they are small amidst the economic weeds of this world.  Nonetheless the are brilliant and just as valuable to our overall health, hence “Govern Locally, Not Globally.” These are just some of the world’s smaller more successful states.  You can tell partly because they’re rarely in the news.

Country	Size (sq mi) / Population	Emp. / Debt (GDP) / Growth
Hong Kong	426 / 7 mil	3.4% / NA / 7.2%
Andorra	180 / 84,000	2.9% / NA / -1.9%
Estonia	17,413 / 1.3 mil	11.3% / 6% / 7.8%
Azerbaijan	33,436 / 9.1 mil	1% / 4.7% / 0.2%
Lithuania	25,174 / 3.1 mil	15.6% / 37.7% / 5.8%
Latvia	24,938 / 2.2 mil	13% / 44.8% / 4%
Singapore	274 / 5.1 (3.2 citizens) mil	2% / 118% / 4.9%
Iceland	39,770 / 320,060	6% / 130% / 2.4%
Costa Rica	19,653 / 4.3 mil	6.5% / 44.5% / 4%
Switzerland	15,940 / 7.9 mil	3.1% / 52.4% / 2.1%
Qatar	4,416 / 1.8 mil	0.4% / 8.9% / 18.7%
Seychelles	174 / 84,000	2% / 46.2% / 5%
United Arab Emirates	32,278 / 8.2 mil	2.4% / 43.9% / 3.3%
San Marino	24 / 31,887	5.5% / NA / 1%

It is clear when you contrast these numbers with the major economies above, albeit some outliers exist, small and beautiful is also more manageable and agile.  While not even small countries are perfect the trajectory is what is most important.  In every one of the aforementioned countries there are bright spots to point to, if not, the countries are lean and prosperous.

Aside from the numbers let us ask ourselves “What Small Countries Can Teach the World.”  The study by Jeffery A. Frankel of Harvard University’s Kennedy School of Government and its conclusions is heretical to macrostate hegemony, a world that consists merely of 189 some odd countries.  The small advanced countries of this planet have so much to teach us if we would just listen: New Zealand’s Inflation Targeting, Estonia’s flat tax, Switzerland’s debt brake, Ireland’s FDI policy, Canada’s banking structure, Sweden’s Nordic model, and the Netherlands’ labor market reforms offer so much to our large and lumbering economies.

So many conservatives and libertarians browbeat economic competition when they would just as easily win over their communist, socialist, green, etc. enemies by merely championing “Let a 1000 Nations Bloom!”  After all it’s the “Most Progressive Movement on the Planet,” but unlike big government solutions and the few experiments they leave us to compare their policies against, this new ethos values competitive governance.  Stop fighting our government and have them fight over us for once.  If we can’t create new governments on land there are even ideas of making them available at sea.

Fresh air anyone?

Once upon a time in America we had 47 of what Justice Brandeis once called the “laboratories of democracy”, each one imbued with all the powers necessary for effective governance.  The people of America had 47 different options of where to live and under what system to thrive.  Since we dismantled the Senate, instituted a private financial dictatorship and forced all wage earners to pay the government before they paid themselves in 1913 those hedges against government intervention and corporate escapade were lost in the fog of reform and "progress."

As the New York Times points out of Leopold Kohr’s book, the Breakdown of Nations, it might be prudent to return to our Kohr Principles:

“In 1943 Kohr secured a professorship at Rutgers, where he taught for 12 years, during which time he finished his central work, “The Breakdown of Nations.” Published first in Britain, in 1957, the book develops his theory of the optimal size of polities: “There seems to be only one cause behind all forms of social misery: bigness.” Size was the root of all evil: “Whenever something is wrong, it is too big.”

Unsurprisingly, Kohr’s guiding principle was anarchism, “the noblest of philosophies.” But its inherent nobility, he recognized, also made it utopian: a truly anarchist society could do away with governments and states only if all individuals were ethical enough to respect one another’s boundaries. Kohr cleverly turned this utopianism upside down, from weakness to strength: any party, any leader, any ideology promising utopia is automatically wrong, or lying. Acceptance of utopia’s unattainability, in other words, is the best insurance against totalitarianism.

