ECB Draghi Admits EU May Breakup For First Time


Davos Exposing #EU’s Date with Destiny

 
The EU Parliament elected a new speaker last week in an unusually hotly contested vote that could strengthen Euroskeptic forces at a time when the EU faces Brexit and questions about its future role. Meanwhile, Europe’s leaders were going at each other’s throats in Davos as the dispute over how to stop the EU from collapsing exposed divisions that are deep within Europe following the British withdrawal.
 
Dutch Prime Minister Mark Rutte lashed out at the whole idea of a single federalized government for Europe. “The whole idea of an ever-closer Europe has gone, it’s buried,” Rutte said. A single government ending European wars has been a highly dangerous romantic fantasy. What they fail to comprehend is that one government will fan the flames of division. Rutte continued his warning, “The fastest way to dismantle the EU is to continue talking about a step-by-step move towards some sort of superstate.”
 
 

Draghi Admits EU May Breakup For First Time

draghai-euro-crisis
For the first time, the head of the European Central Bank, Mario Draghi, has conceded the possibility that the EU may fall apart. Draghi came out and said that any member leaving the Eurozone would need to settle its claims or debts with the bloc’s payments system before severing ties. This statement reveals the heated discussion at Davos and the rift that is beginning to spread. This statement, released on Friday, was made in a letter to two Italian lawmakers in the European Parliament.
 
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Euro is a ‘house of cards’ ready to collapse, key single currency architect warns


Independent

Professor Otmar Issing says the European Central Bank betrayed the principles of the currency project by bailing Greece out in 2008

otmar-issing

Professor Issing says Greece should have been allowed to crash out of the Euro and readopt the drachma AFP/Getty Images


The Euro currency project is unworkable in its current form and at the risk of “collapse”, its principal architect has warned.

Professor Otmar Issing, the European Central Bank’s first chief economist who helped create the single currency at the turn of the century, has warned that the Euro cannot survive in its current form.

He said the ECB had become dangerously overextended as it tries to manage the 19 economies using the single currency.

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You can have ‘hard Brexit’ or no Brexit at all, EU council president warns UK

Speaking to trade journal, Central Banking, he said: “One day, the house of cards will collapse”.

He said the experiment with a single currency went from the moment it was introduced in 2002 and said it had been betrayed by the politics of the region.

“Realistically, it will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly”, he explained.

He believed that the ECB had made a fatal error in agreeing to bailout bankrupt states like Greece and Ireland.

He said: “The Stability and Growth Pact has more or less failed. Market discipline is done away with by ECB interventions.

“So there is no fiscal control mechanism from markets or politics. This has all the elements to bring disaster for monetary union.”

Prof Issing said there is no escape from the currency union’s problems without a political union which is unlikely to happen.

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Leave voter who wants to ‘control our own laws’ can’t name single EU law

He also condemned the first Greek bailout in 2008 as a bailout for French and German banks who had loaned to them.

He said it would have been better to force Greece out of the Euro and offer them generous support after they had restored their exchange rate stability on the drachma.

In 2015, Greece finally agreed a third bailout deal with the troika – the ECB, the European Commission and the International Monetary Fund – after a prolonged stand-off between the ruling party, Syriza, and the country’s creditors.

The left wing party attempted to negotiate more favourable terms after it was voted into office to fight the harsh austerity policies the troika asked for leading to the country running out of cash.


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Collapse of the EU – Is it Inevitable?

Collapse of the EU – Is it Inevitable?

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Reek of Desperation Surrounds EU Banks, Regulators Prepare for “Derivatives Clearing Crisis”


…the controlled demolition of the system continues….


WolfStreet

It’s now clearer than ever that the ECB, the IMF, the BIS and all the other supranational alphabet soup creations will do “whatever it takes” in the coming months to keep Deutsche Bank and its brethren whole. But will it be enough? After all, the problems are not remotely contained to just Germany.

Zombification of EU banking system gathers momentum.

