Hungary is now leading the charge in the insanity. They are demanding hundreds of billions of dollars "or else." I was reading that article, and I couldn't quite figure out where I had heard the plot before. And then it came to me.
Prime Minister Ferenc Gyurcsany said the credit crunch is hitting poorer, eastern member states the hardest. The Hungarian leader called for a special EU fund of up to euro190 billion ($241 billion) to help restore trust and solvency in eastern EU members' financial markets.
He then went on to invoke the era of Soviet imperialism warning of a new "iron curtain" that could be erected in the event of deepening crisis. This follows the pattern that the US banksters took back in September of '08 when the first round of bailouts were happening. Lawmakers were blackmailed with threats of martial law if they didn't pass legislation immediately, giving away hundreds of billions of dollars.
Thankfully, Germany appears to be putting their foot down and are calling the eastern block's bluff.
German Chancellor Angela Merkel has rejected calls for a multibillion-euro bailout plan for eastern European Union member states.
She says the situation is very different in each EU country and aid should be handled on a case-by-case basis. She adds that a one-size-fits-all bailout of poor eastern members is unwise.
Ms. Merkel told reporters during Sunday's summit of EU leaders that “you cannot compare” the dire situation in Hungary with that in other countries. Germany, the EU's largest and richest economy, is under growing pressure to offer more help.
I have long suspected Germany would be forced into this position. I thought they might play nice for a while, even giving in to the first round of pleas for help, but then turning away when the recipients would inevitably come back to the trough.
It doesn't look like they'll even go that far. The implications of this should not be lost on anyone.
With Germany effectively saying "no" to other EU members it will be interesting to see if the promised collapse actually occurs. I'll have my eye on the Zloty and Forint and the European markets in general on Monday.
More important, though, are the geopolitical implications and societal acrimony that is likely going to result in the east. It will not be difficult for anti-west sentiments to fester and grow out of control. German "isolationism" would be an easy target.
Every day, this very flawed union takes another step toward it's ultimate destiny.
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4 comments:
Ferenc Gyurcsany, a new kind of terrorist.
OK, I got that. lol. But I still don't understand the logic of bail-outs.
The logic of the bailouts is really a blackmail as Matt says, but politicians cannot get credit for anything if the economy is bad while they are in office. You can get away with an unpopular war for awhile, but a bad economy you are screwed. Obama is president because the economy was in the dumps when the election came. Truth is the people of the US would have probably rather had the other guy, but he was in the wrong party, the party of the guy on top when the shit hit the fan.
In any case, booms happen only when banks are creating money and they can only create money if they have capital. Otherwise, they can't cash checks and one of the greatest inventions in history turns on the government, deposit insurance. The point is the government is going to get the bill anyhow. AIG is such a case. The banks were using AIG to cover their loan bets and from what I understand, accounting rules and capital requirements allowed them to roll all the profit of a loan over its future life into their capital account like it was
already earned, so long as AIG kept its credit rating. There is no telling how much credit is riding on keeping AIG operative, but it is probably 10 to 20 times what they are putting in to keep it going. Most of the assets of AIG are immune to lien because they are legal reserve life insurance policies.
I believe people are miseducated in money and banking in college and that what are called reserves are not what allows banks to make loans. I believe their capital base allows them to make loans and what the Fed does really has little to do with lending by banks. I believe the universities lied to those that took that class. I took it and I can't find anything that says a bank with no capital, but plenty of reserves can lend money, or should I say create money.
In other news Matt, I found a great link on Ambrose Evans Pritchards website. You may already have it, but it is http://mpettis.com. This guy is evidently the chief economist at Beging university and he isn't exactly bullish on China. If you haven't been there, it is a long and interesting read.
Barry
Fair enough ... and let's not dramatize. Politicians will use whatever rhetoric they think will gain them kudos at home and might bring them a few crumbs from the EU. And on the other side of the argument from the Eastern European countries, Merkel's position was firm but nuanced, and eminently reasonable. It's hardly going to be the first step in breaking up the union.
What is important to say is how much politicians like Valéry Giscard d'Estaing sold the idea of the single currency on the grounds that it would promote European union (as opposed to the European Union) and in particular, reduce protectionism. Now we see that the Euro is one of the main forces driving protectionism within the Union. Amazing how people had such radically different views and actions when times were good, and now that times are tough, are running like lemmings in the opposite direction.
Thanks for the notes folks:
"Amazing how people had such radically different views and actions when times were good, and now that times are tough, are running like lemmings in the opposite direction."
It's not amazing. It's completely predictable through the lens of Generational Theory and/or Socionomics.
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