But if the ideal state cannot be attained, at least it can be approached, Kohr thought, by reducing the scale of government. Which sounds a lot like the famous quote from Thoreau’s “Civil Disobedience”: “That government is best which governs least.” But in Kohr’s vision, smaller government should mean, first and foremost, a smaller area to govern. In such smallness, greatness resides. Counterintuitive as that may sound, didn’t Greece and Italy have their Golden Ages when they were divided into countless city-states? Not a coincidence, according to Kohr: smaller states produce more culture, wealth and happiness.”

Instead of 17 hulking EU states, which are quickly coalescing into one Euro Super State (a possible 4^th Reich, according to George Soros) or heading for a cataclysmic breakup, imagine a setting similar to what the U.S. enjoyed for the first part of its life.

Unfortunately history nor ethnic considerations
come into play on this map, but you get the idea.
In the near future there may be nothing left
of Europe’s borders.

Needless to say this inaugural part of American history, prior to 1913 and the firs World War, made possible the realization of what has been referred to as the “5000 year leap.”

Escape from EU: Rise of the 4th Reich

Topher Morrison

PurpleSerf.com

Where is Snake Plissken when you need him?  Greece is in shambles.  Spain is on the brink and the planet is on the verge of realizing it never recovered from the last recession.  Japan evidently already realizes it as Tokyo’s stock market hit a 28-year-low today, New York will undoubtedly react.  While some in Europe are rallying jittery technocrats to centralize and unite, reason urges otherwise.

The New York Times reports:

“Mario Monti of Italy called for using euro bonds to create a quicker path to common debt for Europe. And Mariano Rajoy of Spain floated the idea of a common fiscal authority in Europe to synchronize budgets and manage debts.

German policy makers have said that kind of deeper budget integration and supervision is a prerequisite before any sort of euro bonds could be issued.”

This process, to embolden Brussles, is estimated to take between five and ten years, but the wonderful thing about a crisis is its ability to motivate.  To be sure, whatever happens will happen soon.  George Soros predicts three months and Joschka Fischer, Germany’s former vice-Chancellor, gives EU leaders two weeks to save the project.

Either the EU will crumble beginning with Greece’s departure on June 17^th after their elections and return to the Drachma (test trading since last week) or a more powerful central government in Europe will emerge.

If this sounds a bit scary it should.  Spain’s Rajoy urged the 17-nation union to “cede more sovereignty” to a central fiscal authority and parroted the European Commission’s call for a banking union with a single regulator and deposit guarantee fund.  Joining the pro union chorus is also new French Finance Minister Pierre Moscovici: “We need to go toward a banking union,” he said on RTL radio.  With that the socialists are officially on board in Paris.  The thing is who has the money to put where their mouth is?  Not Rajoy.  Not Monti.  Maybe Moscovici, but Germany on the other hand…

Given the current crisis Soros sees a possible 4^th Reich ahead, “a German empire with the periphery as the hinterland,” he said.  While CNBC says this was a “warn[ing]” from Soros his statements clearly suggest he wrestles with little misgivings on the prospect.

With northern creditor nations bailing out ailing Spain and Greece, Germany is effectively at the helm and Soros knows it.  “We need to do whatever we can to convince Germany to show leadership and preserve the European Union…the future of Europe depends on it,” said Soros, reports Bloomberg News.

If you listened to Mosocovici the entire planet depends on what happens in Europe and therefore how Germany plans its next move. “Let’s not delude ourselves: If the euro falls apart, so will the European Union, triggering a global economic crisis on a scale that most people alive today have never experienced,” he said, reports The Daily Telegaph.

In a way he might be right, the world is walking a tight rope finer than frogs hair.  US employment numbers are wilting, a fact Obama “lays at the feet of European leaders.”  Brazil, China and India all see anemic growth.  Iran has been writhing in hyperinflation since at least January with fresh sanctions taking their effect at the beginning of the month and the rest of Middle East on perpetual red alert with Syria in the throws of civil war.  To top it all off the first world isn’t setting any kind of example. The OECD club is at a record average public debt of 106% of GDP and the red flags in bond markets couldn’t be raised higher:

“German 10-year Bund yields closed at 1.17pc. The two-year notes turned negative. British Gilts closed at 1.53pc, the lowest in 300 years. US Treasuries fell to 1.45pc, lower than at any time during the Great Depression.”

Greece is aflame with persistent protests, Cyprus isn’t looking good, neither is Portugal and Italy’s ex-premier Silvio Berlusconi claims his “people are in shock.  Confidence has collapsed. [And they] have never had such a dark future.”  The Daily Telegraph’s Ambro Seevans Pritchard agrees:

“Indeed, the jobless rate for [Italian] youth has jumped from 27pc to 35pc in a year. Terrorism has returned. Anarchists knee-capped the head of Ansaldo Nucleare last month [and] Italy’s tax office chief was nearly blinded by a letter bomb.”