The past week’s events in Europe were dominated by the pound sterling’s spectacular flash crash to its lowest point in 31 years. As is often the case with flash crashes, we will probably never know what exactly triggered the currency to free-fall by 6% during Asian trading hours, though the most cited cause, apart from a “fat finger,” is the gathering realization that a so-called “hard” Brexit is a very real possibility.

But it’s an eventuality that can be expected to play out in roughly two and a half years’ time, at the earliest, and in light of the powerful forces arrayed against it, it may never occur at all.

In the meantime, something far more dangerous is happening on the other side of the English Channel: the slow-motion meltdown of the Eurozone’s banking system.

In its Global Financial Stability Report, the IMF warned that banks in Europe were too weak to generate sustainable profits even if — and here’s the kicker — the region saw strong economic growth. That hasn’t happened for years.

The IMF also cautioned that the banks’ weak profitability, caused by subdued growth in the Eurozone and ultra low or negative interest rates — something the ECB vehemently denies, preferring to blame the crisis on Europe’s smaller regional or local banks — could further erode their financial buffers and undermine their ability to support economic recovery.

“In Europe, about one third of the system – representing some $7.5 trillion euros in assets – remains weak and unable to generate sustainable profits,” said IMF economist Peter Dattels as he presented the report in Washington. As such, European banks need “urgent and comprehensive action” to address a legacy of non-performing loans and bloated, inefficient business models, he said.

“Urgent” and “comprehensive” are two words you’d rarely associate with the Eurozone, especially at a time when the region faces a relentless gauntlet of political threats, from the rise of “populist” movements in central and northern Europe to December’s do-or-die constitutional referendum in Italy. That’s not to mention what promises to be tightly fought national elections in the Eurozone’s two biggest economies, France and Germany, scheduled to be held respectively in April and October, 2017.

The last thing either Merkel or Hollande needs during election season is a region-wide banking crisis, which is why every effort will be made to keep a lid on the problem until the votes have been cast. But that is not going to be easy, not with Germany’s flagship lender, Deutsche Bank, continuing to sink at an alarming rate.

Things have got so desperate for the Frankfurt-based bank that it may soon be in need of corporate charity. According to a rumor unleashed on Thursday by the German daily Handelsblatt, the chief executives of several German blue-chip companies have discussed Deutsche’s problems and are — if needed — ready to offer a capital injection to shore up the bank.

If that doesn’t steady investor nerves, there’s always Plan Z: create new rules that would allow the ECB to effectively contravene recently introduced rules that forbid it and other EU institutions and nations from directly bailing out financial institutions without first bailing-in some of their creditors. According to Bloomberg, Plan Z is already under way. But instead of being used to bail out the region’s banks, the new legislation will be used to bail out clearing houses, Europe’s new too-big-to-fail monstrosities:

Draft EU legislation seen by Bloomberg sets out rules on saving or shuttering clearinghouses that would apply to firms such as London-based LCH. The proposals cover everything from the creation of resolution authorities to the powers they would have when winding a company down, including writing down shares, debt and collateral.

The ultimate aim is to dampen investor concerns about the threat posed by the global derivatives time bomb, much of which is tick-tocking on and off the balance sheets not only of Wall Street’s finest, but also of Deutsche Bank. Here’s more from Bloomberg:

The authorities would be able to recapitalize the clearinghouse by seizing variation margin, exercising cash calls defined in recovery or resolution plans and writing down capital and converting debt securities. They would also be able to auction off the defaulters’ positions, tear up some or all contracts and access default funds. The relevant central bank would be able to facilitate resolution by supplying temporary liquidity.

And here’s the real kicker (emphasis added):

“Should these options be unavailable or be demonstrably insufficient to safeguard financial stability, government participation in the shape of equity support or temporary public ownership could be considered as a last resort,” according to the proposal. Those steps would need to comply with EU rules on state aid.

As recent months have shown, EU rules on state aid are extremely elastic, especially when it comes to saving the hide of the continent’s biggest banks and corporations. In August, it was leaked that the ECB has bought bonds from the issuing corporations via “private placements,” thus putting freshly printed cash directly on corporate balance sheets at no cost to the corporation. Yet there’s not been a single whiff of protest from Europe’s competition commissioner.

