Friday, November 4, 2011



Nobody could possibly have invented, and equally nobody would ever have believed the spectacle of the last few days, if they had not witnessed it on live TV with their own eyes. The motley crew masquerading as our G 20 leadership that gathered in Cannes, or more appropriately “Cannot”, should be holding their heads in abject shame.

The only one that has stood out from the crowd has been Georges Papadopoulos. Having negotiated the economic equivalent of a pact with the devil, he had the outrageous temerity to propose, that the sale of Greek nation into decades of bondage, be authorized by the Greek people via a referendum.

Whether he did this out of a belated sense of nationalist pride and loyalty, as a brilliant or misguided internal political maneuver, or whether he finally snapped under the pressure of being serially Bunga Bunga’d by Merkozy and the IMF apparatchiks, perhaps we will never know.

However what has been far more revealing than his actions has been the extraordinary reactions of all other parties.

The Dutch Prime Minister said that they were seeking legal advice as to how to stop the referendum. Does this not seem rather undemocratic and smell like interfering in a sovereign countries internal politics, rather like Iran with Syria for example?

Sarkozy said that if Greece decided to leave the Euro, then they would have to leave the Euro zone. Would he wish that the UK which is not in the Euro leave the Euro zone and leave poor little France with its bankrupt banking system to deal with Mrs. Merkell and Mr Schauble all alone. It is rather doubtful that the “Force de Frappe” would be enough to save them.

Mr Sarkozy who also said all those who do not follow the rules should leave the Euro zone, has still not filed a request for France to withdraw, after multiple years of exceeding the authorized deficit limits.

The Greek finance minister, a real “heavy weight”, sided immediately with the international financial elite. As Papandreou’s right hand man in this game, one would have to say the half life on loyalty in Greece is extremely short. It does not even allow the person falling on his sword, knowingly or unknowingly, to hit the ground.

 So now we have seen the same Papandreou, decide to abandon the referendum and the G 20 would have us believe now everything is fine.

However the realities laid out in my Blog about the EFSF are beginning to come true.

Mrs. Merkell is saying that there is very little appetite in the G 20 for these bonds. Who could possibly blame an incoming investor for feeling a little squeamish, given the spectacle of the last few days, weeks, months?

They even pulled the offering for the EFSF’s initial funding EUR 3 Billion, (0.3%) of the EUR 1000 Billion total, due to poor market conditions. Imagine all those up front banking fees going to waste?

So now we come to the moment of truth, if the G20 does not want to fund the EFSF who will. At this stage if the Martians threatened to invade and promised to come with EUR 1000 Billion of new bank notes, you can be sure the G 20 would be welcome them with open arms.

So what is the nearest earthly equivalent to Martians, it is of course the IMF.
The IMF however has only a limited amount of money and a few years ago was on the edge if insolvency itself. It makes its money “altruistically” of course, by bailing out insolvent states such as Jamaica, Hungary and potentially Greece and Italy if it is not careful.

It gets its money, called SDR’s from the Governments which support the IMF, the main economies, firstly the USA, Japan, Germany etc. It leverages this by borrowing from major banks at favorable terms, and then on lends, at what all debtor nations would call usurious terms to the recipient countries.

In the case of the EFSF, the IMF would be obliged to come up with EUR 440 Billion in hard cash. This is from the same G 20 donor nations who already do not want to contribute directly to the EFSF, except of course for those, that would be back at the trough claiming more back than they put in as they needed a bail out. You really could not make this up if you tried!!!

So here we have the stand off because why should the US wish to contribute to the rescue of the EUR which, but for the utter incompetence of our leaders, would have been the greatest currency threat to the USD.

Similarly, in the UK there is very little appetite to support the EUR, where the EU member states actively promote legislation, designed to weaken London as the leading European financial center.

Why should Germany pay once as EU state member and be obliged to contribute a second time via the IMF.

It is increasingly apparent that the irreconcilable differences that divide the Euro zone are far more powerful that the forces holding it together. We can look forward to a great display of “shock & awe” very soon.

No comments:

Post a Comment