If the real politik lesson holds – let not crisis go to waste – who will pass this global opportunity up?

Should history provide us prologue as it often does.  This is exactly the time when the fearful and insecure turn to anything for security.  With these nations biting their nails strength will need to come from somewhere, lets hope it comes from independence not unity.  Perhaps this is a time when Germany should exit, followed shortly by France and allow the EU to stand on its own for what it is, “a valueless and physically unattractive monument to the hubris of bureaucrats who valued an economic ‘system’ over any actual economies,” writes Tim Cavanaugh of Reason.

The European experiment has failed.  Attempting to prolong the endeavor will only beget more crises down the road.  Individual states should stand on their own, go through the necessary withdrawals and kick the bailout addiction and let the pusher banks sucker some other region.  Let not your hearts be troubled, if the euro is destroyed it will be scary, but we’ll all be the better for it.

It is interesting to note, however, with all the buzz talk about the zombie apocalypse and 2012 how fitting it would be to see Germany’s Angela Merkel leading her zombie states army into perpetual debt slavery.

Sunday's Mail Bag

Topher Morrison
PurpleSerf.com


We all receive a lot of chain mail especially when people catch wind of what is most important to us.  I want to start posting some of the best I receive each week on Sunday.  So here it is, enjoy Purple Serf's - Sunday Mail Bag.  

Don't take him back!  He broke nearly every promise
he every made to you America!  He may be a good
lookin', smooth talkin' long legged mac daddy, but
you know he just playin' you!

          Consider how Barack Obama has recently lambasted fiscal conservatives for using the debt ceiling as a political bludgeon.  These are very different sentiments than he has previously espoused.  Once upon a time you would have thought President Obama was a fiscal hawk!

“The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America's debt weakens us domestically and internationally. Leadership means that, "the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.” - 

-Senator Barack H. Obama, March 2006

          Once upon a time Barack Obama was a lot of things to everyone.  He promised restraint, transparency, but most of all change, yet he has proven as bellicose as the Bush administration, if not more. Barack Obama has now advanced America into Libya, Yemen, Pakistan and covertly in Iran.  We are more deeply involved in Middle Eastern politics than ever.  Obama double downed on Bush's torture gaffs and now tacitly supports extrajudicial killings of US citizens.  


          The virtual financial dictatorship of Ben Bernanke is more apparent than ever when it was shown that not only the biggest banks in America get bailed out, foreign banks were financed as well and behind our backs.  This administration is more involved even in the shadows as the growing Fast and Furious scandal attests.  Moreover, Obama has filled his cabinet with big business insiders, he has increased our nations profligate spending and he presides over unprecedented debt and persistent unemployment.  We are more than ever one nation under Washington.

Occupy Wall St. is 3 Years Late

Topher Morrison
PurpleSerf.com


Is Occupy Wall Street a new Tea Party?  The simple answer, no.

"Eat the Greed!"
Two things are certain, neither the rich or the greedy will ever go away so what do we do from here?

          If anything else, Occupy Wall Street is unfashionably late to the protest party.  It seems frustratingly clear that this part of the occupation is merely transient.  While I don't want to gloss over the libertarian streak clearly evident in signs protesting America's wars, police abuses and bailouts, many in the Occupy Wall Street crowd have been protesting the age old vice "greed" as if it has just reared its ugly head.  In this case their protest is about as productive as protesting lust.


          To ignore that big government (a frequent target in Tea Party demonstrations) and Wall Street (the target of this protest) collude to our detriment is to sacrifice an opportunity to point a public finger in the right direction.  This is not a failure of capitalism, but of brazen corporatism!  Washington and Wall Street created this mess by appropriating and creating nearly $13 trillion of our money in order to buttress teetering financial institutions.


          Ben Bernanke, one of the architects of the 2008 bailouts, has now admitted the recovery is "close to faultering."  Evidently their plan has failed leaving us with a debased currency, stratospheric debt and intolerable unemployment.  Much of the Occupy Wall Street is a reaction to this failure, not to the cause.  The occupiers are seeking ends not a return to restraint.  They see Wall Street getting theirs and they want in.  They are concerned about unemployment, lack of benefits and Wall Street's exorbitant bonus structure not the close relationship between elected officials and CEOs.  The opprobrium being foisted on Wall Street, is justified, but many are not seeing the forrest for the trees.