It’s now clearer than ever that the ECB, the IMF, the BIS and all the other supranational alphabet soup creations will do “whatever it takes” in the coming months to keep Deutsche Bank and its brethren whole. But will it be enough? After all, the problems are not remotely contained to just Germany.

In Italy, JP Morgan Chase’s master plan to save Monte dei Paschi continues to flounder as investors show zero appetite for more MPS capital. In fact, expectations are so low that rumors have already began surfacing that an alternative plan, under the aegis of Italy’s former Industry Minister and senior banker Corrado Passera, is now in the works.

It all reeks of desperation.

So, too, does the semi-clandestine bailout of Spain’s state-owned Banco Mare Nostrum. With the markets showing zero interest in taking the bailed-out entity off the public’s hands, the government is trying to usher it into a forced marriage with largely state-owned Bankia. The message, once again, is resoundingly clear: the only way the bank can be maintained as a going concern is through continued and growing public support.

The zombification of Europe’s banking system — the legacy of years of doing “whatever it takes” to save giant insolvent banks — continues to gather momentum. Things are now so serious that some of the world’s most senior policy makers are not only beginning to warn of a new financial crisis, they’re beginning to turn on each other in public. They include Germany’s dour Finance Minister Wolfgang Schaeuble who, much like the IMF, lays most of the blame for Europe’s current problems on the “ultra-loose monetary policy” pursued by the ECB.

But as always with Schaeuble and Merkel, their complaints are meant for public consumption. When crunch time arrives for Deutsche Bank, and the only institution that can save it is the ECB (perhaps with a little help from the Fed, as on countless occasions before), such criticism will very quickly die down. By Don Quijones, Raging Bull-Shit.

Italy’s Monte dei Paschi’s cleverly concealed debt bomb has had explosive consequences, now associated with a gargantuan crime scene. Read…  Rescue of Monte dei Paschi Gets ‘Dark’ & ‘Complicated’

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Cash Is Not the Enemy; Central Banks Are


FEE

Cash Is Not the Enemy; Central Banks Are

Ostensibly to foil terrorists, the European Central Bank intends to stop producing €500 banknotes. Getting rid of the bill, referred to by the sinister name ‘Bin Laden’, “will make life harder for criminals, raising their costs and increasing their detection risks,” Peter Sands, a former chief executive of the British bank Standard Chartered and enemy of big bills, told the New York Times.

Nonfarm Payrolls
Photo by 401(K) 2013

Rogoff views the world as a giant chess game, and we are mere pawns in the all-knowing monetary mandarins’ game.However, all of the public safety blather is mere eyewash. Kenneth Rogoff writes in The Curse of Cash that central bankers know getting rid of cash “would make it easier for central banks to invoke negative interest rates either when inflation is stuck at very low levels or, far more significantly, when the economy is in deep recession and requires substantially negative real interest rates to help stimulate demand.”

Rogoff quit high school to play chess and achieved Grandmaster status, but decided to pursue economics and now teaches at Harvard after working at the IMF and the Fed. Readers of “Curse” will get the feeling Rogoff views the world as a giant chessboard, and we humans are mere pawns in the all-knowing monetary mandarins’ chess game.

Money in Rogoff’s world is the government’s tool. There is no sense in Bitcoin or anything else competing with government money, for “it can use laws, regulations, and outright coercion to come out on top: a determined government is always going to win the battle of currency supremacy, at least in the long run.”

Ironically, it is the government’s cash that the professor sees as the enemy. The majority of currency (80 percent to 90 percent) is made up of large denomination bills, and he believes there is no use for $100s, $50s, or $20s other than criminal activity and tax evasion.

Cash Is King

I would urge the ex-Fed economist to come down from his Ivory Tower and visit Las Vegas where C-notes are the coin of the realm, or go to a trailer park and collect rent, where most occupants pay in the bills he wants to abolish.

Rogoff’s plan to handle such pedestrian concerns is to hand out debit cards to the poor and let one, five, and 10 dollar bills circulate until converted to coins.

Rogoff and other cash haters wish to turn time-preference on its head. Savers should pay borrowers for delaying consumption, instead of the other way around. However, as Murray Rothbard explained,

What we need, in short, is savings: this is the factor limiting investment. And saving, in turn, is limited by time-preference: the preference for present over future consumption. Investment always takes place by a lengthening of the processes of production, since the shorter productive processes are first to be developed. The longer processes remaining untapped are more productive, but they are not exploited because of the limitations of time-preference. There is, for example, no investment in better and new machines because not enough saving is available.

While the author explains that cash is the enemy of central bank policy, he does not admit it is the enemy of fractionalized banking. A hundred dollars on deposit can be lent out and multiplied by the banking system. A hundred dollars in cash can not. “The ‘bank run,’ which shivers the timbers of every banker,” wrote Murray Rothbard in The Case Against the Fed, “is essentially a ‘populist’ uprising by which the duped public, the depositors, demand the right to their own money. This process can and will break any bank subject to its power.”

In Europe and Japan, where Rogoff’s negative interest rate policy panacea is ineffectively underway, the run is on safes. Savers seeking the high yield of zero are hoarding money at home. “To be sure, the Germans are merely catching up to where the Japanese were over half a year ago,” reports Zero Hedge.

Super Negative Rates

Rogoff writes that incentives to hoard cash must be taken away so negative rates can work their magic. He claims Europe and Japan have just tiptoed into negative rates and if they haven’t worked, and they haven’t, it “cannot be viewed as a decisive test of how they might work after necessary preparations have been made, because many issues have yet to be dealt with, especially finding a way to deal with a run into cash.”

Pushing rates to say -5% if necessary “will be transformative” claims the Harvard economist. He asserts that it’s no big deal, comparing it to dropping the gold standard, moving away from fixed exchange rates, and central banks becoming independent.

Are interest rates not prices? And if so, should they not be discovered instead of imposed?The idea is that instead of letting their money do nothing, negative rates would push people to spend the economy into prosperity. Keynesians view savings (or hoarding) as bad. The hoarder is depriving the economy of consumption that creates employment. In no time, Keynesians fret, everyone becomes a hoarder and the economy spirals down the recessionary rabbit hole never to return.

However, Keynesians forget about production and the capital needed to fund it. On this Ludwig von Mises explained, “Saving and the resulting accumulation of capital goods are at the beginning of every attempt to improve the material condition of man; they are the foundation of human civilization.”

Rogoff believes the government must have monetary policy, to stabilize the economy,  respond to financial crises, create price inflation and ”engage in partial default on government debt.”  Government money is a “natural monopoly” he claims, writing, “the modern-day system of having independent central banks run by technocratic central bankers has worked far better than any other system so far, certainly better than a gold standard would.”

That is an amazing assertion coming from a guy who co-authored, with Carmen Reinhart, This Time Is Different: Eight Centuries of Financial Folly. The world has gyrated between boom and bust since the last thread to the gold standard was cut in 1971, and Rogoff himself lists the numerous inflations and hyperinflations that have occurred in recent decades.

James Grant, in an acceptance speech before the Money Marketeers, wondered aloud what he would have done should Ron Paul have won the presidency in 2012 and appointed him Fed Chair. “Are interest rates not prices?” He would have asked members of the Federal Reserve Board. “And if so, should they not be discovered instead of imposed?”

The Pretense of Knowledge

As for the 700 economics PhDs employed by the Fed that Rogoff is so impressed with, Grant channelled Nobelist F.A. Hayek, saying he would ship “these aspirational physicists” to NASA or the National Science Foundation, and hire a few financial historians in their place.