          In short, much of Occupy Wall St. are 3 years late.  The real protest should have taken place in front of the Department of Treasury, the Federal Reserve, the White House and the FDIC.  If these elements of Occupy Wall Street are sated with more government spending in the form of free college tuition, universal health care and a living wage in the form of a Restoring the American Deal Act, watch the movement dissolve as quickly as it arose.


          There are highlights in the Occupy X movement, however.  Occupy Chicago has camped in front of the Federal Reserve for 11 days and there seems to be a mix of conservative and liberal elements.  Occupy Boston melodically chanted "fuck the Fed" to the beat of drums.

          It is possible, given these recent ancillary developments, there merely has been a strong effort by traditional organizations to re-inject themselves into relevancy before the elections.  It has been reported that labor unions have thrown their weight behind Occupy Wall Street.  Maybe it's the name Wall Street itself, which calls for the traditional left to come out and try to continue where they left off, but given the new direction and the new focus on the Federal Reserve these protests may turn out to be quite different.  Lets hope they are.

Want to know exactly who we're up against, who we should be protesting?  Click here.

Nervous Breakdown? 21 Signs That Something Big Is About To Happen In The Financial World

The Economic Collapse
September 9th, 2011

Image Source: TheEconomicCollapse

          Will global financial markets reach a breaking point during the month of October?  Right now there are all kinds of signs that the financial world is about to experience a nervous breakdown.  Massive amounts of investor money is being pulled out of the stock market and mammoth bets are being made against the S&P 500 in October.  The European debt crisis continues to grow even worse and weird financial moves are being made all over the globe.  Does all of this unusual activity indicate that something big is about to happen?  Let's hope not.  But historically, the biggest stock market crashes have tended to happen in the fall.  So are we on the verge of a "Black October"?

The following are 21 signs that something big is about to happen in the financial world and that global financial markets are on the verge of a nervous breakdown....

#1 We are seeing an amazing number of bets against the S&P 500 right now.  According to CNN, the number of bets against the S&P 500 rose to the highest level in a year last month.  But that was nothing compared to what we are seeing for October.  The number of bets against the S&P 500 for the month of October is absolutely astounding.  Somebody is going to make a monstrous amount of money if there is a stock market crash next month.

#2 Investors are pulling a huge amount of money out of stocks right now.  Do they know something that we don't?  The following is from a report in the Financial Post....

Read the rest of The Economic Collapse Blog's story.

The Real GOP Choice: Paul or Romney?

Topher Morrison
PurpleSerf.com

Who's it going to be GOP?

Ron Paul is now and has been for sometime a legitimate candidate.  Romney is on his second chance, Paul is as well.  A recent Rasmussen Report shows Romney is the only GOP candidate who can beat Obama, but Paul is within a percentage point.  The question then is, who will the GOP rather have as their candidate, Paul or Romney?


          Mitt Romney has shown himself to be a skillful debator and a smooth orator.  Ron Paul on the other hand has a voice that unfortunately comes off a bit whinny, he tends to stammer and loses a bit of coherence from time to time.  However, when in small groups, in interviews with major media and when compared to last year the Congressman from Texas has made huge improvements in his ability to connect with people. 


          When the rubber meets the road, Romney is peeling out.  Mitt received some Big Love from fellow Republican Jeff Flake today adding fuel to establishment support along with the capitulation of Tim Pawlenty who as of last week permanently subdued his criticism of Obamneycare and jumped on board with the former Governor of Massachusetts.  Other nominations like Sarah Palin (if she doesn't run), conservatives stars like Paul Ryan, and other campaign dropouts that may be cannibalized are waiting in the wings.  Is there any doubt that John Huntsman will propose in similar fashion and marry into the Romney camp once his campaign has embraced its futility?  I think not. 


           Meanwhile... Rick Perry has a commanding lead over both Paul and Romney in major polling, yet he falls behind Obama 46% to 39%, according to Rasmussen.  Perry enjoys broad support among conservatives and has Lord Limbaugh fawning since I can't remember, but can he "win over suburbia?"  The differences in Romney and Perry are succinctly described by Alex Castellanos, former aid to Romney:

“You can see the playbook pretty clearly here: It’s populist against patrician, it’s rural Texas steel against unflappable Romney coolness, conservative versus center-right establishment, Texas strength versus Romney’s imperturbability, Perry’s simplicity versus Romney’s flexibility.”