Hayek,in his Nobel Prize

 

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Post #Brexit – Central Banks in Crisis Watch Mode


ArmstrongEconomics

Our sources are saying that the central banks have come to an accord to cooperate in an effort to support financial stability in the wake of Britain’s vote to leave the European Union. This is akin to the Plaza accord of 1985. Central bankers urgently gathered at the Bank of International Settlements in Switzerland to discuss the implications of the BREXIT referendum. The central banks are endorsing a contingency of measures to be put in place by the Bank of England. While the central banks will carefully monitor market functioning and stability, they are clueless what to actually do other than try to prevent currencies from swinging wildly.

The entire crisis has come about because the EU has attempted to federalize Europe and impose its will upon the people and suppress all efforts to resist. This is now reaching a major crisis and the elite refuse to accept that they are simply wrong. This crisis will merely increase. It cannot be rectified without abandoning the entire philosophy behind the EU of one policy fits all.

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Western Banks In Turmoil As British Banking Giant #HSBC Nears Total Collapse


Whatdoesitmean.com

By: Sorcha Faal, and as reported to her Western Subscribers

The Ministry of Finance (MoF) is reporting today that British banking giant HSBC is nearing a total collapse after its having lost a staggering nearly $1 trillion due to the ongoing Great 2015 Global Market Crash and earlier today it completely ran out of cash to pay its obligations and depositors.

According to this report, HSBC is a multinational banking and financial services company headquartered in London, United Kingdom and is the world’s fourth largest bank by total assets worth $2.67 trillion.

Not known to many Westerners, this report continues, HSBC was established in its present form in London in 1991 by the Hong Kong and Shanghai Banking Corporation Limited to act as a new group holding company and the origins of this banking giant mainly lies in Hong Kong, and also to a lesser extent Shanghai, where branches were first opened in 1865.

Due to the staggering crash of the Shanghai Composite index that has shed 38% of its value since 12 June, this report explains, HSBC lost nearly $700 billion of its value in China while a further estimated $300 billion has been lost due to the Dow’s collapse of over 1,800 points since its high for the year was reached on 27 May.

To the consequences of this massive $1 trillion HSBC loss, this report says, began hours ago when reports began to surface in the UK that hundreds-of-thousands of people were not being paid their salaries, which this British banking giant first tried to deny, but a few hours later blamed their failure to pay on a “computer glitch.

HSBC

MoF experts in this report dismiss HSBC’s explanation of a “computer glitch” noting that this phrase is commonly used by Western banking and financial institutions as a “cover story” to mask their inability to access cash…and is likewise being used to explain what is preventing hundreds of American mutual and exchange-traded funds from providing their investors with the values of their holdings, and why one of the world’s largest brokerages, Charles Schwab, shut down earlier today too.

As HSBC is Britain’s largest bank, this report notes, it has appealed for an emergency loan from the Bank of England (BoE), with the BoE then appealing to the European Central Bank (ECB), and the ECB then appealing to the US Federal Reserve System (FRS).

With the US Congress having verified that over $16 trillion of the American peoples money was given by the US Federal Reserve to European corporations and banks, purportedly for “financial assistance” during and after the 2008 fiscal crisis, this report says, it remains “highly probable” they will do so again before HSBC totally collapses.

HSBC2

And with China continuing to dump hundreds-of-billions of its US held debt to stabilize its own markets and economies, this report concludes, the near collapse of HSBC today is but a prelude to the coming greater global financial collapse some experts have warned will “change the landscape of the entire world”.

Though not mentioned in this report, it is interesting to note that at least the American people are seeing the truth and, according to one news source, are “yanking their money from almost everything”…which in turn has led one of the elites major mouthpieces, the Financial Times, to publish an anonymous article calling for the outright abolition of cash in order to give central banks and governments more power.

August 28, 2015 © EU and US all rights reserved. Permission to use this report in its entirety is granted under the condition it is linked back to its original source at WhatDoesItMean.Com. Freebase content licensed under CC-BY and GFDL.

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The Guardian

HSBC system failure leaves thousands facing bank holiday without pay

Problem with BACS payment system means salaries have not arrived for many customers as bank faces barrage of complaints. Read more

HSBC BACS

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