It is on this question that the Romney appeal factors in, electability.  For once Ron Paul is a factor is this equation as well.  Paul is in third in a Real Clear Politics average if the non-candidate Sarah Palin and those voting for her are factored out.  The recent surge for Paul came after Bachmann's latest backfire.


          If we accept, contrary to the generic ballot, which favors Republicans on average by 0.5% that if Perry wins the GOP nomination he will lose to Obama, who is most reflective of the country's and the GOP's values?  Most Americans want Obamacare repealed while only a third believe it is good for America.  In this case Romney and his health care reform in Massachusetts isn't copacetic with the American mainstream.  


          When it comes to bailouts, while Romney criticized holding General Motor's hand on CNN he championed the TARP program, the essentially ex post facto legislation endorsing the myriad of financial vehicles covertly concocted by the Federal Reserve to bailout big banks.  At the 2009 CPAC Conference Romney evidently didn't believe America could survive without them:

"I know we didn’t all agree on TARP. I believe that it was necessary to prevent a cascade of bank collapses. For free markets to work, there has to be a currency and a functioning financial system."

          Ron Paul on the other hand excoriated all attempts at price fixing, printing money, secret lending, etc. and therefore shares more common ground with the American people who loath all recent bailouts than Mr. Romney.  Moreover, the American public wants to see the Federal Reserve fully audited, however, Mitt is contented with current auditing practices as he "believes" the Fed is "independently audited" and doesn't want Congress meddling in its affairs.  If the Fed is so transparent perhaps Romney will explain why Bloomberg required the US Supreme Court and a FOIA request to pry out that the they lent $1.2 trillion in secret lifelines to foreign banks.

          When it comes to foreign adventurism or national defense (can't seem to find a consensus definition) the American public overwhelmingly wants out of 10 years in Afghanistan, doesn't know or care for anything in Libya, almost half don't think "major" cuts in defense will put America at risk, and almost 80% of Americans feel we spend too much protecting other countries.  Listening to our generals, as Mr. Romey would have it, most likely doesn't accomplish a more noninterventionist foreign policy something mainstream America seems to crave. 

          If the campaign were tomorrow, the GOP would be in a tough position to choose to either to win big and lament four to eight years with a flexible patrician or a choose a arduous intellectual battle on behalf of a consistent and ardent libertarian.  If the GOP wants change, I'd suggest they put their helmets on and run with Ron.  

          

Why the "Great Depression" Annoys Me

Topher Morrison

PurpleSerf.com

Image Source: VintageVivant.com

It is like walking into a classroom where the professor is teaching a class about how the Soviet Union put the first man on the moon...  

          It seems as though every time someone refers to the Great Depression they subsequently thank Franklin Delano Roosevelt for literally digging us out of it.  If they don't they invariably annunciate the macroeconomic dogma (the belief that public institutions ought to influence the economy), that the Great Depression "shattered" the previous orthodoxy presumed by our Constitution, that free markets are self correcting.  

          While this may be true, that economic mores radically changed after the turn of the century, to not thoroughly explore why we abandoned over 125 years of tested theory, practices, which raised a feeble constellation of colonies into an unparalleled economic power by 1900 is blatant intellectual disinterest and frankly annoying. 

          The problem with using the Great Depression to bolster the macroeconomic strategies of monetary and fiscal stimulus, favored tools of the new economic vantage, is they were used just before, during, and after the decade long depression and therefore can be included among those suspected influences, which exacerbated what would arguably have otherwise been only a serious recession.  Banking panics prior to 1929 stretching back to the founding never persisted for more than a couple years let alone over a decade!

          Furthermore, the previous orthodoxy's policies, those promulgated by Adam Smith and lain down officially by the Founders, suffered damning blows in 1913 (see Federal Reserve, 16th and 17th Amendments) and were almost all effectively on the bench by 1933.  To blame laissez faire economics, an environment where interactions between private parties are free from government intervention, for the Great Depression and its abnormal longevity is not dissimilar to blaming a sidelined quarterback for his backup's interception and the subsequent touchdown. 

          To be sure, the prospect that public officers could wield control over our economic environment was (and still is) intoxicating and considering what we had achieved since our founding it was a pretty easy sell.  The very idea of control is incredibly self aggrandizing and antithetical to free markets as Adam Smith, the father of capitalism, according to Joyce Appleby: "described an economic universe that was not subject to the laws of the state, but on the contrary, subjected the state to its laws."  In other words, the government can't make the grass green.  We may be able to isolate and explain many parts of an economy because of these known laws, but to expect to steer the fluidity, dynamism, and titanic scope of modern economies with any sort of precision parallels only the naïveté and results of the Sorcerer's Apprentice. 

Image Source: Foroureconomy.org

         The motives for abandoning over a century of limited intervention was not to create an army of patriotic economic sentinels through the Federal Reserve, economic councils, or the alphabet soup of regulatory agencies.  The United States scuttled sound economics because of a newly landed elite's common desire to accomplish what European aristocracy had achieved, government sponsored capitalism also known as "crony capitalism."  It is imperative to understand this was not the necessary evolution of capitalism, quite the opposite, it was a return to feudalistic if not mercantilistic economics! According to W. Cleon Skousen:

“In Europe, certain confederations of wealthy families had gained control of their respective governments and were making a financial killing.  Some of the wealthy families in America coveted the rich government monopolies of their trans-Atlantic cousins.”

          Look no further than J.D. Rockefeller, "competition is a sin."  The "robber barons" of the new world sought to harness central government to wipe out competition, expand their interests, and bail them out in times of need; all on the backs of the American public.  This desire should not be used to deride capitalism and definitely should not be considered laissez faire.

          Capitalism, an economic and political system where trade and industry are controlled solely by private owners, is a novel idea to this world.  The relationship between the state and the economy, until the 1700s, had historically been an intimate one; the nostalgia, therefore, to recapture lost conventions was persuasive.  In the words of Mrs. Appleby:

“…the mores of a more traditional organization of society do not die out with the dominance of capitalism.  Rather they regroup to fight again with new leaders and new causes.  Any history of capitalism must contain the shadowy history of anticapitalism, sometimes carried out in the name of a new theory, but often as a reexpression of values that prevailed before the eighteenth century.”

          This is what was sold to the American working class and all over Europe, a repackaging of benighted policies, by an odd amalgam of interests including, but not limited to eager politicians, "...wealthy industrialists, heads of multi-national banking, leaders in the academic world, and some of the more innovative minds in media" according to Skousen.  While their goals were progressive, as their moniker insinuates, their methods for achieving those goals were in fact regressive.  American aristocracy required a powerful and gullible ally in its quest to fend off the waves of creative destruction inherent within capitalism, the working masses offered that alliance.  From Appleby:

“…critics saw industrialization [brought about by capitalism] as a rapacious transformation engineered by an upstart upper class eager to destroy both the aristocracy and the peasantry, which had once been protected from economic turbulence.” 

         No doubt!  Who wants either peasants or aristocrats in a modern economy?  The new socioeconomic organization of capitalist economies resembled more a tomato than a pyramid, however, the foundation of the New Deal was essentially integrated by the Great Depression even before the legislation by the same name was passed through Congress in 1933.  

         The grand bargain was achieved.  In turn for 8 hour work days, minimum wage, elections for nearly all public officials, social insurance, etc. the elite received the keys to the castle: the Federal Reserve, a public cartel of private banks, introduced plans for a fiat currency and proclaimed their members immortalis corporatus, while an income tax fed their cause and pooled massive wealth under Washington's discretion.  

          By dismantling the Senate and its strict allegiance to the state legislatures a centralized and seemingly endless regulatory bureaucracy arose with the powers to legislate, adjudicate, and enforce most laws and without democratic deliberation beckoned legions of lobbyists.  And the grand prize, an emboldened executive, with what would become the most spectacular military in human history was proffered to carve up the world into spheres of influence under the guise of making the world safe for democracy.

          Here we are over 90 years later still wrangling over similar issues: pensions, benefits, workers rights, depression/recession, and blaming it all on capitalism again while our currency is debased, we prosecute multiple foreign wars and occupy foreign lands, our benefits teeter on the brink of insolvency, while we bail out the aggressive multinational and foreign banks which wrought this travesty upon just us as they did in 1929!

          All of this old baggage rehashed only to fight amongst ourselves over how to pay for it all in some apocalyptical pincer move on what is left of a middle class first created almost a century ago by ideals almost forgotten.

This is the position of a mere serf and why talking about the Great Depression annoys me.